----

----

| x | Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|---|-----------------------------------------------------------------------------------|

| o | Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|---|------------------------------------------------------------------------------------|

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

|                     | Georgia                              |   |   |  58-2005097 |   |
|--------------------------|--------------------------------------|--------|--------|------------------|--------|
| (State of Incorporation) | (I.R.S. Employer Identification No.) |

|                                     | 3530 Wheeler Road, Augusta, Georgia 30909 |   |
|------------------------------------------|-------------------------------------------|--------|
| (Address of principal executive offices) |

|                                                   | (706) 738-6990 |   |
|--------------------------------------------------------|----------------|--------|
| (Issuer’s telephone number, including area code) |

|                                                                               | Not Applicable |   |
|------------------------------------------------------------------------------------|----------------|--------|
| (Former name, former address and former fiscal year, if changed since last report) |

|   |     Large accelerated filer o |   | Non-accelerated filer o                       |
|--------|----------------------------------------------|--------|-----------------------------------------------|
|   |                                         |   | (do not check if a smaller reporting company) |
|   |                                         |   |                                          |
|   |     Accelerated filer o       |   |  Smaller reporting company x             |

----

| SOUTHEASTERN BANK FINANCIAL CORPORATION |
|-----------------------------------------|
| FORM 10-Q                               |
| INDEX                                   |

|                                          |     |                                                                                                                 |   | Page   |
|-----------------------------------------------|----------|----------------------------------------------------------------------------------------------------------------------|--------|--------|
| Part I                                        |     |                                                                                                                 |
|                                          | Item 1.  | Financial Statements (Unaudited)                                                                                     |   |   |
|                                          |     |                                                                                                                 |   |   |
|                                          |     | Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011                                                |   | 3      |
|                                          |     |                                                                                                                 |   |   |
|                                          |     | Consolidated Statements of Income and Comprehensive Income for the Three and Six Months ended June 30, 2012 and 2011 |   | 4      |
|                                          |     |                                                                                                                 |   |   |
|                                          |     | Consolidated Statements of Cash Flows for the Six Months ended June 30, 2012 and 2011                                |   | 6      |
|                                          |     |                                                                                                                 |   |   |
|                                          |     | Notes to Consolidated Financial Statements                                                                           |   | 8      |
|                                          |     |                                                                                                                 |   |   |
|                                          | Item 2.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                          |   | 49     |
|                                          |     |                                                                                                                 |   |   |
|                                          | Item 3.  | Quantitative and Qualitative Disclosures about Market Risk                                                           |   | 72     |
|                                          |     |                                                                                                                 |   |   |
|                                          | Item 4.  | Controls and Procedures                                                                                              |   | 73     |
|                                          |     |                                                                                                                 |   |   |
| Part II Other Information                     |     |                                                                                                                 |
|                                          | Item 1.  | Legal Proceedings                                                                                                    |   | 74     |
|                                          | Item 1A. | Risk Factors                                                                                                         |   | 74     |
|                                          | Item 2.  | Unregistered Sales of Equity Securities and Use of Proceeds                                                          |   | 74     |
|                                          | Item 3.  | Defaults Upon Senior Securities                                                                                      |   | 74     |
|                                          | Item 4.  | Mine Safety Disclosures                                                                                              |   | 74     |
|                                          | Item 5.  | Other Information                                                                                                    |   | 74     |
|                                          | Item 6.  | Exhibits                                                                                                             |   | 75     |
|                                          |     |                                                                                                                 |   |   |
| Signature                                     |     | 76                                                                                                                   |
|                                          |     |                                                                                                                 |   |   |
| * No information submitted under this caption |     |                                                                                                                 |

----

----

| SOUTHEASTERN BANK FINANCIAL CORPORATION   |   |
|-------------------------------------------|--------|
| Consolidated Balance Sheets               |   |
| (Dollars in thousands, except share data) |   |

|                                                                                                                                              |   | June 30,    |      |   |         |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|-----------|--------|--------------|--------|
|                                                                                                                                              |   | 2012        |      |   | December 31, |   |
|                                                                                                                                              |   | (Unaudited) |      |   | 2011         |   |
| Assets                                                                                                                                            |   |        |      |   |         |   |   |   |
| Cash and due from banks                                                                                                                           |   | $           | 53,500    |   |         | $      | 51,080 |   |
| Interest-bearing deposits in other banks                                                                                                          |   |        | 5,820     |   |         |   | 18,761 |   |
| Cash and cash equivalents                                                                                                                         |   |        | 59,320    |   |         |   | 69,841 |   |
|                                                                                                                                              |   |        |      |   |         |   |   |   |
| Available-for-sale securities                                                                                                                     |   |        | 665,369   |   |         |   | 603,759 |   |
| Loans held for sale                                                                                                                               |   |        | 27,197    |   |         |   | 29,615 |   |
| Loans                                                                                                                                             |   |        | 847,759   |   |         |   | 846,010 |   |
| Less allowance for loan losses                                                                                                                    |   |        | 29,552    |   |         |   | 29,046 |   |
| Loans, net                                                                                                                                        |   |        | 818,207   |   |         |   | 816,964 |   |
|                                                                                                                                              |   |        |      |   |         |   |   |   |
| Premises and equipment, net                                                                                                                       |   |        | 26,787    |   |         |   | 27,608 |   |
| Accrued interest receivable                                                                                                                       |   |        | 6,508     |   |         |   | 6,247 |   |
| Bank-owned life insurance                                                                                                                         |   |        | 31,239    |   |         |   | 30,713 |   |
| Restricted equity securities                                                                                                                      |   |        | 5,399     |   |         |   | 5,086 |   |
| Other real estate owned                                                                                                                           |   |        | 7,773     |   |         |   | 6,209 |   |
| Prepaid FDIC assessment                                                                                                                           |   |        | 2,733     |   |         |   | 3,420 |   |
| Deferred tax asset                                                                                                                                |   |        | 11,523    |   |         |   | 12,723 |   |
| Other assets                                                                                                                                      |   |        | 4,072     |   |         |   | 2,588 |   |
|                                                                                                                                              |   | $           | 1,666,127 |   |         | $      | 1,614,773 |   |
| Liabilities and Stockholders’ Equity                                                                                                        |   |        |      |   |         |   |   |   |
| Deposits                                                                                                                                          |   |        |      |   |         |   |   |   |
|      Noninterest-bearing                                                                                                 |   | $           | 154,047   |   |         | $      | 147,196 |   |
|      Interest-bearing:                                                                                                   |   |        |      |   |         |   |   |   |
|         NOW accounts                                                                                      |   |        | 348,628   |   |         |   | 346,236 |   |
|         Savings                                                                                           |   |        | 483,101   |   |         |   | 471,728 |   |
|         Money management accounts                                                                         |   |        | 38,980    |   |         |   | 42,977 |   |
|         Time deposits over $100                                                                           |   |        | 284,014   |   |         |   | 286,319 |   |
|         Other time deposits                                                                               |   |        | 126,245   |   |         |   | 124,766 |   |
|                                                                                                                                              |   |        | 1,435,015 |   |         |   | 1,419,222 |   |
|                                                                                                                                              |   |        |      |   |         |   |   |   |
| Securities sold under repurchase agreements                                                                                                       |   |        | 664       |   |         |   | 701 |   |
| Advances from Federal Home Loan Bank                                                                                                              |   |        | 66,000    |   |         |   | 39,000 |   |
| Accrued interest payable and other liabilities                                                                                                    |   |        | 16,784    |   |         |   | 15,874 |   |
| Subordinated debentures                                                                                                                           |   |        | 21,547    |   |         |   | 22,947 |   |
| Total liabilities                                                                                                                                 |   |        | 1,540,010 |   |         |   | 1,497,744 |   |
|                                                                                                                                              |   |        |      |   |         |   |   |   |
| Stockholders’ equity:                                                                                                                       |   |        |      |   |         |   |   |   |
| Preferred stock, no par value; 10,000,000 shares authorized; 0 shares outstanding in 2012 and  2011, respectively                       |   |        | -         |   |         |   | - |   |
| Common stock, $3.00 par value; 10,000,000 shares authorized; 6,679,381 and 6,677,667 shares issued and outstanding in 2012 and 2011, respectively |   |        | 20,038    |   |         |   | 20,033 |   |
| Additional paid-in capital                                                                                                                        |   |        | 62,804    |   |         |   | 62,767 |   |
| Retained earnings                                                                                                                                 |   |        | 37,256    |   |         |   | 30,593 |   |
| Accumulated other comprehensive income, net                                                                                                       |   |        | 6,019     |   |         |   | 3,636 |   |
| Total stockholders’ equity                                                                                                                  |   |        | 126,117   |   |         |   | 117,029 |   |
|                                                                                                                                              |   | $           | 1,666,127 |   |         | $      | 1,614,773 |   |

----

| SOUTHEASTERN BANK FINANCIAL CORPORATION                    |   |
|------------------------------------------------------------|--------|
| Consolidated Statements of Income and Comprehensive Income |   |
| (Dollars in thousands, except share data)                  |   |
|                                                                            |   | Three Months Ended |   |   | Six Months Ended |   |
|---------------------------------------------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                                                            |   | June 30,           |   |   | June 30,         |   |
|                                                                            |   | 2012               |   |   | 2011             |   |   | 2012 |   |   | 2011 |   |
| Interest income:                                                                |   |               |   |   |             |   |   |   |   |   |   |   |
| Loans, including fees                                                           |   | $                  | 11,558 |   |             | $      | 12,827 |   |   | $ | 23,218 |   |   | $ | 25,455 |   |
| Investment securities                                                           |   |               | 4,422  |   |             |   | 4,510 |   |   |   | 8,667 |   |   |   | 8,830 |   |
| Interest-bearing deposits in other banks                                        |   |               | 22     |   |             |   | 35 |   |   |   | 47 |   |   |   | 70 |   |
| Total interest income                                                           |   |               | 16,002 |   |             |   | 17,372 |   |   |   | 31,932 |   |   |   | 34,355 |   |
| Interest expense:                                                               |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                        |   |               | 2,377  |   |             |   | 3,839 |   |   |   | 5,091 |   |   |   | 7,907 |   |
| Securities sold under repurchase agreements                                     |   |               | 8      |   |             |   | 1 |   |   |   | 9 |   |   |   | 3 |   |
| Other borrowings                                                                |   |               | 631    |   |             |   | 663 |   |   |   | 1,227 |   |   |   | 1,377 |   |
| Total interest expense                                                          |   |               | 3,016  |   |             |   | 4,503 |   |   |   | 6,327 |   |   |   | 9,287 |   |
|                                                                            |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                             |   |               | 12,986 |   |             |   | 12,869 |   |   |   | 25,605 |   |   |   | 25,068 |   |
| Provision for loan losses                                                       |   |               | 1,950  |   |             |   | 3,424 |   |   |   | 4,166 |   |   |   | 6,664 |   |
| Net interest income after provision for loan losses                             |   |               | 11,036 |   |             |   | 9,445 |   |   |   | 21,439 |   |   |   | 18,404 |   |
|                                                                            |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest income:                                                             |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Service charges and fees on deposits                                            |   |               | 1,685  |   |             |   | 1,750 |   |   |   | 3,296 |   |   |   | 3,328 |   |
| Gain on sales of loans                                                          |   |               | 2,003  |   |             |   | 1,720 |   |   |   | 4,022 |   |   |   | 2,927 |   |
| Gain on sale of fixed assets, net                                               |   |               | 8      |   |             |   | - |   |   |   | 6 |   |   |   | 17 |   |
| Investment securities gains (losses), net                                       |   |               | 101    |   |             |   | (30 | ) |   |   | 478 |   |   |   | 118 |   |
| Other-than-temporary loss                                                       |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Total impairment loss                                                           |   |               | (13    | )      |             |   | - |   |   |   | (13 | ) |   |   | (127 | ) |
| Less loss recognized in other comprehensive income                              |   |               | (4     | )      |             |   | - |   |   |   | (4 | ) |   |   | (65 | ) |
| Net impairment loss recognized in earnings                                      |   |               | (9     | )      |             |   | - |   |   |   | (9 | ) |   |   | (62 | ) |
| Retail investment income                                                        |   |               | 505    |   |             |   | 507 |   |   |   | 1,027 |   |   |   | 964 |   |
| Trust service fees                                                              |   |               | 288    |   |             |   | 292 |   |   |   | 577 |   |   |   | 565 |   |
| Earnings from cash surrender value of bank-owned life insurance                 |   |               | 265    |   |             |   | 248 |   |   |   | 526 |   |   |   | 466 |   |
| Miscellaneous income                                                            |   |               | 176    |   |             |   | 191 |   |   |   | 366 |   |   |   | 404 |   |
| Total noninterest income                                                        |   |               | 5,022  |   |             |   | 4,678 |   |   |   | 10,289 |   |   |   | 8,727 |   |
| Noninterest expense:                                                            |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and other personnel expense                                            |   |               | 6,543  |   |             |   | 5,654 |   |   |   | 12,740 |   |   |   | 11,218 |   |
| Occupancy expenses                                                              |   |               | 1,043  |   |             |   | 1,112 |   |   |   | 2,097 |   |   |   | 2,227 |   |
| Other real estate losses, net                                                   |   |               | 688    |   |             |   | 366 |   |   |   | 1,349 |   |   |   | 461 |   |
| Other operating expenses                                                        |   |               | 2,971  |   |             |   | 2,931 |   |   |   | 5,982 |   |   |   | 5,932 |   |
| Total noninterest expense                                                       |   |               | 11,245 |   |             |   | 10,063 |   |   |   | 22,168 |   |   |   | 19,838 |   |
|                                                                            |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income before income taxes                                                      |   |               | 4,813  |   |             |   | 4,060 |   |   |   | 9,560 |   |   |   | 7,293 |   |
| Income tax expense                                                              |   |               | 1,452  |   |             |   | 1,255 |   |   |   | 2,897 |   |   |   | 2,186 |   |
| Net income                                                                      |   | $                  | 3,361  |   |             | $      | 2,805 |   |   | $ | 6,663 |   |   | $ | 5,107 |   |
|                                                                            |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income:                                                     |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized loss on derivatives                                                  |   |               | (839   | )      |             |   | (106 | ) |   |   | (358 | ) |   |   | (106 | ) |
| Unrealized gain on securities available-for-sale                                |   |               | 4,879  |   |             |   | 9,128 |   |   |   | 4,727 |   |   |   | 7,656 |   |
| Reclassification adjustment for realized (gain) loss on securities, net of OTTI |   |               | (92    | )      |             |   | 30 |   |   |   | (469 | ) |   |   | (56 | ) |
| Tax effect                                                                      |   |               | (1,535 | )      |             |   | (3,521 | ) |   |   | (1,517 | ) |   |   | (2,915 | ) |
| Total other comprehensive income                                                |   |               | 2,413  |   |             |   | 5,531 |   |   |   | 2,383 |   |   |   | 4,579 |   |
| Comprehensive income                                                            |   | $                  | 5,774  |   |             | $      | 8,336 |   |   | $ | 9,046 |   |   | $ | 9,686 |   |

----

| SOUTHEASTERN BANK FINANCIAL CORPORATION                    |   |
|------------------------------------------------------------|--------|
| Consolidated Statements of Income and Comprehensive Income |   |
| (Dollars in thousands, except share data)                  |   |
|                                                                       |   | Three Months Ended |      |   | Six Months Ended |   |
|----------------------------------------------------------------------------|--------|--------------------|-----------|--------|------------------|--------|
|                                                                       |   | June 30,           |      |   | June 30,         |   |
|                                                                       |   | 2012               |      |   | 2011             |   |   | 2012 |   |   | 2011 |   |
|                                                                       |   |               |      |   |             |   |   |   |   |   |   |   |
| Basic net income per share                                                 |   | $                  | 0.50      |   |             | $      | 0.42 |   |   | $ | 1.00 |   |   | $ | 0.76 |   |
|                                                                       |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Diluted net income per share                                               |   |               | 0.50      |   |             |   | 0.42 |   |   |   | 1.00 |   |   |   | 0.76 |   |
|                                                                       |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average common shares outstanding                                 |   |               | 6,679,371 |   |             |   | 6,676,467 |   |   |   | 6,678,927 |   |   |   | 6,676,161 |   |
|                                                                       |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common and common equivalent shares outstanding |   |               | 6,679,371 |   |             |   | 6,676,467 |   |   |   | 6,678,927 |   |   |   | 6,676,161 |   |

----

| SOUTHEASTERN BANK FINANCIAL CORPORATION |
|-----------------------------------------|
| Consolidated Statements of Cash Flows   |
| (Dollars in thousands)                  |

|                                                                             |   |                   |     |   |   |   |
|----------------------------------------------------------------------------------|--------|------------------------|----------|--------|--------|--------|
|                                                                             |   |  Six Months Ended |     |
|                                                                             |   | June 30,               |     |
|                                                                             |   | 2012                   |     |   | 2011   |   |
| Cash flows from operating activities:                                            |   |                   |     |   |   |   |
| Net income                                                                       |   | $                      | 6,663    |   |   | $      | 5,107 |   |
| Adjustments to reconcile net income to net cash provided by operating activities |   |                   |     |   |   |   |   |   |
| Depreciation                                                                     |   |                   | 1,104    |   |   |   | 1,254 |   |
| Deferred income tax benefit                                                      |   |                   | (317     | )      |   |   | (1,238 | ) |
| Provision for loan losses                                                        |   |                   | 4,166    |   |   |   | 6,664 |   |
| Net investment securities gains                                                  |   |                   | (478     | )      |   |   | (118 | ) |
| Other-than-temporary impairment losses                                           |   |                   | 9        |   |   |   | 62 |   |
| Net amortization of premiums on investment securities                            |   |                   | 2,300    |   |   |   | 1,609 |   |
| Earnings from CSV of bank-owned life insurance                                   |   |                   | (526     | )      |   |   | (466 | ) |
| Stock options compensation cost                                                  |   |                   | 22       |   |   |   | 63 |   |
| Gain on disposal of premises and equipment                                       |   |                   | (6       | )      |   |   | (17 | ) |
| Loss on the sale of other real estate                                            |   |                   | 852      |   |   |   | 213 |   |
| Provision for other real estate valuation allowance                              |   |                   | 497      |   |   |   | 248 |   |
| Gain on sales of loans                                                           |   |                   | (4,022   | )      |   |   | (2,927 | ) |
| Real estate loans originated for sale                                            |   |                   | (139,226 | )      |   |   | (102,402 | ) |
| Proceeds from sales of real estate loans                                         |   |                   | 145,666  |   |   |   | 102,191 |   |
| (Increase) decrease in accrued interest receivable                               |   |                   | (261     | )      |   |   | 92 |   |
| Increase in other assets                                                         |   | (797                   | )        |   |   | (387   | ) |
| Increase (decrease) in accrued interest payable and other liabilities            |   |                   | 552      |   |   |   | (110 | ) |
| Net cash provided by operating activities                                        |   |                   | 16,198   |   |   |   | 9,838 |   |
|                                                                             |   |                   |     |   |   |   |   |   |
| Cash flows from investing activities:                                            |   |                   |     |   |   |   |   |   |
| Proceeds from sales of securities                                                |   |                   | 62,320   |   |   |   | 59,984 |   |
| Proceeds from maturities and calls of available-for-sale securities              |   |                   | 118,661  |   |   |   | 77,875 |   |
| Purchase of available-for-sale securities                                        |   |                   | (240,164 | )      |   |   | (114,700 | ) |
| Purchase of restricted equity securities                                         |   |                   | (500     | )      |   |   | (38 | ) |
| Proceeds from redemption of FHLB stock                                           |   |                   | 187      |   |   |   | 291 |   |
| Net increase in loans                                                            |   |                   | (12,031  | )      |   |   | (7,970 | ) |
| Purchase of bank-owned life insurance                                            |   |                   | -        |   |   |   | (5,500 | ) |
| Additions to premises and equipment                                              |   |                   | (285     | )      |   |   | (403 | ) |
| Proceeds from sale of other real estate                                          |   |                   | 3,710    |   |   |   | 2,085 |   |
| Proceeds from sale of premises and equipment                                     |   |                   | 8        |   |   |   | 36 |   |
| Net cash (used in) provided by investing activities                              |   |                   | (68,094  | )      |   |   | 11,660 |   |

----

| SOUTHEASTERN BANK FINANCIAL CORPORATION |   |
|-----------------------------------------|--------|
| Consolidated Statements of Cash Flows   |   |
| (Dollars in thousands)                  |   |
|                                                         |   |             |    |   |   |   |
|--------------------------------------------------------------|--------|------------------|---------|--------|--------|--------|
|                                                         |   |
|                                                         |   |             |    |   |   |   |
|                                                         |   | Six Months Ended |    |
|                                                         |   | June 30,         |    |
|                                                         |   | 2012             |    |   | 2011   |   |
|                                                         |   |             |    |   |   |   |
| Cash flows from financing activities:                        |   |             |    |   |   |   |
| Net increase (decrease) in deposits                          |   |             | 15,793  |   |   |   | (8,737 | ) |
| Net decrease in securities sold under repurchase agreements  |   |             | (37     | )      |   |   | (207 | ) |
| Payments of Federal Home Loan Bank advances                  |   |             | -       |   |   |   | (8,000 | ) |
| Advances from Federal Home Loan Bank                         |   |             | 27,000  |   |   |   | - |   |
| Payments on subordinated debentures                          |   |             | (1,400  | )      |   |   | - |   |
| Proceeds from Directors’ stock purchase plan           |   |             | 19      |   |   |   | 15 |   |
| Net cash provided by (used in) financing activities          |   |             | 41,375  |   |   |   | (16,929 | ) |
|                                                         |   |             |    |   |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents         |   |             | (10,521 | )      |   |   | 4,569 |   |
| Cash and cash equivalents at beginning of period             |   |             | 69,841  |   |   |   | 65,115 |   |
| Cash and cash equivalents at end of period                   |   | $                | 59,320  |   |   | $      | 69,684 |   |
|                                                         |   |             |    |   |   |   |   |   |
| Supplemental disclosures of cash paid during the period for: |   |             |    |   |   |   |   |   |
| Interest                                                     |   | $                | 6,273   |   |   | $      | 9,918 |   |
| Income taxes                                                 |   |             | 3,683   |   |   |   | 3,054 |   |
|                                                         |   |             |    |   |   |   |   |   |
| Supplemental information on noncash investing activities:    |   |             |    |   |   |   |   |   |
| Loans transferred to other real estate                       |   | $                | 6,623   |   |   | $      | 3,353 |   |

----

----

----

----

|   | ● | Acquisition Development and Construction (“ADC”) – CSRA |
|--------|---------|---------------------------------------------------------------------------|

|   | ● | ADC – Other |
|--------|---------|-------------------|

|   | ● | Commercial Real Estate – Non owner occupied |
|--------|---------|---------------------------------------------------|

|   | ● | Commercial Real Estate – Owner occupied |
|--------|---------|-----------------------------------------------|

|   | ● | 1-4 Family |
|--------|---------|------------|

|   | ● | Consumer |
|--------|---------|----------|

----

----

|   | ● | Loans are grouped according in categories of similar risk characteristics (Portfolio segments) |
|--------|---------|------------------------------------------------------------------------------------------------|

|   | ● | For each loan category, a four year average rolling historical net loss rate is calculated, with the loss rate more heavily weighted to the most recent two years loss history.  The historical loss ratios are adjusted for internal and external qualitative factors within each loan category.  The qualitative factor adjustment may be further increased for loan classifications of watch rated and substandard within each category.  Factors include: |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | levels and trends in delinquencies and impaired/classified/graded loans; |
|--------|---|--------------------------------------------------------------------------|

|   | o | changes in the quality of the loan review system; |
|--------|---|---------------------------------------------------|

|   | o | trends in volume and terms of loans; |
|--------|---|--------------------------------------|

|   | o | effects of changes in risk selection and underwriting standards, and other changes in lending policies, procedures and practices; |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------|

|   | o | experience, ability, and depth of lending management and other relevant staff; |
|--------|---|--------------------------------------------------------------------------------|

|   | o | national and local economic trends and conditions; |
|--------|---|----------------------------------------------------|

|   | o | changes in the value of underlying collateral; |
|--------|---|------------------------------------------------|

|   | o | other external factors-competition, legal and regulatory requirements; |
|--------|---|------------------------------------------------------------------------|

|   | o | effects of changes in credit concentrations |
|--------|---|---------------------------------------------|

|   | ● | The resultant loss factor is applied to each respective loan pool to calculate the ALLL for each loan pool. |
|--------|---------|-------------------------------------------------------------------------------------------------------------|

|   | ● | The total of each loan pool is then added to the ALLL determined for individual loans evaluated for impairment in accordance with ASC 310. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

|                                             |   | June 30, 2012 |    |
|--------------------------------------------------|--------|---------------|---------|
|                                             |   |          |    |   | Gross |   |   | Gross |   |   |   |   |
|                                             |   | Amortized     |    |   | unrealized |   |   | unrealized |   |   | Estimated |   |
|                                             |   | cost          |    |   | gains |   |   | losses |   |   | fair value |   |
|                                             |   |          |    |   | (Dollars in thousands) |   |   |   |   |
| Available-for-sale                               |   |          |    |   |   |   |   |   |   |   |   |   |
| Obligations of U.S. Government agencies          |   | $             | 169,995 |   |   |   | 990 |   |   |   | (105 | ) |   |   | 170,880 |   |
| Obligations of states and political subdivisions |   |          | 112,420 |   |   |   | 6,828 |   |   |   | (138 | ) |   |   | 119,110 |   |
| Mortgage backed securities                       |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. GSE’s* MBS - residential              |   |          | 145,407 |   |   |   | 4,189 |   |   |   | (19 | ) |   |   | 149,577 |   |
| U.S. GSE’s CMO                             |   |          | 143,906 |   |   |   | 1,938 |   |   |   | (538 | ) |   |   | 145,306 |   |
| Other CMO                                        |   |          | 2,172   |   |   |   | 26 |   |   |   | (220 | ) |   |   | 1,978 |   |
| Corporate bonds                                  |   |          | 78,999  |   |   |   | 690 |   |   |   | (1,171 | ) |   |   | 78,518 |   |
|                                             |   | $             | 652,899 |   |   |   | 14,661 |   |   |   | (2,191 | ) |   |   | 665,369 |   |

----

|                                             |   | December 31, 2011 |    |
|--------------------------------------------------|--------|-------------------|---------|
|                                             |   |              |    |   | Gross |   |   | Gross |   |   |   |   |
|                                             |   | Amortized         |    |   | unrealized |   |   | unrealized |   |   | Estimated |   |
|                                             |   | cost              |    |   | gains |   |   | losses |   |   | fair value |   |
|                                             |   |              |    |   | (Dollars in thousands) |   |   |   |   |
| Available-for-sale                               |   |              |    |   |   |   |   |   |   |   |   |   |
| Obligations of U.S. Government agencies          |   | $                 | 169,137 |   |   |   | 758 |   |   |   | (143 | ) |   |   | 169,752 |   |
| Obligations of states and political subdivisions |   |              | 98,305  |   |   |   | 4,641 |   |   |   | (86 | ) |   |   | 102,860 |   |
| Mortgage backed securities                       |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. GSE’s MBS - residential               |   |              | 154,130 |   |   |   | 3,363 |   |   |   | (27 | ) |   |   | 157,466 |   |
| U.S. GSE’s CMO                             |   |              | 118,173 |   |   |   | 2,040 |   |   |   | (211 | ) |   |   | 120,002 |   |
| Other CMO                                        |   |              | 2,462   |   |   |   | 9 |   |   |   | (248 | ) |   |   | 2,223 |   |
| Corporate bonds                                  |   |              | 53,340  |   |   |   | 131 |   |   |   | (2,015 | ) |   |   | 51,456 |   |
|                                             |   | $                 | 595,547 |   |   |   | 10,942 |   |   |   | (2,730 | ) |   |   | 603,759 |   |

|         |   | Three Months Ended     |   |   | Six Months Ended       |   |
|--------------|--------|------------------------|--------|--------|------------------------|--------|
|         |   | June 30,               |   |   | June 30,               |   |
|         |   | 2012                   |   |   | 2011                   |   |   | 2012 |   |   | 2011 |   |
|         |   | (Dollars in thousands) |   |   | (Dollars in thousands) |   |
|         |   |                   |   |   |                   |   |
| Proceeds     |   | $                      | 29,669 |   |                   | $      | 25,508 |   |   | $ | 62,320 |   |   | $ | 59,984 |   |
| Gross Gains  |   |                   | 144    |   |                   |   | 132 |   |   |   | 588 |   |   |   | 439 |   |
| Gross Losses |   |                   | (56    | )      |                   |   | (187 | ) |   |   | (123 | ) |   |   | (358 | ) |

----

|                               |   | June 30, 2012          |    |
|------------------------------------|--------|------------------------|---------|
|                               |   | Amortized              |    |   | Estimated |   |
|                               |   | cost                   |    |   | fair value |   |
|                               |   | (Dollars in thousands) |    |
| Available-for-sale:                |   |                   |    |   |   |   |
| One year or less                   |   | $                      | 1,001   |   |   |   | 987 |   |
| After one year through five years  |   |                   | 46,315  |   |   |   | 46,579 |   |
| After five years through ten years |   |                   | 83,789  |   |   |   | 85,908 |   |
| After ten years                    |   |                   | 521,794 |   |   |   | 531,895 |   |
|                               |   | $                      | 652,899 |   |   |   | 665,369 |   |

|                                             |   | June 30, 2012          |    |
|--------------------------------------------------|--------|------------------------|---------|
|                                             |   | Less than 12 months    |    |   | 12 months or longer |   |   | Total |   |
|                                             |   | Estimated              |    |   | Unrealized |   |   | Estimated |   |   | Unrealized |   |   | Estimated |   |   | Unrealized |   |
|                                             |   | fair value             |    |   | loss |   |   | fair value |   |   | loss |   |   | fair value |   |   | loss |   |
| Temporarily impaired                             |   | (Dollars in thousands) |    |
| Obligations of U.S. Government agencies          |   | $                      | 18,616  |   |   |   | 89 |   |   |   | 3,995 |   |   |   | 16 |   |   |   | 22,611 |   |   |   | 105 |   |
| Obligations of states and political subdivisions |   |                   | 7,137   |   |   |   | 138 |   |   |   | — |   |   |   | — |   |   |   | 7,137 |   |   |   | 138 |   |
| Mortgage backed securities                       |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. GSE’s MBS - residential               |   |                   | 10,176  |   |   |   | 19 |   |   |   | — |   |   |   | — |   |   |   | 10,176 |   |   |   | 19 |   |
| U.S. GSE’s CMO                             |   |                   | 43,382  |   |   |   | 538 |   |   |   | 295 |   |   |   | — |   |   |   | 43,677 |   |   |   | 538 |   |
| Other CMO                                        |   |                   | 222     |   |   |   | 6 |   |   |   | 1,206 |   |   |   | 210 |   |   |   | 1,428 |   |   |   | 216 |   |
| Corporate bonds                                  |   |                   | 29,890  |   |   |   | 381 |   |   |   | 12,572 |   |   |   | 790 |   |   |   | 42,462 |   |   |   | 1,171 |   |
|                                             |   | $                      | 109,423 |   |   |   | 1,171 |   |   |   | 18,068 |   |   |   | 1,016 |   |   |   | 127,491 |   |   |   | 2,187 |   |
|                                             |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other-than-temporarily impaired                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage backed securities                       |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other CMO                                        |   | $                      | — |   |   |   | — |   |   |   | 446 |   |   |   | 4 |   |   |   | 446 |   |   |   | 4 |   |
|                                             |   | $                      | 109,423 |   |   |   | 1,171 |   |   |   | 18,514 |   |   |   | 1,020 |   |   |   | 127,937 |   |   |   | 2,191 |   |

----

|                                             |   | December 31, 2011      |    |
|--------------------------------------------------|--------|------------------------|---------|
|                                             |   | Less than 12 months    |    |   | 12 months or longer |   |   | Total |   |
|                                             |   | Estimated              |    |   | Unrealized |   |   | Estimated |   |   | Unrealized |   |   | Estimated |   |   | Unrealized |   |
|                                             |   | fair value             |    |   | loss |   |   | fair value |   |   | loss |   |   | fair value |   |   | loss |   |
|                                             |   | (Dollars in thousands) |    |
| Temporarily impaired                             |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations of U.S. Government agencies          |   | $                      | 41,841  |   |   |   | 123 |   |   |   | 4,549 |   |   |   | 20 |   |   |   | 46,390 |   |   |   | 143 |   |
| Obligations of states and political subdivisions |   |                   | 4,977   |   |   |   | 83 |   |   |   | 449 |   |   |   | 3 |   |   |   | 5,426 |   |   |   | 86 |   |
| Mortgage backed securities                       |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. GSE’s MBS - residential               |   |                   | 12,055  |   |   |   | 23 |   |   |   | 2,348 |   |   |   | 4 |   |   |   | 14,403 |   |   |   | 27 |   |
| U.S. GSE’s CMO                             |   |                   | 27,998  |   |   |   | 176 |   |   |   | 5,005 |   |   |   | 35 |   |   |   | 33,003 |   |   |   | 211 |   |
| Other CMO                                        |   |                   | 250     |   |   |   | 10 |   |   |   | 1,305 |   |   |   | 221 |   |   |   | 1,555 |   |   |   | 231 |   |
| Corporate bonds                                  |   |                   | 25,814  |   |   |   | 833 |   |   |   | 17,817 |   |   |   | 1,182 |   |   |   | 43,631 |   |   |   | 2,015 |   |
|                                             |   | $                      | 112,935 |   |   |   | 1,248 |   |   |   | 31,473 |   |   |   | 1,465 |   |   |   | 144,408 |   |   |   | 2,713 |   |
|                                             |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other-than-temporarily impaired                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage backed securities                       |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other CMO                                        |   | $                      | — |   |   |   | — |   |   |   | 478 |   |   |   | 17 |   |   |   | 478 |   |   |   | 17 |   |
|                                             |   | $                      | 112,935 |   |   |   | 1,248 |   |   |   | 31,951 |   |   |   | 1,482 |   |   |   | 144,886 |   |   |   | 2,730 |   |

----

----

----

| Beginning balance, January 1, 2012                                                                                                                                                              |   | $      | 673    |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Amounts related to credit loss for which an other-than-temporary impairment was not previously recognized                                                                                       |   |   | -      |   |
| Additions/Subtractions                                                                                                                                                                          |   |   |   |   |
| Amounts realized for securities sold during the period                                                                                                                                          |   |   | -      |   |
| Amounts related to securities for which the company intends to sell or that it will be more likely than not that the company will be required to sell prior to recovery of amortized cost basis |   |   | -      |   |
| Reductions for increase in cash flows expected to be collected that are recognized over the remaining life of the security                                                                      |   |   | -      |   |
| Increases to the amount related to the credit loss for which other-than-temporary impairment was previously recognized                                                                          |   |   | 9      |   |
|                                                                                                                                                                                            |   |   |   |   |
| Ending balance, June 30, 2012                                                                                                                                                                   |   | $      | 682    |   |

----

----

| Beginning balance, January 1, 2011                                                                                                                                                              |   | $      | 571    |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Amounts related to credit loss for which an other-than-temporary impairment was not previously recognized                                                                                       |   |   | -      |   |
| Additions/Subtractions                                                                                                                                                                          |   |   |   |   |
| Amounts realized for securities sold during the period                                                                                                                                          |   |   | -      |   |
| Amounts related to securities for which the company intends to sell or that it will be more likely than not that the company will be required to sell prior to recovery of amortized cost basis |   |   | -      |   |
| Reductions for increase in cash flows expected to be collected that are recognized over the remaining life of the security                                                                      |   |   | -      |   |
| Increases to the amount related to the credit loss for which other-than-temporary impairment was previously recognized                                                                          |   |   | 62     |   |
|                                                                                                                                                                                            |   |   |   |   |
| Ending balance, June 30, 2011                                                                                                                                                                   |   | $      | 633    |   |

----

|                                        |   | June 30, 2012          |    |   | December 31, 2011 |   |
|---------------------------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                                        |   | (Dollars in thousands) |    |
|                                        |   |                   |    |   |              |   |
| Commercial, financial, and agricultural     |   | $                      | 179,794 |   |              |   | 171,750 |   |
| Real estate:                                |   |                   |    |   |              |   |   |   |
| Commercial                                  |   |                   | 326,363 |   |              |   | 332,666 |   |
| Residential                                 |   |                   | 163,408 |   |              |   | 159,022 |   |
| Acquisition, development and construction   |   |                   | 163,334 |   |              |   | 168,050 |   |
| Consumer installment                        |   |                   | 14,612  |   |              |   | 14,412 |   |
|                                        |   | $                      | 847,511 |   |              |   | 845,900 |   |
| Less allowance for loan losses              |   |                   | 29,552  |   |              |   | 29,046 |   |
| Less deferred loan origination fees (costs) |   |                   | (248    | )      |              |   | (110 | ) |
|                                        |   | $                      | 818,207 |   |              |   | 816,964 |   |

|                       |   | June 30, 2012          |   |
|----------------------------|--------|------------------------|--------|
|                       |   | Commercial,            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   | Financial, and         |   |   | CRE - Owner |   |   | CRE - Non Owner |   |   | Residential |   |   | ADC |   |   | ADC |   |   |   |   |   |   |   |
|                       |   | Agricultural           |   |   | Occupied |   |   | Occupied |   |   | Real Estate |   |   | CSRA |   |   | Other |   |   | Consumer |   |   | Total |   |
|                       |   | (Dollars in thousands) |   |
| Allowance for loan losses: |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning balance          |   | $                      | 4,183  |   |   |   | 6,285 |   |   |   | 4,476 |   |   |   | 5,607 |   |   |   | 4,236 |   |   |   | 3,819 |   |   |   | 440 |   |   |   | 29,046 |   |
| Charge-offs                |   |                   | 658    |   |   |   | 1,049 |   |   |   | 368 |   |   |   | 610 |   |   |   | 258 |   |   |   | 710 |   |   |   | 473 |   |   |   | 4,126 |   |
| Recoveries                 |   |                   | 179    |   |   |   | 2 |   |   |   | 7 |   |   |   | 67 |   |   |   | 22 |   |   |   | 1 |   |   |   | 188 |   |   |   | 466 |   |
| Provision                  |   |                   | 1,081  |   |   |   | 1,464 |   |   |   | (248 | ) |   |   | 757 |   |   |   | 118 |   |   |   | 526 |   |   |   | 468 |   |   |   | 4,166 |   |
| Ending balance             |   | $                      | 4,785  |   |   |   | 6,702 |   |   |   | 3,867 |   |   |   | 5,821 |   |   |   | 4,118 |   |   |   | 3,636 |   |   |   | 623 |   |   |   | 29,552 |   |
|                       |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   | June 30, 2011          |   |
|                       |   | Commercial,            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   | Financial, and         |   |   | CRE - Owner |   |   | CRE - Non Owner |   |   | Residential |   |   | ADC |   |   | ADC |   |   |   |   |   |   |   |   |   |
|                       |   | Agricultural           |   |   | Occupied |   |   | Occupied |   |   | Real Estate |   |   | CSRA |   |   | Other |   |   | Consumer |   |   | Total |   |
|                       |   | (Dollars in thousands) |   |
| Allowance for loan losses: |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning balance          |   | $                      | 3,463  |   |   |   | 3,921 |   |   |   | 4,777 |   |   |   | 5,372 |   |   |   | 5,097 |   |   |   | 3,396 |   |   |   | 631 |   |   |   | 26,657 |   |
| Charge-offs                |   |                   | 1,304  |   |   |   | 115 |   |   |   | 512 |   |   |   | 764 |   |   |   | 760 |   |   |   | 1,784 |   |   |   | 73 |   |   |   | 5,312 |   |
| Recoveries                 |   |                   | 304    |   |   |   | — |   |   |   | — |   |   |   | 8 |   |   |   | — |   |   |   | 6 |   |   |   | 83 |   |   |   | 401 |   |
| Provision                  |   |                   | 1,581  |   |   |   | 2,026 |   |   |   | 235 |   |   |   | 683 |   |   |   | 1,290 |   |   |   | 893 |   |   |   | (44 | ) |   |   | 6,664 |   |
| Ending balance             |   | $                      | 4,044  |   |   |   | 5,832 |   |   |   | 4,500 |   |   |   | 5,299 |   |   |   | 5,627 |   |   |   | 2,511 |   |   |   | 597 |   |   |   | 28,410 |   |

----

|                                  |   | June 30, 2012          |    |
|---------------------------------------|--------|------------------------|---------|
|                                  |   | Commercial,            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   | Financial, and         |    |   | CRE - Owner |   |   | CRE - Non Owner |   |   | Residential |   |   | ADC |   |   | ADC |   |   |   |   |   |   |   |
|                                  |   | Agricultural           |    |   | Occupied |   |   | Occupied |   |   | Real Estate |   |   | CSRA |   |   | Other |   |   | Consumer |   |   | Total |   |
|                                  |   | (Dollars in thousands) |    |
| Allowance for loan losses:            |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending balance attributable to loans: |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment |   | $                      | 42      |   |   |   | — |   |   |   | 61 |   |   |   | 293 |   |   |   | 17 |   |   |   | — |   |   |   | 25 |   |   |   | 438 |   |
| Collectively evaluated for impairment |   |                   | 4,743   |   |   |   | 6,702 |   |   |   | 3,806 |   |   |   | 5,528 |   |   |   | 4,101 |   |   |   | 3,636 |   |   |   | 598 |   |   |   | 29,114 |   |
|                                  |   | $                      | 4,785   |   |   |   | 6,702 |   |   |   | 3,867 |   |   |   | 5,821 |   |   |   | 4,118 |   |   |   | 3,636 |   |   |   | 623 |   |   |   | 29,552 |   |
|                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans:                                |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment |   |                   | 1,077   |   |   |   | 2,461 |   |   |   | 12,828 |   |   |   | 5,991 |   |   |   | 8,424 |   |   |   | 2,745 |   |   |   | 145 |   |   |   | 33,671 |   |
| Collectively evaluated for impairment |   |                   | 178,717 |   |   |   | 193,352 |   |   |   | 117,722 |   |   |   | 157,417 |   |   |   | 126,393 |   |   |   | 25,772 |   |   |   | 14,467 |   |   |   | 813,840 |   |
|                                  |   | $                      | 179,794 |   |   |   | 195,813 |   |   |   | 130,550 |   |   |   | 163,408 |   |   |   | 134,817 |   |   |   | 28,517 |   |   |   | 14,612 |   |   |   | 847,511 |   |
|                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   | December 31, 2011      |    |
|                                  |   | Commercial,            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   | Financial, and         |    |   | CRE - Owner |   |   | CRE - Non Owner |   |   | Residential |   |   | ADC |   |   | ADC |   |   |   |   |   |   |   |   |   |
|                                  |   | Agricultural           |    |   | Occupied |   |   | Occupied |   |   | Real Estate |   |   | CSRA |   |   | Other |   |   | Consumer |   |   | Total |   |
|                                  |   | (Dollars in thousands) |    |
| Allowance for loan losses:            |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending balance attributable to loans: |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment |   | $                      | — |   |   |   | — |   |   |   | — |   |   |   | 96 |   |   |   | — |   |   |   | 171 |   |   |   | — |   |   |   | 267 |   |
| Collectively evaluated for impairment |   |                   | 4,183   |   |   |   | 6,285 |   |   |   | 4,476 |   |   |   | 5,511 |   |   |   | 4,236 |   |   |   | 3,648 |   |   |   | 440 |   |   |   | 28,779 |   |
|                                  |   | $                      | 4,183   |   |   |   | 6,285 |   |   |   | 4,476 |   |   |   | 5,607 |   |   |   | 4,236 |   |   |   | 3,819 |   |   |   | 440 |   |   |   | 29,046 |   |
|                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans:                                |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment |   |                   | 1,920   |   |   |   | 5,472 |   |   |   | 15,988 |   |   |   | 4,191 |   |   |   | 9,645 |   |   |   | 4,697 |   |   |   | 141 |   |   |   | 42,054 |   |
| Collectively evaluated for impairment |   |                   | 169,830 |   |   |   | 188,548 |   |   |   | 122,658 |   |   |   | 154,831 |   |   |   | 130,233 |   |   |   | 23,475 |   |   |   | 14,271 |   |   |   | 803,846 |   |
|                                  |   | $                      | 171,750 |   |   |   | 194,020 |   |   |   | 138,646 |   |   |   | 159,022 |   |   |   | 139,878 |   |   |   | 28,172 |   |   |   | 14,412 |   |   |   | 845,900 |   |

----

|                                                                                                                                  |   | June 30, 2012          |    |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|---------|
|                                                                                                                                  |   | Unpaid                 |    |   |   |   |   | Allowance for |   |   | Average |   |   | Interest |   |   | Cash Basis |   |
|                                                                                                                                  |   | Principal              |    |   | Recorded |   |   | Loan Losses |   |   | Recorded |   |   | Income |   |   | Interest Income |   |
|                                                                                                                                  |   | Balance                |    |   | Investment (2) |   |   | Allocated |   |   | Investment |   |   | Recognized |   |   | Recognized |   |
|                                                                                                                                  |   | (Dollars in thousands) |    |
| With no related allowance recorded: (1)                                                                                               |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial, financial, and agricultural:                                                                                              |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commerical                                                                                                                            |   | $                      | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Financial                                                                                                                             |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Agricultural                                                                                                                          |   |                   | 346     |   |   |   | 327 |   |   |   | — |   |   |   | 346 |   |   |   | — |   |   |   | — |   |
| Equity lines                                                                                                                          |   |                   | 578     |   |   |   | 578 |   |   |   | — |   |   |   | 578 |   |   |   | — |   |   |   | — |   |
| Other                                                                                                                                 |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Commercial real estate:                                                                                                               |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                                                                                                                        |   |                   | 3,206   |   |   |   | 2,461 |   |   |   | — |   |   |   | 2,727 |   |   |   | 5 |   |   |   | 5 |   |
| Non Owner occupied                                                                                                                    |   |                   | 13,022  |   |   |   | 11,759 |   |   |   | — |   |   |   | 15,136 |   |   |   | 43 |   |   |   | 43 |   |
| Residential real estate:                                                                                                              |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by first liens                                                                                                                |   |                   | 4,480   |   |   |   | 3,604 |   |   |   | — |   |   |   | 3,990 |   |   |   | — |   |   |   | — |   |
| Secured by junior liens                                                                                                               |   |                   | 296     |   |   |   | 233 |   |   |   | — |   |   |   | 256 |   |   |   | 2 |   |   |   | 2 |   |
| Acquisition, development and construction:                                                                                            |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                           |   |                   | 208     |   |   |   | 208 |   |   |   | — |   |   |   | 201 |   |   |   | — |   |   |   | — |   |
| Other                                                                                                                                 |   |                   | 12,919  |   |   |   | 10,762 |   |   |   | — |   |   |   | 11,156 |   |   |   | — |   |   |   | — |   |
| Consumer                                                                                                                              |   |                   | 78      |   |   |   | 36 |   |   |   | — |   |   |   | 75 |   |   |   | — |   |   |   | — |   |
|                                                                                                                                  |   |                   | 35,133  |   |   |   | 29,968 |   |   |   | — |   |   |   | 34,465 |   |   |   | 50 |   |   |   | 50 |   |
|                                                                                                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With an allowance recorded:                                                                                                           |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial, financial, and agricultural:                                                                                              |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commerical                                                                                                                            |   |                   | 172     |   |   |   | 172 |   |   |   | 42 |   |   |   | 172 |   |   |   | — |   |   |   | — |   |
| Financial                                                                                                                             |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Agricultural                                                                                                                          |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Equity lines                                                                                                                          |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Other                                                                                                                                 |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Commercial real estate:                                                                                                               |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                                                                                                                        |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Non Owner occupied                                                                                                                    |   |                   | 1,071   |   |   |   | 1,069 |   |   |   | 61 |   |   |   | 1,072 |   |   |   | — |   |   |   | — |   |
| Residential real estate:                                                                                                              |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by first liens                                                                                                                |   |                   | 2,159   |   |   |   | 2,154 |   |   |   | 293 |   |   |   | 2,158 |   |   |   | — |   |   |   | — |   |
| Secured by junior liens                                                                                                               |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Acquisition, development and construction:                                                                                            |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                           |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Other                                                                                                                                 |   |                   | 200     |   |   |   | 199 |   |   |   | 17 |   |   |   | 200 |   |   |   | — |   |   |   | — |   |
| Consumer                                                                                                                              |   |                   | 109     |   |   |   | 109 |   |   |   | 25 |   |   |   | 109 |   |   |   | — |   |   |   | — |   |
|                                                                                                                                  |   |                   | 3,711   |   |   |   | 3,703 |   |   |   | 438 |   |   |   | 3,711 |   |   |   | — |   |   |   | — |   |
|                                                                                                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                  |   | $                      | 38,844  |   |   |   | 33,671 |   |   |   | 438 |   |   |   | 38,176 |   |   |   | 50 |   |   |   | 50 |   |
|                                                                                                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) No specific allowance for credit losses is allocated to these loans since they are sufficiently collateralized or had charge-offs |   |                   |    |   |   |
|                                                                                                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |
| (2) Excludes accrued interest receivable and loan origination fees, net due to immateriality                                          |   |                   |    |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                                                                  |   | December 31, 2011      |    |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|---------|
|                                                                                                                                  |   | Unpaid                 |    |   |   |   |   | Allowance for |   |   | Average |   |   | Interest |   |   | Cash Basis |   |
|                                                                                                                                  |   | Principal              |    |   | Recorded |   |   | Loan Losses |   |   | Recorded |   |   | Income |   |   | Interest Income |   |
|                                                                                                                                  |   | Balance                |    |   | Investment (2) |   |   | Allocated |   |   | Investment |   |   | Recognized |   |   | Recognized |   |
|                                                                                                                                  |   | (Dollars in thousands) |    |
|                                                                                                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With no related allowance recorded: (1)                                                                                               |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial, financial, and agricultural:                                                                                              |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commerical                                                                                                                            |   | $                      | 66      |   |   |   | 66 |   |   |   | — |   |   |   | 88 |   |   |   | — |   |   |   | — |   |
| Financial                                                                                                                             |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Agricultural                                                                                                                          |   |                   | 1,267   |   |   |   | 1,123 |   |   |   | — |   |   |   | 1,165 |   |   |   | 31 |   |   |   | 31 |   |
| Equity lines                                                                                                                          |   |                   | 736     |   |   |   | 731 |   |   |   | — |   |   |   | 732 |   |   |   | — |   |   |   | — |   |
| Other                                                                                                                                 |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Commercial real estate:                                                                                                               |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                                                                                                                        |   |                   | 5,965   |   |   |   | 5,472 |   |   |   | — |   |   |   | 6,902 |   |   |   | 16 |   |   |   | 16 |   |
| Non Owner occupied                                                                                                                    |   |                   | 17,339  |   |   |   | 15,988 |   |   |   | — |   |   |   | 16,261 |   |   |   | — |   |   |   | — |   |
| Residential real estate:                                                                                                              |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by first liens                                                                                                                |   |                   | 3,872   |   |   |   | 3,258 |   |   |   | — |   |   |   | 3,977 |   |   |   | 15 |   |   |   | 15 |   |
| Secured by junior liens                                                                                                               |   |                   | 103     |   |   |   | 103 |   |   |   | — |   |   |   | 103 |   |   |   | 7 |   |   |   | 7 |   |
| Acquisition, development and construction:                                                                                            |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                           |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Other                                                                                                                                 |   |                   | 15,182  |   |   |   | 13,700 |   |   |   | — |   |   |   | 10,314 |   |   |   | — |   |   |   | — |   |
| Consumer                                                                                                                              |   |                   | 141     |   |   |   | 141 |   |   |   | — |   |   |   | 221 |   |   |   | — |   |   |   | — |   |
|                                                                                                                                  |   |                   | 44,671  |   |   |   | 40,582 |   |   |   | — |   |   |   | 39,763 |   |   |   | 69 |   |   |   | 69 |   |
|                                                                                                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With an allowance recorded:                                                                                                           |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial, financial, and agricultural:                                                                                              |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commerical                                                                                                                            |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Financial                                                                                                                             |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Agricultural                                                                                                                          |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Equity lines                                                                                                                          |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Other                                                                                                                                 |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Commercial real estate:                                                                                                               |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                                                                                                                        |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Non Owner occupied                                                                                                                    |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Residential real estate:                                                                                                              |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by first liens                                                                                                                |   |                   | 830     |   |   |   | 830 |   |   |   | 96 |   |   |   | 829 |   |   |   | — |   |   |   | — |   |
| Secured by junior liens                                                                                                               |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Acquisition, development and construction:                                                                                            |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                           |   |                   | 201     |   |   |   | 201 |   |   |   | 7 |   |   |   | 200 |   |   |   | — |   |   |   | — |   |
| Other                                                                                                                                 |   |                   | 441     |   |   |   | 441 |   |   |   | 164 |   |   |   | 441 |   |   |   | — |   |   |   | — |   |
| Consumer                                                                                                                              |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
|                                                                                                                                  |   |                   | 1,472   |   |   |   | 1,472 |   |   |   | 267 |   |   |   | 1,470 |   |   |   | — |   |   |   | — |   |
|                                                                                                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                  |   | $                      | 46,143  |   |   |   | 42,054 |   |   |   | 267 |   |   |   | 41,233 |   |   |   | 69 |   |   |   | 69 |   |
|                                                                                                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) No specific allowance for credit losses is allocated to these loans since they are sufficiently collateralized or had charge-offs |   |
|                                                                                                                                  |   |
| (2) Excludes accrued interest receivable and loan origination fees, net due to immateriality                                          |   |

----

|                                       |   | June 30, 2012          |    |
|--------------------------------------------|--------|------------------------|---------|
|                                       |   | 30 - 89 Days           |    |   | 90 Days or |   |   | Nonaccrual |   |   | Total |   |   | Loans Not |   |   |   |   |
|                                       |   | Past Due               |    |   | More Past Due |   |   | Loans |   |   | Past Due |   |   | Past Due |   |   | Total |   |
|                                       |   | (Dollars in thousands) |    |
| Commercial, financial, and agricultural:   |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commerical                                 |   | $                      | 318     |   |   |   | 8 |   |   |   | 202 |   |   |   | 528 |   |   |   | 99,319 |   |   |   | 99,847 |   |
| Financial                                  |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 15,030 |   |   |   | 15,030 |   |
| Agricultural                               |   |                   | 597     |   |   |   | — |   |   |   | 889 |   |   |   | 1,486 |   |   |   | 8,616 |   |   |   | 10,102 |   |
| Equity lines                               |   |                   | 201     |   |   |   | — |   |   |   | 1,141 |   |   |   | 1,342 |   |   |   | 35,738 |   |   |   | 37,080 |   |
| Other                                      |   |                   | — |   |   |   | — |   |   |   | 87 |   |   |   | 87 |   |   |   | 17,648 |   |   |   | 17,735 |   |
| Commercial real estate:                    |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                             |   |                   | 786     |   |   |   | — |   |   |   | 2,865 |   |   |   | 3,651 |   |   |   | 192,162 |   |   |   | 195,813 |   |
| Non Owner occupied                         |   |                   | 1,570   |   |   |   | — |   |   |   | 12,317 |   |   |   | 13,887 |   |   |   | 116,663 |   |   |   | 130,550 |   |
| Residential real estate:                   |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by first liens                     |   |                   | 1,851   |   |   |   | — |   |   |   | 5,366 |   |   |   | 7,217 |   |   |   | 148,023 |   |   |   | 155,240 |   |
| Secured by junior liens                    |   |                   | 93      |   |   |   | — |   |   |   | 313 |   |   |   | 406 |   |   |   | 7,762 |   |   |   | 8,168 |   |
| Acquisition, development and construction: |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                |   |                   | — |   |   |   | — |   |   |   | 208 |   |   |   | 208 |   |   |   | 43,136 |   |   |   | 43,344 |   |
| Other                                      |   |                   | 1,319   |   |   |   | — |   |   |   | 11,234 |   |   |   | 12,553 |   |   |   | 107,437 |   |   |   | 119,990 |   |
| Consumer                                   |   |                   | 35      |   |   |   | 2 |   |   |   | 292 |   |   |   | 329 |   |   |   | 14,283 |   |   |   | 14,612 |   |
|                                       |   | $                      | 6,770   |   |   |   | 10 |   |   |   | 34,914 |   |   |   | 41,694 |   |   |   | 805,817 |   |   |   | 847,511 |   |
|                                       |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   | December 31, 2011      |    |
|                                       |   | 30 - 89 Days           |    |   | 90 Days or |   |   | Nonaccrual |   |   | Total |   |   | Loans Not |   |   |   |   |   |
|                                       |   | Past Due               |    |   | More Past Due |   |   | Loans |   |   | Past Due |   |   | Past Due |   |   | Total |   |
|                                       |   | (Dollars in thousands) |    |
| Commercial, financial, and agricultural:   |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commerical                                 |   | $                      | 120     |   |   |   | — |   |   |   | 78 |   |   |   | 198 |   |   |   | 98,295 |   |   |   | 98,493 |   |
| Financial                                  |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 15,231 |   |   |   | 15,231 |   |
| Agricultural                               |   |                   | 287     |   |   |   | — |   |   |   | 840 |   |   |   | 1,127 |   |   |   | 13,633 |   |   |   | 14,760 |   |
| Equity lines                               |   |                   | 72      |   |   |   | — |   |   |   | 1,407 |   |   |   | 1,479 |   |   |   | 37,148 |   |   |   | 38,627 |   |
| Other                                      |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 4,639 |   |   |   | 4,639 |   |
| Commercial real estate:                    |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                             |   |                   | 1,346   |   |   |   | — |   |   |   | 6,216 |   |   |   | 7,562 |   |   |   | 186,458 |   |   |   | 194,020 |   |
| Non Owner occupied                         |   |                   | 1,373   |   |   |   | — |   |   |   | 14,740 |   |   |   | 16,113 |   |   |   | 122,533 |   |   |   | 138,646 |   |
| Residential real estate:                   |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by first liens                     |   |                   | 1,870   |   |   |   | — |   |   |   | 4,386 |   |   |   | 6,256 |   |   |   | 143,981 |   |   |   | 150,237 |   |
| Secured by junior liens                    |   |                   | 251     |   |   |   | — |   |   |   | 167 |   |   |   | 418 |   |   |   | 8,367 |   |   |   | 8,785 |   |
| Acquisition, development and construction: |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                |   |                   | — |   |   |   | — |   |   |   | 201 |   |   |   | 201 |   |   |   | 39,707 |   |   |   | 39,908 |   |
| Other                                      |   |                   | 992     |   |   |   | — |   |   |   | 14,531 |   |   |   | 15,523 |   |   |   | 112,619 |   |   |   | 128,142 |   |
| Consumer                                   |   |                   | 73      |   |   |   | — |   |   |   | 331 |   |   |   | 404 |   |   |   | 14,008 |   |   |   | 14,412 |   |
|                                       |   | $                      | 6,384   |   |   |   | — |   |   |   | 42,897 |   |   |   | 49,281 |   |   |   | 796,619 |   |   |   | 845,900 |   |

----

|                                       |   | June 30, 2012          |   |
|--------------------------------------------|--------|------------------------|--------|
|                                       |   |                   |   |   | Pre-Modification |   |   | Post-Modification |   |
|                                       |   | Number of              |   |   | Outstanding |   |   | Outstanding |   |
|                                       |   | Loans                  |   |   | Recorded Investment |   |   | Recorded Investment |   |
|                                       |   | (Dollars in thousands) |   |
| Troubled Debt Restructurings:              |   |                   |   |   |   |   |   |   |   |
| Commercial, financial, and agricultural:   |   |                   |   |   |   |   |   |   |   |
| Commerical                                 |   |                   | -      |   |   | $ | - |   |   | $ | - |   |
| Financial                                  |   |                   | -      |   |   |   | - |   |   |   | - |   |
| Agricultural                               |   |                   | -      |   |   |   | - |   |   |   | - |   |
| Equity lines                               |   |                   | -      |   |   |   | - |   |   |   | - |   |
| Other                                      |   |                   | -      |   |   |   | - |   |   |   | - |   |
| Commercial real estate:                    |   |                   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                             |   |                   | 3      |   |   |   | 711 |   |   |   | 358 |   |
| Non Owner occupied                         |   |                   | 3      |   |   |   | 1,023 |   |   |   | 925 |   |
| Residential real estate:                   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Secured by first liens                     |   |                   | 4      |   |   |   | 746 |   |   |   | 645 |   |
| Secured by junior liens                    |   |                   | 2      |   |   |   | 281 |   |   |   | 205 |   |
| Acquisition, development and construction: |   |                   |   |   |   |   |   |   |   |   |   |   |
| Residential                                |   |                   | -      |   |   |   | - |   |   |   | - |   |
| Other                                      |   |                   | -      |   |   |   | - |   |   |   | - |   |
| Consumer                                   |   |                   | 1      |   |   |   | 80 |   |   |   | 36 |   |
|                                       |   |                   | 13     |   |   | $ | 2,841 |   |   | $ | 2,169 |   |

----

|                                       |   | December 31, 2011      |   |
|--------------------------------------------|--------|------------------------|--------|
|                                       |   |                   |   |   | Pre-Modification |   |   | Post-Modification |   |
|                                       |   | Number of              |   |   | Outstanding |   |   | Outstanding |   |
|                                       |   | Loans                  |   |   | Recorded Investment |   |   | Recorded Investment |   |
|                                       |   | (Dollars in thousands) |   |
| Troubled Debt Restructurings:              |   |                   |   |   |   |   |   |   |   |
| Commercial, financial, and agricultural:   |   |                   |   |   |   |   |   |   |   |
| Commerical                                 |   |                   | 1      |   |   | $ | 72 |   |   | $ | 62 |   |
| Financial                                  |   |                   | -      |   |   |   | - |   |   |   | - |   |
| Agricultural                               |   |                   | -      |   |   |   | - |   |   |   | - |   |
| Equity lines                               |   |                   | -      |   |   |   | - |   |   |   | - |   |
| Other                                      |   |                   | -      |   |   |   | - |   |   |   | - |   |
| Commercial real estate:                    |   |                   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                             |   |                   | 3      |   |   |   | 711 |   |   |   | 579 |   |
| Non Owner occupied                         |   |                   | 4      |   |   |   | 2,451 |   |   |   | 1,954 |   |
| Residential real estate:                   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Secured by first liens                     |   |                   | 6      |   |   |   | 1,712 |   |   |   | 1,465 |   |
| Secured by junior liens                    |   |                   | 1      |   |   |   | 95 |   |   |   | 73 |   |
| Acquisition, development and construction: |   |                   |   |   |   |   |   |   |   |   |   |   |
| Residential                                |   |                   | -      |   |   |   | - |   |   |   | - |   |
| Other                                      |   |                   | -      |   |   |   | - |   |   |   | - |   |
| Consumer                                   |   |                   | 1      |   |   |   | 20 |   |   |   | 18 |   |
|                                       |   |                   | 16     |   |   | $ | 5,061 |   |   | $ | 4,151 |   |

----

|                                       |   | Three Months Ended June 30, 2012 |   |   | Three Months Ended June 30, 2011 |             |
|--------------------------------------------|--------|----------------------------------|--------|--------|----------------------------------|------------------|
|                                       |   |                             |   |   | Pre-Modification                 |             |   | Post-Modification |   |   |   |   |   | Pre-Modification |   |   | Post-Modification |   |
|                                       |   | Number of                        |   |   | Outstanding                      |             |   | Outstanding |   |   | Number of |   |   | Outstanding |   |   | Outstanding |   |
|                                       |   | Loans                            |   |   | Recorded Investment              |             |   | Recorded Investment |   |   | Loans |   |   | Recorded Investment |   |   | Recorded Investment |   |
|                                       |   | (Dollars in thousands)           |   |   | (Dollars in thousands)           |             |
| Troubled Debt Restructurings:              |   |                             |   |   |                             |             |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial, financial, and agricultural:   |   |                             |   |   |                             |             |   |   |   |   |   |   |   |   |   |   |   |   |
| Commerical                                 |   |                             | -      |   |                             | $                | - |   |   | $ | - |   |   |   | - |   |   | $ | - |   |   | $ | - |   |
| Financial                                  |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Agricultural                               |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Equity lines                               |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other                                      |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial real estate:                    |   |                             |   |   |                             |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                             |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | 2 |   |   |   | 519 |   |   |   | 398 |   |
| Non Owner occupied                         |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Residential real estate:                   |   |                             |   |   |                             |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by first liens                     |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | 3 |   |   |   | 688 |   |   |   | 584 |   |
| Secured by junior liens                    |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Acquisition, development and construction: |   |                             |   |   |                             |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other                                      |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                                   |   |                             | 1      |   |                             |             | 80 |   |   |   | 36 |   |   |   | 1 |   |   |   | 20 |   |   |   | 19 |   |
|                                       |   |                             | 1      |   |                             | $                | 80 |   |   | $ | 36 |   |   |   | 6 |   |   | $ | 1,227 |   |   | $ | 1,001 |   |
|                                       |   |                             |   |   |                             |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   | Six Months Ended June 30, 2012   |   |   | Six Months Ended June 30, 2011   |             |
|                                       |   |                             |   |   |                             | Pre-Modification |   |   | Post-Modification |   |   |   |   |   |   | Pre-Modification |   |   | Post-Modification |   |
|                                       |   | Number of                        |   |   | Outstanding                      |             |   | Outstanding |   |   | Number of |   |   | Outstanding |   |   | Outstanding |   |
|                                       |   | Loans                            |   |   | Recorded Investment              |             |   | Recorded Investment |   |   | Loans |   |   | Recorded Investment |   |   | Recorded Investment |   |
|                                       |   | (Dollars in thousands)           |   |   | (Dollars in thousands)           |             |
| Troubled Debt Restructurings:              |   |                             |   |   |                             |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial, financial, and agricultural:   |   |                             |   |   |                             |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commerical                                 |   |                             | -      |   |                             | $                | - |   |   | $ | - |   |   |   | - |   |   | $ | - |   |   | $ | - |   |
| Financial                                  |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Agricultural                               |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Equity lines                               |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other                                      |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial real estate:                    |   |                             |   |   |                             |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                             |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | 2 |   |   |   | 519 |   |   |   | 398 |   |
| Non Owner occupied                         |   |                             | 1      |   |                             |             | 208 |   |   |   | 198 |   |   |   | 1 |   |   |   | 76 |   |   |   | 75 |   |
| Residential real estate:                   |   |                             |   |   |                             |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by first liens                     |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | 4 |   |   |   | 883 |   |   |   | 753 |   |
| Secured by junior liens                    |   |                             | 1      |   |                             |             | 185 |   |   |   | 133 |   |   |   | 2 |   |   |   | 143 |   |   |   | 120 |   |
| Acquisition, development and construction: |   |                             |   |   |                             |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other                                      |   |                             | -      |   |                             |             | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                                   |   |                             | 1      |   |                             |             | 80 |   |   |   | 36 |   |   |   | 1 |   |   |   | 20 |   |   |   | 19 |   |
|                                       |   |                             | 3      |   |                             | $                | 473 |   |   | $ | 367 |   |   |   | 10 |   |   | $ | 1,641 |   |   | $ | 1,365 |   |

----

----

----

|                                       |   | June 30, 2012          |    |
|--------------------------------------------|--------|------------------------|---------|
|                                       |   | Pass                   |    |   | Watch |   |   | Substandard |   |   | Doubtful |   |
|                                       |   | (Dollars in thousands) |    |
| Commercial, financial, and agricultural:   |   |                   |    |   |   |   |   |   |   |   |   |   |
| Commerical                                 |   | $                      | 91,762  |   |   |   | 5,253 |   |   |   | 2,832 |   |   |   | — |   |
| Financial                                  |   |                   | 12,000  |   |   |   | 3,030 |   |   |   | — |   |   |   | — |   |
| Agricultural                               |   |                   | 7,582   |   |   |   | 597 |   |   |   | 1,923 |   |   |   | — |   |
| Equity lines                               |   |                   | 34,346  |   |   |   | 1,249 |   |   |   | 1,485 |   |   |   | — |   |
| Other                                      |   |                   | 17,281  |   |   |   | 326 |   |   |   | 128 |   |   |   | — |   |
| Commercial real estate:                    |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                             |   |                   | 170,433 |   |   |   | 14,333 |   |   |   | 11,047 |   |   |   | — |   |
| Non Owner occupied                         |   |                   | 105,908 |   |   |   | 10,322 |   |   |   | 14,320 |   |   |   | — |   |
| Residential real estate:                   |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by first liens                     |   |                   | 135,955 |   |   |   | 11,599 |   |   |   | 7,686 |   |   |   | — |   |
| Secured by junior liens                    |   |                   | 7,515   |   |   |   | 175 |   |   |   | 478 |   |   |   | — |   |
| Acquisition, development and construction: |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                |   |                   | 41,890  |   |   |   | 1,246 |   |   |   | 208 |   |   |   | — |   |
| Other                                      |   |                   | 84,683  |   |   |   | 15,668 |   |   |   | 19,639 |   |   |   | — |   |
| Consumer                                   |   |                   | 13,946  |   |   |   | 288 |   |   |   | 378 |   |   |   | — |   |
|                                       |   | $                      | 723,301 |   |   |   | 64,086 |   |   |   | 60,124 |   |   |   | — |   |
|                                       |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   | December 31, 2011      |    |
|                                       |   | Pass                   |    |   | Watch |   |   | Substandard |   |   | Doubtful |   |
|                                       |   | (Dollars in thousands) |    |
| Commercial, financial, and agricultural:   |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commerical                                 |   | $                      | 89,345  |   |   |   | 4,701 |   |   |   | 4,447 |   |   |   | — |   |
| Financial                                  |   |                   | 12,953  |   |   |   | 2,278 |   |   |   | — |   |   |   | — |   |
| Agricultural                               |   |                   | 11,961  |   |   |   | 604 |   |   |   | 2,195 |   |   |   | — |   |
| Equity lines                               |   |                   | 35,711  |   |   |   | 1,095 |   |   |   | 1,821 |   |   |   | — |   |
| Other                                      |   |                   | 4,269   |   |   |   | 327 |   |   |   | 43 |   |   |   | — |   |
| Commercial real estate:                    |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                             |   |                   | 165,171 |   |   |   | 15,780 |   |   |   | 13,069 |   |   |   | — |   |
| Non Owner occupied                         |   |                   | 109,033 |   |   |   | 12,118 |   |   |   | 17,495 |   |   |   | — |   |
| Residential real estate:                   |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by first liens                     |   |                   | 130,825 |   |   |   | 11,208 |   |   |   | 8,204 |   |   |   | — |   |
| Secured by junior liens                    |   |                   | 8,069   |   |   |   | 329 |   |   |   | 387 |   |   |   | — |   |
| Acquisition, development and construction: |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                |   |                   | 38,890  |   |   |   | 817 |   |   |   | 201 |   |   |   | — |   |
| Other                                      |   |                   | 97,841  |   |   |   | 7,945 |   |   |   | 22,356 |   |   |   | — |   |
| Consumer                                   |   |                   | 13,685  |   |   |   | 316 |   |   |   | 411 |   |   |   | — |   |
|                                       |   | $                      | 717,753 |   |   |   | 57,518 |   |   |   | 70,629 |   |   |   | — |   |

----

| Level 1: | Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| Level 2: | Significant other observable inputs other than Level 1 prices, such as quoted market prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. |
|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Level 3: | Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                             |   | June 30,               |    |   | Quoted Prices inActive Markets forIdentical Assets |   |   | Significant OtherObservable Inputs |   |   | SignificantUnobservableInputs |   |
|--------------------------------------------------|--------|------------------------|---------|--------|----------------------------------------------------|--------|--------|------------------------------------|--------|--------|-------------------------------|--------|
|                                             |   | 2012                   |    |   | (Level 1)                                          |   |   | (Level 2)                          |   |   | (Level 3)                     |   |
|                                             |   | (Dollars in thousands) |    |
| Assets:                                          |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |
| Available-for-sale securities                    |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |
| Obligations of U.S. Government agencies          |   | $                      | 170,880 |   |                                               |   | 88,533 |                               |   |   | 82,347                        |   |   |   | - |   |
| Obligations of states and political subdivisions |   |                   | 119,110 |   |                                               |   | -      |                               |   |   | 119,110                       |   |   |   | - |   |
| Mortgage-backed securities                       |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |   |   |   |   |
| U.S. GSE’s MBS - residential               |   |                   | 149,577 |   |                                               |   | -      |                               |   |   | 149,577                       |   |   |   | - |   |
| U.S. GSE’s CMO                             |   |                   | 145,306 |   |                                               |   | -      |                               |   |   | 145,306                       |   |   |   | - |   |
| Other CMO                                        |   |                   | 1,978   |   |                                               |   | -      |                               |   |   | 305                           |   |   |   | 1,673 |   |
| Corporate bonds                                  |   |                   | 78,518  |   |                                               |   | -      |                               |   |   | 78,411                        |   |   |   | 107 |   |
| Total available-for-sale securities              |   | $                      | 665,369 |   |                                               |   | 88,533 |                               |   |   | 575,056                       |   |   |   | 1,780 |   |
|                                             |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |   |   |   |   |
| Loans held for sale                              |   |                   | 27,197  |   |                                               |   | -      |                               |   |   | 27,197                        |   |   |   | - |   |
|                                             |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |   |   |   |   |
| Mortgage banking derivatives                     |   |                   | 22      |   |                                               |   | -      |                               |   |   | 22                            |   |   |   | - |   |
|                                             |   | $                      | 692,588 |   |                                               |   | 88,533 |                               |   |   | 602,275                       |   |   |   | 1,780 |   |
|                                             |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |   |   |   |   |
| Liabilities:                                     |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |   |   |   |   |
| Interest rate swap derivatives                   |   |                   | 2,620   |   |                                               |   | -      |                               |   |   | 2,620                         |   |   |   | - |   |
|                                             |   | $                      | 2,620   |   |                                               |   | -      |                               |   |   | 2,620                         |   |   |   | - |   |
|                                             |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |   |   |   |   |
|                                             |   | December 31,           |    |   | Quoted Prices inActive Markets forIdentical Assets |   |   | Significant OtherObservable Inputs |   |   | SignificantUnobservableInputs |   |
|                                             |   | 2011                   |    |   | (Level 1)                                          |   |   | (Level 2)                          |   |   | (Level 3)                     |   |
|                                             |   | (Dollars in thousands) |    |
| Assets:                                          |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |   |   |   |   |
| Available-for-sale securities                    |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |   |   |   |   |
| Obligations of U.S. Government agencies          |   | $                      | 169,752 |   |                                               |   | 59,343 |                               |   |   | 110,409                       |   |   |   | - |   |
| Obligations of states and political subdivisions |   |                   | 102,860 |   |                                               |   | -      |                               |   |   | 102,860                       |   |   |   | - |   |
| Mortgage-backed securities                       |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |   |   |   |   |
| U.S. GSE’s MBS - residential               |   |                   | 157,466 |   |                                               |   | -      |                               |   |   | 157,466                       |   |   |   | - |   |
| U.S. GSE’s CMO                             |   |                   | 120,002 |   |                                               |   | -      |                               |   |   | 120,002                       |   |   |   | - |   |
| Other CMO                                        |   |                   | 2,223   |   |                                               |   | -      |                               |   |   | 315                           |   |   |   | 1,908 |   |
| Corporate bonds                                  |   |                   | 51,456  |   |                                               |   | -      |                               |   |   | 49,015                        |   |   |   | 2,441 |   |
| Total available-for-sale securities              |   | $                      | 603,759 |   |                                               |   | 59,343 |                               |   |   | 540,067                       |   |   |   | 4,349 |   |
|                                             |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |   |   |   |   |
| Loans held for sale                              |   |                   | 29,046  |   |                                               |   | -      |                               |   |   | 29,046                        |   |   |   | - |   |
|                                             |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |   |   |   |   |
| Mortgage banking derivatives                     |   |                   | 24      |   |                                               |   | -      |                               |   |   | 24                            |   |   |   | - |   |
|                                             |   | $                      | 632,829 |   |                                               |   | 59,343 |                               |   |   | 569,137                       |   |   |   | 4,349 |   |
|                                             |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |   |   |   |   |
| Liabilities:                                     |   |                   |    |   |                                               |   |   |                               |   |   |                          |   |   |   |   |   |
| Interest rate swap derivatives                   |   |                   | 2,262   |   |                                               |   | -      |                               |   |   | 2,262                         |   |   |   | - |   |
|                                             |   | $                      | 2,262   |   |                                               |   | -      |                               |   |   | 2,262                         |   |   |   | - |   |

----

|                                        |   | Total                  |   |   | Other CMO |   |   | Corporate bonds |   |
|---------------------------------------------|--------|------------------------|--------|--------|-----------|--------|--------|-----------------|--------|
|                                        |   | (Dollars in thousands) |   |
|                                        |   |                   |   |   |      |   |   |            |   |
| Beginning balance, January 1, 2012          |   | $                      | 4,349  |   |      | $      | 1,908  |            |   | $ | 2,441 |   |
| Total gains or losses (realized/unrealized) |   |                   |   |   |      |   |   |            |   |   |   |   |
| Included in earnings                        |   |                   |   |   |      |   |   |            |   |   |   |   |
| Gain (loss) on sales                        |   |                   | -      |   |      |   | -      |            |   |   | - |   |
| Other-than-temporary impairment             |   |                   | (9     | )      |      |   | (9     | )               |   |   | - |   |
| Included in other comprehensive income      |   |                   | (133   | )      |      |   | (226   | )               |   |   | 93 |   |
| Purchases, sales, issuances and settlements |   |                   |   |   |      |   |   |            |   |   |   |   |
| Purchases                                   |   |                   | -      |   |      |   | -      |            |   |   | - |   |
| Sales                                       |   |                   | (1,500 | )      |      |   | -      |            |   |   | (1,500 | ) |
| Issuances                                   |   |                   | -      |   |      |   | -      |            |   |   | - |   |
| Settlements                                 |   |                   | -      |   |      |   | -      |            |   |   | - |   |
| Transfers into Level 3                      |   |                   | -      |   |      |   | -      |            |   |   | - |   |
| Transfers out of Level 3                    |   |                   | (927   | )      |      |   | -      |            |   |   | (927 | ) |
|                                        |   |                   |   |   |      |   |   |            |   |   |   |   |
| Ending balance, June 30, 2012               |   | $                      | 1,780  |   |      | $      | 1,673  |            |   | $ | 107 |   |

----

|                                        |   | Total                  |   |   | Other CMO |   |   | Corporate bonds |   |
|---------------------------------------------|--------|------------------------|--------|--------|-----------|--------|--------|-----------------|--------|
|                                        |   | (Dollars in thousands) |   |
|                                        |   |                   |   |   |      |   |   |            |   |
| Beginning balance, January 1, 2011          |   | $                      | 13,657 |   |      | $      | 2,919  |            |   | $ | 10,738 |   |
| Total gains or losses (realized/unrealized) |   |                   |   |   |      |   |   |            |   |   |   |   |
| Included in earnings                        |   |                   |   |   |      |   |   |            |   |   |   |   |
| Gain (loss) on sales                        |   |                   | -      |   |      |   | -      |            |   |   | - |   |
| Other-than-temporary impairment             |   |                   | (62    | )      |      |   | (62    | )               |   |   | - |   |
| Included in other comprehensive income      |   |                   | (1,567 | )      |      |   | (442   | )               |   |   | (1,125 | ) |
| Purchases, sales, issuances and settlements |   |                   |   |   |      |   |   |            |   |   |   |   |
| Purchases                                   |   |                   | -      |   |      |   | -      |            |   |   | - |   |
| Sales                                       |   |                   | -      |   |      |   | -      |            |   |   | - |   |
| Issuances                                   |   |                   | -      |   |      |   | -      |            |   |   | - |   |
| Settlements                                 |   |                   | -      |   |      |   | -      |            |   |   | - |   |
| Transfers into Level 3                      |   |                   | -      |   |      |   | -      |            |   |   | - |   |
| Transfers out of Level 3                    |   |                   | (7,278 | )      |      |   | -      |            |   |   | (7,278 | ) |
| Ending balance, June 30, 2011               |   | $                      | 4,750  |   |      | $      | 2,415  |            |   | $ | 2,335 |   |

----

|                                          |   |   | June 30,                                                        |   | Valuation            |   | Unobservable              |   | Range                    |
|-----------------------------------------------|--------|--------|-----------------------------------------------------------------|--------|----------------------|--------|---------------------------|--------|--------------------------|
|                                          |   |   | 2012                                                            |   | Technique            |   | Inputs                    |   | (Weighted Avg)           |
|                                          |   |   | (Dollars in thousands)                                          |
| Available-for-sale securities                 |   |   |                                                            |   |                 |   |                      |   |                     |
| Mortgage-backed securities                    |   |   |                                                            |   |                 |   |                      |   |                     |
|       Other CMO |   |   |        1,673                 |   | discounted cash flow |   | voluntary prepayment rate |   | 5.00% - 10.00% (6.56%)   |
|                                          |   |   |                                                            |   |                 |   | constant default rate     |   | 31.15% - 3.55% (14.28%)  |
|                                          |   |   |                                                            |   |                 |   | loss severity             |   | 45.00% - 55.00% (54.42%) |
|                                          |   |   |                                                            |   |                 |   | yield                     |   | 10.00%                   |
|                                          |   |   |                                                            |   |                 |   |                      |   |                     |
| Corporate bonds                               |   |   |           107 |   | discounted cash flow |   | yield                     |   | 10.00%                   |

|                                                      |   | Other CMO              |   |
|-----------------------------------------------------------|--------|------------------------|--------|
|                                                      |   | 2012                   |   |   | 2011 |   |
|                                                      |   | (Dollars in thousands) |   |
|                                                      |   |                   |   |   |   |   |
| Changes in unrealized gains (losses) included in earnings |   | $                      | (9     | ) |   | $ | (62 | ) |
| Other changes in fair value                               |   |                   | -      |   |   |   | - |   |
|                                                      |   | $                      | (9     | ) |   | $ | (62 | ) |

----

|                                                    |   | June 30,               |   |   | Quoted Prices inActive Markets forIdentical Assets |   |   | Significant OtherObservable Inputs |   |   | SignificantUnobservable Inputs |   |
|---------------------------------------------------------|--------|------------------------|--------|--------|----------------------------------------------------|--------|--------|------------------------------------|--------|--------|--------------------------------|--------|
|                                                    |   | 2012                   |   |   | (Level 1)                                          |   |   | (Level 2)                          |   |   | (Level 3)                      |   |
|                                                    |   | (Dollars in thousands) |   |
| Assets:                                                 |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |
| Impaired loans (1)                                      |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |
| Commercial, financial, and agricultural                 |   | $                      | 130    |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 130 |   |
| Real estate:                                            |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |   |   |   |   |
| Commercial                                              |   |                   | 5,032  |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 5,032 |   |
| Residential                                             |   |                   | 5,210  |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 5,210 |   |
| Acquisition, development and construction               |   |                   | 3,338  |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 3,338 |   |
| Consumer installment                                    |   |                   | 120    |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 120 |   |
|                                                    |   | $                      | 13,830 |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 13,830 |   |
|                                                    |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |   |   |   |   |
| Other real estate owned                                 |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |   |   |   |   |
| Real estate:                                            |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |   |   |   |   |
| Commercial                                              |   |                   | 96     |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 96 |   |
| Acquisition, development and construction               |   |                   | 716    |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 716 |   |
|                                                    |   | $                      | 812    |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 812 |   |
|                                               |   | $                      | 14,642 |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 14,642 |   |
|                                                    |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |   |   |   |   |
| (1) Includes loans directly charged down to fair value. |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |   |
|                                                    |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |   |   |   |   |
|                                                    |   | December 31,           |   |   | Quoted Prices inActive Markets forIdentical Assets |   |   | Significant OtherObservable Inputs |   |   | SignificantUnobservableInputs  |   |
|                                                    |   | 2011                   |   |   | (Level 1)                                          |   |   | (Level 2)                          |   |   | (Level 3)                      |   |
|                                                    |   | (Dollars in thousands) |   |
| Assets:                                                 |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |   |   |   |   |
| Impaired loans                                          |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |   |   |   |   |
| Commercial, financial, and agricultural                 |   | $                      | 130    |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 130 |   |
| Real estate:                                            |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |   |   |   |   |
| Commercial                                              |   |                   | 8,426  |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 8,426 |   |
| Residential                                             |   |                   | 3,602  |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 3,602 |   |
| Acquisition, development and construction               |   |                   | 4,984  |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 4,984 |   |
| Consumer installment                                    |   |                   | 123    |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 123 |   |
|                                                    |   | $                      | 17,265 |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 17,265 |   |
|                                                    |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |   |   |   |   |
| Other real estate owned                                 |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |   |   |   |   |
| Real estate:                                            |   |                   |   |   |                                               |   |   |                               |   |   |                           |   |   |   |   |   |
| Commercial                                              |   |                   | 146    |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 146 |   |
| Residential                                             |   |                   | 444    |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 444 |   |
| Acquisition, development and construction               |   |                   | 3,701  |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 3,701 |   |
|                                                    |   | $                      | 4,291  |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 4,291 |   |
|                                                    |   | $                      | 21,556 |   |                                               |   | -      |                               |   |   | -                              |   |   |   | 21,556 |   |

----

----

|                                      |   |   | June 30,                                                                   |   | Valuation              |   | Unobservable         |   | Range                    |
|-------------------------------------------|--------|--------|----------------------------------------------------------------------------|--------|------------------------|--------|----------------------|--------|--------------------------|
|                                      |   |   | 2012                                                                       |   | Techniques             |   | Inputs               |   | (Weighted Avg)           |
|                                      |   |   | (Dollars in thousands)                                                     |
| Impaired loans                            |   |   |                                                                       |   |                   |   |                 |   |                     |
| Commercial, financial, and agricultural   |   |   |           130            |   | liquidation value      |   |                 |   |                     |
|                                      |   |   |                                                                       |   | of inventory           |   |                 |   |                     |
|                                      |   |   |                                                                       |   |                   |   |                 |   |                     |
| Real estate:                              |   |   |                                                                       |   |                   |   |                 |   |                     |
| Commercial                                |   |   |        5,032                            |   | sales comparison       |   | adjustment for       |   | 0.00% - 50.00% (18.52%)  |
|                                      |   |   |                                                                       |   |                   |   | differences between  |   |                     |
|                                      |   |   |                                                                       |   |                   |   | the comparable sales |   |                     |
|                                      |   |   |                                                                       |   |                   |   |                 |   |                     |
|                                      |   |   |                                                                       |   |  income approach  |   | capitalization rate  |   | 10.00%                   |
|                                      |   |   |                                                                       |   |                   |   |                 |   |                     |
| Residential                               |   |   |        5,210                            |   | sales comparison       |   | adjustment for       |   | 0.00% - 95.63% (10.35%)  |
|                                      |   |   |                                                                       |   |                   |   | differences between  |   |                     |
|                                      |   |   |                                                                       |   |                   |   | the comparable sales |   |                     |
|                                      |   |   |                                                                       |   |                   |   |                 |   |                     |
| Acquisition, development and construction |   |   |        3,338                            |   | sales comparison       |   | adjustment for       |   | 0.00% - 65.01% (29.07%)  |
|                                      |   |   |                                                                       |   |                   |   | differences between  |   |                     |
|                                      |   |   |                                                                       |   |                   |   | the comparable sales |   |                     |
|                                      |   |   |                                                                       |   |                   |   |                 |   |                     |
|                                      |   |   |                                                                       |   |  income approach  |   | discount rate        |   | 12.00%                   |
|                                      |   |   |                                                                       |   |                   |   |                 |   |                     |
| Consumer installment                      |   |   |           120            |   | quoted market price    |   |                 |   |                     |
|                                      |   |   |                                                                       |   | of equity security     |   |                 |   |                     |
|                                      |   |   |                                                                       |   |                   |   |                 |   |                     |
|                                      |   |   |                                                                       |   |                   |   |                 |   |                     |
| Other real estate owned                   |   |   |                                                                       |   |                   |   |                 |   |                     |
| Real estate:                              |   |   |                                                                       |   |                   |   |                 |   |                     |
| Commercial                                |   |   |             96 |   |  sales comparison |   | adjustment for       |   | 10.60% - 74.50% (42.55%) |
|                                      |   |   |                                                                       |   |                   |   | differences between  |   |                     |
|                                      |   |   |                                                                       |   |                   |   | the comparable sales |   |                     |
|                                      |   |   |                                                                       |   |                   |   |                 |   |                     |
| Acquisition, development and construction |   |   |           716            |   |  sales comparison |   | adjustment for       |   | 0.00% - 39.95% (14.28%)  |
|                                      |   |   |                                                                       |   |                   |   | differences between  |   |                     |
|                                      |   |   |                                                                       |   |                   |   | the comparable sales |   |                     |

----

|   | (a) | Cash and Cash Equivalents |
|--------|-----|---------------------------|

|   | (b) | Loans, net |
|--------|-----|------------|

----

|   | (c) | Restricted Equity Securities |
|--------|-----|------------------------------|

|   | The fair value of Federal Home Loan Bank (“FHLB”) stock was not practicable to determine due to restrictions placed on its transferability. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Deposits |
|--------|-----|----------|

|   | (e) | Securities Sold Under Repurchase Agreements |
|--------|-----|---------------------------------------------|

|   | (f) | Advances from FHLB |
|--------|-----|--------------------|

|   | (g) | Subordinated debentures |
|--------|-----|-------------------------|

|   | (h) | Commitments |
|--------|-----|-------------|

----

|                                        |   | June 30, 2012          |      |
|---------------------------------------------|--------|------------------------|-----------|
|                                        |   |  Carrying         |      |   | Fair Value Measurements |   |
|                                        |   | amount                 |      |   | Total |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|                                        |   | (Dollars in thousands) |      |
| Financial assets:                           |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                   |   | $                      | 59,320    |   |   |   | 59,320 |   |   |   | 59,320 |   |   |   | - |   |   |   | - |   |
| Loans, net                                  |   |                   | 804,377   |   |   |   | 807,780 |   |   |   | - |   |   |   | - |   |   |   | 807,780 |   |
| Restricted equity securities                |   |                   | 5,399     |   |   |   | N/A |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                      |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits with stated maturities             |   |                   | 410,259   |   |   |   | 412,483 |   |   |   | - |   |   |   | 412,483 |   |   |   | - |   |
| Deposits without stated maturities          |   |                   | 1,024,756 |   |   |   | 1,024,756 |   |   |   | 1,024,756 |   |   |   | - |   |   |   | - |   |
| Securities sold under repurchase agreements |   |                   | 664       |   |   |   | 664 |   |   |   | 664 |   |   |   | - |   |   |   | - |   |
| Advances from FHLB                          |   |                   | 66,000    |   |   |   | 72,716 |   |   |   | - |   |   |   | 72,716 |   |   |   | - |   |
| Subordinated debentures                     |   |                   | 21,547    |   |   |   | 13,879 |   |   |   | - |   |   |   | - |   |   |   | 13,879 |   |

|                                        |   | December 31, 2011      |      |
|---------------------------------------------|--------|------------------------|-----------|
|                                        |   | Carrying               |      |   | Estimated |   |
|                                        |   | amount                 |      |   | fair value |   |
|                                        |   | (Dollars in thousands) |      |
| Financial assets:                           |   |                   |      |   |   |   |
| Cash and cash equivalents                   |   | $                      | 69,841    |   |   |   | 69,841 |   |
| Loans, net                                  |   |                   | 799,699   |   |   |   | 799,590 |   |
| Restricted equity securities                |   |                   | 5,086     |   |   |   | N/A |   |
| Financial liabilities:                      |   |                   |      |   |   |   |   |   |
| Deposits with stated maturities             |   |                   | 411,085   |   |   |   | 413,885 |   |
| Deposits without stated maturities          |   |                   | 1,008,137 |   |   |   | 1,008,137 |   |
| Securities sold under repurchase agreements |   |                   | 701       |   |   |   | 701 |   |
| Advances from FHLB                          |   |                   | 39,000    |   |   |   | 45,262 |   |
| Subordinated debentures                     |   |                   | 22,947    |   |   |   | 15,169 |   |

----

|                           |   | June 30, 2012          |   |   | December 31, 2011 |   |
|--------------------------------|--------|------------------------|--------|--------|-------------------|--------|
|                           |   | (Dollars in thousands) |   |
|                           |   |                   |   |   |              |   |   |   |
| Notional Amounts               |   | $                      | 10,000 |   |              | $      | 10,000 |   |
| Weighted average pay rates     |   |                   | 5.35   | %      |              |   | 5.35 | % |
| Weighted average receive rates |   |                   | 1.87   | %      |              |   | 1.95 | % |
| Weigted average maturity       |   | 16.58 years            |   |   | 16.75 years       |   |
| Unrealized losses              |   | $                      | 2,620  |   |              | $      | 2,262 |   |

----

----

| Table 1 - Selected Financial Data         |   |
|-------------------------------------------|--------|
|                                      |   |   |   |   |   |   |   |   |   |
|                                      |   | June 30, |   |   | December 31, |   |   | June 30, |   |
|                                      |   | 2012 |   |   | 2011 |   |   | 2011 |   |
|                                      |   | (Dollars in thousands) |   |
|                                      |   |   |   |   |   |   |   |   |   |
| Assets                                    |   | $ | 1,666,127 |   |   | $ | 1,614,773 |   |   | $ | 1,599,921 |   |
| Investment securities                     |   |   | 665,369 |   |   |   | 603,759 |   |   |   | 569,500 |   |
| Loans                                     |   |   | 847,759 |   |   |   | 846,010 |   |   |   | 873,801 |   |
| Deposits                                  |   |   | 1,435,015 |   |   |   | 1,419,222 |   |   |   | 1,402,000 |   |
|                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Annualized return on average total assets |   |   | 0.82 | % |   |   | 0.69 | % |   |   | 0.64 | % |
| Annualized return on average equity       |   |   | 11.01 | % |   |   | 10.23 | % |   |   | 10.09 | % |

----

----

----

----

| Table 2 - Selected Balance Sheet Data              |   |
|----------------------------------------------------|--------|
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   | June 30, |   |   | December 31, |   |   | Variance |   |
|                                               |   | 2012 |   |   | 2011 |   |   | Amount |   |   | % |   |
|                                               |   | (Dollars in thousands) |   |
| Cash, due from banks and interest-bearing deposits |   | $ | 59,320 |   |   | $ | 69,841 |   |   | ($ | 10,521 | ) |   |   | (15.06 | %) |
| Investment securities                              |   |   | 665,369 |   |   |   | 603,759 |   |   |   | 61,610 |   |   |   | 10.20 | % |
| Loans                                              |   |   | 847,759 |   |   |   | 846,010 |   |   |   | 1,749 |   |   |   | 0.21 | % |
| Other real estate owned                            |   |   | 7,773 |   |   |   | 6,209 |   |   |   | 1,564 |   |   |   | 25.19 | % |
| Assets                                             |   |   | 1,666,127 |   |   |   | 1,614,773 |   |   |   | 51,354 |   |   |   | 3.18 | % |
| Deposits                                           |   |   | 1,435,015 |   |   |   | 1,419,222 |   |   |   | 15,793 |   |   |   | 1.11 | % |
| Securities sold under repurchase agreements        |   |   | 664 |   |   |   | 701 |   |   |   | (37 | ) |   |   | (5.28 | %) |
| Advances from Federal Home Loan Bank               |   |   | 66,000 |   |   |   | 39,000 |   |   |   | 27,000 |   |   |   | 69.23 | % |
| Liabilities                                        |   |   | 1,540,010 |   |   |   | 1,497,744 |   |   |   | 42,266 |   |   |   | 2.82 | % |
| Stockholders’ equity                         |   |   | 126,117 |   |   |   | 117,029 |   |   |   | 9,088 |   |   |   | 7.77 | % |

----

----

| Table 3 - Average Balances, Income and Expenses, Yields and Rates                        |
|------------------------------------------------------------------------------------------|
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                     |   | Three Months Ended June 30, 2012 |   |   | Three Months Ended June 30, 2011 |   |
|                                                                                     |   | AverageAmount |   |   | AnnualizedAverageYield orRate |   |   | AmountPaid orEarned |   |   | AverageAmount |   |   | AnnualizedAverageYield orRate |   |   | AmountPaid orEarned |   |
|                                                                                     |   | (Dollars in thousands) |   |
| Interest-earning assets:                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Loans                                                                  |   | $ | 865,072 |   |   |   | 5.31 | % |   | $ | 11,558 |   |   | $ | 881,038 |   |   |   | 5.78 | % |   | $ | 12,827 |   |
|    Investment securities                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Taxable                                              |   |   | 571,893 |   |   |   | 2.66 | % |   |   | 3,805 |   |   |   | 524,054 |   |   |   | 3.07 | % |   |   | 4,027 |   |
|       Tax-exempt                                           |   |   | 71,255 |   |   |   | 3.46 | % |   |   | 617 |   |   |   | 48,533 |   |   |   | 3.98 | % |   |   | 483 |   |
|    Interest-bearing deposits in other banks                               |   |   | 19,242 |   |   |   | 0.46 | % |   |   | 22 |   |   |   | 30,952 |   |   |   | 0.45 | % |   |   | 35 |   |
|          Total interest-earning assets      |   | $ | 1,527,462 |   |   |   | 4.17 | % |   | $ | 16,002 |   |   | $ | 1,484,577 |   |   |   | 4.66 | % |   | $ | 17,372 |   |
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Deposits                                                               |   | $ | 1,277,295 |   |   |   | 0.75 | % |   | $ | 2,377 |   |   | $ | 1,272,288 |   |   |   | 1.21 | % |   | $ | 3,839 |   |
|    Securities sold under repurchase agreements                            |   |   | 4,417 |   |   |   | 0.72 | % |   |   | 8 |   |   |   | 696 |   |   |   | 0.86 | % |   |   | 1 |   |
|    Other borrowings                                                       |   |   | 76,999 |   |   |   | 3.30 | % |   |   | 631 |   |   |   | 77,606 |   |   |   | 3.43 | % |   |   | 663 |   |
|          Total interest-bearing liabilities |   | $ | 1,358,711 |   |   |   | 0.89 | % |   | $ | 3,016 |   |   | $ | 1,350,590 |   |   |   | 1.34 | % |   | $ | 4,503 |   |
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest margin/income:                                                              |   |   |   |   |   |   | 3.38 | % |   | $ | 12,986 |   |   |   |   |   |   |   | 3.44 | % |   | $ | 12,869 |   |

| Table 4 - Average Balances, Income and Expenses, Yields and Rates                        |
|------------------------------------------------------------------------------------------|
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                     |   | Six Months Ended June 30, 2012 |   |   | Six Months Ended June 30, 2011 |   |
|                                                                                     |   | AverageAmount |   |   | AnnualizedAverageYield orRate |   |   | AmountPaid orEarned |   |   | AverageAmount |   |   | AnnualizedAverageYield orRate |   |   | AmountPaid orEarned |   |
|                                                                                     |   | (Dollars in thousands) |   |
| Interest-earning assets:                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Loans                                                                  |   | $ | 866,468 |   |   |   | 5.32 | % |   | $ | 23,218 |   |   | $ | 880,580 |   |   |   | 5.77 | % |   | $ | 25,455 |   |
|    Investment securities                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Taxable                                              |   |   | 554,283 |   |   |   | 2.69 | % |   |   | 7,443 |   |   |   | 525,598 |   |   |   | 3.00 | % |   |   | 7,890 |   |
|       Tax-exempt                                           |   |   | 70,382 |   |   |   | 3.48 | % |   |   | 1,224 |   |   |   | 46,879 |   |   |   | 4.01 | % |   |   | 940 |   |
|    Interest-bearing deposits in other banks                               |   |   | 24,025 |   |   |   | 0.40 | % |   |   | 47 |   |   |   | 33,096 |   |   |   | 0.43 | % |   |   | 70 |   |
|          Total interest-earning assets      |   | $ | 1,515,158 |   |   |   | 4.19 | % |   | $ | 31,932 |   |   | $ | 1,486,153 |   |   |   | 4.62 | % |   | $ | 34,355 |   |
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Deposits                                                               |   | $ | 1,274,875 |   |   |   | 0.80 | % |   | $ | 5,091 |   |   | $ | 1,276,307 |   |   |   | 1.25 | % |   | $ | 7,907 |   |
|    Securities sold under repurchase agreements                            |   |   | 2,585 |   |   |   | 0.70 | % |   |   | 9 |   |   |   | 684 |   |   |   | 0.88 | % |   |   | 3 |   |
|    Other borrowings                                                       |   |   | 75,572 |   |   |   | 3.26 | % |   |   | 1,227 |   |   |   | 80,262 |   |   |   | 3.46 | % |   |   | 1,377 |   |
|          Total interest-bearing liabilities |   | $ | 1,353,032 |   |   |   | 0.94 | % |   | $ | 6,327 |   |   | $ | 1,357,253 |   |   |   | 1.38 | % |   | $ | 9,287 |   |
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest margin/income:                                                              |   |   |   |   |   |   | 3.35 | % |   | $ | 25,605 |   |   |   |   |   |   |   | 3.36 | % |   | $ | 25,068 |   |

----

----

|                                                                                     |   |                                    |   |   |   |   |   |     |   |   |   |   |
|------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|--------|--------|--------|--------|----------|--------|--------|--------|--------|
|                                                                                     |   | Three Months Ended                      |   |
|                                                                                     |   | June 30, 2012 compared to June 30, 2011 |   |
|                                                                                     |   | Increase (Decrease) due to              |   |
|                                                                                     |   | Volume                                  |   |   | Rate   |   |   | Combined |   |   | Total  |   |
|                                                                                     |   | (Dollars in thousands)                  |   |
| Interest-earning assets:                                                                 |   |                                    |   |   |   |   |   |     |   |   |   |   |   |   |   |   |
|    Loans                                                                  |   |                                    | (232   | )      |   |   | (1,056 | )        |   |   | 19     |   |   |   | (1,269 | ) |
|    Investment securities                                                  |   |                                    |   |   |   |   |   |     |   |   |   |   |   |   |   |   |
|       Taxable                                              |   |                                    | 367    |   |   |   | (539   | )        |   |   | (50    | )      |   |   | (222 | ) |
|       Tax-exempt                                           |   |                                    | 226    |   |   |   | (63    | )        |   |   | (29    | )      |   |   | 134 |   |
|    Interest-bearing deposits in other banks                               |   |                                    | (13    | )      |   |   | -      |     |   |   | -      |   |   |   | (13 | ) |
|          Total interest-earning assets      |   |                                    | 348    |   |   |   | (1,658 | )        |   |   | (60    | )      |   |   | (1,370 | ) |
|                                                                                     |   |                                    |   |   |   |   |   |     |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                            |   |                                    |   |   |   |   |   |     |   |   |   |   |   |   |   |   |
|    Deposits                                                               |   |                                    | 15     |   |   |   | (1,471 | )        |   |   | (6     | )      |   |   | (1,462 | ) |
|    Securities sold under repurchase agreements                            |   |                                    | 5      |   |   |   | -      |     |   |   | 2      |   |   |   | 7 |   |
|    Other borrowings                                                       |   |                                    | (5     | )      |   |   | (27    | )        |   |   | -      |   |   |   | (32 | ) |
|          Total interest-bearing liabilities |   |                                    | 15     |   |   |   | (1,498 | )        |   |   | (4     | )      |   |   | (1,487 | ) |
|                                                                                     |   |                                    |   |   |   |   |   |     |   |   |   |   |   |   |   |   |
| Net change in net interest income                                                        |   |                                    |   |   |   |   |   |     |   |   |   |   |   | $ | 117 |   |

----

|                                                                                     |   |                                    |   |   |   |   |   |     |   |   |   |   |
|------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|--------|--------|--------|--------|----------|--------|--------|--------|--------|
|                                                                                     |   | Six Months Ended                        |   |
|                                                                                     |   | June 30, 2012 compared to June 30, 2011 |   |
|                                                                                     |   | Increase (Decrease) due to              |   |
|                                                                                     |   | Volume                                  |   |   | Rate   |   |   | Combined |   |   | Total  |   |
| Interest-earning assets:                                                                 |   | (Dollars in thousands)                  |   |
|    Loans                                                                  |   |                                    | (408   | )      |   |   | (1,859 | )        |   |   | 30     |   |   |   | (2,237 | ) |
|    Investment securities                                                  |   |                                    |   |   |   |   |   |     |   |   |   |   |   |   |   |   |
|       Taxable                                              |   |                                    | 431    |   |   |   | (832   | )        |   |   | (46    | )      |   |   | (447 | ) |
|       Tax-exempt                                           |   |                                    | 471    |   |   |   | (125   | )        |   |   | (62    | )      |   |   | 284 |   |
|    Interest-bearing deposits in other banks                               |   |                                    | (19    | )      |   |   | (5     | )        |   |   | 1      |   |   |   | (23 | ) |
|          Total interest-earning assets      |   |                                    | 475    |   |   |   | (2,821 | )        |   |   | (77    | )      |   |   | (2,423 | ) |
|                                                                                     |   |                                    |   |   |   |   |   |     |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                            |   |                                    |   |   |   |   |   |     |   |   |   |   |   |   |   |   |
|    Deposits                                                               |   |                                    | (9     | )      |   |   | (2,810 | )        |   |   | 3      |   |   |   | (2,816 | ) |
|    Securities sold under repurchase agreements                            |   |                                    | 8      |   |   |   | (1     | )        |   |   | (1     | )      |   |   | 6 |   |
|    Other borrowings                                                       |   |                                    | (80    | )      |   |   | (74    | )        |   |   | 4      |   |   |   | (150 | ) |
|          Total interest-bearing liabilities |   |                                    | (81    | )      |   |   | (2,885 | )        |   |   | 6      |   |   |   | (2,960 | ) |
| Net change in net interest income                                                        |   |                                    |   |   |   |   |   |     |   |   |   |   |   | $ | 537 |   |

----

|                                                                         |   |                   |   |   |                   |   |   |     |   |   |             |   |   |   |    |   |   |   |   |   |   |   |   |   |
|------------------------------------------------------------------------------|--------|------------------------|--------|--------|------------------------|--------|--------|----------|--------|--------|------------------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                         |   | Three Months Ended     |   |   |                   |   |   |     |   |   | Six Months Ended |   |   |   |    |   |   |
|                                                                         |   | June 30,               |   |   | Variance               |   |   | June 30, |   |   | Variance         |   |
|                                                                         |   | 2012                   |   |   | 2011                   |   |   | Amount   |   |   | %                |   |   | 2012   |    |   | 2011   |   |   | Amount |   |   | %      |   |
|                                                                         |   | (Dollars in thousands) |   |   | (Dollars in thousands) |   |
|                                                                         |   |                   |   |   |                   |   |   |     |   |   |             |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Service charges and fees on deposits                                         |   | $                      | 1,685  |   |                   | $      | 1,750  |     |   | $      | (65              | )      |   |   | (3.71   | %)     |   | $      | 3,296  |   |   | $      | 3,328  |   |   | $ | (32 | ) |   |   | (0.96 | %) |
| Gain on sales of loans                                                       |   |                   | 2,003  |   |                   |   | 1,720  |     |   |   | 283              |   |   |   | 16.45   | %      |   |   | 4,022  |   |   |   | 2,927  |   |   |   | 1,095 |   |   |   | 37.41 | % |
| (Loss) gain on sale of fixed assets, net                                     |   |                   | 8      |   |                   |   | -      |     |   |   | 8                |   |   |   | N/A     |   |   |   | 6      |   |   |   | 17     |   |   |   | (11 | ) |   |   | (64.71 | %) |
| Investment securities gains (losses), net of other-than-temporary impairment |   |                   | 92     |   |                   |   | (30    | )        |   |   | 122              |   |   |   | (406.67 | %)     |   |   | 469    |   |   |   | 56     |   |   |   | 413 |   |   |   | 737.50 | % |
| Retail investment income                                                     |   |                   | 505    |   |                   |   | 507    |     |   |   | (2               | )      |   |   | (0.39   | %)     |   |   | 1,027  |   |   |   | 964    |   |   |   | 63 |   |   |   | 6.54 | % |
| Trust services fees                                                          |   |                   | 288    |   |                   |   | 292    |     |   |   | (4               | )      |   |   | (1.37   | %)     |   |   | 577    |   |   |   | 565    |   |   |   | 12 |   |   |   | 2.12 | % |
| Earnings from cash surrender value of bank-owned life insurance              |   |                   | 265    |   |                   |   | 248    |     |   |   | 17               |   |   |   | 6.85    | %      |   |   | 526    |   |   |   | 466    |   |   |   | 60 |   |   |   | 12.88 | % |
| Miscellaneous income                                                         |   |                   | 176    |   |                   |   | 191    |     |   |   | (15              | )      |   |   | (7.85   | %)     |   |   | 366    |   |   |   | 404    |   |   |   | (38 | ) |   |   | (9.41 | %) |
| Total noninterest income                                                     |   | $                      | 5,022  |   |                   | $      | 4,678  |     |   | $      | 344              |   |   |   | 7.35    | %      |   | $      | 10,289 |   |   | $      | 8,727  |   |   | $ | 1,562 |   |   |   | 17.90 | % |

----

|                                   |   |                   |   |   |     |   |   |                   |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|----------------------------------------|--------|------------------------|--------|--------|----------|--------|--------|------------------------|--------|--------|------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                   |   | Three Months Ended     |   |   |     |   |   |                   |   |   | Six Months Ended |   |   |   |   |   |   |
|                                   |   | June 30,               |   |   | Variance |   |   | June 30,               |   |   | Variance         |   |
|                                   |   | 2012                   |   |   | 2011     |   |   | Amount                 |   |   | %                |   |   | 2012   |   |   | 2011   |   |   | Amount |   |   | %      |   |
|                                   |   | (Dollars in thousands) |   |   |     |   |   | (Dollars in thousands) |   |   |             |   |
|                                   |   |                   |   |   |     |   |   |                   |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and other personnel expense   |   | $                      | 6,543  |   |     | $      | 5,654  |                   |   | $      | 889              |   |   |   | 15.72  | %      |   | $      | 12,740 |   |   | $      | 11,218 |   |   | $ | 1,522 |   |   |   | 13.57 | % |
| Occupancy expenses                     |   |                   | 1,043  |   |     |   | 1,112  |                   |   |   | (69              | )      |   |   | (6.21  | %)     |   |   | 2,097  |   |   |   | 2,227  |   |   |   | (130 | ) |   |   | (5.84 | %) |
| Marketing & business development   |   |                   | 388    |   |     |   | 365    |                   |   |   | 23               |   |   |   | 6.30   | %      |   |   | 778    |   |   |   | 699    |   |   |   | 79 |   |   |   | 11.30 | % |
| Processing expense                     |   |                   | 460    |   |     |   | 408    |                   |   |   | 52               |   |   |   | 12.75  | %      |   |   | 920    |   |   |   | 820    |   |   |   | 100 |   |   |   | 12.20 | % |
| Legal and professional fees            |   |                   | 388    |   |     |   | 350    |                   |   |   | 38               |   |   |   | 10.86  | %      |   |   | 821    |   |   |   | 743    |   |   |   | 78 |   |   |   | 10.50 | % |
| Data processing expense                |   |                   | 354    |   |     |   | 389    |                   |   |   | (35              | )      |   |   | (9.00  | %)     |   |   | 733    |   |   |   | 738    |   |   |   | (5 | ) |   |   | (0.68 | %) |
| FDIC insurance                         |   |                   | 400    |   |     |   | 362    |                   |   |   | 38               |   |   |   | 10.50  | %      |   |   | 779    |   |   |   | 979    |   |   |   | (200 | ) |   |   | (20.43 | %) |
| Communications expense                 |   |                   | 177    |   |     |   | 275    |                   |   |   | (98              | )      |   |   | (35.64 | %)     |   |   | 366    |   |   |   | 452    |   |   |   | (86 | ) |   |   | (19.03 | %) |
| Loss on sale of other real estate      |   |                   | 638    |   |     |   | 231    |                   |   |   | 407              |   |   |   | 176.19 | %      |   |   | 852    |   |   |   | 213    |   |   |   | 639 |   |   |   | 300.00 | % |
| Provision for other real estate losses |   |                   | 50     |   |     |   | 135    |                   |   |   | (85              | )      |   |   | (62.96 | %)     |   |   | 497    |   |   |   | 248    |   |   |   | 249 |   |   |   | 100.40 | % |
| Other operating expenses               |   |                   | 804    |   |     |   | 782    |                   |   |   | 22               |   |   |   | 2.81   | %      |   |   | 1,585  |   |   |   | 1,501  |   |   |   | 84 |   |   |   | 5.60 | % |
| Total noninterest expense              |   | $                      | 11,245 |   |     | $      | 10,063 |                   |   | $      | 1,182            |   |   |   | 11.75  | %      |   | $      | 22,168 |   |   | $      | 19,838 |   |   | $ | 2,330 |   |   |   | 11.75 | % |

----

----

| Table 9 - Loan Portfolio Composition                                                |   |
|-------------------------------------------------------------------------------------|--------|
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   | June 30, 2012 |   |   | December 31, 2011 |   |
|                                                                                |   | Amount |   |   | % |   |   | Amount |   |   | % |   |
|                                                                                |   | (Dollars in thousands) |   |
| Commercial financial and agricultural                                               |   | $ | 179,794 |   |   |   | 21.21 | % |   | $ | 171,750 |   |   |   | 20.30 | % |
| Real estate                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Commercial                                                        |   |   | 326,363 |   |   |   | 38.50 | % |   |   | 332,666 |   |   |   | 39.32 | % |
|    Residential                                                       |   |   | 163,408 |   |   |   | 19.28 | % |   |   | 159,022 |   |   |   | 18.80 | % |
|    Acquisition, development and construction                         |   |   | 163,334 |   |   |   | 19.27 | % |   |   | 168,050 |   |   |   | 19.86 | % |
|            Total real estate |   |   | 653,105 |   |   |   | 77.05 | % |   |   | 659,738 |   |   |   | 77.98 | % |
| Consumer                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Direct                                                            |   |   | 13,996 |   |   |   | 1.65 | % |   |   | 13,600 |   |   |   | 1.61 | % |
|    Indirect                                                          |   |   | 199 |   |   |   | 0.02 | % |   |   | 384 |   |   |   | 0.05 | % |
|    Revolving                                                         |   |   | 417 |   |   |   | 0.05 | % |   |   | 428 |   |   |   | 0.05 | % |
|            Total consumer    |   |   | 14,612 |   |   |   | 1.72 | % |   |   | 14,412 |   |   |   | 1.71 | % |
| Deferred loan origination costs (fees)                                              |   |   | 248 |   |   |   | 0.02 | % |   |   | 110 |   |   |   | 0.01 | % |
|            Total             |   | $ | 847,759 |   |   |   | 100.00 | % |   | $ | 846,010 |   |   |   | 100.00 | % |

----

----

----

|                                                                              |   | June 30, 2012          |   |   | December 31, 2011 |   |   | June 30, 2011 |   |
|-----------------------------------------------------------------------------------|--------|------------------------|--------|--------|-------------------|--------|--------|---------------|--------|
|                                                                              |   | (Dollars in thousands) |   |
| Nonaccrual loans:                                                                 |   |                   |   |   |              |   |   |          |   |
|    Commercial financial and agricultural                           |   | $                      | 2,318  |   |              | $      | 2,325  |          |   | $ | 2,972 |   |
|    Real Estate:                                                    |   |                   |   |   |              |   |   |          |   |   |   |   |
|       Commercial                                    |   |                   | 15,182 |   |              |   | 20,956 |          |   |   | 7,516 |   |
|       Residential                                   |   |                   | 5,679  |   |              |   | 4,553  |          |   |   | 5,232 |   |
|       Acquisition, development and construction     |   |                   | 11,443 |   |              |   | 14,732 |          |   |   | 9,258 |   |
|    Consumer                                                        |   |                   | 292    |   |              |   | 331    |          |   |   | 254 |   |
|          Total Nonaccrual loans      |   |                   | 34,914 |   |              |   | 42,897 |          |   |   | 25,232 |   |
| Restructured loans (1)                                                            |   |                   | 1,056  |   |              |   | 2,330  |          |   |   | 2,792 |   |
| Other real estate owned                                                           |   |                   | 7,773  |   |              |   | 6,209  |          |   |   | 8,558 |   |
|          Total Non-performing assets |   | $                      | 43,743 |   |              | $      | 51,436 |          |   | $ | 36,582 |   |
|                                                                              |   |                   |   |   |              |   |   |          |   |   |   |   |
| Loans past due 90 days or more and still accruing interest                        |   | $                      | 10     |   |              | $      | -      |          |   | $ | - |   |
|                                                                              |   |                   |   |   |              |   |   |          |   |   |   |   |
| Non-performing assets to total assets                                             |   |                   | 2.63   | %      |              |   | 3.19   | %             |   |   | 2.29 | % |
|                                                                              |   |                   |   |   |              |   |   |          |   |   |   |   |
| Non-performing assets to period end loans and OREO                                |   |                   | 5.11   | %      |              |   | 6.04   | %             |   |   | 4.15 | % |
|                                                                              |   |                   |   |   |              |   |   |          |   |   |   |   |
| Allowance for loan loss to period end nonaccrual loans                            |   |                   | 84.64  | %      |              |   | 67.71  | %             |   |   | 112.59 | % |

----

|                                     |   |                   |   |             |        |       |        |    |                |             |                    |      |   |      |   |             |      |   |   |   |
|------------------------------------------|--------|------------------------|--------|------------------|-------------|------------|-------------|---------|---------------------|------------------|-------------------------|-----------|--------|-----------|--------|------------------|-----------|--------|--------|--------|
|                                     |   |                   |   |             |        | Nonaccrual |        |    |                |             |                    |      |   | Appraisal |   |             | Appraised |   |
|                                     |   | Balance                |   |  Originated |        |  Date |        | Trigger |                |  Collateral |                    | Allowance |   | Method    |   | Date             |      |   | Value  |   |
|                                     |   | (Dollars in thousands) |   |
| ADC Loan / 1-4 Family / Equity lines (1) |   | $                      | 1,938  |             | 03/07-09/08 |       | 11/09-09/10 |    | delinquency         |             | houses, lots & land |      |   | -         |   | collateral value |      |   | 03/12  |   |   | $ | 2,453 |   |
| Commercial Real Estate                   |   |                   | 9,231  |             | 08/08-01/11 |       | 11/18/11    |    | bankruptcy          |             | commercial bldg         |      |   | -         |   | collateral value |      |   | 12/11  |   |   |   | 14,150 |   |
| ADC Loan - CSRA                          |   |                   | 6,758  |             | 03/29/11    |       | 03/11-11/11 |    | financial condition |             | lots & land         |      |   | -         |   | collateral value |      |   | 06/11  |   |   |   | 9,070 |   |
| ADC Loan - Other                         |   |                   | 1,039  |             | 09/30/08    |       | 05/06/10    |    | delinquency         |             | lots & land         |      |   | -         |   | collateral value |      |   | 09/11  |   |   |   | 1,269 |   |
| 1-4 Family Residential                   |   |                   | 1,415  |             | 01/31/07    |       | 06/27/12    |    | financial condition |             | house                   |      |   | 101       |   | collateral value |      |   | 01/07  | (2)    |   |   | 1,900 |   |
| Commercial Real Estate                   |   |                   | 1,230  |             | 09/18/08    |       | 10/28/11    |    | financial condition |             | commercial bldg         |      |   | -         |   | collateral value |      |   | 12/11  |   |   |   | 1,531 |   |
|                                     |   | $                      | 21,611 |             |        |       |        |    |                |             |                    |      |   |      |   |             |      |   |   |   |   |   |   |   |
| Other, net                               |   |                   | 13,303 |             |        |       |        |    |                |             |                    |      |   |      |   |             |      |   |   |   |   |   |   |   |
| Nonaccrual loans at June 30, 2012        |   | $                      | 34,914 |             |        |       |        |    |                |             |                    |      |   |      |   |             |      |   |   |   |   |   |   |   |

|                               |   |                   |   |   |   |   |
|------------------------------------|--------|------------------------|--------|--------|--------|--------|
|                               |   | 2012                   |   |   | 2011   |   |
|                               |   | (Dollars in thousands) |   |
|  Beginning balance, January 1 |   | $                      | 6,209  |   |   | $      | 7,751 |   |
| Additions                          |   |                   | 6,623  |   |   |   | 3,353 |   |
| Increase in valuation allowance    |   |                   | (497   | )      |   |   | (248 | ) |
| Sales                              |   |                   | (3,710 | )      |   |   | (2,085 | ) |
| Loss on sale of OREO               |   |                   | (852   | )      |   |   | (213 | ) |
| Ending balance, June 30            |   | $                      | 7,773  |   |   | $      | 8,558 |   |

----

|                                                                                            |   | 2012                   |   |   | 2011   |   |
|-------------------------------------------------------------------------------------------------|--------|------------------------|--------|--------|--------|--------|
|                                                                                            |   | (Dollars in thousands) |   |
|    Other Real Estate:                                                            |   |                   |   |   |   |   |
|       Commercial, financial and agricultural                      |   | $                      | -      |   |   | $      | - |   |
|       Real Estate                                                 |   |                   |   |   |   |   |   |   |
|          Commercial                                |   |                   | 6,349  |   |   |   | 298 |   |
|          Residential                               |   |                   | 17     |   |   |   | 13 |   |
|          Acquisition, development and construction |   |                   | 2,924  |   |   |   | 10,239 |   |
|       Consumer                                                    |   |                   | -      |   |   |   | 130 |   |
|                                                                                            |   |                   | 9,290  |   |   |   | 10,680 |   |
|                                                                                            |   |                   |   |   |   |   |   |   |
|    Valuation allowance                                                           |   |                   | (1,517 | )      |   |   | (2,122 | ) |
|                                                                                            |   | $                      | 7,773  |   |   | $      | 8,558 |   |

----

----

| Table 12 - Regulatory Capital Requirements |   |
|--------------------------------------------|--------|
| June 30, 2012                              |   |
|                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   |   |   |   |   |   |   | Required for capital |   |   |   |   |   |   |   |
|                                       |   | Actual |   |   | adequacy purposes |   |   | Excess |   |
|                                       |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |
|                                       |   | (Dollars in thousands) |   |
| Southeastern Bank Financial Corporation    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk-based capital:                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Tier 1 capital           |   | $ | 139,958 |   |   |   | 13.31 | % |   |   | 42,047 |   |   |   | 4.00 | % |   |   | 97,911 |   |   |   | 9.31 | % |
|    Total capital            |   |   | 153,609 |   |   |   | 14.61 | % |   |   | 84,094 |   |   |   | 8.00 | % |   |   | 69,515 |   |   |   | 6.61 | % |
| Tier 1 leverage ratio                      |   |   | 139,958 |   |   |   | 8.49 | % |   |   | 65,966 |   |   |   | 4.00 | % |   |   | 73,992 |   |   |   | 4.49 | % |
|                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Georgia Bank & Trust Company           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk-based capital:                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Tier 1 capital           |   | $ | 137,357 |   |   |   | 13.11 | % |   |   | 41,912 |   |   |   | 4.00 | % |   |   | 95,445 |   |   |   | 9.11 | % |
|    Total capital            |   |   | 150,658 |   |   |   | 14.38 | % |   |   | 83,824 |   |   |   | 8.00 | % |   |   | 66,834 |   |   |   | 6.38 | % |
| Tier 1 leverage ratio                      |   |   | 137,357 |   |   |   | 8.41 | % |   |   | 73,481 |   |   |   | 4.50 | % |   |   | 63,876 |   |   |   | 3.91 | % |

----

----

| Table 13 - Commitments and Contractual Obligations |   |
|----------------------------------------------------|--------|
|                                               |   |
|                                               |   | Less than1 Year |   |   | 1 - 3Years |   |   | 3 - 5Years |   |   | More than5 Years |   |
|                                               |   | (Dollars in thousands) |   |
|  Lines of credit                              |   | $ | 169,909 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Lease agreements                                   |   |   | 247 |   |   |   | 399 |   |   |   | 277 |   |   |   | - |   |
| Deposits                                           |   |   | 1,278,957 |   |   |   | 120,821 |   |   |   | 34,833 |   |   |   | 404 |   |
| Securities sold under repurchase agreements        |   |   | 664 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| FHLB advances                                      |   |   | 12,000 |   |   |   | - |   |   |   | 15,000 |   |   |   | 39,000 |   |
| Subordinated debentures                            |   |   | - |   |   |   | 1,547 |   |   |   | - |   |   |   | 20,000 |   |
| Total commitments and contractual obligations      |   | $ | 1,461,777 |   |   | $ | 122,767 |   |   | $ | 50,110 |   |   | $ | 59,404 |   |

----

----

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Item 1.  | Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     | There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is subject.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Item 1A. | Risk Factors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     | In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, which could materially affect its business, financial condition or future results. The risks described in the Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to management or that management currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results. |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Item 2.  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     | Issuer Purchases of Equity Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     | On April 15, 2004, the Company announced the commencement of a stock repurchase program, pursuant to which it will, from time to time, repurchase up to 100,000 shares of its outstanding stock. The program does not have a stated expiration date. No stock repurchase programs were terminated during the second quarter of 2012 and there were no shares repurchased under the existing stock repurchase plan or otherwise during the second quarter.                                                                                                                                                                                                                               |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Item 3.  | Defaults Upon Senior Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     | Not applicable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Item 4.  | Mine Safety Disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     | Not applicable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Item 5.  | Other Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

----

|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|---------|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Item 6. | Exhibits |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|    | * 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   | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                     |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|    | **101    | Interactive Data Files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 in XBRL (eXtensible Business Reporting Language). Pursuant to Regulation 406T of Regulation S-T, these Interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and are otherwise not subject to liability. |

|   |   |                                                                                                               |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|
| *      |   | Filed herewith                                                                                                     |
| **     |   | The registant will file this exhibit within the 30day grace period allowed in accordance with SEC release 34-59324 |

----

|   |                                                                      | SOUTHEASTERN BANK FINANCIAL CORPORATION |
|--------|---------------------------------------------------------------------------|-----------------------------------------|
|   |                                                                      |                                    |
| Date:  |      July 27, 2012      |                                    | By: |              /s/ Darrell R. Rains |
|   |                                                                      |                                    | Darrell R. Rains |
|   |                                                                      |                                    | Group Vice President, Chief |
|   |                                                                      |                                    | Financial Officer (Duly Authorized |
|   |                                                                      |                                    | Officer of Registrant and Principal |
|   |                                                                      |                                    | Financial Officer) |