SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                    FORM 10-Q

(Mark One)

X    Quarterly  Report  under Section 13 or 15(d) of the Securities Exchange Act
-    of 1934
     For the quarterly period ended June 30, 2006.
                                    -------------

                                       or

     Transition  Report under Section 13 or 15(d) of the Securities Exchange Act
-    of 1934
     For the transition period from _______________ to ________________.

                          Commission File No.  0-23980
                                               -------

                     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)

     Check  whether  the  issuer:  (1) filed all reports required to be filed by
Section  13  or 15(d) of the Exchange Act during the past 12 months (or for such
shorter  period  that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X  No
                                                                      ---    ---

     Check  whether  the  issuer  is  a  large accelerated filer, an accelerated
filer,  or  a  non-accelerated  filer.  See definition of "accelerated filer and
large  accelerated  filer"  in Rule 12b-2 of the Exchange Act.
Large accelerated filer  [ ]  Accelerated filer  [X]  Non-accelerated filer  [ ]

     Indicate  by  check  mark  whether  the  registrant  is a shell company (as
defined  in  Rule  12b-2  of  the  Exchange  Act):  Yes       No X
                                                        ---     ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS

     State  the  number of shares outstanding of each of the issuer's classes of
common  equity,  as  of  the  latest  practicable  date:

     5,283,246 shares of common stock, $3.00 par value per share, outstanding as
of  July  31,  2006.


<PAGE>
<TABLE>
<CAPTION>
                       SOUTHEASTERN BANK FINANCIAL CORPORATION
                                      FORM 10-Q
                                        INDEX


                                                                                Page
<S>                                                                             <C>
Part I

      Item 1.  Financial Statements (Unaudited)

               Consolidated Balance Sheets as of June 30, 2006 and
                 December 31, 2005                                                 3

               Consolidated Statements of Income for the Three and Six
                 Months ended June 30, 2006 and 2005                               4

               Consolidated Statements of Cash Flows for the
                 Six Months ended June 30, 2006 and 2005                           5

               Notes to Consolidated Financial Statements                          6

      Item 2.  Management's Discussion and Analysis of
               Financial Condition and Results of Operations                      13

      Item 3.  Quantitative and Qualitative Disclosures about Market Risk         26

      Item 4.  Controls and Procedures                                            26

Part II  Other Information

      Item 1.  Legal Proceedings                                                   *
      Item 1A. Risk Factors                                                       27
      Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds        27
      Item 3.  Defaults Upon Senior Securities                                     *
      Item 4.  Submission of Matters to a Vote of Security Holders                28
      Item 5.  Other Information                                                   *
      Item 6.  Exhibits                                                           29

Signature                                                                         30
</TABLE>

* No information submitted under this caption


                                        1
<PAGE>
<TABLE>
<CAPTION>
                                         PART I
                                  FINANCIAL INFORMATION



                                        2
<PAGE>
                 SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARY
                               Consolidated Balance Sheets
                                       (Unaudited)


                           ASSETS
                                                             June 30,      December 31,
                                                               2006            2005
                                                           -------------  --------------
<S>                                                        <C>            <C>
Cash and due from banks                                    $ 19,572,531   $  18,792,799
Federal funds sold                                            8,124,000       2,758,000
Interest-bearing deposits in other banks                        512,406       1,012,257
                                                           -------------  --------------
      Cash and cash equivalents                              28,208,937      22,563,056

Investment securities
  Available-for-sale                                        202,271,023     197,551,996
  Held-to-maturity, at cost (fair values of
    $3,352,195 and $3,897,341, respectively)                  3,275,847       3,776,040

Loans held for sale                                          20,101,184      22,146,834

Loans                                                       638,618,458     579,087,791
  Less allowance for loan losses                             (9,304,146)     (9,124,801)
                                                           -------------  --------------
      Loans, net                                            629,314,312     569,962,990

Premises and equipment, net                                  22,038,107      21,376,183
Accrued interest receivable                                   4,775,293       4,624,023
Bank-owned life insurance                                    15,666,519      11,863,276
Restricted equity securities                                  4,936,281       4,287,481
Other assets                                                  7,345,431       6,125,360
                                                           -------------  --------------

                                                           $937,932,934   $ 864,277,239
                                                           =============  ==============

              LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
  Noninterest-bearing                                      $104,373,028   $  97,083,931
  Interest-bearing:
    NOW accounts                                            114,281,798     100,692,388
    Savings                                                 254,044,309     265,131,754
    Money management accounts                                44,951,173      37,719,408
    Time deposits over $100,000                             153,375,134     122,009,813
    Other time deposits                                      58,612,194      41,017,555
                                                           -------------  --------------
                                                            729,637,636     663,654,849

Federal funds purchased and securities sold
  under repurchase agreements                                54,404,190      67,013,416
Advances from Federal Home Loan Bank                         60,000,000      52,000,000
Other borrowed funds                                            400,000       1,000,000
Accrued interest payable and other liabilities                7,225,394       7,025,767
Subordinated debentures                                      20,000,000      10,000,000
                                                           -------------  --------------
      Total liabilities                                     871,667,220     800,694,032
                                                           -------------  --------------

Stockholders' equity:
  Common stock, $3.00 par value; 10,000,000 shares
    authorized; 5,279,549 and 5,279,241 shares issued in
    2006 and 2005, respectively; 5,279,440 and 5,263,144
    shares outstanding in 2006 and 2005, respectively        15,838,647      15,837,723
  Additional paid-in capital                                 34,311,955      34,138,876
  Retained earnings                                          20,113,703      16,099,414
  Treasury stock, at cost; 109 and 16,097 shares in
    2006 and 2005, respectively                                  (4,033)       (233,898)
  Accumulated other comprehensive loss, net                  (3,994,558)     (2,258,908)
                                                           -------------  --------------
      Total stockholders' equity                             66,265,714      63,583,207
                                                           -------------  --------------
                                                           $937,932,934   $ 864,277,239
                                                           =============  ==============
</TABLE>

See accompanying notes to consolidated financial statements.


                                        3
<PAGE>
<TABLE>
<CAPTION>
                       SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARY
                                 Consolidated Statements of Income
                                          (Unaudited)

                                                   Three Months Ended         Six Months Ended
                                                        June 30,                  June 30,
                                               -------------------------  -------------------------
                                                    2006        2005          2006         2005
                                               -----------  ------------  -----------  ------------
<S>                                            <C>          <C>           <C>          <C>
Interest income:
  Loans, including fees                        $13,018,274  $ 9,271,626   $24,830,362  $17,515,164
  Investment securities                          2,702,309    1,936,599     5,158,381    3,701,141
  Federal funds sold                                44,036       95,762       194,629      151,369
  Interest-bearing deposits in other banks           5,675        6,766        13,650        9,199
                                               -----------  ------------  -----------  ------------
      Total interest income                     15,770,294   11,310,753    30,197,022   21,376,873
                                               -----------  ------------  -----------  ------------

Interest expense:
  Deposits                                       5,547,283    3,244,981    10,465,934    5,890,571
  Federal funds purchased and securities sold
    under repurchase agreements                    724,846      350,430     1,408,754      622,400
  Other borrowings                               1,058,303      554,263     1,905,291    1,062,090
                                               -----------  ------------  -----------  ------------
      Total interest expense                     7,330,432    4,149,674    13,779,979    7,575,061
                                               -----------  ------------  -----------  ------------

      Net interest income                        8,439,862    7,161,079    16,417,043   13,801,812

Provision for loan losses                          456,336      515,269       960,128      986,963
                                               -----------  ------------  -----------  ------------

      Net interest income after provision
        for loan losses                          7,983,526    6,645,810    15,456,915   12,814,849
                                               -----------  ------------  -----------  ------------

Noninterest income:
  Service charges and fees on deposits           1,539,978    1,354,425     2,892,122    2,565,475
  Gain on sales of loans                         1,270,992    1,298,399     2,525,337    2,340,582
  Investment securities gains (losses), net        283,600      (40,051)      283,600      (39,260)
  Retail investment income                         216,562      121,603       383,973      203,566
  Trust service fees                               198,367      150,024       390,832      306,936
  Increase in cash surrender value of
    bank-owned life insurance                      149,973      102,157       289,243      184,946
  Miscellaneous income                             146,770      202,201       296,395      327,303
                                               -----------  ------------  -----------  ------------
      Total noninterest income                   3,806,242    3,188,758     7,061,502    5,889,548
                                               -----------  ------------  -----------  ------------

Noninterest expense:
  Salaries                                       3,427,626    3,014,016     6,808,185    5,763,555
  Employee benefits                              1,077,414      775,925     2,136,835    1,585,369
  Occupancy expenses                               685,165      682,433     1,433,901    1,355,526
  Other operating expenses                       2,041,484    1,734,410     4,018,655    3,239,572
                                               -----------  ------------  -----------  ------------
      Total noninterest expense                  7,231,689    6,206,784    14,397,576   11,944,022
                                               -----------  ------------  -----------  ------------

      Income before income taxes                 4,558,079    3,627,784     8,120,841    6,760,375

Income tax expense                               1,631,675    1,222,052     2,734,462    2,270,654
                                               -----------  ------------  -----------  ------------

      Net income                               $ 2,926,404  $ 2,405,732   $ 5,386,379  $ 4,489,721
                                               ===========  ============  ===========  ============

Basic net income per share                     $      0.55  $      0.46   $      1.02  $      0.85
                                               ===========  ============  ===========  ============

Diluted net income per share                   $      0.55  $      0.45   $      1.01  $      0.84
                                               ===========  ============  ===========  ============

Weighted average common shares outstanding       5,279,333    5,256,807     5,276,526    5,255,175
                                               ===========  ============  ===========  ============

Weighted average number of common and
  common equivalent shares outstanding           5,331,632    5,343,086     5,329,007    5,337,433
                                               ===========  ============  ===========  ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                        4
<PAGE>
<TABLE>
<CAPTION>
                          SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARY
                                  Consolidated Statements of Cash Flows
                                               (Unaudited)

                                                                              Six Months Ended June 30,
                                                                                2006            2005
                                                                           --------------  --------------
<S>                                                                        <C>             <C>
Cash flows from operating activities:
Net income                                                                 $   5,386,379   $   4,489,721
  Adjustments to reconcile net income to net cash
  provided by operating activities
    Depreciation                                                                 720,553         719,321
    Provision for loan losses                                                    960,128         986,963
    Net investment securities (gains) losses                                    (283,600)         39,260
    Net (accretion of discount) amortization of premium
      on investment securities                                                  (167,840)        194,700
    Increase in CSV of bank owned life insurance                                (289,243)       (184,946)
    Stock options compensation cost                                              258,890               -
     (Gain) loss on disposal of premises and equipment                           (91,834)             17
    Gain on the sale of other real estate                                              -          (4,150)
    Gain on sales of loans                                                    (2,525,337)     (2,340,582)
    Real estate loans originated for sale                                   (136,105,604)   (122,078,283)
    Proceeds from sales of real estate loans                                 140,676,591     120,681,852
    Increase in accrued interest receivable                                     (151,270)       (525,964)
    Increase in other assets                                                    (339,948)        (12,122)
    Increase (decrease) in accrued interest payable and other liabilities        199,627        (198,877)
                                                                           --------------  --------------
      Net cash provided by operating activities                                8,247,492       1,766,910
                                                                           --------------  --------------

Cash flows from investing activities:
    Proceeds from sales of available for sale securities                      15,729,239      20,164,223
    Proceeds from maturities of available for sale securities                 22,151,932      10,070,942
    Proceeds from maturities of held to maturity securities                      500,000               -
    Purchase of available for sale securities                                (44,778,338)    (44,546,679)
    Purchase of Federal Home Loan Bank stock                                    (873,800)       (650,600)
    Proceeds from redemption of FHLB stock                                       225,000               -
    Net increase in loans                                                    (60,311,450)    (54,619,056)
    Purchase of Bank-owned life insurance                                     (3,500,000)              -
    Additions to premises and equipment                                       (3,061,294)       (512,396)
    Proceeds from sale of other real estate                                            -          57,579
    Proceeds from sale of premises and equipment                               1,770,651           2,500
                                                                           --------------  --------------
      Net cash used in investing activities                                  (72,148,060)    (70,033,487)
                                                                           --------------  --------------

Cash flows from financing activities:
    Net increase in deposits                                                  65,982,787      59,299,848
    Net (decrease) increase in federal funds purchased and
      securities sold under repurchase agreements                            (12,609,226)     12,370,388
    Advances from Federal Home Loan Bank                                      19,000,000      11,000,000
    Payments of Federal Home Loan Bank advances                              (11,000,000)     (5,000,000)
    Proceeds from subordinated debentures                                     10,000,000               -
    Principal payments on other borrowed funds                                  (600,000)              -
    Purchase of treasury stock                                                   (31,146)              -
    Payment of cash dividends                                                 (1,372,090)     (1,365,834)
    Proceeds from stock options exercised                                        176,124               -
                                                                           --------------  --------------
      Net cash provided by financing activities                               69,546,449      76,304,402
                                                                           --------------  --------------

      Net increase in cash and cash equivalents                            $   5,645,881   $   8,037,825

Cash and cash equivalents at beginning of period                              22,563,056      26,024,197

                                                                           --------------  --------------
Cash and cash equivalents at end of period                                 $  28,208,937   $  34,062,022
                                                                           ==============  ==============

Supplemental disclosures of cash paid during the period for:
    Interest                                                               $  13,165,019   $   7,401,882
                                                                           ==============  ==============

    Income taxes                                                           $   3,255,000   $   2,420,000
                                                                           ==============  ==============
</TABLE>

See accompanying notes to consolidated financial statements.


                                        5
<PAGE>
             SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                                  June 30, 2006

Note  1  -  Basis  of  Presentation

The  accompanying  consolidated  financial  statements  include  the accounts of
Southeastern  Bank  Financial  Corporation,  and  its  wholly-owned  subsidiary,
Georgia  Bank  &  Trust  Company  (the  "Company"  or  the "Bank").  Significant
intercompany transactions and accounts are eliminated in consolidation.

The  financial  statements  for the three and six months ended June 30, 2006 and
2005  are unaudited and have been prepared pursuant to the rules and regulations
of  the  Securities  and  Exchange Commission.  Certain information and footnote
disclosures  normally  included  in  financial statements prepared in accordance
with  accounting  principles  generally accepted in the United States of America
have  been  condensed  or omitted pursuant to such rules and regulations.  These
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and footnotes included in the Company's annual
report on Form 10-K for the year ended December 31, 2005.

In  the  opinion  of management, all adjustments necessary to present fairly the
financial  position and the results of operations and cash flows for the interim
periods  have been made.  All such adjustments are of a normal recurring nature.
The  results  of operations for the three and six months ended June 30, 2006 are
not  necessarily  indicative  of the results of operations which the Company may
achieve  for  the  entire  year.

Some items in the prior period financial statements were reclassified to conform
to  the  current  presentation.

Note 2 - Comprehensive Income

Other  comprehensive income for the Company consists of net unrealized gains and
losses  on investment securities available for sale.  Total comprehensive income
for the three months ended June 30, 2006 was $806,000 compared to $2,893,000 for
the  three  months  ended June 30, 2005.  Total comprehensive income for the six
months  ended  June  30,  2006 was $3,651,000 compared to $3,688,000 for the six
months  ended  June  30,  2005.


Note 3 - Stock-based Compensation

During  2000,  the  Company  adopted the 2000 Long-Term Incentive Plan (the 2000
Plan)  which  allows  for  stock  option  awards for up to 253,000 shares of the
Company's  common  stock  to  employees, officers, and directors of the Company.
The  Company


                                        6
<PAGE>
believes that such awards better align the interests of its employees with those
of its shareholders.  Under the provisions of the 2000 Plan, the option price is
determined by a committee of the board of directors at the time of grant and may
not  be  less than 100% of the fair value of the common stock on the date of the
grant  of  such  option.  Generally,  when  granted,  these  options vest over a
five-year period.  However, there were 10,000 options granted in 2005, that vest
based  on  specific  loan  growth  performance  targets.  All  options  must  be
exercised  within  a  ten-year  period.

During  2006,  the  Company  adopted the 2006 Long-Term Incentive Plan (the 2006
Plan)  which  allows  for  stock  options awards for up to 250,000 shares of the
Company's  common  stock  to  key employees, officers, directors and independent
contractors providing material services to the Bank.  The purpose of the Plan is
to  enhance  stockholder  investment by attracting, retaining and motivating key
employees,  officers,  directors and independent contractors of the Bank, and to
encourage  stock  ownership  by  such  persons by providing them with a means to
acquire a proprietary interest in the Bank's success, and to align the interests
of  management  with  those  of  stockholders.  Under the provisions of the 2006
Plan, the option price is determined by a committee of the board of directors at
the  time of grant and may not be less than 100% of the fair value of the common
stock  on  the date of the grant of such option.  Notwithstanding the foregoing,
in  the  case of an Incentive Stock Option granted to a Participant who is a Ten
Percent Stockholder, the Option Price shall not be less than one hundred and ten
percent  (110%)  of  the  Fair  Market  Value of the Common Stock on the Date of
Grant.  Generally,  when  granted,  these  options vest over a five-year period.
All  options  must  be  exercised  within a ten year period from the date of the
grant;  however,  options  issued to a ten percent stockholder must be exercised
within  a  five  year  period  from  its date of grant.  As of June 30, 2006, no
options  had  been  granted  under  this  Plan.

The  Company  periodically purchases treasury stock and uses it for stock option
exercises, when available.  If treasury stock is not available, additional stock
is  issued.  The  Company  estimates  it  will  repurchase 25,000 shares or less
during  the  2006  year.

The  Company  will  accept  as  payment for options exercised, at the optionee's
discretion,  cash,  or  shares  of  the  Company's  stock  at market value, or a
combination  of  cash  and  Company  stock.  For the three months ended June 30,
2006,  the Company received $12,000 in cash, and no stock was received.  For the
three  months ended June 30, 2005, no stock options were exercised.  For the six
months  ended  June  30,  2006, the Company received $176,000 in cash, and stock
with  a  fair  market value of $22,000.  For the six months ended June 30, 2005,
the  Company received stock with a fair market value of $210,000 and no cash was
received.  All  options issued are incentive stock options and therefore, no tax
benefit  is  realized.

Effective  January  1,  2006,  the  Company adopted SFAS No. 123 (Revised 2004),
Accounting  for  Stock-Based Compensation, which requires the Company to compute
the  fair  value  of options at the date of grant and to recognize such costs as
compensation  expense  ratably  over the vesting period of the options.  For the
three  and  six  months ended June 30, 2006, the Company recognized $189,000 and
$259,000,  respectively,  as  compensation  expense  resulting  from  all  stock
options.  This  expense  includes  $138,000


                                        7
<PAGE>
related  to  the  accelerated stock option vesting period for two key employees.
The  Company  accelerated  this  vesting period to cause expense as to partially
offset  a  $526,000  gain  on  sale  of  equity  securities.

The  fair  value  of  each  option  is  estimated on the date of grant using the
Black-Scholes  valuation  model that uses the assumptions noted in the following
table.  Expected  volatility  is  the  annualized  standard  deviation  of  the
continuously  compounded rate of return. The method used to calculate historical
average  annualized  volatility is based on the closing price of the first trade
of  each month. Expected dividends are based on the Company's historical pattern
of  dividend  payments.  The  Company  uses  historical  data to estimate option
exercise and employee termination within the valuation model. The risk-free rate
is  the  ten  year  U.S.  Treasury  note  at  the  time  of  grant.

Stock Options with a Specified Vesting Period
---------------------------------------------

The following tables provide information for stock options that vest over a five
year  period.

<TABLE>
<CAPTION>
                           Three Months Ended June 30        Six Months Ended June 30
                         -------------------------------  --------------------------------
                              2006             2005            2006             2005
                         ---------------  --------------  ---------------  ---------------
<S>                      <C>              <C>             <C>              <C>
Expected volatility               37.36%               -  33.47% - 37.36%           29.87%

Expected dividend yield            2.00%               -            2.00%            2.00%

Expected option life               7.92                -            7.92             8.54

Risk-free interest rate            5.14%               -    4.36% - 5.14%            4.05%
</TABLE>

A  summary of activity for stock options that vest over a five year period as of
June  30, 2006 and June 30, 2005, and changes during the six months is presented
in  the  following  table:


                                        8
<PAGE>
<TABLE>
<CAPTION>
                                           For the Six Months Ended June 30, 2006 and 2005
                                         -----------------------------------------------------
                                                                      Weighted
                                                     Weighted         average
                                                      average        remaining      Aggregate
                                                     exercise     contractual life  Intrinsic
                                          Shares    price/share       in years        Value
                                         --------  -------------  ----------------  ----------
<S>                                      <C>       <C>            <C>               <C>
Options outstanding - December 31, 2005  205,434   $      21.35

Granted in 2006                           10,000          38.63

Options exercised in 2006                (17,674)        (11.18)
                                         --------  -------------

Options outstanding - June 30, 2006      197,760   $      23.15               6.94  $2,936,736
                                         ========  =============  ================  ==========

Exercisable at June 30, 2006              98,220   $      17.05               5.93  $2,057,709
                                         ========  =============  ================  ==========



Options outstanding - December 31, 2004  188,040   $      17.05

Granted in 2005                            9,000          30.00

Options exercised in 2005                (13,200)        (15.90)
                                         --------  -------------

Options outstanding - June 30, 2005      183,840   $      17.77               7.02  $2,983,723
                                         ========  =============  ================  ==========

Exercisable at June 30, 2005              84,872   $      14.93               6.44  $1,618,509
                                         ========  =============  ================  ==========
</TABLE>

The  weighted  average  grant-date  fair value of the options granted during the
three  months  ended  June  30,  2006 was $14.13.  There were no options granted
during  the  three  month  period  ended  June  30,  2005.  The weighted average
grant-date  fair  value  of the options granted during the six months ended June
30,  2006  and  June  30,  2005  was $14.87 and $10.52, respectively.  The total
intrinsic value of options exercised during the three months ended June 30, 2006
was $19,000.  There were no options exercised during the three months ended June
30,  2005.  The total intrinsic value of options exercised during the six months
ended  June  30, 2006 and June 30, 2005 was $475,000 and $219,000, respectively.

A  summary  of  the status of the Company's nonvested shares as of June 30, 2006
and  June  30,  2005  is  presented  in  the  following  table.


                                        9
<PAGE>
<TABLE>
<CAPTION>
                                           Weighted
                                            Average
                                          Grant date
                                 Shares   Fair value
                                --------  -----------
<S>                             <C>       <C>
Nonvested at December 31, 2005  115,837   $     17.73

Granted in 2006                  10,000         14.87

Vested in 2006                  (26,297)        15.98
                                --------  -----------

Nonvested at June 30, 2006       99,540   $     17.90
                                ========  ===========


Nonvested at December 31, 2004  115,851   $     19.57

Granted in 2005                   9,000         10.00

Vested in 2005                  (25,883)        16.46
                                --------  -----------

Nonvested at June 30, 2005       98,968   $     19.52
                                ========  ===========
</TABLE>

As  of June 30, 2006, there was $532,000 of total unrecognized compensation cost
related  to  nonvested  options that vest over a five year period.  That cost is
expected  to  be  recognized  over  a weighted average period of 3.1 years.  The
total  fair  value  of shares vested during the six month periods ended June 30,
2006  and  2005  was  $1.0  million  and  $834,000,  respectively.

Performance  Stock  Options
---------------------------

The  following  tables  provide information for stock options that vest based on
specific  loan  growth  performance  targets.

<TABLE>
<CAPTION>
                                         For the Six Months Ended June 30, 2005 and 2006
                                        --------------------------------------------------
                                                                  Weighted
                                                                  average
                                                                  remaining     Aggregate
                                                  Exercise    contractual life  Intrinsic
                                        Shares  price/share       in years        Value
                                        ------  ------------  ----------------  ----------
<S>                                     <C>     <C>           <C>               <C>
Options outstanding- December 31, 2005  10,000  $      34.30

Granted in 2006                              -             -

Options exercised in 2006                    -             -
                                        ------  ------------

Options outstanding - June 30, 2006     10,000  $      34.30               9.0  $   37,000
                                        ======  ============  ================  ==========

Exercisable at June 30, 2006                 -  $          -                 -  $        -
                                        ======  ============  ================  ==========
</TABLE>


                                       10
<PAGE>
There were no options based on performance granted as of June 30, 2005.

<TABLE>
<CAPTION>
                                         Weighted
                                          Average
                                        Grant Date
                                Shares  Fair Value
                                ------  -----------
<S>                             <C>     <C>
Nonvested at December 31, 2005  10,000  $     11.59
                                ------  -----------

Granted in 2006                      -            -

Vested in 2006                       -            -
                                ------  -----------

Nonvested at June 30, 2006      10,000  $     11.59
                                ======  ===========
</TABLE>

As  of  June 30, 2006, there was $60,000 of total unrecognized compensation cost
related  to  nonvested  options  granted  based  on  performance.  That  cost is
expected to be recognized over a weighted average period of 4.0 years.

Pro Forma Earnings Per Share
----------------------------

Had  compensation  cost been determined based upon the fair value of the options
at  the  grant dates consistent with the method recommended by SFAS No. 123, the
Company's  net  income and income per share, on a pro forma basis, for the three
and six months ended June 30, 2005 is indicated in the following table.

<TABLE>
<CAPTION>
                                      Three Months     Six Months
                                         Ended           Ended
                                     June 30, 2005   June 30, 2005
                                     --------------  --------------
<S>                                  <C>             <C>
Net income                           $    2,405,732  $    4,489,721
Deduct: Total stock-based
  Compensation expense determined
  Under fair value based method,
  net of related tax effect                  54,261         108,522
                                     --------------  --------------
Pro Forma, net income                $    2,351,471  $    4,381,199
                                     ==============  ==============

Basic net income per share:
  As reported                        $         0.46  $         0.85
  Pro forma                          $         0.45  $         0.83

Diluted net income per share:
  As reported                        $         0.45  $         0.84
  Pro forma                          $         0.44  $         0.82
</TABLE>

Note 4 - Cash Dividend Declared

On  April  18, 2006, the Company declared a quarterly cash dividend of $0.13 per
share  on  outstanding  shares.  The  dividend  was  paid  on  May  19,  2006 to
shareholders  of  record  as  of  May  4,  2006.


                                       11
<PAGE>
On  July  19,  2006, the Company declared a quarterly cash dividend of $0.13 per
share  on  outstanding  shares.  The  dividend  is payable on August 15, 2006 to
shareholders  of  record  as  of  August  4,  2006.


                                       12
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of  Operations

Overview
--------

The  Bank  was  organized by a group of local citizens and commenced business on
August 28, 1989, with one branch location.  Today, the Bank is Augusta's largest
community  banking company operating eight full service branches in Richmond and
Columbia  counties  in  Augusta,  Martinez, and Evans, Georgia and one branch in
Athens, Georgia.  The Bank operates two mortgage origination offices in Augusta,
Georgia,  and  Savannah,  Georgia.  The  Savannah,  Georgia  office  also offers
construction  lending  services.  Bank  and  mortgage  operations are located in
Augusta,  Georgia  in  two operations campuses located in close proximity to the
main  office  in  Augusta,  Georgia.   Wealth  management and trust services are
located  in  the  main office.  The Company received approval from the Office of
Thrift  Supervision  in July 2006 to open a federally chartered thrift in Aiken,
South  Carolina  and  anticipates  that  the  thrift  will  open for business in
September  2006.

Richmond  and  Columbia  counties  have a diversified economy based primarily on
government,  transportation,  public  utilities,  health  care,  manufacturing,
construction,  and  wholesale  and  retail  trade. Augusta is one of the leading
medical  centers  in  the Southeast. The 2005 population of the Augusta-Richmond
County,  GA-SC metropolitan area was 520,332, the second largest in Georgia. The
Bank  expanded  into  the  Athens, Georgia market in December 2005. Athens has a
diversified  economy  which  includes  government,  retail  services,  tourism,
manufacturing,  other  services,  and  health  care,  with  the largest share of
government  jobs  in  the  state. The Athens-Clarke County, GA metropolitan area
ranks  sixth  in  Georgia  with  a  2005  population  of  175,085.

The  Bank's  services include the origination of residential and commercial real
estate  loans,  construction  and development loans, and commercial and consumer
loans.  The  Bank  also  offers  a  variety  of  deposit  programs,  including
noninterest-bearing  demand,  interest  checking, money management, savings, and
time deposits. In the Augusta-Richmond County, GA-SC metropolitan area, the Bank
had  11.25% of all deposits and was the fourth largest depository institution at
June  30,  2005,  as  cited  from  the  Federal  Deposit Insurance Corporation's
website.  Securities  sold  under  repurchase  agreements  are  also  offered.
Additional  services  include  wealth  management, trust, retail investment, and
mortgage. As a matter of practice, most mortgage loans are sold in the secondary
market;  however,  some  mortgage  loans  are  placed  in the portfolio based on
asset/liability  management  strategies.  The  Bank  continues to concentrate on
increasing  its  market  share through various new deposit and loan products and
other financial services and by focusing on the customer relationship management
philosophy.  The  Bank is committed to building life-long relationships with its
customers,  employees,  shareholders,  and  the  communities  it  serves.

The  Bank's  primary source of income is from its lending activities followed by
interest  income  from  its  investment  activities, service charges and fees on
deposits, and gain on sales of mortgage loans in the secondary market.  Interest
income  on  loans  and


                                       13
<PAGE>
investment  securities increased during the first six months of 2006 as compared
to  the  first  six  months  of  2005 due to rising interest rates and increased
volumes.  Service  charges  and  fees  on  deposits  increased for the first six
months  of  2006  as compared to the same period in 2005 due to increases in NSF
income on retail checking accounts and debit/ATM card income, both the result of
new  account  growth.  Gain  on  sales of mortgage loans increased due to higher
production  levels.  Other significant contributors to income are trust services
fees  and  retail  investment  income.

The  Bank  continues  to  experience  steady  growth.  Over the past four years,
assets  grew  from  $481.5  million  at  December  31, 2001 to $864.3 million at
December 31, 2005.  At June 30, 2006, assets were $937.9 million.  From year end
2001  to  year  end 2005, loans increased $261.6 million, and deposits increased
$294.5  million.  From December 31, 2005 to June 30, 2006, loans increased $57.5
million  and  deposits increased $66.0 million.  Also, from 2001 to 2005, return
on  average  equity increased from 12.19% to 16.15% and return on average assets
increased  from  1.02%  to  1.27%.  For  the  six  months  ended  June  30 2006,
annualized  return  on average assets was 1.20% and annualized return on average
equity was 16.47%.  Net income for the year ended 2001 was $4.6 million compared
to  net income of $10.0 million at year end 2005.  Net income for the six months
ended  June  30,  2006  was  $5.4  million.  The  Company has reached a level of
maturity  evidenced  by  long-term  financial  performance  and  stability  that
resulted  in cash dividends of $0.13 per share paid for each quarter of 2004 and
2005  and  for  the  first  two  quarters  of  2006.

The  Bank meets its liquidity needs by managing cash and due from banks, federal
funds  purchased  and  sold,  maturity  of  investment  securities,  principal
repayments  from  mortgage-backed  securities,  and  draws  on  lines of credit.
Additionally,  liquidity  can  be  managed  through structuring deposit and loan
maturities.  The  Bank  funds  loan  and  investment  growth with core deposits,
securities sold under repurchase agreements and Federal Home Loan Bank advances.
During  inflationary  periods,  interest  rates generally increase and operating
expenses  generally  rise.  When  interest  rates  rise, variable rate loans and
investments  produce  higher  earnings;  however,  deposit  and other borrowings
interest  expense  also  rise.  The  Bank  monitors its interest rate risk as it
applies  to  net  income  in  a  ramp up and down annually 200 basis points (2%)
scenario  and  as  it applies to economic value of equity in a shock up and down
200  (2%)  basis  points scenario.  The Bank monitors operating expenses through
responsibility  center  budgeting.

Forward-Looking  Statements
---------------------------

Southeastern  Bank Financial Corporation (the "Company") may, from time to time,
make  written or oral forward-looking statements, including statements contained
in  the  Company's  filings  with  the  Securities  and Exchange Commission (the
"Commission")  and  its  reports  to  shareholders.  Statements  made  in  such
documents,  other  than  those  concerning  historical  information,  should  be
considered forward-looking and subject to various risks and uncertainties.  Such
forward-looking  statements  are  made based upon management's belief as well as
assumptions made by, and information currently available to, management pursuant
to  "safe  harbor" provisions of the Private Securities Litigation Reform Act of
1995.  The  Company's  actual  results  may  differ  materially  from  the


                                       14
<PAGE>
results  anticipated  in forward-looking statements due to a variety of factors,
including  unanticipated  changes  in  the  Bank's  local  economy, the national
economy, governmental monetary and fiscal policies, deposit levels, loan demand,
loan collateral values and securities portfolio values; difficulties in interest
rate  risk  management;  the  effects  of  competition  in the banking business;
difficulties  in  expanding  the  Bank's  business  into new markets; changes in
governmental  regulation relating to the banking industry, including regulations
relating  to  branching  and acquisitions; failure of assumptions underlying the
establishment  of  reserves  for  loan losses, including the value of collateral
underlying  delinquent loans; and other factors.  The Company cautions that such
factors  are  not  exclusive.  The  Company  does  not  undertake  to update any
forward-looking  statement  that  may be made from time to time by, or on behalf
of,  the  Company.

Critical  Accounting  Estimates
-------------------------------

The  accounting  and  financial  reporting  policies  of  the Company conform to
accounting  principles generally accepted in the United States of America and to
general practices within the banking industry. Of these policies, management has
identified  the allowance for loan losses as a critical accounting estimate that
requires  difficult, subjective judgment and is important to the presentation of
the  financial  condition  and  results  of  operations  of  the  Company.

The allowance for loan losses is established through a provision for loan losses
charged  to  expense,  which  affects the Company's earnings directly. Loans are
charged  against the allowance for loan losses when management believes that the
collectibility  of the principal is unlikely. Subsequent recoveries are added to
the  allowance.  The  allowance  is  an  amount that management believes will be
adequate  to absorb losses on existing loans that become uncollectible, based on
evaluations  of  the  collectibility  of  loans.  The  evaluations  take  into
consideration  such  factors  as  changes  in  the nature and volume of the loan
portfolio,  historical loss rates, overall portfolio quality, review of specific
problem  loans,  and  current  economic  conditions and trends that may affect a
borrower's  ability  to  repay.

The  Company  segments  its  allowance  for loan losses into the following three
major categories: 1) identified losses for impaired loans; 2) general allocation
for  Classified/Watch  loans;  and  3)  general  allocation  for  loans  with
satisfactory ratings. Risk ratings are initially assigned in accordance with the
Bank's  loan  and  collection policy. An organizationally independent department
reviews  grade  assignments  on  an  ongoing  basis.  Management reviews current
information and events regarding a borrower's financial condition and strengths,
cash  flows  available for debt repayment, the related collateral supporting the
loan  and  the  effects  of  known  and  expected  economic conditions. When the
evaluation  reflects  a  greater than normal risk associated with the individual
loan,  management  classifies the loan accordingly. If the loan is determined to
be impaired, management allocates a portion of the allowance for loan losses for
that  loan  based  upon the present value of future cash flows discounted at the
loan's  effective  interest  rate,  or  the  fair  value  of  the  collateral if
collection of the loan is deemed to be dependent upon the collateral. Regulatory
guidance  is  also  considered.  Cash receipts for accruing loans are applied to
principal  and  interest  under  the  contractual  terms  of  the  loan


                                       15
<PAGE>
agreement; however, cash receipts on impaired and nonaccrual loans for which the
accrual  of  interest  has  been  discontinued  are  generally  applied first to
principal  and  then  to  interest  income  depending  upon  the overall risk of
principal  loss  to  the  Company.  Impaired  and  Classified/Watch  loans  are
aggressively  monitored.  The allocation for loans rated satisfactory is further
subdivided  into  various  types  of  loans as defined by call report codes. The
Company's  management  also  gives  consideration to subjective factors such as,
national  and local economic conditions, bankruptcy trends, unemployment trends,
loan  concentrations, and competitive factors in the local market. These factors
represent  uncertainties  in the Bank's business environment and are included in
the  various  individual  components  of  the  allowance  for  loan  losses.

Performance Overview -- Net Income
----------------------------------

The  Company's net income for the second quarter of 2006 was $2.9 million, which
was  an  increase of $521,000 (21.6%) compared to net income of $2.4 million for
the  second  quarter of 2005.  Diluted net income per share for the three months
ended  June 30, 2006 was $0.55 compared to $0.45 for the three months ended June
30,  2005.  Net  income  for  the  first six months of 2006 was $5.4 million, an
increase  of  $897,000  (20.0%) compared with net income of $4.5 million for the
first  six  months  of  2005.  The  increase in net income for the three and six
months  ended June 30, 2006 as compared with the three and six months ended June
30,  2005,  was  primarily  a  result  of  increases  in net interest income and
noninterest  income,  somewhat  offset  by  increases  in  noninterest  expense.
Interest  income  on  both  loans  and  investment  securities  increased due to
increased  volumes  and  higher  interest  rates.  Interest expense on deposits,
securities  sold under repurchase agreements and other borrowings increased as a
result of rising interest rates and higher volumes.  Factors contributing to the
increase in noninterest income for the three and six months ended June 30, 2006,
were  increases  in both service charges and fees on deposits and net investment
securities  gains.  NSF  fees  on  retail  checking  accounts and debit/ATM card
income  increased  due  to  new  account growth, somewhat offset by decreases in
service  charges  on business checking accounts due to increases in the earnings
credit.  Net  investment  securities  gains  increased  due  to  a $526,000 gain
recognized  on  the sale of equity securities, partially offset by losses on the
sale  of  agency  securities.  Increases  in  gain  on  sales  of  loans, retail
investment  income  and  increase  in  cash-surrender  value  of bank-owned life
insurance  also  contributed  to the increase in non-interest income for the six
months  ended June 30, 2006.  Noninterest expense increased during the three and
six months ended June 30, 2006 compared to the same periods ended June 30, 2005,
primarily  due to increases in salaries and employee benefits related to company
growth  and  increases in other operating expenses.  The increase in noninterest
expense  for  the  six  months ended June 30, 2006 included $610,000 in expenses
related  to  the  Company's  expansion into new markets.  Significant changes in
other  operating  expenses  during  the  three  and  six  month  periods include
increases  in  processing expenses for retail and business checking products and
retail  investment services as well as increases in contributions for a $200,000
donation  to  Georgia  Bank  Foundation.  Professional  fees  increased  for the
six-month  period  for  Sarbanes-Oxley  404  compliance,  legal  fees  and other
advisory  services.


                                       16
<PAGE>
Total  assets  of  $937.9  million at June 30, 2006 reflect an increase of $73.7
million  (8.5%)  from year-end 2005.  This increase is primarily attributable to
higher  balances  for  loans, federal funds sold and investment securities since
December  2005.  Total  loans  at  June  30,  2006  were  $658.7  million  which
represented  an  increase of $57.5 million (9.6%) from December 31, 2005.  Since
December  31,  2005,  federal  funds  sold  increased  $5.4  million  (194.6%),
investment securities increased $4.2 million (2.1%), and cash surrender value of
bank-owned  life insurance increased $3.8 million (32.1%).  These increases were
funded  by  increases  in  total  deposits of $66.0 million (9.9%), increases in
subordinated  debentures of $10.0 million (100.0%) and increases in Federal Home
Loan  Bank  advances  of  $8.0  million (15.4%), somewhat offset by decreases in
securities  sold  under  repurchase  agreements  of  $12.6 million (18.8%).  Net
income  of  $5.4 million less dividends paid of $1.4 million also contributed to
the  funding.

The  annualized  return  on average assets for the Company was 1.20% for the six
months  ended  June  30,  2006, compared to 1.21% for the same period last year.
The  steady ratio reflects growth of both net income and assets in proportion to
one  another  during  the  periods  compared.  The  annualized return on average
stockholders' equity was 16.47% for the six months ended June 30, 2006, compared
to 15.10% for the same period last year.  The increase is primarily attributable
to net income growth and increases in accumulated other comprehensive loss.

<TABLE>
<CAPTION>
Net  Interest  Income
---------------------
                                              Table 1 - Net Interest Income

                                Three Months Ended                      Six Months Ended
                                      June 30            Variance            June 30,           Variance
                                ------------------  ------------------  ------------------  ------------------
                                  2006      2005     Amount      %        2006      2005     Amount      %
                                --------  --------  --------  --------  --------  --------  --------  --------
<S>                             <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
                                                         (Dollars in thousands)
Interest income:
  Loans, including fees         $ 13,018  $  9,272  $  3,746     40.4%  $ 24,830  $ 17,515  $  7,315     41.8%
  Investment securities            2,702     1,937       765     39.5%     5,158     3,701     1,457     39.4%

Interest expense:
  Deposits                         5,547     3,245     2,302     70.9%    10,466     5,891     4,575     77.7%
  Federal funds purchased
    and securities sold under
    repurchase agreements            725       350       375    107.1%     1,409       622       787    126.5%
  Other borrowings                 1,058       554       504     91.0%     1,905     1,062       843     79.4%

Net interest income                8,440     7,161     1,279     17.9%    16,417    13,802     2,615     18.9%
</TABLE>

Net interest income increased $1.3 million (17.9%) during the three-month period
and  $2.6  million  (18.9%)  during  the  six-month period due to an increase in
average earning assets.  Interest-earning assets were $893.5 million at June 30,
2006, an increase of $144.0 million (19.2%) over June 30, 2005 and $71.0 million
(8.6%)  over December 31, 2005.  Loan interest income increased $3.7 million and
$7.3  million  in  the  three and six month periods, respectively, while deposit
interest  expense  increased  $2.3 million and $4.6 million in the three and six


                                       17
<PAGE>
month  periods,  respectively,  all  the result of rising interest rates and the
continued  growth of account balances.  The annual average balance for loans was
$626.0  million  at  June  30,  2006  with  an annualized average yield of 7.92%
compared  to $513.5 million at June 30, 2005 with an annualized average yield of
6.82%.  Deposits  had  an  annual  average  balance  of  $600.0  million with an
annualized average rate of 3.52% at June 30, 2006 compared to $498.7 million and
2.38%  at  June  30, 2005.  Other contributing factors during both the three and
six  month  periods  included  increases  in  interest  income  on  investment
securities,  increases  in interest expense on other borrowings and increases in
interest expense on federal funds purchased and securities sold under repurchase
agreements,  all  the  result  of  increased  volumes and higher interest rates.

The  Company's  net interest margin for both the three and six months ended June
30,  2006 was 3.84% as compared to 3.95% for the three and six months ended June
30,  2005.  The  decrease  in the net interest margin for both the three and six
month  periods  is primarily the result of increases in the cost to fund earning
assets  due  to  interest  expense on subordinated debentures issued in December
2005  and  March 2006.  Interest expense on subordinated debentures was $326,000
for  the  three months ended June 30, 2006 and $518,000 for the six months ended
June  30,  2006.

<TABLE>
<CAPTION>
Noninterest Income
------------------
                                              Table 2 - Noninterest Income

                             Three Months Ended                         Six Months Ended
                                   June 30,             Variance             June 30,            Variance
                             -------------------  -------------------  -------------------  ------------------
                               2006      2005      Amount       %        2006      2005      Amount      %
                             --------  ---------  ---------  --------  --------  ---------  --------  --------
<S>                          <C>       <C>        <C>        <C>       <C>       <C>        <C>       <C>
                                                         (Dollars in thousands)
Service charges and fees
  on deposits                $  1,540  $  1,354   $    186      13.7%  $  2,892  $  2,565   $    327     12.7%
Gain on sales of loans          1,271     1,298        (27)    (2.1%)     2,525     2,341        184      7.9%
Investment securities
  gains (losses), net             284       (40)       324   (810.0%)       284       (39)       323  (828.2%)
Retail investment income          217       122         95      77.9%       384       204        180     88.2%
Increase in cash surrender
  value of bank-owned
  life insurance                  150       102         48      47.1%       289       185        104     56.2%

Noninterest income              3,806     3,189        617      19.3%     7,062     5,890      1,172     19.9%
</TABLE>

Noninterest  income increased $617,000 (19.3%) during the three-month period and
$1.2  million (19.9%) during the six-month period.  The most significant changes
for  the  three  and  six  month  periods  were  for service charges and fees on
deposits  and net investment securities gains.  Increases in service charges and
fees  on deposits during both the three and six month periods were primarily due
to increases in NSF fees for retail checking accounts and debit/ATM card income,
both  the  result  of  new  account  growth,  somewhat


                                       18
<PAGE>
offset  by  decreases  in  service  charges on business checking accounts due to
increases  in the earnings credit.  Increases in net investment securities gains
for  both  the  three  and  six month periods were the result of a $526,000 gain
recognized  on  the sale of equity securities, partially offset by losses on the
sale  of  agency  securities.  Other  contributing  factors  to  the increase in
noninterest  income  for the six-month period include increases in gain on sales
of  loans due to increased mortgage production, which is primarily the result of
new  personnel,  increases  in retail investment income due to production by new
personnel  and  increases  in the increase in cash-surrender value of bank-owned
life  insurance due to an additional purchase of $3.5 million in bank-owned life
insurance  in  February  2006.

<TABLE>
<CAPTION>
Noninterest  Expense
--------------------

                                                    Table 3 - Noninterest Expense

                                     Three Months Ended                        Six Months Ended
                                 June 30,            Variance            June 30,            Variance
                            ------------------  ------------------  ------------------  ------------------
                              2006      2005     Amount      %        2006      2005     Amount      %
                            --------  --------  --------  --------  --------  --------  --------  --------
<S>                         <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
                                                         (Dollars in thousands)
Salaries                    $  3,428  $  3,014  $    414     13.7%  $  6,808  $  5,763  $  1,045     18.1%
Employee benefits              1,078       776       302     38.9%     2,137     1,585       552     34.8%
Occupancy expenses               685       683         2      0.3%     1,434     1,356        78      5.8%
Other operating expenses       2,041     1,734       307     17.7%     4,019     3,240       779     24.0%
                            --------  --------  --------  --------  --------  --------  --------  --------
Total noninterest expense   $  7,232  $  6,207  $  1,025     16.5%  $ 14,398  $ 11,944  $  2,454     20.5%
                            ========  ========  ========  ========  ========  ========  ========  ========
</TABLE>

Noninterest expense increased $1.0 million (16.5%) during the three-month period
and  $2.5  million  (20.5%)  during  the  six-month period.  Noninterest expense
attributable  to  the  Company's expansion into new markets totaled $279,000 for
the  three months ended June 30, 2006 and $610,000 for the six months ended June
30,  2006.  Salary  expense  increased  during  the  three and six month periods
primarily  as  the result of company growth related to new markets, opening of a
customer  care center and expansion of the wealth management area.  Increases in
employee benefits during the three and six month periods were for FICA taxes and
medical  expenses directly related to salaries and for stock option compensation
expense  recognized  for  the  acceleration  of  the  vesting period for two key
employees  and  to  comply  with  SFAS  No. 123 (Revised 2004).  Other operating
expenses  increased  $307,000  (17.7%)  for  the three-month period and $779,000
(24.0%)  for the six-month period.  Increases in processing expenses during both
the three and six month periods were attributable to new account growth for both
retail  and  business  checking  products  and retail investment processing fees
related  to increased production. Contributions increased for both the three and
six  month  periods  as  the  result of a $200,000 donation made to Georgia Bank
Foundation.  Professional  fees  increased  for  the  six-month  period  for
Sarbanes-Oxley 404 compliance, legal fees and other advisory services.


                                       19
<PAGE>
Income  Taxes
-------------

Income  tax  expense  in  the  second  quarter  of 2006 totaled $1.6 million, an
increase of $410,000 (33.5%) over the second quarter of 2005.  The effective tax
rate  for  the  three  months  ended June 30, 2006 and 2005 was 35.8% and 33.7%,
respectively.  Income tax expense for the six months ended June 30, 2006 totaled
$2.7  million  for  an effective tax rate of 33.7% compared to 33.6% for the six
months  ended  June  30,  2005.  The  increase in the effective tax rate for the
three  month  period  is  primarily  due  to  nondeductible stock option expense
related  to incentive stock options recorded in the second quarter of 2006.  For
the  six months ended June 30, 2006 as compared to the six months ended June 30,
2005,  the  nondeductible  stock  option  expense and the increase in disallowed
state  agency  and  non-Georgia  municipal  interest income was mostly offset by
increases  in  federal  deductible  interest  income.

Asset  Quality
--------------

Table  4  which  follows  shows  the  current  and  prior  period  amounts  of
non-performing assets. Non-performing assets were $3.2 million at June 30, 2006,
compared  to  $4.0  million  at December 31, 2005 and June 30, 2005. Significant
changes  from  December  2005  to  June  2006  include  a  $723,000  decrease in
non-performing  assets with balances less than $100,000, a $940,000 decrease for
one  customer  from  a combination of collateral sale and charge-off, and a $1.0
million  increase  for  three customers added to nonaccrual status. The ratio of
non-performing assets to total loans and other real estate was 0.48% at June 30,
2006,  compared  to  0.67%  at December 31, 2005 and 0.72% at June 30, 2005. The
control  and  monitoring  of non-performing assets continues to be a priority of
management.

There were no loans past due 90 days or more and still accruing at June 30, 2006
and  June  30,  2005.  At December 31, 2005 there were loans past due 90 days or
more  and  still  accruing  of  $1,000.

<TABLE>
<CAPTION>
                                          Table 4 - Non-Performing Assets
                                              (Dollars in thousands)

                                 June 30, 2006   December 31, 2005   June 30, 2005
                                 --------------  ------------------  --------------
<S>                              <C>             <C>                 <C>
Nonaccrual loans                 $        3,185  $            4,009  $        3,955
Other real estate owned                       -                   -               -
                                 --------------  ------------------  --------------
    Total non-performing assets  $        3,185  $            4,009  $        3,955
                                 ==============  ==================  ==============


Loans past due 90 days or more
  and still accruing interest    $            -  $                1  $            -
                                 ==============  ==================  ==============
</TABLE>


                                       20
<PAGE>
Allowance  for  Loan  Losses
----------------------------

The  allowance  for  loan  losses represents an allocation for probable incurred
loan  losses  in  the  loan  portfolio.  The  adequacy of the allowance for loan
losses  is  evaluated  periodically  based on a review of all significant loans,
with  particular  emphasis  on impaired, non-accruing, past due, and other loans
that  management  believes  require special attention.  The determination of the
allowance  for  loan  losses is considered a critical accounting estimate of the
Company.  See  "Critical  Accounting  Estimates."

When  reviewing  the allowance for loan losses, it is important to understand to
whom  the  Company lends.  The following table sets forth the composition of the
Company's  loan  portfolio  as  of  June  30,  2006  and  December  31,  2005.

<TABLE>
<CAPTION>
                         Table 5 - Loan Portfolio Composition

                                            June 30, 2006      December 31, 2005
                                         -------------------  -------------------
                                          Amount       %       Amount       %
                                         ---------  --------  ---------  --------
<S>                                      <C>        <C>       <C>        <C>
                                                  (Dollars in thousands)

Commercial financial and agricultural.   $ 75,260     11.43%  $ 64,398     10.71%
                                         ---------  --------  ---------  --------
Real estate
  Commercial                              187,859     28.52%   171,652     28.55%
  Residential                             125,034     18.98%   123,960     20.62%
  Residential held for sale                20,101      3.05%    22,147      3.68%
  Construction and
    development                           218,131     33.11%   184,826     30.74%
                                         ---------  --------  ---------  --------
      Total real estate                   551,125     83.67%   502,585     83.59%
                                         ---------  --------  ---------  --------
Lease financing                               132      0.02%       111      0.02%
Consumer
  Direct.                                  24,591      3.73%    24,343      4.05%
  Indirect                                  7,725      1.17%     9,752      1.62%
  Revolving                                   745      0.11%       656      0.11%
                                         ---------  --------  ---------  --------
      Total consumer                       33,061      5.02%    34,751      5.78%
                                         ---------  --------  ---------  --------
Deferred loan origination fees               (858)    -0.13%      (610)    -0.10%
                                         ---------  --------  ---------  --------
      Total                              $658,720    100.00%  $601,235    100.00%
                                         =========  ========  =========  ========
</TABLE>

At  June  30, 2006, the loan portfolio is comprised of 83.67% real estate loans.
Commercial, financial and agricultural loans comprise 11.43%, and consumer loans
comprise  5.02%  of  the  portfolio.

While  the  Company  has  83.67%  of  its loan portfolio composed of real estate
loans,  this  percentage  is  not  significantly  higher than in previous years.
Commercial  real  estate comprises 28.52% of the loan portfolio and is primarily
owner  occupied properties where the operations of the commercial entity provide
the  necessary  cash  flow  to service the debt. For this portion of real estate
loan portfolio, repayment is not dependent upon the sale of the real estate held
as  collateral.  Construction  and development (33.11%) has been an increasingly
important  portion  of  the  real  estate  loan portfolio. The Company carefully
monitors  the  loans  in  this  category  since  the repayment of these loans is
generally  dependent  upon  the  sale of the real estate in the normal course of
business  and  can  be  impacted  by national and local economic conditions. The
residential  category,


                                       21
<PAGE>
18.98%  of  the  portfolio,  represents  those loans that the Company chooses to
maintain  in  its  portfolio  rather  than selling into the secondary market for
marketing  and  competitive  reasons and commercial loans secured by residential
real  estate.  The  residential  held for sale category, 3.05% of the portfolio,
comprises loans that are in the process of being sold into the secondary market.
In  these  loans,  the credit has been approved by the investor and the interest
rate  locked  so  that  the Company minimizes credit and interest rate risk with
respect  to  these  loans.

The Company has no large loan concentrations to individual borrowers.  Unsecured
loans  at  June  30,  2006  were $10.5 million.  While management uses available
information  to recognize losses on loans, future additions to the allowance may
be  necessary  based  on  changes  in economic conditions.  In addition, various
regulatory  agencies,  as  an  integral  part  of  their  examination  process,
periodically  review the Company's allowance for loan losses.  Such agencies may
advise  additions  to  the  allowance based on their judgments about information
available to them at the time of their examination.  Such regulatory guidance is
considered,  and  the  Company  may  recognize  additions  to the allowance as a
result.

Additions to the allowance for loan losses are made periodically to maintain the
allowance  at an appropriate level based upon management's analysis of potential
risk  in the loan portfolio. Loans determined to be uncollectible are charged to
the  allowance  for  loan  losses  and  subsequent  recoveries  are added to the
allowance.  A  provision  for  losses  in  the amount of $456,000 was charged to
expense for the quarter ended June 30, 2006 compared to $515,000 for the quarter
ended  June  30,  2005,  and  $960,000  for  the  six months ended June 30, 2006
compared  to  $987,000  for  the six months ended June 30, 2005. The decrease in
provision  for loan losses for both the three and six month periods is primarily
due  to  adjustments  in  the allowance calculation for economic and market risk
factors  related  to  improvements  in  local  economic  conditions  within  the
Company's  market area and decreases in the levels of Classified and Watch-rated
debt.  The  increase  in  the  allowance for loans losses as of June 30, 2006 as
compared  to  June  30,  2005  is primarily due to increases in outstanding loan
balances  somewhat  offset  by decreases to the allowance due to lower levels of
Classified  and  Watch-rated  debt  and  the change in the allowance calculation
related  to  economic and market risk factors. Charge-offs for the three and six
months  ended  June  30,  2006  increased  primarily as the result of a $423,000
charge-off  for  one  real  estate  loan.

<TABLE>
<CAPTION>
           Table 6 - Allowance for Loan Losses

                                 2006         2005
                              -----------  -----------
<S>                           <C>          <C>
Beginning balance, January 1  $    9,125   $    7,930
Provision charged to expense         960          987
Recoveries                           426          511
Loans charged off                 (1,207)        (750)
                              -----------  -----------
Ending balance, June 30       $    9,304   $    8,678
                              ===========  ===========
</TABLE>

At June 30, 2006 the ratio of allowance for loan losses to total loans was 1.41%
compared  to  1.52% at December 31, 2005 and 1.57% at June 30, 2005.  Management
considers  the  current  allowance  for  loan  losses appropriate based upon its
analysis  of  the


                                       22
<PAGE>
potential  risk  in  the  portfolio, although there can be no assurance that the
assumptions underlying such analysis will continue to be correct.

Liquidity  and  Capital  Resources
----------------------------------

The  Company's  liquidity  remains  adequate  to meet operating and loan funding
requirements.  The  loan to deposit ratio at June 30, 2006 was 90.3% compared to
90.6%  at  December  31,  2005  and  89.6%  at June 30, 2005. The steady loan to
deposit  ratio  from  December 31, 2005 to June 30, 2006 reflects growth of both
loans  and  deposits in proportion to one another during the first six months of
2006.  The  increase in the loan to deposit ratio from June 30, 2005 to December
31,  2005  reflects loan growth at a higher rate than deposit growth during that
time  period.  Deposits  at  June  30,  2006 and December 31, 2005 include $57.7
million and $40.4 million of brokered certificates of deposit, respectively. The
Company  has  also  utilized  borrowings  from  the  Federal Home Loan Bank. The
Company maintains a line of credit with the Federal Home Loan Bank approximating
10%  of  the  Bank's  total  assets.  Federal  Home  Loan  Bank  advances  are
collateralized  by  eligible  first mortgage loans, commercial real estate loans
and  investment  securities.  These borrowings totaled $60.0 million at June 30,
2006.  The  Company  maintains repurchase lines of credit with SunTrust Robinson
Humphrey,  Atlanta,  Georgia,  for  advances  up  to  $20.0 million and with The
Bankers  Bank,  Atlanta,  Georgia,  for advances up to $10.0 million of which no
amounts  were  outstanding  in  either  case at June 30, 2006. The Company has a
federal  funds  purchased accommodation with The Bankers Bank, Atlanta, Georgia,
for  advances  up  to $16.7 million and with SunTrust Bank, Atlanta, Georgia for
advances  up to $10.0 million. Additionally, liquidity needs can be satisfied by
the  structuring  of the maturities of investment securities and the pricing and
maturities  on  loans  and  deposits offered to customers. The Company also uses
retail  securities  sold  under  repurchase  agreements  to  fund growth. Retail
securities sold under repurchase agreements were $54.4 million at June 30, 2006.

Shareholders'  equity  to  total  assets  was 7.07% at June 30, 2006 compared to
7.36%  at  December  31,  2005  and  7.80% at June 30, 2005.  The capital of the
Company  and  the  Bank  exceeded all required regulatory guidelines at June 30,
2006.  The  Company's  Tier  1 risk-based, total risk-based and leverage capital
ratios  were  12.10%,  13.38%,  and  9.74%, respectively, at June 30, 2006.  The
following  table  reflects the current regulatory capital levels in more detail,
including  comparisons  to  the  regulatory  minimums.


                                       23
<PAGE>
<TABLE>
<CAPTION>
                                Table 7 - Regulatory Capital Requirements
                                              June 30, 2006
                                         (Dollars in Thousands)

                                                         Required for capital
                                      Actual               adequacy purposes             Excess
                                Amount       Percent      Amount      Percent      Amount      Percent
                              -----------  -----------  ----------  -----------  ----------  -----------
<S>                           <C>          <C>          <C>         <C>          <C>         <C>
Southeastern Bank Financial
Corporation

Risk-based capital:
  Tier 1 capital              $    90,121       12.10%      29,790        4.00%      60,331        8.10%
  Total capital                    99,664       13.38%      59,579        8.00%      40,085        5.38%
Tier 1 leverage ratio              90,121        9.74%      37,010        4.00%      53,111        5.74%

Georgia Bank & Trust Company

Risk-based capital:
  Tier 1 capital              $    67,245        9.11%      29,527        4.00%      37,718        5.11%
  Total capital                    76,473       10.36%      59,054        8.00%      17,419        2.36%
Tier 1 leverage ratio              67,245        7.43%      36,199        4.00%      31,046        3.43%
</TABLE>

Management  is  not  aware  of  any  events or uncertainties that are reasonably
likely  to  have a material effect on the Company's liquidity, capital resources
or  operations.

Commitments  and  Contractual  Obligations
------------------------------------------

The Bank is a party to lines of credit with off-balance sheet risk in the normal
course  of  business  to  meet  the  financing needs of its customers.  Lines of
credit are unfunded commitments to extend credit.  These instruments involve, in
varying  degrees,  exposure  to  credit  and interest rate risk in excess of the
amounts  recognized  in the financial statements.  The Bank's exposure to credit
loss  in  the  event  of  nonperformance  by  the  other  party to the financial
instrument  for  unfunded  commitments to extend credit and letters of credit is
represented  by the contractual amount of those instruments.  The Bank evaluates
construction  and acquisition and development loans for the percentage completed
before  extending  additional credit.  The Bank follows the same credit policies
in  making  commitments  and  contractual  obligations as it does for on-balance
sheet  instruments.

Unfunded commitments to extend credit where contract amounts represent potential
credit  risk  totaled  $173.6  million  at June 30, 2006.  These commitments are
primarily  at  variable  interest  rates.

The  Company's  commitments  are  funded  through  internal  funding  sources of
scheduled  repayments of loans and sales and maturities of investment securities
available  for  sale  or


                                       24
<PAGE>
external  funding  sources  through  acceptance  of  deposits  from customers or
borrowings  from  other  financial  institutions.

The  following table is a summary of the Company's commitments to extend credit,
commitments  under  contractual  leases  as  well  as  the  Company' contractual
obligations,  consisting  of deposits, FHLB advances, which are subject to early
termination options, and borrowed funds by contractual maturity date.

<TABLE>
<CAPTION>
Table 8 - Commitments and
Contractual Obligations       Less than    1 - 3    3 - 5   More than
($in thousands)                 1 Year     Years    Years    5 Years
----------------------------  ----------  -------  -------  ----------
<S>                           <C>         <C>      <C>      <C>
Lines of credit               $  173,633        -        -           -
Lease agreements                      84       42        9           -
Deposits                         670,599   49,788    4,772       4,479
Securities sold under
  repurchase agreements           54,404        -        -           -
FHLB advances                      5,000        -   30,000      25,000
Other borrowings                     400        -        -           -
                              ----------  -------  -------  ----------
  Total commitments and
    contractual obligations   $  904,120  $49,830  $34,781  $   29,479
                              ==========  =======  =======  ==========
</TABLE>

Although management regularly monitors the balance of outstanding commitments to
fund  loans  to  ensure  funding  availability should the need arise, management
believes  that  the  risk  of  all customers fully drawing on all these lines of
credit  at  the  same  time  is  remote.

Effects of Inflation and Changing Prices
----------------------------------------

Inflation  generally  increases the cost of funds and operating overhead, and to
the  extent  loans  and  other  assets  bear  variable rates, the yields on such
assets.  Unlike  most  industrial  companies,  virtually  all  of the assets and
liabilities  of  a  financial  institution are monetary in nature.  As a result,
interest  rates generally have a more significant impact on the performance of a
financial institution than the effects of general levels of inflation.  Although
interest  rates  do  not  necessarily move in the same direction and to the same
extent  as  the  prices  of goods and services, increases in inflation generally
have  resulted in increased interest rates.  In addition, inflation can increase
a  financial  institution's  cost  of  goods and services purchased, the cost of
salaries  and  benefits,  occupancy  expense  and  similar items.  Inflation and
related  increases  in  interest  rates  generally  decrease the market value of
investments  and  loans  held  and may adversely affect liquidity, earnings, and
stockholders'  equity.  Mortgage  originations  and refinancings tend to slow as
interest  rates  increase,  and  can  reduce  the  Company's  earnings from such
activities  and  the  income  from the sale of residential mortgage loans in the
secondary  market.


                                       25
<PAGE>
Item 3.  Quantitative and Qualitative Disclosures About Market Risk

As  of  June  30,  2006,  there were no substantial changes in the interest rate
sensitivity  analysis or the sensitivity of market value of portfolio equity for
various  changes  in  interest  rates  calculated  as of December 31, 2005.  The
foregoing  disclosures  related to the market risk of the Company should be read
in  conjunction  with  the  Company's audited consolidated financial statements,
related  notes  and  management's discussion and analysis of financial condition
and  results  of operations for the year ended December 31, 2005 included in the
Company's  2005  Annual  Report  on  Form  10-K.

Item 4.  Controls and Procedures

As  of  the end of the period covered by this report, the Company carried out an
evaluation,  under  the  supervision and with the participation of the Company's
management,  including  the  Company's  President  and  Chief  Executive Officer
(principal  executive  officer) and its Group Vice President and Chief Financial
Officer  (principal  financial  officer), of the effectiveness of the design and
operation  of  the  Company's  disclosure  controls  and  procedures pursuant to
Exchange  Act  Rule 13a-15.  Based upon that evaluation, such officers concluded
that  the  Company's  disclosure controls and procedures are effective in timely
alerting  them  to  material  information relating to the Company (including its
consolidated  subsidiaries)  that  is  required  to be included in the Company's
periodic  filings  with the Securities and Exchange Commission.  There have been
no changes in the Company's internal controls or, to the Company's knowledge, in
other  factors  during  the  quarter covered by this report that have materially
affected,  or are reasonably likely to materially affect, the Company's internal
controls  over  financial  reporting.


                                       26
<PAGE>
                                     PART II
                                OTHER INFORMATION


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, 2005, 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

               The  following  table  sets  forth  information  regarding  the
               Company's purchases of its common stock on a monthly basis during
               the  second  quarter  of  2006.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
                                                                 Maximum Number
                                                                 (or appropriate
                                                                Dollar Value) of
                                            Total Number of     Shares (or Units)
                   Total                   Shares (or Units)     that May Yet be
                 Number of    Average    Purchased as Part of    Purchased Under
                  Shares    Price Paid    Publicly Announced      the Plans or
Period           Purchased   Per Share     Plans or Programs        Programs
---------------------------------------------------------------------------------
<S>              <C>        <C>          <C>                    <C>
April 1 through
April 30, 2006         723  $     37.50                    723             99,277
---------------------------------------------------------------------------------
May 1 through
May 31, 2006             -            -                      -            100,000
---------------------------------------------------------------------------------
June 1 through
June 30, 2006          109        37.00                    109             99,891
---------------------------------------------------------------------------------
Total                  832        37.43                    832             99,891
---------------------------------------------------------------------------------
</TABLE>


                                       27
<PAGE>
               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  2006.


Item  3.       Defaults  Upon  Senior  Securities

               Not  applicable

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

          (a)  The  Annual Meeting of Shareholders was held on April 19, 2006 at
               the  Company's  Cotton  Exchange office located at 32 8th Street,
               Augusta,  Georgia.

          (b)  The  following  directors were elected for a term of one year and
               until  a  successor  is  duly  qualified  and  elected:

                    William J. Badger
                    R. Daniel Blanton
                    Warren Daniel
                    Edward G. Meybohm
                    Robert W. Pollard, Jr.
                    Randolph R. Smith
                    Ronald L. Thigpen
                    John W. Trulock, Jr.

          (c)  The following  matters  were  voted  on  at  the  meeting  as was
               previously  identified  in  the Proxy materials forwarded to each
               shareholder:

               1.   Proposal  to  elect  the  eight  individuals  nominated  by
                    management  as  Directors.

                    Votes were cast as follows:

<TABLE>
<CAPTION>
Director                    For     Withhold
--------                    ---     --------
<S>                      <C>        <C>
William J. Badger        4,817,399         0
R. Daniel Blanton        4,813,899     3,500
Warren Daniel            4,817,237       162
Edward G. Meybohm        4,817,399         0
Robert W. Pollard, Jr.   4,813,737     3,662
Randolph R. Smith, M.D.  4,813,899     3,500
Ronald L. Thigpen        4,813,899     3,500
John W. Trulock, Jr.     4,742,251    75,148
</TABLE>


                                       28
<PAGE>
               2.   Proposal to amend the Articles of Incorporation to eliminate
                    the  preemptive  rights  provision  in  Article  Eight.

                    Votes were cast as follows:

                    For               Against          Abstain
                    ---               -------          -------
                   3,844,788          101,410          128,336

               3.   Proposal to approve the 2006 Long-Term Incentive Plan.

                    Votes were cast as follows:

                    For               Against          Abstain
                    ---               -------          -------
                    3,787,559         145,670          141,305


Item 5.        Other Information

               None


Item 6.        Exhibits

               10.1 2006  Long-Term  Incentive  Plan

               10.2 Form  of  Incentive  Stock  Option  Agreement under the 2006
                    Long-  Term  Incentive  Plan

               10.3 Form  of Non-Qualified Stock Option Agreement under the 2006
                    Long-Term  Incentive  Plan

               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.


                                       29
<PAGE>
                     SOUTHEASTERN BANK FINANCIAL CORPORATION
                              Form 10-Q Signatures


     Pursuant  to  the  requirements of the Securities Exchange Act of 1934, the
registrant  caused  this  report  to be signed on its behalf by the undersigned,
thereunto  duly  authorized.

                               SOUTHEASTERN BANK FINANCIAL CORPORATION



Date: August 7, 2006                    By: /s/ Darrell R. Rains
     ----------------                      --------------------------------
                                        Darrell R. Rains
                                        Group Vice President, Chief
                                        Financial Officer (Duly Authorized
                                        Officer of Registrant and Principal
                                        Financial Officer)


                                       30