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SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2011.
 or
 o
    
    Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to .
 Commission File No. 0-24172
 Southeastern Bank Financial Corporation
  Georgia
    
    58-2005097(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
 3530 Wheeler Road, Augusta, Georgia 30909
 (Issuers telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o
  Large accelerated filer o
    
    Non-accelerated filer o
    
    Accelerated filer o
    
    Smaller reporting company þ(do not check if a smaller reporting company)
 o þ




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##### 



SOUTHEASTERN BANK FINANCIAL CORPORATION
 FORM 10-Q
 INDEX
  
 PagePart IItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets as of March 31, 2011 and
December 31, 2010
    
    
    3Consolidated Statements of Income for the Three
Months ended March 31, 2011 and 2010
    
    
    4Consolidated Statements of Cash Flows for the
Three Months ended March 31, 2011 and 2010
    
    
    6Notes to Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    34Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    60Item 4. Controls and Procedures
    
    
    60Part IIOther InformationItem 1. Legal Proceedings
    
    
    61Item 1A. Risk Factors
    
    
    61Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    61Item 3. Defaults Upon Senior Securities
    
    
    61Item 4. [Removed and Reserved]
    
    
    61Item 5. Other Information
    
    
    61Item 6. Exhibits
    
    
    62Signature
    
    
    63EX-31.1EX-31.2EX-32.1
  *
    
    No information submitted under this caption   1




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SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
 
 March 31,2011
    
    
    December 31,(Unaudited)
    
    
    2010AssetsCash and due from banks
    
    $
    60,120
    
    
    $
    42,305Interest-bearing deposits in other banks
    
    
    65,251
    
    
    
    22,810Cash and cash equivalents
    
    
    125,371
    
    
    
    65,115Investment securitiesAvailable-for-sale
    
    
    558,306
    
    
    
    586,302Held-to-maturity, at cost (fair values of
$0 and $311, respectively)
    
    
    
    
    
    
    310Loans held for sale
    
    
    10,700
    
    
    
    12,775Loans
    
    
    871,017
    
    
    
    874,095Less allowance for loan losses
    
    
    26,821
    
    
    
    26,657Loans, net
    
    
    844,196
    
    
    
    847,438Premises and equipment, net
    
    
    29,103
    
    
    
    29,416Accrued interest receivable
    
    
    6,576
    
    
    
    6,382Bank-owned life insurance
    
    
    24,397
    
    
    
    24,178Restricted equity securities
    
    
    5,745
    
    
    
    5,707Other real estate owned
    
    
    7,565
    
    
    
    7,751Prepaid FDIC assessment
    
    
    4,221
    
    
    
    4,784Deferred tax asset
    
    
    15,683
    
    
    
    14,595Other assets
    
    
    2,939
    
    
    
    2,352$
    1,634,802
    
    
    $
    1,607,105
  2




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SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
 March 31,2011
    
    
    December 31,(Unaudited)
    
    
    2010Liabilities and Stockholders EquityDepositsNoninterest-bearing
    
    $
    135,220
    
    
    $
    120,139Interest-bearing:NOW accounts
    
    
    363,309
    
    
    
    356,267Savings
    
    
    433,636
    
    
    
    409,584Money management accounts
    
    
    37,650
    
    
    
    36,937Time deposits over $100
    
    
    332,876
    
    
    
    346,721Other time deposits
    
    
    135,485
    
    
    
    141,0891,438,176
    
    
    
    1,410,737Securities sold under repurchase agreements
    
    
    610
    
    
    
    818Advances from Federal Home Loan Bank
    
    
    60,000
    
    
    
    60,000Accrued interest payable and other liabilities
    
    
    11,722
    
    
    
    12,645Subordinated debentures
    
    
    22,947
    
    
    
    22,947Total liabilities
    
    
    1,533,455
    
    
    
    1,507,147Stockholders equity:Preferred stock, no par value; 10,000,000 shares
authorized; 0 shares outstanding in 2011 and
2010, respectively
    
    
    
    
    
    
    Common stock, $3.00 par value; 10,000,000 shares
authorized; 6,675,851 and 6,675,147 shares issued
and outstanding in 2011 and 2010, respectively
    
    
    20,028
    
    
    
    20,025Additional paid-in capital
    
    
    62,654
    
    
    
    62,618Retained earnings
    
    
    21,850
    
    
    
    19,548Accumulated other comprehensive loss, net
    
    
    (3,185
    )
    
    
    (2,233
    )Total stockholders equity
    
    
    101,347
    
    
    
    99,958$
    1,634,802
    
    
    $
    1,607,105
   3




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SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
 
  Three Months EndedMarch 31,2011
    
    
    2010Interest income:Loans, including fees
    
    $
    12,628
    
    
    $
    13,343Investment securities
    
    
    4,320
    
    
    
    3,419Federal funds sold
    
    
    
    
    
    
    3Interest-bearing deposits in other banks
    
    
    47
    
    
    
    89Total interest income
    
    
    16,995
    
    
    
    16,854Interest expense:Deposits
    
    
    4,080
    
    
    
    5,367Securities sold under repurchase
agreements
    
    
    2
    
    
    
    11Other borrowings
    
    
    714
    
    
    
    954Total interest expense
    
    
    4,796
    
    
    
    6,332Net interest income
    
    
    12,199
    
    
    
    10,522Provision for loan losses
    
    
    3,240
    
    
    
    3,288Net interest income after provision
for loan losses
    
    
    8,959
    
    
    
    7,234Noninterest income:Service charges and fees on deposits
    
    
    1,578
    
    
    
    1,595Gain on sales of loans
    
    
    1,207
    
    
    
    1,353Gain on sale of fixed assets
    
    
    17
    
    
    
    27Investment securities gains, net
    
    
    148
    
    
    
    13Other-than-temporary lossTotal impairment loss
    
    
    (127
    )
    
    
    Loss recognized in other comprehensive loss
    
    
    65
    
    
    
    Net impairment loss recognized in earnings
    
    
    (62
    )
    
    
    Retail investment income
    
    
    457
    
    
    
    335Trust service fees
    
    
    273
    
    
    
    287Increase in cash surrender value of
bank-owned life insurance
    
    
    218
    
    
    
    229Miscellaneous income
    
    
    213
    
    
    
    161Total noninterest income
    
    
    4,049
    
    
    
    4,000Noninterest expense:Salaries and other personnel expense
    
    
    5,564
    
    
    
    5,494Occupancy expenses
    
    
    1,115
    
    
    
    1,171Other real estate losses (gains), net
    
    
    95
    
    
    
    (85
    )Other operating expenses
    
    
    3,001
    
    
    
    2,852Total noninterest expense
    
    
    9,775
    
    
    
    9,432Income before income taxes
    
    
    3,233
    
    
    
    1,802Income tax expense
    
    
    931
    
    
    
    547Net income
    
    $
    2,302
    
    
    $
    1,255
  4




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SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
  Three Months EndedMarch 31,2011
    
    
    2010Basic net income per share
    
    $
    0.34
    
    
    $
    0.19Diluted net income per share
    
    $
    0.34
    
    
    $
    0.19Weighted average common shares outstanding
    
    
    6,675,851
    
    
    
    6,673,334Weighted average number of common and
common equivalent shares outstanding
    
    
    6,676,015
    
    
    
    6,673,334
   5




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SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
 
  Three Months EndedMarch 31,2011
    
    
    2010Cash flows from operating activities:Net income
    
    $
    2,302
    
    
    $
    1,255Adjustments to reconcile net income to net cash
provided by operating activitiesDepreciation
    
    
    629
    
    
    
    687Deferred income tax benefit
    
    
    (482
    )
    
    
    (390
    )Provision for loan losses
    
    
    3,240
    
    
    
    3,288Net investment securities gains
    
    
    (148
    )
    
    
    (13
    )Other-than-temporary impairment losses
    
    
    62
    
    
    
    Net amortization of premium on investment securities
    
    
    944
    
    
    
    280Increase in CSV of Bank-owned life insurance
    
    
    (218
    )
    
    
    (229
    )Stock options compensation cost
    
    
    32
    
    
    
    60Gain on disposal of premises and equipment
    
    
    (17
    )
    
    
    (27
    )Gain on the sale of other real estate
    
    
    (18
    )
    
    
    (340
    )Provision for other real estate valuation allowance
    
    
    113
    
    
    
    255Gain on sales of loans
    
    
    (1,207
    )
    
    
    (1,353
    )Real estate loans originated for sale
    
    
    (44,337
    )
    
    
    (58,601
    )Proceeds from sales of real estate loans
    
    
    47,619
    
    
    
    59,374(Increase) decrease in accrued interest receivable
    
    
    (194
    )
    
    
    611(Increase) decrease in other assets
    
    
    (23
    )
    
    
    5,696Decrease in accrued interest payable and other liabilities
    
    
    (923
    )
    
    
    (2,021
    )Net cash provided by operating activities
    
    
    7,374
    
    
    
    8,532Cash flows from investing activities:Proceeds from sales of securities
    
    
    34,476
    
    
    
    Proceeds from maturities and calls of available-for-sale securities
    
    
    31,787
    
    
    
    26,551Proceeds from maturities of held-to-maturity securities
    
    
    
    
    
    
    180Purchase of available-for-sale securities
    
    
    (40,373
    )
    
    
    (92,835
    )Purchase of restricted equity securities
    
    
    (38
    )
    
    
    Net (increase) decrease in loans
    
    
    (138
    )
    
    
    12,994Additions to premises and equipment
    
    
    (336
    )
    
    
    (37
    )Proceeds from sale of other real estate
    
    
    230
    
    
    
    4,424Proceeds from sale of premises and equipment
    
    
    36
    
    
    
    30Net cash provided by (used in) investing activities
    
    
    25,644
    
    
    
    (48,693
    )
  6




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SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
  Three Months EndedMarch 31,2011
    
    
    2010Cash flows from financing activities:Net increase in deposits
    
    
    27,439
    
    
    
    10,363Net decrease in securities sold under
repurchase agreements
    
    
    (208
    )
    
    
    (1,057
    )Payments of Federal Home Loan Bank advances
    
    
    
    
    
    
    (5,000
    )Proceeds from other borrowed funds
    
    
    
    
    
    
    100Proceeds from Directors stock purchase plan
    
    
    7
    
    
    
    5Net cash provided by financing activities
    
    
    27,238
    
    
    
    4,411Net increase (decrease) in cash and cash equivalents
    
    $
    60,256
    
    
    $
    (35,750
    )Cash and cash equivalents at beginning of period
    
    
    65,115
    
    
    
    147,994Cash and cash equivalents at end of period
    
    $
    125,371
    
    
    $
    112,244Supplemental disclosures of cash paid during the period for:Interest
    
    $
    5,084
    
    
    $
    6,570Income taxes
    
    $
    2,053
    
    
    $
    21Supplemental information on noncash investing activities:Loans transferred to other real estate
    
    $
    139
    
    
    $
    2,230
   7




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March 31, 2011Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair value(Dollars in thousands)Available-for-saleObligations of U.S.
Government agencies
    
    $
    205,793
    
    
    
    486
    
    
    
    (2,275
    )
    
    
    204,004Obligations of states and
political subdivisions
    
    
    73,529
    
    
    
    422
    
    
    
    (2,794
    )
    
    
    71,157Mortgage backed securitiesU.S. GSEs* MBS  residential
    
    
    128,859
    
    
    
    1,561
    
    
    
    (1,763
    )
    
    
    128,657U.S. GSEs CMO
    
    
    115,923
    
    
    
    1,476
    
    
    
    (562
    )
    
    
    116,837Other CMO
    
    
    2,939
    
    
    
    
    
    
    
    (287
    )
    
    
    2,652Corporate bonds
    
    
    36,477
    
    
    
    45
    
    
    
    (1,523
    )
    
    
    34,999$
    563,520
    
    
    
    3,990
    
    
    
    (9,204
    )
    
    
    558,306
 *
    
    Government sponsored entities December 31, 2010Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair value(Dollars in thousands)Available-for-saleObligations of U.S.
Government agencies
    
    $
    202,153
    
    
    
    527
    
    
    
    (1,763
    )
    
    
    200,917Obligations of states and
political subdivisions
    
    
    67,137
    
    
    
    318
    
    
    
    (3,337
    )
    
    
    64,118Mortgage backed securitiesU.S. GSEs MBS  residential
    
    
    141,524
    
    
    
    1,880
    
    
    
    (1,679
    )
    
    
    141,725U.S. GSEs CMO
    
    
    139,208
    
    
    
    1,756
    
    
    
    (630
    )
    
    
    140,334Other CMO
    
    
    3,382
    
    
    
    50
    
    
    
    (359
    )
    
    
    3,073Corporate bonds
    
    
    36,551
    
    
    
    467
    
    
    
    (885
    )
    
    
    36,133Equity securities
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2$
    589,957
    
    
    
    4,998
    
    
    
    (8,653
    )
    
    
    586,302Held-to-maturityObligations of states and
political subdivisions
    
    $
    310
    
    
    
    1
    
    
    
    
    
    
    
    311$
    310
    
    
    
    1
    
    
    
    
    
    
    
    311
  10




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March 31,2011
    
    
    2010(Dollars in thousands)Proceeds
    
    $
    34,476
    
    
    $
    Gross Gains
    
    
    307
    
    
    
    Gross Losses
    
    
    171
    
    
    
    
  March 31, 2011Amortized
    
    
    Estimatedcost
    
    
    fair value(Dollars in thousands)Available-for-sale:One year or less
    
    $
    1,674
    
    
    
    1,708After one year through five years
    
    
    17,751
    
    
    
    17,482After five years through ten years
    
    
    84,854
    
    
    
    84,871After ten years
    
    
    459,241
    
    
    
    454,245$
    563,520
    
    
    
    558,306
  11




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March 31, 2011Less than 12 months
    
    
    12 months or longer
    
    
    TotalEstimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealizedfair value
    
    
    loss
    
    
    fair value
    
    
    loss
    
    
    fair value
    
    
    loss(Dollars in thousands)Temporarily impairedObligations of U.S.
Government agencies
    
    $
    122,873
    
    
    
    2,275
    
    
    
    
    
    
    
    
    
    
    
    122,873
    
    
    
    2,275Obligations of states and
political subdivisions
    
    
    46,338
    
    
    
    2,782
    
    
    
    1,679
    
    
    
    12
    
    
    
    48,017
    
    
    
    2,794Mortgage backed securitiesU.S. GSEs MBS  residential
    
    
    80,579
    
    
    
    1,633
    
    
    
    465
    
    
    
    130
    
    
    
    81,044
    
    
    
    1,763U.S. GSEs CMO
    
    
    27,481
    
    
    
    524
    
    
    
    2,619
    
    
    
    38
    
    
    
    30,100
    
    
    
    562Other CMO
    
    
    
    
    
    
    
    
    
    
    2,143
    
    
    
    222
    
    
    
    2,143
    
    
    
    222Corporate bonds
    
    
    26,449
    
    
    
    375
    
    
    
    6,559
    
    
    
    1,148
    
    
    
    33,008
    
    
    
    1,523$
    303,720
    
    
    
    7,589
    
    
    
    13,465
    
    
    
    1,550
    
    
    
    317,185
    
    
    
    9,139Other-than-temporarily impairedMortgage backed securitiesOther CMO
    
    $
    
    
    
    
    
    
    
    
    510
    
    
    
    65
    
    
    
    510
    
    
    
    65$
    303,720
    
    
    
    7,589
    
    
    
    13,975
    
    
    
    1,615
    
    
    
    317,695
    
    
    
    9,204
 December 31, 2010Less than 12 months
    
    
    12 months or longer
    
    
    TotalEstimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealizedfair value
    
    
    loss
    
    
    fair value
    
    
    loss
    
    
    fair value
    
    
    loss(Dollars in thousands)Temporarily impairedObligations of U.S.
Government agencies
    
    $
    99,306
    
    
    
    1,763
    
    
    
    
    
    
    
    
    
    
    
    99,306
    
    
    
    1,763Obligations of states and
political subdivisions
    
    
    45,906
    
    
    
    3,245
    
    
    
    2,309
    
    
    
    92
    
    
    
    48,215
    
    
    
    3,337Mortgage backed securitiesU.S. GSEs MBS  residential
    
    
    81,783
    
    
    
    1,538
    
    
    
    509
    
    
    
    141
    
    
    
    82,292
    
    
    
    1,679U.S. GSEs CMO
    
    
    46,776
    
    
    
    630
    
    
    
    
    
    
    
    
    
    
    
    46,776
    
    
    
    630Other CMO
    
    
    
    
    
    
    
    
    
    
    2,085
    
    
    
    359
    
    
    
    2,085
    
    
    
    359Corporate bonds
    
    
    22,385
    
    
    
    481
    
    
    
    3,880
    
    
    
    404
    
    
    
    26,265
    
    
    
    885$
    296,156
    
    
    
    7,657
    
    
    
    8,783
    
    
    
    996
    
    
    
    304,939
    
    
    
    8,653
 Other-Than-Temporary Impairment  March 31, 2011
 Investments  Debt and Equity Securities.
  12




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Mortgage-backed Securities
     13




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Corporate Securities
    14




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Beginning balance, January 1, 2011
    
    $
    571Amounts related to credit loss for which
an other-than-temporary impairment
was not previously recognized
    
    
    Additions/SubtractionsAmounts realized for securities sold during the period
    
    
    Amounts related to securities for which the company
intends to sell or that it will be more likely than not
that the company will be required to sell prior to
recovery of amortized cost basis
    
    
    Reductions for increase in cash flows expected to be
collected that are recognized over the remaining
life of the security
    
    
    Increases to the amount related to the credit
loss for which other-than-temporary impairment was
previously recognized
    
    
    62Ending balance, March 31, 2011
    
    $
    633
  Other-Than-Temporary Impairment March 31, 2010
   15




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March 31, 2011
    
    
    December 31, 2010(Dollars in thousands)Commercial, financial, and agricultural
    
    $
    183,637
    
    
    
    189,128Real estate:Commercial
    
    
    332,991
    
    
    
    327,458Residential
    
    
    160,256
    
    
    
    157,680Acquisition, development and construction
    
    
    178,392
    
    
    
    182,412Consumer installment
    
    
    15,762
    
    
    
    17,412$
    871,038
    
    
    
    874,090Less allowance for loan losses
    
    
    26,821
    
    
    
    26,657Less deferred loan origination fees (costs)
    
    
    21
    
    
    
    (5
    )$
    844,196
    
    
    
    847,438
  16




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Commercial,Financial, and
    
    
    CRE - Owner
    
    
    CRE - Non Owner
    
    
    Residential
    
    
    ADC
    
    
    ADC
    
    
    ADC
    
    
    ADC
    
    
    ADC
    
    
    ADCAgricultural
    
    
    Occupied
    
    
    Occupied
    
    
    Real Estate
    
    
    CSRA
    
    
    Savannah
    
    
    Greenville
    
    
    Athens
    
    
    Participations - FL
    
    
    Participations - GA
    
    
    Consumer
    
    
    Total(Dollars in thousands)Allowance for loan losses:Beginning balance
    
    $
    3,463
    
    
    
    3,921
    
    
    
    4,777
    
    
    
    5,372
    
    
    
    5,097
    
    
    
    453
    
    
    
    284
    
    
    
    796
    
    
    
    888
    
    
    
    975
    
    
    
    631
    
    
    
    26,657Charge-offs
    
    
    1,122
    
    
    
    
    
    
    
    424
    
    
    
    162
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    496
    
    
    
    888
    
    
    
    
    
    
    
    36
    
    
    
    3,242Recoveries
    
    
    102
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    166Provision
    
    
    1,987
    
    
    
    458
    
    
    
    169
    
    
    
    (1,148
    )
    
    
    1,175
    
    
    
    117
    
    
    
    (128
    )
    
    
    451
    
    
    
    
    
    
    
    374
    
    
    
    (215
    )
    
    
    3,240Ending balance
    
    $
    4,430
    
    
    
    4,379
    
    
    
    4,522
    
    
    
    4,066
    
    
    
    6,158
    
    
    
    570
    
    
    
    162
    
    
    
    751
    
    
    
    
    
    
    
    1,349
    
    
    
    434
    
    
    
    26,821Ending balance attributable to loans:Individually evaluated for impairment
    
    
    
    
    
    
    3
    
    
    
    35
    
    
    
    258
    
    
    
    298
    
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    925Collectively evaluated for impairment
    
    
    4,430
    
    
    
    4,376
    
    
    
    4,487
    
    
    
    3,808
    
    
    
    5,860
    
    
    
    270
    
    
    
    162
    
    
    
    751
    
    
    
    
    
    
    
    1,349
    
    
    
    403
    
    
    
    25,896$
    4,430
    
    
    
    4,379
    
    
    
    4,522
    
    
    
    4,066
    
    
    
    6,158
    
    
    
    570
    
    
    
    162
    
    
    
    751
    
    
    
    
    
    
    
    1,349
    
    
    
    434
    
    
    
    26,821Loans:Individually evaluated for impairment
    
    
    1,849
    
    
    
    581
    
    
    
    3,335
    
    
    
    5,638
    
    
    
    7,345
    
    
    
    1,946
    
    
    
    
    
    
    
    3,722
    
    
    
    521
    
    
    
    
    
    
    
    85
    
    
    
    25,022Collectively evaluated for impairment
    
    
    181,788
    
    
    
    185,766
    
    
    
    143,316
    
    
    
    154,622
    
    
    
    141,692
    
    
    
    8,711
    
    
    
    1,432
    
    
    
    6,523
    
    
    
    
    
    
    
    6,500
    
    
    
    15,677
    
    
    
    846,027$
    183,637
    
    
    
    186,347
    
    
    
    146,651
    
    
    
    160,260
    
    
    
    149,037
    
    
    
    10,657
    
    
    
    1,432
    
    
    
    10,245
    
    
    
    521
    
    
    
    6,500
    
    
    
    15,762
    
    
    
    871,049
  17




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##### Table of Contents



March 31, 2011Allowance for
    
    
    Average
    
    
    
    
    
    
    Cash BasisUnpaid Principal
    
    
    Recorded
    
    
    Loan Losses
    
    
    Recorded
    
    
    Interest Income
    
    
    Interest IncomeBalance
    
    
    Investment
    
    
    Allocated
    
    
    Investment
    
    
    Recognized
    
    
    Recognized(Dollars in thousands)With no related allowance recorded:Commercial, financial, and
agricultural:Commerical
    
    $
    8
    
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    Financial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Agricultural
    
    
    1,016
    
    
    
    1,016
    
    
    
    
    
    
    
    1,016
    
    
    
    
    
    
    
    Equity lines
    
    
    725
    
    
    
    725
    
    
    
    
    
    
    
    725
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate:Owner occupied
    
    
    293
    
    
    
    293
    
    
    
    
    
    
    
    334
    
    
    
    
    
    
    
    Non Owner occupied
    
    
    173
    
    
    
    173
    
    
    
    
    
    
    
    177
    
    
    
    8
    
    
    
    8Residential real estate:Secured by first liens
    
    
    1,689
    
    
    
    1,689
    
    
    
    
    
    
    
    1,614
    
    
    
    12
    
    
    
    12Secured by junior liens
    
    
    46
    
    
    
    46
    
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    Acquisition, development and
construction:Residential
    
    
    73
    
    
    
    73
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    Other
    
    
    3,975
    
    
    
    3,975
    
    
    
    
    
    
    
    3,965
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,998
    
    
    
    7,998
    
    
    
    
    
    
    
    7,958
    
    
    
    20
    
    
    
    20With an allowance recorded:Commercial, financial, and
agricultural:Commerical
    
    
    100
    
    
    
    100
    
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    Financial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Agricultural
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity lines
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate:Owner occupied
    
    
    288
    
    
    
    288
    
    
    
    3
    
    
    
    290
    
    
    
    2
    
    
    
    2Non Owner occupied
    
    
    3,155
    
    
    
    3,162
    
    
    
    35
    
    
    
    3,639
    
    
    
    27
    
    
    
    27Residential real estate:Secured by first liens
    
    
    3,732
    
    
    
    3,736
    
    
    
    165
    
    
    
    3,784
    
    
    
    25
    
    
    
    25Secured by junior liens
    
    
    167
    
    
    
    167
    
    
    
    93
    
    
    
    168
    
    
    
    1
    
    
    
    1Acquisition, development and
construction:Residential
    
    
    1,199
    
    
    
    1,199
    
    
    
    131
    
    
    
    1,346
    
    
    
    3
    
    
    
    3Other
    
    
    8,287
    
    
    
    8,287
    
    
    
    467
    
    
    
    8,850
    
    
    
    2
    
    
    
    2Consumer
    
    
    85
    
    
    
    85
    
    
    
    31
    
    
    
    87
    
    
    
    
    
    
    
    17,013
    
    
    
    17,024
    
    
    
    925
    
    
    
    18,210
    
    
    
    60
    
    
    
    60$
    25,011
    
    
    
    25,022
    
    
    
    925
    
    
    
    26,168
    
    
    
    80
    
    
    
    80
  18




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##### Table of Contents



December 31, 2010Allowance forUnpaid Principal
    
    
    Recorded
    
    
    Loan LossesBalance
    
    
    Investment
    
    
    Allocated(Dollars in thousands)With no related allowance recorded:Commercial, financial, and
agricultural:Commerical
    
    $
    8
    
    
    
    8
    
    
    
    Financial
    
    
    
    
    
    
    
    
    
    
    Agricultural
    
    
    1,016
    
    
    
    1,016
    
    
    
    Equity lines
    
    
    720
    
    
    
    720
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Commercial real estate:Owner occupied
    
    
    390
    
    
    
    390
    
    
    
    Non Owner occupied
    
    
    180
    
    
    
    180
    
    
    
    Residential real estate:Secured by first liens
    
    
    1,742
    
    
    
    1,742
    
    
    
    Secured by junior liens
    
    
    
    
    
    
    
    
    
    
    Acquisition, development and construction:Residential
    
    
    636
    
    
    
    636
    
    
    
    Other
    
    
    5,987
    
    
    
    5,987
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    10,679
    
    
    
    10,679
    
    
    
    With an allowance recorded:Commercial, financial, and
agricultural:Commerical
    
    
    
    
    
    
    
    
    
    
    Financial
    
    
    
    
    
    
    
    
    
    
    Agricultural
    
    
    
    
    
    
    
    
    
    
    Equity lines
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Commercial real estate:Owner occupied
    
    
    129
    
    
    
    129
    
    
    
    3Non Owner occupied
    
    
    3,227
    
    
    
    3,230
    
    
    
    210Residential real estate:Secured by first liens
    
    
    3,229
    
    
    
    3,234
    
    
    
    42Secured by junior liens
    
    
    
    
    
    
    
    
    
    
    Acquisition, development and
construction:Residential
    
    
    156
    
    
    
    156
    
    
    
    Other
    
    
    7,628
    
    
    
    7,638
    
    
    
    1,219Consumer
    
    
    
    
    
    
    
    
    
    
    14,369
    
    
    
    14,387
    
    
    
    1,474$
    25,048
    
    
    
    25,066
    
    
    
    1,474
   19




---



##### Table of Contents



March 31, 2011Loans Past Due90 Days or MoreNonaccrual
    
    
    Still Accruing(Dollars in thousands)Commercial, financial, and
agricultural:Commerical
    
    $
    176
    
    
    
    Financial
    
    
    
    
    
    
    Agricultural
    
    
    1,249
    
    
    
    Equity lines
    
    
    1,752
    
    
    
    Other
    
    
    
    
    
    
    Commercial real estate:Owner occupied
    
    
    1,229
    
    
    
    Non Owner occupied
    
    
    2,518
    
    
    
    Residential real estate:Secured by first liens
    
    
    4,309
    
    
    
    Secured by junior liens
    
    
    316
    
    
    
    Acquisition, development and
construction:Residential
    
    
    1,509
    
    
    
    Other
    
    
    12,366
    
    
    
    Consumer
    
    
    284
    
    
    
    $
    25,708
    
    
    
    
  20




---



##### Table of Contents



December 31, 2010Loans Past Due90 Days or MoreNonaccrual
    
    
    Still Accruing(Dollars in thousands)Commercial, financial, and
agricultural:Commerical
    
    $
    190
    
    
    
    Financial
    
    
    
    
    
    
    Agricultural
    
    
    1,250
    
    
    
    Equity lines
    
    
    1,136
    
    
    
    Other
    
    
    348
    
    
    
    Commercial real estate:Owner occupied
    
    
    1,207
    
    
    
    Non Owner occupied
    
    
    2,586
    
    
    
    Residential real estate:Secured by first liens
    
    
    4,551
    
    
    
    69Secured by junior liens
    
    
    183
    
    
    
    Acquisition, development and
construction:Residential
    
    
    1,275
    
    
    
    Other
    
    
    10,678
    
    
    
    Consumer
    
    
    301
    
    
    
    $
    23,705
    
    
    
    69
  March 31, 201130 - 89 Days
    
    
    90 Days or
    
    
    Nonaccrual
    
    
    Total
    
    
    Loans NotPast Due
    
    
    More Past Due
    
    
    Loans
    
    
    Past Due
    
    
    Past Due
    
    
    Total(Dollars in thousands)Commercial, financial, and
agricultural:Commerical
    
    $
    153
    
    
    
    
    
    
    
    176
    
    
    
    329
    
    
    
    116,213
    
    
    
    116,542Financial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,506
    
    
    
    3,506Agricultural
    
    
    598
    
    
    
    
    
    
    
    1,249
    
    
    
    1,847
    
    
    
    13,130
    
    
    
    14,977Equity lines
    
    
    107
    
    
    
    
    
    
    
    1,752
    
    
    
    1,859
    
    
    
    39,597
    
    
    
    41,456Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,156
    
    
    
    7,156Commercial real estate:Owner occupied
    
    
    99
    
    
    
    
    
    
    
    1,229
    
    
    
    1,328
    
    
    
    185,019
    
    
    
    186,347Non Owner occupied
    
    
    120
    
    
    
    
    
    
    
    2,518
    
    
    
    2,638
    
    
    
    144,006
    
    
    
    146,644Residential real estate:Secured by first liens
    
    
    2,031
    
    
    
    
    
    
    
    4,309
    
    
    
    6,340
    
    
    
    143,779
    
    
    
    150,119Secured by junior liens
    
    
    
    
    
    
    
    
    
    
    316
    
    
    
    316
    
    
    
    9,821
    
    
    
    10,137Acquisition, development and
construction:Residential
    
    
    66
    
    
    
    
    
    
    
    1,509
    
    
    
    1,575
    
    
    
    41,811
    
    
    
    43,386Other
    
    
    178
    
    
    
    
    
    
    
    12,366
    
    
    
    12,544
    
    
    
    122,462
    
    
    
    135,006Consumer
    
    
    28
    
    
    
    
    
    
    
    284
    
    
    
    312
    
    
    
    15,450
    
    
    
    15,762$
    3,380
    
    
    
    
    
    
    
    25,708
    
    
    
    29,088
    
    
    
    841,950
    
    
    
    871,038
  21




---



##### Table of Contents



December 31, 201030 - 89 Days
    
    
    90 Days or
    
    
    Nonaccrual
    
    
    Total
    
    
    Loans NotPast Due
    
    
    More Past Due
    
    
    Loans
    
    
    Past Due
    
    
    Past Due
    
    
    Total(Dollars in thousands)Commercial, financial, and
agricultural:Commerical
    
    $
    170
    
    
    
    
    
    
    
    190
    
    
    
    360
    
    
    
    117,786
    
    
    
    118,146Financial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,588
    
    
    
    3,588Agricultural
    
    
    
    
    
    
    
    
    
    
    1,250
    
    
    
    1,250
    
    
    
    12,940
    
    
    
    14,190Equity lines
    
    
    214
    
    
    
    
    
    
    
    1,136
    
    
    
    1,350
    
    
    
    41,687
    
    
    
    43,037Other
    
    
    
    
    
    
    
    
    
    
    348
    
    
    
    348
    
    
    
    9,819
    
    
    
    10,167Commercial real estate:Owner occupied
    
    
    317
    
    
    
    
    
    
    
    1,207
    
    
    
    1,524
    
    
    
    182,939
    
    
    
    184,463Non Owner occupied
    
    
    521
    
    
    
    
    
    
    
    2,586
    
    
    
    3,107
    
    
    
    139,888
    
    
    
    142,995Residential real estate:Secured by first liens
    
    
    2,417
    
    
    
    69
    
    
    
    4,551
    
    
    
    7,037
    
    
    
    140,238
    
    
    
    147,275Secured by junior liens
    
    
    155
    
    
    
    
    
    
    
    183
    
    
    
    338
    
    
    
    10,067
    
    
    
    10,405Acquisition, development and
construction:Residential
    
    
    
    
    
    
    
    
    
    
    1,275
    
    
    
    1,275
    
    
    
    41,538
    
    
    
    42,813Other
    
    
    121
    
    
    
    
    
    
    
    10,678
    
    
    
    10,799
    
    
    
    128,800
    
    
    
    139,599Consumer
    
    
    31
    
    
    
    
    
    
    
    301
    
    
    
    332
    
    
    
    17,080
    
    
    
    17,412$
    3,946
    
    
    
    69
    
    
    
    23,705
    
    
    
    27,720
    
    
    
    846,370
    
    
    
    874,090
    22




---



##### Table of Contents



March 31, 2011Pre-Modification
    
    
    Post-ModificationNumber of
    
    
    Outstanding
    
    
    OutstandingContracts
    
    
    Recorded Investment
    
    
    Recorded Investment(Dollars in thousands)Troubled Debt Restructurings:Commercial, financial, and
agricultural:Commerical
    
    
    
    
    
    $
    
    
    
    $
    Financial
    
    
    
    
    
    
    
    
    
    
    Agricultural
    
    
    
    
    
    
    
    
    
    
    Equity lines
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Commercial real estate:Owner occupied
    
    
    1
    
    
    
    127
    
    
    
    127Non Owner occupied
    
    
    5
    
    
    
    2,116
    
    
    
    2,098Residential real estate:Secured by first
liens
    
    
    5
    
    
    
    1,506
    
    
    
    1,497Secured by junior
liens
    
    
    2
    
    
    
    135
    
    
    
    128Acquisition, development and
construction:Residential
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
      23




---



##### Table of Contents



March 31, 2011Pass
    
    
    Watch
    
    
    Substandard
    
    
    Doubtful(Dollars in thousands)Commercial, financial, and
agricultural:Commerical
    
    $
    103,029
    
    
    
    6,629
    
    
    
    6,884
    
    
    
    Financial
    
    
    
    
    
    
    3,506
    
    
    
    
    
    
    
    Agricultural
    
    
    10,157
    
    
    
    2,583
    
    
    
    2,237
    
    
    
    Equity lines
    
    
    37,737
    
    
    
    1,730
    
    
    
    1,989
    
    
    
    Other
    
    
    5,704
    
    
    
    838
    
    
    
    614
    
    
    
    Commercial real estate:Owner occupied
    
    
    157,630
    
    
    
    21,760
    
    
    
    6,957
    
    
    
    Non Owner occupied
    
    
    121,762
    
    
    
    18,234
    
    
    
    6,648
    
    
    
    Residential real estate:Secured by first liens
    
    
    128,541
    
    
    
    13,073
    
    
    
    8,505
    
    
    
    Secured by junior liens
    
    
    8,995
    
    
    
    732
    
    
    
    410
    
    
    
    Acquisition, development and
construction:Residential
    
    
    39,716
    
    
    
    1,654
    
    
    
    2,016
    
    
    
    Other
    
    
    95,663
    
    
    
    10,956
    
    
    
    28,387
    
    
    
    Consumer
    
    
    14,831
    
    
    
    411
    
    
    
    520
    
    
    
    $
    723,765
    
    
    
    82,106
    
    
    
    65,167
    
    
    
    
  24




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##### Table of Contents



December 31, 2010Pass
    
    
    Watch
    
    
    Substandard
    
    
    Doubtful(Dollars in thousands)Commercial, financial, and
agricultural:Commerical
    
    $
    103,337
    
    
    
    8,074
    
    
    
    6,735
    
    
    
    Financial
    
    
    1,103
    
    
    
    2,485
    
    
    
    
    
    
    
    Agricultural
    
    
    9,343
    
    
    
    2,609
    
    
    
    2,238
    
    
    
    Equity lines
    
    
    39,144
    
    
    
    1,915
    
    
    
    1,978
    
    
    
    Other
    
    
    8,893
    
    
    
    926
    
    
    
    348
    
    
    
    Commercial real estate:Owner occupied
    
    
    157,155
    
    
    
    22,329
    
    
    
    4,979
    
    
    
    Non Owner occupied
    
    
    119,160
    
    
    
    16,579
    
    
    
    7,256
    
    
    
    Residential real estate:Secured by first liens
    
    
    124,261
    
    
    
    14,837
    
    
    
    8,177
    
    
    
    Secured by junior liens
    
    
    9,418
    
    
    
    708
    
    
    
    279
    
    
    
    Acquisition, development and construction:Residential
    
    
    38,374
    
    
    
    2,721
    
    
    
    1,718
    
    
    
    Other
    
    
    92,514
    
    
    
    23,285
    
    
    
    23,800
    
    
    
    Consumer
    
    
    16,247
    
    
    
    567
    
    
    
    598
    
    
    
    $
    718,949
    
    
    
    97,035
    
    
    
    58,106
    
    
    
    
   Level 1:
    
    Quoted prices (unadjusted) for identical assets or liabilities in
active markets that the entity has the ability to access as of
the measurement date.Level 2:
    
    Significant other observable inputs other than Level 1 prices,
such as quoted market prices for similar assets or liabilities,
quoted prices in markets that are not active, or other inputs
that are observable or can be corroborated by observable market
data.Level 3:
    
    Significant unobservable inputs that reflect a companys own
assumptions about the assumptions that market participants would
use in pricing an asset or liability.
  25




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##### Table of Contents



Investment Securities
 Mortgage Banking Derivatives:
 Loans Held for Sale
 Impaired Loans
 Investments in Tax Credits:
 Other Real Estate Owned
  26




---



##### Table of Contents



Assets and Liabilities Measured on a Recurring Basis
  Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableMarch 31,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Inputs2011
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Available-for-sale securitiesObligations of U.S.
Government agencies
    
    $
    204,004
    
    
    
    38,510
    
    
    
    165,494
    
    
    
    Obligations of states and
political subdivisions
    
    
    71,157
    
    
    
    
    
    
    
    71,157
    
    
    
    Mortgage-backed securitiesU.S. GSEs MBS  residential
    
    
    128,657
    
    
    
    
    
    
    
    128,192
    
    
    
    465U.S. GSEs CMO
    
    
    116,837
    
    
    
    
    
    
    
    116,837
    
    
    
    Other CMO
    
    
    2,652
    
    
    
    
    
    
    
    507
    
    
    
    2,145Corporate bonds
    
    
    34,999
    
    
    
    
    
    
    
    32,706
    
    
    
    2,293Total available-for-sale securities
    
    $
    558,306
    
    
    
    38,510
    
    
    
    514,893
    
    
    
    4,903Tax credits
    
    
    336
    
    
    
    
    
    
    
    
    
    
    
    336Loans held for sale
    
    
    10,700
    
    
    
    
    
    
    
    10,700
    
    
    
    Mortgage banking derivatives
    
    
    19
    
    
    
    
    
    
    
    19
    
    
    
    Total
    
    $
    569,361
    
    
    
    38,510
    
    
    
    525,612
    
    
    
    5,239
 Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableDecember 31,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Inputs2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Available-for-sale securitiesObligations of U.S.
Government agencies
    
    $
    200,917
    
    
    
    31,405
    
    
    
    169,512
    
    
    
    Obligations of states and
political subdivisions
    
    
    64,118
    
    
    
    
    
    
    
    64,118
    
    
    
    Mortgage-backed securitiesU.S. GSEs MBS  residential
    
    
    141,725
    
    
    
    
    
    
    
    141,216
    
    
    
    509U.S. GSEs CMO
    
    
    140,334
    
    
    
    985
    
    
    
    139,349
    
    
    
    Other CMO
    
    
    3,073
    
    
    
    
    
    
    
    663
    
    
    
    2,410Corporate bonds
    
    
    36,133
    
    
    
    
    
    
    
    25,395
    
    
    
    10,738Equity securities
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    Total available-for-sale securities
    
    $
    586,302
    
    
    
    32,392
    
    
    
    540,253
    
    
    
    13,657Tax credits
    
    
    356
    
    
    
    
    
    
    
    
    
    
    
    356Loans held for sale
    
    
    12,775
    
    
    
    
    
    
    
    12,775
    
    
    
    Mortgage banking derivatives
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    Total
    
    $
    599,435
    
    
    
    32,392
    
    
    
    553,030
    
    
    
    14,013
  27




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##### Table of Contents



Fair Value Measurements Using Significant Unobservable Inputs(Level 3)Available-for-saleTax credits
    
    
    Securities
    
    
    Total(Dollars in thousands)Beginning balance, January 1, 2011
    
    $
    356
    
    
    
    13,657
    
    
    
    14,013Total gains or losses (realized/unrealized)Included in earningsGain (loss) on sales
    
    
    
    
    
    
    
    
    
    
    Other-than-temporary impairment
    
    
    
    
    
    
    (62
    )
    
    
    (62
    )Amortization of tax credit investment
    
    
    (20
    )
    
    
    
    
    
    
    (20
    )Included in other comprehensive income
    
    
    
    
    
    
    (1,414
    )
    
    
    (1,414
    )Purchases, sales, issuances and settlementsPurchases
    
    
    
    
    
    
    
    
    
    
    Sales
    
    
    
    
    
    
    
    
    
    
    Issuances
    
    
    
    
    
    
    
    
    
    
    Settlements
    
    
    
    
    
    
    
    
    
    
    Transfers into Level 3
    
    
    
    
    
    
    
    
    
    
    Transfers out of Level 3
    
    
    
    
    
    
    (7,278
    )
    
    
    (7,278
    )Ending balance, March 31, 2011
    
    $
    336
    
    
    
    4,903
    
    
    
    5,239
 Fair Value Measurements Using Significant Unobservable Inputs(Level 3)Available-for-saleTax credits
    
    
    Securities
    
    
    Total(Dollars in thousands)Beginning balance, January 1, 2010
    
    $
    435
    
    
    
    14,365
    
    
    
    14,800Total gains or losses (realized/unrealized)Included in earningsGain (loss) on sales
    
    
    
    
    
    
    
    
    
    
    Other-than-temporary impairment
    
    
    
    
    
    
    
    
    
    
    Amortization of tax credit investment
    
    
    (20
    )
    
    
    
    
    
    
    (20
    )Included in other comprehensive income
    
    
    
    
    
    
    1,513
    
    
    
    1,513Purchases, sales, issuances and settlements
    
    
    
    
    
    
    
    
    
    
    Transfers into Level 3
    
    
    
    
    
    
    
    
    
    
    Transfers out of Level 3
    
    
    
    
    
    
    
    
    
    
    Ending balance, March 31, 2010
    
    $
    415
    
    
    
    15,878
    
    
    
    16,293
  28




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##### Table of Contents



Assets and Liabilities Measured on a Non-Recurring Basis
  Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableMarch 31,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Inputs2011
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Assets:Impaired loansCommercial, financial, and agricultural
    
    $
    100
    
    
    
    
    
    
    
    
    
    
    
    100Real estate:Commercial
    
    
    3,405
    
    
    
    
    
    
    
    
    
    
    
    3,405Residential
    
    
    3,641
    
    
    
    
    
    
    
    
    
    
    
    3,641Acquisition, development and
construction
    
    
    8,888
    
    
    
    
    
    
    
    
    
    
    
    8,888Consumer installment
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    54Total impaired loans
    
    $
    16,088
    
    
    
    
    
    
    
    
    
    
    
    16,088Other real estate owned
    
    
    7,565
    
    
    
    
    
    
    
    
    
    
    
    7,565Total
    
    $
    23,653
    
    
    
    
    
    
    
    
    
    
    
    23,653
 Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableDecember 31,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Inputs2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Assets:Impaired loansCommercial, financial, and agricultural
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate:Commercial
    
    
    3,143
    
    
    
    
    
    
    
    
    
    
    
    3,143Residential
    
    
    3,187
    
    
    
    
    
    
    
    
    
    
    
    3,187Acquisition, development and
construction
    
    
    6,565
    
    
    
    
    
    
    
    
    
    
    
    6,565Consumer installment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total impaired loans
    
    $
    12,895
    
    
    
    
    
    
    
    
    
    
    
    12,895Other real estate owned
    
    
    7,751
    
    
    
    
    
    
    
    
    
    
    
    7,751Total
    
    $
    20,646
    
    
    
    
    
    
    
    
    
    
    
    20,646
     29




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##### Table of Contents



30




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##### Table of Contents



(a)
    
    Cash and Cash EquivalentsFair value equals the carrying value of such assets due to their nature.(b)
    
    Loans, netThe fair value of loans is calculated using discounted cash flows by loan type. The
discount rate used to determine the present value of the loan portfolio is an estimated
market rate that reflects the credit and interest rate risk inherent in the loan
portfolio without considering widening credit spreads due to market illiquidity. The
estimated maturity is based on the Companys historical experience with repayments
adjusted to estimate the effect of current market conditions. The carrying amount of
related accrued interest receivable approximates its fair value and is not disclosed.
The carrying amount of real estate loans originated for sale approximates their fair
value. The allowance for loan losses is considered a reasonable discount for credit
risk.(c)
    
    DepositsFair values for certificates of deposit have been determined using discounted cash
flows. The discount rate used is based on estimated market rates for deposits of
similar remaining maturities. The carrying amounts of all other deposits, due to their
short-term nature, approximate their fair values. The
carrying amount of related accrued interest payable approximates its fair value and is
not disclosed.(d)
    
    Securities Sold Under Repurchase AgreementsFair value approximates the carrying value of such liabilities due to their short-term
nature.(e)
    
    Advances from Federal Home Loan BankThe fair value of the Federal Home Loan Bank (FHLB) advances is obtained from the
FHLB and is calculated by discounting contractual cash flows using an estimated
interest rate based on the current rates available to the Company for debt of similar
remaining maturities and collateral terms.(f)
    
    Subordinated debenturesThe fair value for subordinated debentures is calculated based upon current market
spreads to LIBOR for debt of similar remaining maturities and collateral terms.(g)
    
    CommitmentsThe difference between the carrying values and fair values of commitments to extend
credit are not significant and are not disclosed.
  31




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##### Table of Contents



March 31, 2011Carrying
    
    
    Estimatedamount
    
    
    fair value(Dollars in thousands)Financial assets:Cash and cash
equivalents
    
    $
    125,371
    
    
    
    125,371Loans, net
    
    
    854,896
    
    
    
    854,899Financial liabilities:Deposits with stated maturities
    
    
    468,361
    
    
    
    472,515Deposits without stated maturities
    
    
    969,815
    
    
    
    969,815Securities sold under
repurchase agreements
    
    
    610
    
    
    
    610Advances from FHLB
    
    
    60,000
    
    
    
    63,975Subordinated debentures
    
    
    22,947
    
    
    
    15,025
 December 31, 2010Carrying
    
    
    Estimatedamount
    
    
    fair value(Dollars in thousands)Financial assets:Cash and cash
equivalents
    
    $
    65,115
    
    
    
    65,115Loans, net
    
    
    860,213
    
    
    
    858,505Financial liabilities:Deposits with stated maturities
    
    
    487,810
    
    
    
    491,867Deposits without stated maturities
    
    
    922,927
    
    
    
    922,927Securities sold under
repurchase agreements
    
    
    818
    
    
    
    818Advances from FHLB
    
    
    60,000
    
    
    
    64,615Subordinated debentures
    
    
    22,947
    
    
    
    14,978
  32




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##### Table of Contents



Three Months EndedMarch 31,2011
    
    
    2010(Dollars in thousands)Net income
    
    $
    2,302
    
    
    $
    1,255Other comprehensive income (loss):Unrealized gains (losses) arising
during the period
    
    
    (1,472
    )
    
    
    4,131Reclassification adjustment for gains,
net of OTTI
included in net income
    
    
    (86
    )
    
    
    (13
    )Tax effect
    
    
    606
    
    
    
    (1,583
    )Other comprehensive income (loss)
    
    
    (952
    )
    
    
    2,535Total comprehensive income
    
    $
    1,350
    
    
    $
    3,790
    33




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
     34




---



##### Table of Contents



Table 1  Selected Financial Data
 March 31,
    
    
    December 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2010(Dollars in thousands)Assets
    
    $
    1,634,802
    
    
    $
    1,607,105
    
    
    $
    1,497,359Loans
    
    
    871,017
    
    
    
    874,095
    
    
    
    919,777Deposits
    
    
    1,438,176
    
    
    
    1,410,737
    
    
    
    1,290,897Annualized return on average total assets
    
    
    0.58
    %
    
    
    0.44
    %
    
    
    0.34
    %Annualized return on average equity
    
    
    9.37
    %
    
    
    6.81
    %
    
    
    5.31
    %
    35




---



##### Table of Contents



Forward-Looking Statements
  Critical Accounting Estimates
   36




---



##### Table of Contents



Allowance for Loan Losses
    Fair Value of Financial Instruments
   37




---



##### Table of Contents



Other Real Estate Owned
  Investment Securities
  Results of Operations
    38




---



##### Table of Contents



Table 2  Selected Balance Sheet Data
 March 31,
    
    
    December 31,
    
    
    Variance2011
    
    
    2010
    
    
    Amount
    
    
    %(Dollars in thousands)Cash, due from banks
and interest-bearing deposits
    
    $
    125,371
    
    
    $
    65,115
    
    
    $
    60,256
    
    
    
    92.5
    %Investment securities
    
    
    558,306
    
    
    
    586,612
    
    
    
    (28,306
    )
    
    
    (4.8
    %)Loans
    
    
    871,017
    
    
    
    874,095
    
    
    
    (3,078
    )
    
    
    (0.4
    %)Other real estate owned
    
    
    7,565
    
    
    
    7,751
    
    
    
    (186
    )
    
    
    (2.4
    %)Assets
    
    
    1,634,802
    
    
    
    1,607,105
    
    
    
    27,697
    
    
    
    1.7
    %Deposits
    
    
    1,438,176
    
    
    
    1,410,737
    
    
    
    27,439
    
    
    
    1.9
    %Securities sold under repurchase
agreements
    
    
    610
    
    
    
    818
    
    
    
    (208
    )
    
    
    (25.4
    %)Advances from Federal Home Loan Bank
    
    
    60,000
    
    
    
    60,000
    
    
    
    
    
    
    
    0.0
    %Liabilities
    
    
    1,533,455
    
    
    
    1,507,147
    
    
    
    26,308
    
    
    
    1.7
    %Stockholders equity
    
    
    101,347
    
    
    
    99,958
    
    
    
    1,389
    
    
    
    1.4
    %
   39




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##### Table of Contents



Net Interest Income
   40




---



##### Table of Contents



Table 3  Average Balances, Income and Expenses, Yields and Rates
 Three Months Ended March 31, 2011
    
    
    Three Months Ended March 31, 2010Annualized
    
    
    
    
    
    
    
    
    
    
    AnnualizedAverage
    
    
    Amount
    
    
    
    
    
    
    Average
    
    
    AmountAverage
    
    
    Yield or
    
    
    Paid or
    
    
    Average
    
    
    Yield or
    
    
    Paid orAmount
    
    
    Rate
    
    
    Earned
    
    
    Amount
    
    
    Rate
    
    
    Earned(Dollars in thousands)Interest-earning assets:Loans
    
    $
    880,117
    
    
    
    5.76
    %
    
    $
    12,628
    
    
    $
    940,030
    
    
    
    5.70
    %
    
    $
    13,343Investment securitiesTaxable
    
    
    529,588
    
    
    
    2.92
    %
    
    
    3,863
    
    
    
    311,253
    
    
    
    4.10
    %
    
    
    3,187Tax-exempt
    
    
    42,777
    
    
    
    4.27
    %
    
    
    457
    
    
    
    21,529
    
    
    
    4.31
    %
    
    
    232Federal funds sold
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    7,300
    
    
    
    0.16
    %
    
    
    3Interest-bearing deposits in other
banks
    
    
    35,265
    
    
    
    0.54
    %
    
    
    47
    
    
    
    85,446
    
    
    
    0.42
    %
    
    
    89Total interest-earning assets
    
    $
    1,487,747
    
    
    
    4.58
    %
    
    $
    16,995
    
    
    $
    1,365,558
    
    
    
    4.95
    %
    
    $
    16,854Interest-bearing liabilities:Deposits
    
    $
    1,280,371
    
    
    
    1.29
    %
    
    $
    4,080
    
    
    $
    1,168,891
    
    
    
    1.86
    %
    
    $
    5,367Securities sold under repurchase
agreements
    
    
    672
    
    
    
    1.19
    %
    
    
    2
    
    
    
    3,058
    
    
    
    1.47
    %
    
    
    11Other borrowings
    
    
    82,947
    
    
    
    3.49
    %
    
    
    714
    
    
    
    100,307
    
    
    
    3.86
    %
    
    
    954Total interest-bearing liabilities
    
    $
    1,363,990
    
    
    
    1.43
    %
    
    $
    4,796
    
    
    $
    1,272,256
    
    
    
    2.02
    %
    
    $
    6,332Net interest margin/income:
    
    
    
    
    
    
    3.28
    %
    
    $
    12,199
    
    
    
    
    
    
    
    3.07
    %
    
    $
    10,522
     41




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##### Table of Contents



Table 4  Rate/Volume Analysis
 Three Months EndedMarch 31, 2011 compared to March 31, 2010Increase (Decrease) due toVolume
    
    
    Rate
    
    
    Combined
    
    
    Total(Dollars in thousands)Interest-earning assets:Loans
    
    
    (851
    )
    
    
    145
    
    
    
    (9
    )
    
    
    (715
    )Investment securitiesTaxable
    
    
    2,236
    
    
    
    (917
    )
    
    
    (643
    )
    
    
    676Tax-exempt
    
    
    229
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    225Federal funds sold
    
    
    (3
    )
    
    
    (3
    )
    
    
    3
    
    
    
    (3
    )Interest-bearing deposits in other
banks
    
    
    (52
    )
    
    
    25
    
    
    
    (15
    )
    
    
    (42
    )Total interest-earning assets
    
    
    1,559
    
    
    
    (752
    )
    
    
    (666
    )
    
    
    141Interest-bearing liabilities:Deposits
    
    
    512
    
    
    
    (1,642
    )
    
    
    (157
    )
    
    
    (1,287
    )Securities sold under repurchase
agreements
    
    
    (9
    )
    
    
    (2
    )
    
    
    2
    
    
    
    (9
    )Other borrowings
    
    
    (165
    )
    
    
    (91
    )
    
    
    16
    
    
    
    (240
    )Total interest-bearing liabilities
    
    
    338
    
    
    
    (1,735
    )
    
    
    (139
    )
    
    
    (1,536
    )Net change in net interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,677
 Provision for Loan Losses
   42




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##### Table of Contents



Noninterest Income
 Table 5  Noninterest Income
 Three Months EndedMarch 31,
    
    
    Variance2011
    
    
    2010
    
    
    Amount
    
    
    %(Dollars in thousands)Service charges and fees on deposits
    
    $
    1,578
    
    
    $
    1,595
    
    
    $
    (17
    )
    
    
    (1.1
    %)Gain on sales of loans
    
    
    1,207
    
    
    
    1,353
    
    
    
    (146
    )
    
    
    (10.8
    %)Gain on sale of fixed assets
    
    
    17
    
    
    
    27
    
    
    
    (10
    )
    
    
    (37.0
    %)Investment securities gains, net
of other-than-temporary impairment
    
    
    86
    
    
    
    13
    
    
    
    73
    
    
    
    561.5
    %Retail investment income
    
    
    457
    
    
    
    335
    
    
    
    122
    
    
    
    36.4
    %Trust services fees
    
    
    273
    
    
    
    287
    
    
    
    (14
    )
    
    
    (4.9
    %)Increase in cash surrender value of
bank-owned life insurance
    
    
    218
    
    
    
    229
    
    
    
    (11
    )
    
    
    (4.8
    %)Miscellaneous income
    
    
    213
    
    
    
    161
    
    
    
    52
    
    
    
    32.3
    %Total noninterest income
    
    $
    4,049
    
    
    $
    4,000
    
    
    $
    49
    
    
    
    1.2
    %
   43




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##### Table of Contents



Noninterest Expense
 Table 6  Noninterest Expense
 Three Months EndedMarch 31,
    
    
    Variance2011
    
    
    2010
    
    
    Amount
    
    
    %(Dollars in thousands)Salaries and other
personnel expense
    
    $
    5,564
    
    
    $
    5,494
    
    
    $
    70
    
    
    
    1.3
    %Occupancy expenses
    
    
    1,115
    
    
    
    1,171
    
    
    
    (56
    )
    
    
    (4.8
    %)Marketing & business development
    
    
    334
    
    
    
    293
    
    
    
    41
    
    
    
    14.0
    %Processing expense
    
    
    412
    
    
    
    366
    
    
    
    46
    
    
    
    12.6
    %Legal and professional fees
    
    
    393
    
    
    
    432
    
    
    
    (39
    )
    
    
    (9.0
    %)Data processing expense
    
    
    349
    
    
    
    345
    
    
    
    4
    
    
    
    1.2
    %FDIC insurance
    
    
    617
    
    
    
    541
    
    
    
    76
    
    
    
    14.0
    %Gain on sale of other real estate
    
    
    (18
    )
    
    
    (340
    )
    
    
    322
    
    
    
    (94.7
    %)Other real estate valuation
allowance
    
    
    113
    
    
    
    255
    
    
    
    (142
    )
    
    
    (55.7
    %)Other operating expenses
    
    
    896
    
    
    
    875
    
    
    
    21
    
    
    
    2.4
    %Total noninterest expense
    
    $
    9,775
    
    
    $
    9,432
    
    
    $
    343
    
    
    
    3.6
    %
      44




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##### Table of Contents



Income Taxes
     45




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##### Table of Contents



Loans
  Table 7  Loan Portfolio Composition
 March 31, 2011
    
    
    December 31, 2010Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Commercial financial and
agricultural
    
    $
    183,637
    
    
    
    21.08
    %
    
    $
    189,128
    
    
    
    21.64
    %Real estateCommercial
    
    
    332,991
    
    
    
    38.23
    %
    
    
    327,458
    
    
    
    37.46
    %Residential
    
    
    160,256
    
    
    
    18.40
    %
    
    
    157,680
    
    
    
    18.04
    %Acquisition, development
and construction
    
    
    178,392
    
    
    
    20.48
    %
    
    
    182,412
    
    
    
    20.87
    %Total real estate
    
    
    671,639
    
    
    
    77.11
    %
    
    
    667,550
    
    
    
    76.37
    %ConsumerDirect
    
    
    14,855
    
    
    
    1.70
    %
    
    
    15,643
    
    
    
    1.79
    %Indirect
    
    
    741
    
    
    
    0.09
    %
    
    
    899
    
    
    
    0.10
    %Revolving
    
    
    166
    
    
    
    0.02
    %
    
    
    870
    
    
    
    0.10
    %Total consumer
    
    
    15,762
    
    
    
    1.81
    %
    
    
    17,412
    
    
    
    1.99
    %Deferred loan origination
costs (fees)
    
    
    (21
    )
    
    
    (0.00
    %)
    
    
    5
    
    
    
    0.00
    %Total
    
    $
    871,017
    
    
    
    100.00
    %
    
    $
    874,095
    
    
    
    100.00
    %
    46




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##### Table of Contents



March 31, 2011ReservesBalance
    
    
    Original
    
    
    Advanced
    
    
    Remaining(Dollars in thousands)Loan 1
    
    $
    4,154
    
    
    
    179
    
    
    
    179
    
    
    
    Loan 2
    
    
    10,072
    
    
    
    300
    
    
    
    300
    
    
    
    Loan 3
    
    
    2,145
    
    
    
    255
    
    
    
    255
    
    
    
    Loan 4
    
    
    452
    
    
    
    30
    
    
    
    30
    
    
    
    Loan 5
    
    
    161
    
    
    
    10
    
    
    
    10
    
    
    
    Loan 6
    
    
    1,111
    
    
    
    81
    
    
    
    81
    
    
    
    
 December 31, 2010ReservesBalance
    
    
    Original
    
    
    Advanced
    
    
    Remaining(Dollars in thousands)Loan 1
    
    $
    4,166
    
    
    
    179
    
    
    
    179
    
    
    
    Loan 2
    
    
    10,135
    
    
    
    300
    
    
    
    300
    
    
    
    Loan 3
    
    
    2,234
    
    
    
    255
    
    
    
    255
    
    
    
    Loan 4
    
    
    452
    
    
    
    30
    
    
    
    30
    
    
    
    Loan 5
    
    
    162
    
    
    
    10
    
    
    
    10
    
    
    
    Loan 6
    
    
    1,114
    
    
    
    81
    
    
    
    81
    
    
    
    
   47




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##### Table of Contents



Loan Review and Classification Process
     48




---



##### Table of Contents



Nonperforming Assets
     49




---



##### Table of Contents



Table 8  Non-Performing Assets
 March 31, 2011
    
    
    December 31, 2010
    
    
    March 31, 2010(Dollars in thousands)Nonaccrual loans:Commercial financial and agricultural
    
    $
    3,177
    
    
    $
    2,924
    
    
    $
    1,145Real Estate:Commercial
    
    
    3,747
    
    
    
    3,793
    
    
    
    9,314Residential
    
    
    4,625
    
    
    
    4,734
    
    
    
    3,757Acquisition, development and construction
    
    
    13,875
    
    
    
    11,953
    
    
    
    17,113Consumer
    
    
    284
    
    
    
    301
    
    
    
    536Total Nonaccrual loans
    
    
    25,708
    
    
    
    23,705
    
    
    
    31,865Restructured loans (1)
    
    
    2,611
    
    
    
    2,544
    
    
    
    Other real estate owned
    
    
    7,565
    
    
    
    7,751
    
    
    
    5,865Total Non-performing assets
    
    $
    35,884
    
    
    $
    34,000
    
    
    $
    37,730Loans past due 90 days or more
and still accruing interest
    
    $
    
    
    
    $
    69
    
    
    $
    Non-performing assets to total assets
    
    
    2.20
    %
    
    
    3.89
    %
    
    
    2.52
    %Non-performing assets to total loans and OREO
    
    
    4.08
    %
    
    
    3.86
    %
    
    
    4.08
    %Allowance for loan loss to total nonaccrual
loans
    
    
    104.33
    %
    
    
    112.45
    %
    
    
    72.61
    %
 (1)
    
    Restructured loans on nonaccrual status at period end are included under nonaccrual loans
in the table.   Table 9  Other Real Estate Owned
 2011
    
    
    2010(Dollars in thousands)Beginning balance, January 1
    
    $
    7,751
    
    
    
    7,974Additions
    
    
    139
    
    
    
    2,230Increase in valuation allowance
    
    
    (113
    )
    
    
    (255
    )Sales
    
    
    (230
    )
    
    
    (4,424
    )Net gain on sale of OREO
    
    
    18
    
    
    
    340Ending balance, March 31
    
    $
    7,565
    
    
    
    5,865
  50




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##### Table of Contents



2011
    
    
    2010(Dollars in thousands)Other Real Estate:Single family developed lots
    
    $
    1,938
    
    
    $
    1,651Residential land
    
    
    196
    
    
    
    1-4 Family residential
    
    
    1,692
    
    
    
    284Commercial real estate
    
    
    3,126
    
    
    
    1,299Condominums
    
    
    2,827
    
    
    
    2,8869,779
    
    
    
    6,120Valuation allowance
    
    
    (2,214
    )
    
    
    (255
    )$
    7,565
    
    
    $
    5,865
  Nonaccrual
    
    
    
    
    
    
    
    
    
    
    
    Appraisal
    
    AppraisedBalance
    
    
    Originated
    
    
    Date
    
    Trigger
    
    Collateral
    
    Allowance
    
    
    Method
    
    Date
    
    Value(Dollars in thousands)1-4 Family Residential
    
    $
    1,086
    
    
    
    05/08-06/08
    
    
    12/14/10
    
    financial condition
    
    houses & land
    
    $
    
    
    
    collateral value
    
    03/11
    
    $
    1,450ADC Loan  Savannah, Georgia
    
    
    1,604
    
    
    
    09/30/08
    
    
    05/06/10
    
    delinquency
    
    lots & land
    
    
    300
    
    
    collateral value
    
    06/10
    
    
    2,110ADC Loan  CSRA
    
    
    1,009
    
    
    
    03/07-04/08
    
    
    11/30/09
    
    delinquency
    
    lots & land
    
    
    
    
    
    collateral value
    
    03/11
    
    
    1,0751-4 Family Residential
    
    
    982
    
    
    
    01/08-09/08
    
    
    11/09-09/10
    
    delinquency
    
    houses
    
    
    
    
    
    collateral value
    
    03/11
    
    
    1,843Farmland & Equity lines
    
    
    1,163
    
    
    
    09/18/08
    
    
    11/10-12/10
    
    financial condition
    
    house & land
    
    
    
    
    
    collateral value
    
    11/10 - 12/10
    
    
    2,328ADC Loan  CSRA
    
    
    945
    
    
    
    06/07-12/10
    
    
    03/29/11
    
    financial condition
    
    lots & land
    
    
    325
    
    
    collateral value
    
    03/10 - 12/10
    
    
    1,4131-4 Family Residential
    
    
    805
    
    
    
    04/19/07
    
    
    06/21/10
    
    financial condition
    
    house
    
    
    40
    
    
    collateral value
    
    08/10
    
    
    895ADC Loan  CSRA
    
    
    2,908
    
    
    
    8/06-11/07
    
    
    08/17/09
    
    delinquency
    
    lots & land
    
    
    
    
    
    collateral value
    
    09/10 - 03/11
    
    
    5,726ADC Loan  Athens, Georgia
    
    
    934
    
    
    
    09/07/07
    
    
    12/16/10
    
    financial condition
    
    lots & land
    
    
    
    
    
    collateral value
    
    03/11
    
    
    1,0381-4 Family Residential
    
    
    863
    
    
    
    02/07-05/09
    
    
    10/10-03/11
    
    financial condition
    
    houses
    
    
    33
    
    
    collateral value
    
    01/08 - 03/11
    
    
    1,128ADC Loan  Athens, Georgia
    
    
    1,974
    
    
    
    08/06-01/07
    
    
    01/28/09
    
    delinquency
    
    land & townhomes
    
    
    
    
    
    collateral value
    
    02/09 - 09/10
    
    
    2,255ADC Loan  Georgia Loan Participation
    
    
    1,500
    
    
    
    03/29/11
    
    
    03/29/11
    
    financial condition
    
    land
    
    
    
    
    
    collateral value
    
    12/09
    
    
    2,600$
    15,773Other, net
    
    
    9,935Nonaccrual loans at March 31, 2011
    
    $
    25,708
  51




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Allowance for Loan Losses
      52




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##### Table of Contents



Table 10  Acquisition Development and Construction Loans
 March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)CSRA  primary market areaPeriod-end loans
    
    $
    149,037
    
    
    $
    148,570Impaired loans
    
    
    7,345
    
    
    
    4,492Other classified/watch rated loans
    
    
    19,973
    
    
    
    27,719Charge-offs % (annualized)
    
    
    0.31
    %
    
    
    2.20
    %Specific reserve allowance / Impaired loans
    
    
    4.06
    %
    
    
    3.47
    %General reserve allowance / Loans not
impaired %
    
    
    4.14
    %
    
    
    3.43
    %Allowance / Charge-offs
    
    
    13.50
    
    
    
    1.56Savannah, GeorgiaPeriod-end loans
    
    $
    10,657
    
    
    $
    10,985Impaired loans
    
    
    1,946
    
    
    
    2,066Other classified/watch rated loans
    
    
    493
    
    
    
    638Charge-offs % (annualized)
    
    
    0.00
    %
    
    
    13.32
    %Specific reserve allowance / Impaired loans
    
    
    15.42
    %
    
    
    8.47
    %General reserve allowance / Loans not
impaired %
    
    
    3.10
    %
    
    
    3.13
    %Allowance / Charge-offs
    
    
    0
    
    
    
    0.31Athens, GeorgiaPeriod-end loans
    
    $
    10,245
    
    
    $
    11,178Impaired loans
    
    
    3,722
    
    
    
    4,193Other classified/watch rated loans
    
    
    1,767
    
    
    
    1,439Charge-offs % (annualized)
    
    
    19.37
    %
    
    
    3.38
    %Specific reserve allowance / Impaired loans
    
    
    0.00
    %
    
    
    0.00
    %General reserve allowance / Loans not
impaired %
    
    
    11.51
    %
    
    
    11.40
    %Allowance / Charge-offs
    
    
    0.38
    
    
    
    2.11ADC Participations  GeorgiaPeriod-end loans
    
    $
    6,500
    
    
    $
    6,500Impaired loans
    
    
    
    
    
    
    Other classified/watch rated loans
    
    
    6,500
    
    
    
    6,500Charge-offs % (annualized)
    
    
    0.00
    %
    
    
    22.52
    %Specific reserve allowance / Impaired loans
    
    
    0.00
    %
    
    
    0.00
    %General reserve allowance / Loans not
impaired %
    
    
    20.75
    %
    
    
    15.00
    %Allowance / Charge-offs
    
    
    0
    
    
    
    0.67ADC Loans  GreenvillePeriod-end loans
    
    $
    1,432
    
    
    $
    1,673Impaired loans
    
    
    
    
    
    
    150Other classified/watch rated loans
    
    
    746
    
    
    
    821Charge-offs % (annualized)
    
    
    (1.96
    %)
    
    
    17.33
    %Specific reserve allowance / Impaired loans
    
    
    0.00
    %
    
    
    0.00
    %General reserve allowance / Loans not
impaired %
    
    
    11.31
    %
    
    
    18.65
    %Allowance / Charge-offs
    
    
    (5.79
    )
    
    
    0.21ADC Participations  FloridaPeriod-end loans
    
    $
    521
    
    
    $
    3,506Impaired loans
    
    
    521
    
    
    
    3,506Other classified/watch rated loans
    
    
    
    
    
    
    Charge-offs % (annualized)
    
    
    44.10
    %
    
    
    5.56
    %Specific reserve allowance / Impaired loans
    
    
    0.00
    %
    
    
    25.33
    %General reserve allowance / Loans not
impaired %
    
    
    0.00
    %
    
    
    0.00
    %Allowance / Charge-offs
    
    
    
    
    
    
    4.55
  53




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##### Table of Contents



54




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##### Table of Contents



Table 11  Allowance for Loan Losses
 March 31,2011
    
    
    2010(Dollars in thousands)Total loans outstanding at end of period,
net of unearned income
    
    $
    871,017
    
    
    $
    919,777Average loans outstanding, net of
unearned income
    
    $
    870,927
    
    
    $
    920,584Balance of allowance for loan losses at
beginning of year
    
    $
    26,657
    
    
    $
    22,338Charge-offs:Commercial, financial and agricultural
    
    
    1,122
    
    
    
    223Real estate  commercial
    
    
    424
    
    
    
    66Real estate  residential mortgage
    
    
    162
    
    
    
    326Real estate  acquisition, development
and construction
    
    
    1,498
    
    
    
    2,214Consumer
    
    
    36
    
    
    
    194Total charge-offs
    
    
    3,242
    
    
    
    3,023Recoveries of previous loan losses:Commercial, financial and agricultural
    
    
    102
    
    
    
    72Real estate  commercial
    
    
    
    
    
    
    5Real estate  residential mortgage
    
    
    4
    
    
    
    31Real estate  acquisition, development
and construction
    
    
    6
    
    
    
    356Consumer
    
    
    54
    
    
    
    71Total recoveries
    
    
    166
    
    
    
    535Net loan losses
    
    
    3,076
    
    
    
    2,488Provision for loan losses
    
    
    3,240
    
    
    
    3,288Balance of allowance for loan losses at
end of period
    
    $
    26,821
    
    
    $
    23,138Allowance for loan losses to period end
loans
    
    
    3.08
    %
    
    
    2.52
    %Annualized net charge-offs to average loans
    
    
    1.43
    %
    
    
    1.10
    %
   55




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##### Table of Contents



Liquidity and Capital Resources
    56




---



##### Table of Contents



Table 12  Regulatory Capital Requirements
March 31, 2011
 Required for capitalActual
    
    
    adequacy purposes
    
    
    ExcessAmount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Southeastern Bank
Financial
CorporationRisk-based capital:Tier 1 capital
    
    $
    124,392
    
    
    
    12.25
    %
    
    
    40,630
    
    
    
    4.00
    %
    
    
    83,762
    
    
    
    8.25
    %Total capital
    
    
    139,031
    
    
    
    13.69
    %
    
    
    81,259
    
    
    
    8.00
    %
    
    
    57,772
    
    
    
    5.69
    %Tier 1 leverage ratio
    
    
    124,392
    
    
    
    7.78
    %
    
    
    63,983
    
    
    
    4.00
    %
    
    
    60,409
    
    
    
    3.78
    %Georgia Bank & Trust CompanyRisk-based capital:Tier 1 capital
    
    $
    109,248
    
    
    
    12.22
    %
    
    
    35,748
    
    
    
    4.00
    %
    
    
    73,500
    
    
    
    8.22
    %Total capital
    
    
    120,579
    
    
    
    13.49
    %
    
    
    71,496
    
    
    
    8.00
    %
    
    
    49,083
    
    
    
    5.49
    %Tier 1 leverage ratio
    
    
    109,248
    
    
    
    7.67
    %
    
    
    64,077
    
    
    
    4.50
    %
    
    
    45,171
    
    
    
    3.17
    %Southern Bank & TrustRisk-based capital:Tier 1 capital
    
    $
    14,621
    
    
    
    12.10
    %
    
    
    4,832
    
    
    
    4.00
    %
    
    
    9,789
    
    
    
    8.10
    %Total capital
    
    
    16,146
    
    
    
    13.37
    %
    
    
    9,664
    
    
    
    8.00
    %
    
    
    6,482
    
    
    
    5.37
    %Tier 1 leverage ratio
    
    
    14,621
    
    
    
    7.92
    %
    
    
    7,389
    
    
    
    4.00
    %
    
    
    7,232
    
    
    
    3.92
    %
   Commitments and Contractual Obligations
   57




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Table 13  Commitments and Contractual Obligations
 Less than 1
    
    
    1 - 3
    
    
    3 - 5
    
    
    More than 5Year
    
    
    Years
    
    
    Years
    
    
    Years(Dollars in thousands)Lines of credit
    
    $
    145,246
    
    
    
    
    
    
    
    
    
    
    
    Lease agreements
    
    
    290
    
    
    
    184
    
    
    
    84
    
    
    
    17Deposits
    
    
    1,263,120
    
    
    
    146,587
    
    
    
    26,912
    
    
    
    1,557Securities sold under
repurchase agreements
    
    
    610
    
    
    
    
    
    
    
    
    
    
    
    FHLB advances
    
    
    8,000
    
    
    
    13,000
    
    
    
    
    
    
    
    39,000Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    2,947
    
    
    
    20,000Total commitments and
contractual
obligations
    
    $
    1,417,266
    
    
    $
    159,771
    
    
    $
    29,943
    
    
    $
    60,574
  Effects of Inflation and Changing Prices
   58




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##### Table of Contents



Regulatory Reform Legislation
  
 
 
 
 
 
 
  59




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##### Table of Contents




 
 
 
 
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4.
    
    Controls and Procedures
   60




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##### Table of Contents



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, 2010, which could
materially affect its business, financial condition or future results. The risks
described in the Annual Report on Form 10-K are not the only risks facing the
Company. Additional risks and uncertainties not currently known to management or
that management currently deems to be immaterial also may materially adversely
affect the Companys business, financial condition and/or operating results.
 
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 Issuer Purchases of Equity Securities
 On April 15, 2004, the Company announced the commencement of a stock
repurchase program, pursuant to which it will, from time to time, repurchase up to
100,000 shares of its outstanding stock. The program does not have a stated
expiration date. No stock repurchase programs were terminated during the first
quarter of 2011 and there were no shares repurchased under the existing stock
repurchase plan or otherwise during the first quarter.
 
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    [Removed and Reserved]
 
 Item 5.
    
    Other Information
 None
  61




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##### Table of Contents



Item 6.
    
    Exhibits
 31.1
    
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    
    
    Certification of Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  62




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##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATIONDate:      April 29, 2011
    By:
    /s/ Darrell R. RainsDarrell R. RainsGroup Vice President, Chief
Financial Officer (Duly Authorized
Officer of Registrant and Principal
Financial Officer)  63