##### Table of Contents



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 June 30, 2009.
 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 þ
    
    Smaller reporting company o(do not check if a smaller reporting company)
 Yes o No þ




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##### 



SOUTHEASTERN BANK FINANCIAL CORPORATION
 FORM 10-Q
 INDEX
 PagePart IItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets as of June 30, 2009 and
December 31, 2008
    
    
    3Consolidated Statements of Income for the Three and Six
Months ended June 30, 2009 and 2008
    
    
    5Consolidated Statements of Cash Flows for the
Six Months ended June 30, 2009 and 2008
    
    
    7Notes to Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    24Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    44Item 4. Controls and Procedures
    
    
    44Part IIOther InformationItem 1. Legal Proceedings
    
    
    *Item 1A. Risk Factors
    
    
    45Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    45Item 3. Defaults Upon Senior Securities
    
    
    *Item 4. Submission of Matters to a Vote of Security Holders
    
    
    46Item 5. Other Information
    
    
    *Item 6. Exhibits
    
    
    47Signature
    
    
    48Exhibit 31.1Exhibit 31.2Exhibit 32.1
  *
    
    No information submitted under this caption  1




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2




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SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
 
 June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)AssetsCash and due from banks
    
    $
    91,490
    
    
    $
    24,860Federal funds sold
    
    
    7,300
    
    
    
    9,780Interest-bearing deposits in other banks
    
    
    25,407
    
    
    
    3,128Cash and cash equivalents
    
    
    124,197
    
    
    
    37,768Investment securitiesAvailable-for-sale
    
    
    276,905
    
    
    
    299,339Held-to-maturity, at cost (fair values of
$485 and $698, respectively)
    
    
    490
    
    
    
    689Loans held for sale
    
    
    23,975
    
    
    
    18,955Loans
    
    
    957,727
    
    
    
    986,831Less allowance for loan losses
    
    
    (16,031
    )
    
    
    (14,742
    )Loans, net
    
    
    941,696
    
    
    
    972,089Premises and equipment, net
    
    
    32,908
    
    
    
    33,960Accrued interest receivable
    
    
    6,266
    
    
    
    7,085Bank-owned life insurance
    
    
    22,762
    
    
    
    17,368Restricted equity securities
    
    
    6,338
    
    
    
    6,571Other real estate owned
    
    
    13,786
    
    
    
    5,734Other assets
    
    
    12,552
    
    
    
    11,481$
    1,461,875
    
    
    $
    1,411,039
  3




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SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
 June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)Liabilities and Stockholders EquityDepositsNoninterest-bearing
    
    $
    116,805
    
    
    $
    111,291Interest-bearing:NOW accounts
    
    
    173,262
    
    
    
    166,561Savings
    
    
    285,819
    
    
    
    247,249Money management accounts
    
    
    42,858
    
    
    
    50,404Time deposits
over $100
    
    
    404,173
    
    
    
    385,439Other time
deposits
    
    
    168,360
    
    
    
    178,6081,191,277
    
    
    
    1,139,552Federal funds purchased and securities sold
under repurchase agreements
    
    
    49,361
    
    
    
    62,553Advances from Federal Home Loan Bank
    
    
    84,000
    
    
    
    84,000Other borrowed funds
    
    
    700
    
    
    
    Accrued interest payable and other liabilities
    
    
    10,739
    
    
    
    10,283Subordinated debentures
    
    
    22,947
    
    
    
    20,000Total
liabilities
    
    
    1,359,024
    
    
    
    1,316,388Stockholders equity:Common stock, $3.00 par value; 10,000,000 shares
authorized; 6,671,509 and 5,987,674 shares issued in
2009 and 2008, respectively; 6,671,509 and 5,987,674
shares outstanding in 2009 and 2008, respectively
    
    
    20,014
    
    
    
    17,963Preferred stock, no par value; 10,000,000 shares
authorized; 0 shares outstanding in 2009 and
2008, respectively
    
    
    
    
    
    
    Additional paid-in
capital
    
    
    62,251
    
    
    
    55,189Retained earnings
    
    
    21,370
    
    
    
    21,455Accumulated other comprehensive (loss) income, net
    
    
    (784
    )
    
    
    44Total stockholders equity
    
    
    102,851
    
    
    
    94,651$
    1,461,875
    
    
    $
    1,411,039
   4




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SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
 
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Interest income:Loans, including fees
    
    $
    14,206
    
    
    $
    15,087
    
    
    $
    28,010
    
    
    $
    31,480Investment securities
    
    
    3,595
    
    
    
    3,337
    
    
    
    7,669
    
    
    
    6,598Federal funds sold
    
    
    16
    
    
    
    96
    
    
    
    41
    
    
    
    187Interest-bearing deposits in other banks
    
    
    18
    
    
    
    6
    
    
    
    22
    
    
    
    12Total interest income
    
    
    17,835
    
    
    
    18,526
    
    
    
    35,742
    
    
    
    38,277Interest expense:Deposits
    
    
    6,009
    
    
    
    7,166
    
    
    
    12,810
    
    
    
    15,042Federal funds purchased and securities sold
under repurchase agreements
    
    
    95
    
    
    
    324
    
    
    
    206
    
    
    
    864Other borrowings
    
    
    1,023
    
    
    
    993
    
    
    
    1,919
    
    
    
    2,063Total interest expense
    
    
    7,127
    
    
    
    8,483
    
    
    
    14,935
    
    
    
    17,969Net interest income
    
    
    10,708
    
    
    
    10,043
    
    
    
    20,807
    
    
    
    20,308Provision for loan losses
    
    
    5,114
    
    
    
    1,652
    
    
    
    9,863
    
    
    
    2,923Net interest income after provision
for loan losses
    
    
    5,594
    
    
    
    8,391
    
    
    
    10,944
    
    
    
    17,385Noninterest income:Service charges and fees on deposits
    
    
    1,737
    
    
    
    1,820
    
    
    
    3,378
    
    
    
    3,491Gain on sales of loans
    
    
    2,461
    
    
    
    1,576
    
    
    
    4,697
    
    
    
    2,836(Loss) gain on sale of fixed assets
    
    
    (42
    )
    
    
    5
    
    
    
    (16
    )
    
    
    8Investment securities gains, net
    
    
    1,101
    
    
    
    30
    
    
    
    1,312
    
    
    
    68Other-than-temporary impairment losses (less
$572 recognized in other comprehensive
income, before taxes)
    
    
    (244
    )
    
    
    
    
    
    
    (619
    )
    
    
    Retail investment income
    
    
    318
    
    
    
    276
    
    
    
    527
    
    
    
    564Trust service fees
    
    
    245
    
    
    
    299
    
    
    
    498
    
    
    
    584Increase in cash surrender value of
bank-owned life insurance
    
    
    213
    
    
    
    194
    
    
    
    394
    
    
    
    358Miscellaneous income
    
    
    123
    
    
    
    252
    
    
    
    286
    
    
    
    473Total noninterest income
    
    
    5,912
    
    
    
    4,452
    
    
    
    10,457
    
    
    
    8,382Noninterest expense:Salaries and other personnel expense
    
    
    5,800
    
    
    
    5,383
    
    
    
    11,458
    
    
    
    10,554Occupancy expenses
    
    
    1,140
    
    
    
    1,005
    
    
    
    2,281
    
    
    
    2,030Other operating expenses
    
    
    3,868
    
    
    
    2,877
    
    
    
    6,903
    
    
    
    5,601Total noninterest expense
    
    
    10,808
    
    
    
    9,265
    
    
    
    20,642
    
    
    
    18,185Income before income taxes
    
    
    698
    
    
    
    3,578
    
    
    
    759
    
    
    
    7,582Income tax expense
    
    
    61
    
    
    
    1,170
    
    
    
    66
    
    
    
    2,539Net income
    
    $
    637
    
    
    $
    2,408
    
    
    $
    693
    
    
    $
    5,043
  5




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SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
 
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Basic net income per share
    
    $
    0.10
    
    
    $
    0.40
    
    
    $
    0.11
    
    
    $
    0.85Diluted net income per share
    
    $
    0.10
    
    
    $
    0.40
    
    
    $
    0.11
    
    
    $
    0.84Weighted average common shares outstanding
    
    
    6,348,312
    
    
    
    5,965,978
    
    
    
    6,169,125
    
    
    
    5,962,471Weighted average number of common and
common equivalent shares outstanding
    
    
    6,354,344
    
    
    
    6,020,119
    
    
    
    6,177,569
    
    
    
    6,021,581
   6




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SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
  Six Months Ended June 30,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    693
    
    
    $
    5,043Adjustments to reconcile net income to net cash
provided by operating activitiesDepreciation
    
    
    1,336
    
    
    
    1,094Deferred income tax benefit
    
    
    
    
    
    
    (1,003
    )Provision for loan losses
    
    
    9,863
    
    
    
    2,923Net investment securities gains
    
    
    (693
    )
    
    
    (68
    )Net accretion of discount on investment securities
    
    
    (90
    )
    
    
    (88
    )Increase in CSV of bank owned life insurance
    
    
    (394
    )
    
    
    (358
    )Stock options compensation cost
    
    
    94
    
    
    
    102Loss (gain) on disposal of premises and equipment
    
    
    16
    
    
    
    (8
    )Loss on the sale of other real estate
    
    
    291
    
    
    
    4Gain on sales of loans
    
    
    (4,697
    )
    
    
    (2,836
    )Real estate loans originated for sale
    
    
    (219,406
    )
    
    
    (135,588
    )Proceeds from sales of real estate loans
    
    
    219,083
    
    
    
    130,355Decrease in accrued interest receivable
    
    
    820
    
    
    
    955Increase in other assets
    
    
    (545
    )
    
    
    (363
    )Increase (decrease) in accrued interest payable and other liabilities
    
    
    456
    
    
    
    (600
    )Net cash provided (used) by operating activities
    
    
    6,827
    
    
    
    (436
    )Cash flows from investing activities:Proceeds from sales of available for sale securities
    
    
    58,439
    
    
    
    15,121Proceeds from maturities of available for sale securities
    
    
    90,467
    
    
    
    50,234Proceeds from maturities of held to maturity securities
    
    
    203
    
    
    
    765Purchase of available for sale securities
    
    
    (126,515
    )
    
    
    (73,666
    )Purchase of restricted equity securities
    
    
    (299
    )
    
    
    (1,341
    )Net decrease (increase) in loans
    
    
    9,225
    
    
    
    (78,117
    )Purchase of Bank-owned life insurance
    
    
    (5,000
    )
    
    
    Additions to premises and equipment
    
    
    (570
    )
    
    
    (3,989
    )Proceeds from sale of other real estate
    
    
    2,961
    
    
    
    408Proceeds from sale of premises and equipment
    
    
    270
    
    
    
    1,454Net cash provided (used) in investing activities
    
    
    29,181
    
    
    
    (89,131
    )Cash flows from financing activities:Net increase in deposits
    
    
    51,724
    
    
    
    98,206Net decrease in federal funds purchased and
securities sold under repurchase agreements
    
    
    (13,192
    )
    
    
    (19,741
    )Advances from Federal Home Loan Bank
    
    
    
    
    
    
    22,000Proceeds from subordinated debentures
    
    
    2,947
    
    
    
    Proceeds from other borrowed funds
    
    
    700
    
    
    
    Principal payments on other borrowed funds
    
    
    
    
    
    
    (100
    )Purchase of treasury stock
    
    
    (5
    )
    
    
    (437
    )Proceeds from issuance of common stock
    
    
    9,010
    
    
    
    Payment of cash dividends
    
    
    (778
    )
    
    
    (1,414
    )Proceeds from stock options exercised
    
    
    
    
    
    
    179Proceeds from Directors stock purchase plan
    
    
    15
    
    
    
    13Net cash provided by financing activities
    
    
    50,421
    
    
    
    98,706Net increase in cash and cash equivalents
    
    $
    86,429
    
    
    $
    9,139Cash and cash equivalents at beginning of period
    
    
    37,768
    
    
    
    25,058Cash and cash equivalents at end of period
    
    $
    124,197
    
    
    $
    34,197Supplemental disclosures of cash paid during the period for:Interest
    
    $
    15,879
    
    
    $
    18,635Income taxes
    
    $
    336
    
    
    $
    3,640Supplemental information on noncash investing activities:Loans transferred to other real estate
    
    $
    11,305
    
    
    $
    412
   7




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SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
         8




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Recognition and
Presentation of Other-Than-Temporary Impairments,
 Determining Fair Value When the
Volume and Level of Activity for the Asset and Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly
 Interim Disclosures about Fair Value of
Financial Instruments Disclosures about Fair Value of
Financial Instruments
  9




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##### Table of Contents



June 30, 2009Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair value(Dollars in Thousands)Available for saleMortgage backed securitiesU.S. Agency MBS  residential
    
    $
    103,114
    
    
    
    2,355
    
    
    
    (146
    )
    
    
    105,323U.S. Agency CMO
    
    
    47,104
    
    
    
    689
    
    
    
    (204
    )
    
    
    47,589Other CMO
    
    
    10,433
    
    
    
    
    
    
    
    (965
    )
    
    
    9,468Total MBS
    
    $
    160,651
    
    
    
    3,044
    
    
    
    (1,315
    )
    
    
    162,380Obligations of U.S. Government agencies
    
    $
    77,181
    
    
    
    295
    
    
    
    (1,086
    )
    
    
    76,390Obligations of states and
political subdivisions
    
    
    24,400
    
    
    
    237
    
    
    
    (861
    )
    
    
    23,776Corporate bonds
    
    
    15,943
    
    
    
    119
    
    
    
    (1,710
    )
    
    
    14,352Equity securities
    
    
    14
    
    
    
    
    
    
    
    (7
    )
    
    
    7$
    278,189
    
    
    
    3,695
    
    
    
    (4,979
    )
    
    
    276,905Held to maturityObligations of states and
political subdivisions
    
    $
    490
    
    
    
    1
    
    
    
    (6
    )
    
    
    485$
    490
    
    
    
    1
    
    
    
    (6
    )
    
    
    485
   10




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##### Table of Contents



June 30, 2009Amortized
    
    
    Estimatedcost
    
    
    fair valueDollars in ThousandsAvailable for sale:One year or less
    
    $
    1,405
    
    
    
    1,405After one year
through five years
    
    
    8,053
    
    
    
    7,988After five years
through ten years
    
    
    44,013
    
    
    
    43,646After ten years
    
    
    224,704
    
    
    
    223,859$
    278,175
    
    
    
    276,898Held to maturity:One year or less
    
    
    180
    
    
    
    181After one year
through five years
    
    
    310
    
    
    
    304490
    
    
    
    485
  June 30, 2009Less 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 impairedMortgage backed securitiesU.S. Agency MBS  residential
    
    $
    14,803
    
    
    
    146
    
    
    
    
    
    
    
    
    
    
    
    14,803
    
    
    
    146U.S. Agency CMO
    
    
    14,663
    
    
    
    193
    
    
    
    891
    
    
    
    11
    
    
    
    15,554
    
    
    
    204Other CMO
    
    
    583
    
    
    
    68
    
    
    
    6,905
    
    
    
    325
    
    
    
    7,488
    
    
    
    393Total MBS
    
    $
    30,049
    
    
    
    407
    
    
    
    7,796
    
    
    
    336
    
    
    
    37,845
    
    
    
    743Obligations of U.S.
Government agencies
    
    $
    47,084
    
    
    
    1,086
    
    
    
    
    
    
    
    
    
    
    
    47,084
    
    
    
    1,086Obligations of states and
political subdivisions
    
    
    6,838
    
    
    
    211
    
    
    
    7,248
    
    
    
    650
    
    
    
    14,086
    
    
    
    861Corporate bonds
    
    
    3,293
    
    
    
    405
    
    
    
    8,473
    
    
    
    1,305
    
    
    
    11,766
    
    
    
    1,710Equity securities
    
    
    7
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    7$
    87,271
    
    
    
    2,116
    
    
    
    23,517
    
    
    
    2,291
    
    
    
    110,788
    
    
    
    4,407Other-than-temporarily impairedMortgage backed securitiesOther CMO
    
    $
    
    
    
    
    
    
    
    
    1,981
    
    
    
    572
    
    
    
    1,981
    
    
    
    572Total temporarily impaired and
other-than-temporarily impaired
    
    $
    87,271
    
    
    
    2,116
    
    
    
    25,498
    
    
    
    2,863
    
    
    
    112,769
    
    
    
    4,979
  11




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##### Table of Contents



Other-Than-Temporary-Impairment
 Accounting for Certain Investments in Debt and
Equity Securities Recognition of Interest Income and Impairment on Purchased Beneficial Interests
and Beneficial Interests that Continue to be Held by a Transfer in Securitized Financial Assets.
    12




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Mortgage-backed Securities
     13




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Corporate Securities
     14




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##### Table of Contents



Beginning balance, April 1, 2009
    
    $
    375Amounts related to credit loss for which
an other-than-temporary impairment
was not previously recognized
    
    
    119Additions/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 was previously
recognized
    
    
    125Ending balance, June 30, 2009
    
    
    619
  SilvertonFinancialServices, Inc
    
    
    CMO 1
    
    
    CMO 2
    
    
    Total(dollars in thousands)Amount of other-than temporary-impairment
related to credit losses at April 1, 2009
    
    $
    375
    
    
    $
    
    
    
    $
    
    
    
    $
    375Addition for
credit losses recognized in earnings
    
    
    125
    
    
    
    57
    
    
    
    62
    
    
    
    244Amount of other-than temporary-impairment
related to credit losses at June 30, 2009
    
    $
    500
    
    
    $
    57
    
    
    $
    62
    
    
    $
    619
   15




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##### Table of Contents



EstimatedAmortized
    
    
    Fair
    
    
    Unrealized
    
    
    Ratings as of June 30, 2009(dollars in thousands)
    
    cost
    
    
    Value
    
    
    Losses
    
    
    S&P
    
    
    Fitch
    
    
    MoodysSilverton Financial Services, Inc.
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    NR
    
    
    NR
    
    
    NRCMO 1
    
    
    925
    
    
    
    720
    
    
    
    (205
    )
    
    B*-
    
    
    CCC
    
    
    NRCMO 2
    
    
    1,628
    
    
    
    1,260
    
    
    
    (368
    )
    
    AAA*-
    
    
    NR
    
    
    Caa2Total
    
    $
    2,553
    
    
    $
    1,980
    
    
    $
    (573
    )
       Investment Securities
  16




---



##### Table of Contents



Impaired Loans
 Investments in tax credits:
 Other Real Estate Owned
 Assets and Liabilities Measured on a Recurring Basis
  QuotedPrices inActiveMarkets for
    
    
    Significant Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableJune 30,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Available-for-sale securities
    
    $
    276,905
    
    
    $
    16,675
    
    
    $
    245,443
    
    
    $
    14,787Tax credits
    
    
    474
    
    
    
    
    
    
    
    
    
    
    
    474Held-to-maturity securities
    
    
    485
    
    
    
    
    
    
    
    485
    
    
    
    Total
    
    $
    277,864
    
    
    $
    16,675
    
    
    $
    245,928
    
    
    $
    15,261
  17




---



##### Table of Contents



QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Available-for-sale securities
    
    $
    299,339
    
    
    $
    46
    
    
    $
    295,163
    
    
    $
    4,130Tax credits
    
    
    515
    
    
    
    
    
    
    
    
    
    
    
    515Held-to-maturity securities
    
    
    698
    
    
    
    
    
    
    
    698
    
    
    
    Total
    
    $
    300,552
    
    
    $
    46
    
    
    $
    295,861
    
    
    $
    4,645
  
 Available-for-saleTax credits
    
    
    Securities
    
    
    Total(dollars in thousands)Beginning balance, January 1, 2009
    
    $
    515
    
    
    $
    4,130
    
    
    $
    4,645Total gains or losses (realized/unrealized)Included in earningsOther-than-temporary impairment
    
    
    
    
    
    
    (119
    )
    
    
    (119
    )Amortization of tax credit investment
    
    
    (41
    )
    
    
    
    
    
    
    (41
    )Included in other comprehensive income
    
    
    
    
    
    
    1,162
    
    
    
    1,162Transfers in and/or out of Level 3
    
    
    
    
    
    
    9,614
    
    
    
    9,614Ending balance, June 30, 2009
    
    $
    474
    
    
    $
    14,787
    
    
    $
    15,261
  18




---



##### Table of Contents



Available-for-saleTax credits
    
    
    Securities
    
    
    Total(dollars in thousands)Beginning balance, January 1, 2008
    
    $
    594
    
    
    $
    
    
    
    $
    594Total gains or losses (realized/unrealized)Included in earningsOther-than-temporary impairment
    
    
    
    
    
    
    
    
    
    
    Amortization of tax credit investment
    
    
    (41
    )
    
    
    
    
    
    
    (41
    )Included in other comprehensive income
    
    
    
    
    
    
    
    
    
    
    Transfers in and/or out of Level 3
    
    
    
    
    
    
    
    
    
    
    Ending balance, June 30, 2008
    
    $
    553
    
    
    $
    
    
    
    $
    553
 Assets and Liabilities Measured on a Non-Recurring Basis
  QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableJune 30,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Assets:Impaired loans
    
    $
    14,007
    
    
    
    
    
    
    
    
    
    
    $
    14,007Other real estate owned
    
    
    13,786
    
    
    
    
    
    
    
    
    
    
    
    13,786
 QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Assets:Impaired loans
    
    $
    14,743
    
    
    
    
    
    
    
    
    
    
    $
    14,743Other real estate owned
    
    
    5,734
    
    
    
    
    
    
    
    
    
    
    
    5,734
  19




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##### Table of Contents



(a)
    
    Cash and Cash Equivalents
   20




---



##### Table of Contents



(b)
    
    Investment Securities
 The fair values of investment securities are determined as discussed above.
 (c)
    
    Loans
 The fair value of loans is calculated using discounted cash flows by loan type as
described in paragraph 31 of SFAS 107, Disclosures about Fair Values of Financial
Instruments. 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.
 (d)
    
    Deposits
 Fair 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.
 (e)
    
    Federal Funds Sold and Securities Sold Under Repurchase Agreements
 Fair value approximates the carrying value of such liabilities due to their short-term
nature.
 (f)
    
    Other Borrowed Funds
 Fair value approximates the carrying value of such liabilities as the borrowings are at
a variable rate of interest.
 (g)
    
    Advances from FHLB
 The fair value of the 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.
 (h)
    
    Subordinated debentures
 The fair value approximates the carrying value of the subordinated debentures as the
debentures are at a variable rate of interest.
  21




---



##### Table of Contents



(i)
    
    Commitments
 The difference between the carrying values and fair values of commitments to extend
credit are not significant and are not disclosed.
  June 302009Carrying
    
    
    Estimatedamount
    
    
    fair value(Dollars in Thousands)Financial assets:Cash and cash
equivalents
    
    $
    124,197
    
    
    
    124,197Investment securities
    
    
    277,395
    
    
    
    277,390Loans, net
    
    
    965,671
    
    
    
    968,103Financial liabilities:Deposits
    
    
    1,191,277
    
    
    
    1,194,523Federal funds purchased
and securities sold under
repurchase agreements
    
    
    49,361
    
    
    
    49,361Other borrowed funds
    
    
    700
    
    
    
    700Advances from FHLB
    
    
    84,000
    
    
    
    88,555Subordinated debentures
    
    
    22,947
    
    
    
    22,947
 December 312008Carrying
    
    
    Estimatedamount
    
    
    fair value(Dollars in Thousands)Financial assets:Cash and cash
equivalents
    
    $
    37,768
    
    
    
    37,768Investment securities
    
    
    300,028
    
    
    
    300,037Loans, net
    
    
    991,044
    
    
    
    997,338Financial liabilities:Deposits
    
    
    1,139,552
    
    
    
    1,141,627Federal funds purchased
and securities sold under
repurchase agreements
    
    
    62,553
    
    
    
    62,553Other borrowed funds
    
    
    
    
    
    
    Advances from FHLB
    
    
    84,000
    
    
    
    76,090Subordinated debentures
    
    
    20,000
    
    
    
    20,000
  22




---



##### Table of Contents



23




---



##### Table of Contents



Item 2.

    Managements Discussion and Analysis of Financial Condition and
Results of Operations
  Overview
      24




---



##### Table of Contents



Table 1  Selected Financial Data
 June 30,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2004(Dollars in thousands)Assets
    
    $
    1,461,875
    
    
    $
    1,411,039
    
    
    $
    706,517Loans
    
    
    981,702
    
    
    
    1,005,786
    
    
    
    494,170Deposits
    
    
    1,191,277
    
    
    
    1,139,552
    
    
    
    556,785Annualized return on average total assets
    
    
    0.10
    %
    
    
    0.57
    %
    
    
    1.29
    %Annualized return on average equity
    
    
    1.44
    %
    
    
    8.48
    %
    
    
    15.50
    %
  25




---



##### Table of Contents



Forward-Looking Statements
   26




---



##### Table of Contents



Critical Accounting Estimates
  Allowance for Loan Losses
     27




---



##### Table of Contents



Fair Value of Financial Instruments
  Investment Securities
  Performance Overview
   28




---



##### Table of Contents



29




---



##### Table of Contents



Table 2  Selected Balance Sheet Data
 June 30,
    
    
    December 31,
    
    
    Variance2009
    
    
    2008
    
    
    Amount
    
    
    %(Dollars in thousands)Cash, due from banks
and interest-bearing deposits
    
    $
    116,897
    
    
    $
    27,988
    
    
    $
    88,909
    
    
    
    317.7
    %Federal funds sold
    
    
    7,300
    
    
    
    9,780
    
    
    
    (2,480
    )
    
    
    (25.4
    %)Investment securities
    
    
    277,395
    
    
    
    300,028
    
    
    
    (22,633
    )
    
    
    (7.5
    %)Loans
    
    
    981,702
    
    
    
    1,005,786
    
    
    
    (24,084
    )
    
    
    (2.4
    %)Assets
    
    
    1,461,875
    
    
    
    1,411,039
    
    
    
    50,836
    
    
    
    3.6
    %Deposits
    
    
    1,191,277
    
    
    
    1,139,552
    
    
    
    51,725
    
    
    
    4.5
    %Securities sold under repurchase agreements
    
    
    49,361
    
    
    
    62,553
    
    
    
    (13,192
    )
    
    
    (21.1
    %)Advances from Federal Home Loan Bank
    
    
    84,000
    
    
    
    84,000
    
    
    
    0
    
    
    
    0.0
    %Liabilities
    
    
    1,359,024
    
    
    
    1,316,388
    
    
    
    42,636
    
    
    
    3.2
    %Stockholders equity
    
    
    102,851
    
    
    
    94,651
    
    
    
    8,200
    
    
    
    8.7
    %
     30




---



##### Table of Contents



Net Interest Income
  Table 3  Average Balances, Income and Expenses, Yields and Rates
 Three Months Ended June 30, 2009
    
    
    Three Months Ended June 30, 2008Annualized
    
    
    
    
    
    
    
    
    
    
    AnnualizedAverage
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    Yield or
    
    
    Amount Paid
    
    
    Average
    
    
    Yield or
    
    
    Amount PaidAmount
    
    
    Rate
    
    
    or Earned
    
    
    Amount
    
    
    Rate
    
    
    or Earned(Dollars in thousands)Interest-earning assets:Loans
    
    $
    986,570
    
    
    
    5.72
    %
    
    $
    14,206
    
    
    $
    946,386
    
    
    
    6.33
    %
    
    $
    15,087Investment securities
    
    
    289,123
    
    
    
    4.97
    %
    
    
    3,595
    
    
    
    251,467
    
    
    
    5.31
    %
    
    
    3,337Federal funds sold
    
    
    19,980
    
    
    
    0.32
    %
    
    
    16
    
    
    
    19,628
    
    
    
    1.96
    %
    
    
    96Interest-bearing deposits in other banks
    
    
    36,181
    
    
    
    0.20
    %
    
    
    18
    
    
    
    500
    
    
    
    4.60
    %
    
    
    6Total interest-earning assets
    
    $
    1,331,854
    
    
    
    5.33
    %
    
    $
    17,835
    
    
    $
    1,217,981
    
    
    
    6.05
    %
    
    $
    18,526Interest-bearing liabilities:Deposits
    
    $
    1,072,863
    
    
    
    2.25
    %
    
    $
    6,009
    
    
    $
    918,522
    
    
    
    3.13
    %
    
    $
    7,166Federal funds purchased / securities sold under repurchase agreements
    
    
    48,389
    
    
    
    0.79
    %
    
    
    95
    
    
    
    62,589
    
    
    
    2.08
    %
    
    
    324Other borrowings
    
    
    106,153
    
    
    
    3.87
    %
    
    
    1,023
    
    
    
    100,145
    
    
    
    3.98
    %
    
    
    993Total interest-bearing liabilities
    
    $
    1,227,405
    
    
    
    2.33
    %
    
    $
    7,127
    
    
    $
    1,081,256
    
    
    
    3.15
    %
    
    $
    8,483Net interest margin/income:
    
    
    
    
    
    
    3.18
    %
    
    $
    10,708
    
    
    
    
    
    
    
    3.25
    %
    
    $
    10,043
  31




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##### Table of Contents



Table 4  Average Balances, Income and Expenses, Yields and Rates
 Six Months Ended June 30, 2009
    
    
    Six Months Ended June 30, 2008Annualized
    
    
    
    
    
    
    
    
    
    
    AnnualizedAverage
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    Yield or
    
    
    Amount Paid
    
    
    Average
    
    
    Yield or
    
    
    Amount PaidAmount
    
    
    Rate
    
    
    or Earned
    
    
    Amount
    
    
    Rate
    
    
    or Earned(Dollars in thousands)Interest-earning assets:Loans
    
    $
    993,531
    
    
    
    5.63
    %
    
    $
    28,010
    
    
    $
    921,443
    
    
    
    6.78
    %
    
    $
    31,480Investment securities
    
    
    292,253
    
    
    
    5.25
    %
    
    
    7,669
    
    
    
    250,042
    
    
    
    5.28
    %
    
    
    6,598Federal funds sold
    
    
    37,593
    
    
    
    0.22
    %
    
    
    41
    
    
    
    17,303
    
    
    
    2.16
    %
    
    
    187Interest-bearing deposits in other banks
    
    
    21,188
    
    
    
    0.21
    %
    
    
    22
    
    
    
    500
    
    
    
    4.60
    %
    
    
    12Total interest-earning assets
    
    $
    1,344,565
    
    
    
    5.31
    %
    
    $
    35,742
    
    
    $
    1,189,288
    
    
    
    6.40
    %
    
    $
    38,277Interest-bearing liabilities:Deposits
    
    $
    1,074,926
    
    
    
    2.40
    %
    
    $
    12,810
    
    
    $
    896,472
    
    
    
    3.37
    %
    
    $
    15,042Federal funds purchased / securities sold under repurchase agreements
    
    
    51,913
    
    
    
    0.80
    %
    
    
    206
    
    
    
    63,447
    
    
    
    2.73
    %
    
    
    864Other borrowings
    
    
    105,354
    
    
    
    3.67
    %
    
    
    1,919
    
    
    
    93,328
    
    
    
    4.43
    %
    
    
    2,063Total interest-bearing liabilities
    
    $
    1,232,193
    
    
    
    2.44
    %
    
    $
    14,935
    
    
    $
    1,053,247
    
    
    
    3.42
    %
    
    $
    17,969Net interest margin/income:
    
    
    
    
    
    
    3.07
    %
    
    $
    20,807
    
    
    
    
    
    
    
    3.37
    %
    
    $
    20,308
   32




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##### Table of Contents



Noninterest Income
 Table 5  Noninterest Income
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    Variance
    
    
    June 30,
    
    
    Variance2009
    
    
    2008
    
    
    Amount
    
    
    %
    
    
    2009
    
    
    2008
    
    
    Amount
    
    
    %(Dollars in thousands)
    
    
    (Dollars in thousands)Service charges and fees
on deposits
    
    $
    1,737
    
    
    $
    1,820
    
    
    $
    (83
    )
    
    
    (4.6
    %)
    
    $
    3,378
    
    
    $
    3,491
    
    
    $
    (113
    )
    
    
    (3.2
    %)Gain on sales of loans
    
    
    2,461
    
    
    
    1,576
    
    
    
    885
    
    
    
    56.2
    %
    
    
    4,697
    
    
    
    2,836
    
    
    
    1,861
    
    
    
    65.6
    %(Loss) gain on sale of fixed assets
    
    
    (42
    )
    
    
    5
    
    
    
    (47
    )
    
    
    (940.0
    %)
    
    
    (16
    )
    
    
    8
    
    
    
    (24
    )
    
    
    (300.0
    %)Investment securities gains, net
    
    
    857
    
    
    
    30
    
    
    
    827
    
    
    
    2756.7
    %
    
    
    693
    
    
    
    68
    
    
    
    625
    
    
    
    919.1
    %Retail investment income
    
    
    318
    
    
    
    276
    
    
    
    42
    
    
    
    15.2
    %
    
    
    527
    
    
    
    564
    
    
    
    (37
    )
    
    
    (6.6
    %)Trust services fees
    
    
    245
    
    
    
    299
    
    
    
    (54
    )
    
    
    (18.1
    %)
    
    
    498
    
    
    
    584
    
    
    
    (86
    )
    
    
    (14.7
    %)Increase in cash surrender value of bank-owned life insurance
    
    
    213
    
    
    
    194
    
    
    
    19
    
    
    
    9.8
    %
    
    
    394
    
    
    
    358
    
    
    
    36
    
    
    
    10.1
    %Miscellaneous income
    
    
    123
    
    
    
    252
    
    
    
    (129
    )
    
    
    (51.2
    %)
    
    
    286
    
    
    
    473
    
    
    
    (187
    )
    
    
    (39.5
    %)Total noninterest income
    
    $
    5,912
    
    
    $
    4,452
    
    
    $
    1,460
    
    
    
    32.8
    %
    
    $
    10,457
    
    
    $
    8,382
    
    
    $
    2,075
    
    
    
    24.8
    %
   33




---



##### Table of Contents



Noninterest Expense
 Table 6  Noninterest Expense
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    Variance
    
    
    June 30,
    
    
    Variance2009
    
    
    2008
    
    
    Amount
    
    
    %
    
    
    2009
    
    
    2008
    
    
    Amount
    
    
    %(Dollars in thousands)
    
    
    (Dollars in thousands)Salaries and other
personnel expense
    
    $
    5,800
    
    
    $
    5,383
    
    
    $
    417
    
    
    
    7.7
    %
    
    $
    11,458
    
    
    $
    10,554
    
    
    $
    904
    
    
    
    8.6
    %Occupancy expenses
    
    
    1,140
    
    
    
    1,005
    
    
    
    135
    
    
    
    13.4
    %
    
    
    2,281
    
    
    
    2,030
    
    
    
    251
    
    
    
    12.4
    %Other operating expenses
    
    
    3,868
    
    
    
    2,877
    
    
    
    991
    
    
    
    34.4
    %
    
    
    6,903
    
    
    
    5,601
    
    
    
    1,302
    
    
    
    23.2
    %Total noninterest expense
    
    $
    10,808
    
    
    $
    9,265
    
    
    $
    1,543
    
    
    
    16.7
    %
    
    $
    20,642
    
    
    $
    18,185
    
    
    $
    2,457
    
    
    
    13.5
    %
  Salaries and other personnel expenses:
  Occupancy expenses:
  Other operating expenses:
  Income Taxes
   34




---



##### Table of Contents



Asset Quality
    35




---



##### Table of Contents



Table 7  Acquisition Development and Construction Loans
 June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)CSRA  primary market areaPeriod-end loans
    
    
    257,372
    
    
    
    266,156FAS 114 Impaired loans
    
    
    619
    
    
    
    5,187Classified/watch rated loans
    
    
    22,473
    
    
    
    9,879Charge-offs % (annualized)
    
    
    0.11
    %
    
    
    0.19
    %FAS 114 allowance / Impaired loans
    
    
    0.00
    %
    
    
    0.00
    %FAS 5 Allowance / Loans not impaired %
    
    
    0.92
    %
    
    
    0.67
    %Allowance / Charge-offs
    
    
    8.12
    
    
    
    4.78Savannah, GeorgiaPeriod-end loans
    
    
    21,270
    
    
    
    28,300FAS 114 Impaired loans
    
    
    3,306
    
    
    
    2,645Classified/watch rated loans
    
    
    5,155
    
    
    
    5,060Charge-offs % (annualized)
    
    
    10.12
    %
    
    
    3.18
    %FAS 114 allowance / Impaired loans
    
    
    19.57
    %
    
    
    6.62
    %FAS 5 Allowance / Loans not impaired %
    
    
    5.68
    %
    
    
    4.20
    %Allowance / Charge-offs
    
    
    0.78
    
    
    
    1.39Athens, GeorgiaPeriod-end loans
    
    
    29,278
    
    
    
    31,806FAS 114 Impaired loans
    
    
    13,913
    
    
    
    8,772Classified/watch rated loans
    
    
    2,789
    
    
    
    13,667Charge-offs % (annualized)
    
    
    16.42
    %
    
    
    1.78
    %FAS 114 allowance / Impaired loans
    
    
    14.30
    %
    
    
    12.04
    %FAS 5 Allowance / Loans not impaired %
    
    
    7.72
    %
    
    
    3.97
    %Allowance / Charge-offs
    
    
    0.66
    
    
    
    2.55ADC Participations  GeorgiaPeriod-end loans
    
    
    17,415
    
    
    
    21,676FAS 114 Impaired loans
    
    
    10,915
    
    
    
    10,637Classified/watch rated loans
    
    
    
    
    
    
    48Charge-offs % (annualized)
    
    
    35.13
    %
    
    
    8.88
    %FAS 114 allowance / Impaired loans
    
    
    0.00
    %
    
    
    4.09
    %FAS 5 Allowance / Loans not impaired %
    
    
    1.50
    %
    
    
    9.55
    %Allowance / Charge-offs
    
    
    0.02
    
    
    
    0.77ADC Participations  FloridaPeriod-end loans
    
    
    4,923
    
    
    
    8,005FAS 114 Impaired loans
    
    
    1,034
    
    
    
    3,650Classified/watch rated loans
    
    
    
    
    
    
    704Charge-offs % (annualized)
    
    
    16.78
    %
    
    
    0.19
    %FAS 114 allowance / Impaired loans
    
    
    0.00
    %
    
    
    11.34
    %FAS 5 Allowance / Loans not impaired %
    
    
    3.00
    %
    
    
    4.27
    %Allowance / Charge-offs
    
    
    0.14
    
    
    
    2.00Total ADC Impaired Loans
    
    
    29,787
    
    
    
    30,891Total ADC Classified/Watch Loans
    
    
    30,417
    
    
    
    29,358
  36




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Table 8  Non-Performing Assets
(Dollars in thousands)
 June 30, 2009
    
    
    December 31, 2008
    
    
    June 30, 2008Nonaccrual loans
    
    $
    39,564
    
    
    $
    34,781
    
    
    $
    27,689Other real estate owned
    
    
    13,786
    
    
    
    5,734
    
    
    
    Total non-performing assets
    
    $
    53,350
    
    
    $
    40,515
    
    
    $
    27,689Loans past due 90 days or more
and still accruing interest
    
    $
    3,478
    
    
    $
    7,298
    
    
    $
    Non-performing assets to total assets
    
    
    3.65
    %
    
    
    2.87
    %
    
    
    2.11
    %Non-performing assets to total loans
and ORE
    
    
    5.36
    %
    
    
    4.01
    %
    
    
    2.86
    %Allowance for loan loss to total
non-performing loans
    
    
    40.52
    %
    
    
    42.39
    %
    
    
    51.73
    %
 Allowance for Loan Losses
    37




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##### Table of Contents



Table 9  Loan Portfolio Composition
 June 30, 2009
    
    
    December 31, 2008Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Commercial financial and
agricultural
    
    $
    100,139
    
    
    
    10.20
    %
    
    $
    109,751
    
    
    
    10.91
    %Real estateCommercial
    
    
    282,095
    
    
    
    28.74
    %
    
    
    266,362
    
    
    
    26.49
    %Residential
    
    
    209,836
    
    
    
    21.37
    %
    
    
    212,856
    
    
    
    21.16
    %Residential held for sale
    
    
    23,975
    
    
    
    2.44
    %
    
    
    18,955
    
    
    
    1.88
    %Construction and
development
    
    
    339,944
    
    
    
    34.63
    %
    
    
    369,731
    
    
    
    36.76
    %Total real estate
    
    
    855,850
    
    
    
    87.18
    %
    
    
    867,904
    
    
    
    86.29
    %Lease financing
    
    
    
    
    
    
    0.00
    %
    
    
    33
    
    
    
    0.00
    %ConsumerDirect
    
    
    22,527
    
    
    
    2.29
    %
    
    
    24,272
    
    
    
    2.41
    %Indirect
    
    
    2,634
    
    
    
    0.27
    %
    
    
    3,319
    
    
    
    0.33
    %Revolving
    
    
    784
    
    
    
    0.08
    %
    
    
    905
    
    
    
    0.09
    %Total consumer
    
    
    25,945
    
    
    
    2.64
    %
    
    
    28,496
    
    
    
    2.83
    %Deferred loan origination fees
    
    
    (232
    )
    
    
    -0.02
    %
    
    
    (398
    )
    
    
    -0.03
    %Total
    
    $
    981,702
    
    
    
    100.00
    %
    
    $
    1,005,786
    
    
    
    100.00
    %
    38




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39




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##### Table of Contents



Table 10  Allowance for Loan Losses
 At June 30,2009
    
    
    2008(Dollars in thousands)Total loans outstanding at end of period,
net of unearned income
    
    $
    981,702
    
    
    $
    968,117Average loans outstanding, net of
unearned income
    
    $
    993,531
    
    
    $
    921,443Balance of allowance for loan losses at
beginning of year
    
    $
    14,742
    
    
    $
    11,800Charge-offs:Commercial, financial and agricultural
    
    
    429
    
    
    
    399Real estate  acquisition, development
and construction
    
    
    7,100
    
    
    
    125Real estate  mortgage
    
    
    1,213
    
    
    
    118Consumer
    
    
    332
    
    
    
    144Total charge-offs
    
    
    9,074
    
    
    
    786Recoveries of previous loan losses:Commercial, financial and agricultural
    
    
    207
    
    
    
    200Real estate  acquisition, development
and construction
    
    
    1
    
    
    
    21Real estate  mortgage
    
    
    168
    
    
    
    26Consumer
    
    
    124
    
    
    
    140Total recoveries
    
    
    500
    
    
    
    387Net loan losses
    
    
    8,574
    
    
    
    399Provision for loan losses
    
    
    9,863
    
    
    
    2,923Balance of allowance for loan losses at
end of period
    
    $
    16,031
    
    
    $
    14,324Allowance for loan losses to period end
loans
    
    
    1.63
    %
    
    
    1.48
    %Net charge-offs to average loans
    
    
    0.86
    %
    
    
    0.04
    %
   40




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##### Table of Contents



Liquidity and Capital Resources
       41




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##### Table of Contents



Table 11  Regulatory Capital Requirements
June 30, 2009  (Dollars in Thousands)
 Required for capitalActual
    
    
    adequacy purposes
    
    
    ExcessAmount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentSoutheastern Bank
Financial
CorporationRisk-based capital:Tier 1 capital
    
    $
    123,489
    
    
    
    11.40
    %
    
    
    43,328
    
    
    
    4.00
    %
    
    
    80,161
    
    
    
    7.40
    %Total capital
    
    
    137,060
    
    
    
    12.65
    %
    
    
    86,655
    
    
    
    8.00
    %
    
    
    50,405
    
    
    
    4.65
    %Tier 1 leverage ratio
    
    
    123,489
    
    
    
    8.48
    %
    
    
    58,215
    
    
    
    4.00
    %
    
    
    65,274
    
    
    
    4.48
    %Georgia Bank & Trust
CompanyRisk-based capital:Tier 1 capital
    
    $
    108,548
    
    
    
    11.41
    %
    
    
    38,042
    
    
    
    4.00
    %
    
    
    70,506
    
    
    
    7.41
    %Total capital
    
    
    120,464
    
    
    
    12.67
    %
    
    
    76,085
    
    
    
    8.00
    %
    
    
    44,379
    
    
    
    4.67
    %Tier 1 leverage ratio
    
    
    108,548
    
    
    
    8.31
    %
    
    
    58,756
    
    
    
    4.50
    %
    
    
    49,792
    
    
    
    3.81
    %Southern Bank & TrustRisk-based capital:Tier 1 capital
    
    $
    13,969
    
    
    
    10.77
    %
    
    
    5,187
    
    
    
    4.00
    %
    
    
    8,782
    
    
    
    6.77
    %Total capital
    
    
    15,593
    
    
    
    12.03
    %
    
    
    10,373
    
    
    
    8.00
    %
    
    
    5,220
    
    
    
    4.03
    %Tier 1 leverage ratio
    
    
    13,969
    
    
    
    9.06
    %
    
    
    6,169
    
    
    
    4.00
    %
    
    
    7,800
    
    
    
    5.06
    %
   Commitments and Contractual Obligations
   42




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##### Table of Contents



Table 12  Commitments and Contractual Obligations
 Less than 1
    
    
    
    
    
    
    
    
    
    
    More than($ in thousands)
    
    Year
    
    
    1 - 3 Years
    
    
    3 - 5 Years
    
    
    5 YearsLines of credit
    
    $
    186,314
    
    
    
    
    
    
    
    
    
    
    
    Lease agreements
    
    
    360
    
    
    
    558
    
    
    
    115
    
    
    
    79Deposits
    
    
    1,084,014
    
    
    
    98,276
    
    
    
    8,192
    
    
    
    795Securities sold under
repurchase agreements
    
    
    49,361
    
    
    
    
    
    
    
    
    
    
    
    FHLB advances
    
    
    13,000
    
    
    
    32,000
    
    
    
    
    
    
    
    39,000Other borrowings
    
    
    700
    
    
    
    
    
    
    
    
    
    
    
    Total commitments and
contractual obligations
    
    $
    1,333,749
    
    
    $
    130,834
    
    
    $
    8,307
    
    
    $
    39,874
  Effects of Inflation and Changing Prices
   43




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
   44




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##### Table of Contents



Part II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   Issuer Purchases of Equity Securities
   45




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##### Table of Contents



Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    The Annual Meeting of Shareholders was held on April 22, 2009 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 or until a
successor is duly qualified and elected:
 
 (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 eleven individuals nominated by
management as Directors.Votes were cast as follows:
 Director
    
    For
    
    
    WithholdWilliam J. Badger
    
    
    5,485,293
    
    
    
    1,345R. Daniel Blanton
    
    
    5,481,934
    
    
    
    4,704Warren Daniel
    
    
    5,485,293
    
    
    
    1,345Edward G. Meybohm
    
    
    5,481,934
    
    
    
    1,854Robert W. Pollard, Jr.
    
    
    5,848,693
    
    
    
    1,945Larry S. Prather, Sr.
    
    
    5,485,293
    
    
    
    1,345Randolph R. Smith, M.D.
    
    
    5,467,972
    
    
    
    18,666Ronald L. Thigpen
    
    
    5,478,167
    
    
    
    8,471John W. Trulock, Jr.
    
    
    5,485,293
    
    
    
    1,345W. Marshall Brown
    
    
    5,484,793
    
    
    
    1,845Patrick D. Cunning
    
    
    5,485,293
    
    
    
    1,345
  46




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##### Table of Contents



Item 5. Other Information
  
 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.
  47




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##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATIONDate: July 31, 2009
    By:
    /s/ Darrell R. RainsDarrell R. RainsGroup Vice President, Chief
Financial Officer 
(Duly Authorized
Officer of Registrant and Principal
Financial Officer)  48




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##### Table of Contents



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.
  49