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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-24172
 SOUTHEASTERN BANK FINANCIAL CORPORATION
  GEORGIA
    
    58-2005097(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 3530 Wheeler RoadAugusta, Georgia
    
    30909(Address of principal executive offices)
    
    (Zip Code)
 (706) 738-6990
 None
    Yes o No þ
 o þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller Reporting Company þ(do not check if smaller reporting company)
 Yes o No þ
   Class
    
    Outstanding at February 17, 2010Common Stock, $3 par value per share
    
    6,673,352 shares
 DOCUMENTS INCORPORATED BY REFERENCE
 Document
    
    Parts Into Which IncorporatedProxy Statement for the Annual Meeting of Shareholders to
be held
April 28, 2010
    
    Part III




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TABLE OF CONTENTS  Item 1. Description of BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of ShareholdersPART IIItem 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors and Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESEXHIBIT INDEXExhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1    Table of Contents  Introductory Note: Due to market conditions affecting the financial services industry and the
Registrant during 2009, the aggregate market value of the Registrants common stock held by
non-affiliates (its public float) fell below $50 million as of June 30, 2009. As a result, the
Company has exited accelerated filer status and is now classified as a smaller reporting
company as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended. The Company
has elected, however, to file a report and attestation as to its internal controls over financial
reporting and otherwise comply voluntarily, as to the disclosure contained in this Annual Report on
Form 10-K, with the requirements applicable to an accelerated filer.
 
 Item 1. Description of Business
 General
   www.georgiabankandtrust.com
  2




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www.sec.gov
 History
  Employees
  Management Team
   3




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Market Area
    4




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Competition
   Lending Activities
  Real Estate Loans.
 Commercial Real Estate Loans.
  5




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Construction and Development Loans
     6




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December 31, 2009ReservesBalance
    
    
    Original
    
    
    Advanced
    
    
    Remaining(Dollars in thousands)Loan 1
    
    $
    4,278
    
    
    
    179
    
    
    
    179
    
    
    
    Loan 2
    
    
    9,666
    
    
    
    300
    
    
    
    77
    
    
    
    223Loan 3
    
    
    2,598
    
    
    
    255
    
    
    
    255
    
    
    
    Loan 4
    
    
    455
    
    
    
    30
    
    
    
    30
    
    
    
    Loan 5
    
    
    166
    
    
    
    10
    
    
    
    10
    
    
    
    Loan 6
    
    
    1,133
    
    
    
    81
    
    
    
    81
    
    
    
    
 December 31, 2008ReservesBalance
    
    
    Original
    
    
    Advanced
    
    
    Remaining(Dollars in thousands)Loan 1
    
    $
    1,245
    
    
    
    138
    
    
    
    16
    
    
    
    122Loan 2
    
    
    
    
    
    
    300
    
    
    
    
    
    
    
    300Loan 3
    
    
    2,088
    
    
    
    255
    
    
    
    192
    
    
    
    63Loan 4
    
    
    440
    
    
    
    30
    
    
    
    15
    
    
    
    15Loan 5
    
    
    163
    
    
    
    10
    
    
    
    5
    
    
    
    5Loan 6
    
    
    1,113
    
    
    
    81
    
    
    
    19
    
    
    
    62
  Residential Loans.
  7




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.
 Commercial Loans.
 Consumer Loans.
 Loan Approval and Review.
  8




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9




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Deposits
  Deposit Mix
 (Dollars in Thousands)Noninterest-bearing
    
    $
    114,780
    
    
    
    8.96
    %NOW accounts
    
    
    210,438
    
    
    
    16.44
    %Money management accounts
    
    
    44,781
    
    
    
    3.50
    %Savings
    
    
    343,740
    
    
    
    26.84
    %Time depositsUnder $100
    
    
    148,044
    
    
    
    11.56
    %$100 and over
    
    
    418,751
    
    
    
    32.70
    %$
    1,280,534
    
    
    
    100.00
    %
 .
 Supervision and Regulation
   
    
    how, when and where the Company may expand geographically;
 
    
    into what product or service markets it may enter;
 
    
    how it must manage its assets; and
 
    
    under what circumstances money may or must flow between the Company and its
subsidiaries.
  10




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The Company
  Acquisitions of Banks .
 
    
    acquiring direct or indirect ownership or control of any voting shares of
any bank if, after the acquisition, the bank holding company will directly or
indirectly own or control more than 5% of the banks voting shares;
 
    
    acquiring all or substantially all of the assets of any bank; or
 
    
    merging or consolidating with any other bank holding company.
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Change in Bank Control .
 
    
    the bank holding company has registered securities under Section 12 of the
Securities Act of 1934; or
 
    
    no other person owns a greater percentage of that class of voting
securities immediately after the transaction.
  Permitted Activities
  Capital Adequacy .
   12




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Payment of Dividends
    13




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Restrictions on Transactions with Affiliates
  
    
    a banks loans or extensions of credit to affiliates;
 
    
    a banks investment in affiliates;
 
    
    assets a bank may purchase from affiliates, except for real and personal
property exempted by the Federal Reserve Board;
 
    
    loans or extensions of credit made by a bank to third parties
collateralized by the securities or obligations of affiliates; and
 
    
    a banks guarantee, acceptance or letter of credit issued on behalf of an
affiliate.
    Support of Subsidiary Institutions.
  14




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Prompt Corrective Action .
  FDIC Insurance Assessments .
     15




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FDIC Temporary Liquidity Guarantee Program.
   Community Reinvestment Act .
  16




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Allowance for Loan and Lease Losses.
 Commercial Real Estate Lending
 
    
    total reported loans for construction, land development and other land
represent 100% or more of the institutions total capital, or
    
    total commercial real estate loans represent 300% or more of the
institutions total capital, and the outstanding balance of the institutions
commercial real estate loan portfolio has increased by 50% or more.
 Other Regulations .
  
    
    Truth-In-Lending Act, governing disclosures of credit terms to consumer
borrowers;
    
    Home Mortgage Disclosure Act of 1975, requiring financial institutions to
provide information to enable the public and public officials to determine whether a
financial institution is fulfilling its obligation to help meet the housing needs of
the community it serves;
    
    Equal Credit Opportunity Act, prohibiting discrimination on the basis of
race, creed or other prohibited factors in extending credit;
    
    Fair Credit Reporting Act of 1978, governing the use and provision of
information to credit reporting agencies, certain identity theft protections, and
certain credit and other disclosures;
    
    Fair Debt Collection Act, governing the manner in which consumer debts may
be collected by collection agencies;
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
    
    Soldiers and Sailors Civil Relief Act of 1940, as amended, governing the
repayment terms of, and property rights underlying, secured obligations of persons
currently on active duty with the U.S. military;
    
    Talent Amendment in the 2007 Defense Authorization Act, establishing a 36%
annual percentage rate ceiling, which includes a variety of charges including late
fees, for certain types of consumer loans to military service members and their
dependents; and
    
    rules and regulations of the various federal agencies charged with the
responsibility of implementing these federal laws.
  
    
    Truth-In-Savings Act, requiring certain disclosures for consumer deposit
accounts;
    
    Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes procedures for complying
with administrative subpoenas of financial records;
    
    Electronic Funds Transfer Act and Regulation E issued by the Federal
Reserve to implement that act, which govern automatic deposits to and withdrawals from
deposit accounts and customers rights and liabilities arising from the use of
automated teller machines and other electronic banking services; and,
    
    rules and regulations of the various federal agencies charged with the
responsibility of implementing these federal laws.
 Georgia Bank & Trust Company
  Branching .
   18




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Southern Bank & Trust
  Qualified Thrift Lender Status.
   
    
    Loans to purchase, refinance, construct, improve or repair domestic
residential or manufactured housing;
    
    Home equity loans;
    
    Educational loans;
    
    Small business loans;
    
    Loans made through credit card or credit card accounts;
    
    Securities backed by or representing an interest in mortgages on domestic
residential or manufactured housing;
    
    Federal Home Loan Bank stock; and
    
    Obligations of the FDIC, FSLIC, RTC, and the FSLIC Resolution Fund.
  
    
    Fifty percent of the amount of domestic residential housing mortgage loans
originated and sold within 90 days. An institution may, on a consistent basis, include
as QTI either the sales amounts from a previous quarter or the previous rolling 90 days
or three-month period;
    
    Investments in a service corporation that derives at least 80% of its gross
revenues from activities related to domestic or manufactured residential housing;
    
    Two hundred percent of the amount of loans and investments in starter
homes;
    
    Two hundred percent of the amount of certain loans in credit-needy areas;
    
    Loans for the purchase, construction, development, or improvements of
community service facilities not in credit-needy areas;
    
    Loans for personal, family, or household purposes (other than those
reported in the assets includable without limit category); and
    
    FNMA and FHLMC stock.
  19




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Lending Limit.
   
    
    Commercial loans up to 20% of assets (50% of which must be in small
business loans).
    
    Nonresidential real property loans up to 400% of capital (the OTS may grant
increased authority if it is determined that the increased authority poses no
significant threat to the safe and sound operation of the institution and is consistent
with prudent operating practices).
    
    Consumer loans up to 35% of assets (all loans in excess of 30% of assets
must be direct loans).
    
    Education loans up to 5% of assets.
    
    Non-conforming loans up to 5% of assets.
    
    Construction loans (residential) without security up to 5% of assets.
 Proposed Legislation and Regulatory Action
  Effect of Governmental Monetary Policies
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Item 1A. Risk Factors
  The amount of other real estate owned (OREO) may increase significantly, resulting in
additional losses, and costs and expenses that will negatively affect our operations
  The deterioration in the residential mortgage market may continue to spread to commercial credits,
which may result in greater losses and non-performing assets, adversely affecting our business
operations.
  The FDIC Deposit Insurance assessments that we are required to pay may materially increase in the
future, which would have an adverse effect on our earnings.
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Future impairment losses could be required on various investment securities, which may materially
reduce the Companys and the Banks regulatory capital levels.
     We could suffer loan losses from a decline in credit quality.
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As a community financial institution, we have different lending risks than larger banks.
   If the value of real estate in our core market were to decline materially, a significant portion of
our loan portfolio could become under-collateralized, which could have a material adverse effect on
our business, financial condition and results of operations.
    23




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We make and hold in our portfolio a significant number of land acquisition and development and
construction loans, which pose more credit risk than other types of loans typically made by
financial institutions.
  Our profitability is vulnerable to interest rate fluctuations.
  Our allowance for loan losses may not be adequate to cover actual loan losses, which may require us
to take a charge to our earnings and adversely impact our financial condition and results of
operations.
   24




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An economic downturn, especially one affecting our market areas, could adversely affect our
financial condition, results of operations or cash flows.
  Ongoing deterioration in the housing market and the homebuilding industry may lead to increased
losses and further worsening of delinquencies and non-performing assets in our loan portfolios.
Consequently, our results of operations may be adversely impacted.
   We will realize additional future losses if the proceeds we receive upon liquidation of
non-performing assets are less than the fair value of such assets.
   25




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Our use of appraisals in deciding whether to make a loan on or secured by real property or how to
value such loan in the future may not accurately describe the net value of the real property
collateral that we can realize.
  Confidential customer information transmitted through our online banking service is vulnerable to
security breaches and computer viruses, which could expose us to litigation and adversely affect
our reputation and ability to generate deposits.
  We face intense competition in all of our current and planned markets.
   
    
    the ability to develop, maintain, and build upon long-term customer
relationships based on top quality service and high ethical standards;
    
    the scope, relevance, and pricing of products and services offered to meet
customer needs and demands;
    
    the rate at which we introduce new products and services relative to our
competitors;
    
    customer satisfaction with our level of service; and
    
    industry and general economic trends.
   26




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Additional growth may require us to raise additional capital in the future, but that capital may
not be available when it is needed, which could adversely affect our financial condition and
results of operations.
   Our ability to pay dividends is limited and we may be unable to pay future dividends. As a result,
capital appreciation, if any, of our common stock may be your sole opportunity for gains on your
investment for the foreseeable future.
  We are subject to extensive regulation that could limit or restrict our activities and impose
financial requirements or limitations on the conduct of our business, which limitations or
restrictions could adversely affect our profitability.
    27




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Environmental liability associated with lending activities could result in losses.
  Holders of our subordinated debentures have rights that are senior to those of our common
shareholders.
  If we are unable to increase our share of deposits in our market, we may accept out of market and
brokered deposits, the costs of which may be higher than expected.
  Opening new offices may not result in increased assets or revenues for us.
   28




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Changes in monetary policies may have an adverse effect on our business, financial condition and
results of operations.
  Our directors and executive officers own a significant portion of our common stock and can
influence shareholder decisions.
  
 Item 1B. Unresolved Staff Comments
   29




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Item 2.
    
    Properties
         30




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Item 3.
    
    Legal Proceedings
  
 Item 4.
    
    Submission of Matters to a Vote of Shareholders
   31




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PART II
 
 Item 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
  Southeastern Bank Financial Corporation Stock Price
 Low
    
    
    HighQuarter endedMarch 31, 2008
    
    
    23.64
    
    
    
    31.82June 30, 2008
    
    
    24.68
    
    
    
    32.05September 30, 2008
    
    
    25.55
    
    
    
    30.00December 31, 2008
    
    
    14.55
    
    
    
    28.00Quarter endedMarch 31, 2009
    
    
    12.00
    
    
    
    19.50June 30, 2009
    
    
    13.05
    
    
    
    18.00September 30, 2009
    
    
    11.00
    
    
    
    15.50December 31, 2009
    
    
    10.00
    
    
    
    13.00Period endedFebruary 17, 2010
    
    
    9.17
    
    
    
    11.75
    32




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Item 6.
    
    Selected Financial Data
     34




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Selected Consolidated Financial Data
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in thousands, except per share data)EarningsTotal interest income
    
    $
    70,760
    
    
    $
    75,675
    
    
    $
    79,181
    
    
    $
    65,626
    
    
    $
    47,277Total interest expense
    
    
    28,483
    
    
    
    35,489
    
    
    
    40,932
    
    
    
    31,423
    
    
    
    17,885Net interest income
    
    
    42,277
    
    
    
    40,186
    
    
    
    38,249
    
    
    
    34,203
    
    
    
    29,392Provision for loan losses
    
    
    30,904
    
    
    
    9,055
    
    
    
    3,823
    
    
    
    2,478
    
    
    
    1,842Noninterest income
    
    
    20,739
    
    
    
    16,705
    
    
    
    16,168
    
    
    
    14,040
    
    
    
    12,371Noninterest expense
    
    
    46,511
    
    
    
    36,752
    
    
    
    32,508
    
    
    
    28,932
    
    
    
    25,012Net income (loss)
    
    
    (7,985
    )
    
    
    7,578
    
    
    
    11,765
    
    
    
    11,160
    
    
    
    9,954Per Share DataNet income (loss)- Diluted
    
    $
    (1.24
    )
    
    $
    1.26
    
    
    $
    1.95
    
    
    $
    1.89
    
    
    $
    1.69Book value
    
    
    14.05
    
    
    
    15.81
    
    
    
    15.04
    
    
    
    13.21
    
    
    
    10.98Cash dividends declared per common share
    
    
    0.13
    
    
    
    0.52
    
    
    
    0.52
    
    
    
    0.52
    
    
    
    0.52Weighted average common and common
equivalent shares outstanding
    
    
    6,422,867
    
    
    
    6,011,689
    
    
    
    6,044,871
    
    
    
    5,908,659
    
    
    
    5,885,261Selected Average BalancesAssets
    
    $
    1,476,887
    
    
    $
    1,318,384
    
    
    $
    1,133,064
    
    
    $
    951,115
    
    
    $
    785,081Total loans (net of unearned income)
    
    
    965,111
    
    
    
    934,512
    
    
    
    800,852
    
    
    
    647,421
    
    
    
    530,662Deposits
    
    
    1,221,100
    
    
    
    1,057,198
    
    
    
    893,959
    
    
    
    735,128
    
    
    
    611,029Stockholders equity
    
    
    100,760
    
    
    
    89,337
    
    
    
    83,850
    
    
    
    69,317
    
    
    
    61,655Selected Year-End BalancesAssets
    
    $
    1,491,119
    
    
    $
    1,411,039
    
    
    $
    1,212,980
    
    
    $
    1,041,202
    
    
    $
    864,277Loans (net of unearned income)
    
    
    937,489
    
    
    
    986,831
    
    
    
    871,440
    
    
    
    735,112
    
    
    
    579,088Allowance for loan losses
    
    
    22,338
    
    
    
    14,742
    
    
    
    11,800
    
    
    
    9,777
    
    
    
    9,125Deposits
    
    
    1,280,534
    
    
    
    1,139,552
    
    
    
    952,166
    
    
    
    801,763
    
    
    
    663,655Short-term borrowings
    
    
    20,788
    
    
    
    62,553
    
    
    
    81,666
    
    
    
    76,020
    
    
    
    73,013Long-term borrowings
    
    
    82,947
    
    
    
    104,000
    
    
    
    79,000
    
    
    
    75,000
    
    
    
    57,000Stockholders equity
    
    
    93,744
    
    
    
    94,651
    
    
    
    89,758
    
    
    
    78,924
    
    
    
    63,583Selected RatiosReturn on average total assets
    
    
    (0.54
    %)
    
    
    0.57
    %
    
    
    1.04
    %
    
    
    1.17
    %
    
    
    1.27
    %Return on average equity
    
    
    (7.92
    %)
    
    
    8.48
    %
    
    
    14.03
    %
    
    
    16.10
    %
    
    
    16.15
    %Average earning assets to average total assets
    
    
    91.54
    %
    
    
    94.11
    %
    
    
    93.66
    %
    
    
    93.67
    %
    
    
    93.90
    %Average loans to average deposits
    
    
    79.04
    %
    
    
    88.40
    %
    
    
    89.58
    %
    
    
    88.07
    %
    
    
    86.85
    %Average equity to average total assets
    
    
    6.82
    %
    
    
    6.78
    %
    
    
    7.40
    %
    
    
    7.29
    %
    
    
    7.85
    %Net interest margin
    
    
    3.12
    %
    
    
    3.24
    %
    
    
    3.60
    %
    
    
    3.84
    %
    
    
    3.98
    %Operating efficiency
    
    
    75.66
    %
    
    
    64.52
    %
    
    
    60.64
    %
    
    
    60.20
    %
    
    
    59.78
    %Net charge-offs to average loans
    
    
    2.42
    %
    
    
    0.65
    %
    
    
    0.22
    %
    
    
    0.17
    %
    
    
    0.12
    %Allowance for loan losses to net loans (year-end)
    
    
    2.38
    %
    
    
    1.49
    %
    
    
    1.35
    %
    
    
    1.33
    %
    
    
    1.58
    %Risk-based capitalTier 1 capital
    
    
    11.06
    %
    
    
    10.45
    %
    
    
    11.38
    %
    
    
    12.09
    %
    
    
    11.10
    %Total capital
    
    
    12.55
    %
    
    
    11.70
    %
    
    
    12.61
    %
    
    
    13.29
    %
    
    
    12.35
    %Tier 1 leverage ratio
    
    
    7.51
    %
    
    
    8.14
    %
    
    
    9.08
    %
    
    
    9.78
    %
    
    
    9.01
    %Proforma data to illustrate the effect of SAB 108Allowance for loan losses to net loans excluding amount
applicable to unfunded lines, commitments and standby letters
of credit (year-end)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.40
    %Provision for loan losses excluding amount applicable to
unfunded lines, commitments and standby letters of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,723Allowance for loan losses excluding amount applicable to
unfunded lines, commitments and standby letters of credit (year-
end)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,431
  35




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Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
     36




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Critical Accounting Estimates
  Allowance for Loan Losses
    37




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Fair Value of Financial Instruments
  Other Real Estate Owned
  Investment Securities
   38




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Results of Operations
       39




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Net Interest Income
   40




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##### Table of Contents



Average Balances, Income and Expenses, Yields and Rates
 Year Ended Dec. 31, 2009
    
    
    Year Ended Dec. 31, 2008
    
    
    Year Ended Dec. 31, 2007Average
    
    
    Amount
    
    
    
    
    
    
    Average
    
    
    Amount
    
    
    
    
    
    
    Average
    
    
    AmountAverage
    
    
    Yield or
    
    
    Paid or
    
    
    Average
    
    
    Yield or
    
    
    Paid or
    
    
    Average
    
    
    Yield or
    
    
    Paid orAmount
    
    
    Rate
    
    
    Earned
    
    
    Amount
    
    
    Rate
    
    
    Earned
    
    
    Amount
    
    
    Rate
    
    
    Earned(Dollars in thousands)ASSETSInterest-earning assets:Loans
    
    $
    986,305
    
    
    
    5.70
    %
    
    $
    56,196
    
    
    $
    952,800
    
    
    
    6.46
    %
    
    $
    61,568
    
    
    $
    811,509
    
    
    
    8.16
    %
    
    $
    66,219InvestmentsTaxable
    
    
    273,834
    
    
    
    4.88
    %
    
    
    13,376
    
    
    
    239,253
    
    
    
    5.38
    %
    
    
    12,875
    
    
    
    209,082
    
    
    
    5.27
    %
    
    
    11,023Tax-exempt
    
    
    20,969
    
    
    
    4.32
    %
    
    
    906
    
    
    
    16,266
    
    
    
    4.40
    %
    
    
    716
    
    
    
    18,734
    
    
    
    4.27
    %
    
    
    800Federal funds sold
    
    
    22,322
    
    
    
    0.43
    %
    
    
    95
    
    
    
    29,916
    
    
    
    1.57
    %
    
    
    470
    
    
    
    21,434
    
    
    
    5.19
    %
    
    
    1,112Interest-bearing deposits in other
banks
    
    
    48,509
    
    
    
    0.39
    %
    
    
    187
    
    
    
    2,557
    
    
    
    1.80
    %
    
    
    46
    
    
    
    506
    
    
    
    5.34
    %
    
    
    27Total interest-earning assets
    
    
    1,351,939
    
    
    
    5.23
    %
    
    $
    70,760
    
    
    
    1,240,792
    
    
    
    6.10
    %
    
    $
    75,675
    
    
    
    1,061,265
    
    
    
    7.46
    %
    
    $
    79,181Cash and due from banks
    
    
    49,848
    
    
    
    
    
    
    
    
    
    
    
    22,846
    
    
    
    
    
    
    
    
    
    
    
    25,624Premises and equipment
    
    
    32,894
    
    
    
    
    
    
    
    
    
    
    
    33,584
    
    
    
    
    
    
    
    
    
    
    
    26,676Other
    
    
    58,036
    
    
    
    
    
    
    
    
    
    
    
    34,581
    
    
    
    
    
    
    
    
    
    
    
    30,527Allowance for loan losses
    
    
    (15,830
    )
    
    
    
    
    
    
    
    
    
    
    (13,419
    )
    
    
    
    
    
    
    
    
    
    
    (11,029
    )Total assets
    
    $
    1,476,887
    
    
    
    
    
    
    
    
    
    
    $
    1,318,384
    
    
    
    
    
    
    
    
    
    
    $
    1,133,063LIABILITIES AND STOCKHOLDERS EQUITYInterest-bearing liabilities:NOW accounts
    
    $
    187,250
    
    
    
    0.95
    %
    
    $
    1,777
    
    
    $
    147,227
    
    
    
    1.46
    %
    
    $
    2,149
    
    
    $
    127,093
    
    
    
    2.30
    %
    
    $
    2,926Savings and money management
accounts
    
    
    341,118
    
    
    
    1.71
    %
    
    
    5,842
    
    
    
    353,719
    
    
    
    2.52
    %
    
    
    8,912
    
    
    
    341,097
    
    
    
    4.04
    %
    
    
    13,788Time deposits
    
    
    577,897
    
    
    
    2.88
    %
    
    
    16,630
    
    
    
    446,434
    
    
    
    4.25
    %
    
    
    18,956
    
    
    
    317,298
    
    
    
    5.18
    %
    
    
    16,433Federal funds purchased / securities
sold under repurchase agreements
    
    
    40,823
    
    
    
    0.80
    %
    
    
    327
    
    
    
    60,629
    
    
    
    2.17
    %
    
    
    1,317
    
    
    
    65,735
    
    
    
    5.03
    %
    
    
    3,305Other borrowings
    
    
    103,238
    
    
    
    3.78
    %
    
    
    3,907
    
    
    
    98,741
    
    
    
    4.21
    %
    
    
    4,155
    
    
    
    79,250
    
    
    
    5.65
    %
    
    
    4,480Total interest-bearing liabilities
    
    
    1,250,326
    
    
    
    2.28
    %
    
    
    28,483
    
    
    
    1,106,750
    
    
    
    3.21
    %
    
    
    35,489
    
    
    
    930,473
    
    
    
    4.40
    %
    
    
    40,932Noninterest-bearing demand deposits
    
    
    114,835
    
    
    
    
    
    
    
    
    
    
    
    109,818
    
    
    
    
    
    
    
    
    
    
    
    108,470Other liabilities
    
    
    10,966
    
    
    
    
    
    
    
    
    
    
    
    12,479
    
    
    
    
    
    
    
    
    
    
    
    10,270Stockholders equity
    
    
    100,760
    
    
    
    
    
    
    
    
    
    
    
    89,337
    
    
    
    
    
    
    
    
    
    
    
    83,850Total liabilities and stockholders
equity
    
    $
    1,476,887
    
    
    
    
    
    
    
    
    
    
    $
    1,318,384
    
    
    
    
    
    
    
    
    
    
    $
    1,133,063Net interest spread
    
    
    
    
    
    
    2.95
    %
    
    
    
    
    
    
    
    
    
    
    2.89
    %
    
    
    
    
    
    
    
    
    
    
    3.06
    %Benefit of noninterest sources
    
    
    
    
    
    
    0.17
    %
    
    
    
    
    
    
    
    
    
    
    0.35
    %
    
    
    
    
    
    
    
    
    
    
    0.54
    %Net interest margin/income
    
    
    
    
    
    
    3.12
    %
    
    $
    42,277
    
    
    
    
    
    
    
    3.24
    %
    
    $
    40,186
    
    
    
    
    
    
    
    3.60
    %
    
    $
    38,249
 2009 compared with 2008:
   41




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42




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##### Table of Contents



2008 compared with 2007:
     43




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##### Table of Contents



Analysis of Changes in Net Interest Income
 2009 vs. 2008
    
    
    2008 vs. 2007Increase (Decrease)
    
    
    Increase (Decrease)Average
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    AverageVolume
    
    
    Rate
    
    
    Combined
    
    
    Total
    
    
    Volume
    
    
   Rate
    
    
    Combined
    
    
    Total(Dollars in thousands)
    
    
    (Dollars in thousands)Interest income from interest-earning assets:Loans
    
    $
    2,164
    
    
    $
    (7,264
    )
    
    $
    (272
    )
    
    $
    (5,372
    )
    
    $
    11,529
    
    
    $
    (13,781
    )
    
    $
    (2,399
    )
    
    $
    (4,651
    )Investments, taxable
    
    
    1,860
    
    
    
    (1,185
    )
    
    
    (174
    )
    
    
    501
    
    
    
    1,590
    
    
    
    233
    
    
    
    29
    
    
    
    1,852Investments, tax-exempt
    
    
    207
    
    
    
    (13
    )
    
    
    (4
    )
    
    
    190
    
    
    
    (105
    )
    
    
    24
    
    
    
    (3
    )
    
    
    (84
    )Federal funds sold
    
    
    (119
    )
    
    
    (342
    )
    
    
    86
    
    
    
    (375
    )
    
    
    440
    
    
    
    (726
    )
    
    
    (356
    )
    
    
    (642
    )Interest-bearing deposits in
other banks
    
    
    827
    
    
    
    (36
    )
    
    
    (650
    )
    
    
    141
    
    
    
    109
    
    
    
    (19
    )
    
    
    (71
    )
    
    
    19Total
    
    $
    4,939
    
    
    $
    (8,840
    )
    
    $
    (1,014
    )
    
    $
    (4,915
    )
    
    $
    13,563
    
    
    $
    (14,269
    )
    
    $
    (2,800
    )
    
    $
    (3,506
    )Interest expense on interest-bearing liabilities:NOW accounts
    
    $
    584
    
    
    $
    (752
    )
    
    $
    (204
    )
    
    $
    (372
    )
    
    $
    463
    
    
    $
    (1,068
    )
    
    $
    (172
    )
    
    $
    (777
    )Savings and money management accounts
    
    
    (318
    )
    
    
    (2,857
    )
    
    
    104
    
    
    
    (3,071
    )
    
    
    510
    
    
    
    (5,186
    )
    
    
    (200
    )
    
    
    (4,876
    )Time deposits
    
    
    5,587
    
    
    
    (6,127
    )
    
    
    (1,785
    )
    
    
    (2,325
    )
    
    
    6,689
    
    
    
    (2,963
    )
    
    
    (1,203
    )
    
    
    2,523Federal funds purchased /
securities sold under
repurchase agreements
    
    
    (430
    )
    
    
    (829
    )
    
    
    269
    
    
    
    (990
    )
    
    
    (257
    )
    
    
    (1,878
    )
    
    
    147
    
    
    
    (1,988
    )Other borrowings
    
    
    189
    
    
    
    (420
    )
    
    
    (17
    )
    
    
    (248
    )
    
    
    1,101
    
    
    
    (1,143
    )
    
    
    (283
    )
    
    
    (325
    )Total
    
    $
    5,612
    
    
    $
    (10,985
    )
    
    $
    (1,633
    )
    
    $
    (7,006
    )
    
    $
    8,506
    
    
    $
    (12,238
    )
    
    $
    (1,711
    )
    
    $
    (5,443
    )Change in net interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,091
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,937
  Provision for Loan Losses
  Noninterest Income
   44




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##### Table of Contents



2009 compared with 2008:
  2008 compared with 2007:
   Noninterest Income
 Year Ended December 31,2009
    
    
    2008
    
    
    2007(Dollars in thousands)Service charges and fees on deposits
    
    $
    7,051
    
    
    $
    7,291
    
    
    $
    6,409Gain on sales of loans
    
    
    8,493
    
    
    
    5,747
    
    
    
    5,185(Loss) gain on sale of fixed assets, net
    
    
    (15
    )
    
    
    8
    
    
    
    1,049Investment securities gains (losses), net of OTTI
    
    
    1,557
    
    
    
    (77
    )
    
    
    (237
    )Retail investment income
    
    
    1,175
    
    
    
    1,096
    
    
    
    1,267Trust service fees
    
    
    1,040
    
    
    
    1,134
    
    
    
    1,132Increase in cash surrender value of
bank-owned
life insurance
    
    
    880
    
    
    
    708
    
    
    
    678Miscellaneous income
    
    
    558
    
    
    
    798
    
    
    
    685Total noninterest income
    
    $
    20,739
    
    
    $
    16,705
    
    
    $
    16,168Noninterest income as a percentage of total
average assets
    
    
    1.40
    %
    
    
    1.27
    %
    
    
    1.43
    %Noninterest income as a percentage of total
income
    
    
    22.67
    %
    
    
    18.08
    %
    
    
    16.96
    %
  45




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##### Table of Contents



Noninterest Expense
 2009 compared with 2008:
     2008 compared with 2007:
    46




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##### Table of Contents



Noninterest Expense
 Year Ended December 31,2009
    
    
    2008
    
    
    2007(Dollars in thousands)Salaries and other personnel expense
    
    $
    22,534
    
    
    $
    20,852
    
    
    $
    19,343Occupancy expense
    
    
    4,691
    
    
    
    4,373
    
    
    
    3,457Marketing & business development
    
    
    1,451
    
    
    
    1,668
    
    
    
    1,586Processing expense
    
    
    1,733
    
    
    
    1,917
    
    
    
    1,750Legal and professional fees
    
    
    1,552
    
    
    
    1,763
    
    
    
    1,508Data processing expense
    
    
    1,265
    
    
    
    1,203
    
    
    
    942FDIC insurance
    
    
    2,723
    
    
    
    898
    
    
    
    113Loss (gain) on sale of other real estate
    
    
    5,741
    
    
    
    (63
    )
    
    
    29Other real estate valuation allowance
    
    
    588
    
    
    
    
    
    
    
    Loan costs
    
    
    917
    
    
    
    658
    
    
    
    460Supplies expense
    
    
    604
    
    
    
    763
    
    
    
    704Other expense
    
    
    2,712
    
    
    
    2,720
    
    
    
    2,616Total noninterest expense
    
    $
    46,511
    
    
    $
    36,752
    
    
    $
    32,508Noninterest expense as a percentage
of total average assets
    
    
    3.15
    %
    
    
    2.79
    %
    
    
    2.87
    %Operating efficiency ratio
    
    
    75.66
    %
    
    
    64.52
    %
    
    
    60.64
    %
  Income Taxes
    47




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##### Table of Contents



Financial Condition
 Composition of the Loan Portfolio
    st st
 Loan Portfolio Composition
 December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Commercial financial and
agricultural
    
    $
    102,160
    
    
    
    10.90
    %
    
    $
    109,751
    
    
    
    11.12
    %
    
    $
    93,318
    
    
    
    10.71
    %
    
    $
    80,823
    
    
    
    10.99
    %
    
    $
    64,398
    
    
    
    11.12
    %Real estateCommercial
    
    
    322,864
    
    
    
    34.44
    %
    
    
    266,362
    
    
    
    26.99
    %
    
    
    236,358
    
    
    
    27.12
    %
    
    
    198,453
    
    
    
    27.00
    %
    
    
    156,896
    
    
    
    27.09
    %Residential
    
    
    219,217
    
    
    
    23.38
    %
    
    
    212,856
    
    
    
    21.57
    %
    
    
    190,613
    
    
    
    21.88
    %
    
    
    158,543
    
    
    
    21.57
    %
    
    
    138,716
    
    
    
    23.95
    %Acquisition, development
and construction
    
    
    270,062
    
    
    
    28.81
    %
    
    
    369,731
    
    
    
    37.47
    %
    
    
    318,438
    
    
    
    36.54
    %
    
    
    266,875
    
    
    
    36.30
    %
    
    
    184,826
    
    
    
    31.92
    %Total real estate
    
    
    812,143
    
    
    
    86.63
    %
    
    
    848,949
    
    
    
    86.03
    %
    
    
    745,409
    
    
    
    85.54
    %
    
    
    623,871
    
    
    
    84.87
    %
    
    
    480,438
    
    
    
    82.96
    %Lease financing
    
    
    0
    
    
    
    0.00
    %
    
    
    33
    
    
    
    0.00
    %
    
    
    37
    
    
    
    0.00
    %
    
    
    116
    
    
    
    0.02
    %
    
    
    111
    
    
    
    0.02
    %ConsumerDirect
    
    
    20,507
    
    
    
    2.19
    %
    
    
    24,272
    
    
    
    2.46
    %
    
    
    25,569
    
    
    
    2.93
    %
    
    
    24,146
    
    
    
    3.28
    %
    
    
    24,343
    
    
    
    4.20
    %Indirect
    
    
    1,898
    
    
    
    0.20
    %
    
    
    3,319
    
    
    
    0.34
    %
    
    
    4,237
    
    
    
    0.49
    %
    
    
    6,232
    
    
    
    0.85
    %
    
    
    9,752
    
    
    
    1.69
    %Revolving
    
    
    836
    
    
    
    0.09
    %
    
    
    905
    
    
    
    0.09
    %
    
    
    3,819
    
    
    
    0.44
    %
    
    
    843
    
    
    
    0.12
    %
    
    
    656
    
    
    
    0.11
    %Total consumer
    
    
    23,241
    
    
    
    2.48
    %
    
    
    28,496
    
    
    
    2.89
    %
    
    
    33,625
    
    
    
    3.86
    %
    
    
    31,221
    
    
    
    4.25
    %
    
    
    34,751
    
    
    
    6.00
    %Deferred loan origination fees
    
    
    (55
    )
    
    
    (0.01
    %)
    
    
    (398
    )
    
    
    (0.04
    %)
    
    
    (949
    )
    
    
    (0.11
    %)
    
    
    (919
    )
    
    
    (0.13
    %)
    
    
    (610
    )
    
    
    (0.10
    %)Total
    
    $
    937,489
    
    
    
    100.00
    %
    
    $
    986,831
    
    
    
    100.00
    %
    
    $
    871,440
    
    
    
    100.00
    %
    
    $
    735,112
    
    
    
    100.00
    %
    
    $
    579,088
    
    
    
    100.00
    %
  48




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##### Table of Contents



Loan Maturity Schedule At
December 31, 2009
 Within
    
    
    One to Five
    
    
    After FiveOne Year
    
    
    Years
    
    
    Years
    
    
    Total(Dollars in thousands)Commercial, financial and agricultural
    
    $
    59,443
    
    
    $
    41,369
    
    
    $
    1,348
    
    
    $
    102,160Real EstateCommercial
    
    
    94,632
    
    
    
    219,457
    
    
    
    8,775
    
    
    
    322,864Residential
    
    
    103,825
    
    
    
    91,765
    
    
    
    23,627
    
    
    
    219,217Acquisition, development and
construction
    
    
    202,139
    
    
    
    62,707
    
    
    
    5,216
    
    
    
    270,062Consumer
    
    
    12,573
    
    
    
    10,343
    
    
    
    325
    
    
    
    23,241Deferred loan origination fees
    
    
    (55
    )
    
    
    
    
    
    
    
    
    
    
    (55
    )Total loans
    
    $
    472,557
    
    
    $
    425,641
    
    
    $
    39,291
    
    
    $
    937,489
  Sensitivity of Loans to Changes in Interest Rates
At December 31, 2009
 Within
    
    
    One to Five
    
    
    After Five($ in thousands)
    
    One year
    
    
    Years
    
    
    Years
    
    
    TotalLoans maturing or repricing with:Predetermined interest rates
    
    $
    152,143
    
    
    $
    208,857
    
    
    $
    10,914
    
    
    $
    371,914Floating or adjustable interest rates
    
    
    405,149
    
    
    
    157,026
    
    
    
    3,400
    
    
    
    565,575Total loans
    
    $
    557,292
    
    
    $
    365,883
    
    
    $
    14,314
    
    
    $
    937,489
 Non-Performing Assets
   49




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st
    50




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##### Table of Contents



Non-Performing Assets
 Year Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in thousands)Nonaccrual loans:Commercial, financial and agricultural
    
    $
    616
    
    
    $
    261
    
    
    $
    253
    
    
    $
    101
    
    
    $
    87Real Estate:Commercial
    
    
    2,932
    
    
    
    3,491
    
    
    
    1,440
    
    
    
    1,028
    
    
    
    1,022Residential
    
    
    4,623
    
    
    
    2,815
    
    
    
    993
    
    
    
    787
    
    
    
    1,735Acquisition, development and construction
    
    
    23,755
    
    
    
    27,908
    
    
    
    2,261
    
    
    
    205
    
    
    
    674Consumer:Direct
    
    
    331
    
    
    
    306
    
    
    
    548
    
    
    
    230
    
    
    
    491Revolving
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Nonaccrual loans
    
    $
    32,257
    
    
    $
    34,781
    
    
    $
    5,495
    
    
    $
    2,351
    
    
    $
    4,009Restructured loans (1)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Other real estate owned
    
    
    7,974
    
    
    
    5,734
    
    
    
    
    
    
    
    
    
    
    
    Total Nonperforming assets
    
    $
    40,231
    
    
    $
    40,515
    
    
    $
    5,495
    
    
    $
    2,351
    
    
    $
    4,009Loans past due 90 days or more and still
accruing interest
    
    $
    
    
    
    $
    7,298
    
    
    $
    
    
    
    $
    
    
    
    $
    1Allowance for loan losses to period end total
loans
    
    
    2.38
    %
    
    
    1.49
    %
    
    
    1.35
    %
    
    
    1.33
    %
    
    
    1.58
    %Allowance for loan losses to period end
nonperforming loans
    
    
    69.25
    %
    
    
    42.39
    %
    
    
    214.74
    %
    
    
    415.87
    %
    
    
    227.61
    %Net charge-offs to average loans
    
    
    2.42
    %
    
    
    0.65
    %
    
    
    0.22
    %
    
    
    0.17
    %
    
    
    0.12
    %Nonperforming assets to period end loans
    
    
    4.29
    %
    
    
    4.11
    %
    
    
    0.63
    %
    
    
    0.32
    %
    
    
    0.69
    %Nonperforming assets to period end loans
and other real estate owned
    
    
    4.26
    %
    
    
    4.08
    %
    
    
    0.63
    %
    
    
    0.32
    %
    
    
    0.69
    %Proforma data to illustrate the effect of SAB 108Allowance for loan losses to period end net
loans
excluding amount applicable to unfunded lines,
commitments and standby letters of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.40
    %Allowance for loan losses to period end
nonperforming loans excluding amount applicable
to unfunded lines, commitments and standby letters
of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    210.30
    %
 (1)
    
    Restructured loans on nonaccrual status at year end are included under nonaccrual loans in the
table.  51




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##### Table of Contents



Other Real Estate Owned
 2009
    
    
    2008Beginning balance, January 1
    
    $
    5,734
    
    
    $
    Additions
    
    
    20,752
    
    
    
    6,386Valuation allowance
    
    
    (588
    )
    
    
    Sales
    
    
    (12,183
    )
    
    
    (715
    )(Loss) gain on sale of OREO
    
    
    (5,741
    )
    
    
    63Ending balance, December 31
    
    $
    7,974
    
    
    $
    5,734
  2009
    
    
    2008Other Real Estate:Single family developed lots
    
    $
    724
    
    
    $
    1,636Single family undeveloped land
    
    
    
    
    
    
    1,0501-4 Family residential
    
    
    484
    
    
    
    1,848Commercial land
    
    
    4,468
    
    
    
    1,200Condominums
    
    
    2,886
    
    
    
    8,562
    
    
    
    5,734Valuation allowance
    
    
    (588
    )
    
    
    $
    7,974
    
    
    $
    5,734
  Nonaccrual
    
    
    
    
    
    ($000s)
    
    
    
    
    Appraisal
    
    AppraisedBalance
    
    
    Originated
    
    
    Date
    
    Trigger
    
    Collateral
    
    Allowance
    
    
    Method
    
    Date
    
    ValueADC Loan  Athens, Georgia
    
    $
    856
    
    
    
    07/31/06-10/11/06
    
    
    01/28/09
    
    delinquency
    
    houses
    
    
    
    
    
    collateral value
    
    05/09
    
    $
    1,580ADC Loan  CSRA
    
    
    1,814
    
    
    
    12/16/05-04/11/08
    
    
    11/30/09
    
    delinquency
    
    lots & land
    
    
    
    
    
    collateral value
    
    In Process
    
    
    2,6821-4 Family Residential
    
    
    1,265
    
    
    
    09/22/06-09/04/08
    
    
    11/30/09
    
    delinquency
    
    houses & lots
    
    
    
    
    
    collateral value
    
    In Process
    
    
    1,733ADC Loan  Georgia Loan Participation
    
    
    1,272
    
    
    
    12/06/06
    
    
    09/17/08
    
    delinquency
    
    lots
    
    
    
    
    
    collateral value
    
    12/09
    
    
    2,000ADC Loan  Georgia Loan Participation
    
    
    1,727
    
    
    
    04/13/06
    
    
    09/17/08
    
    delinquency
    
    lots
    
    
    706
    
    
    collateral value
    
    03/09
    
    
    1,330ADC Loan  CSRA
    
    
    1,222
    
    
    
    08/17/07-05/02/08
    
    
    12/30/09
    
    delinquency
    
    lots
    
    
    124
    
    
    collateral value
    
    12/09
    
    
    1,220ADC Loan  Athens, Georgia
    
    
    1,611
    
    
    
    03/29/06
    
    
    06/11/09
    
    delinquency
    
    condominums
    
    
    
    
    
    collateral value
    
    10/09
    
    
    1,790ADC Loan  CSRA
    
    
    3,514
    
    
    
    08/25/06
    
    
    08/17/09
    
    delinquency
    
    lots
    
    
    
    
    
    collateral value
    
    09/09
    
    
    6,333ADC Loan  Athens, Georgia
    
    
    1,638
    
    
    
    01/12/05-07/26/06
    
    
    4/08-6/08
    
    delinquency
    
    lots & land
    
    
    
    
    
    collateral value
    
    12/09
    
    
    1,880ADC Loan  Athens, Georgia
    
    
    657
    
    
    
    03/26/08
    
    
    06/02/08
    
    delinquency
    
    lots
    
    
    
    
    
    collateral value
    
    12/09
    
    
    730ADC Loan  Athens, Georgia
    
    
    2,747
    
    
    
    08/18/06-01/10/07
    
    
    01/28/09
    
    delinquency
    
    land & townhomes
    
    
    
    
    
    collateral value
    
    02/09
    
    
    3,526$
    18,323Other, net
    
    
    13,934Nonaccrual loans at December 31, 2009
    
    $
    32,257
  52




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Allowance for Loan Losses
      53




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Allocation of the Allowance for Loan Loss
 December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Amount
    
    
    Percent(1)
    
    
    Amount
    
    
    Percent(1)
    
    
    Amount
    
    
    Percent(1)
    
    
    Amount
    
    
    Percent(1)
    
    
    Amount
    
    
    Percent(1)(Dollars in thousands)Balance at end of year
Applicable to:Commercial, financial,
agricultural
    
    $
    1,442
    
    
    
    18.21
    %
    
    $
    1,964
    
    
    
    18.93
    %
    
    $
    1,760
    
    
    
    17.73
    %
    
    $
    1,713
    
    
    
    18.91
    %
    
    $
    1,550
    
    
    
    22.66
    %Real estate-commercial
    
    $
    5,709
    
    
    
    33.10
    %
    
    $
    2,565
    
    
    
    26.92
    %
    
    $
    2,483
    
    
    
    28.67
    %
    
    $
    2,547
    
    
    
    25.04
    %
    
    $
    2,494
    
    
    
    26.32
    %Real estate-acquisition,
development and construction
    
    
    8,876
    
    
    
    29.51
    %
    
    
    7,050
    
    
    
    37.13
    %
    
    
    4,344
    
    
    
    34.38
    %
    
    
    3,191
    
    
    
    36.33
    %
    
    
    2,521
    
    
    
    32.99
    %Real estate  residential mortgage
    
    
    5,322
    
    
    
    16.68
    %
    
    
    2,048
    
    
    
    14.11
    %
    
    
    2,198
    
    
    
    15.37
    %
    
    
    1,382
    
    
    
    16.42
    %
    
    
    82
    
    
    
    13.69
    %Consumer loans to
individuals
    
    
    989
    
    
    
    2.50
    %
    
    
    1,115
    
    
    
    2.91
    %
    
    
    1,015
    
    
    
    3.85
    %
    
    
    944
    
    
    
    3.30
    %
    
    
    1,784
    
    
    
    4.34
    %Unfunded lines, commitments
and standby letters of credit
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    694
    
    
    
    0.00
    %Other
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %AmountBalance at end of year
    
    $
    22,338
    
    
    
    100.00
    %
    
    $
    14,742
    
    
    
    100.00
    %
    
    $
    11,800
    
    
    
    100.00
    %
    
    $
    9,777
    
    
    
    100.00
    %
    
    $
    9,125
    
    
    
    100.00
    %Proforma excluding unfunded lines, commitments and
standby letters of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (694
    )$
    8,431
 (1)
    
    Percent of gross loans in each category to total loans adjusted for loans recorded at fair
value     54




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55




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##### Table of Contents



Acquisition Development and Construction Loans
 2009
    
    
    2008(Dollars in thousands)CSRA  primary market areaPeriod-end loans
    
    
    195,394
    
    
    
    266,156Specific reserve impaired loans
    
    
    11,278
    
    
    
    5,187Classified/watch rated loans
    
    
    27,237
    
    
    
    9,879Charge-offs % (annual)
    
    
    0.44
    %
    
    
    0.19
    %Specific reserve allowance / Impaired loans
    
    
    10.29
    %
    
    
    0.00
    %General reserve allowance / Loans not impaired %
    
    
    2.10
    %
    
    
    0.67
    %Allowance / Charge-offs
    
    
    6.94
    
    
    
    4.78Savannah, GeorgiaPeriod-end loans
    
    
    19,666
    
    
    
    28,300Specific reserve impaired loans
    
    
    1,300
    
    
    
    2,645Classified/watch rated loans
    
    
    4,064
    
    
    
    5,060Charge-offs % (annual)
    
    
    11.21
    %
    
    
    3.18
    %Specific reserve allowance / Impaired loans
    
    
    8.62
    %
    
    
    6.62
    %General reserve allowance / Loans not impaired %
    
    
    3.42
    %
    
    
    4.20
    %Allowance / Charge-offs
    
    
    0.34
    
    
    
    1.39Athens, GeorgiaPeriod-end loans
    
    
    20,031
    
    
    
    31,806Specific reserve impaired loans
    
    
    8,457
    
    
    
    8,772Classified/watch rated loans
    
    
    2,742
    
    
    
    13,667Charge-offs % (annual)
    
    
    47.59
    %
    
    
    1.78
    %Specific reserve allowance / Impaired loans
    
    
    0.00
    %
    
    
    12.04
    %General reserve allowance / Loans not impaired %
    
    
    10.68
    %
    
    
    3.97
    %Allowance / Charge-offs
    
    
    0.13
    
    
    
    2.55ADC Participations  GeorgiaPeriod-end loans
    
    
    9,893
    
    
    
    21,676Specific reserve impaired loans
    
    
    3,393
    
    
    
    10,637Classified/watch rated loans
    
    
    6,500
    
    
    
    48Charge-offs % (annual)
    
    
    47.41
    %
    
    
    8.88
    %Specific reserve allowance / Impaired loans
    
    
    20.81
    %
    
    
    4.09
    %General reserve allowance / Loans not impaired %
    
    
    9.50
    %
    
    
    9.55
    %Allowance / Charge-offs
    
    
    0.28
    
    
    
    0.77ADC Participations  FloridaPeriod-end loans
    
    
    4,034
    
    
    
    8,005Specific reserve impaired loans
    
    
    1,034
    
    
    
    3,650Classified/watch rated loans
    
    
    
    
    
    
    704Charge-offs % (annual)
    
    
    10.26
    %
    
    
    0.19
    %Specific reserve allowance / Impaired loans
    
    
    0.00
    %
    
    
    11.34
    %General reserve allowance / Loans not impaired %
    
    
    10.00
    %
    
    
    4.27
    %Allowance / Charge-offs
    
    
    0.72
    
    
    
    2.00
   56




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##### Table of Contents



Allowances for Loan Losses
 At December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in thousands)Total loans outstanding at end of period,
net of unearned income
    
    $
    937,489
    
    
    $
    986,831
    
    
    $
    871,440
    
    
    $
    735,112
    
    
    $
    579,088Average loans outstanding, net of
unearned income
    
    $
    965,111
    
    
    $
    934,512
    
    
    $
    800,852
    
    
    $
    647,421
    
    
    $
    530,662Balance of allowance for loan losses at
beginning of year
    
    $
    14,742
    
    
    $
    11,800
    
    
    $
    9,777
    
    
    $
    8,431
    (1)
    
    $
    7,930Charge-offs:Commercial, financial and agricultural
    
    
    1,061
    
    
    
    816
    
    
    
    98
    
    
    
    648
    
    
    
    694Real estate  commercial
    
    
    1,082
    
    
    
    279
    
    
    
    219
    
    
    
    130
    
    
    
    65Real estate  acquisition, development
and construction
    
    
    17,573
    
    
    
    4,265
    
    
    
    915
    
    
    
    100
    
    
    
    80Real estate  residential mortgage
    
    
    3,801
    
    
    
    665
    
    
    
    258
    
    
    
    676
    
    
    
    30Consumer
    
    
    616
    
    
    
    711
    
    
    
    1,086
    
    
    
    386
    
    
    
    736Total charge-offs
    
    
    24,133
    
    
    
    6,736
    
    
    
    2,576
    
    
    
    1,940
    
    
    
    1,605Recoveries of previous loan losses:Commercial, financial and agricultural
    
    
    360
    
    
    
    348
    
    
    
    21
    
    
    
    287
    
    
    
    307Real estate  commercial
    
    
    15
    
    
    
    
    
    
    
    32
    
    
    
    20
    
    
    
    45Real estate  acquisition, development
and construction
    
    
    6
    
    
    
    2
    
    
    
    12
    
    
    
    6
    
    
    
    5Real estate  residential mortgage
    
    
    172
    
    
    
    41
    
    
    
    93
    
    
    
    11
    
    
    
    7Consumer
    
    
    272
    
    
    
    232
    
    
    
    618
    
    
    
    484
    
    
    
    594Total recoveries
    
    
    825
    
    
    
    623
    
    
    
    776
    
    
    
    808
    
    
    
    958Net loan losses
    
    
    23,308
    
    
    
    6,113
    
    
    
    1,800
    
    
    
    1,132
    
    
    
    647Provision for loan losses
    
    
    30,904
    
    
    
    9,055
    
    
    
    3,823
    
    
    
    2,478
    
    
    
    1,842Balance of allowance for loan losses at
end of period
    
    $
    22,338
    
    
    $
    14,742
    
    
    $
    11,800
    
    
    
    9,777
    
    
    
    9,125Allowance for loan losses to period end
loans
    
    
    2.38
    %
    
    
    1.49
    %
    
    
    1.35
    %
    
    
    1.33
    %
    
    
    1.58
    %Net charge-offs to average loans
    
    
    2.42
    %
    
    
    0.65
    %
    
    
    0.22
    %
    
    
    0.17
    %
    
    
    0.12
    %Proforma ALLL at end of period (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,431Proforma
ALLL to period end loans (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.40
    %
 (1)
    
    Includes adjustment of $694 for estimated overstatement of allowance for loan loss as of
12/31/05 as required by SAB 108.(2)
    
    Proforma assumes adjustment to prior periods of amounts corrected pursuant to SAB108 under the
iron curtain method.  57




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##### Table of Contents



Investment Securities
   58




---



##### Table of Contents



Investment Securities
 December 31,2009
    
    
    2008
    
    
    2007(Dollars in
thousands)Available for sale:U.S. Government Agencies
    
    $
    55,086
    
    
    $
    109,256
    
    
    $
    96,166Obligations of states and political subdivisions
    
    
    26,402
    
    
    
    17,384
    
    
    
    15,755Mortgage-backed securitiesU.S. GSEs MBS  residential
    
    
    98,667
    
    
    
    117,373
    
    
    
    82,921U.S. GSEs CMO
    
    
    107,153
    
    
    
    28,179
    
    
    
    24,704Other CMO
    
    
    8,484
    
    
    
    11,997
    
    
    
    10,554Corporate bonds
    
    
    12,591
    
    
    
    15,032
    
    
    
    15,036Equity securities
    
    
    4
    
    
    
    46
    
    
    
    250Total
    
    $
    308,387
    
    
    $
    299,267
    
    
    $
    245,386
 December 31,2009
    
    
    2008
    
    
    2007Held to maturity:Obligations of states and political subdivisions
    
    $
    490
    
    
    $
    689
    
    
    $
    1,435Total
    
    $
    490
    
    
    $
    689
    
    
    $
    1,435
    59




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##### Table of Contents



Maturity Distribution and Yields of Investment Securities
 December 31, 2009Amortized Cost
    
    
    Yield(Dollars in
thousands)Available for SaleObligations of U.S. Government
agenciesOver five through ten years
    
    
    5,996
    
    
    
    3.77
    %Over ten years
    
    
    49,090
    
    
    
    4.72
    %Total
    
    $
    55,086
    
    
    
    4.62
    %Obligations of states and political
subdivisions(1)Over one through five years
    
    $
    1,790
    
    
    
    4.27
    %Over five through ten years
    
    
    5,891
    
    
    
    5.37
    %Over ten years
    
    
    18,721
    
    
    
    6.17
    %Total
    
    $
    26,402
    
    
    
    5.86
    %Corporate bondsOver one through five years
    
    $
    1,008
    
    
    
    6.44
    %Over five through ten years
    
    
    2,909
    
    
    
    6.01
    %Over ten years
    
    
    8,674
    
    
    
    5.34
    %Total
    
    $
    12,591
    
    
    
    5.59
    %U.S. GSEs MBS  residentialOne year or less
    
    $
    1,181
    
    
    
    3.50
    %Over one through five years
    
    
    1,819
    
    
    
    4.13
    %Over five through ten years
    
    
    16,750
    
    
    
    3.47
    %Over ten years
    
    
    78,917
    
    
    
    3.78
    %Total
    
    $
    98,667
    
    
    
    3.73
    %U.S. GSEs CMOOver five through ten years
    
    $
    8,250
    
    
    
    4.35
    %Over ten years
    
    
    98,903
    
    
    
    4.05
    %Total
    
    $
    107,153
    
    
    
    4.07
    %Other CMOOver five through ten years
    
    $
    721
    
    
    
    4.98
    %Over ten years
    
    
    7,763
    
    
    
    7.30
    %Total
    
    $
    8,484
    
    
    
    7.10
    %Equity securities
    
    $
    4
    
    
    
    0.00
    %Total Available for Sale
    
    $
    308,387
    
    
    
    4.36
    %Held to MaturityObligations of states and political
subdivisions(1)One year or less
    
    $
    180
    
    
    
    7.87
    %Over one through five years
    
    $
    310
    
    
    
    7.87
    %Total
    
    $
    490
    
    
    
    7.87
    %Total Held to Maturity
    
    $
    490
    
    
    
    7.87
    %Total Investment Securities
    
    $
    308,877
    
    
    
    4.36
    %
 (1)
    
    Tax-equivalent yield  60




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##### Table of Contents



Deposits
    Average Deposit and Borrowing Balances and Rates
 Year ended December 31,2009
    
    
    2008
    
    
    2007Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(Dollars in thousands)Noninterest-bearing demand deposits
    
    $
    114,835
    
    
    
    0.00
    %
    
    $
    109,818
    
    
    
    0.00
    %
    
    $
    108,470
    
    
    
    0.00
    %Interest-bearing liabilities:NOW accounts
    
    
    187,250
    
    
    
    0.95
    %
    
    
    147,227
    
    
    
    1.46
    %
    
    
    127,093
    
    
    
    2.30
    %Savings, money management accounts
    
    
    341,118
    
    
    
    1.71
    %
    
    
    353,719
    
    
    
    2.52
    %
    
    
    341,097
    
    
    
    4.04
    %Time deposits
    
    
    577,897
    
    
    
    2.88
    %
    
    
    446,434
    
    
    
    4.25
    %
    
    
    317,298
    
    
    
    5.18
    %Federal funds purchased / securities
sold under repurchase agreements
    
    
    40,823
    
    
    
    0.80
    %
    
    
    60,629
    
    
    
    2.17
    %
    
    
    65,735
    
    
    
    5.03
    %Other borrowings
    
    
    103,238
    
    
    
    3.78
    %
    
    
    98,741
    
    
    
    4.21
    %
    
    
    79,250
    
    
    
    5.65
    %Total interest-bearing liabilities
    
    $
    1,250,326
    
    
    
    2.28
    %
    
    $
    1,106,750
    
    
    
    3.21
    %
    
    $
    930,473
    
    
    
    4.40
    %Total noninterest & interest-bearing liabilities
    
    $
    1,365,161
    
    
    
    
    
    
    $
    1,216,568
    
    
    
    
    
    
    $
    1,038,943
  Maturities of Time Deposits  (Dollars in thousands)
 Time Certificatesof Deposit of$100 or MoreMonths to MaturityWithin 3 months
    
    $
    119,439After 3 through 6 months
    
    
    39,076After 6 through 12 months
    
    
    115,227Within one year
    
    
    273,742After 12 months
    
    
    145,009Total
    
    $
    418,751
  61




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##### Table of Contents



Off-Balance Sheet Arrangements
     Commitments and Contractual Obligations
 Less than
    
    
    1 - 3
    
    
    3 - 5
    
    
    More than(Dollars in thousands)
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsLines of credit
    
    $
    146,874
    
    
    
    
    
    
    
    
    
    
    
    Mortgage loan commitments
    
    
    28,020
    
    
    
    
    
    
    
    
    
    
    
    Lease agreements
    
    
    361
    
    
    
    459
    
    
    
    72
    
    
    
    61Deposits
    
    
    1,093,122
    
    
    
    173,438
    
    
    
    11,750
    
    
    
    2,224Securities sold under
repurchase agreements
    
    
    3,188
    
    
    
    
    
    
    
    
    
    
    
    FHLB advances
    
    
    17,000
    
    
    
    8,000
    
    
    
    13,000
    
    
    
    39,000Other borrowings
    
    
    600
    
    
    
    
    
    
    
    
    
    
    
    Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    2,947
    
    
    
    20,000Total commitments and
contractual obligations
    
    $
    1,289,165
    
    
    
    181,897
    
    
    
    27,769
    
    
    
    61,285
  62




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##### Table of Contents



Asset/Liability Management, Interest Rate Sensitivity and Liquidity
 General.
  Interest Rate Sensitivity.
     63




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##### Table of Contents



64




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##### Table of Contents



Interest Sensitivity Analysis
At December 31, 2009
 After SixAfter Three
    
    
    Through
    
    
    
    
    
    
    One YearWithin Three
    
    
    Through Six
    
    
    Twelve
    
    
    Within
    
    
    Through Five
    
    
    Over FiveMonths
    
    
    Months
    
    
    Months
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Total(Dollars in thousands)Interest-earning assets:Loans
    
    $
    386,803
    
    
    
    71,481
    
    
    
    99,008
    
    
    
    557,292
    
    
    
    365,883
    
    
    
    14,314
    
    
    
    937,489Investment securities (including
restricted equity securities)
    
    
    27,867
    
    
    
    24,632
    
    
    
    20,533
    
    
    
    73,032
    
    
    
    160,401
    
    
    
    79,611
    
    
    
    313,044Federal funds sold
    
    
    7,300
    
    
    
    
    
    
    
    
    
    
    
    7,300
    
    
    
    
    
    
    
    
    
    
    
    7,300Interest-bearing deposits in other
banks
    
    
    17,033
    
    
    
    
    
    
    
    
    
    
    
    17,033
    
    
    
    
    
    
    
    
    
    
    
    17,033Total interest-earning assets
    
    $
    439,003
    
    
    $
    96,113
    
    
    $
    119,541
    
    
    $
    654,657
    
    
    $
    526,284
    
    
    $
    93,925
    
    
    $
    1,274,866Interest-bearing liabilities:Money management accounts
    
    $
    44,781
    
    
    
    
    
    
    
    
    
    
    
    44,781
    
    
    
    
    
    
    
    
    
    
    
    44,781Savings accounts
    
    
    343,740
    
    
    
    
    
    
    
    
    
    
    
    343,740
    
    
    
    
    
    
    
    
    
    
    
    343,740NOW accounts
    
    
    210,438
    
    
    
    
    
    
    
    
    
    
    
    210,438
    
    
    
    
    
    
    
    
    
    
    
    210,438Time deposits
    
    
    169,107
    
    
    
    68,734
    
    
    
    143,752
    
    
    
    381,593
    
    
    
    185,202
    
    
    
    
    
    
    
    566,795Federal funds purchased / securities
sold under repurchase ageements
    
    
    3,188
    
    
    
    
    
    
    
    
    
    
    
    3,188
    
    
    
    
    
    
    
    
    
    
    
    3,188Federal Home Loan Bank advances
    
    
    5,000
    
    
    
    
    
    
    
    12,000
    
    
    
    17,000
    
    
    
    21,000
    
    
    
    39,000
    
    
    
    77,000Notes and bonds payable
    
    
    600
    
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    
    
    
    
    600Subordinated debentures
    
    
    20,000
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    2,947
    
    
    
    
    
    
    
    22,947Total interest-bearing liabilities
    
    $
    796,854
    
    
    $
    68,734
    
    
    $
    155,752
    
    
    $
    1,021,340
    
    
    $
    209,149
    
    
    $
    39,000
    
    
    $
    1,269,489Period gap
    
    $
    (357,851
    )
    
    $
    27,379
    
    
    $
    (36,211
    )
    
    $
    (366,683
    )
    
    $
    317,135
    
    
    $
    54,925Cumulative gap
    
    $
    (357,851
    )
    
    $
    (330,472
    )
    
    $
    (366,683
    )
    
    $
    (366,683
    )
    
    $
    (49,548
    )
    
    $
    5,377Ratio of cumulative gap to total
interest-earning assets
    
    
    (28.07
    %)
    
    
    (25.92
    %)
    
    
    (28.76
    %)
    
    
    (28.76
    %)
    
    
    (3.89
    %)
    
    
    0.42
    %
 Liquidity
   65




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##### Table of Contents



Capital
    Return on Equity and Assets
 Years ended December 31,2009
    
    
    2008
    
    
    2007Return on average total assets
    
    
    (0.54
    %)
    
    
    0.57
    %
    
    
    1.04
    %Return on average equity
    
    
    (7.92
    %)
    
    
    8.48
    %
    
    
    14.03
    %Average equity to average assets ratio
    
    
    6.82
    %
    
    
    6.78
    %
    
    
    7.40
    %
   66




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##### Table of Contents



ANALYSIS OF CAPITAL
 Required
    
    
    Actual
    
    
    ExcessAmount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Southeastern Bank Financial
Corporation12/31/2009Risk-based capital:Tier 1 capital
    
    $
    41,573
    
    
    
    4.00
    %
    
    $
    114,930
    
    
    
    11.06
    %
    
    $
    73,357
    
    
    
    7.06
    %Total capital
    
    
    83,146
    
    
    
    8.00
    %
    
    
    130,395
    
    
    
    12.55
    %
    
    
    47,249
    
    
    
    4.55
    %Tier 1 leverage ratio
    
    
    61,177
    
    
    
    4.00
    %
    
    
    114,930
    
    
    
    7.51
    %
    
    
    53,753
    
    
    
    3.51
    %12/31/2008Risk-based capital:Tier 1 capital
    
    $
    43,829
    
    
    
    4.00
    %
    
    $
    114,467
    
    
    
    10.45
    %
    
    $
    70,638
    
    
    
    6.45
    %Total capital
    
    
    87,658
    
    
    
    8.00
    %
    
    
    128,177
    
    
    
    11.70
    %
    
    
    40,519
    
    
    
    3.70
    %Tier 1 leverage ratio
    
    
    56,231
    
    
    
    4.00
    %
    
    
    114,467
    
    
    
    8.14
    %
    
    
    58,236
    
    
    
    4.14
    %Georgia Bank & Trust Company12/31/2009Risk-based capital:Tier 1 capital
    
    $
    36,391
    
    
    
    4.00
    %
    
    $
    99,984
    
    
    
    10.99
    %
    
    $
    63,593
    
    
    
    6.99
    %Total capital
    
    
    72,782
    
    
    
    8.00
    %
    
    
    111,465
    
    
    
    12.25
    %
    
    
    38,683
    
    
    
    4.25
    %Tier 1 leverage ratio
    
    
    61,301
    
    
    
    4.50
    %
    
    
    99,984
    
    
    
    7.34
    %
    
    
    38,683
    
    
    
    2.84
    %12/31/2008Risk-based capital:Tier 1 capital
    
    $
    39,246
    
    
    
    4.00
    %
    
    $
    95,546
    
    
    
    9.74
    %
    
    $
    56,300
    
    
    
    5.74
    %Total capital
    
    
    78,491
    
    
    
    8.00
    %
    
    
    107,821
    
    
    
    10.99
    %
    
    
    29,330
    
    
    
    2.99
    %Tier 1 leverage ratio
    
    
    57,551
    
    
    
    4.50
    %
    
    
    95,546
    
    
    
    7.47
    %
    
    
    37,995
    
    
    
    2.97
    %Southern Bank & Trust12/31/2009Risk-based capital:Tier 1 capital
    
    $
    5,091
    
    
    
    4.00
    %
    
    $
    14,136
    
    
    
    11.11
    %
    
    $
    9,045
    
    
    
    7.11
    %Total capital
    
    
    10,183
    
    
    
    8.00
    %
    
    
    15,734
    
    
    
    12.36
    %
    
    
    5,551
    
    
    
    4.36
    %Tier 1 leverage ratio
    
    
    6,640
    
    
    
    4.00
    %
    
    
    14,136
    
    
    
    8.52
    %
    
    
    7,496
    
    
    
    4.52
    %12/31/2008Risk-based capital:Tier 1 capital
    
    $
    4,528
    
    
    
    4.00
    %
    
    $
    13,939
    
    
    
    12.31
    %
    
    $
    9,411
    
    
    
    8.31
    %Total capital
    
    
    9,055
    
    
    
    8.00
    %
    
    
    15,356
    
    
    
    13.57
    %
    
    
    6,301
    
    
    
    5.57
    %Tier 1 leverage ratio
    
    
    4,943
    
    
    
    4.00
    %
    
    
    13,939
    
    
    
    11.28
    %
    
    
    8,996
    
    
    
    7.28
    %
 Cash Flows from Operating, Investing and Financing Activities
    67




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##### Table of Contents



Forward-Looking Statements
  Adoption of New Accounting Standards
   68




---



##### Table of Contents



The Hierarchy of Generally Accepted Accounting Principles, FASB Accounting Standards Codification
   69




---



##### Table of Contents



Newly Issued Not Yet Effective Standards
  Effects of Inflation and Changing Prices
    70




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
     71




---



##### Table of Contents



Market Risk at December 31, 2009  (Dollars in thousands)
 Fair2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter
    
    
    Total
    
    
    ValueRate Sensitive Assets:Fixed interest rate loans
    
    
    158,913
    
    
    
    95,003
    
    
    
    75,387
    
    
    
    21,144
    
    
    
    9,280
    
    
    
    31,344
    
    
    
    391,071
    
    
    
    504,030Average interest rate
    
    
    5.90
    %
    
    
    6.29
    %
    
    
    6.25
    %
    
    
    6.51
    %
    
    
    6.35
    %
    
    
    5.82
    %
    
    
    6.10
    %Variable interest rate loans
    
    
    397,982
    
    
    
    65,407
    
    
    
    54,511
    
    
    
    19,583
    
    
    
    7,911
    
    
    
    20,181
    
    
    
    565,575
    
    
    
    462,193Average interest rate
    
    
    5.59
    %
    
    
    6.20
    %
    
    
    6.15
    %
    
    
    5.60
    %
    
    
    6.20
    %
    
    
    4.74
    %
    
    
    5.69
    %Fixed interest rate securities
    
    
    31,425
    
    
    
    30,472
    
    
    
    31,854
    
    
    
    30,621
    
    
    
    30,704
    
    
    
    109,219
    
    
    
    264,295
    
    
    
    264,297Average interest rate
    
    
    4.22
    %
    
    
    4.14
    %
    
    
    4.66
    %
    
    
    4.49
    %
    
    
    4.41
    %
    
    
    4.67
    %
    
    
    4.50
    %Variable interest rate securities
    
    
    35,266
    
    
    
    6,873
    
    
    
    272
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,411
    
    
    
    42,411Average interest rate
    
    
    2.32
    %
    
    
    4.83
    %
    
    
    4.95
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    2.75
    %Variable federal funds sold
    
    
    7,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,300
    
    
    
    7,300Average interest rate
    
    
    0.02
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.02
    %Fixed interest-bearing deposits in other banks
    
    
    17,033
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,033
    
    
    
    17,027Average interest rate
    
    
    0.19
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.19
    %Rate Sensitive Liabilities:Noninterest-bearing deposits
    
    
    114,780
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,780
    
    
    
    107,692Average interest rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Money market accounts
    
    
    44,781
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,781
    
    
    
    44,936Average interest rate
    
    
    1.59
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    1.59
    %Savings accounts
    
    
    343,740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    343,740
    
    
    
    337,505Average interest rate
    
    
    1.70
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    1.70
    %NOW accounts
    
    
    210,438
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    210,438
    
    
    
    202,212Average interest rate
    
    
    0.89
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.91
    %Fixed interest rate time deposits < $100M
    
    
    107,782
    
    
    
    32,023
    
    
    
    2,245
    
    
    
    2,106
    
    
    
    3,819
    
    
    
    4
    
    
    
    147,979
    
    
    
    148,256Average interest rate
    
    
    2.01
    %
    
    
    2.68
    %
    
    
    3.36
    %
    
    
    3.50
    %
    
    
    3.05
    %
    
    
    3.44
    %
    
    
    2.22
    %Variable interest rate time deposits < $100M
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    66Average interest rate
    
    
    4.16
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    4.16
    %Fixed interest rate time deposits > $100M
    
    
    273,741
    
    
    
    74,178
    
    
    
    65,011
    
    
    
    2,851
    
    
    
    2,970
    
    
    
    
    
    
    
    418,751
    
    
    
    422,470Average interest rate
    
    
    2.36
    %
    
    
    2.38
    %
    
    
    2.46
    %
    
    
    3.41
    %
    
    
    3.03
    %
    
    
    0.00
    %
    
    
    2.38
    %Variable interest rate time deposits > $100M
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Securities sold under repurchase agreements
    
    
    3,188
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,188
    
    
    
    3,188Average interest rate
    
    
    1.50
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    1.50
    %Fixed Federal Home Loan Bank borrowings
    
    
    17,000
    
    
    
    8,000
    
    
    
    
    
    
    
    13,000
    
    
    
    
    
    
    
    39,000
    
    
    
    77,000
    
    
    
    80,670Average interest rate
    
    
    5.73
    %
    
    
    4.47
    %
    
    
    0.00
    %
    
    
    2.86
    %
    
    
    0.00
    %
    
    
    3.98
    %
    
    
    4.23
    %Variable Federal Home Loan Bank borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %TT&L note borrowings
    
    
    600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    600Average interest rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Fixed subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,947
    
    
    
    
    
    
    
    2,947
    
    
    
    2,947Average interest rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    8.00
    %
    
    
    0.00
    %
    
    
    1.65
    %Variable subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    20,000
    
    
    
    11,846Average interest rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    1.65
    %
    
    
    1.65
    %
  72




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##### Table of Contents



Market Risk at December 31, 2008  (Dollars in thousands)
 Fair2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    Total
    
    
    ValueRate Sensitive Assets:Fixed interest rate loans
    
    
    172,617
    
    
    
    96,837
    
    
    
    113,054
    
    
    
    23,316
    
    
    
    27,549
    
    
    
    33,105
    
    
    
    466,478
    
    
    
    472,771Average interest rate
    
    
    6.36
    %
    
    
    7.01
    %
    
    
    6.46
    %
    
    
    7.13
    %
    
    
    6.56
    %
    
    
    7.02
    %
    
    
    6.61
    %Variable interest rate loans
    
    
    505,786
    
    
    
    15,774
    
    
    
    7,869
    
    
    
    6,474
    
    
    
    2,656
    
    
    
    749
    
    
    
    539,308
    
    
    
    539,308Average interest rate
    
    
    5.30
    %
    
    
    5.48
    %
    
    
    6.43
    %
    
    
    5.64
    %
    
    
    5.04
    %
    
    
    5.86
    %
    
    
    5.32
    %Fixed interest rate securities
    
    
    26,037
    
    
    
    27,086
    
    
    
    25,713
    
    
    
    27,443
    
    
    
    28,628
    
    
    
    154,353
    
    
    
    289,260
    
    
    
    289,268Average interest rate
    
    
    5.64
    %
    
    
    5.39
    %
    
    
    5.23
    %
    
    
    5.30
    %
    
    
    5.03
    %
    
    
    5.37
    %
    
    
    5.34
    %Variable interest rate securities
    
    
    3,932
    
    
    
    1,431
    
    
    
    2,453
    
    
    
    1,431
    
    
    
    1,431
    
    
    
    90
    
    
    
    10,768
    
    
    
    10,768Average interest rate
    
    
    5.93
    %
    
    
    5.00
    %
    
    
    4.87
    %
    
    
    5.61
    %
    
    
    5.54
    %
    
    
    5.54
    %
    
    
    5.47
    %Variable federal funds sold
    
    
    9,780
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,780
    
    
    
    9,780Average interest rate
    
    
    0.04
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.04
    %Fixed interest-bearing deposits in other banks
    
    
    3,128
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,128
    
    
    
    3,124Average interest rate
    
    
    1.48
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    1.48
    %Rate Sensitive Liabilities:Noninterest-bearing deposits
    
    
    111,291
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111,291
    
    
    
    111,291Average interest rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Money market accounts
    
    
    50,404
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,404
    
    
    
    50,404Average interest rate
    
    
    2.70
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    2.70
    %Savings accounts
    
    
    247,249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    247,249
    
    
    
    247,249Average interest rate
    
    
    1.94
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    1.94
    %NOW accounts
    
    
    166,561
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    166,561
    
    
    
    166,561Average interest rate
    
    
    1.18
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    1.18
    %Fixed interest rate time deposits < $100M
    
    
    161,189
    
    
    
    11,185
    
    
    
    1,920
    
    
    
    567
    
    
    
    1,465
    
    
    
    
    
    
    
    176,326
    
    
    
    176,474Average interest rate
    
    
    3.38
    %
    
    
    3.53
    %
    
    
    4.51
    %
    
    
    4.21
    %
    
    
    3.61
    %
    
    
    0.00
    %
    
    
    3.41
    %Variable interest rate time deposits < $100M
    
    
    2,282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,282
    
    
    
    2,282Average interest rate
    
    
    4.16
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    4.16
    %Fixed interest rate time deposits > $100M
    
    
    321,219
    
    
    
    57,354
    
    
    
    1,511
    
    
    
    3,552
    
    
    
    626
    
    
    
    
    
    
    
    384,262
    
    
    
    384,347Average interest rate
    
    
    3.60
    %
    
    
    3.97
    %
    
    
    4.88
    %
    
    
    4.48
    %
    
    
    4.47
    %
    
    
    0.00
    %
    
    
    3.67
    %Variable interest rate time deposits > $100M
    
    
    1,177
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,177
    
    
    
    1,177Average interest rate
    
    
    4.16
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    4.16
    %Securities sold under repurchase agreements
    
    
    62,553
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,553
    
    
    
    62,553Average interest rate
    
    
    0.54
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.54
    %Fixed Federal Home Loan Bank borrowings
    
    
    
    
    
    
    24,000
    
    
    
    8,000
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    52,000
    
    
    
    47,720Average interest rate
    
    
    0.00
    %
    
    
    5.86
    %
    
    
    4.47
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    3.44
    %
    
    
    4.72
    %Variable Federal Home Loan Bank borrowings
    
    
    32,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,000
    
    
    
    28,370Average interest rate
    
    
    2.73
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    2.73
    %TT&L note borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    20,000
    
    
    
    11,814Average interest rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    3.40
    %
    
    
    3.40
    %
  73




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
  74




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##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 Table of Contents
 PageReport of Independent Registered Public Accounting Firm
    
    
    76Consolidated Balance Sheets
    
    
    77Consolidated Statements of Income (Loss)
    
    
    79Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss)
    
    
    81Consolidated Statements of Cash Flows
    
    
    83Notes to Consolidated Financial Statements
    
    
    85
  75




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##### Table of Contents



Internal Control
- Integrated Framework
  
  76




---



##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
   2009
    
    
    2008(Dollars in thousands)AssetsCash and due from banks
    
    $
    123,661
    
    
    
    24,860Federal funds sold
    
    
    7,300
    
    
    
    9,780Interest-bearing deposits in other banks
    
    
    17,033
    
    
    
    3,128Cash and cash equivalents
    
    
    147,994
    
    
    
    37,768Investment securities:Available-for-sale
    
    
    306,216
    
    
    
    299,339Held-to-maturity, at cost (fair values of $492
and $698 at December 31, 2009 and 2008,
respectively)
    
    
    490
    
    
    
    689Loans held for sale
    
    
    19,157
    
    
    
    18,955Loans
    
    
    937,489
    
    
    
    986,831Less allowance for loan losses
    
    
    22,338
    
    
    
    14,742Loans, net
    
    
    915,151
    
    
    
    972,089Premises and equipment, net
    
    
    31,702
    
    
    
    33,960Accrued interest receivable
    
    
    6,091
    
    
    
    7,085Goodwill, net
    
    
    140
    
    
    
    140Bank-owned life insurance
    
    
    23,248
    
    
    
    17,368Restricted equity securities
    
    
    6,338
    
    
    
    6,571Other real estate owned
    
    
    7,974
    
    
    
    5,734Prepaid FDIC assessment
    
    
    6,886
    
    
    
    32Deferred tax asset
    
    
    11,160
    
    
    
    6,342Other assets
    
    
    8,572
    
    
    
    4,967$
    1,491,119
    
    
    
    1,411,039
   77




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##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
   2009
    
    
    2008Liabilities and Stockholders EquityDeposits:Noninterest-bearing
    
    $
    114,780
    
    
    
    111,291Interest-bearing:NOW accounts
    
    
    210,438
    
    
    
    166,561Savings
    
    
    343,740
    
    
    
    247,249Money management accounts
    
    
    44,781
    
    
    
    50,404Time deposits of $100 or more
    
    
    418,751
    
    
    
    385,439Other time deposits
    
    
    148,044
    
    
    
    178,6081,280,534
    
    
    
    1,139,552Securities sold under repurchase agreements
    
    
    3,188
    
    
    
    62,553Advances from Federal Home Loan Bank
    
    
    77,000
    
    
    
    84,000Other borrowed funds
    
    
    600
    
    
    
    Accrued interest payable and other liabilities
    
    
    13,106
    
    
    
    10,283Subordinated debentures
    
    
    22,947
    
    
    
    20,000Total liabilities
    
    
    1,397,375
    
    
    
    1,316,388Stockholders equity:Preferred stock, no par value; 10,000,000 shares
authorized; 0 shares outstanding in 2009
and 2008, respectively
    
    
    
    
    
    
    Common stock, $3.00 par value; 10,000,000 shares
authorized; 6,672,826 and 5,987,674 shares issued and
outstanding in 2009 and 2008, respectively
    
    
    20,018
    
    
    
    17,963Additional paid-in capital
    
    
    62,360
    
    
    
    55,189Retained earnings
    
    
    12,692
    
    
    
    21,455Accumulated other comprehensive (loss) income, net
    
    
    (1,326
    )
    
    
    44Total stockholders equity
    
    
    93,744
    
    
    
    94,651$
    1,491,119
    
    
    
    1,411,039
   78




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##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
   2009
    
    
    2008
    
    
    2007(Dollars in thousands, except per share data)Interest income:Loans, including fees
    
    $
    56,196
    
    
    
    61,568
    
    
    
    66,219Investment securities:Taxable
    
    
    13,376
    
    
    
    12,875
    
    
    
    11,023Tax-exempt
    
    
    906
    
    
    
    716
    
    
    
    800Federal funds sold
    
    
    95
    
    
    
    470
    
    
    
    1,112Interest-bearing deposits in other banks
    
    
    187
    
    
    
    46
    
    
    
    27Total interest income
    
    
    70,760
    
    
    
    75,675
    
    
    
    79,181Interest expense:Deposits (including interest on time deposits over
$100 of $12,135, $13,342 and $11,529 in 2009,
2008 and 2007, respectively)
    
    
    24,249
    
    
    
    30,017
    
    
    
    33,147Federal funds purchased and securities sold
under repurchase agreements
    
    
    327
    
    
    
    1,317
    
    
    
    3,305Other borrowings
    
    
    3,907
    
    
    
    4,155
    
    
    
    4,480Total interest expense
    
    
    28,483
    
    
    
    35,489
    
    
    
    40,932Net interest income
    
    
    42,277
    
    
    
    40,186
    
    
    
    38,249Provision for loan losses
    
    
    30,904
    
    
    
    9,055
    
    
    
    3,823Net interest income after provision
for loan losses
    
    
    11,373
    
    
    
    31,131
    
    
    
    34,426Noninterest income:Service charges and fees on deposits
    
    
    7,051
    
    
    
    7,291
    
    
    
    6,409Gain on sales of loans
    
    
    8,493
    
    
    
    5,747
    
    
    
    5,185(Loss) gain on sale of fixed assets, net
    
    
    (15
    )
    
    
    8
    
    
    
    1,049Investment securities gains (losses), net
    
    
    2,532
    
    
    
    (77
    )
    
    
    (237
    )Other-than-temporary lossTotal impairment loss
    
    
    (991
    )
    
    
    
    
    
    
    Loss recognized in other comprehensive loss
    
    
    16
    
    
    
    
    
    
    
    Net impairment loss recognized in earnings
    
    
    (975
    )
    
    
    
    
    
    
    Retail investment income
    
    
    1,175
    
    
    
    1,096
    
    
    
    1,267Trust services fees
    
    
    1,040
    
    
    
    1,134
    
    
    
    1,132Increase in cash surrender value of bank-owned
life insurance
    
    
    880
    
    
    
    708
    
    
    
    678Miscellaneous income
    
    
    558
    
    
    
    798
    
    
    
    685Total noninterest income
    
    
    20,739
    
    
    
    16,705
    
    
    
    16,168Noninterest expense:Salaries and other personnel expense
    
    
    22,534
    
    
    
    20,852
    
    
    
    19,343Occupancy expenses
    
    
    4,691
    
    
    
    4,373
    
    
    
    3,457Other real estate losses (gains)
    
    
    6,329
    
    
    
    (63
    )
    
    
    29Other operating expenses
    
    
    12,957
    
    
    
    11,590
    
    
    
    9,679Total noninterest expense
    
    
    46,511
    
    
    
    36,752
    
    
    
    32,508Income (loss) before income taxes
    
    
    (14,399
    )
    
    
    11,084
    
    
    
    18,086Income tax (benefit) expense
    
    
    (6,414
    )
    
    
    3,506
    
    
    
    6,321Net income (loss)
    
    $
    (7,985
    )
    
    
    7,578
    
    
    
    11,765
   79




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##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
   2009
    
    
    2008
    
    
    2007Basic net income (loss) per share
    
    $
    (1.24
    )
    
    
    1.27
    
    
    
    1.97Diluted net income (loss) per share
    
    
    (1.24
    )
    
    
    1.26
    
    
    
    1.95Weighted average common shares outstanding
    
    
    6,422,867
    
    
    
    5,972,429
    
    
    
    5,972,793Weighted average number of common and
common equivalent shares outstanding
    
    
    6,422,867
    
    
    
    6,011,689
    
    
    
    6,044,871
   80




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##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
 
 AccumulatedCommon stock
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    other
    
    
    TotalComprehensive
    
    
    Number
    
    
    
    
    
    
    paid-in
    
    
    Retained
    
    
    Treasury
    
    
    comprehensive
    
    
    stockholdersincome (loss)
    
    
    of shares
    
    
    Amount
    
    
    capital
    
    
    earnings
    
    
    stock
    
    
    income (loss), net
    
    
    equityBalance, December 31, 2006
    
    
    
    
    
    
    5,433
    
    
    $
    16,300
    
    
    
    38,989
    
    
    
    25,287
    
    
    
    (17
    )
    
    
    (1,635
    )
    
    
    78,924Comprehensive income:Net income
    
    $
    11,765
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,765
    
    
    
    
    
    
    
    
    
    
    
    11,765Other comprehensive income  unrealized
gain on investment securities available for sale,
net of income tax effect of $857
    
    
    1,663
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,663
    
    
    
    1,663Total comprehensive income
    
    $
    13,428Cash dividends ($0.52 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,824
    )
    
    
    
    
    
    
    
    
    
    
    (2,824
    )Stock options exercised
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    (17
    )
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    1Stock options compensation cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    546Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (317
    )
    
    
    
    
    
    
    (317
    )Balance, December 31, 2007
    
    
    
    
    
    
    5,434
    
    
    $
    16,301
    
    
    
    39,518
    
    
    
    34,228
    
    
    
    (317
    )
    
    
    28
    
    
    
    89,758Comprehensive income:Net income
    
    $
    7,578
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,578
    
    
    
    
    
    
    
    
    
    
    
    7,578Other comprehensive income  unrealized
gain on investment securities available for sale,
net of income tax effect of $13
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    16Total comprehensive income
    
    $
    7,594Cash dividends ($0.52 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,968
    )
    
    
    
    
    
    
    
    
    
    
    (2,968
    )Stock options exercised
    
    
    
    
    
    
    11
    
    
    
    32
    
    
    
    (291
    )
    
    
    
    
    
    
    726
    
    
    
    
    
    
    
    467Stock options compensation cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    209
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    209Stock dividend
    
    
    
    
    
    
    543
    
    
    
    1,630
    
    
    
    15,753
    
    
    
    (17,383
    )
    
    
    
    
    
    
    
    
    
    
    Directors stock purchase plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    36Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (445
    )
    
    
    
    
    
    
    (445
    )Balance, December 31, 2008
    
    
    
    
    
    
    5,988
    
    
    $
    17,963
    
    
    
    55,189
    
    
    
    21,455
    
    
    
    
    
    
    
    44
    
    
    
    94,651Comprehensive income (loss):Net loss
    
    $
    (7,985
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,985
    )
    
    
    
    
    
    
    
    
    
    
    (7,985
    )Other comprehensive loss  unrealized
loss on investment securities available for sale,
net of income tax effect of $873
    
    
    (1,370
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,370
    )
    
    
    (1,370
    )Total comprehensive loss
    
    $
    (9,355
    )Cash dividends ($0.13 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (778
    )
    
    
    
    
    
    
    
    
    
    
    (778
    )Stock options compensation cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188Issuance of common stock
    
    
    
    
    
    
    683
    
    
    
    2,049
    
    
    
    6,961
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,010Directors stock purchase plan
    
    
    
    
    
    
    2
    
    
    
    6
    
    
    
    22
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    33Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )Balance, December 31, 2009
    
    
    
    
    
    
    6,673
    
    
    $
    20,018
    
    
    
    62,360
    
    
    
    12,692
    
    
    
    
    
    
    
    (1,326
    )
    
    
    93,744
   81




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##### Table of Contents



Disclosure of reclassification amount2009
    
    
    2008
    
    
    2007Unrealized holding (losses) gains arising
during period, net of taxes
    
    $
    (686
    )
    
    
    (48
    )
    
    
    2,283Reclassification adjustment for (gains) losses
included in net income (loss)
    
    
    (1,557
    )
    
    
    77
    
    
    
    237Tax effect
    
    
    873
    
    
    
    (13
    )
    
    
    (857
    )Net unrealized (losses) gains in securities
    
    $
    (1,370
    )
    
    
    16
    
    
    
    1,663
   82




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##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
   2009
    
    
    2008
    
    
    2007(Dollars in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    (7,985
    )
    
    
    7,578
    
    
    
    11,765Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Depreciation
    
    
    2,718
    
    
    
    2,343
    
    
    
    1,606Deferred income tax benefit
    
    
    (3,945
    )
    
    
    (929
    )
    
    
    (825
    )Provision for loan losses
    
    
    30,904
    
    
    
    9,055
    
    
    
    3,823Investment securities (gains) losses, net
    
    
    (2,532
    )
    
    
    77
    
    
    
    237Other-than-temporary impairment losses
    
    
    975
    
    
    
    
    
    
    
    Net amortization of premium (accretion of discount)
on investment securities
    
    
    366
    
    
    
    (147
    )
    
    
    (151
    )Increase in cash surrender value of bank-owned
life insurance
    
    
    (880
    )
    
    
    (708
    )
    
    
    (678
    )Stock options compensation cost
    
    
    188
    
    
    
    209
    
    
    
    546Loss (gain) on disposal of premises and equipment
    
    
    15
    
    
    
    (8
    )
    
    
    (1,049
    )Loss (gain) on the sale of other real estate
    
    
    5,741
    
    
    
    (63
    )
    
    
    29Other real estate valuation allowance
    
    
    588
    
    
    
    
    
    
    
    Gain on sales of loans
    
    
    (8,493
    )
    
    
    (5,747
    )
    
    
    (5,185
    )Real estate loans originated for sale
    
    
    (367,532
    )
    
    
    (258,946
    )
    
    
    (252,114
    )Proceeds from sales of real estate loans
    
    
    375,823
    
    
    
    257,042
    
    
    
    260,853Decrease (increase) in accrued interest receivable
    
    
    994
    
    
    
    331
    
    
    
    (1,433
    )Increase in other assets
    
    
    (10,458
    )
    
    
    (2,199
    )
    
    
    (710
    )Increase (decrease) in accrued interest payable and other liabilities
    
    
    2,823
    
    
    
    (107
    )
    
    
    895Net cash provided by operating activities
    
    
    19,310
    
    
    
    7,781
    
    
    
    17,609Cash flows from investing activities:Proceeds from sales of available for sale securities
    
    
    127,524
    
    
    
    27,285
    
    
    
    20,712Proceeds from maturities of available for sale securities
    
    
    128,193
    
    
    
    68,665
    
    
    
    52,200Proceeds from maturities of held to maturity securities
    
    
    203
    
    
    
    765
    
    
    
    1,555Purchase of available for sale securities
    
    
    (263,117
    )
    
    
    (149,781
    )
    
    
    (116,790
    )Purchase of restricted equity securities
    
    
    (322
    )
    
    
    (1,511
    )
    
    
    (619
    )Proceeds from redemption of FHLB stock
    
    
    23
    
    
    
    
    
    
    
    495Purchase of loans
    
    
    (1,809
    )
    
    
    
    
    
    
    Net decrease (increase) in loans
    
    
    7,090
    
    
    
    (127,889
    )
    
    
    (138,469
    )Purchase of Bank-owned life insurance
    
    
    (5,000
    )
    
    
    
    
    
    
    Additions to premises and equipment
    
    
    (747
    )
    
    
    (5,196
    )
    
    
    (12,783
    )Proceeds from sale of other real estate
    
    
    12,183
    
    
    
    715
    
    
    
    312Proceeds from sale of premises and equipment
    
    
    271
    
    
    
    1,513
    
    
    
    3,016Net cash provided by (used in) investing activities
    
    
    4,492
    
    
    
    (185,434
    )
    
    
    (190,371
    )
   83




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##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 2009
    
    
    2008
    
    
    2007Cash flows from financing activities:Net increase in deposits
    
    
    140,982
    
    
    
    187,386
    
    
    
    150,403Net (decrease) increase in federal funds purchased
and securities sold under repurchase agreements
    
    
    (59,365
    )
    
    
    (18,613
    )
    
    
    11,146Advances from Federal Home Loan Bank
    
    
    
    
    
    
    25,000
    
    
    
    10,000Payments of Federal Home Loan Bank advances
    
    
    (7,000
    )
    
    
    
    
    
    
    (11,000
    )Proceeds from subordinated debentures
    
    
    2,947
    
    
    
    
    
    
    
    Proceeds from other borrowed funds
    
    
    600
    
    
    
    
    
    
    
    Principal payments on other borrowed funds
    
    
    
    
    
    
    (500
    )
    
    
    (500
    )Proceeds from issuance of common stock
    
    
    9,010
    
    
    
    
    
    
    
    Proceeds from directors stock purchase plan
    
    
    33
    
    
    
    36
    
    
    
    Purchase of treasury stock
    
    
    (5
    )
    
    
    (445
    )
    
    
    (317
    )Payment of cash dividends
    
    
    (778
    )
    
    
    (2,968
    )
    
    
    (2,824
    )Proceeds from stock options exercised, net of stock redeemed
    
    
    
    
    
    
    467
    
    
    
    1Net cash provided by financing activities
    
    
    86,424
    
    
    
    190,363
    
    
    
    156,909Net increase (decrease) in cash and
cash equivalents
    
    
    110,226
    
    
    
    12,710
    
    
    
    (15,853
    )Cash and cash equivalents at beginning of year
    
    
    37,768
    
    
    
    25,058
    
    
    
    40,911Cash and cash equivalents at end of year
    
    $
    147,994
    
    
    
    37,768
    
    
    
    25,058Supplemental disclosures of cash paid during the year for:Interest
    
    $
    29,620
    
    
    
    35,729
    
    
    
    40,285Income taxes
    
    
    628
    
    
    
    4,092
    
    
    
    7,394Supplemental information on noncash investing activities:Loans transferred to other real estate
    
    $
    20,752
    
    
    
    6,386
    
    
    
    341
   84




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##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
   Summary of Significant Accounting Policies
   (a) Subsequent Events
  (b) Basis of Presentation
     85




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##### Table of Contents



(c) Cash and Cash Equivalents
  (d) Investment Securities
     (e) Loans and Allowance for Loan Losses
   86




---



##### Table of Contents



Concentration of Credit Risk:
  Certain Purchased Loans:
    Allowance for Loan Losses:
   87




---



##### Table of Contents



88




---



##### Table of Contents



(f) Premises and Equipment
  (g) Other Real Estate
  (h) Goodwill
  (i) Stock-Based Compensation
   89




---



##### Table of Contents



(j) Income Taxes
    (k) Income (Loss) Per Share
  December 31,2009
    
    
    2008
    
    
    2007Weighted average common shares outstanding
for basic earnings per common share
    
    
    6,422,867
    
    
    
    5,972,429
    
    
    
    5,972,793Add: Dilutive effects of assumed exercises of
stock options
    
    
    
    
    
    
    39,260
    
    
    
    72,078Weighted average number of common and
common equivalent shares outstanding
    
    
    6,422,867
    
    
    
    6,011,689
    
    
    
    6,044,871
 (l) Other Comprehensive Income (Loss)
   90




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##### Table of Contents



(m) Segment Disclosures
  (n) Adoption of New Accounting Standards
    91




---



##### Table of Contents



The Hierarchy of Generally Accepted Accounting
Principles, FASB Accounting Standards Codification
  (o) Newly Issued Not Yet Effective Standards
   92




---



##### Table of Contents



(p) Bank Owned Life Insurance
  (q) Loss Contingencies
  (r) Reclassifications
  (s) Rounding
  (2) Cash and Due From Banks
   93




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##### Table of Contents



(3) Investment Securities
  2009Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair value(Dollars in Thousands)Held to maturity:Obligations of states and
political subdivisions
    
    $
    490
    
    
    
    2
    
    
    
    
    
    
    
    492$
    490
    
    
    
    2
    
    
    
    
    
    
    
    492Available for sale:Obligations of U.S.
Government agencies
    
    $
    55,086
    
    
    
    38
    
    
    
    (968
    )
    
    
    54,156Obligations of states and
political subdivisions
    
    
    26,402
    
    
    
    299
    
    
    
    (521
    )
    
    
    26,180Mortgage-backed securitiesU.S. GSEs MBS  residential
    
    
    98,667
    
    
    
    2,250
    
    
    
    (142
    )
    
    
    100,775U.S. GSEs CMO
    
    
    107,153
    
    
    
    1,116
    
    
    
    (1,427
    )
    
    
    106,842Other CMO
    
    
    8,484
    
    
    
    142
    
    
    
    (399
    )
    
    
    8,227Corporate bonds
    
    
    12,591
    
    
    
    35
    
    
    
    (2,594
    )
    
    
    10,032Equity securities
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4$
    308,387
    
    
    
    3,880
    
    
    
    (6,051
    )
    
    
    306,216
 2008Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair value(Dollars in Thousands)Held to maturity:Obligations of states and
political subdivisions
    
    $
    689
    
    
    
    9
    
    
    
    
    
    
    
    698$
    689
    
    
    
    9
    
    
    
    
    
    
    
    698Available for sale:Obligations of U.S.
Government agencies
    
    $
    109,256
    
    
    
    1,448
    
    
    
    (29
    )
    
    
    110,675Obligations of states and
political subdivisions
    
    
    17,384
    
    
    
    131
    
    
    
    (559
    )
    
    
    16,956Mortgage-backed securitiesU.S. GSEs MBS  residential
    
    
    117,373
    
    
    
    3,427
    
    
    
    (28
    )
    
    
    120,772U.S. GSEs CMO
    
    
    28,179
    
    
    
    359
    
    
    
    (113
    )
    
    
    28,425Other CMO
    
    
    11,997
    
    
    
    
    
    
    
    (1,159
    )
    
    
    10,838Corporate bonds
    
    
    15,032
    
    
    
    
    
    
    
    (3,405
    )
    
    
    11,627Equity securities
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    46$
    299,267
    
    
    
    5,365
    
    
    
    (5,293
    )
    
    
    299,339
    94




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##### Table of Contents



Securities
    
    
    Securitiesheld to maturity
    
    
    available for saleAmortized
    
    
    Estimated
    
    
    Amorized
    
    
    Estimatedcost
    
    
    fair value
    
    
    cost
    
    
    fair valueDollars in thousandsOne year or less
    
    $
    180
    
    
    
    180
    
    
    
    1,181
    
    
    
    1,188After one year through five years
    
    
    310
    
    
    
    312
    
    
    
    4,617
    
    
    
    4,524After five years through ten years
    
    
    
    
    
    
    
    
    
    
    40,517
    
    
    
    40,356After ten years
    
    
    
    
    
    
    
    
    
    
    262,068
    
    
    
    260,144$
    490
    
    
    
    492
    
    
    
    308,383
    
    
    
    306,212
  December 31, 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 impairedObligations of U.S.
Government agencies
    
    $
    35,628
    
    
    
    968
    
    
    
    
    
    
    
    
    
    
    
    35,628
    
    
    
    968Obligations of states and
political subdivisions
    
    
    8,644
    
    
    
    220
    
    
    
    4,457
    
    
    
    301
    
    
    
    13,101
    
    
    
    521Mortgage-backed securitiesU.S. GSEs MBS  residential
    
    
    29,344
    
    
    
    142
    
    
    
    
    
    
    
    
    
    
    
    29,344
    
    
    
    142U.S. GSEs CMO
    
    
    61,373
    
    
    
    1,408
    
    
    
    665
    
    
    
    19
    
    
    
    62,038
    
    
    
    1,427Other CMO
    
    
    552
    
    
    
    98
    
    
    
    4,243
    
    
    
    285
    
    
    
    4,795
    
    
    
    383Corporate bonds
    
    
    733
    
    
    
    267
    
    
    
    6,291
    
    
    
    2,327
    
    
    
    7,024
    
    
    
    2,594$
    136,274
    
    
    
    3,103
    
    
    
    15,656
    
    
    
    2,932
    
    
    
    151,930
    
    
    
    6,035Other-than-temporarily impairedMortgage-backed securities
Other CMO
    
    $
    
    
    
    
    
    
    
    
    748
    
    
    
    16
    
    
    
    748
    
    
    
    16Total
    
    $
    136,274
    
    
    
    3,103
    
    
    
    16,404
    
    
    
    2,948
    
    
    
    152,678
    
    
    
    6,051
  95




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##### Table of Contents



December 31, 2008Less 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
    
    $
    6,462
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    6,462
    
    
    
    29Obligations of states and
political subdivisions
    
    
    5,556
    
    
    
    112
    
    
    
    5,619
    
    
    
    447
    
    
    
    11,175
    
    
    
    559Mortgage-backed securitiesU.S. GSEs MBS  residential
    
    
    8,045
    
    
    
    17
    
    
    
    1,316
    
    
    
    11
    
    
    
    9,361
    
    
    
    28U.S. GSEs CMO
    
    
    6,477
    
    
    
    86
    
    
    
    1,034
    
    
    
    27
    
    
    
    7,511
    
    
    
    113Other CMO
    
    
    8,580
    
    
    
    650
    
    
    
    2,258
    
    
    
    509
    
    
    
    10,838
    
    
    
    1,159Corporate bonds
    
    
    6,995
    
    
    
    1,912
    
    
    
    4,632
    
    
    
    1,493
    
    
    
    11,627
    
    
    
    3,405$
    42,115
    
    
    
    2,806
    
    
    
    14,859
    
    
    
    2,487
    
    
    
    56,974
    
    
    
    5,293Total
    
    $
    42,115
    
    
    
    2,806
    
    
    
    14,859
    
    
    
    2,487
    
    
    
    56,974
    
    
    
    5,293
 Other-Than-Temporary Impairment
 Investments  Debt and Equity
Securities.
   96




---



##### Table of Contents



Mortgage-backed Securities
      97




---



##### Table of Contents



Corporate Securities
     98




---



##### Table of Contents



Beginning balance, January 1, 2009
    
    $
    Amounts related to credit loss for which
an other-than-temporary impairment
was not previously recognized
    
    
    975Additions/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
    
    
    Ending balance, December 31, 2009
    
    $
    975
  SilvertonFinancialServices, Inc
    
    
    CMO 1
    
    
    CMO 2
    
    
    Total(Dollars in thousands)Amount of other-than temporary-impairment
related to credit losses at January 1, 2009
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Addition for credit losses recognized in earnings
    
    
    500
    
    
    
    155
    
    
    
    320
    
    
    
    975Amount of other-than temporary-impairment
related to credit losses at December 31, 2009
    
    $
    500
    
    
    $
    155
    
    
    $
    320
    
    
    $
    975
   99




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##### Table of Contents



EstimatedAmortized
    
    
    Fair
    
    
    Unrealized
    
    
    Ratings as of Dec. 31, 2009(Dollars in thousands)
    
    cost
    
    
    Value
    
    
    Gains (Losses)
    
    
    S&P
    
    Fitch
    
    MoodysSilverton Financial Services, Inc.
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    NR
    
    NR
    
    NRCMO 1
    
    
    764
    
    
    
    748
    
    
    
    (16
    )
    
    CCC
    
    C
    
    NRCMO 2
    
    
    1,270
    
    
    
    1,399
    
    
    
    129
    
    
    CCC
    
    NR
    
    Caa2Total
    
    $
    2,034
    
    
    $
    2,147
    
    
    $
    113
  (4) Loans
  2009
    
    
    2008Dollars in thousandsCommercial, financial, and agricultural
    
    $
    102,160
    
    
    $
    109,784Real estate:Construction
    
    
    270,062
    
    
    
    369,731Residential
    
    
    219,217
    
    
    
    212,856Commercial
    
    
    322,864
    
    
    
    266,362Consumer installment
    
    
    23,241
    
    
    
    28,496937,544
    
    
    
    987,229Less allowance for loan losses
    
    
    22,338
    
    
    
    14,742Less deferred loan origination fees
    
    
    55
    
    
    
    398$
    915,151
    
    
    $
    972,089
  2009
    
    
    2008
    
    
    2007Dollars in thousandsBalance, beginning of year
    
    $
    14,742
    
    
    
    11,800
    
    
    
    9,777Provision for loan losses
    
    
    30,904
    
    
    
    9,055
    
    
    
    3,823Charge-offs
    
    
    (24,133
    )
    
    
    (6,736
    )
    
    
    (2,576
    )Recoveries
    
    
    825
    
    
    
    623
    
    
    
    776Balance, end of year
    
    $
    22,338
    
    
    
    14,742
    
    
    
    11,800
  100




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##### Table of Contents



2009
    
    
    2008Dollars in thousandsYear end loans with no allocated allowance
for loan losses
    
    $
    22,921
    
    
    $
    16,836Year end loans with allocated allowance
for loan losses
    
    
    11,746
    
    
    
    16,944$
    34,667
    
    
    $
    33,780Amount of the allowance for loan loss allocated
    
    $
    1,979
    
    
    $
    2,201
 2009
    
    
    2008
    
    
    2007Dollars in thousandsAverage of individually impaired loans during year
    
    $
    37,212
    
    
    $
    29,397
    
    
    $
    5,022Interest income recognized during impairment
    
    
    784
    
    
    
    702
    
    
    
    598Cash-basis interest income recognized
    
    
    784
    
    
    
    702
    
    
    
    598
  2009
    
    
    2008Dollars in thousandsLoans past due over 90 days still on accrual
    
    $
    
    
    
    $
    7,298Nonaccrual loans
    
    
    32,257
    
    
    
    34,781
    101




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##### Table of Contents



2009
    
    
    2008
    
    
    2007Dollars in thousandsConstruction
    
    $
    2,121
    
    
    
    
    
    
    
    Carrying
amount, net of
allowance of $706,
$0 and $0
respectively
    
    $
    1,415
    
    
    
    
    
    
    
    
   2009
    
    
    2008
    
    
    2007Dollars in thousandsLoans purchased during the year
    
    $
    2,121
    
    
    
    
    
    
    
    Loans at end of year
    
    
    1,415
    
    
    
    
    
    
    
    
   Dollars in thousandsBalance at beginning of year
    
    $
    39,360New loans
    
    
    53,818Effect of changes in composition
of related parties
    
    
    12Principal repayments
    
    
    (57,336
    )Balance at end of year
    
    $
    35,854
   102




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##### Table of Contents



(5) Real Estate Owned
  2009
    
    
    2008
    
    
    2007(Dollars in thousands)Beginning balance, January 1
    
    $
    5,734
    
    
    $
    
    
    
    $
    Additions
    
    
    20,752
    
    
    
    6,386
    
    
    
    341Valuation allowance
    
    
    (588
    )
    
    
    
    
    
    
    Sales
    
    
    (12,183
    )
    
    
    (715
    )
    
    
    (312
    )(Loss) gain on sale of OREO
    
    
    (5,741
    )
    
    
    63
    
    
    
    (29
    )Ending balance, December 31
    
    $
    7,974
    
    
    $
    5,734
    
    
    $
    
  2009
    
    
    2008
    
    
    2007(Dollars in thousands)Beginning balance
    
    $
    
    
    
    $
    
    
    
    $
    Provision charged to expense
    
    
    588
    
    
    
    
    
    
    
    Ending balance
    
    $
    588
    
    
    $
    
    
    
    $
    
  2009
    
    
    2008
    
    
    2007(Dollars in thousands)Net loss (gain) on sales
    
    $
    5,741
    
    
    $
    (63
    )
    
    $
    29OREO expenses, net of
rental income
    
    
    248
    
    
    
    72
    
    
    
    5OREO valuation allowance
    
    
    588
    
    
    
    
    
    
    
    $
    6,577
    
    
    $
    9
    
    
    $
    34
 (6) Fair Value Measurements
  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.
  103




---



##### Table of Contents



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.
  Investment Securities:
 Mortgage Banking Derivatives:
 Loans Held for Sale:
 Impaired Loans
 Investments in Tax Credits:
 Other Real Estate Owned
  104




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##### Table of Contents



Assets and Liabilities Measured on a Recurring Basis
  Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableDecember 31,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Inputs2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Available-for-sale securitiesObligations of U.S.
Government agencies
    
    $
    54,156
    
    
    
    9,489
    
    
    
    44,667
    
    
    
    Obligations of states and
political subdivisions
    
    
    26,180
    
    
    
    
    
    
    
    26,180
    
    
    
    Mortgage-backed securitiesU.S. GSEs MBS  residential
    
    
    100,775
    
    
    
    12,174
    
    
    
    88,601
    
    
    
    U.S. GSEs CMO
    
    
    106,842
    
    
    
    10,510
    
    
    
    96,332
    
    
    
    Other CMO
    
    
    8,227
    
    
    
    
    
    
    
    3,894
    
    
    
    4,333Corporate bonds
    
    
    10,032
    
    
    
    
    
    
    
    
    
    
    
    10,032Equity securities
    
    
    4
    
    
    
    4
    
    
    
    
    
    
    
    Total available-for-sale securities
    
    $
    306,216
    
    
    
    32,177
    
    
    
    259,674
    
    
    
    14,365Tax credits
    
    
    435
    
    
    
    
    
    
    
    
    
    
    
    435Loans held for sale
    
    
    19,157
    
    
    
    
    
    
    
    19,157
    
    
    
    Mortgage banking derivatives
    
    
    182
    
    
    
    
    
    
    
    182
    
    
    
    Total
    
    $
    325,990
    
    
    
    32,177
    
    
    
    279,013
    
    
    
    14,800
  105




---



##### Table of Contents



Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableDecember 31,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Available-for-sale securitiesObligations of U.S.
Government agencies
    
    $
    110,675
    
    
    
    
    
    
    
    110,675
    
    
    
    Obligations of states and
political subdivisions
    
    
    16,956
    
    
    
    
    
    
    
    16,956
    
    
    
    Mortgage-backed securitiesU.S. GSEs MBS  residential
    
    
    120,772
    
    
    
    
    
    
    
    120,772
    
    
    
    U.S. GSEs CMO
    
    
    28,425
    
    
    
    
    
    
    
    28,425
    
    
    
    Other CMO
    
    
    10,838
    
    
    
    
    
    
    
    10,838
    
    
    
    Corporate bonds
    
    
    11,627
    
    
    
    
    
    
    
    7,497
    
    
    
    4,130Equity securities
    
    
    46
    
    
    
    46
    
    
    
    
    
    
    
    Total available-for-sale securities
    
    $
    299,339
    
    
    
    46
    
    
    
    295,163
    
    
    
    4,130Tax credits
    
    
    515
    
    
    
    
    
    
    
    
    
    
    
    515Loans held for sale
    
    
    18,955
    
    
    
    
    
    
    
    18,955
    
    
    
    Mortgage banking derivatives
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    Total
    
    $
    318,817
    
    
    
    46
    
    
    
    314,126
    
    
    
    4,645
  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)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
    
    
    
    
    
    
    (975
    )
    
    
    (975
    )Amortization of tax credit investment
    
    
    (80
    )
    
    
    
    
    
    
    (80
    )Included in other comprehensive income (loss)
    
    
    
    
    
    
    1,595
    
    
    
    1,595Transfers in and/or out of Level 3
    
    
    
    
    
    
    9,615
    
    
    
    9,615Ending balance, December 31, 2009
    
    $
    435
    
    
    
    14,365
    
    
    
    14,800
  106




---



##### 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, 2008
    
    $
    594
    
    
    
    
    
    
    
    594Total gains or losses (realized/unrealized)Included in earningsOther-than-temporary impairment
    
    
    
    
    
    
    
    
    
    
    Amortization of tax credit investment
    
    
    (79
    )
    
    
    
    
    
    
    (79
    )Included in other comprehensive income
    
    
    
    
    
    
    (282
    )
    
    
    (282
    )Transfers in and/or out of Level 3
    
    
    
    
    
    
    4,412
    
    
    
    4,412Ending balance, December 31, 2008
    
    $
    515
    
    
    
    4,130
    
    
    
    4,645
 Assets and Liabilities Measured on a Non-Recurring Basis
  Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableDecember 31,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Inputs2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Assets:Impaired loans
    
    $
    9,767
    
    
    
    
    
    
    
    
    
    
    
    9,767Other real estate owned
    
    
    7,974
    
    
    
    
    
    
    
    
    
    
    
    7,974
 Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableDecember 31,
    
    
    Identical Assets
    
    
    Observable 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
     107




---



##### Table of Contents



(7) Premises and Equipment
  2009
    
    
    2008(Dollars in thousands)Land
    
    $
    7,819
    
    
    $
    7,868Buildings
    
    
    23,876
    
    
    
    24,289Furniture and equipment
    
    
    16,152
    
    
    
    15,25147,847
    
    
    
    47,408Less accumulated depreciation
    
    
    16,145
    
    
    
    13,448$
    31,702
    
    
    $
    33,960
  (8) Commitments
  (Dollars in thousands)2010
    
    $
    3612011
    
    
    2842012
    
    
    1752013
    
    
    372014
    
    
    352015 & Beyond
    
    
    61$
    953
    108




---



##### Table of Contents



(9) Deposits
  Dollars in thousands2010
    
    $
    379,3832011
    
    
    106,1772012
    
    
    67,2612013
    
    
    4,9592014
    
    
    6,791Thereafter
    
    
    2,224Total
    
    $
    566,795
  (10) Borrowings
 Securities Sold Under Repurchase Agreements
   109




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007(Dollars in thousands)Securities Sold Under Repurchase AgreementsWeighted average borrowing rate at
year-end
    
    
    1.50
    %
    
    
    0.96
    %
    
    
    4.38
    %Weighted average borrowing rate during
the year
    
    
    0.80
    %
    
    
    2.15
    %
    
    
    5.03
    %Average daily balance during the year
    
    $
    40,820
    
    
    
    59,925
    
    
    
    64,501Maximum month-end balance during
the year
    
    
    61,378
    
    
    
    64,734
    
    
    
    74,525Balance at year-end
    
    $
    3,188
    
    
    
    62,553
    
    
    
    63,629Federal Funds Purchased
    
    
    
    
    
    
    
    
    
    
    17,537$
    3,188
    
    
    
    62,553
    
    
    
    81,166
 Advances from Federal Home Loan Bank
   110




---



##### Table of Contents



2009
    
    
    Rate
    
    
    2008
    
    
    Rate(Dollars in thousands)Due March 22, 2010
    
    $
    
    
    
    
    0.000
    %
    
    $
    7,000
    
    
    
    6.180
    %Due March 30, 2010
    
    
    5,000
    
    
    
    6.020
    %
    
    
    5,000
    
    
    
    6.020
    %Due September 29, 2010
    
    
    5,000
    
    
    
    5.820
    %
    
    
    5,000
    
    
    
    5.820
    %Due October 18, 2010
    
    
    7,000
    
    
    
    5.460
    %
    
    
    7,000
    
    
    
    5.460
    %Due April 29, 2011
    
    
    2,000
    
    
    
    3.455
    %
    
    
    2,000
    
    
    
    3.455
    %Due May 2, 2011
    
    
    6,000
    
    
    
    4.800
    %
    
    
    6,000
    
    
    
    4.800
    %Due April 4, 2013
convertible flipper
    
    
    10,000
    
    
    
    2.900
    %
    
    
    10,000
    
    
    
    3.708
    %Due July 18, 2013
convertible flipper
    
    
    3,000
    
    
    
    2.720
    %
    
    
    3,000
    
    
    
    4.003
    %Due July 26, 2017
    
    
    10,000
    
    
    
    4.406
    %
    
    
    10,000
    
    
    
    4.406
    %Due January 31, 2018
    
    
    10,000
    
    
    
    2.475
    %
    
    
    10,000
    
    
    
    2.475
    %Due January 27, 2019
convertible flipper
    
    
    5,000
    
    
    
    4.100
    %
    
    
    5,000
    
    
    
    0.000
    %Due April 22, 2019
convertible flipper
    
    
    8,000
    
    
    
    4.750
    %
    
    
    8,000
    
    
    
    3.559
    %Due May 22, 2019
convertible flipper
    
    
    6,000
    
    
    
    4.680
    %
    
    
    6,000
    
    
    
    1.653
    %$
    77,000
    
    
    
    
    
    
    $
    84,000Total weighted average rate
    
    
    4.23
    %
    
    
    
    
    
    
    3.96
    %
    111




---



##### Table of Contents



Other Borrowed Funds
  (11) Subordinated Debentures
     112




---



##### Table of Contents



Special Redemption During the12-Month Period Beginning June 15
    
    Percentage of Principal Amount2010
    
    
    100.785
    %2011 and thereafter
    
    
    100.000
    %
   113




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##### Table of Contents



(12) Income Taxes
  2009
    
    
    2008
    
    
    2007Current tax (benefit) expense:
    
    (Dollars in thousands)Federal
    
    $
    (2,469
    )
    
    $
    4,268
    
    
    $
    6,543State
    
    
    
    
    
    
    167
    
    
    
    603Total current
    
    
    (2,469
    )
    
    
    4,435
    
    
    
    7,146Deferred tax benefitFederal
    
    
    (2,500
    )
    
    
    (800
    )
    
    
    (681
    )State
    
    
    (1,445
    )
    
    
    (129
    )
    
    
    (144
    )Total deferred
    
    
    (3,945
    )
    
    
    (929
    )
    
    
    (825
    )Total income tax (benefit) expense
    
    $
    (6,414
    )
    
    $
    3,506
    
    
    $
    6,321
  Years ended December 312009
    
    
    2008
    
    
    2007(Dollars in thousands)Computed expected tax (benefit) expense
    
    $
    (4,896
    )
    
    $
    3,879
    
    
    $
    6,330Increase (decrease) resulting from:Tax-exempt interest income
    
    
    (370
    )
    
    
    (326
    )
    
    
    (368
    )Nondeductible interest expense
    
    
    33
    
    
    
    40
    
    
    
    53State income tax, net of Federal tax
effect
    
    
    (966
    )
    
    
    25
    
    
    
    298Earnings on cash surrender value of
life insurance
    
    
    (299
    )
    
    
    (248
    )
    
    
    (237
    )Nondeductible stock compensation expense
    
    
    64
    
    
    
    73
    
    
    
    191Meals, entertainment, and club dues
    
    
    58
    
    
    
    59
    
    
    
    51Other, net
    
    
    (38
    )
    
    
    4
    
    
    
    3$
    (6,414
    )
    
    $
    3,506
    
    
    $
    6,321
  114




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2009
    
    
    2008(Dollars in thousands)Deferred tax assets:Allowance for loan losses
    
    $
    8,556
    
    
    $
    5,678Deferred compensation
    
    
    2,177
    
    
    
    1,611Nonaccrual loan interest income
    
    
    29
    
    
    
    600State net operating loss and other carryovers
    
    
    982
    
    
    
    Unrealized loss on investment securities available for sale
    
    
    845
    
    
    
    Other
    
    
    427
    
    
    
    311Total deferred tax assets
    
    
    13,016
    
    
    
    8,200Deferred tax liabilities:Depreciation
    
    
    (1,198
    )
    
    
    (1,225
    )Prepaid assets and other
    
    
    (658
    )
    
    
    (605
    )Unrealized gain on investment securities available for sale
    
    
    
    
    
    
    (28
    )Total deferred tax liabilities
    
    
    (1,856
    )
    
    
    (1,858
    )Net deferred tax asset
    
    $
    11,160
    
    
    $
    6,342
     115




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(13) Related Party Transactions
  (14) Regulatory Capital Requirements
      116




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##### Table of Contents



To be well capitalizedFor capital adequacy
    
    
    under prompt correctiveActual
    
    
    purposes
    
    
    action provisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in thousands)Southeastern Bank Financial Corporation
and subsidiaries consolidated:As of December 31, 2009:Total Capital (to risk-
weighted assets)
    
    $
    130,395
    
    
    
    12.55
    %
    
    $
    83,146
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ATier I Capital  risk-based
(to risk-weighted assets)
    
    
    114,930
    
    
    
    11.06
    %
    
    
    41,573
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ATier I Capital  leverage
(to average assets)
    
    
    114,930
    
    
    
    7.51
    %
    
    
    61,177
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AAs of December 31, 2008:Total Capital (to risk-
weighted assets)
    
    
    128,177
    
    
    
    11.70
    %
    
    $
    87,658
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ATier I Capital  risk-based
(to risk-weighted assets)
    
    
    114,467
    
    
    
    10.45
    %
    
    
    43,829
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ATier I Capital  leverage
(to average assets)
    
    
    114,467
    
    
    
    8.14
    %
    
    
    56,231
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/A
 To be well capitalizedFor capital adequacy
    
    
    under prompt correctiveActual
    
    
    purposes
    
    
    action provisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in thousands)Georgia Bank & Trust Company:As of December 31, 2009:Total Capital (to risk-
weighted assets)
    
    $
    111,465
    
    
    
    12.25
    %
    
    $
    72,782
    
    
    
    8.00
    %
    
    $
    90,978
    
    
    
    10.00
    %Tier I Capital  risk-based
(to risk-weighted assets)
    
    
    99,984
    
    
    
    10.99
    %
    
    
    36,391
    
    
    
    4.00
    %
    
    
    54,587
    
    
    
    6.00
    %Tier I Capital  leverage
(to average assets)
    
    
    99,984
    
    
    
    7.34
    %
    
    
    61,301
    
    
    
    4.50
    %
    
    
    68,112
    
    
    
    5.00
    %As of December 31, 2008:Total Capital (to risk-
weighted assets)
    
    
    107,821
    
    
    
    10.99
    %
    
    $
    78,491
    
    
    
    8.00
    %
    
    $
    98,114
    
    
    
    10.00
    %Tier I Capital  risk-based
(to risk-weighted assets)
    
    
    95,546
    
    
    
    9.74
    %
    
    
    39,246
    
    
    
    4.00
    %
    
    
    58,869
    
    
    
    6.00
    %Tier I Capital  leverage
(to average assets)
    
    
    95,546
    
    
    
    7.47
    %
    
    
    57,551
    
    
    
    4.50
    %
    
    
    63,945
    
    
    
    5.00
    %
  117




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To be well capitalizedFor capital adequacy
    
    
    under prompt correctiveActual
    
    
    purposes
    
    
    action provisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in thousands)Southern Bank & Trust:As of December 31, 2009:Total Capital (to risk-
weighted assets)
    
    $
    15,734
    
    
    
    12.36
    %
    
    $
    10,183
    
    
    
    8.00
    %
    
    $
    12,729
    
    
    
    10.00
    %Tier I Capital  risk-based
(to risk-weighted assets)
    
    
    14,136
    
    
    
    11.11
    %
    
    
    5,091
    
    
    
    4.00
    %
    
    
    7,637
    
    
    
    6.00
    %Tier I Capital  leverage
(to average assets)
    
    
    14,136
    
    
    
    8.52
    %
    
    
    6,640
    
    
    
    4.00
    %
    
    
    8,300
    
    
    
    5.00
    %As of December 31, 2008:Total Capital (to risk-
weighted assets)
    
    
    15,356
    
    
    
    13.57
    %
    
    $
    9,055
    
    
    
    8.00
    %
    
    $
    11,319
    
    
    
    10.00
    %Tier I Capital  risk-based
(to risk-weighted assets)
    
    
    13,939
    
    
    
    12.31
    %
    
    
    4,528
    
    
    
    4.00
    %
    
    
    6,792
    
    
    
    6.00
    %Tier I Capital  leverage
(to average assets)
    
    
    13,939
    
    
    
    11.28
    %
    
    
    4,943
    
    
    
    4.00
    %
    
    
    6,179
    
    
    
    5.00
    %
   (15) Employee Benefit Plans
    118




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(16) Stock Option Plan
    119




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007Options granted
    
    
    n/a
    
    
    
    19,300
    
    
    
    30,250Risk-free interest rate
    
    
    n/a
    
    
    
    3.23
    %
    
    
    4.74
    %Dividend yield
    
    
    n/a
    
    
    
    2.00
    %
    
    
    2.00
    %Expected life at date of grant
    
    
    n/a
    
    
    8.01 years
    
    7.86 yearsVolatility
    
    
    n/a
    
    
    
    21.96
    %
    
    
    17.50
    %Weighted average fair value of
options granted
    
    
    n/a
    
    
    $
    7.36
    
    
    $
    15.12
  120




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WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term (Years)
    
    
    ValueOptions outstanding  December 31, 2008
    
    
    277,263
    
    
    $
    27.02
    
    
    
    
    
    
    
    Options lapsed in 2009
    
    
    (2,200
    )
    
    
    36.82
    
    
    
    
    
    
    
    Options Outstanding  December 31, 2009
    
    
    275,063
    
    
    $
    26.94
    
    
    
    4.97
    
    
    
    Fully vested or expected to vest
    
    
    275,063
    
    
    $
    26.94
    
    
    
    4.97
    
    
    
    Exercisable at December 31, 2009
    
    
    208,253
    
    
    $
    24.71
    
    
    
    4.32
    
    
    
    
  2009
    
    
    2008
    
    
    2007(Dollars in thousands, except per share data)Intrinsic value of options exercised
    
    $
    
    
    
    
    423
    
    
    
    27Intrinsic value of options forfeit
    
    
    
    
    
    
    
    
    
    
    Intrinsic value of options lapsed
    
    
    
    
    
    
    
    
    
    
    Cash received from option exercises
    
    
    
    
    
    
    466
    
    
    
    1Fair market value of stock received from option exercises
    
    
    
    
    
    
    
    
    
    
    17Weighted average grant-date fair value
    
    
    
    
    
    
    7.36
    
    
    
    15.12
    WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term (Years)
    
    
    ValueOptions outstanding  December 31, 2008
    
    
    11,000
    
    
    $
    31.18
    
    
    
    6.50
    
    
    
    Options Outstanding  December 31, 2009
    
    
    11,000
    
    
    $
    31.18
    
    
    
    5.50
    
    
    $
    Exercisable at December 31, 2009
    
    
    8,250
    
    
    $
    31.18
    
    
    
    5.50
    
    
    $
    
  121




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##### Table of Contents



(17) Other Operating Expenses
  2009
    
    
    2008
    
    
    2007(Dollars in thousands)Marketing and business development
    
    $
    1,451
    
    
    $
    1,668
    
    
    $
    1,586Processing expense
    
    
    1,733
    
    
    
    1,917
    
    
    
    1,750Legal and professional fees
    
    
    1,552
    
    
    
    1,763
    
    
    
    1,508Data processing expense
    
    
    1,265
    
    
    
    1,203
    
    
    
    942FDIC Insurance
    
    
    2,723
    
    
    
    898
    
    
    
    113Other expense
    
    
    4,233
    
    
    
    4,141
    
    
    
    3,780Total other operating expense
    
    $
    12,957
    
    
    $
    11,590
    
    
    $
    9,679
 (18) Fair Value of Financial Instruments
     122




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##### Table of Contents



(a)
    
    Cash and Cash Equivalents
  (b)
    
    Investment Securities
  (c)
    
    Loans, net
  (d)
    
    Deposits
   (e)
    
    Securities Sold Under Repurchase Agreements
   123




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##### Table of Contents



(f)
    
    Other Borrowed Funds
  (g)
    
    Advances from FHLB
  (h)
    
    Subordinated debentures
  (i)
    
    Commitments
   December 312009
    
    
    2008Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    Estimatedamount
    
    
    fair value
    
    
    amount
    
    
    fair value(Dollars in thousands)Financial assets:Cash and cash
equivalents
    
    $
    147,994
    
    
    
    147,994
    
    
    $
    37,768
    
    
    
    37,768Investment securities
    
    
    306,706
    
    
    
    306,708
    
    
    
    300,028
    
    
    
    300,037Loans, net
    
    
    934,308
    
    
    
    943,885
    
    
    
    991,044
    
    
    
    997,338Financial liabilities:Deposits
    
    
    1,280,534
    
    
    
    1,263,137
    
    
    
    1,139,552
    
    
    
    1,141,627Securities sold under
repurchase agreements
    
    
    3,188
    
    
    
    3,188
    
    
    
    62,553
    
    
    
    62,553Other borrowed funds
    
    
    600
    
    
    
    600
    
    
    
    
    
    
    
    Advances from FHLB
    
    
    77,000
    
    
    
    80,670
    
    
    
    84,000
    
    
    
    76,090Subordinated debentures
    
    
    22,947
    
    
    
    14,793
    
    
    
    20,000
    
    
    
    11,814
  124




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##### Table of Contents



(19) Condensed Financial Statements of Southeastern Bank Financial Corporation (Parent Only)
  Condensed Balance Sheets
 December 312009
    
    
    2008(Dollars in thousands)AssetsCash and due from banks
    
    $
    564
    
    
    
    1,921Investment securities
    
    
    2,005
    
    
    
    2,042available for sale
Investment in banking subsidiaries
    
    
    112,932
    
    
    
    109,671Premises and equipment, net
    
    
    811
    
    
    
    856Accrued interest receivable
    
    
    20
    
    
    
    20Deferred tax asset, net
    
    
    12
    
    
    
    2Income tax receivable
    
    
    1,178
    
    
    
    166Other assets
    
    
    5
    
    
    
    6$
    117,527
    
    
    
    114,684Liabilities and
Stockholders EquityLiabilities:Accrued interest and other
liabilities
    
    $
    836
    
    
    
    33Subordinated debentures
    
    
    22,947
    
    
    
    20,000Total liabilities
    
    
    23,783
    
    
    
    20,033Stockholders equity
    
    
    93,744
    
    
    
    94,651$
    117,527
    
    
    
    114,684
  125




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##### Table of Contents



Condensed Statements of Income (Loss)
 Years ended December 312009
    
    
    2008
    
    
    2007(Dollars in thousands)Income:Dividend income
    
    $
    15
    
    
    
    1,481
    
    
    
    43Interest income on investment securities
    
    
    110
    
    
    
    143
    
    
    
    294Investment securities (losses) gains, net
    
    
    (35
    )
    
    
    (204
    )
    
    
    23Miscellaneous income
    
    
    102
    
    
    
    102
    
    
    
    102192
    
    
    
    1,522
    
    
    
    462Expense:Interest expense
    
    
    647
    
    
    
    960
    
    
    
    1,435Salaries and other personnel expense
    
    
    (6
    )
    
    
    (6
    )
    
    
    24Occupancy expense
    
    
    45
    
    
    
    60
    
    
    
    52Other operating expense
    
    
    139
    
    
    
    187
    
    
    
    166825
    
    
    
    1,201
    
    
    
    1,677Income (loss) before equity in
undistributed (excess distributed)
earnings of banking subsidiaries
    
    
    (633
    )
    
    
    321
    
    
    
    (1,215
    )Equity in (excess distributed) undistributed
earnings of banking subsidiaries
    
    
    (7,593
    )
    
    
    6,818
    
    
    
    12,494Income tax benefit
    
    
    (241
    )
    
    
    (439
    )
    
    
    (486
    )Net income (loss)
    
    $
    (7,985
    )
    
    
    7,578
    
    
    
    11,765
  126




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##### Table of Contents



Condensed Statements of Cash Flows
 Year Ended December 312009
    
    
    2008
    
    
    2007(Dollars in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    (7,985
    )
    
    
    7,578
    
    
    
    11,765Adjustments to reconcile net income (loss) to
net cash (used in) provided by operating activities
Depreciation
    
    
    45
    
    
    
    45
    
    
    
    45Deferred income tax benefit
    
    
    (12
    )
    
    
    
    
    
    
    Equity in excess distributed (undistributed)
earnings of banking subsidiaries
    
    
    7,593
    
    
    
    (6,818
    )
    
    
    (12,494
    )Investment securities losses (gains), net
    
    
    35
    
    
    
    204
    
    
    
    (23
    )Stock options compensation cost
    
    
    (6
    )
    
    
    (6
    )
    
    
    24Accretion on investment securities
    
    
    
    
    
    
    
    
    
    
    (113
    )Decrease (increase) in accrued interest receivable
    
    
    
    
    
    
    20
    
    
    
    (33
    )Increase (decrease) in accrued interest payable
and other liabilities
    
    
    803
    
    
    
    (31
    )
    
    
    (3
    )(Increase) decrease in other assets
    
    
    (1,011
    )
    
    
    (44
    )
    
    
    5Net cash (used in) provided by operating activities
    
    
    (538
    )
    
    
    948
    
    
    
    (827
    )Cash flows from investing activities:Proceeds from sales and maturities of investment securities
    
    
    7
    
    
    
    4,000
    
    
    
    18,023Purchase of investment securities
    
    
    
    
    
    
    (3,000
    )
    
    
    (10,941
    )Investment in banking subsidiary
    
    
    (12,000
    )
    
    
    
    
    
    
    (5,000
    )Additions to premises and equipment
    
    
    
    
    
    
    
    
    
    
    (1,700
    )Proceeds from sale of premises and equipment
    
    
    
    
    
    
    1,400
    
    
    
    Net cash (used in) provided by investing activities
    
    
    (11,993
    )
    
    
    2,400
    
    
    
    382Cash flows from financing activities:Proceeds from subordinated debentures
    
    
    2,947
    
    
    
    
    
    
    
    Proceeds from issuance of common stock
    
    
    9,010
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (5
    )
    
    
    (445
    )
    
    
    (317
    )Payment of cash dividends
    
    
    (778
    )
    
    
    (2,968
    )
    
    
    (2,824
    )Proceeds from stock options exercised,
net of stock redeemed
    
    
    
    
    
    
    467
    
    
    
    1Net cash provided by (used in) financing activities
    
    
    11,174
    
    
    
    (2,946
    )
    
    
    (3,140
    )Net (decrease) increase in cash
and cash equivalents
    
    
    (1,357
    )
    
    
    402
    
    
    
    (3,585
    )Cash and cash equivalents at beginning of year
    
    
    1,921
    
    
    
    1,519
    
    
    
    5,104Cash and cash equivalents at end of year
    
    $
    564
    
    
    
    1,921
    
    
    
    1,519
  127




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##### Table of Contents



(20) Quarterly Financial Data (Unaudited)
  Quarters endedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2009
    
    
    2009
    
    
    2009
    
    
    2009(Dollars in Thousands)Interest income
    
    $
    17,907
    
    
    
    17,835
    
    
    
    17,602
    
    
    
    17,416Interest expense
    
    
    7,808
    
    
    
    7,127
    
    
    
    6,781
    
    
    
    6,767Net interest income
    
    
    10,099
    
    
    
    10,708
    
    
    
    10,821
    
    
    
    10,649Provision for loan losses
    
    
    4,749
    
    
    
    5,114
    
    
    
    4,879
    
    
    
    16,162Noninterest income
    
    
    4,545
    
    
    
    5,912
    
    
    
    4,808
    
    
    
    5,474Noninterest expense
    
    
    9,833
    
    
    
    10,808
    
    
    
    10,264
    
    
    
    15,606Net income (loss)
    
    
    56
    
    
    
    637
    
    
    
    740
    
    
    
    (9,418
    )Net income (loss) per share  basic
    
    
    0.01
    
    
    
    0.10
    
    
    
    0.11
    
    
    
    (1.41
    )Net income (loss) per share  diluted
    
    
    0.01
    
    
    
    0.10
    
    
    
    0.11
    
    
    
    (1.41
    )
 Quarters endedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2008
    
    
    2008
    
    
    2008
    
    
    2008(Dollars in Thousands)Interest income
    
    $
    19,751
    
    
    
    18,526
    
    
    
    18,543
    
    
    
    18,855Interest expense
    
    
    9,486
    
    
    
    8,483
    
    
    
    8,801
    
    
    
    8,719Net interest income
    
    
    10,265
    
    
    
    10,043
    
    
    
    9,742
    
    
    
    10,136Provision for loan losses
    
    
    1,271
    
    
    
    1,652
    
    
    
    2,073
    
    
    
    4,059Noninterest income
    
    
    3,931
    
    
    
    4,452
    
    
    
    4,437
    
    
    
    3,886Noninterest expense
    
    
    8,921
    
    
    
    9,265
    
    
    
    9,365
    
    
    
    9,201Net income
    
    
    2,635
    
    
    
    2,408
    
    
    
    1,875
    
    
    
    660Net income per share  basic
    
    
    0.45
    
    
    
    0.40
    
    
    
    0.31
    
    
    
    0.11Net income per share  diluted
    
    
    0.44
    
    
    
    0.40
    
    
    
    0.31
    
    
    
    0.11
   128




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Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
  
 
 Item 9A. Controls and Procedures
   129




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Managements Report on Internal Control over Financial Reporting
  Internal Control-Integrated Framework
 /s/ R. Daniel Blanton

Chief Executive Officer(principal executive officer)/s/ Ronald L. Thigpen

Chief Operating Officer/s/ Darrell R. Rains

Chief Financial Officer(principal financial officer)Date: February 25, 2010
  130




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Internal Control  Integrated Framework
    Internal Control  Integrated Framework
  131




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132




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##### Table of Contents



Item 9B. Other Information
  
 PART III
 
 Item 10. Directors and Executive Officers and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
   133




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##### Table of Contents



Equity Compensation Plan Table(a)
    
    
    (b)
    
    
    (c)Number of securities to be
    
    
    Weighted average
    
    
    Number of securities remaining availableissued upon exercise of
    
    
    exercise price of
    
    
    for future issuance under equityoutstanding options,
    
    
    outstanding options,
    
    
    compensation plans (excluding securitiesPlan Category
    
    warrants and rights
    
    
    warrants and rights
    
    
    reflected in column (a))Equity compensation
plans approved by
security holders
    
    
    275,063
    
    
    $
    26.94
    
    
    
    177,233Equity compensation
plans not approved by
security holders
    
    
    0
    
    
    
    0
    
    
    
    0TOTAL
    
    
    275,063
    
    
    $
    26.94
    
    
    
    177,233
 
 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
   134




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PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)(1)
    
    See Item 8 for a list of the financial statements as filed as a part of this report.(2)
    
    No financial statement schedules are applicable as the required information is
included in the financial statements in Item 8.(3)
    
    The following exhibits are filed as part of this report. Documents incorporated
by reference have been filed with the Securities and Exchange Commission. The Companys
Commission file number is: 0-24172. See Item 1  Description of Business  General for
additional information regarding the Companys filings with the Commission.
 Exhibit No. and Document
 3.1
    
    
    Articles of Incorporation of the Company (Incorporated by
reference to Exhibit 3.1 to the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2008.)3.2
    
    
    Bylaws of the Company (Incorporated by reference to Exhibit
3.2 to the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2004.)4.1
    
    
    Indenture dated December 5, 2005 between the Company and
U.S. Bank
National Association (Incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed on December 8, 2005.)4.2
    
    
    Indenture dated March 31, 2006 between the Company and La
Salle Bank
National Association (Incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed on April 6, 2006.)4.3
    
    
    8% Subordinated Debenture due 2014 (Incorporated by reference
to Exhibit 4.1 to the Companys Current Report on Form 8-K filed on May 20,
2009.)10.1
    
    
    Key Officer Compensation Agreement dated January 1, 2000
between the Bank & R. Daniel Blanton (Incorporated by reference to Exhibit 10.1
to the Companys Annual Report on Form 10-K for the fiscal year ended December
31, 2000.)*10.2
    
    
    First Amendment dated October 15, 2003 to Key Officer
Compensation Agreement dated January 1, 2000 between the Bank and R. Daniel
Blanton. (Incorporated by reference to Exhibit 10.2 to the Companys
Annual Report on Form 10-K for the fiscal year ended December 31, 2006.)*
  135




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##### Table of Contents



10.3
    
    
    Second Amendment dated December 31, 2008 to Key Officer
Compensation Agreement dated January 1, 2000 between the Bank and R. Daniel
Blanton (Incorporated by reference to Exhibit 10.3 to the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2008.)*10.4
    
    
    Key Officer Compensation Agreement dated January 1, 2000
between the Bank & Ronald L. Thigpen (Incorporated by reference to Exhibit 10.2
to the Companys Annual Report on Form 10-K for the fiscal year ended December
31, 2000.)*10.5
    
    
    First Amendment dated October 15, 2003 to Key Officer
Compensation Agreement dated January 1, 2000 between the Bank and Ronald L.
Thigpen (Incorporated by reference to Exhibit 10.4 to the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2006.)*10.6
    
    
    Second Amendment dated December 31, 2008 to Key Officer
Compensation Agreement dated January 1, 2000 between the Bank and Ronald L.
Thigpen (Incorporated by reference to Exhibit 10.6 to the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2008.)*10.7
    
    
    2006 Long-term Incentive Plan (Incorporated by reference to
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2006.)*10.8
    
    
    Form of incentive stock option agreement under the 2006
Long-term Incentive Plan (Incorporated by reference to Exhibit 10.2 to the
Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.)*10.9
    
    
    Form of non-qualified stock option agreement under the 2006
Long-term Incentive Plan (Incorporated by reference to Exhibit 10.3 to the
Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.)*10.10
    
    
    2000 Long Term Incentive Plan (Incorporated by reference to
Appendix A to the Companys definitive Proxy Statement, filed on March 29,
2001.)*10.11
    
    
    Form of option agreement under 2000 Long Term Incentive Plan.
(Incorporated by reference to Exhibit 10.4 to the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2004.)*
  136




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##### Table of Contents



10.12
    
    
    1997 Long-term Incentive Plan. (Incorporated by reference to
Exhibit 10.5 to the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2004.)*10.13
    
    
    Form of stock appreciation rights agreement under 1997
Long-term Incentive Plan. (Incorporated by reference to Exhibit 10.6 to the
Companys Annual Report on Form 10-K for the fiscal year ended December 31,
2004.)*10.14
    
    
    Non-Qualified Defined Benefit Plan dated October 1, 2000.
(Incorporated by reference to Exhibit 10.7 to the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2005.)*10.15
    
    
    Salary Continuation Agreement dated October 1, 2000 between
the Company, the Bank and R. Daniel Blanton. (Incorporated by reference to
Exhibit 10.8 to the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2005.)*10.16
    
    
    First Amendment dated as of October 15, 2003 to Salary
Continuation Agreement dated October 1, 2000 between the Company, the Bank and
R. Daniel Blanton. (Incorporated by reference to Exhibit 10.14 to the Companys
Annual Report on Form 10-K for the fiscal year ended December 31, 2006.)*10.17
    
    
    Salary Continuation Agreement dated October 15, 2003 between
the Company, the Bank and Ronald L. Thigpen. (Incorporated by reference to
Exhibit 10.11 to the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2005.)*10.18
    
    
    Supplemental Executive Retirement Benefits Agreement dated
December 31, 2008 between the Bank and R. Daniel Blanton (Incorporated by
reference to Exhibit 10.18 to the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2008.)*10.19
    
    
    Supplemental Executive Retirement Benefits Agreement dated
December 31, 2008 between the Bank and Ronald L. Thigpen (Incorporated by
reference to Exhibit 10.19 to the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2008.)*10.20
    
    
    Supplemental Executive Retirement Benefits Agreement dated
December 31, 2008 between the Bank and Darrell R. Rains (Incorporated by
reference to Exhibit 10.20 to the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2008.)*
  137




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##### Table of Contents



10.21
    
    
    Employment Agreement dated April 30, 2007 between the Bank and
Darrell R. Rains. (Incorporated by reference to Exhibit 10.1 to the Companys
Current Report on Form 8-K filed on May 4, 2007.)*10.22
    
    
    First Amendment dated December 31, 2008 to Employment
Agreement dated April 30, 2007 between the Bank and Darrell R. Rains
(Incorporated by reference to Exhibit 10.22 to the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2008.)*10.23
    
    
    Southeastern Bank Financial Corporation Director Stock
Purchase Plan (Incorporated by reference to Exhibit 10.1 to the Companys
Current Report on Form 8-K filed on December 27, 2007.)14.1
    
    
    Code of Ethics (Incorporated by reference to Exhibit 14.2 to
the Companys Annual Report on Form 10-K for the fiscal year ended December 31,
2003.)21.1
    
    
    Subsidiaries of the Company (Incorporated by reference to
Exhibit 21.1 to the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2008.)23.1
    
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    
    Certification by the Chief Executive Officer (principal 
executive officer)31.2
    
    
    Certification by the Chief Financial Officer (principal 
financial officer)32.1
    
    
    Certification by the Chief Executive Officer and Chief
Financial Officer
 *
    
    Denotes a management compensatory agreement or arrangement.  138




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##### Table of Contents



By:
    
    /s/ Robert W. Pollard, Jr.Robert W. Pollard, Jr.Chairman of the BoardFebruary 25, 2010
    /s/ Robert W. Pollard, Jr.

Robert W. Pollard, Jr.
    
    Chairman of the Board
and Director/s/ Edward G. Meybohm

Edward G. Meybohm
    
    Vice Chairman of the Board
and Director/s/ R. Daniel Blanton

R. Daniel Blanton
    
    President, Chief Executive Officer
and Director 
(Principal Executive Officer)/s/ Ronald L. Thigpen

Ronald L. Thigpen
    
    Executive Vice President, 
Chief
Operating Officer and Director/s/ Darrell R. Rains

Darrell R. Rains
    
    Group Vice President and Chief
Financial Officer 
(Principal Financial Officer)
  139




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##### Table of Contents



/s/ William J. Badger

William J. Badger
    
    Director/s/ Warren A. Daniel

Warren A. Daniel
    
    Director/s/ Randolph R. Smith, M.D.

Randolph R. Smith, M.D.
    
    Director/s/ John W. Trulock, Jr.

John W. Trulock, Jr.
    
    Director/s/ Patrick D. Cunning

Patrick D. Cunning
    
    Director/s/ Larry S. Prather, Sr.

Larry S. Prather, Sr.
    
    Director/s/ W. Marshall Brown

W. Marshall Brown
    
    Director
  140




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##### Table of Contents



EXHIBIT INDEX
 (a) Exhibits
    
    
    
    Page3.1
    
    
    Articles of Incorporation of the
Company (Incorporated by reference to Exhibit 3.1 to
the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2008.)3.2
    
    
    Bylaws of the Company (Incorporated
by reference to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2004.)4.1
    
    
    Indenture dated December 5, 2005
between the Company and U.S. Bank National
Association (Incorporated by reference to Exhibit
4.1 to the Companys Current Report on Form 8-K filed
on December 8, 2005.)4.2
    
    
    Indenture dated March 31, 2006
between the Company and La Salle Bank National
Association (Incorporated by reference to Exhibit 4.1
to the Companys Current Report on Form 8-K filed on
April 6, 2006.)4.3
    
    
    8% Subordinated Debenture due 2014
(Incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed on May 20,
2009.)10.1
    
    
    Key Officer Compensation Agreement
dated January 1, 2000 between the Bank & R. Daniel
Blanton (Incorporated by reference to Exhibit 10.1 to
the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2000.)*10.2
    
    
    First Amendment dated October 15, 2003
to Key Officer Compensation Agreement dated January 1,
2000 between the Bank and R. Daniel Blanton.
(Incorporated by reference to Exhibit 10.2 to the
Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2006.)*10.3
    
    
    Second Amendment dated December 31,
2008 to Key Officer Compensation Agreement dated
January 1, 2000 between the Bank and R. Daniel Blanton
(Incorporated by reference to Exhibit 10.3 to the
Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2008.)*
  141




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##### Table of Contents



(a) Exhibits
    
    
    
    Page10.4
    
    
    Key Officer Compensation Agreement
dated January 1, 2000 between the Bank & Ronald L.
Thigpen (Incorporated by reference to Exhibit 10.2 to
the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2000.)*10.5
    
    
    First Amendment dated October 15, 2003
to Key Officer Compensation Agreement dated January 1,
2000 between the Bank and Ronald L. Thigpen.
(Incorporated by reference to Exhibit 10.4 to the
Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2006.)*10.6
    
    
    Second Amendment dated December 31,
2008 to Key Officer Compensation Agreement dated
January 1, 2000 between the Bank and Ronald L. Thigpen
(Incorporated by reference to Exhibit 10.6 to the
Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2008.)*10.7
    
    
    2006 Long-term Incentive Plan
(Incorporated by reference to Exhibit 10.1 to the
Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2006.)*10.8
    
    
    Form of incentive stock option
agreement under the 2006 Long-term Incentive Plan
(Incorporated by reference to Exhibit 10.2 to the
Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2006.)*10.9
    
    
    Form of non-qualified stock option
agreement under the 2006 Long-term Incentive Plan
(Incorporated by reference to Exhibit 10.3 to the
Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2006.)*10.10
    
    
    2000 Long Term Incentive Plan
(Incorporated by reference to Appendix A to the
Companys
definitive Proxy Statement, filed on March 29,
2001.)*
  142




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##### Table of Contents



(a) Exhibits
    
    
    
    Page10.11
    
    
    Form of option agreement under 2000
Long Term Incentive Plan. (Incorporated by reference to
Exhibit 10.4 to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2004.)*10.12
    
    
    1997 Long-term Incentive Plan.
(Incorporated by reference to Exhibit 10.5 to the
Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2004.)*10.13
    
    
    Form of stock appreciation rights
agreement under 1997 Long-term Incentive Plan.
(Incorporated by reference to Exhibit 10.6 to the
Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2004.)*10.14
    
    
    Non-Qualified Defined Benefit Plan
dated October 1, 2000. (Incorporated by reference to
Exhibit 10.7 to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2005.)*10.15
    
    
    Salary continuation agreement dated
October 1, 2000 between the Company, the Bank and R.
Daniel Blanton. (Incorporated by reference to Exhibit
10.8 to the Companys Annual Report on Form 10-K for
the fiscal year ended December 31, 2005.)*10.16
    
    
    First Amendment dated as of October
15, 2003 to Salary Continuation Agreement dated October
1, 2000 between the Company, the Bank and R. Daniel
Blanton. (Incorporated by reference to Exhibit 10.14 to
the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2006.)*10.17
    
    
    Salary continuation agreement dated
October 15, 2003 between the Company, the Bank and
Ronald L. Thigpen. (Incorporated by reference to
Exhibit 10.11 to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2005.)*
  143




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##### Table of Contents



(a) Exhibits
    
    
    
    Page10.18
    
    
    Supplemental Executive Retirement
Benefits Agreement dated December 31, 2008 between the
Bank and R. Daniel Blanton (Incorporated by reference
to Exhibit 10.18 to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2008.)*10.19
    
    
    Supplemental Executive Retirement
Benefits Agreement dated December 31, 2008 between the
Bank and Ronald L. Thigpen (Incorporated by reference
to Exhibit 10.19 to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2008.)*10.20
    
    
    Supplemental Executive Retirement
Benefits Agreement dated December 31, 2008 between the
Bank and Darrell R. Rains (Incorporated by reference to
Exhibit 10.20 to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2008.)*10.21
    
    
    Employment Agreement dated April 30,
2007 between the Bank and Darrell R. Rains.
(Incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed on May 4,
2007.)*10.22
    
    
    First Amendment dated December 31,
2008 to Employment Agreement dated April 30, 2007
between the Bank and Darrell R. Rains (Incorporated by
reference to Exhibit 10.22 to the Companys Annual
Report on Form 10-K for the fiscal year ended December
31, 2008.)*10.23
    
    
    Southeastern Bank Financial
Corporation Director Stock Purchase Plan (Incorporated
by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K filed on December 27, 2007.)14.1
    
    
    Code of Ethics (Incorporated by
reference to the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2003)21.1
    
    
    Subsidiaries of the Company
(Incorporated by reference to Exhibit 21.1 to the
Companys Annual
Report on Form 10-K for the fiscal year ended
December 31, 2008.)
  144




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(a) Exhibits
    
    
    
    Page23.1
    
    
    Consent of Independent Registered Public
Accounting Firm
    
    
    14631.1
    
    
    Certification by the Chief Executive
Officer (principal executive officer)
    
    
    14731.2
    
    
    Certification by the Chief Financial
Officer (principal financial officer)
    
    
    14932.1
    
    
    Certification by the Chief Executive
Officer and Chief Financial Officer
    
    
    151
 *
    
    Denotes a management compensatory agreement or arrangement.  145