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Southeastern Bank Financial Corp. Reports Earnings for the Second Quarter 2014 and Declares Dividend

AUGUSTA, Ga., July 25, 2014 (GLOBE NEWSWIRE) -- Southeastern Bank Financial Corp. (OTCQB:SBFC), the holding company for Georgia Bank & Trust Company of Augusta (GB&T), today reported quarterly net income of $4.0 million, or $0.60 in diluted earnings per share, for the three months ended June 30, 2014, compared to $4.0 million, or $0.60 in diluted earnings per share, in the second quarter of 2013.

"We are pleased to report incremental increases in net income for both the quarter and first six months of 2014," said President and Chief Operating Officer Ronald L. Thigpen. "The ongoing historically low interest rate environment continues to squeeze our net interest margin and net interest income. Our loan-loss provision has decreased significantly owing to continued asset quality improvement. Noninterest income is down due primarily to lower mortgage lending volume. But we also saw quarterly improvement in both retail investment and trust income, as well as excellent loan and total deposit growth. We continued our steady performance in the quarter."

Total assets at June 30, 2014, were $1.8 billion, an increase of $91.3 million from Dec. 31, 2013. Total loans outstanding at the end of the second quarter were $984.7 million, an increase of $54.0 million from Dec. 31, 2013, and an increase of $81.3 million from June 30, 2013. Total deposits were $1.5 billion at June 30, 2014, an increase of $77.0 million from Dec. 31, 2013, and an increase of $88.9 million from June 30, 2013. Cash and cash equivalents totaled $81.0 million at the end of the second quarter of 2014.

Net interest income for the second quarter of 2014 totaled $13.0 million, a 2.0 percent decrease from $13.3 million for the same period in 2013, resulting from lower spreads in the ongoing compressed interest rate environment. Noninterest income for the second quarter totaled $4.5 million, a 13.5 percent decline from the same period a year ago, due primarily to lower mortgage lending volume. Noninterest expense was $10.6 million in the second quarter of 2014, a 3.4 percent increase from a year ago, kept in check by significantly lower losses related to Other Real Estate.

The net interest margin was 3.18 percent for the quarter ended June 30, 2014, compared to 3.16 percent at March 31, 2014, and 3.36 percent for the same period a year ago. Annualized return on average assets (ROA) was 0.93 percent for the second quarter of 2014, a decrease of 2 basis points from the same period a year ago, and annualized return on average shareholder's equity (ROE) was 11.39 percent, a decrease of 3 basis points from the second quarter of 2013.

Nonperforming assets at June 30, 2014, were 1.28 percent of total assets, compared to 1.38 percent at March 31, 2014, and 2.08 percent at June 30, 2013. Net charge-offs for the second quarter of 2014 totaled 0.18 percent of average loans on an annualized basis, compared to 0.52 percent annualized in the first quarter of 2014 and 1.87 percent annualized in the second quarter of 2013. The company held $1.5 million in OREO at June 30, 2014, compared to $1.3 million at March 31, 2014, and $1.1 million at June 30, 2013.

The company's loan-loss provision expense was $1.0 million in the second quarter of 2014, a 1.0 percent decrease from $1.1 million in the previous quarter, and a 41.9 percent decrease from $2.4 million in the second quarter a year ago. The allowance for loan losses at June 30, 2014, was $26.9 million, or 2.79 percent of loans outstanding, compared to $26.3 million, or 2.80 percent of loans outstanding, at March 31, 2014, and $27.3 million, or 3.12 percent of loans outstanding, at June 30, 2013.

"We continue to see growth in the balance sheet, with significant core loan and deposit growth," said Thigpen. "We expect ongoing margin pressure from this low interest rate environment to contribute to lower net interest income and we continue to be focused on increasing noninterest income and controlling noninterest expense."

On July 23, 2014, the company's Board of Directors declared a regular quarterly cash dividend of $0.13 per share of common stock payable on August 22, 2014, to shareholders of record as of August 8, 2014. Based on the share price of $23.80 at the close of business on Thursday, July 24, 2014, this dividend represents an annualized yield to shareholders of 2.19 percent.

About Southeastern Bank Financial Corp.

Southeastern Bank Financial Corp. is the $1.8 billion-asset bank holding company of Georgia Bank & Trust Company of Augusta (GB&T). GB&T is the largest locally owned and operated community bank in the Augusta metro market, with nine full-service Augusta-area offices, three full-service offices in Aiken County, S.C., operating as Southern Bank & Trust and one limited service Loan Production Office in Athens, Ga. The company also has mortgage operations in Augusta and Savannah. The banks primary focus is on real estate, commercial and consumer loans to individuals, small to medium-sized businesses and professionals, and also provides wealth management, trust and retail investment services. The company's common stock is publicly traded under the symbol SBFC on OTCQB. Investors can find Real-Time quotes and market information for the Company on www.otcmarkets.com or by visiting the Company's Web site, www.georgiabankandtrust.com.

Safe Harbor Statement - Forward-Looking Statements

Statements made in this release by Southeastern Bank Financial Corporation (The Company) other than those concerning historical information, should be considered forward-looking and subject to various risks and uncertainties. Such forward-looking statements are made based upon management's belief as well as assumptions made by, and information currently available to, management pursuant to "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The Company's actual results may differ materially from the results anticipated in forward-looking statements due to a variety of factors, including: unanticipated changes in the Bank's local economy and in the national economy; governmental monetary and fiscal policies; deposit levels, loan demand, loan collateral values and securities portfolio values; difficulties in interest rate risk management; difficulties in operating in a variety of geographic areas; the effects of competition in the banking business; changes in governmental regulation relating to the banking industry, including regulations relating to branching and acquisitions; failure of assumptions underlying the establishment of reserves for loan losses, including the value of collateral underlying delinquent loans; and other factors. The Company cautions that such factors are not exclusive. The Company does not undertake to update any forward-looking statement that may be made from time to time by, or on behalf of, the Company.

SOUTHEASTERN BANK FINANCIAL CORPORATION
Consolidated Balance Sheets
June 30,
2014 December 31,
Assets (Unaudited) 2013
Cash and due from banks $ 71,979,967 $ 36,766,420
Interest-bearing deposits in other banks 9,054,964 10,570,222
Cash and cash equivalents 81,034,931 47,336,642
Available-for-sale securities 647,599,251 649,979,319
Loans held for sale 24,499,481 10,638,179
Loans 960,230,782 905,712,691
Less allowance for loan losses 26,882,652 26,408,723
Loans, net 933,348,130 879,303,968
Premises and equipment, net 27,379,247 27,002,697
Accrued interest receivable 5,987,039 6,221,061
Bank-owned life insurance 36,304,149 35,744,649
Restricted equity securities 4,398,400 4,869,600
Other real estate owned 1,500,002 1,013,563
Deferred tax asset 15,919,575 21,022,576
Other assets 2,606,648 6,193,363
$ 1,780,576,853 $ 1,689,325,617
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing $ 196,701,793 $ 187,287,015
Interest-bearing:
NOW accounts 392,968,835 351,798,554
Savings 522,861,133 521,656,334
Money management accounts 15,370,461 16,065,409
Time deposits of $100,000 or more 322,844,870 293,003,961
Other time deposits 81,065,197 84,991,883
1,531,812,289 1,454,803,156
Securities sold under repurchase agreements 653,273 808,311
Advances from Federal Home Loan Bank 64,000,000 64,000,000
Accrued interest payable and other liabilities 17,470,680 16,598,876
Subordinated debentures 20,000,000 21,546,646
Total liabilities 1,633,936,242 1,557,756,989
Stockholders' equity:
Preferred stock, no par value; 10,000,000 shares authorized; 0 shares outstanding in 2014 and 2013, respectively -- --
Common stock, $3.00 par value; 10,000,000 shares authorized; 6,744,253 and 6,680,225 shares issued in 2014 and 2013, respectively; 6,744,253 and 6,679,982 shares outstanding in 2014 and 2013, respectively 20,232,759 20,040,675
Additional paid-in capital 62,850,459 62,863,774
Retained earnings 64,873,818 58,768,914
Treasury stock, at cost; 0 and 243 shares in 2014 and 2013, respectively -- (3,380)
Accumulated other comprehensive loss, net (1,316,425) (10,101,355)
Total stockholders' equity 146,640,611 131,568,628
$ 1,780,576,853 $ 1,689,325,617
SOUTHEASTERN BANK FINANCIAL CORPORATION
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
Interest income:
Loans, including fees $ 11,640,560 $ 11,744,176 $ 22,921,062 $ 23,434,937
Investment securities 3,618,401 3,897,515 7,152,006 7,879,253
Interest-bearing deposits in other banks 17,914 20,662 32,912 36,885
Total interest income 15,276,875 15,662,353 30,105,980 31,351,075
Interest expense:
Deposits 1,584,877 1,683,039 3,173,693 3,512,522
Securities sold under repurchase agreements 2,249 813 3,008 1,701
Other borrowings 659,125 676,209 1,326,975 1,345,576
Total interest expense 2,246,251 2,360,061 4,503,676 4,859,799
Net interest income 13,030,624 13,302,292 25,602,304 26,491,276
Provision for loan losses 1,010,384 2,413,949 2,067,704 4,158,692
Net interest income after provision for loan losses 12,020,240 10,888,343 23,534,600 22,332,584
Noninterest income:
Service charges and fees on deposits 1,792,581 1,793,770 3,421,475 3,467,563
Gain on sales of loans 1,372,632 2,155,303 2,192,092 4,056,812
Gain on sale of fixed assets, net 12,604 16,204 11,522 21,704
Investment securities gains (losses), net 26,341 14,903 276,980 (29,326)
Retail investment income 514,071 487,132 1,087,992 987,840
Trust service fees 318,537 284,369 641,658 589,255
Earnings from cash surrender value of bank-owned life insurance 281,092 287,915 559,500 570,449
Miscellaneous income 204,818 186,758 422,723 375,413
Total noninterest income 4,522,676 5,226,354 8,613,942 10,039,710
Noninterest expense:
Salaries and other personnel expense 6,147,991 6,140,533 11,914,142 12,337,942
Occupancy expenses 986,592 939,055 1,930,784 1,874,136
Other real estate losses (gains), net 21,831 207,571 (13,234) 617,300
Other operating expenses 3,484,540 3,000,886 6,922,355 6,219,098
Total noninterest expense 10,640,954 10,288,045 20,754,047 21,048,476
Income before income taxes 5,901,962 5,826,652 11,394,495 11,323,818
Income tax expense 1,857,714 1,824,018 3,544,355 3,544,765
Net income $ 4,044,248 $ 4,002,634 $ 7,850,140 $ 7,779,053
Other comprehensive income (loss):
Unrealized gain (loss) on derivatives (288,200) 780,581 (643,311) 1,124,970
Unrealized gain (loss) on securities available-for-sale 6,811,549 (18,927,847) 15,298,245 (19,834,428)
Reclassification adjustment for realized (gain) loss on securities, net of OTTI (26,341) (14,903) (276,980) 29,326
Tax effect (2,527,336) 7,065,083 (5,593,024) 7,266,571
Total other comprehensive income (loss) 3,969,672 (11,097,086) 8,784,930 (11,413,561)
Comprehensive income (loss) $ 8,013,920 $ (7,094,452) $ 16,635,070 $ (3,634,508)
Basic net income per share $ 0.61 $ 0.60 $ 1.18 $ 1.16
Diluted net income per share $ 0.60 $ 0.60 $ 1.17 $ 1.16
Weighted average common shares outstanding 6,681,253 6,678,807 6,680,945 6,678,112
Weighted average number of common and common equivalent shares outstanding 6,686,332 6,678,807 6,682,954 6,678,112
Southeastern Bank Financial Corporation
June 2014 Ratios
QTD 2014 YTD 2014
RETURN ON AVERAGE ASSETS* 0.93% 0.92%
RETURN ON AVERAGE EQUITY* 11.39% 11.38%
NET INTEREST MARGIN* 3.18% 3.17%
Note: Excludes Bank Owned Life Insurance
CHARGE OFFS / GROSS AVG LOANS* 0.18% 0.35%
Note: Excludes Loans Held for Sale
* Annualized

CONTACT: Ronald L. Thigpen President and Chief Operating Officer Southeastern Bank Financial Corp. 706-481-1014Source:Southeastern Bank Financial Corp.