Southeastern Bank Financial Corp. Reports Solid Growth in Third Quarter 2007 Income and Earnings


AUGUSTA, Ga., Oct. 19, 2007 (PRIME NEWSWIRE) -- Southeastern Bank Financial Corp. (OTCBB:SBFC), the holding company for Georgia Bank & Trust Company of Augusta and Southern Bank & Trust, today reported quarterly net income of $3.4 million for the three months ended Sept. 30, 2007, an increase of 14.7 percent from $2.9 million in the third quarter of 2006. Diluted earnings per share for the third quarter of 2007 were $0.61, a 10.9 percent increase from $0.55 for the same period last year.

"We produced quality growth across our banking franchise in the third quarter, from core deposits to loans to fee income," said R. Daniel Blanton, president and chief executive officer. "Our Southern Bank & Trust subsidiary has exceeded our expectations and closed the quarter with more than $75 million in total assets, contributing substantially to our continued strong growth. In August, we opened our second Southern Bank & Trust office, in North Augusta, S.C.

"We are also pleased that our traditionally strong credit culture is holding up well in an environment that is causing asset quality issues at many institutions," said Blanton. "We will continue to take a measured approach to our growth as we look to expand in the future." Nonperforming assets at Sept. 30, 2007, were 0.33 percent of total loans, and net charge-offs for the quarter totaled 0.04 percent of average loans. At December 31, 2006, non performing assets were also 0.33 percent of total loans and net chargeoffs for 2006 were 0.17 percent of average loans.

At Sept. 30, 2007, total assets were $1.2 billion, an increase of $146.7 million, or 14.1 percent, from Dec. 31, 2006. Loans outstanding at the end of the third quarter were $849.4 million, an increase of 13.3 percent from Dec. 31, 2006. Total deposits were $951.2 million, an increase of 18.6 percent for the same period.

Net interest income for the third quarter of 2007 was $9.7 million, up 11.8 percent from the same period a year ago. Noninterest income for the quarter was $4.7 million, an increase of 37.3 percent over the third quarter of 2006, including a one-time gain on the sale of real estate totaling $1.1 million, which was partially offset by a one-time loss on the sale of securities of $278,206. The securities sale involved the sale of lower yielding securities in exchange for higher yielding securities, in an effort to position the company for greater earnings growth in the future.

Noninterest expense totaled $8.3 million in the third quarter of 2007, a 14.9 percent increase from a year ago, reflecting higher operating costs associated with the company's expansion activities, including the opening of a new Southern Bank & Trust banking center, as well as a $250,000 charitable donation made during the quarter to Georgia Bank Foundation.

"Notwithstanding the one-time gain, we generated solid returns in noninterest income in the third quarter, which was driven by several factors," said Blanton. "Deposits in our Augusta and Aiken markets grew faster than projected, resulting in a sizable increase in service charge and fee income. Our mortgage operations have held steady, despite the ongoing turmoil in the housing and credit markets, even gaining slightly from the third quarter of 2006. And our wealth management business continued to expand, as income from retail investment and trust services was up significantly in the third quarter."

Return on average assets (ROA) was 1.16 percent for the third quarter of 2007, and return on average shareholders' equity (ROE) was 15.86 percent.

For the nine months ended Sept. 30, 2007, the company reported net income of $9.1 million, or $1.65 in diluted earnings per share, an increase of 9.3 percent and 5.8 percent, respectively, from the same period a year ago.

Net interest income for the first nine months of 2007 was $28.3 million, up 12.5 percent from $25.1 million in the comparable nine months in 2006. Noninterest income was $12.1 million for the first nine months of 2007, compared to $10.6 million for the same period in 2006, an increase of 14.1 percent. Noninterest expense for the first three quarters of 2007 totaled $23.7 million, compared to $21.7 million for the comparable period in 2006.

About Southeastern Bank Financial Corp.

Southeastern Bank Financial Corp. is the $1.2 billion-asset bank holding company of Georgia Bank & Trust Company of Augusta (GB&T) and Southern Bank & Trust (SB&T). GB&T is the largest locally owned and operated community bank in the Augusta metro market, with nine full-service Augusta-area offices and an office in Athens, Ga. SB&T is a federally chartered thrift serving the Aiken County, S.C., market, with two full-service offices. The company also has mortgage operations in Augusta and Savannah. The banks focus primarily on real estate, commercial and consumer loans to individuals, small to medium-sized businesses and professionals, and also provide wealth management and trust services. The company's common stock is publicly traded on the OTC Bulletin Board under the symbol SBFC. For more information, please visit 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 AND SUBSIDIARIES

                      Consolidated Balance Sheets

                                       September 30,
                                           2007          December 31,
          Assets                        (Unaudited)          2006
                                      --------------   --------------

 Cash and due from banks              $   26,487,084   $   25,709,915
 Federal funds sold                       23,847,000       14,688,000
 Interest-bearing deposits in
  other banks                                500,031          512,690
                                      --------------   --------------
        Cash and cash equivalents         50,834,115       40,910,605

 Investment securities
    Available-for-sale                   232,545,144      199,135,716
    Held-to-maturity, at cost
     (fair values of $1,980,734 and
     $3,048,196, respectively)             1,935,227        2,970,619

 Loans held for sale                       9,562,760       14,857,315

 Loans                                   839,862,823      735,111,615
   Less allowance for loan losses        (11,804,686)      (9,776,779)
                                      --------------   --------------
        Loans, net                       828,058,137      725,334,836

 Premises and equipment, net              28,140,004       23,402,588
 Accrued interest receivable               7,424,365        5,982,654
 Bank-owned life insurance                16,476,922       15,982,052
 Restricted equity securities              5,059,781        4,936,281
 Other assets                              7,882,950        7,689,596
                                      --------------   --------------
                                      $1,187,919,405   $1,041,202,262
                                      ==============   ==============

  Liabilities and Stockholders' Equity

 Deposits
   Noninterest-bearing                $  109,053,029   $  106,846,160
   Interest-bearing:
   NOW accounts                          136,381,664      119,334,300
     Savings                             301,562,674      255,065,766
     Money management accounts            59,520,051       45,897,176
     Time deposits over $100,000         238,930,907      193,860,714
     Other time deposits                 105,779,924       80,758,973
                                      --------------   --------------
                                         951,228,249      801,763,089

 Federal funds purchased and
  securities sold under repurchase
  agreements                              61,953,938       70,019,551
 Advances from Federal Home Loan Bank     59,000,000       60,000,000
 Other borrowed funds                        900,000        1,000,000
 Accrued interest payable and other
  liabilities                              8,224,404        9,495,498
 Subordinated debentures                  20,000,000       20,000,000
                                      --------------   --------------

      Total liabilities                1,101,306,591      962,278,138
                                      --------------   --------------

 Stockholders' equity:
   Common stock, $3.00 par value;
   10,000,000 shares authorized;
   5,433,614 and 5,433,285 shares
   issued in 2007 and 2006,
   respectively; 5,425,982 and
   5,432,854 shares outstanding in
   2007 and 2006, respectively            16,300,842       16,299,855
   Additional paid-in capital             39,376,328       38,989,058
   Retained earnings                      32,255,461       25,287,006
   Treasury stock, at cost; 7,632
    and 431 shares in 2007 and 2006,
    respectively                            (289,865)         (16,809)
   Accumulated other comprehensive
    loss, net                             (1,029,952)      (1,634,986)
                                      --------------   --------------

      Total stockholders' equity          86,612,814       78,924,124
                                      --------------   --------------

                                      $1,187,919,405   $1,041,202,262
                                      ==============   ==============


       SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES

                   Consolidated Statements of Income

                              (Unaudited)

                      Three Months Ended         Nine Months Ended
                        September, 30,             September, 30,
                   ------------------------  ------------------------
                      2007         2006          2007         2006
                   -----------  -----------  -----------  -----------
 Interest income:
  Loans, including
   fees            $17,138,785  $14,208,614  $49,041,654  $39,038,976
  Investment
   securities        3,015,836    2,705,083    8,548,646    7,863,464
  Federal funds
   sold                220,138      195,013      901,723      389,642
  Interest-bearing
   deposits in
   other banks           6,710        5,808       20,180       19,458
                   -----------  -----------  -----------  -----------
    Total interest
     income         20,381,469   17,114,518   58,512,203   47,311,540
                   -----------  -----------  -----------  -----------

 Interest expense:
  Deposits           8,688,555    6,479,749   24,345,638   16,945,683
  Federal funds
   purchased and
   securities sold
   under repurchase
   agreements          829,797      754,106    2,499,627    2,162,860
  Other borrowings   1,127,128    1,168,587    3,390,854    3,073,878
                   -----------  -----------  -----------  -----------
    Total interest
     expense        10,645,480    8,402,442   30,236,119   22,182,421
                   -----------  -----------  -----------  -----------

    Net interest
     income          9,735,989    8,712,076   28,276,084   25,129,119

 Provision for
  loan losses        1,001,232      666,913    2,607,419    1,627,041
                   -----------  -----------  -----------  -----------

    Net interest
     income after
     provision for
     loan losses     8,734,757    8,045,163   25,668,665   23,502,078
                   -----------  -----------  -----------  -----------

 Noninterest
  income:
  Service charges
   and fees on
   deposits          1,675,173    1,422,806    4,653,640    4,314,928
  Gain on sales
   of loans          1,349,880    1,328,907    3,954,535    3,854,244
  Gain on sale of
   fixed assets      1,094,902        3,210    1,031,764       95,049
  Investment
   securities
   (losses) gains,
   net                (278,206)     (10,000)    (245,015)     273,600
  Retail
   investment
   income              296,025      192,363      894,482      576,336
  Trust service
   fees                271,167      214,294      829,609      605,126
  Increase in cash
   surrender value
   of bank-owned
   life insurance      169,133      156,010      494,870      445,253
  Miscellaneous
   income              168,453      150,682      496,993      447,077
                   -----------  -----------  -----------  -----------
    Total
     noninterest
     income          4,746,527    3,458,272   12,110,878   10,611,613
                   -----------  -----------  -----------  -----------

 Noninterest
  expense:
  Salaries and
   other personnel
   expense           4,905,273    4,538,449   14,329,031   13,483,469
  Occupancy
   expenses            845,373      637,723    2,348,159    2,071,624
  Other operating
   expenses          2,557,612    2,057,702    6,984,774    6,168,196
                   -----------  -----------  -----------  -----------
    Total
     noninterest
     expense         8,308,258    7,233,874   23,661,964   21,723,289
                   -----------  -----------  -----------  -----------

    Income before
     income taxes    5,173,026    4,269,561   14,117,579   12,390,402

 Income tax expense  1,816,746    1,344,532    5,031,078    4,078,994
                   -----------  -----------  -----------  -----------

    Net income     $ 3,356,280  $ 2,925,029  $ 9,086,501  $ 8,311,408
                   ===========  ===========  ===========  ===========

 Basic net income
  per share        $      0.62  $      0.55  $      1.67  $      1.57
                   ===========  ===========  ===========  ===========

 Diluted net
  income per share $      0.61  $      0.55  $      1.65  $      1.56
                   ===========  ===========  ===========  ===========

 Weighted average
  common shares
  outstanding        5,428,409    5,312,831    5,431,489    5,288,760
                   ===========  ===========  ===========  ===========

 Weighted average
  number of common
  and common
  equivalent shares
  outstanding        5,492,967    5,361,440    5,499,414    5,329,051
                   ===========  ===========  ===========  ===========


                Southeastern Bank Financial Corporation
                         September 2007 Ratios

                                        3rd Quarter      YTD 2007
                                        -----------    -----------

 RETURN ON AVERAGE ASSETS:                  1.16%          1.10%

 RETURN ON AVERAGE EQUITY:                 15.86%         14.77%

 NET INTEREST MARGIN:                       3.54%          3.58%

 CHARGE OFFS / GROSS AVG LOANS              0.04%          0.07%


            

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