Southeastern Bank Financial (SBFC) 8-K Results of Operations and Financial Condition

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

For More Information:
Ronald L. Thigpen	Andy Mus
Executive Vice President and COO	Vice President
Southeastern Bank Financial Corp.	Ketchum Inc.
706-481-1014	404-879-9075

Southeastern Bank Financial Corp. Reports Earnings For The

Fourth Quarter and Year-End 2012

AUGUSTA, Ga., Jan. 25, 2013 -- Southeastern Bank Financial Corp. (OTCQB:SBFC), the holding company for Georgia Bank & Trust Company of Augusta (GB&T), today reported quarterly net income of $3.9 million for the three months ended Dec. 31, 2012, or $0.58 in diluted earnings per share, compared to $3.0 million, or $0.45 in diluted earnings per share, in the fourth quarter of 2011. For the full year, the company reported net income of $14.4 million, or $2.16 per diluted share, compared to net income of $11.0 million, or $1.65 per diluted share, for 2011.

“We are pleased to have ended 2012 on a strong note, generating a 29.3 percent gain in quarterly net income over the fourth quarter of last year and a 30.7 percent increase in earnings for 2012 over 2011,” said President and Chief Executive Officer R. Daniel Blanton. “Our effort and performance over the entire year have been solid and our success is reflected in the fact that we increased net interest income in a historically low interest rate environment, improved our deposit mix, grew loans in a market of low demand and improved our asset quality in what continues to be a challenging economic environment.”

Total assets at Dec. 31, 2012, were $1.7 billion, an increase of $47.7 million from Dec. 31, 2011. Loans outstanding at the end of the fourth quarter were $901.5 million, an increase of $25.9 million from Dec. 31, 2011. Total deposits were $1.4 billion at Dec. 31, 2012, an increase of $2.0 million from Dec. 31, 2011. Cash and cash equivalents totaled $43.9 million at the end of the fourth quarter of 2012.

Net interest income for the fourth quarter of 2012 totaled $13.1 million, a 5.2 percent increase from $12.4 million for the same period in 2011. Noninterest income for the fourth quarter totaled $5.5 million, a decrease from $5.7 million for the same period a year ago, due to a reduction in investment securities gains as compared to 2011. Noninterest expense was $11.3 million in the fourth quarter of 2012, a 2.6 percent decrease from a year ago resulting from lower losses on other real estate.

The net interest margin was 3.30 percent for the quarter-ended Dec. 31, 2012, compared to 3.34 percent for the third quarter of 2012, and 3.28 percent for the same period a year ago. Annualized return on average assets (ROA) was 0.92 percent for the fourth quarter of 2012, an increase of 18 basis points from the same period a year ago, and annualized return on average shareholder’s equity (ROE) was 11.52 percent, an increase of 115 basis points from the fourth quarter of 2011.

Nonperforming assets at Dec. 31, 2012, were 2.08 percent of total assets, compared to 2.03 percent at Sept. 30, 2012, and 3.19 percent at Dec. 31, 2011. Net charge-offs for the fourth quarter of 2012 totaled 0.84 percent of average loans on an annualized basis, compared to 0.93 percent annualized in the third quarter of 2012 and 1.26 percent annualized in the fourth quarter of 2011. The company held $3.5 million in OREO at Dec. 31, 2012, compared to $6.2 million at December 31, 2011.

The company’s loan-loss provision expense was $1.6 million in the fourth quarter of 2012, a 33.3 percent decrease from $2.4 million in the third quarter of 2012, and a 34.1 percent decrease from $2.4 million in the fourth quarter a year ago. The allowance for loan losses at Dec. 31, 2012, was $28.9 million, or 3.20 percent of loans outstanding, compared to $29.0 million, or 3.32 percent of loans outstanding, at Dec. 31, 2011.

Net interest income for the 12 months ended Dec. 31, 2012, was $51.6 million, a 2.1 percent increase from $50.6 million in the full year 2011. Noninterest income was $21.5 million for the 12 months ended Dec. 31, 2012, a 9.3 percent increase from $19.7 million in the same period of 2011, primarily as a result of a 32.4 percent increase in mortgage income for the year. Noninterest expense was $44.1 million for the full year 2012, compared to $42.0 million in the same period in 2011.

“We significantly reduced our provision for loan losses due to the growing strength and stability of our loan portfolio,” said Blanton. “We will continue to monitor our assets closely, however, keeping in line with our conservative approach to banking.”

About Southeastern Bank Financial Corp.

Southeastern Bank Financial Corp. is the $1.7 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 focus primarily on real estate, commercial and consumer loans to individuals, small to medium-sized businesses and professionals, and also provides wealth management and trust 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.

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SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
Assets	December 31, 2012 (Unaudited)			December 31, 2011
Cash and due from banks	$	39,565,757		$	51,080,600
Interest-bearing deposits in other banks		4,322,317			18,760,812
Cash and cash equivalents		43,888,074			69,841,412
Available-for-sale securities		654,738,964			603,758,999
Loans held for sale		30,051,204			29,615,131
Loans		871,446,844			846,010,275
Less allowance for loan losses		28,846,336			29,045,876
Loans, net		842,600,508			816,964,399
Premises and equipment, net		26,145,378			27,608,118
Accrued interest receivable		6,602,879			6,246,880
Bank-owned life insurance		34,825,588			30,713,488
Restricted equity securities		5,295,600			5,086,000
Other real estate owned		3,489,887			6,208,720
Prepaid FDIC assessment		2,023,977			3,419,738
Deferred tax asset		10,406,187			12,723,238
Other assets		2,434,228			2,586,986
	$	1,662,502,474		$	1,614,773,109
Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing	$	158,066,510		$	147,196,034
Interest-bearing:
NOW accounts		349,531,376			346,235,936
Savings		504,193,793			471,727,749
Money management accounts		18,032,530			42,977,515
Time deposits over $100,000		280,870,648			286,318,774
Other time deposits		110,576,827			124,766,377
		1,421,271,684			1,419,222,385
Securities sold under repurchase agreements		976,433			700,798
Advances from Federal Home Loan Bank		64,000,000			39,000,000
Accrued interest payable and other liabilities		18,924,619			15,874,526
Subordinated debentures		21,546,646			22,946,646
Total liabilities		1,526,719,382			1,497,744,355
Stockholders’ equity:
Preferred stock, no par value; 10,000,000 shares
authorized; 0 shares outstanding in 2012 and
2011, respectively		-			-
Common stock, $3.00 par value; 10,000,000 shares
authorized; 6,680,225 and 6,677,667 shares issued in
2012 and 2011, respectively; 6,675,000 and 6,677,667
shares outstanding in 2012 and 2011, respectively		20,040,675			20,033,001
Additional paid-in capital		62,835,122			62,767,133
Retained earnings		45,028,153			30,593,180
Treasury stock, at cost; 5,225 and 0 shares in
2012 and 2011, respectively		(72,680	)		-
Accumulated other comprehensive income, net		7,951,822			3,635,440
Total stockholders’ equity		135,783,092			117,028,754
	$	1,662,502,474		$	1,614,773,109

SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARY

Consolidated Statements of Income

(Unaudited)

	Three Months Ended					Twelve Months Ended
	December 31,					December 31,
	2012			2011		2012			2011
Interest income:
Loans, including fees	$	11,732,583		$	11,945,592	$	46,692,599		$	50,036,221
Investment securities		4,093,654			4,204,477		16,895,170			17,484,345
Interest-bearing deposits in other banks		20,272			26,834		81,848			119,728
Total interest income		15,846,509			16,176,903		63,669,617			67,640,294
Interest expense:
Deposits		2,106,626			3,154,118		9,425,091			14,443,074
Securities sold under repurchase
agreements		2,602			1,808		12,010			6,296
Other borrowings		686,102			614,666		2,596,700			2,629,082
Total interest expense		2,795,330			3,770,592		12,033,801			17,078,452
Net interest income		13,051,179			12,406,311		51,635,816			50,561,842
Provision for loan losses		1,573,465			2,385,948		8,140,563			12,584,033
Net interest income after provision
for loan losses		11,477,714			10,020,363		43,495,253			37,977,809
Noninterest income:
Service charges and fees on deposits		1,819,570			1,691,869		6,848,502			6,749,018
Gain on sales of loans		2,472,172			2,050,637		9,367,753			7,074,950
Gain on sale of fixed assets		-			54,049		10,459			70,708
Investment securities gains (losses), net		(120,192	)		750,143		320,994			1,118,880
Other-than-temporary loss
Total impairment loss		-			-		(13,314	)		(191,618	)
Less loss recognized in other comprehensive income		-			-		(4,268	)		(89,494	)
Net impairment loss recognized in earnings		-			-		(9,046	)		(102,124	)
Retail investment income		494,764			443,446		1,941,313			1,851,570
Trust service fees		288,611			278,876		1,145,695			1,128,234
Earnings from cash surrender value of
bank-owned life insurance		281,225			266,956		1,112,100			1,034,854
Miscellaneous income		221,217			172,131		756,491			745,649
Total noninterest income		5,457,367			5,708,107		21,494,261			19,671,739
Noninterest expense:
Salaries and other personnel expense		6,546,113			6,015,029		25,889,475			23,222,936
Occupancy expenses		982,430			1,044,877		4,093,548			4,359,701
Other real estate losses, net		532,348			865,460		1,784,617			1,898,672
Other operating expenses		3,227,502			3,655,851		12,300,551			12,560,027
Total noninterest expense		11,288,393			11,581,217		44,068,191			42,041,336
Income before income taxes		5,646,688			4,147,253		20,921,323			15,608,212
Income tax expense		1,750,627			1,134,151		6,486,350			4,563,638
Net income	$	3,896,061		$	3,013,102	$	14,434,973		$	11,044,574
Comprehensive income	$	3,058,960		$	1,589,769	$	18,751,355		$	16,913,531
Basic net income per share	$	0.58		$	0.45	$	2.16		$	1.65
Diluted net income per share	$	0.58		$	0.45	$	2.16		$	1.65
Weighted average common shares outstanding		6,675,000			6,677,697		6,678,215			6,676,774
Weighted average number of common and
common equivalent shares outstanding		6,675,000			6,677,697		6,678,215			6,676,774