SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
- --- of 1934
For the quarterly period ended June 30, 2005.
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or
Transition Report under Section 13 or 15(d) of the Securities Exchange Act
- --- of 1934
For the transition period from _______________ to ________________.
Commission File No. 0-23980
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Southeastern Bank Financial Corporation
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(Exact name of registrant as specified in its charter)
Georgia 58-2005097
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(State of Incorporation) (I.R.S. Employer Identification No.)
3530 Wheeler Road, Augusta, Georgia 30909
-----------------------------------------
(Address of principal executive offices)
(706) 738-6990
--------------
(Issuer's telephone number, including area code)
Formerly known as Georgia Bank Financial Corporation
----------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X
---
No
---
Check whether the issuer is an accelerated filer (as defined in Rule 12b-2
of the Exchange Act). Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
5,256,807 shares of common stock, $3.00 par value per share, outstanding as
of July 31, 2005.
SOUTHEASTERN BANK FINANCIAL CORPORATION
FORM 10-Q
INDEX
Page
Part I
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 2005 and
December 31, 2004 3
Consolidated Statements of Income for the Three and Six
Months ended June 30, 2005 and 2004 4
Consolidated Statements of Cash Flows for the
Six Months ended June 30, 2005 and 2004 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 23
Item 4. Controls and Procedures 23
Part II Other Information
Item 1. Legal Proceedings *
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
Item 3. Defaults Upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information *
Item 6. Exhibits 25
Signature 26
* No information submitted under this caption
1
PART I
FINANCIAL INFORMATION
2
SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
ASSETS
June 30, December 31,
2005 2004
------------- --------------
Cash and due from banks $ 18,455,904 $ 13,186,173
Federal funds sold 14,594,000 12,326,000
Interest-bearing deposits in other banks 1,012,118 512,024
------------- --------------
Cash and cash equivalents 34,062,022 26,024,197
Investment securities
Available-for-sale 166,150,577 152,637,090
Held-to-maturity, at cost (fair values of
$3,947,419 and $3,997,361, respectively) 3,776,234 3,776,428
Loans held for sale 18,515,627 14,778,614
Loans 533,770,596 479,391,209
Less allowance for loan losses (8,677,660) (7,930,366)
------------- --------------
Loans, net 525,092,936 471,460,843
Premises and equipment, net 18,228,058 18,437,500
Accrued interest receivable 4,164,211 3,638,247
Intangible assets, net 139,883 139,883
Bank-owned life insurance 11,648,537 11,463,591
Other assets 4,532,665 4,160,918
------------- --------------
$786,310,750 $ 706,517,311
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 87,738,653 $ 80,798,355
Interest-bearing:
NOW accounts 92,719,311 80,417,657
Savings 265,079,711 225,533,029
Money management accounts 25,060,686 25,142,955
Time deposits over $100,000 110,317,208 106,835,743
Other time deposits 35,168,950 38,056,932
------------- --------------
616,084,519 556,784,671
Federal funds purchased and securities sold
under repurchase agreements 56,951,647 44,581,259
Advances from Federal Home Loan Bank 46,000,000 40,000,000
Other borrowed funds 900,000 900,000
Accrued interest and other liabilities 5,072,679 5,271,556
------------- --------------
Total liabilities 725,008,845 647,537,486
------------- --------------
Stockholders' equity
Common stock, $3.00 par value; 10,000,000 shares
authorized; 5,281,104 and 5,287,100 shares issued in
2005 and 2004, respectively; 5,256,807 and 5,249,604
shares outstanding in 2005 and 2004, respectively 15,843,312 15,861,300
Additional paid-in capital 34,229,127 34,375,510
Retained earnings 12,002,520 8,878,633
Treasury stock, at cost; 24,297 and 37,496 shares in
2005 and 2004, respectively (332,755) (497,127)
Accumulated other comprehensive income (440,299) 361,509
------------- --------------
Total stockholders' equity 61,301,905 58,979,825
------------- --------------
$786,310,750 $ 706,517,311
============= ==============
See accompanying notes to consolidated financial statements.
3
SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------ ----------- ------------ ------------
2005 2004 2005 2004
------------ ----------- ------------ ------------
Interest income:
Loans, including fees $ 9,271,626 $6,791,048 $17,515,164 $13,431,392
Investment securities 1,936,599 1,712,465 3,701,141 3,419,308
Federal funds sold 95,762 9,006 151,369 17,230
Interest-bearing deposits in other banks 6,766 14 9,199 43
------------ ----------- ------------ ------------
Total interest income 11,310,753 8,512,533 21,376,873 16,867,973
------------ ----------- ------------ ------------
Interest expense:
Deposits 3,244,981 1,674,482 5,890,571 3,314,020
Federal funds purchased and securities sold
under repurchase agreements 350,430 134,421 622,400 311,809
Other borrowings 554,263 445,930 1,062,090 878,037
------------ ----------- ------------ ------------
Total interest expense 4,149,674 2,254,833 7,575,061 4,503,866
------------ ----------- ------------ ------------
Net interest income 7,161,079 6,257,700 13,801,812 12,364,107
Provision for loan losses 515,269 131,197 986,963 519,920
------------ ----------- ------------ ------------
Net interest income after provision
for loan losses 6,645,810 6,126,503 12,814,849 11,844,187
------------ ----------- ------------ ------------
Noninterest income:
Service charges and fees on deposits 1,354,425 1,227,462 2,565,475 2,286,369
Gain on sales of loans 1,298,399 1,628,426 2,340,582 2,905,106
Investment securities losses, net (40,051) (85,293) (39,260) (4,542)
Retail investment income 121,603 108,983 203,566 204,538
Trust service fees 150,024 135,831 306,936 258,070
Increase in cash surrender value of
bank-owned life insurance 102,157 126,823 184,946 252,086
Miscellaneous income 202,201 112,612 327,303 211,944
------------ ----------- ------------ ------------
Total noninterest income 3,188,758 3,254,844 5,889,548 6,113,571
------------ ----------- ------------ ------------
Noninterest expense:
Salaries 3,014,016 3,120,656 5,763,555 5,633,780
Employee benefits 775,925 730,100 1,585,369 1,496,955
Occupancy expenses 682,433 642,195 1,355,526 1,261,359
Other operating expenses 1,734,410 1,654,695 3,239,572 3,354,625
------------ ----------- ------------ ------------
Total noninterest expense 6,206,784 6,147,646 11,944,022 11,746,719
------------ ----------- ------------ ------------
Income before income taxes 3,627,784 3,233,701 6,760,375 6,211,039
Income tax expense 1,222,052 1,076,978 2,270,654 2,048,226
------------ ----------- ------------ ------------
Net income $ 2,405,732 $2,156,723 $ 4,489,721 $ 4,162,813
============ =========== ============ ============
<FN>
(continued)
4
SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------- ---------- ---------- ----------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Basic net income per share $ 0.46 $ 0.41 $ 0.85 $ 0.79
========== ========== ========== ==========
Diluted net income per share $ 0.45 $ 0.41 $ 0.84 $ 0.78
========== ========== ========== ==========
Weighted average common shares outstanding 5,256,807 5,247,204 5,255,175 5,247,204
========== ========== ========== ==========
Weighted average number of common and
common equivalent shares outstanding 5,343,086 5,323,482 5,337,433 5,323,786
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
5
SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
2005 2004
-------------- ---------------
Cash flows from operating activities:
Net income $ 4,489,721 $ 4,162,813
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 719,321 646,054
Provision for loan losses 986,963 519,920
Net investment securities losses 39,260 4,542
Net amortization of premium on investment securities 194,700 186,162
Increase in CSV of bank owned life insurance (184,946) (252,086)
Loss (gain) on disposal of premises and equipment 17 (1,867)
(Gain) loss on the sale of other real estate (4,150) 22,233
Gain on sales of loans (2,340,582) (2,905,106)
Real estate loans originated for sale (122,078,283) (148,063,638)
Proceeds from sales of real estate loans 120,681,852 144,584,629
(Increase) decrease in accrued interest receivable (525,964) 228,925
Increase in other assets (12,122) (5,688)
Decrease in accrued interest and other liabilities (198,877) (834,614)
-------------- ---------------
Net cash provided by (used in) operating activities 1,766,910 (1,707,721)
-------------- ---------------
Cash flows from investing activities:
Proceeds from sales of available for sale securities 20,164,223 15,930,455
Proceeds from maturities of available for sale securities 10,070,942 25,926,243
Proceeds from maturities of held to maturity securities - 668,000
Purchase of available for sale securities (44,546,679) (50,231,608)
Purchase of Federal Home Loan Bank stock (650,600) (250,000)
Net increase in loans (54,619,056) (23,461,164)
Purchases of premises and equipment (512,396) (3,303,103)
Proceeds from sale of other real estate 57,579 226,988
Proceeds from sale of premises and equipment 2,500 50,207
-------------- ---------------
Net cash used in investing activities (70,033,487) (34,443,982)
-------------- ---------------
Cash flows from financing activities:
Net increase in deposits 59,299,848 54,753,462
Net increase (decrease) in federal funds purchased and
securities sold under repurchase agreements 12,370,388 (16,201,875)
Advances from Federal Home Loan Bank 11,000,000 10,000,000
Payments of Federal Home Loan Bank advances (5,000,000) -
Proceeds from other borrowed funds - 100,000
Payment of cash dividends (1,365,834) (1,364,273)
-------------- ---------------
Net cash provided by financing activities 76,304,402 47,287,314
-------------- ---------------
<FN>
(continued)
6
SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
2005 2004
------------- --------------
Net increase in cash and cash equivalents $ 8,037,825 $ 11,135,611
Cash and cash equivalents at beginning of period 26,024,197 15,721,884
------------- --------------
Cash and cash equivalents at end of period $ 34,062,022 $ 26,857,495
============= ==============
Supplemental disclosures of cash paid during the period for:
Interest $ 7,401,882 $ 4,764,509
============= ==============
Income taxes $ 2,420,000 $ 2,200,000
============= ==============
Supplemental information on noncash investing activities:
Loans transferred to other real estate $ - $ 249,221
============= ==============
See accompanying notes to consolidated financial statements.
7
SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005
Note 1 - Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Southeastern Bank Financial Corporation, formerly Georgia Bank Financial
Corporation, and its wholly-owned subsidiary, Georgia Bank & Trust Company (the
"Company" or the "Bank"). Significant intercompany transactions and accounts
are eliminated in consolidation.
The financial statements for the three and six months ended June 30, 2005 and
2004 are unaudited and have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations. These
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and footnotes included in the Company's annual
report on Form 10-K for the year ended December 31, 2004.
In the opinion of management, all adjustments necessary to present fairly the
financial position and the results of operations and cash flows for the interim
periods have been made. All such adjustments are of a normal recurring nature.
The results of operations for the three and six months ended June 30, 2005 are
not necessarily indicative of the results of operations which the Company may
achieve for the entire year.
Some items in the prior period financial statements were reclassified to conform
to the current presentation.
Note 2 - Recent Accounting Pronouncements
SFAS No. 123 (Revised 2004), Accounting for Stock-Based Compensation, will
require most public entities, effective at the beginning of the first annual
period beginning after June 15, 2005, to compute the fair value of options at
the date of grant and to recognize such costs as compensation expense
immediately if there is no vesting period or ratably over the vesting period of
the options. Due to the April 15, 2005, deferral of the effective date to the
beginning of the first annual period beginning after June 15, 2005, the Bank has
chosen not to adopt the cost recognition principles of this statement for 2005.
If the Bank had chosen to adopt these principles, an annual expense of $217,000
would be recorded for 2005. Based on the options outstanding as of June 30,
2005, the expense would decline in succeeding years as the options fully vest.
The Bank will adopt SFAS No. 123 (Revised 2004) as of January 1, 2006.
8
Note 3 - Comprehensive Income
Other comprehensive income (loss) for the Company consists of net unrealized
gains and (losses) on investment securities available for sale. Total
comprehensive income (loss) for the three months ended June 30, 2005 was
$2,893,000 compared to ($1,189,000) for the three months ended June 30, 2004.
Total comprehensive income for the six months ended June 30, 2005 was $3,688,000
compared to $1,537,000 for the six months ended June 30, 2004.
Note 4 - Stock-based Compensation
The Company applies Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for its
stock option plans. Accordingly compensation cost is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of grant over
the amount an employee must pay to acquire the stock. Had compensation cost
been determined based upon the fair value of the options at the grant dates
consistent with the method recommended by SFAS No. 123, on a pro forma basis,
the Company's net income and income per share, on a pro forma basis, for the
three and six months ended June 30, 2005 and 2004 is indicated below.
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Net income $2,405,732 $2,156,723 $4,489,721 $4,162,813
Deduct: Total stock-based
Compensation expense determined
Under fair value based method,
net of related tax effect 54,261 51,969 108,522 103,938
---------- ---------- ---------- ----------
Pro Forma, net income $2,351,471 $2,104,754 $4,381,199 $4,058,875
========== ========== ========== ==========
Basic net income per share:
As reported $ 0.46 $ 0.41 $ 0.85 $ 0.79
Pro forma $ 0.45 $ 0.40 $ 0.83 $ 0.77
Diluted net income per share:
As reported $ 0.45 $ 0.41 $ 0.84 $ 0.78
Pro forma $ 0.44 $ 0.40 $ 0.82 $ 0.76
Note 5 - Cash Dividend Declared
On April 20, 2005, the Company declared a quarterly cash dividend of $0.13 per
share on outstanding shares. The dividend was paid on May 20, 2005 to
shareholders of record as of May 4, 2005.
On July 18, 2005, the Company declared a quarterly cash dividend of $0.13 per
share on outstanding shares. The dividend is payable on August 15, 2005 to
shareholders of record as of August 1, 2005.
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
- --------
The Bank was organized by a group of local citizens and commenced business on
August 28, 1989. It began operations with one branch. Today, the Bank operates
eight full service branches in Richmond and Columbia counties in Augusta,
Martinez, and Evans, Georgia. The Bank operates two mortgage origination
offices in Augusta, Georgia, and Savannah, Georgia. The Savannah, Georgia
office also offers construction lending services. Bank and mortgage operations
are located in Augusta, Georgia in two operations campuses located in close
proximity to the main office in Augusta, Georgia. Wealth management, trust,
and retail investment services are located in the main office. The Bank is
Augusta's largest community banking company. On July 12, 2005, the Company
announced its plans to expand outside its current markets by opening a branch in
Athens, Georgia and chartering a thrift in Aiken, South Carolina.
Richmond and Columbia counties have a diversified economy based primarily on
government, transportation, public utilities, health care, manufacturing,
construction, and wholesale and retail trade. Augusta is one of the leading
medical centers in the Southeast. The 2003 population of the Augusta-Richmond
County, GA-SC metropolitan area was 340,048, the second largest in Georgia.
The Bank's services include the origination of residential and commercial real
estate loans, construction and development loans, and commercial and consumer
loans. The Bank also offers a variety of deposit programs, including
noninterest-bearing demand, interest checking, money management, savings, and
time deposits. In the combined Richmond and Columbia counties, the Bank had
16.84% of all deposits and was the second largest depository institution at June
30, 2004, as cited from the Federal Deposit Insurance Corporation's website.
Securities sold under repurchase agreements are also offered. Additional
services include wealth management, trust, retail investment, and mortgage. As
a matter of practice, most mortgage loans are sold in the secondary market;
however, some mortgage loans are placed in the portfolio based on marketing and
balance sheet considerations. The Bank continues to concentrate on increasing
its market share through various new deposit and loan products and other
financial services and by focusing on the customer relationship management
philosophy. The Bank is committed to building life-long relationships with its
customers, employees, shareholders, and the communities it serves.
The Bank's primary source of income is from its lending activities followed by
income from its investment activities, service charges and fees on deposits, and
gain on sale of mortgage loans in the secondary market. Loan interest income
increased during the first six months of 2005 as compared to the first six
months of 2004 due to rising interest rates and increased volumes while gain on
sales of mortgage loans decreased due to lower production levels. Service
charges and fees on deposits increased for the first six months of 2005 as a
result of new retail checking account products introduced in March 2004.
10
Both trust services and retail investments generated record income in 2004 and
trust services income increased for the six months ended June 30, 2005, as
compared with the six months ended June 30, 2004, while retail investment income
remained stable. The Bank is focusing on the expansion of its wealth management
area.
The Bank continues to experience steady growth. Over the past five years,
assets grew from $405.8 million at December 31, 2000 to $706.5 million at
December 31, 2004. At June 30, 2005, assets were $786.3 million. From year end
2000 to year end 2004, loans increased $210.6 million, and deposits increased
$245.9 million. From December 31, 2004 to June 30, 2005, loans increased $58.1
million and deposits increased $59.3 million. Also, from 2000 to 2004, return
on average equity increased from 12.58% to 15.50% and return on average assets
increased from 1.08% to 1.29%. At June 30 2005, return on average assets was
1.21% and return on average equity was 15.10%. Net income for the year ended
2000 was $4.0 million compared to net income of $8.7 million at year end 2004.
Net income for the six months ended June 30, 2005 was $4.5 million. The Company
has reached a level of maturity evidenced by long-term financial performance and
stability that resulted in cash dividends of $0.13 per share paid for each
quarter of 2004, as well as the first two quarters of 2005.
The Bank meets its liquidity needs by managing cash and due from banks, federal
funds purchased and sold, maturity of investment securities, paydowns from
mortgage-backed securities, and draws on lines of credit. Additionally,
liquidity can be managed through structuring deposit and loan maturities. The
Bank funds loan and investment growth with core deposits, securities sold under
repurchase agreements and wholesale borrowings. During inflationary periods,
interest rates generally increase and operating expenses generally rise. When
interest rates rise, variable rate loans and investments produce higher
earnings; however, deposit and other borrowings interest expense also rise. The
Bank monitors its interest rate risk as it applies to income in a ramp up and
down annually 200 basis points (2%) scenario and as it applies to economic value
of equity in a shock up and down 200 (2%) basis points scenario. The Bank
monitors operating expenses through responsibility center budgeting.
Forward-Looking Statements
- ---------------------------
Southeastern Bank Financial Corporation (the "Company") may, from time to time,
make written or oral forward-looking statements, including statements contained
in the Company's filings with the Securities and Exchange Commission (the
"Commission") and its reports to shareholders. Statements made in such
documents, 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, 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; the effects of
11
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.
Critical Accounting Policies
- ------------------------------
The accounting and financial reporting policies of the Company conform to
accounting principles generally accepted in the United States of America and to
general practices within the banking industry. Of these policies, management
has identified the allowance for loan losses as a critical accounting policy
that requires difficult, subjective judgment and is important to the
presentation of the financial condition and results of operations of the
Company.
The allowance for loan losses is established through a provision for loan losses
charged to expense, which affects the Company's earnings directly. Loans are
charged against the allowance for loan losses when management believes that the
collectibility of the principal is unlikely. Subsequent recoveries are added to
the allowance. The allowance is an amount that management believes will be
adequate to absorb losses on existing loans that become uncollectible, based on
evaluations of the collectibility of loans. The evaluations take into
consideration such factors as changes in the nature and volume of the loan
portfolio, historical loss rates, overall portfolio quality, review of specific
problem loans, and current economic conditions and trends that may affect a
borrower's ability to repay.
The Company segments its allowance for loan losses into the following four major
categories: 1) identified losses for impaired loans; 2) general reserves for
Classified/Watch loans; 3) general reserves for loans with satisfactory ratings;
and 4) general reserves based on economic and market risk qualitative factors.
Risk ratings are initially assigned in accordance with the Bank's loan and
collection policy. An organizationally independent department reviews grade
assignments on an ongoing basis. Management reviews current information and
events regarding a borrower's financial condition and strengths, cash flows
available for debt repayment, the related collateral supporting the loan and the
effects of known and expected economic conditions. When the evaluation reflects
a greater than normal risk associated with the individual loan, management
classifies the loan accordingly. If the loan is determined to be impaired,
management allocates a portion of the allowance for loan losses for that loan
based upon the present value of future cash flows discounted at the loan's
effective interest rate, or the fair value of the collateral if collection of
the loan is deemed to be dependent upon the collateral. Regulatory guidance is
also considered. Cash receipts for accruing loans are applied to principal and
interest under the contractual terms of the loan agreement, where cash receipts
on impaired and nonaccrual loans for which the accrual of interest has been
discontinued are applied first to principal and then to interest income.
Impaired and Classified/Watch loans are aggressively monitored. The reserves
for loans rated satisfactory are further subdivided into various types of loans
as defined by call report
12
codes. Qualitative factors are based upon economic, market and industry
conditions that are specific to the Company's two local county markets. These
qualitative factors include, but are not limited to, national and local economic
conditions, bankruptcy trends, unemployment trends, loan concentrations, and
competitive factors in the local market. These allocations for the qualitative
factors are included in the various individual components of the allowance for
loan losses. The qualitative factors are subjective in nature and require
considerable judgment on the part of the Company's management. However, it is
the Company's opinion that these factors represent uncertainties in the Bank's
business environment that must be factored into the Company's analysis of the
allowance for loan losses.
Performance Overview -- Net Income
- ----------------------------------
The Company's net income for the second quarter of 2005 was $2,406,000 which was
an increase of $249,000 (11.5%) compared to net income of $2,157,000 for the
second quarter of 2004. Diluted net income per share for the three months ended
June 30, 2005 was $0.45 compared to $0.41 for the three months ended June 30,
2004. Net income for the first six months of 2005 was $4,490,000, an increase
of $327,000 (7.9%) compared with net income of $4,163,000 for the first six
months of 2004. The increase in net income for the three and six months ended
June 30, 2005 as compared with the three and six months ended June 30, 2004, was
primarily a result of increases in net interest income, somewhat offset by an
increase in the loan loss provision, a decrease in noninterest income and an
increase in noninterest expense. Both loan interest income and deposit interest
expense increased due to higher interest rates and increased volumes. The
provision for loan losses increased due to increases in outstanding loan
balances and the level of Classified debt. Factors contributing to the decrease
in noninterest income were a decrease in the gain on sale of mortgage loans in
the secondary market due to lower volumes, somewhat offset by increases in
service charges and fees on deposits. Retail checking accounts introduced in
March 2004 generated increases in NSF fees and ATM income, somewhat offset by
decreases in service charges. Noninterest expense increased during the
six-month period ended June 30, 2005 compared to the six-month period ended June
30, 2004 primarily due to increases in salaries and employee benefits related to
company growth, somewhat offset by decreases in other operating expenses.
Significant changes in other operating expenses include a decrease in loan costs
for losses that were recorded in the first six months of 2004 for a loan that
was sold into the secondary market based on a fraudulent appraisal and for
commercial loan litigation settlement. Additional factors include decreases in
processing expenses attributable to ATM processing and new retail checking
products, the expiration of commissions due under an overdraft protection
contract, increases in trust advisory fees and professional fees for
Sarbanes-Oxley 404 compliance and increases in staff development expense for
sales training.
Total assets of $786.3 million at June 30, 2005 reflect an increase of $79.8
million (11.3%) from year-end 2004. This increase is primarily attributable to
higher loan and investment balances since December 2004. Total loans at June
30, 2005 were $552.3 million which represented an increase of $58.1 million
(11.8%) from December 31, 2004.
13
Since December 31, 2004 investment securities increased $13.5 million (8.6%),
cash and due from banks increased $5.3 million (40.0%), and federal funds sold
increased $2.3 million (18.4%). These increases were funded by increases in
total deposits of $59.3 million (10.7%), increases in securities sold under
repurchase agreements of $12.4 million (27.8%), increases in Federal Home Loan
Bank advances of $6.0 million (15.0%), and net income of $4.5 million less
dividends paid of $1.4 million.
The annualized return on average assets for the Company was 1.21% for the six
months ended June 30, 2005, compared to 1.28% for the same period last year.
While total assets have increased $107.7 million since second quarter 2004, net
income has only increased $327,000, resulting in a decrease in ROA. Increases
in net interest income were offset by decreases in noninterest income and
increases in noninterest expense and income tax expense. The annualized return
on average stockholders' equity was 15.10% for both the six months ended June
30, 2005 and 2004. The steady ratio reflects growth of both net income and
stockholders' equity in proportion to one another during the periods compared.
Net Interest Income
- ---------------------
Table 1 - Net Interest Income
Three Months Ended Six Months Ended
June 30, Variance June 30, Variance
---------------------- ----------------- --------------------- --------------
2005 2004 Amount % 2005 2004 Amount %
--------- ----------- ------- -------- --------- ---------- ------- -----
(Dollars in thousands)
Interest income:
Loans, including fees $ 9,272 $ 6,791 $ 2,481 36.5% $ 17,515 $ 13,431 $ 4,084 30.4%
Investment securities 1,937 1,712 225 13.1% 3,701 3,419 282 8.2%
Interest expense:
Deposits 3,245 1,674 1,571 93.8% 5,891 3,314 2,577 77.8%
Federal funds purchased
and securities sold under
repurchase agreements 350 134 216 161.2% 622 312 310 99.4%
Net interest income 7,161 6,258 903 14.4% 13,802 12,364 1,438 11.6%
========= =========== ======= ======== ========= ========== ======= =====
Net interest income increased $903,000 (14.4%) during the three-month period and
$1,438,000 (11.6%) during the six-month period as the result of increases in
both interest income and interest expense. Loan interest income increased $2.5
million and $4.1 million in the three and six month periods, respectively, while
deposit interest expense increased $1.6 million and $2.6 million in the three
and six month periods, respectively, all the result of higher interest rates and
increased volumes. Other contributing factors during both the three and six
month periods included the increase in interest income on investment securities
and the increase in interest expense on federal funds purchased and securities
sold under repurchase agreements, again the result of increased volumes and
higher interest rates. Interest-earning assets were $737.8 million at June 30,
2005, an
14
increase of $103.7 million (16.4%) over June 30, 2004 and $74.4 million (11.21%)
over December 31, 2004.
The Company's net interest margin for both the three and six months ended June
30, 2005 was 3.96%, as compared to 3.97% and 4.01% for the three and six months
ended June 30, 2004, respectively. Both the rates earned on assets and the
costs to fund those earnings have increased at primarily the same rate resulting
in a stable net interest margin for all comparable periods.
Noninterest Income
- ------------------
Table 2 - Noninterest Income
Three Months Ended Six Months Ended
June 30, Variance June 30, Variance
----------------------- ------------------ --------------------- -----------------
2005 2004 Amount % 2005 2004 Amount %
---------- ----------- -------- -------- -------- ----------- -------- -------
(Dollars in thousands)
Service charges and fees
on deposits $ 1,354 $ 1,227 $ 127 10.4% $ 2,565 $ 2,236 $ 279 12.2%
Gain on sales of loans 1,298 1,628 (330) (20.3%) 2,341 2,905 (564) (19.4%)
Miscellaneous income 202 113 89 78.8% 327 212 115 54.2%
Noninterest income 3,189 3,254 (65) (2.0%) 5,890 6,114 (224) (3.7%)
Noninterest income decreased $65,000 (2.0%) during the three-month period and
$224,000 (3.7%) during the six-month period. Contributing factors included
decreases in gain on sales of mortgage loans in the secondary market during the
three and six month periods due to lower mortgage loan volumes which are
primarily the result of overall market conditions, increased competition,
reduced staff in existing offices, and the closing of the Nashville, Tennessee
mortgage office. These decreases were partially offset by increases in service
charges and fees on deposits during the three and six month periods primarily
due to increases in NSF fees and ATM income, somewhat offset by decreases in
service charges, all a result of new retail checking accounts. In addition,
recognition of income due to changes in the fair value of derivative loan
commitments and forward loan sales commitments was the primary contributor to
the increase in miscellaneous income for the three and six month periods ended
June 30, 2005.
15
Noninterest Expense
- --------------------
Table 3 - Noninterest Expense
Three Months Ended Six Months Ended
June 30, Variance June 30, Variance
---------------------- -------------------- --------------------- ----------------
2005 2004 Amount % 2005 2004 Amount %
--------- ----------- -------- ---------- -------- ----------- -------- ------
(Dollars in thousands)
Salaries $ 3.014 $ 3.121 $ (107) (3.4%) $ 5.764 $ 5.634 $ 130 2.3%
Employee benefits 776 730 46 6.3% 1,585 1,497 88 5.9%
Occupancy expenses 682 642 40 6.2% 1,355 1,261 94 7.5%
Other operating expenses 1.735 1.655 80 4.8% 3,240 3,355 (115) (3.4%)
--------- ----------- -------- ---------- -------- ----------- -------- ------
Total noninterest expense $ 6.207 $ 6.148 $ 59 1.0% $ 11,944 $ 11,747 $ 197 1.7%
========= =========== ======== ========== ======== =========== ======== ======
Noninterest expense increased $59,000 (1.0%) during the three-month period and
$197,000 (1.7%) during the six-month period. Salary expense decreased during
the three-month period due to decreases in mortgage commissions and incentive
compensation related to reduced mortgage loan volumes partially offset by
increases in salaries related to company growth. Salary expense and employee
benefits increased during the six-month period primarily as the result of
company growth. The increase in occupancy expenses during the six-month period
is primarily due to depreciation and maintenance expense on the Walton Way
Operations Campus opened in February 2004 and the Cotton Exchange branch which
opened in September 2004. Other operating expenses decreased $115,000 (3.4%)
during the first six months of 2005. Contributing factors include losses
recorded in the first six months of 2004 for $150,000 for a loan which was sold
into the secondary market based on a fraudulent appraisal, $50,000 for a
commercial loan litigation settlement, and $147,000 (23.6%) decrease in
processing expense attributable to moving ATM processing in-house, retail
checking products expense, and the expiration of the contract to pay commissions
for overdraft protection. These decreases in other operating expenses were
partially offset by an $88,000 (21.7%) increase in professional fees for trust
advisory fees and Sarbanes-Oxley 404 compliance and a $108,000 (54.9%) increase
in staff development expense for sales training. The increase in other
operating expenses for the three-month period was primarily due to the sales
training expense.
Income Taxes
- -------------
Income tax expense in the second quarter of 2005 totaled $1,222,000, an increase
of $145,000 (13.5%) over the second quarter of 2004. The effective tax rate for
the three months ended June 30, 2005 and 2004 was 33.7% and 33.3%, respectively.
Income tax expense for the six months ended June 30, 2005 totaled $2,271,000 for
an effective tax rate of 33.6% compared to 33.0% for the six months ended June
30, 2004. The increase in the effective tax rate for both the three and six
month periods is primarily due to an adjustment to deferred income taxes in
2004, with a smaller impact from a decrease in cash surrender value, somewhat
offset by an increase in tax exempt municipal and loan income.
16
Asset Quality
- --------------
Table 5 which follows shows the current and prior period amounts of
non-performing assets. Non-performing assets were $4.0 million at June 30,
2005, compared to $3.0 million at December 31, 2004 and $2.6 million at June 30,
2004. The ratio of non-performing assets to total loans and other real estate
was 0.72% at June 30, 2005, compared to 0.60% at December 31, 2004 and 0.56% at
June 30, 2004. The control and monitoring of non-performing assets continues to
be a priority of management.
There was $29,000 of loans past due 90 days or more and still accruing at
December 31, 2004. There were no loans past due 90 days or more and still
accruing at June 30, 2005 and June 30, 2004.
Allowance for Loan Losses
- ----------------------------
The allowance for loan losses represents a reserve for probable loan losses in
the loan portfolio. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with particular
emphasis on impaired, non-accruing, past due, and other loans that management
believes require special attention. The determination of the allowance for loan
losses is considered a critical accounting policy of the Company. See "Critical
Accounting Policies."
When reviewing the allowance for loan losses, it is important to understand to
whom the Company lends. At June 30, 2005, the loan portfolio is comprised of
81.43% real estate loans. Commercial, financial and agricultural loans comprise
11.80%, and consumer loans comprise 6.77% of the portfolio.
While the Company has 81.43% of its loan portfolio secured by real estate loans,
this percentage is not significantly higher than in previous years. Commercial
real estate comprises 29.52% of the loan portfolio and is primarily owner
occupied properties where the operations of the commercial entity provide the
necessary cash flow to service the debt. For this portion of real estate loans,
repayment is not dependent upon liquidation of the real estate. Construction
and development (28.84%) has been an increasingly important portion of the real
estate loan portfolio. The Company carefully monitors the loans in this
category since the repayment of these loans is generally dependent upon the
liquidation of the real estate and is impacted by national and local economic
conditions. The residential category, 19.72% of the portfolio, represents those
loans that the Company chooses to maintain in its portfolio rather than selling
into the secondary market for marketing and competitive reasons and commercial
loans secured by residential real estate. The residential held for sale
category, 3.35% of the portfolio, comprises loans that are in the process of
being sold into the secondary market. In these loans, the credit has been
approved by the investor and the interest rate locked so that the Company
minimizes credit and interest rate risk with respect to these loans.
The Company has no large loan concentrations to individual borrowers or
industries. Unsecured loans at June 30, 2005 were $9.9 million. While
management uses available information to recognize losses on loans, future
additions to the allowance may be
17
necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses. Such agencies may
require the Company to recognize additions to the allowance based on their
judgments about information available to them at the time of their examination.
Additions to the allowance for loan losses are made periodically to maintain the
allowance at an appropriate level based upon management's analysis of potential
risk in the loan portfolio. Loans determined to be uncollectible are charged to
the allowance for loan losses and subsequent recoveries are added to the
allowance. A provision for losses in the amount of $515,000 was charged to
expense for the quarter ended June 30, 2005 compared to $131,000 for the quarter
ended June 30, 2004, and $987,000 for the six months ended June 30, 2005
compared to $520,000 for the six months ended June 30, 2004. The higher
provision for the three and six months ended June 30, 2005 as compared to the
three and six months ended June 30, 2004 is due to increases in outstanding loan
balances and the level of Classified and Watch-rated debt.
At June 30, 2005 the ratio of allowance for loan losses to total loans was 1.57%
compared to 1.60% at December 31, 2004 and 1.58% at June 30, 2004. Management
considers the current allowance for loan losses appropriate based upon its
analysis of the potential risk in the portfolio, although there can be no
assurance that the assumptions underlying such analysis will continue to be
correct.
Liquidity and Capital Resources
- ----------------------------------
The Company's liquidity remains adequate to meet operating and loan funding
requirements. The loan to deposit ratio at June 30, 2005 was 89.6% compared to
88.8% at December 31, 2004 and 85.7% at June 30, 2004. The steady loan to
deposit ratio from December 31, 2004 to June 30, 2005 reflects growth of both
loans and deposits in proportion to one another during the first six months of
2005. The increase in the loan to deposit ratio from June 30, 2004 to December
31, 2004 reflects significant loan growth during that time period. Deposits at
June 30, 2005 and December 31, 2004 include $37.6 million and $34.9 million of
brokered certificates of deposit, respectively. The Company has also utilized
borrowings from the Federal Home Loan Bank. The Company maintains a line of
credit with the Federal Home Loan Bank approximating 10% of the Bank's total
assets. Federal Home Loan Bank advances are collateralized by eligible first
mortgage loans, and commercial real estate loans. These borrowings totaled
$46.0 million at June 30, 2005. The Company maintains repurchase lines of
credit with SunTrust Robinson Humphrey, Atlanta, Georgia, for advances up to
$20.0 million and with The Bankers Bank, Atlanta, Georgia, for advances up to
$10.0 million of which no amounts were outstanding in either case at June 30,
2005. The Company has a federal funds purchased accommodation with The Bankers
Bank, Atlanta, Georgia, for advances up to $16.7 million and with SunTrust Bank,
Atlanta, Georgia for advances up to $10.0 million. Additionally, liquidity
needs can be satisfied by the structuring of the maturities of investment
securities and the pricing and maturities on loans and deposits offered to
customers. The Company also uses retail securities sold under repurchase
agreements to
18
fund growth. Securities sold under repurchase agreements were $57.0 million at
June 30, 2005.
Shareholders' equity to total assets was 7.80% at June 30, 2005 compared to
8.35% at December 31, 2004 and 7.94% at June 30, 2004. The capital of the
Company and the Bank exceeded all required regulatory guidelines at June 30,
2005. The Company's Tier 1 risk-based, total risk-based and leverage capital
ratios were 9.77%, 11.02%, and 7.98%, respectively, at June 30, 2005. Table 6
which follows reflects the current regulatory capital levels in more detail,
including comparisons to the regulatory minimums.
Management is not aware of any events or uncertainties that are reasonably
likely to have a material effect on the Company's liquidity, capital resources
or operations.
Commitments and Contractual Obligations
- ------------------------------------------
The Bank is a party to lines of credit with off-balance sheet risk in the normal
course of business to meet the financing needs of its customers. Lines of
credit are unfunded commitments to extend credit. These instruments involve, in
varying degrees, exposure to credit and interest rate risk in excess of the
amounts recognized in the financial statements. The Bank's exposure to credit
loss in the event of nonperformance by the other party to the financial
instrument for unfunded commitments to extend credit and letters of credit is
represented by the contractual amount of those instruments. The Bank evaluates
construction and acquisition and development loans for the percentage completed
before extending additional credit. The Bank follows the same credit policies
in making commitments and contractual obligations as it does for on-balance
sheet instruments.
Unfunded commitments to extend credit where contract amounts represent potential
credit risk totaled $172.8 million at June 30, 2005. These commitments are
primarily at variable interest rates.
The Company's commitments are funded through internal funding sources of
scheduled repayments of loans and sales and maturities of investment securities
available for sale or external funding sources through acceptance of deposits
from customers or borrowings from other financial institutions.
The following table is a summary of the Company's commitments to extend credit,
commitments under contractual leases as well as the Company' contractual
obligations, consisting of deposits, FHLB advances, which are subject to early
termination options, and borrowed funds by contractual maturity date for the
next five years.
19
Table 4 - Commitments and Due in Due in Due in Due in Due in
Contractual Obligations 1 Year 2 Years 3 Years 4 Years 5 Years
- --------------------------- -------- -------- -------- -------- --------
Lines of credit $172,820 - - - -
Lease agreements 86 75 22 - -
Deposits 266,673 119,082 91,156 37,944 39,017
Securities sold under
repurchase agreements 56,952 - - - -
FHLB advances 5,000 - - - 23,000
Other borrowings 900 - - - -
-------- -------- -------- -------- --------
Total commitments and
contractual obligations $502,431 $119,157 $ 91,178 $ 37,944 $ 62,017
-------- -------- -------- -------- --------
Although management regularly monitors the balance of outstanding commitments to
fund loans to ensure funding availability should the need arise, management
believes that the risk of all customers fully drawing on all these lines of
credit at the same time is remote.
Effects of Inflation and Changing Prices
- ----------------------------------------
Inflation generally increases the cost of funds and operating overhead and to
the extent loans and other assets bear variable rates, the yields on such
assets. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on the performance of a
financial institution than the effects of general levels of inflation. Although
interest rates do not necessarily move in the same direction and to the same
extent as the prices of goods and services, increases in inflation generally
have resulted in increased interest rates. In addition, inflation can increase
a financial institution's cost of goods and services purchased, the cost of
salaries and benefits, occupancy expense and similar items. Inflation and
related increases in interest rates generally decrease the market value of
investments and loans held and may adversely affect liquidity, earnings, and
stockholders' equity. Mortgage originations and refinancings tend to slow as
interest rates increase, and can reduce the Company's earnings from such
activities and the income from the sale of residential mortgage loans in the
secondary market.
20
TABLE 5
- -------
SELECTED FINANCIAL DATA
(Dollars in Thousands)
Six Months Ended June 30,
-------------------------------
PROFITABILITY 2005 2004
- ---------------------------- -------------- ---------------
Return on average assets * 1.21% 1.28%
Return on average equity * 15.10% 15.10%
ALLOWANCE FOR LOAN LOSSES
- ----------------------------
Beginning balance, January 1 $ 7,930 $ 7,278
Provision charged to expense 987 520
Recoveries 511 335
Loans charged off (750) (831)
-------------- ---------------
Ending balance, June 30 $ 8,678 $ 7,302
============== ===============
NON-PERFORMING ASSETS June 30, 2005 December 31, 2004 June 30, 2004
- ---------------------------
Non-accrual loans $ 3,955 $ 2,972 $ 2,568
Other real estate owned 0 53 5
-------------- ------------------ --------------
Total non-performing assets $ 3,955 $ 3,025 $ 2,578
============== ================== ==============
LOANS PAST DUE 90 DAYS OR
MORE AND STILL ACCRUING $ 0 $ 29 $ 0
============== ================== ==============
* Annualized
21
TABLE 6
- -------
Regulatory Capital Requirements
June 30, 2005
(Dollars in Thousands)
Required for capital
Actual adequacy purposes Excess
Amount Percent Amount Percent Amount Percent
----------------- ----------------------- ----------------
Southeastern Bank Financial
Corporation
Risk-based capital:
Tier 1 capital $61,602 9.77% 25,232 4.00% 36,370 5.77%
Total capital 69,497 11.02% 50,464 8.00% 19,033 3.02%
Tier 1 leverage ratio 61,602 7.98% 30,871 4.00% 30,731 3.98%
Georgia Bank & Trust Company
Risk-based capital:
Tier 1 capital $59,095 9.39% 25,170 4.00% 33,925 5.39%
Total capital 66,971 10.64% 50,341 8.00% 16,630 2.64%
Tier 1 leverage ratio 59,095 7.67% 30,811 4.00% 28,284 3.67%
22
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of June 30, 2005, there were no substantial changes in the interest rate
sensitivity analysis or the sensitivity of market value of portfolio equity for
various changes in interest rates calculated as of December 31, 2004. The
foregoing disclosures related to the market risk of the Company should be read
in conjunction with the Company's audited consolidated financial statements,
related notes and management's discussion and analysis of financial condition
and results of operations for the year ended December 31, 2004 included in the
Company's 2004 Annual Report on Form 10-K.
Item 4. Controls and Procedures
As of the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's President and Chief Executive Officer
(principal executive officer) and its Executive Vice President and Chief
Operating Officer (principal financial officer), of the effectiveness of the
design and operation of the Company's disclosure controls and procedures
pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, such officers
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including
its consolidated subsidiaries) that is required to be included in the Company's
periodic filings with the Securities and Exchange Commission. There have been
no significant changes in the Company's internal controls or, to the Company's
knowledge, in other factors that could significantly affect those internal
controls subsequent to the date the Company carried out its evaluation, and
there have been no corrective actions with respect to significant deficiencies
or material weaknesses.
23
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the Company
or any of its subsidiaries is a party or of which any of their
property is subject.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On April 15, 2004, the Company announced the commencement of a stock
repurchase program, pursuant to which it will, from time to time,
repurchase up to 100,000 shares of its outstanding stock. The program
does not have a stated expiration date. No stock repurchase programs
were terminated during the second quarter of 2005. There were no
shares repurchased under an existing stock repurchase plan or
otherwise during the second quarter of 2005.
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on April 27, 2005 at the
Company's Cotton Exchange office located at 32 8th Street, Augusta,
Georgia.
(b) The following directors were elected for a term of one year and until
a successor is duly qualified and elected:
William J. Badger
R. Daniel Blanton
Warren Daniel
Edward G. Meybohm
Robert W. Pollard, Jr.
Randolph R. Smith
Ronald L. Thigpen
John W. Trulock, Jr.
(c) The following matters were voted on at the meeting as was previously
identified in the Proxy materials forwarded to each shareholder:
24
1. Proposal to elect the eight individuals nominated by management
as Directors.
Votes were cast as follows:
Director For Withhold
----------------------- --------- --------
William J. Badger 4,520,472 5,190
R. Daniel Blanton 4,516,972 8,690
Warren Daniel 4,520,472 5,190
Edward G. Meybohm 4,520,472 5,190
Robert W. Pollard, Jr. 4,516,972 8,690
Randolph R. Smith, M.D. 4,520,472 5,190
Ronald L. Thigpen 4,515,392 10,270
John W. Trulock, Jr. 4,520,472 5,190
Item 5. Other Information
None
Item 6. Exhibits
3.1 Articles of Incorporation, as amended.
31.1 Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
25
SOUTHEASTERN BANK FINANCIAL CORPORATION
Form 10-Q Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SOUTHEASTERN BANK FINANCIAL CORPORATION
Date: August 8, 2005 By: /s/ Ronald L. Thigpen .
-------------- ------------------------------------
Ronald L. Thigpen
Executive Vice President, Chief
Operating Officer (Duly Authorized
Officer of Registrant and Principal
Financial Officer)
26