News Column

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

July 25, 2014

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,  
 2014December 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 EndedSix Months Ended
 June 30,June 30,
 2014201320142013
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 2014YTD 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. 706-481-1014

Source: Southeastern Bank Financial Corp.


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