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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2003

OR

For the transition period from              to             

Commission file number 2-83157

SOUTHEASTERN BANKING CORPORATION

(Exact name of registrant as specified in its charter)

(912) 437-4141

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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  ¨

As of April 30, 2003, 3,333,139 shares of the registrant’s common stock, par value $1.25 per share, were outstanding.

Southeastern Banking Corporation

Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

1

Southeastern Banking Corporation

Consolidated Statement of Income

(Unaudited)

See accompanying notes to consolidated financial statements.

2

Southeastern Banking Corporation

Consolidated Statements of Shareholders’ Equity

(Unaudited)

See accompanying notes to consolidated financial statements.

3

Southeastern Banking Corporation

Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to consolidated financial statements.

4

Southeastern Banking Corporation

Notes to Consolidated Financial Statements

(Unaudited)

The accompanying unaudited consolidated financial statements of Southeastern Banking Corporation (the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. These statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. In the opinion of management, all adjustments necessary for a fair presentation have been made. These adjustments, consisting of normal, recurring accruals, include estimates for various fringe benefits and other transactions normally determined or settled at year-end. Operating results for the quarter ended March 31, 2003 are not necessarily indicative of trends or results to be expected for the year ended December 31, 2003. For further information, refer to the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

Certain prior year amounts have been restated to conform with the current year financial statement presentation.

Accounting for Costs Associated with Exit or Disposal Activities

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement provides guidance on the recognition and measurement of liabilities for costs associated with exit or disposal activities. Generally, SFAS No. 146 stipulates that defined exit costs, including restructuring and employee termination costs, are to be recorded on an incurred rather than commitment basis. The Company adopted SFAS 146 effective January 1, 2003. SFAS 146 did not have a material impact on the consolidated financial statements.

Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others

In November 2002, the FASB issued Interpretation (FIN) No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others.” This interpretation clarifies that a guarantor is required to recognize, at the inception of certain guarantees, a liability for the fair value of the obligation undertaken in issuing the guarantee. The Company has identified standby letters of credit as guarantees under FIN No. 45 and adopted FIN 45, in entirety, effective January 1, 2003. Adoption of FIN No. 45 did not have a material impact on the Company’s financial position or results of operations.

Amendment of Statement 133 on Derivative Instruments and Hedging Activities

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and

5

Southeastern Banking Corporation

Notes to Consolidated Financial Statements

(Unaudited)

reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Generally, this standard is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 will not have a current impact on the Company’s consolidated financial statements.

On January 31, 2002, the Company acquired the Richmond Hill office of Valdosta, Georgia-based Park Avenue Bank. The Company received certain loans, property and equipment, and other assets with fair values of approximately $12,201,000, while assuming deposits and other liabilities totaling approximately $4,270,000. Cash balances applied towards the purchase approximated $8,000,000. A deposit premium of $100,000 was recorded in conjunction with the transaction.

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Southeastern Banking Corporation

Management’s Discussion and Analysis

This Analysis should be read in conjunction with the 2002 Annual Report on Form 10-K and the consolidated financial statements & related notes on pages 1–6 of this quarterly filing.

Description of Business

Southeastern Banking Corporation (the Company), with assets exceeding $379,061,000, is a financial services company with operations in southeast Georgia and northeast Florida. Southeastern Bank (SEB), the Company’s principal subsidiary, offers a full line of commercial and retail services to meet the financial needs of its customer base through its fifteen branch locations and ATM network. Services offered include traditional deposit and credit services, long-term mortgage originations, and credit cards. SEB also offers 24-hour delivery channels including internet and telephone banking. The Company’s insurance subsidiary, SBC Financial Services, Inc. (SBCF), provides insurance agent and investment brokerage services with an emphasis on financial planning. In addition to traditional insurance, products offered include fixed and indexed annuities, mutual funds, retirement plans, and long-term care policies. SBCF had a nominal impact on the Company’s financial condition and results of operations at March 31, 2003 and 2002.

Acquisition

On January 31, 2002, the Company acquired the Richmond Hill office of Valdosta, Georgia-based Park Avenue Bank. The Company received certain loans, property and equipment, and other assets with fair values of approximately $12,201,000, while assuming deposits and other liabilities totaling $4,270,000. Cash balances applied towards the purchase approximated $8,000,000. A deposit premium of $100,000 was recorded in conjunction with the transaction. Operating results for Richmond Hill are included from the date of acquisition.

Financial Condition

Consolidated assets totaled $379,061,329 at March 31, 2003, up $921,700 or 0.24% from year-end 2002 and $6,750,862 or 1.81% from March 31, 2002. Virtually all of the 2003 growth year-to-date occurred in the loan portfolio. Offsetting a $1,822,000 reduction in federal funds sold, loan balances grew $2,409,757. Loans comprised 51%, investment securities, 43%, and federal funds sold, 6%, of earning assets at March 31, 2003 versus 49%, 44%, and 7% at December 31, 2002. Overall, earning assets aggregated 92% of total assets at March 31, 2003 and year-end 2002. During the year-earlier period, total assets increased $17,095,652 or 4.81%. The acquisition of the Richmond Hill branch and deposit growth at other SEB locations were the primary factors in the 2002 increase. Refer to the Liquidity section of this Analysis for additional details on deposits and other funding sources.

Investment Securities

On a carrying value basis, investment securities declined $918,281, or less than 1%, since December 31, 2002. Purchases of securities during the three-month period approximated $21,695,000, and redemptions, $21,646,000. Approximately 84% of securities transactions year-to-date were attributable to various issuers’ exercise of call options and other prepayments as a result of the current low-rate interest environment. The effective repricing of securities at lower rates impacts current and future earnings results; refer to the Interest Rate and Market Risk/Interest Rate Sensitivity and Operations sections of this Analysis for more details. Although no significant changes occurred in the investment securities mix during 2003 year-to-date, the Company continues to increase its holdings of mortgage-backed securities, corporates, and municipals to reduce its exposure to Agency securities with call features. At March 31, 2003, mortgage-backed securities, corporates, and municipals comprised 27%,

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Southeastern Banking Corporation

Management’s Discussion and Analysis

12%, and 25% of the portfolio. Overall, securities comprised 43% of earning assets at March 31, 2003 versus 44% at year-end 2002.

Management believes the credit quality of the investment portfolio remains sound, with 62.31% of the carrying value of debt securities being backed by the U.S. Treasury or other U.S. Government-sponsored agencies at March 31, 2003. All of the Company’s corporate bonds were rated “A” or higher by at least one nationally recognized rating agency at March 31, 2003. The amortized cost and estimated fair value of investment securities are delineated in the table below:

As shown, the carrying value of the securities portfolio reflected $5,143,000 in net unrealized gains at March 31, 2003; refer to the Capital Adequacy section of this Analysis for more details on investment securities and related fair value. The Company does not have a concentration in the obligations of any issuer other than the U.S. Government and its agencies.

Loans

Loans, net of unearned income, grew 1.37% or $2,405,803 at March 31, 2003 compared to year-end 2002. Reflecting higher deposit balances, the net loans to deposits ratio dropped 12 basis points to 54.93% at March 31, 2003 from 55.05% at year-end 2002 and 21 basis points from 55.14% a year ago. Growth in the commercial and real estate—mortgage/construction portfolios fueled the 2003 balance improvement year-to-date. More specifically, gross commercial loans increased $3,152,286 or 4.06% at March 31, 2003 compared to December 31, 2002. Nonfarm real estate and agricultural loans within the commercial portfolio grew $3,651,303 and $2,024,725; governmental and other commercial/industrial loans fell $565,513 and $1,958,229. On a combined basis, real estate—mortgage and construction loans grew a modest 1.73% or $1,265,815 in 2003 year-to-date. The majority, or 74%, of the growth within these real estate loans was concentrated in the residential mortgage sector. Although construction balances were virtually unchanged at March 31, 2003 versus year-end 2002, most of the loans in the real estate-construction portfolio are preparatory to customers’ attainment of permanent financing or developer’s sale and are, by nature, short-term and somewhat cyclical; swings in these account balances are normal and to be expected. While the Company, like peer institutions of similar size, originates permanent residential mortgages for new construction, it traditionally does not hold or service mortgage loans with maturities greater than fifteen years for its own portfolio. Rather, permanent residential mortgages are typically brokered through a mortgage underwriter or government agency. The Company receives mortgage origination fees for its participation in these origination transactions; refer to the disclosures provided under Results of Operations for more details. Consumer loans declined $2,046,124 or 8.30% during the first quarter of 2003 compared to year-end 2002. Reduced demand was the chief element in the 2003 results. Consumer loans remain the Company’s highest-yielding interest-earning asset, and the Company is committed to reversing the decline in this portfolio.

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Southeastern Banking Corporation

Management’s Discussion and Analysis

Despite the current economic slowdown within the Company’s markets, management is optimistic that overall loan volumes will remain higher in 2003 than 2002. Strategies implemented by management to increase loan production include continuing competitive pricing on loan products, development of additional loan relationships, and purchase of loan participations from correspondent banks, all without compromising portfolio quality. Additionally, in February 2003, the Company opened a loan production office in Brunswick, Georgia, providing the Company with a foothold in one of the fastest-growing and more populous markets in southeast Georgia. The loan production office is expected to increase origination volume in 2003. During the same period last year, net loans grew 6.96% or $11,364,490. More than 90%, or $10,300,000, of the 2002 improvement was attributable to the Richmond Hill acquisition. Loans outstanding are presented by type in the table below:

The Company had no concentration of loans to borrowers engaged in any single industry that exceeded 10% of total loans for any of the periods presented. Although the Company’s loan portfolio is diversified, significant portions of its loans are collateralized by real estate. At March 31, 2003, the Company had approximately $129,786,000 in real estate loans, and an additional $12,327,000 commitment to extend credit on such loans. As required by policy, real estate loans are collateralized based on certain loan-to-appraised value ratios. A geographic concentration in loans arises given the Company’s operations within a regional area of southeast Georgia and northeast Florida. On an aggregate basis, commitments to extend credit and standby letters of credit approximated $25,238,000 at March 31, 2003; because a substantial amount of these contracts expire without being drawn upon, total contractual amounts do not represent future credit exposure or liquidity requirements.

Nonperforming Assets

Nonperforming assets consist of nonaccrual loans, restructured loans, and foreclosed real estate and other assets. Overall, nonperforming assets approximated $2,056,000 at March 31, 2003, down $338,000 or 14.12% from year-end 2002 and down $70,000 from March 31, 2002. As a percent of total assets, nonperforming assets totaled 0.54% at March 31, 2003 versus 0.63% at year-end 2002 and 0.57% a year ago. The fluctuation in nonperforming asset balances year-to-date resulted predominantly from agricultural-based loans. Specifically, nonaccrual balances in 2002 included approximately $600,000 pertaining to an impaired agricultural loan secured by timber and farmlands. In March 2003, this loan was paid-off; interest income recognized upon settlement totaled $112,000. Conversely, due to the decline in the shrimping industry, multiple loans to commercial fishermen totaling approximately $238,000 were converted to nonaccrual status since year-end 2002. Collateral held varies but includes

9

Southeastern Banking Corporation

Management’s Discussion and Analysis

real estate and commercial fishing vessels. Approximately 22% of nonaccrual balances at March 31, 2003 pertained to the shrimping industry; however, management considers the allowance sufficient to absorb any losses that may result from these loans.

At March 31, 2003 and year-end 2002, nonaccrual balances also included loans to four other borrowers averaging $191,000 each. Due to the underlying collateral coverage, no material losses, if any, are expected on these credits. Refer to the subsection entitled Policy Note for criteria used by management in classifying loans as nonaccrual. The allowance for loan losses approximated 2.07X the nonperforming loans balance at March 31, 2003 versus 1.77X at year-end 2002 and 1.62X a year ago. The modest increase in foreclosed real estate was due to normal foreclosure and sales activity.

Loans past due 90 days or more approximated $1,249,000, or less than 1% of net loans, at March 31, 2003. Management is unaware of any material concentrations within these past due balances. The table below provides further information about nonperforming assets and loans past due 90 plus days:

Policy Note. Loans classified as nonaccrual have been placed in nonperforming, or impaired, status because the borrower’s ability to make future principal and/or interest payments has become uncertain. The Company considers a loan to be nonaccrual with the occurrence of any one of the following events: a) interest or principal has been in default 90 days or more, unless the loan is well-secured and in the process of collection; b) collection of recorded interest or principal is not anticipated; or c) the income on the loan is recognized on a cash basis due to deterioration in the financial condition of the borrower. Smaller balance consumer loans are generally not subject to the above-referenced guidelines and are normally placed on nonaccrual status or else charged-off when payments have been in default 90 days or more. Nonaccrual loans are reduced to the lower of the principal balance of the loan or the market value of the underlying real estate or other collateral net of selling costs. Any impairment in the principal balance is charged against the allowance for loan losses. Accrued interest on any loan switched to nonaccrual status is reversed. Interest income on nonaccrual loans, if subsequently recognized, is

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Southeastern Banking Corporation

Management’s Discussion and Analysis

recorded on a cash basis. No interest is subsequently recognized on nonaccrual (or former nonaccrual) loans until all principal has been collected. Loans are classified as restructured when either interest or principal has been reduced or deferred because of deterioration in the borrower’s financial position. Foreclosed real estate represents real property acquired by foreclosure or directly by title or deed transfer in settlement of debt. Provisions for subsequent devaluations of foreclosed real estate are charged to operations, while costs associated with improving the properties are generally capitalized.

Allowance for Loan Losses

The Company maintains an allowance for loan losses available to absorb inherent losses in the loan portfolio. At March 31, 2003, the Company’s allowance totaled $3,596,879, or 2.03% of period-end loans. Net charge-offs totaled $237,954, up $206,314 from 2002’s low $31,640, which was down $568,976 from 2001. Approximately one-half of the high charge-offs at March 31, 2001 were attributable to a single loan included in nonperforming balances from December 2000 through August 2001; refer to the 2002 Form 10-K for more details on this particular loan. Long-term strategies implemented by management the last several years to reduce and minimize charge-off levels include: a) a revised loan grading system, b) periodic external loan review, c) formation of a full-time collection department, and d) managerial and staff changes at various locations. The adequacy of the allowance is further discussed in the next subsection of this Analysis. The three-month provision from income totaled $234,000 at March 31, 2003. Activity in the allowance is presented in the table below: