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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2004

Commission File Number 2-83157

SOUTHEASTERN BANKING CORPORATION

(Exact name of registrant as specified in its charter)

P. O. Box 455, 1010 Northway, Darien, Georgia 31305

(Address of principal executive offices) (Zip Code)

(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  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of July 31, 2004, 3,308,969 shares of the registrant’s common stock, par value $1.25 per share, were outstanding.

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Part I - Financial Information

Southeastern Banking Corporation

Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

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Southeastern Banking Corporation

Consolidated Statements of Income

(Unaudited)

See accompanying notes to consolidated financial statements.

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Southeastern Banking Corporation

Consolidated Statements of Shareholders’ Equity

(Unaudited)

See accompanying notes to consolidated financial statements.

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Southeastern Banking Corporation

Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to consolidated financial statements.

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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 and six months ended June 30, 2004 are not necessarily indicative of trends or results to be expected for the full year 2004. 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, 2003. There have been no significant changes to the Company’s Accounting Policies as disclosed in the 2003 Form 10-K.

Accounting for Loans or Certain Debt Securities Acquired in a Transfer

In December 2003, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 03-3, “Accounting for Loans or Certain Debt Securities Acquired in a Transfer.” This statement addresses accounting for differences arising between contractual cash flows and cash flows expected to be collected from an investor’s initial investment in loans or debt securities acquired in a transfer, if those differences relate to credit quality. SOP 03-3 also prohibits the “carryover” or creation of a valuation allowance in the initial accounting for loans acquired in a transfer. The scope of SOP 03-3 includes loans acquired in purchase business combinations but not loans originated by the entity. The Company adopted SOP 03-3 effective January 1, 2004. Adoption of SOP 03-3 did not have a significant impact on the consolidated financial statements.

Employers’ Disclosures about Pensions and Other Postretirement Benefits – an amendment of FASB Statements No. 87, 88, and 106

In December 2003, the FASB revised SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits – an amendment of FASB Statements No. 87, 88, and 106.” This statement requires additional disclosures about the assets, obligations, and cash flows of defined benefit pension and postretirement plans, as well as the expense recorded for such plans. Because the Company has no defined benefit plans, the adoption of SFAS No. 149 did not have a current impact on the Company’s consolidated financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Analysis should be read in conjunction with the 2003 Annual Report on Form 10-K and the consolidated financial statements & related notes on pages 3 – 7 of this quarterly filing. The Company’s accounting policies, which are described in detail in Form 10-K, are integral to understanding the results reported. The Company’s accounting policies require management’s judgment in valuing assets, liabilities, commitments, and contingencies. A variety of factors could affect the ultimate value that is obtained when earning income, recognizing an expense, recovering an asset, or relieving a liability. This Analysis contains forward-looking statements with respect to business and financial matters. Actual results may vary from those contained in these forward-looking statements. See the section entitled Forward-Looking Statements within this Analysis.

Description of Business

Southeastern Banking Corporation (the Company), with assets exceeding $384,733,000, 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, loan production office in Brunswick, Georgia, 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, and through an affiliation with Raymond James Financial Services, provides insurance agent and investment brokerage services.

Financial Condition

Consolidated assets totaled $384,733,705 at June 30, 2004, up $10,365,971 or 2.77% from year-end 2003 and $14,553,907 or 3.93% from June 30, 2003. The asset growth in 2004 year-to-date was concentrated in the loan and investment securities portfolios. Specifically, loans grew $5,393,217 and investment securities, $2,998,283; federal funds sold increased a marginal $19,000. Loans comprised approximately 59%, investment securities, 38%, and federal funds sold, 3%, of earning assets at both June 30, 2004 and December 31, 2003. Overall, earning assets approximated 92% of total assets at June 30, 2004. During the year-earlier period, total assets declined $7,959,831 or 2.10%. Declines in federal funds sold and the investment portfolio were the primary factors in the 2003 results. Refer to the Liquidity section of this Analysis for details on deposits and other funding sources.

Investment Securities

On a carrying value basis, investment securities grew $2,998,283 or 2.28% since December 31, 2003. Purchases of securities during the six-month period approximated $33,590,000, and redemptions, $28,309,000. Approximately 60% 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. In conjunction with asset/liability management, the Company continues to increase its proportionate holdings of mortgage-backed securities, corporates, and municipals when feasible to reduce its exposure to Agency securities with call features. At June 30, 2004, mortgage-backed securities, corporates, and municipals comprised 29%, 11%, and 28% of the portfolio. Overall, securities comprised 38% of earning assets at June 30, 2004, virtually unchanged from year-end 2003. The portfolio yield decreased from 4.95% in 2003 to 4.86% in 2004 year-to-date, primarily from reinvesting accelerated prepayments and maturities at lower market rates.

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Management believes the credit quality of the investment portfolio remains sound, with 60.38% of the carrying value of debt securities being backed by the U.S. Treasury or other U.S. Government-sponsored agencies at June 30, 2004. All of the Company’s corporate bonds were rated “A” or higher by at least one nationally recognized rating agency at June 30, 2004. The weighted average life of the portfolio remained less than 4.0 years at June 30, 2004. The amortized cost and estimated fair value of investment securities are delineated in the table below:

As shown, the carrying value of the investment portfolio reflected $997,312 in net unrealized gains at June 30, 2004; 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 2.71% or $5,569,948 since year-end 2003. The net loans to deposits ratio aggregated 64.37% at June 30, 2004 versus 64.89% at December 31, 2003, and 59.22% a year ago. An $8,713,055 or 19.91% increase in real estate-construction loans was the primary factor in the year-to-date results. The majority of the growth within the construction portfolio was residential in nature. 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. Although the Company, like peer institutions of similar size, originates permanent mortgages for new construction, it traditionally does not hold or service long-term mortgage loans for its own portfolio. Rather, permanent 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. Reversing earlier declines in 2004, real estate – mortgage loans grew $2,624,677 or 4.95% during the second quarter and $855,879 year-to-date. Due to pay-downs on large loans in the normal course of business, commercial loans declined $2,119,649 or 2.46% at June 30, 2004 compared to December 31, 2003. Nonfarm real estate, governmental, and other commercial/industrial loans within the commercial portfolio fell $1,790,944, $585,341, and $1,433,026 during the six-month period; agricultural loans grew $1,689,662. Balances in the consumer portfolio also declined $1,863,961 or 8.76% during the first half of 2004; reduced demand was the chief element in the 2004 results.

Loan volumes have continued to grow since June 30, 2004, and despite economic uncertainties within the Company’s markets, management is optimistic that loan volumes will trend higher in 2004 than 2003. Managerial strategies 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, the Brunswick loan production office, which opened in February 2003, is expected to continue its strong origination volume

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in 2004. During the same period last year, net loans grew 5.36% or $9,381,738. Approximately 74% of the 2003 improvement was attributable to the Brunswick office; the remaining increase resulted from loan origination at other SEB locations. 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 June 30, 2004, the Company had approximately $159,025,000 in real estate loans, and an additional $24,986,000 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 $39,625,000 at June 30, 2004; because a substantial amount of these contracts expire without being drawn upon, total contractual amounts do not represent future credit exposure or liquidity requirements. The Company did not fund or incur any losses on letters of credit in 2004 year-to-date.

Nonperforming Assets

Nonperforming assets consist of nonaccrual loans, restructured loans, and foreclosed real estate and other assets. Overall, nonperforming assets approximated $1,589,000 at June 30, 2004, virtually unchanged from year-end 2003 but down $627,000 or 28.29% from June 30, 2003. As a percent of total assets, nonperforming assets totaled 0.41% at June 30, 2004 versus 0.43% at year-end 2003 and 0.60% a year ago. Other than the foreclosure of a commercial real estate parcel valued at $220,000 and the sale of a separate $98,000 parcel, no material credits have been transferred or removed from nonperforming status during 2004 year-to-date. Industry or individual concentrations within nonaccrual balances at June 30, 2004 included:

Refer to the subsection entitled Policy Note for criteria used by management in classifying loans as nonaccrual. The allowance for loan losses approximated 3.17X the nonperforming loans balance at June 30,

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2004 versus 2.76X at year-end 2003 and 2.05X a year ago. Management is unaware of any other material developments in nonperforming assets at June 30, 2004 that should be presented or otherwise discussed.

Loans past due 90 days or more approximated $822,000, or less than 1% of net loans, at June 30, 2004. 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-collateralized and in the process of collection; b) collection of recorded interest or principal is not anticipated; or c) 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 placed on nonaccrual status is reversed. Interest income on nonaccrual loans, if subsequently recognized, is 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.

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Allowance for Loan Losses

The Company continuously reviews its loan portfolio and maintains an allowance for loan losses available to absorb losses inherent in the portfolio. The six-month provision for loan losses at June 30, 2004 totaled $423,983, which exceeded net charge-offs of $247,252 by $176,731. The comparable provision and charge-off amounts at June 30, 2003 were $451,000 and $$383,124. Net charge-offs represented 0.24% of average loans at June 30, 2004 compared to 0.43% at June 30, 2003 and 0.25% in 2002. Other than a $49,000 charge-off pertaining to the commercial fishing industry, no single charge-off exceeded $25,000 at June 30, 2004. The Company is committed to the early recognition of problem loans and to an appropriate and adequate level of allowance. The adequacy of the allowance is further discussed in the next subsection of this Analysis. Activity in the allowance is presented in the table below: