<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended June 30, 2000

                        Commission File Number 000-25193

                     ATLANTIC PREFERRED CAPITAL CORPORATION
             (Exact name of registrant as specified in its charter)

                 Massachusetts                           04-3439366
       (State or other jurisdiction of      (I.R.S. Employer Identification No.)
       incorporation or organization)

               101 Summer Street                           02110
             Boston, Massachusetts                       (Zip Code)
  (Address of principal executive offices)

       Registrant's telephone number, including area code: (617) 880-1000

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 [ ]

The number of shares outstanding of the registrant's sole class of common stock
was 100 shares, $.01 par value per share, as of August 7, 2000.


<PAGE>

                     ATLANTIC PREFERRED CAPITAL CORPORATION
                                TABLE OF CONTENTS

                         PART I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>

                                                                           Page
<S>                                                                        <C>
Item 1.  Financial Statements:

a)       Balance Sheets                                                      1

b)       Statements of Income                                                2

c)       Statements of Changes in Stockholders' Equity                       3

d)       Statements of Cash Flows                                            4

e)       Notes to Financial Statements                                       5

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                 5

Item 3.  Quantitative and Qualitative Disclosures about Market Risk          10


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                   12

Item 4.  Submission of Matters to a Vote of Security Holders                 12

Item 6.  Exhibits and Reports on Form 8-K                                    12


              Signatures                                                     13

</TABLE>


<PAGE>

                                     PART I

ITEM 1. FINANCIAL STATEMENTS

                     ATLANTIC PREFERRED CAPITAL CORPORATION
                                 BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>

                                                                         JUNE 30,               DECEMBER 31,
                                                                           2000                     1999
                                                                      --------------           -------------
<S>                                                                   <C>                      <C>
                               ASSETS

Cash account with Capital Crossing Bank                               $           78           $          40
Interest-bearing deposits with Capital Crossing Bank                          58,353                  32,393
                                                                      --------------           -------------

          Total cash and cash equivalents                                     58,431                  32,433
                                                                      --------------           -------------

Loans, net of deferred loan fees                                             216,083                 150,880
     Less discount                                                           (13,591)                (12,862)
     Less allowance for loan losses                                           (4,070)                 (2,855)
                                                                      --------------           -------------

          Loans, net                                                         198,422                 135,163
                                                                      --------------           -------------

Accrued interest receivable                                                    1,300                     812
Other real estate owned                                                            -                     434
Other assets                                                                      12                      31
                                                                      --------------           -------------

                                                                      $      258,165           $     168,873
                                                                      ==============           =============

                LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued expenses and other liabilities                                $          267           $         206
                                                                      --------------           -------------

          Total liabilities                                                      267                     206
                                                                      --------------           -------------

Stockholders' equity:
Preferred stock, Series A, 9 3/4% non-cumulative, exchangeable;
   $.01 par value; $10 liquidation value per share;
   1,449,000 shares authorized, 1,416,130 shares issued and
   outstanding at June 30, 2000 and December 31, 1999                             14                      14
Preferred stock, Series B, 8% cumulative, non convertible;
   $.01 par value; $1,000 liquidation value per share plus
   accrued dividends; 1,000 shares authorized, 998 shares
   issued and outstanding at June 30, 2000, 1,000 shares
   authorized, issued and outstanding at December 31, 1999                         -                       -
Common stock, $.01 par value, 100 shares authorized, issued
   and outstanding                                                                 -                       -
Additional paid-in capital                                                   248,270                 167,839
Retained earnings                                                              9,614                     814
                                                                      --------------           -------------

          Total stockholders' equity                                         257,898                 168,667
                                                                      --------------           -------------

                                                                      $      258,165           $     168,873
                                                                      ==============           =============

</TABLE>

                 See accompanying notes to financial statements.


                                       1
<PAGE>

                     ATLANTIC PREFERRED CAPITAL CORPORATION
                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                    THREE MONTHS ENDED              SIX MONTHS ENDED
                                                                         JUNE 30,                       JUNE 30,
                                                              ------------------------------- ------------------------------
                                                                  2000             1999            2000           1999
                                                              --------------  --------------- --------------- --------------
                                                                                       (IN THOUSANDS)
<S>                                                               <C>              <C>             <C>            <C>
Interest income:
     Interest and fees on loans                                   $   5,359        $   4,873       $   8,823      $   8,745
     Interest on interest-bearing deposits
          with Capital Crossing Bank                                    469              190             787            388
                                                              --------------  --------------- --------------- --------------

               Total interest income                                  5,828            5,063           9,610          9,133
                                                              --------------  --------------- --------------- --------------

General and administrative expenses:
     Loan servicing and advisory services                               132              104             225            202
     Other real estate owned income                                       -              (14)           (245)          (365)
     Other general and administrative                                    27               15              99             50
                                                              --------------  --------------- --------------- --------------

               Total general and administrative expenses                159              105              79           (113)
                                                              --------------  --------------- --------------- --------------

               Net income                                             5,669            4,958           9,531          9,246

Preferred stock dividends                                               366              367             731            609
                                                              --------------  --------------- --------------- --------------

Net income available to common stockholder                       $    5,303        $   4,591       $   8,800      $   8,637
                                                              ==============  =============== =============== ==============

</TABLE>

                 See accompanying notes to financial statements.


                                       2
<PAGE>

                     ATLANTIC PREFERRED CAPITAL CORPORATION
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                       SIX MONTHS ENDED JUNE 30, 2000
                                          -----------------------------------------------------------------------------------------
                                                            PREFERRED STOCK   PREFERRED STOCK
                                           COMMON STOCK        SERIES A           SERIES B       ADDITIONAL
                                          ---------------  ------------------ -----------------   PAID-IN     RETAINED    TOTAL
                                          SHARES  AMOUNT   SHARES    AMOUNT   SHARES   AMOUNT     CAPITAL     EARNINGS   AMOUNT
                                          ------- -------  -------- --------- -------- -------- ------------  -------- ------------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                          <C>    <C>    <C>        <C>       <C>      <C>      <C>          <C>      <C>
Balance at December 31, 1999                 100    $  -   1,416,130  $   14    1,000    $   -    $ 167,839    $  814   $168,667
Net income                                     -       -           -       -        -        -            -     9,531      9,531
Capital contribution from common
  stockholder                                  -       -           -       -        -        -       80,433         -     80,433
Dividends on preferred stock, Series A         -       -           -       -        -        -            -      (691)      (691)
Repurchase of preferred stock, Series B        -       -           -       -       (2)       -           (2)        -         (2)
Cumulative dividends on preferred stock,
  Series B                                     -       -           -       -        -        -            -       (40)       (40)
                                          ======= =======  ========= ========= ======== ======== ============  ======== ==========
Balance at June  30, 2000                    100    $  -   1,416,130  $   14      998    $   -   $  248,270    $9,614   $257,898
                                          ======= =======  ========= ========= ======== ======== ============  ======== ==========

</TABLE>


<TABLE>
<CAPTION>


                                                                      SIX MONTHS ENDED JUNE 30, 1999
                                          ---------------------------------------------------------------------------------------
                                                            PREFERRED STOCK   PREFERRED STOCK
                                           COMMON STOCK        SERIES A           SERIES B       ADDITIONAL
                                          ---------------  ------------------ -----------------   PAID-IN     RETAINED   TOTAL
                                          SHARES  AMOUNT   SHARES    AMOUNT   SHARES   AMOUNT     CAPITAL     EARNINGS  AMOUNT
                                          ------- -------  -------- --------- -------- -------- ------------  -------- ----------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                         <C>   <C>      <C>        <C>       <C>      <C>    <C>           <C>       <C>
Balance at December 31, 1998                 100   $   -         -    $    -    1,000    $   -  $   155,263   $ 1,055   $ 156,318
Issuance of preferred stock, Series A          -       -   1,416,130      14        -        -       12,530         -     12,544
Net income                                     -       -         -         -        -        -            -     9,246      9,246
Dividends on preferred stock, Series A         -       -         -         -        -        -            -      (568)      (568)
Cumulative dividends on preferred stock,
 Series B                                      -       -         -         -        -        -            -       (41)       (41)
                                          ------- -------  --------- --------- -------- -------- ------------  -------- ----------
Balance at June  30, 1999                    100   $   -   1,416,130  $   14    1,000    $   -   $  167,793    $ 9,692  $ 177,499
                                          ======= =======  ========= ========= ======== ======== ============  ======== ==========

</TABLE>


                 See accompanying notes to financial statements.


                                       3
<PAGE>

                     ATLANTIC PREFERRED CAPITAL CORPORATION
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                          SIX MONTHS ENDED JUNE 30,
                                                                                          -------------------------
                                                                                             2000          1999
                                                                                           --------      --------
                                                                                               (IN THOUSANDS)
<S>                                                                                        <C>           <C>
Cash flows from operating activities:
     Net income                                                                            $  9,531      $  9,246
     Adjustments to reconcile net income to net cash provided by operating activities:
       Net gain on sale and disposition of other real estate owned                             (245)         (365)
       Other, net                                                                              (409)         (915)
                                                                                           --------      --------

         Net cash provided by operating activities                                            8,877         7,966
                                                                                           --------      --------

Cash flows from investing activities:
     Loan repayments                                                                         17,173        24,625
     Purchase of loans from Capital Crossing Bank                                                 -       (36,774)
     Sales of other real estate owned                                                           679         1,440
                                                                                           --------      --------

         Net cash provided by (used in) investing activities                                 17,852       (10,709)
                                                                                           --------      --------

Cash flows from financing activities:
     Net proceeds from issuance of preferred stock, Series A                                      -        12,544
     Payment of preferred stock dividends                                                      (731)         (453)
                                                                                           --------      --------

         Net cash (used in) provided by financing activities                                   (731)       12,091
                                                                                           --------      --------

Net change in cash and cash equivalents                                                      25,998         9,348
Cash and cash equivalents at beginning of period                                             32,433        10,580
                                                                                           --------      --------

Cash and cash equivalents at end of period                                                 $ 58,431      $ 19,928
                                                                                           ========      ========

Supplemental information:
     Dividends declared, not paid, on preferred stock, Series A                                 115           115
     Cumulative dividends accrued, not paid on preferred stock, Series B                         20            41
     Capital contributions from common stockholder in the form of mortgage loans             80,433             -
     Transfers from loans to other real estate owned                                              -         1,075


</TABLE>

                 See accompanying notes to financial statements.


                                       4
<PAGE>

                     ATLANTIC PREFERRED CAPITAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                 THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2000

Note 1.           BASIS OF PRESENTATION

Atlantic Preferred Capital Corporation ("Atlantic Preferred Capital") is a
Massachusetts corporation incorporated on March 20, 1998. Capital Crossing Bank
("Capital Crossing"), organized Atlantic Preferred Capital to acquire and hold
real estate mortgage assets in a cost-effective manner and to provide Capital
Crossing with an additional means of raising capital for federal and state
regulatory purposes. Capital Crossing owns all of the outstanding common stock
of Atlantic Preferred Capital. Atlantic Preferred Capital operates in a manner
which allows it to be taxed as a real estate investment trust, or a "REIT",
under the Internal Revenue Code of 1986, as amended. As a REIT, Atlantic
Preferred Capital generally will not be required to pay federal income tax if it
distributes its earnings to its stockholders and continues to meet a number of
other requirements.

The financial information as of June 30, 2000 and the results of operations,
changes in stockholders' equity and cash flows for the periods ended June 30,
2000 and 1999 are unaudited; however, in the opinion of management, the
financial information reflects all adjustments (consisting solely of normal
recurring accruals) necessary for a fair presentation in accordance with
generally accepted accounting principles. Interim results are not necessarily
indicative of results to be expected for the entire year. These interim
statements are intended to be read in conjunction with the financial statements
presented in Atlantic Preferred Capital's Annual Report on Form 10-K for the
year ended December 31, 1999.

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the
balance sheet and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Material estimates
that are particularly susceptible to significant change in the near term relate
to the determination of the allowance for losses on loans, the valuation of real
estate acquired in connection with foreclosures or in satisfaction of loans, the
allocation of purchase discount between amortizing and non-amortizing portions,
and the amortization of discount on loans.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Statements made or incorporated in this Quarterly Report on Form 10-Q include a
number of forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements include, without limitation, statements containing
the words "anticipates," "believes," "expects," "intends," "future" and words of
similar import which express management's belief, expectations or intentions
regarding the future performance of Atlantic Preferred Capital. Atlantic
Preferred Capital's actual results could differ materially from those set forth
in the forward-looking statements. Certain factors that might cause such
differences are discussed in this Form 10-Q, Atlantic Preferred Capital's Annual
Report on Form 10-K, and include, without limitation: (i) the possible exchange
of the Series A preferred shares for preferred shares of Capital Crossing at the
direction of the FDIC if Capital Crossing becomes or may in the near term become
undercapitalized or is placed in conservatorship or receivership; (ii) risks
associated with mortgage loans generally, and particularly the geographic
concentration of Atlantic Preferred Capital's loan portfolio at June 30, 2000 in
the Northeast and California; and (iii) the failure by Atlantic Preferred
Capital to maintain its status as a REIT for federal income tax purposes.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2000 AND 1999

Net income available to common stockholders increased $712,000, or 15.5%, to
$5.3 million for the three months ended June 30, 2000 compared to $4.6 million
for the three months ended June 30, 1999. This increase is attributable to an
increase in total interest income of $765,000, or 15.1%, to $5.8 million for the
three months ended June 30, 2000, compared to $5.1 million for the three months
ended June 30, 1999. Interest income from loans for the three months ended June
30, 2000 increased $486,000, or 10.0%, to $5.4 million compared to $4.9 million
for the three months ended June 30, 1999.



                                       5
<PAGE>

The yields on Atlantic Preferred Capital's earning assets are summarized as
follows:

<TABLE>
<CAPTION>

                                                             THREE MONTHS ENDED JUNE 30,
                                ----------------------------------------------------------------------------------
                                                2000                                       1999
                                -------------------------------------     ----------------------------------------
                                  AVERAGE      INTEREST                     AVERAGE      INTEREST
                                  BALANCE       INCOME       YIELD          BALANCE       INCOME        YIELD
                                ------------  -----------  ----------     ------------  -----------  -------------
                                                             (DOLLARS IN THOUSANDS)
<S>                             <C>           <C>              <C>        <C>           <C>                 <C>
Loans, net                      $   189,927   $    5,359       11.35  %   $   147,754   $    4,873          13.23 %
Interest-bearing deposits
   at Capital Crossing Bank          49,665          469        3.79           28,619          190           2.66
                                ============  ===========  =============  ============  ===========  =============
                                $   239,592   $    5,828        8.11  %   $   176,373   $    5,063          11.51 %
                                ============  ===========  =============  ============  ===========  =============

</TABLE>

The weighted average yield on interest-earning assets decreased to 8.11% for
2000 from 11.51% for 1999. During the three months ended June 30, 2000 and 1999,
the yield on the loan portfolio was 11.35% and 13.23%, respectively. This
decrease is primarily a result of a decrease in discount income recognized at
the time of individual loan payoffs due primarily to the rising interest rate
environment. Average loans, net for the three months ended June 30, 2000 totaled
$190.0 million compared to $147.8 million for the three months ended June 30,
1999. This increase is due primarily to loans in the amount of $80.4 million
contributed by Capital Crossing in the second quarter of 2000. These contributed
loans have a lower yield than the loans that were in the portfolio at the time
of the contributions, offsetting the increases in interest income experienced as
a result of the higher interest rate environment.

Income on loans includes the portion of the purchase discount that is accreted
into income over the remaining lives of the related loans using the interest
method. Because the carrying value of the loan portfolio is net of purchase
discount, the related yield on this portfolio generally is higher than the
aggregate contractual rate paid on the loans. The total yield includes the
excess of a loan's expected discounted future cash flows over its net
investment, recognized using the interest method.

When a loan is paid off, the excess of any cash received over the net investment
is recorded as interest income. In addition to the amount of purchase discount
that is recognized at that time, income may also include interest owed by the
borrower prior to Capital Crossing's acquisition of the loan, interest collected
if on nonaccrual status and other loan fees ("other interest income"). The
following table sets forth, for the periods indicated, the components of
interest and fees on loans and leases. There can be no assurance regarding
future interest income, including the yields and related level of such income,
or the relative portion attributable to loan pay-offs as compared to other
sources.

<TABLE>
<CAPTION>

                                                                            THREE MONTHS ENDED JUNE 30,
                                                               -------------------------------------------------------
                                                                          2000                         1999
                                                               ---------------------------   -------------------------
                                                                INTEREST                      INTEREST
                                                                 INCOME         YIELD          INCOME        YIELD
                                                               -----------   -------------    -----------  -----------
                                                                               (DOLLARS IN THOUSANDS)
<S>                                                            <C>              <C>          <C>             <C>
           Regularly scheduled interest and accretion income   $     4,887      10.35 %      $     3,818     10.36 %
           Purchase discount recognized on loan pay-offs
                and other interest income                              472       1.00              1,055      2.87
                                                               -----------   -------------   ------------  -----------
                                                               $     5,359      11.35 %      $     4,873     13.23 %
                                                               ===========   =============   ============  ===========

</TABLE>

The amount of loan payoffs and related discount income is influenced by several
factors, including the interest rate environment, the real estate market in
particular areas, the timing of transactions, and circumstances related to
individual borrowers and loans.

The average balance of interest-bearing deposits at Capital Crossing increased
$21.0 million to $49.7 million for the three months ended June 30, 2000 2000,
compared to $28.6 million for 1999 as a result of cash accumulated from
operating activities. The yield on interest-bearing deposits increased in 2000
because Atlantic Preferred Capital Corporation transferred a portion of
interest-bearing deposits from the money market account to higher yielding
certificates of deposit.

Loan servicing and advisory services for the three months ended June 30, 2000
increased $28,000 or 26.9%, to $132,000 compared to $104,000 for the three
months ended June 30, 1999. This increase is due to the overall increase in the
loan portfolio.


                                       6
<PAGE>

General and administrative expenses for the three months ended June 30, 2000
increased $12,000, or 80.0%, to $27,000 compared to $15,000 for the three months
ended June 30, 1999. This increase is due primarily to increased financial
printing costs for the three months ended June 30, 2000.

SIX MONTHS ENDED JUNE 30, 2000 AND 1999

Net income available to common stockholders increased $163,000, or 1.9%, to $8.8
million for the six months ended June 30, 2000 compared to $8.6 million for the
six months ended June 30, 1999. Total interest income increased $477,000, or
5.2%, to $9.6 million for the six months ended June 30, 2000, compared to $9.1
million for the six months ended June 30, 1999. Interest income from loans for
the six months ended June 30, 2000 increased $78,000, or .9%, to $8.8 million
compared to $8.7 million for the six months ended June 30, 1999.

The yields on Atlantic Preferred Capital's earning assets are summarized as
follows:

<TABLE>
<CAPTION>

                                                              SIX MONTHS ENDED JUNE 30,
                                ----------------------------------------------------------------------------------
                                                2000                                      1999
                                -------------------------------------   ------------------------------------------
                                  AVERAGE      INTEREST                     AVERAGE      INTEREST
                                  BALANCE       INCOME       YIELD          BALANCE       INCOME        YIELD
                                ------------  -----------  ----------     ------------  -----------  -------------
                                                             (DOLLARS IN THOUSANDS)
<S>                             <C>           <C>              <C>        <C>           <C>                 <C>
Loans, net                      $   161,404   $    8,823       10.99  %   $   144,475   $    8,745          12.21 %
Interest-bearing deposits
   at Capital Crossing Bank          43,640          787        3.63           27,805          388           2.81
                                ============  ===========  =============  ============  ===========  =============
                                $   205,044   $    9,610        9.43  %   $   172,280   $    9,133          10.69 %
                                ============  ===========  =============  ============  ===========  =============

</TABLE>

The weighted average yield on interest-earning assets decreased to 9.43% for
2000 from 10.69% for 1999. For the six months ended June 30, 2000 and 1999, the
yield on the loan portfolio was 10.99% and 12.21%, respectively. This decrease
is primarily a result of a decrease in discount income recognized at the time of
individual loan payoffs due primarily to the higher interest rate environment.
Average loans, net for the six months ended June 30, 2000 totaled $161.4 million
compared to $144.5 million for the six months ended June 30, 1999. This increase
is due primarily to loans in the amount of $80.4 million contributed by Capital
Crossing in the second quarter of 2000. These contributed loans have a lower
yield than the loans that were in the portfolio at the time of the
contributions, offsetting the increase experienced as a result of the higher
interest rate environment

Income on loans includes the portion of the purchase discount that is accreted
into income over the remaining lives of the related loans using the interest
method. Because the carrying value of the loan portfolio is net of purchase
discount, the related yield on this portfolio generally is higher than the
aggregate contractual rate paid on the loans. The total yield includes the
excess of a loan's expected discounted future cash flows over its net
investment, recognized using the interest method.

When a loan is paid off, the excess of any cash received over the net investment
is recorded as interest income. In addition to the amount of purchase discount
that is recognized at that time, income may also include interest owed by the
borrower prior to Capital Crossing's acquisition of the loan, interest collected
if on nonaccrual status and other loan fees ("other interest income"). The
following table sets forth, for the periods indicated, the components of
interest and fees on loans and leases. There can be no assurance regarding
future interest income, including the yields and related level of such income,
or the relative portion attributable to loan pay-offs as compared to other
sources.

<TABLE>
<CAPTION>

                                                                  SIX MONTHS ENDED JUNE 30,
                                                    -------------------------------------------------------
                                                               2000                         1999
                                                    ---------------------------   -------------------------
                                                     INTEREST                      INTEREST
                                                      INCOME         YIELD          INCOME        YIELD
                                                    ------------ --------------   ------------ ------------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                                 <C>              <C>           <C>            <C>
Regularly scheduled interest and accretion income   $     8,308      10.35 %       $    7,382     10.31 %
Purchase discount recognized on loan pay-offs
     and other interest income                              515       0.64              1,363      1.90
                                                    ------------ --------------   ------------ ------------
                                                    $     8,823      10.99 %      $     8,745     12.21 %
                                                    ============ ==============   ============ ============

</TABLE>


                                       7
<PAGE>

The amount of loan payoffs and related discount income is influenced by several
factors, including the interest rate environment, the real estate market in
particular areas, the timing of transactions, and circumstances related to
individual borrowers and loans.

The average balance of interest-bearing deposits increased $15.8 million to
$43.6 million for the six months ended June 30, 2000, compared to $27.8 million
for 1999 as a result of cash accumulated from loan payments received. During the
six months ended June 30, 2000, Atlantic Preferred Capital invested in
short-term certificates of deposits yielding higher rates of interest than money
market accounts, accounting for the higher yield for the six months ended June
30, 2000 as compared to the six months ended June 30, 1999.

Gain on sale of other real estate owned of $245,000 for the six months ended
June 30, 2000, consisted of the gain on sale of one property. The gain on sale
of other real estate owned of $365,000 in the 1999 period consisted of the gain
on sale of two properties.

General and administrative expenses for the six months ended June 30, 2000
increased $49,000, or 98.0%, to $99,000 compared to $50,000 for the six months
ended June 30, 1999. This increase is attributable primarily to professional
services related to tax compliance incurred during the first quarter of 2000.

FINANCIAL CONDITION

INTEREST-BEARING DEPOSITS

Interest-bearing deposits consist of a money market account with a balance of
$40.8 million and certificates of deposit. Certificates of deposit totaled $17.6
million with an interest rate of 5.75%, all maturing in August 2000.

LOAN PORTFOLIO

The following table sets forth information regarding the composition of the loan
portfolio:

<TABLE>
<CAPTION>

                                                       JUNE 30,        DECEMBER 31,
                                                         2000              1999
                                                   ----------------   ---------------
                                                             (IN THOUSANDS)
<S>                                                <C>                <C>
Mortgage loans on real estate:
      Commercial                                   $        128,281   $        98,748
      Multi-family                                           79,572            42,677
      One-to-four family                                      7,374             8,415
      Land                                                      721               820
                                                   ----------------   ---------------
      Total                                                 215,948           150,660

Secured commercial                                              221               232
Other                                                            29                29
                                                   ----------------   ---------------
      Total loan portfolio                                  216,198           150,921
Less discount:
      Non-amortizing discount                                (7,943)           (7,318)
      Amortizing discount                                    (5,648)           (5,544)
      Allowance for loan losses                              (4,070)           (2,855)
      Net deferred loan income                                 (116)              (41)
                                                   ----------------   ---------------

      Loans, net                                   $        198,421    $      135,163
                                                   ================   ===============

</TABLE>

Atlantic Preferred Capital intends that each loan acquired from Capital Crossing
in the future will be a whole loan, and will be originated or acquired by
Capital Crossing in the ordinary course of its business. Atlantic Preferred
Capital also intends that all loans held by it will be serviced pursuant to the
master service agreement.

Non-accrual loans, net of discount totaled $2.4 million and $1.1 million at June
30, 2000 and December 31, 1999, respectively. Loans are generally placed on
non-accrual status and interest is not accrued when the collectibility of
principal and interest is not probable or estimable. Unpaid interest income
previously accrued on such loans is reversed against current period interest
income. A loan is returned to accrual status when a loan is brought current in
accordance with management's anticipated cash flows at the time of acquisition.

                                       8

<PAGE>

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to earnings. Loan losses
are charged against the allowance when management believes the loan balance, or
a portion thereof, is uncollectible. Subsequent recoveries, if any, are credited
to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and
is based upon management's periodic review of the collectibility of the loans in
light of known and inherent risks in the nature and volume of the loan
portfolio, adverse situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral, and prevailing economic
conditions. This evaluation is inherently subjective as it requires estimates
that are susceptible to significant revision as more information becomes
available.

Ultimately, losses may vary from current estimates and future additions to the
allowance may be necessary.

Quarterly reviews of the loan portfolio are performed to identify loans for
which specific allowance allocations are considered prudent. Specific
allocations include the results of measuring impaired loans under Statement of
Financial Accounting Standards No. 114. General risk allocations are determined
by formula whereby the loan portfolio is stratified by loan type and by internal
risk rating categories. Loss factors are then applied to each strata based on
various considerations including historical loss experience, delinquency trends,
current economic conditions, industry standards and regulatory guidelines. Any
remaining unallocated portion is reviewed for adequacy in relation to the
overall loan portfolio and in recognition of estimates inherent in the
calculation methodology.

An analysis of the allowance for loan losses follows:

<TABLE>
<CAPTION>

                                                  THREE MONTHS ENDED JUNE 30,             SIX MONTHS ENDED JUNE 30,
                                              -------------------------------------  ------------------------------------
                                                    2000                1999               2000                1999
                                              ----------------     ----------------  ----------------    ----------------
                                                                            (IN THOUSANDS)
<S>                                           <C>                 <C>                <C>                            <C>
Balance at beginning of period                $          2,855    $          2,516   $          2,855               1,337
Transfer from Capital Crossing with
   loans acquired                                        1,215                 339              1,215                 658
Transfer from non-amortizing discount                        -                   -                  -                 860
                                              ----------------     ----------------  ----------------    ----------------
Balance at end of period                      $          4,070    $          2,855   $          4,070    $          2,855
                                              ================    ================   ================    ================

</TABLE>

During the first quarter of 1999, Atlantic Preferred Capital transferred
$860,000 from non-amortizing discount to the allowance for loan losses,
representing general reserve allocations, in connection with its change from
accounting for loan discounts on a static pool basis to accounting for them on
an individual loan basis.

INTEREST RATE RISK

Atlantic Preferred Capital's income consists primarily of interest income on
mortgage assets. Atlantic Preferred Capital does not intend to use any
derivative products to manage its interest rate risk. If there is a decline in
market interest rates, Atlantic Preferred Capital may experience a reduction in
interest income on its mortgage loans and a corresponding decrease in funds
available to be distributed to its stockholders. The reduction in interest
income may result from downward adjustments of the indices upon which the
interest rates on loans are based and from prepayments of mortgage loans with
fixed interest rates, resulting in reinvestment of the proceeds in lower
yielding mortgage loans.

SIGNIFICANT CONCENTRATION OF CREDIT RISK

Concentration of credit risk generally arises with respect to Atlantic Preferred
Capital's loan portfolio when a number of borrowers engage in similar business
activities, or activities in the same geographical region. Concentration of
credit risk indicates the relative sensitivity of Atlantic Preferred Capital's
performance to both positive and negative developments affecting a particular
industry. Atlantic Preferred Capital's balance sheet exposure to geographic
concentrations directly affects the credit risk of the loans within its loan
portfolio. At June 30, 2000, 33.5% and 40.2%, respectively, of Atlantic
Preferred Capital's total loan portfolio consisted of loans located in New
England and California. At December 31, 1999, 49.3% and 26.8%, respectively, of
Atlantic Preferred Capital's total loan portfolio consisted of loans located in
New England and California. Consequently, the portfolio may experience a higher
default rate, than its current default rate, in the event of adverse economic,
political or business developments or natural hazards in New England or
California that may affect the ability of property owners to make payments of
principal and interest on the underlying mortgages.



                                       9
<PAGE>

LIQUIDITY RISK MANAGEMENT

The objective of liquidity risk management is to ensure the availability of
sufficient cash flows to meet all of Atlantic Preferred Capital's financial
commitments and to capitalize on opportunities for Atlantic Preferred Capital's
business expansion. In managing liquidity risk, Atlantic Preferred Capital takes
into account various legal limitations placed on a REIT.

       Atlantic Preferred Capital's principal liquidity needs are:

       (1) to maintain the current portfolio size through the acquisition of
       additional mortgage assets as mortgage assets currently in the loan
       portfolio mature, pay down or prepay, and

       (2) to pay dividends on the Series A preferred shares and common shares.

The acquisition of additional mortgage assets is intended to be funded primarily
through repayment of principal balances of mortgage assets by individual
borrowers. Atlantic Preferred Capital does not have and does not anticipate
having any material capital expenditures. To the extent that the Board of
Directors determines that additional funding is required, Atlantic Preferred
Capital may raise such funds through additional equity offerings, debt financing
or retention of cash flow (after consideration of provisions of the Internal
Revenue Code requiring the distribution by a REIT of at least 95% of its REIT
taxable income and taking into account taxes that would be imposed on
undistributed income), or a combination of these methods. Except for its
obligation to guarantee certain commitments of Capital Crossing, Atlantic
Preferred Capital does not currently intend to incur any indebtedness. The
organizational documents of Atlantic Preferred Capital limit the amount of
indebtedness which it is permitted to incur without the approval of certain
stockholders to no more than 100% of the total stockholders' equity of Atlantic
Preferred Capital. Any such debt may include intercompany advances made by
Capital Crossing to Atlantic Preferred Capital.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Asset and liability management is concerned with the timing and magnitude of the
repricing of assets and liabilities. It is the objective of Atlantic Preferred
Capital to attempt to control risks associated with interest rate movements.
Market risk is the risk of loss from adverse changes in market prices and
interest rates. Atlantic Preferred Capital's market risk arises primarily from
interest rate risk inherent in holding loans. To that end, management actively
monitors and manages the interest rate risk exposure of Atlantic Preferred
Capital. Atlantic Preferred Capital's management reviews, among other things,
the sensitivity of Atlantic Preferred Capital's assets to interest rate changes,
the book and market values of assets, purchase and sale activity, and
anticipated loan pay-offs. Capital Crossing's senior management also approves
and establishes pricing and funding decisions with respect to Atlantic Preferred
Capital's overall asset composition. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Interest Rate
Risk;--Significant Concentration of Credit Risk" and "--Liquidity Risk
Management" beginning on page 9 of this Quarterly Report on Form 10-Q.

Atlantic Preferred Capital's methods for evaluating interest rate risk include
an analysis of its interest rate sensitivity "gap" which is defined as the
difference between interest-earning assets and interest-bearing liabilities
maturing or repricing within a given time period. A gap is considered positive
when the amount of interest-rate sensitive assets exceeds the amount of
interest-rate sensitive liabilities. A gap is considered negative when the
amount of interest-rate sensitive liabilities exceeds interest-rate sensitive
assets. During a period of rising interest rates, a negative gap would tend to
adversely affect net interest income, while a positive gap would tend to result
in an increase in net interest income. During a period of falling interest
rates, a negative gap would tend to result in an increase in net interest
income, while a positive gap would tend to adversely affect net interest income.
Because different types of assets and liabilities with the same or similar
maturities may react differently to changes in overall market rates or
conditions, changes in interest rates may affect net interest income positively
or negatively even if an institution were perfectly matched in each maturity
category.


                                       10
<PAGE>

The following table sets forth interest-rate sensitive assets and related
weighted average rates categorized by repricing dates at June 30, 2000. For
fixed rate instruments, the repricing date is the maturity date. For
adjustable-rate instruments, the repricing date is deemed to be the earliest
possible interest rate adjustment date.

<TABLE>
<CAPTION>

                                             WITHIN       ONE TO       TWO TO      THREE TO      FOUR TO       OVER
                                               ONE         TWO          THREE        FOUR         FIVE         FIVE
                                  OVERNIGHT    YEAR       YEARS         YEARS        YEARS        YEARS       YEARS        TOTAL
                                  ---------    ----       -----         -----        -----        -----       -----        -----
                                                                        (DOLLARS IN THOUSANDS)
<S>                                <C>       <C>         <C>           <C>          <C>           <C>         <C>          <C>
RATE-SENSITIVE ASSETS:
Interest-bearing deposits in
    banks.                         $ 40,753  $ 17,600    $      -      $      -     $      -      $     -     $      -     $  58,353
  Average interest rate               3.50%     5.74%
Fixed-rate loans (1)                      -    31,125       8,902         4,262        3,426        3,057       14,218        64,990
  Average interest rate                         9.35%       9.39%         8.94%        8.94%        9.06%        8.65%
Adjustable-rate loans(1)             42,042    96,672       5,185         1,839          395        2,306            -       148,439
  Average interest rate              10.62%     8.54%       9.03%         9.21%        8.06%        7.76%
                                   --------  --------    --------      --------      -------      -------     --------     ---------
      Total rate-sensitive assets  $ 82,795  $145,397    $ 14,087      $  6,101      $ 3,821      $ 5,363     $ 14,218     $ 271,782
                                   ========  ========    ========      ========      =======      =======     ========     =========
</TABLE>

----------------
(1)      Loans are presented at gross amounts before deducting discounts on
         purchased loans, the allowance for loan losses and net deferred loan
         income.

         Adjustable-rate loans originated by Capital Crossing are generally
indexed to prime with an average spread of 100 to 200 basis points. The majority
of purchased adjustable-rate loans are tied to the 11th District Monthly
Weighted Average Cost of Funds Index (COFI) with the remainder subject to
various indices and rate spreads established by the originating banks. The COFI
index reflects the actual interest expenses recognized during a given period by
all savings institution members of the Federal Home Loan Bank of San Francisco.



                                       11
<PAGE>

                                     PART II

ITEM 1.  LEGAL PROCEEDINGS

From time to time, Atlantic Preferred Capital may be involved in routine
litigation incidental to its business, including a variety of legal proceedings
with borrowers, which would contribute to Atlantic Preferred Capital's expenses,
including the costs of carrying non-performing assets. Atlantic Preferred
Capital is not currently a party to any material proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

By written consent dated June 1, 2000, the sole common stockholder of Atlantic
Preferred Capital (1) established the number of Directors at five members and
(2) re-elected the following individuals as its directors: Nicholas W. Lazares,
Richard Wayne, John L. Champion, Jeffrey Ross, and Michael J. Fox, M.D.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits required by Item 601 of Regulation S-K are set forth below.

<TABLE>
<CAPTION>

EXHIBIT
  NO.             EXHIBIT
-------           -------
<S>               <C>
  27              Financial Data Schedule

</TABLE>

(b) Reports on Form 8-K filed during the three months ended June 30, 2000 are
set forth below.


i)       On April 6, 2000, Atlantic Preferred Capital filed a Form 8-K to report
         the dismissal of Wolf & Company, P.C. as the Registrant's independent
         accountants and the retention of KPMG LLP as the Registrant's new
         independent accountants.










                                       12
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                     ATLANTIC PREFERRED CAPITAL CORPORATION


Date: August 11, 2000               BY: /s/ RICHARD WAYNE
                                    ---------------------

                                        Richard Wayne
                                        President (Principal Executive Officer)


Date: August 11, 2000               BY: /s/ JOHN L. CHAMPION
                                    ------------------------

                                        John L. Champion
                                        Treasurer (Principal Financial Officer)





                                       13