----

|  ̈ | TRANSITION                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF                1934 |
|--------|------------------------------------------------------------------------------------------------------------------|

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| Florida                                        | 59-3543956                         |
|------------------------------------------------|------------------------------------|
| (State                or other jurisdiction of | (I.R.S.                Employer    |
| incorporation                or organization)  | Identification                No.) |

----

----

|      Class         | Outstanding                as of August 3, 2007 |
|-------------------------------------------------------------------------------------|-------------------------------------------------|
| Common                Stock                                                         | Common                Stock – 1,247,516   |
|   Par                Value $0.01 per share                                |                                            |

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**ATLANTIC      BANCGROUP, INC. AND SUBSIDIARY**

**FORM      10-QSB - FOR THE QUARTER ENDED JUNE 30, 2007**

**INDEX**

|                                              |                              |                                                                                                                                                                                    |   | PAGE   |
|---------------------------------------------------|-----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                              |                              |                                                                                                                                                                                    |   | NUMBER |
|                                              |                              |                                                                                                                                                                                    |   |   |
| **PART                I - FINANCIAL INFORMATION** |                              |                                                                                                                                                                                    |
|                                              |                              |                                                                                                                                                                                    |   |   |
|                                              | **Item                1 -**       | **Financial                Statements**                                                                                                                                                 |   |   |
|                                              |                              |                                                                                                                                                                                    |   |   |
|                                              |                              | Condensed                Consolidated Statements of Financial Condition as of                June 30, 2007 (Unaudited) and December 31, 2006                                            |   | 3      |
|                                              |                              |                                                                                                                                                                                    |   |   |
|                                              |                              | Condensed                Consolidated Statements of Income and Comprehensive                Income for the Three and Six Months Ended June 30, 2007 and 2006                (Unaudited) |   | 4      |
|                                              |                              |                                                                                                                                                                                    |   |   |
|                                              |                              | Condensed                Consolidated Statements of Cash Flows for the Three                and Six Months Ended June 30, 2007 and 2006                (Unaudited)                      |   | 5      |
|                                              |                              |                                                                                                                                                                                    |   |   |
|                                              |                              | Condensed                Consolidated Statements of Stockholders' Equity                (Unaudited)                                                                                     |   | 6      |
|                                              |                              |                                                                                                                                                                                    |   |   |
|                                              |                              | Notes                to Consolidated Financial Statements                (Unaudited)                                                                                                    |   | 7      |
|                                              |                              |                                                                                                                                                                                    |   |   |
|                                              | **Item                2 -**  | **Management’s                  Discussion and Analysis of Financial Condition and Results of                  Operations**                                                       |   | 13     |
|                                              |                              |                                                                                                                                                                                    |   |   |
|                                              | **Item                3 -**       | **Controls                and Procedures**                                                                                                                                              |   | 23     |
|                                              |                              |                                                                                                                                                                                    |   |   |
|                                              |                              |                                                                                                                                                                                    |   |   |
| **PART                II - OTHER INFORMATION**    |                              | 24                                                                                                                                                                                      |
|                                              |                              |                                                                                                                                                                                    |   |   |
|                                              |                              |                                                                                                                                                                                    |   |   |
| **SIGNATURES**                                    |                              | 26                                                                                                                                                                                      |
|                                              |                              |                                                                                                                                                                                    |   |   |

----

*Index*

| **ATLANTIC                    BANCGROUP, INC. AND SUBSIDIARY**                                                     |
|--------------------------------------------------------------------------------------------------------------------|
| **CONDENSED                    CONSOLIDATED STATEMENTS OF FINANCIAL                    CONDITION**                 |
| **(Dollars                    in Thousands, Except Per Share                    Data)**                            |
|                                                                                                               |   |   |   |   |   |   |
|                                                                                                               |   | June                    30, |   |   |   |   |
|                                                                                                               |   | 2007 |   |   | December                    31, |   |
|                                                                                                               |   | (Unaudited) |   |   | 2006 |   |
| **ASSETS**                                                                                                         |   |   |   |   |   |   |
| Cash                    and due from banks                                                                         |   | $ | 9,513 |   |   | $ | 6,566 |   |
| Federal                    funds sold                                                                              |   |   | 9,675 |   |   |   | 11,133 |   |
| Total                    cash and cash equivalents                                                                 |   |   | 19,188 |   |   |   | 17,699 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |
| Investment                    securities, available-for-sale                                                       |   |   | 28,053 |   |   |   | 29,805 |   |
| Investment                    securities, held-to-maturity (market value of $15,288 in 2007                    and |   |   |   |   |   |   |   |   |
|   $10,138                    in 2006)                                                                    |   |   | 15,765 |   |   |   | 10,032 |   |
| Restricted                    stock, at cost                                                                       |   |   | 746 |   |   |   | 735 |   |
| Loans,                    net                                                                                      |   |   | 181,129 |   |   |   | 176,109 |   |
| Bank                    premises and equipment                                                                     |   |   | 3,905 |   |   |   | 3,960 |   |
| Accrued                    interest receivable                                                                     |   |   | 1,388 |   |   |   | 1,223 |   |
| Deferred                    income taxes                                                                           |   |   | 1,013 |   |   |   | 860 |   |
| Investment                    in unconsolidated subsidiary                                                         |   |   | 93 |   |   |   | 93 |   |
| Cash                    surrender value of bank-owned life insurance                                               |   |   | 4,591 |   |   |   | 2,543 |   |
| Other                    assets                                                                                    |   |   | 469 |   |   |   | 438 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |
| TOTAL                                                                                                              |   | $ | 256,340 |   |   | $ | 243,497 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |
| **LIABILITIES                    AND STOCKHOLDERS' EQUITY**                                                        |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                          |   |   |   |   |   |   |   |   |
| Noninterest-bearing                                                                                                |   | $ | 31,793 |   |   | $ | 32,006 |   |
| Interest-bearing                                                                                                   |   |   | 175,759 |   |   |   | 160,698 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |
| Total                    deposits                                                                                  |   |   | 207,552 |   |   |   | 192,704 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |
| Short-term                    borrowings                                                                           |   |   | 23,769 |   |   |   | 26,921 |   |
| Long-term                    borrowings                                                                            |   |   | 5,393 |   |   |   | 5,393 |   |
| Accrued                    interest payable                                                                        |   |   | 322 |   |   |   | 279 |   |
| Other                    liabilities                                                                               |   |   | 1,328 |   |   |   | 949 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |
| Total                    liabilities                                                                               |   |   | 238,364 |   |   |   | 226,246 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |
| Commitments                    and contingencies                                                                   |   |   | - |   |   |   | - |   |
|                                                                                                               |   |   |   |   |   |   |   |   |
| Stockholders'                    equity:                                                                           |   |   |   |   |   |   |   |   |
| Common                    stock                                                                                    |   |   | 12 |   |   |   | 12 |   |
| Additional                    paid-in capital                                                                      |   |   | 11,788 |   |   |   | 11,788 |   |
| Retained                    earnings                                                                               |   |   | 6,665 |   |   |   | 5,734 |   |
| Accumulated                    other comprehensive loss:                                                           |   |   |   |   |   |   |   |   |
| Net                    unrealized holding losses on securities,                    available-for-sale              |   |   | (489 | ) |   |   | (283 | ) |
|                                                                                                               |   |   |   |   |   |   |   |   |
| Total                    stockholders' equity                                                                      |   |   | 17,976 |   |   |   | 17,251 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |
| TOTAL                                                                                                              |   | $ | 256,340 |   |   | $ | 243,497 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |
| Book                    value per common share                                                                     |   | $ | 14.41 |   |   | $ | 13.83 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |
| Common                    shares outstanding                                                                       |   |   | 1,247,516 |   |   |   | 1,247,516 |   |

----

*Index*

| **ATLANTIC                  BANCGROUP, INC. AND SUBSIDIARY**          |
|-----------------------------------------------------------------------|
| **CONDENSED                  CONSOLIDATED STATEMENTS OF INCOME**      |
| **AND                  COMPREHENSIVE INCOME (UNAUDITED)**             |
| **(Dollars                  in Thousands, Except Per Share Data)**    |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                  |   | For                  the Three Months Ended |   |   | For                  the Six Months Ended |   |
|                                                                  |   | June                  30,    |   |   | June                  30,    |   |
|                                                                  |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  and fees on loans                           |   | $ | 3,748 |   |   | $ | 3,271 |   |   | $ | 7,509 |   |   | $ | 6,386 |   |
| Investment                  income on investment securities and       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interest-bearing                  deposits in banks                   |   |   | 332 |   |   |   | 302 |   |   |   | 664 |   |   |   | 622 |   |
| Tax-exempt                  interest income on investment securities  |   |   | 146 |   |   |   | 74 |   |   |   | 256 |   |   |   | 143 |   |
| Interest                  on federal funds sold                       |   |   | 155 |   |   |   | 93 |   |   |   | 194 |   |   |   | 131 |   |
| Total                  interest income                                |   |   | 4,381 |   |   |   | 3,740 |   |   |   | 8,623 |   |   |   | 7,282 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  on deposits                                 |   |   | 2,147 |   |   |   | 1,540 |   |   |   | 4,110 |   |   |   | 2,877 |   |
| Short-term                  borrowings                                |   |   | 204 |   |   |   | 209 |   |   |   | 404 |   |   |   | 418 |   |
| Long-term                  borrowings                                 |   |   | 72 |   |   |   | 72 |   |   |   | 144 |   |   |   | 144 |   |
| Total                  interest expense                               |   |   | 2,423 |   |   |   | 1,821 |   |   |   | 4,658 |   |   |   | 3,439 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income before provision for loan losses |   |   | 1,958 |   |   |   | 1,919 |   |   |   | 3,965 |   |   |   | 3,843 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision                  for loan losses                            |   |   | - |   |   |   | 84 |   |   |   | 62 |   |   |   | 96 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income after provision for loan losses  |   |   | 1,958 |   |   |   | 1,835 |   |   |   | 3,903 |   |   |   | 3,747 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest                  income:                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fees                  and service charges on deposit accounts         |   |   | 172 |   |   |   | 144 |   |   |   | 319 |   |   |   | 295 |   |
| Other                  fee income for banking services                |   |   | 50 |   |   |   | 47 |   |   |   | 103 |   |   |   | 80 |   |
| Mortgage                  banking fees                                |   |   | 28 |   |   |   | 25 |   |   |   | 40 |   |   |   | 61 |   |
| Income                  from bank-owned life insurance                |   |   | 28 |   |   |   | 26 |   |   |   | 55 |   |   |   | 52 |   |
| Dividends                  from restricted stock                      |   |   | 9 |   |   |   | 7 |   |   |   | 17 |   |   |   | 13 |   |
| Dividends                  from unconsolidated subsidiary             |   |   | 2 |   |   |   | 2 |   |   |   | 3 |   |   |   | 3 |   |
| Other                  income                                         |   |   | 16 |   |   |   | 10 |   |   |   | 28 |   |   |   | 15 |   |
| Total                  noninterest income                             |   |   | 305 |   |   |   | 261 |   |   |   | 565 |   |   |   | 519 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest                  expenses:                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                  and employee benefits                       |   |   | 766 |   |   |   | 712 |   |   |   | 1,542 |   |   |   | 1,445 |   |
| Expenses                  of bank premises and fixed assets           |   |   | 289 |   |   |   | 290 |   |   |   | 565 |   |   |   | 587 |   |
| Other                  operating expenses                             |   |   | 548 |   |   |   | 462 |   |   |   | 1,038 |   |   |   | 940 |   |
| Total                  noninterest expenses                           |   |   | 1,603 |   |   |   | 1,464 |   |   |   | 3,145 |   |   |   | 2,972 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  before provision for income taxes             |   |   | 660 |   |   |   | 632 |   |   |   | 1,323 |   |   |   | 1,294 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision                  for income taxes                           |   |   | 189 |   |   |   | 205 |   |   |   | 392 |   |   |   | 422 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income                                           |   |   | 471 |   |   |   | 427 |   |   |   | 931 |   |   |   | 872 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  comprehensive income, net of income taxes:     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized                  holding losses arising during period      |   |   | (253 | ) |   |   | (191 | ) |   |   | (206 | ) |   |   | (360 | ) |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive                  income                                 |   | $ | 218 |   |   | $ | 236 |   |   | $ | 725 |   |   | $ | 512 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                  per common share                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                 |   | $ | 0.38 |   |   | $ | 0.34 |   |   | $ | 0.75 |   |   | $ | 0.70 |   |
| Diluted                                                               |   | $ | 0.38 |   |   | $ | 0.34 |   |   | $ | 0.75 |   |   | $ | 0.70 |   |

----

*Index*

| **ATLANTIC                  BANCGROUP, INC. AND SUBSIDIARY**                                      |
|---------------------------------------------------------------------------------------------------|
| **CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS                  (UNAUDITED)** |
| **(Dollars                  in Thousands)**                                                       |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                              |   | For                  the Three Months Ended |   |   | For                  the Six Months Ended |   |
|                                                                                              |   | June                  30,    |   |   | June                  30,    |   |
|                                                                                              |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  cash provided by operating activities:                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income                                                                       |   | $ | 471 |   |   | $ | 427 |   |   | $ | 931 |   |   | $ | 872 |   |
| Provision                  for loan losses                                                        |   |   | - |   |   |   | 84 |   |   |   | 62 |   |   |   | 96 |   |
| Depreciation                  and amortization                                                    |   |   | 81 |   |   |   | 88 |   |   |   | 159 |   |   |   | 177 |   |
| Net                  premium amortization and discount accretion                                  |   |   | (22 | ) |   |   | 8 |   |   |   | (14 | ) |   |   | 26 |   |
| Net                  change in other assets and liabilities                                       |   |   | (932 | ) |   |   | (1,142 | ) |   |   | (522 | ) |   |   | (1,219 | ) |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  cash provided (used) by operating activities                                 |   |   | (402 | ) |   |   | (535 | ) |   |   | 616 |   |   |   | (48 | ) |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  flows from investing activities:                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  (increase) decrease in:                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment                  securities                                                            |   |   | (5,205 | ) |   |   | 558 |   |   |   | (3,637 | ) |   |   | 2,375 |   |
| Loans                                                                                             |   |   | (621 | ) |   |   | (228 | ) |   |   | (5,082 | ) |   |   | (15,494 | ) |
| Purchase                  of bank-owned life insurance for                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| salary                  continuation plan                                                         |   |   | (2,000 | ) |   |   | - |   |   |   | (2,000 | ) |   |   | - |   |
| Purchases                  of bank premises and equipment, net                                    |   |   | (34 | ) |   |   | (42 | ) |   |   | (104 | ) |   |   | (86 | ) |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  cash provided (used) by investing activities                                 |   |   | (7,860 | ) |   |   | 288 |   |   |   | (10,823 | ) |   |   | (13,205 | ) |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  flows from financing activities:                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  increase (decrease) in deposits                                              |   |   | 1,206 |   |   |   | (1,621 | ) |   |   | 14,848 |   |   |   | 15,021 |   |
| Net                  increase (decrease) in other borrowings                                      |   |   | 2,773 |   |   |   | (5,183 | ) |   |   | (3,152 | ) |   |   | 382 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  cash provided (used) by financing activities                                 |   |   | 3,979 |   |   |   | (6,804 | ) |   |   | 11,696 |   |   |   | 15,403 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  increase (decrease) in cash and cash equivalents                             |   |   | (4,283 | ) |   |   | (7,051 | ) |   |   | 1,489 |   |   |   | 2,150 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents at beginning of period                                 |   |   | 23,471 |   |   |   | 24,188 |   |   |   | 17,699 |   |   |   | 14,987 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents at end of period                                       |   | $ | 19,188 |   |   | $ | 17,137 |   |   | $ | 19,188 |   |   | $ | 17,137 |   |

----

*Index*

| **ATLANTIC                  BANCGROUP, INC. AND SUBSIDIARY**                                                |
|-------------------------------------------------------------------------------------------------------------|
| **CONDENSED                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                  (UNAUDITED)** |
| (Dollars                  In Thousands)                                                                     |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   | **Net** |   |   |   |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   | **Unrealized** |   |   |   |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   | **Holding                  Gains** |   |   |   |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   | **(Losses)                  on** |   |   |   |   |
|                                                                                                        |   |   |   |   |   |   |   | **Additional** |   |   |   |   |   | **Securities** |   |   | **Total** |   |
|                                                                                                        |   | **Common                  Stock** |   |   | **Paid-in** |   |   | **Retained** |   |   | **Available-** |   |   | **Stockholders'** |   |
|                                                                                                        |   | **Shares** |   |   | **Amount** |   |   | **Capital** |   |   | **Earnings** |   |   | **for-Sale** |   |   | **Equity** |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,                  December 31, 2006                                                                 |   |   | 1,247,516 |   |   | $ | 12 |   |   | $ | 11,788 |   |   | $ | 5,734 |   |   | $ | (283 | ) |   | $ | 17,251 |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive                  income:                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income for the quarter                                                                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 460 |   |   |   | - |   |   |   |   |   |
| Net                  change in unrealized                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| holding                  gains on securities                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| available-for-sale                                                                                          |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 47 |   |   |   |   |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  comprehensive income                                                                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 507 |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,                  March 31, 2007                                                                    |   |   | 1,247,516 |   |   |   | 12 |   |   |   | 11,788 |   |   |   | 6,194 |   |   |   | (236 | ) |   |   | 17,758 |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive                  income:                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income for the quarter                                                                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 471 |   |   |   | - |   |   |   |   |   |
| Net                  change in unrealized                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| holding                  losses on securities                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| available-for-sale                                                                                          |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (253 | ) |   |   |   |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  comprehensive income                                                                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 218 |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,                  June 30, 2007                                                                     |   |   | 1,247,516 |   |   | $ | 12 |   |   | $ | 11,788 |   |   | $ | 6,665 |   |   | $ | (489 | ) |   | $ | 17,976 |   |

----

*Index*

**ATLANTIC              BANCGROUP, INC. AND              SUBSIDIARY**

**NOTES              TO CONSOLIDATED FINANCIAL STATEMENTS              (UNAUDITED)**

**JUNE              30,              2007**

**NOTE      1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING      POLICIES**

***Use      of Estimates***
***-***

----

*Index*

**ATLANTIC              BANCGROUP, INC. AND SUBSIDIARY**
**NOTES              TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
**JUNE              30, 2007**

**NOTE      1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES**

***Fair      Value of Financial Instruments -***

***Reclassifications***
***-***

***Recent      Accounting Pronouncements***
***-***
*Accounting      for*
* *
*Servicing*
* *
*Financial*
* *
*Assets*
*,      an amendment of SFAS No. 140*

*Accounting for Uncertainty      in Income Taxes*
*Accounting for Income      Taxes*

*Fair Value Measurements*

*Accounting      for Deferred Compensation and Postretirement Benefit Aspects of Endorsement      Split-Dollar Life Insurance Arrangements*

----

*Index*

**ATLANTIC              BANCGROUP, INC. AND              SUBSIDIARY**

**NOTES              TO CONSOLIDATED FINANCIAL STATEMENTS              (UNAUDITED)**

**JUNE              30,              2007**

**NOTE      1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES**

*The Fair Value Option for Financial Assets and Financial Liabilities -      including an amendment of FASB Statement No. 115*

*Accounting for Income Tax Benefits of Dividends on Share-Based Payment      Awards, *

|   | · | Proposed                amended to SFAS 128, *Earnings per                Share*; |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | Proposed                replacement of SFAS 141 regarding *Business Combinations*;                and |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | Proposed                replacement of Accounting Research Bulletin No. 151 regarding                *Consolidated Financial Statements, Including Accounting and                Reporting                for Noncontrolling Interests*. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Index*

**ATLANTIC              BANCGROUP, INC. AND              SUBSIDIARY**

**NOTES              TO CONSOLIDATED FINANCIAL STATEMENTS              (UNAUDITED)**

**JUNE              30,              2007**

**NOTE      2 - COMPUTATION OF PER SHARE EARNINGS**

|                                                                       |   | **Three                Months Ended June 30,** |   |
|----------------------------------------------------------------------------|--------|------------------------------------------------|--------|
|                                                                       |   | **2007**                                       |   |   | **2006** |   |
| Basic                and diluted EPS computation:                          |   |                                           |   |   |   |   |
| Numerator                - Net income                                      |   | $                                              | 471    |   |   | $ | 427 |   |
| Denominator                - Weighted average shares outstanding (rounded) |   |                                           | 1,248  |   |   |   | 1,248 |   |
| Basic                and diluted EPS                                       |   | $                                              | 0.38   |   |   | $ | 0.34 |   |

|                                                                       |   |                                         |   |   |     |   |   |   |
|----------------------------------------------------------------------------|--------|----------------------------------------------|--------|--------|----------|--------|--------|--------|
|                                                                       |   | **Six                Months Ended June 30,** |   |
|                                                                       |   | **2007**                                     |   |   | **2006** |   |
| Basic                and diluted EPS computation:                          |   |                                         |   |   |     |   |   |   |
| Numerator                - Net income                                      |   | $                                            | 931    |   |     | $      | 872    |   |
| Denominator                - Weighted average shares outstanding (rounded) |   |                                         | 1,248  |   |     |   | 1,248  |   |
| Basic                and diluted EPS                                       |   | $                                            | 0.75   |   |     | $      | 0.70   |   |

**NOTE      3 - INVESTMENT SECURITIES**

|                                       |   |                             |   |   |                                 |   |
|--------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------------|--------|
|                                       |   | **June                30, 2007** |   |   | **December                31, 2006** |   |
|                                       |   |                             |   |   | **Gross**                            |   |   | **Gross** |   |   |   |   |   |   |   |   | **Gross** |   |   | **Gross** |   |   |   |   |
|                                       |   | **Amortized**                    |   |   | **Unrealized**                       |   |   | **Unrealized** |   |   | **Fair** |   |   | **Amortized** |   |   | **Unrealized** |   |   | **Unrealized** |   |   | **Fair** |   |
|                                       |   | **Cost**                         |   |   | **Gains**                            |   |   | **Losses** |   |   | **Value** |   |   | **Cost** |   |   | **Gains** |   |   | **Losses** |   |   | **Value** |   |
| Available-for-sale                         |   |                             |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.                Government-sponsored   |   |                             |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| agency                securities           |   | $                                | 2,983  |   |                                 | $      | - |   |   | $ | (74 | ) |   | $ | 2,909 |   |   | $ | 1,000 |   |   | $ | 7 |   |   | $ | - |   |   | $ | 1,007 |   |
| Mortgage-backed                securities  |   |                             | 25,854 |   |                                 |   | 5 |   |   |   | (715 | ) |   |   | 25,144 |   |   |   | 29,259 |   |   |   | 24 |   |   |   | (485 | ) |   |   | 28,798 |   |
|                                       |   |                             | 28,837 |   |                                 |   | 5 |   |   |   | (789 | ) |   |   | 28,053 |   |   |   | 30,259 |   |   |   | 31 |   |   |   | (485 | ) |   |   | 29,805 |   |
| Held-to-maturity                           |   |                             |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| State,                county and           |   |                             |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| municipal                bonds             |   |                             | 15,765 |   |                                 |   | 91 |   |   |   | (568 | ) |   |   | 15,288 |   |   |   | 10,032 |   |   |   | 144 |   |   |   | (38 | ) |   |   | 10,138 |   |
| Total                investment securities |   | $                                | 44,602 |   |                                 | $      | 96 |   |   | $ | (1,357 | ) |   | $ | 43,341 |   |   | $ | 40,291 |   |   | $ | 175 |   |   | $ | (523 | ) |   | $ | 39,943 |   |
|                                       |   |                             |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

*Index*

**ATLANTIC              BANCGROUP, INC. AND              SUBSIDIARY**

**NOTES              TO CONSOLIDATED FINANCIAL STATEMENTS              (UNAUDITED)**

**JUNE              30, 2007**

**NOTE      3 - INVESTMENT SECURITIES **

**NOTE      4 - LOANS**

|                                                          |   | **June                30,** |    |   | **December                31,** |   |
|---------------------------------------------------------------|--------|-----------------------------|---------|--------|---------------------------------|--------|
|                                                          |   | **2007**                    |    |   | **2006**                        |   |
| Real                estate loans:                             |   |                        |    |   |                            |   |
| Construction,                land development, and other land |   | $                           | 49,597  |   |                            | $      | 51,598 |   |
| 1-4                family residential                         |   |                        | 38,745  |   |                            |   | 38,018 |   |
| Multifamily                residential                        |   |                        | 2,458   |   |                            |   | 2,489 |   |
| Commercial                                                    |   |                        | 76,129  |   |                            |   | 68,588 |   |
|                                                          |   |                        | 166,929 |   |                            |   | 160,693 |   |
| Commercial                loans                               |   |                        | 10,558  |   |                            |   | 11,214 |   |
| Consumer                and other loans                       |   |                        | 5,342   |   |                            |   | 5,828 |   |
| Total                loan portfolio                           |   |                        | 182,829 |   |                            |   | 177,735 |   |
| Less,                deferred fees                            |   |                        | (48     | )      |                            |   | (27 | ) |
| Less,                allowance for loan losses                |   |                        | (1,652  | )      |                            |   | (1,599 | ) |
|                                                          |   |                        |    |   |                            |   |   |   |
| Loans,                net                                     |   | $                           | 181,129 |   |                            | $      | 176,109 |   |
|                                                          |   |                        |    |   |                            |   |   |   |

**NOTE      5 - ALLOWANCE FOR LOAN LOSSES**

|                                                    |   |                             |   |   |                                 |   |
|---------------------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------------|--------|
|                                                    |   | **For                the Six**   |   |   | **For                the Twelve**    |   |
|                                                    |   | **Months                Ended**  |   |   | **Months                Ended**      |   |
|                                                    |   | **June                30, 2007** |   |   | **December                31, 2006** |   |
|                                                    |   |                             |   |   |                                 |   |
| Balance,                beginning of period             |   | $                                | 1,599  |   |                                 | $      | 1,552 |   |
| Provisions                charged to operating expenses |   |                             | 62     |   |                                 |   | 194 |   |
| Loans,                charged-off                       |   |                             | (21    | )      |                                 |   | (181 | ) |
| Recoveries                                              |   |                             | 12     |   |                                 |   | 34 |   |
|                                                    |   |                             |   |   |                                 |   |   |   |
| Balance,                end of period                   |   | $                                | 1,652  |   |                                 | $      | 1,599 |   |

----

*Index*

**ATLANTIC              BANCGROUP, INC. AND              SUBSIDIARY**

**NOTES              TO CONSOLIDATED FINANCIAL STATEMENTS              (UNAUDITED)**

**JUNE              30,              2007**

**NOTE      6 - OTHER BORROWINGS**

|                                          |   |                        |   |   |                            |   |
|-----------------------------------------------|--------|-----------------------------|--------|--------|---------------------------------|--------|
|                                          |   | **June                30,** |   |   | **December                31,** |   |
|                                          |   | **2007**                    |   |   | **2006**                        |   |
|                                          |   |                        |   |   |                            |   |
| FHLB                of Atlanta advances       |   | $                           | 2,300  |   |                            | $      | 2,300 |   |
| Junior                subordinated debentures |   |                        | 3,093  |   |                            |   | 3,093 |   |
|                                          |   |                        |   |   |                            |   |   |   |
| Total                other borrowings         |   | $                           | 5,393  |   |                            | $      | 5,393 |   |

**NOTE      7 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK**

**NOTE      8 - REGULATORY CAPITAL**

|                                                        |       |   |            |
|-------------------------------------------------------------|------------|--------|-----------------|
|                                                        |       |   | **Regulatory**  |
|                                                        | **Actual** |   | **Requirement** |
|                                                        |       |   |            |
| Total                capital ratio to risk-weighted assets  | 10.88%     |   | 8.00%           |
| Tier                1 capital ratio to risk-weighted assets | 10.11%     |   | 4.00%           |
| Tier                1 capital to average assets             | 8.63%      |   | 4.00%           |

----

*Index*

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

**Overview**

*Commercial        Banking Operations.  *

**Forward-looking        Statements**

**Future        Accounting Requirements**

**Impact        of Inflation**

----

*Index*

**Critical        Accounting Policies**

**Results        of Operations**

| · | Average                  loans grew at a pace of 9.9% and 11.3% for the three and six months                  ended                  June 30, 2007, respectively, over the same periods of                  2006.  With the growth in average deposits of 14.2% and 13.7%,                  respectively, we were able to fund the increased loan                  demand. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | With                  the double-digit growth in average earning assets and the favorable                  mix of                  earning assets and deposits, we grew our net interest income (before                  provision for loan losses) $39,000 and $122,000, or 2.0% and 3.2%,                  respectively, during the three and six months ended June 30, 2007,                  over                  the comparable periods of 2006. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Total                  noninterest expenses increased $139,000 and $173,000, or 9.5% and                  5.8%,                  for the three and six months ended June 30, 2007, respectively,                  over the                  same periods in 2006.  This compares with the growth in earning                  assets of 13.1% and 12.0% for the same                  periods. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Financial        Condition**

|                                                    |   |                                     |   |                                     |   |                                    |   |   |
|---------------------------------------------------------|--------|------------------------------------------|--------|------------------------------------------|--------|-----------------------------------------|--------|--------|
|                                                    |   | **Three                  Months**   |   | **Six                  Months**     |   | **Year                  Ended**    |
|                                                    |   | **Ended**                           |   | **Ended**                           |   | **December                  31,**  |
|                                                    |   | **June                  30, 2007**  |   | **June                  30, 2007**  |   | **2006**                           |
|                                                    |   |                                     |   |                                     |   |                                    |   |   |   |
| Return                  on average assets               |   |                                     | 0.76   | %                                        |   |                                    | 0.77   | %      |   |   | 0.85 | % |
| Return                  on average equity               |   |                                     | 10.56  | %                                        |   |                                    | 10.64  | %      |   |   | 11.96 | % |
| Interest-rate                  spread                   |   |                                     | 2.75   | %                                        |   |                                    | 2.89   | %      |   |   | 3.10 | % |
| Net                  interest margin                    |   |                                     | 3.49   | %                                        |   |                                    | 3.63   | %      |   |   | 3.84 | % |
| Noninterest                  expenses to average assets |   |                                     | 2.58   | %                                        |   |                                    | 2.61   | %      |   |   | 2.65 | % |

**Liquidity        and Capital Resources**

*Liquidity        Management*

----

*Index*

| · | Available                  cash, including both interest and noninterest-bearing balances,                  and                  federal funds sold ,which totaled $19.2 million at June 30,                  2007; |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | The                  repayment of loans, which include loans with a remaining maturity                  of one                  year or less (excluding those in nonaccrual status) totaling $102.1                  million; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Proceeds                  of unpledged securities available-for-sale and principal repayments                  from                  mortgage-backed securities; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Growth                  in deposits; and, |
|--------|-------------------------------------------|

| · | If                  necessary, borrowing against approved lines of credit and other                  alternative funding strategies. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------|

*Short-Term        Investments.*

*Deposits        and Other Sources of Funds*

*Core        Deposits*

*Capital*

----

*Index*

|                                                    |   | **Actual** |   |   | **Minimum(1)** |   |       | **Well-Capitalized(2)** |   |
|---------------------------------------------------------|--------|------------|--------|--------|----------------|--------|------------|-------------------------|--------|
|                                                    |   | **Amount** |   |   | **%**     |   | **Amount** |                    |   | **%**  |   | **Amount** |   |   | **%**  |
|                                                    |   |       |   |   |           |   |       |                    |   |   |   |   |   |   |   |   |   |   |
| Total                  capital to risk-weighted assets  |   | $          | 23,111 |   |           |   | 10.88      | %                       |   | $ | 16,988 |   |   |   | 8.00 | % |   | $ | 21,235 |   |   |   | 10.00 | % |
| Tier                  1 capital to risk-weighted assets |   | $          | 21,459 |   |           |   | 10.11      | %                       |   | $ | 8,494 |   |   |   | 4.00 | % |   | $ | 12,741 |   |   |   | 6.00 | % |
| Tier                  1 capital to average assets       |   | $          | 21,459 |   |           |   | 8.63       | %                       |   | $ | 9,946 |   |   |   | 4.00 | % |   | $ | 12,432 |   |   |   | 5.00 | % |

**Asset        Quality**

*Asset        Classification.  *

*Allowance        for Loan Losses*

----

*Index*

|                                                                   |   | **For                  the Six**   |    |   | **For                  the Twelve**    |   |
|------------------------------------------------------------------------|--------|------------------------------------|---------|--------|----------------------------------------|--------|
|                                                                   |   | **Months                  Ended**  |    |   | **Months                  Ended**      |   |
|                                                                   |   | **June                  30, 2007** |    |   | **December                  31, 2006** |   |
|                                                                   |   |                               |    |   |                                   |   |
| End                  of period loans (net of deferred fees)            |   | $                                  | 182,781 |   |                                   | $      | 177,708 |   |
| End                  of period allowance for loan losses               |   | $                                  | 1,652   |   |                                   | $      | 1,599 |   |
| %                  of allowance for loan losses to total loans         |   |                               | 0.90    | %      |                                   |   | 0.90 | % |
| Average                  loans for the period                          |   | $                                  | 181,182 |   |                                   | $      | 167,883 |   |
| Net                  charge-offs as a percentage of average loans      |   |                               |    |   |                                   |   |   |   |
| for                  the period (annualized for 2007)                  |   |                               | 0.01    | %      |                                   |   | 0.09 | % |
| Nonperforming                  assets:                                 |   |                               |    |   |                                   |   |   |   |
| Nonaccrual                  loans                                      |   | $                                  | -       |   |                                   | $      | 53 |   |
| Loans                  past due 90 days or more and still accruing (*) |   |                               | 732     |   |                                   |   | - |   |
| Foreclosed                  real estate                                |   |                               | -       |   |                                   |   | - |   |
| Other                  repossessed assets                              |   |                               | -       |   |                                   |   | - |   |
|                                                                   |   | $                                  | 732     |   |                                   | $      | 53 |   |
| Nonperforming                  assets to period end loans              |   |                               | 0.40    | %      |                                   |   | 0.03 | % |
| Nonperforming                  assets to period end total assets       |   |                               | 0.29    | %      |                                   |   | 0.02 | % |

**Interest        Rate Risk**

**Quantitative        and Qualitative Disclosures about Market Risk**

----

*Index*

**Average        Balances, Income and Expenses, and Rates**

|                                                                                                                                                          |   | **For                  the Three Months Ended June 30,** |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|---------|
|                                                                                                                                                          |   | **2007**                                                 |    |   | **2006** |   |
|                                                                                                                                                          |   |                                                     |    |   | **Interest** |   |   | **Average** |   |   |   |   |   | **Interest** |   |   | **Average** |   |
|                                                                                                                                                          |   | **Average**                                              |    |   | **and** |   |   | **Yield/** |   |   | **Average** |   |   | **and** |   |   | **Yield/** |   |
|                                                                                                                                                          |   | **Balance**                                              |    |   | **Dividends** |   |   | **Rate** |   |   | **Balance** |   |   | **Dividends** |   |   | **Rate** |   |
| Interest-earning                  assets:                                                                                                                     |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Loans                                                                                                                           |   | $                                                        | 181,389 |   |   | $ | 3,748 |   |   |   | 8.29 | % |   | $ | 165,070 |   |   | $ | 3,271 |   |   |   | 7.95 | % |
|      Investment                  securities and                                                                                      |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         interest-bearing                  deposits (1)                                                                |   |                                                     | 42,297  |   |   |   | 478 |   |   |   | 5.37 | % |   |   | 35,437 |   |   |   | 376 |   |   |   | 4.77 | % |
|      Other                  interest-earning assets                                                                                  |   |                                                     | 11,567  |   |   |   | 155 |   |   |   | 5.37 | % |   |   | 7,538 |   |   |   | 93 |   |   |   | 4.95 | % |
|                                                                                                                                                          |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           Total                  interest-earning assets (1)                                                |   |                                                     | 235,253 |   |   |   | 4,381 |   |   |   | 7.62 | % |   |   | 208,045 |   |   |   | 3,740 |   |   |   | 7.30 | % |
|                                                                                                                                                          |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-earning                  assets                                                                                          |   |                                                     | 13,507  |   |   |   |   |   |   |   |   |   |   |   | 14,800 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                          |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                Total                  assets                                       |   | $                                                        | 248,760 |   |   |   |   |   |   |   |   |   |   | $ | 222,845 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                          |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                                                                                                                |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Demand,                  money market                                                                                           |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          and                  NOW deposits                                                                       |   | $                                                        | 43,046  |   |   |   | 430 |   |   |   | 4.01 | % |   | $ | 39,164 |   |   |   | 314 |   |   |   | 3.22 | % |
|      Savings                                                                                                                         |   |                                                     | 3,932   |   |   |   | 14 |   |   |   | 1.43 | % |   |   | 5,100 |   |   |   | 16 |   |   |   | 1.26 | % |
|      Certificates                  of deposit                                                                                        |   |                                                     | 130,902 |   |   |   | 1,703 |   |   |   | 5.22 | % |   |   | 103,232 |   |   |   | 1,210 |   |   |   | 4.70 | % |
|      Other                  borrowings                                                                                               |   |                                                     | 21,719  |   |   |   | 276 |   |   |   | 5.10 | % |   |   | 24,064 |   |   |   | 281 |   |   |   | 4.68 | % |
|                                                                                                                                                          |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           Total                  interest-bearing liabilities                                               |   |                                                     | 199,599 |   |   |   | 2,423 |   |   |   | 4.87 | % |   |   | 171,560 |   |   |   | 1,821 |   |   |   | 4.26 | % |
|                                                                                                                                                          |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing                  liabilities                                                                                                              |   |                                                     | 31,275  |   |   |   |   |   |   |   |   |   |   |   | 35,650 |   |   |   |   |   |   |   |   |   |
| Stockholders’                  equity                                                                                                                   |   |                                                     | 17,886  |   |   |   |   |   |   |   |   |   |   |   | 15,635 |   |   |   |   |   |   |   |   |   |
|                Total                  liabilities and                              |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    stockholders’                  equity |   | $                                                        | 248,760 |   |   |   |   |   |   |   |   |   |   | $ | 222,845 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                          |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income before                                                                                                                   |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     provision                  for loan losses                                                                                            |   |                                                     |    |   |   | $ | 1,958 |   |   |   |   |   |   |   |   |   |   | $ | 1,919 |   |   |   |   |   |
|                                                                                                                                                          |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-rate                  spread                                                                                                                         |   |                                                     |    |   |   |   |   |   |   |   | 2.75 | % |   |   |   |   |   |   |   |   |   |   | 3.04 | % |
| Net                  interest margin (1)                                                                                                                      |   |                                                     |    |   |   |   |   |   |   |   | 3.49 | % |   |   |   |   |   |   |   |   |   |   | 3.79 | % |
| Ratio                  of average interest-earning assets                                                                                                     |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     to                  average interest-bearing                  liabilities                                    |   |                                                     | 117.86  | %  |   |   |   |   |   |   |   |   |   |   | 121.27 | %  |   |   |   |   |   |   |   |   |

| (1) | Tax-exempt                  income has been adjusted to a tax-equivalent basis using an incremental                  rate of 37.6% for purposes of computing the average                  yield/rate. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Index*

|                                                                                                                                                          |   | **For                  the Six Months Ended June 30,** |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|---------|
|                                                                                                                                                          |   | **2007**                                               |    |   | **2006** |   |
|                                                                                                                                                          |   |                                                   |    |   | **Interest** |   |   | **Average** |   |   |   |   |   | **Interest** |   |   | **Average** |   |
|                                                                                                                                                          |   | **Average**                                            |    |   | **and** |   |   | **Yield/** |   |   | **Average** |   |   | **and** |   |   | **Yield/** |   |
|                                                                                                                                                          |   | **Balance**                                            |    |   | **Dividends** |   |   | **Rate** |   |   | **Balance** |   |   | **Dividends** |   |   | **Rate** |   |
| Interest-earning                  assets:                                                                                                                     |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Loans                                                                                                                           |   | $                                                      | 181,182 |   |   | $ | 7,509 |   |   |   | 8.36 | % |   | $ | 162,802 |   |   | $ | 6,386 |   |   |   | 7.91 | % |
|      Investment                  securities and                                                                                      |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         interest-bearing                  deposits (1)                                                                |   |                                                   | 40,717  |   |   |   | 920 |   |   |   | 5.32 | % |   |   | 36,414 |   |   |   | 765 |   |   |   | 4.71 | % |
|      Other                  interest-earning assets                                                                                  |   |                                                   | 7,215   |   |   |   | 194 |   |   |   | 5.42 | % |   |   | 5,426 |   |   |   | 131 |   |   |   | 4.87 | % |
|                                                                                                                                                          |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           Total                  interest-earning assets (1)                                                |   |                                                   | 229,114 |   |   |   | 8,623 |   |   |   | 7.73 | % |   |   | 204,642 |   |   |   | 7,282 |   |   |   | 7.26 | % |
|                                                                                                                                                          |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-earning                  assets                                                                                                                   |   |                                                   | 14,023  |   |   |   |   |   |   |   |   |   |   |   | 14,728 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                          |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                Total                  assets                                       |   | $                                                      | 243,137 |   |   |   |   |   |   |   |   |   |   | $ | 219,370 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                          |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                                                                                                                |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Demand,                  money market                                                                                           |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          and                  NOW deposits                                                                       |   | $                                                      | 44,411  |   |   |   | 889 |   |   |   | 4.04 | % |   | $ | 39,702 |   |   |   | 592 |   |   |   | 3.01 | % |
|      Savings                                                                                                                         |   |                                                   | 4,359   |   |   |   | 32 |   |   |   | 1.48 | % |   |   | 5,319 |   |   |   | 29 |   |   |   | 1.10 | % |
|      Certificates                  of deposit                                                                                        |   |                                                   | 123,514 |   |   |   | 3,189 |   |   |   | 5.21 | % |   |   | 99,373 |   |   |   | 2,256 |   |   |   | 4.58 | % |
|      Other                  borrowings                                                                                               |   |                                                   | 21,686  |   |   |   | 548 |   |   |   | 5.10 | % |   |   | 24,607 |   |   |   | 562 |   |   |   | 4.61 | % |
|                                                                                                                                                          |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           Total                  interest-bearing liabilities                                               |   |                                                   | 193,970 |   |   |   | 4,658 |   |   |   | 4.84 | % |   |   | 169,001 |   |   |   | 3,439 |   |   |   | 4.10 | % |
|                                                                                                                                                          |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing                  liabilities                                                                                                              |   |                                                   | 31,514  |   |   |   |   |   |   |   |   |   |   |   | 34,899 |   |   |   |   |   |   |   |   |   |
| Stockholders’                  equity                                                                                                                   |   |                                                   | 17,653  |   |   |   |   |   |   |   |   |   |   |   | 15,470 |   |   |   |   |   |   |   |   |   |
|                Total                  liabilities and                              |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    stockholders’                  equity |   | $                                                      | 243,137 |   |   |   |   |   |   |   |   |   |   | $ | 219,370 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                          |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income before                                                                                                                   |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     provision                  for loan losses                                                                                            |   |                                                   |    |   |   | $ | 3,965 |   |   |   |   |   |   |   |   |   |   | $ | 3,843 |   |   |   |   |   |
|                                                                                                                                                          |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-rate                  spread                                                                                                                         |   |                                                   |    |   |   |   |   |   |   |   | 2.89 | % |   |   |   |   |   |   |   |   |   |   | 3.16 | % |
| Net                  interest margin (1)                                                                                                                      |   |                                                   |    |   |   |   |   |   |   |   | 3.63 | % |   |   |   |   |   |   |   |   |   |   | 3.87 | % |
| Ratio                  of average interest-earning assets                                                                                                     |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     to                  average interest-bearing liabilities                                                                              |   |                                                   | 118.12  | % |   |   |   |   |   |   |   |   |   |   | 121.09 | % |   |   |   |   |   |   |   |   |
|                                                                                                                                                          |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1) | Tax-exempt                  income has been adjusted to a tax-equivalent basis using an incremental                  rate of 37.6% for purposes of computing the average                  yield/rate. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Index*

**Analysis        of Changes in Net Interest Income**

|                                                                 |   | Three                  Months Ended June 30,2007                  vs. 2006 |   |
|----------------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|
|                                                                 |   | Increase                  (Decrease) Due to                                |   |
|                                                                 |   |                                                                       |   |   |   |   |   |   |   |   | Rate/ |   |
|                                                                 |   | Rate                                                                       |   |   | Volume |   |   | Volume |   |   | Total |   |
| Interest-earning                  assets:                            |   |                                                                       |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                |   | $                                                                          | 140    |   |   | $ | 323 |   |   | $ | 14 |   |   | $ | 477 |   |
| Investment                  securities and interest-bearing deposits |   |                                                                       | 53     |   |   |   | 82 |   |   |   | (33 | ) |   |   | 102 |   |
| Other                  interest-earning assets                       |   |                                                                       | 8      |   |   |   | 50 |   |   |   | 4 |   |   |   | 62 |   |
| Total                  interest-earning assets                       |   |                                                                       | 201    |   |   |   | 455 |   |   |   | (15 | ) |   |   | 641 |   |
|                                                                 |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                       |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand,                  money market and NOW deposits               |   |                                                                       | 77     |   |   |   | 31 |   |   |   | 8 |   |   |   | 116 |   |
| Savings                                                              |   |                                                                       | 2      |   |   |   | (4 | ) |   |   | - |   |   |   | (2 | ) |
| Certificates                  of deposit                             |   |                                                                       | 134    |   |   |   | 324 |   |   |   | 36 |   |   |   | 494 |   |
| Other                  borrowings                                    |   |                                                                       | 25     |   |   |   | (27 | ) |   |   | (2 | ) |   |   | (4 | ) |
| Total                  interest-bearing liabilities                  |   |                                                                       | 238    |   |   |   | 324 |   |   |   | 42 |   |   |   | 604 |   |
|                                                                 |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income                                 |   | $                                                                          | (37    | ) |   | $ | 131 |   |   | $ | (57 | ) |   | $ | 37 |   |

|                                                                 |   | Six                  Months Ended June 30,  |   |
|----------------------------------------------------------------------|--------|---------------------------------------------|--------|
|                                                                 |   | 2007                  vs. 2006              |   |
|                                                                 |   | Increase                  (Decrease) Due to |   |
|                                                                 |   |                                        |   |   |   |   |   |   |   |   | Rate/ |   |
|                                                                 |   | Rate                                        |   |   | Volume |   |   | Volume |   |   | Total |   |
| Interest-earning                  assets:                            |   |                                        |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                |   | $                                           | 363    |   |   | $ | 721 |   |   | $ | 39 |   |   | $ | 1,123 |   |
| Investment                  securities and interest-bearing deposits |   |                                        | 110    |   |   |   | 101 |   |   |   | (56 | ) |   |   | 155 |   |
| Other                  interest-earning assets                       |   |                                        | 15     |   |   |   | 43 |   |   |   | 5 |   |   |   | 63 |   |
| Total                  interest-earning assets                       |   |                                        | 488    |   |   |   | 865 |   |   |   | (12 | ) |   |   | 1,341 |   |
|                                                                 |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                       |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand,                  money market and NOW deposits               |   |                                        | 203    |   |   |   | 70 |   |   |   | 24 |   |   |   | 297 |   |
| Savings                                                              |   |                                        | 10     |   |   |   | (5 | ) |   |   | (2 | ) |   |   | 3 |   |
| Certificates                  of deposit                             |   |                                        | 310    |   |   |   | 548 |   |   |   | 75 |   |   |   | 933 |   |
| Other                  borrowings                                    |   |                                        | 60     |   |   |   | (67 | ) |   |   | (7 | ) |   |   | (14 | ) |
| Total                  interest-bearing liabilities                  |   |                                        | 583    |   |   |   | 546 |   |   |   | 90 |   |   |   | 1,219 |   |
|                                                                 |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income                                 |   | $                                           | (95    | ) |   | $ | 319 |   |   | $ | (102 | ) |   | $ | 122 |   |

**Comparison        of Three Months Ended June 30, 2007 and 2006**

**Interest        Income and Expense**

*Interest        Income*

----

*Index*

*Interest        Expense.*

*Net        Interest Income before Provision for Loan Losses*

**Provision        for Loan Losses**

**Noninterest        Income and Expenses**

*Noninterest        Income.*

*Noninterest        Expenses.*

| · | higher                  data processing and settlement fees of                  $33,000; |
|--------|------------------------------------------------------------------------------------------|

| · | increased                  pension costs of $8,000; |
|--------|-----------------------------------------------------|

| · | increases                  in audit, legal, and professional fees of                  $14,000; |
|--------|------------------------------------------------------------------------------------------------|

| · | increases                  in postage, freight, and courier costs of                  $5,000; |
|--------|-----------------------------------------------------------------------------------------------|

| · | increases                  in advertising and business development of 7,000;                  and |
|--------|---------------------------------------------------------------------------------------------------|

| · | increases                  in other losses of $19,000 (net of collection, repossession, and                  foreclosure expenses of $4,000). |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

----

*Index*

**Provision        for Income Taxes**

**Comparison        of Six Months Ended June 30, 2007 and 2006**

**Interest        Income and Expense**

*Interest        Income*

*Interest        Expense.*

*Net        Interest Income before Provision for Loan Losses*

**Provision        for Loan Losses**

**Noninterest        Income and Expenses**

*Noninterest        Income.*

----

*Index*

*Noninterest        Expenses.*

| · | higher                  data processing and settlement fees of                  $43,000; |
|--------|------------------------------------------------------------------------------------------|

| · | increased                  pension costs of $13,000; |
|--------|------------------------------------------------------|

| · | increases                  in audit, legal, and professional fees of                  $25,000; |
|--------|------------------------------------------------------------------------------------------------|

| · | increases                  in postage, freight, and courier costs of                  $12,000; |
|--------|------------------------------------------------------------------------------------------------|

| · | increases                  in advertising and business development of 6,000;                  and |
|--------|---------------------------------------------------------------------------------------------------|

| · | increases                  in other losses of $8,000 (net of collection, repossession, and                  foreclosure expenses of $23,000). |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

**Provision        for Income Taxes**

**ITEM        3.  CONTROLS AND PROCEDURES**

*Background        of Internal Controls and Internal Audits.*

*Evaluation        of Disclosure Controls and Procedures.*

*Changes        in Internal Controls.*

----

*Index*

**ATLANTIC              BANCGROUP, INC. AND              SUBSIDIARY**

R

|  Class                II Directors with Terms Expiring in 2010    |
|---------------------------------------------------------------------------------------|
| Director                                                                              | Votes                  For | Votes                  Against or Withheld | Votes                  Abstained |
| Donald                  F. Glisson, Jr.                                               | 924,706 | 9,630 | - |
| Robin                  H. Scheiderman                                                 | 924,706 | 9,630 | - |
| Gordon                  K. Watson                                                     | 924,706 | 9,630 | - |

| Votes                  For | Votes                  Against or Withheld | Votes                  Abstained |   |
|----------------------------|--------------------------------------------|----------------------------------|--------|
| 922,906                    | 9,150                                      | 2,280                            |   |

| Votes                  For | Votes                  Against or Withheld | Votes                  Abstained |   |
|----------------------------|--------------------------------------------|----------------------------------|--------|
| 919,530                    | 10,846                                     | 3,960                            |   |

|   | **Legend** |
|--------|------------|

|   | (a) | Incorporated                  by reference on Atlantic’s Form 10-KSB for year ended December 31,                  1999 |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Incorporated                  by reference on Atlantic’s Form 10-KSB for year ended December 31,                  2000 |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Incorporated                  by reference on Atlantic’s Form 10-KSB for year ended December 31,                  2002 |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Incorporated                  by reference on Atlantic’s Form 10-KSB for year ended December 31,                  2003 |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | Incorporated                  by reference on Atlantic’s Form 10-QSB for quarter ended September 30,                  2006 |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------|

----

*Index*

| **Exhibit                  No.** | **Description                  of Exhibit**                                                                                                                                                                            |
|----------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                             |                                                                                                                                                                                                                   |
| 3.1                              | Articles                  of Incorporation (a)                                                                                                                                                                         |
| 3.2                              | Bylaws                  (a)                                                                                                                                                                                            |
| 4.1                              | Specimen                  Stock Certificate (a)                                                                                                                                                                        |
| 10.1                             | Software                  License Agreement dated as of October 6, 1997, between Oceanside                  and File                  Solutions, Inc. (a)                                                              |
| 10.2                             | File                  Solutions Software Maintenance Agreement dated as of July 15, 1997,                  between Oceanside and SPARAK Financial Systems, Inc.                  (a)                                   |
| 10.3                             | Remote                  Data Processing Agreement dated as of March 3, 1997, between Oceanside                  and                  Bankers Data Services, Inc. (a)                                                   |
| 10.4                             | Lease                  dated September 27, 2000, between MANT EQUITIES, LLC and Oceanside.                  (b)                                                                                                        |
| 10.5                             | Lease                  dated August 22, 2002, between PROPERTY MANAGEMENT SUPPORT, INC.,                  and                  Oceanside. (c)                                                                          |
| 10.6                             | Change                  in Control Agreement for Barry W. Chandler. (e)                                                                                                                                                |
| 10.7                             | Change                  in Control Agreement for David L. Young. (e)                                                                                                                                                   |
| 10.8                             | Change                  in Control Agreement for Grady R. Kearsey. (e)                                                                                                                                                 |
| 14                               | Code                  of Ethics for Senior Officers Policy. (d)                                                                                                                                                        |
| 16                               | Letter                  on Change of Certifying Accountant (incorporated by reference on                  Form 8-K                  filed October 2, 2006).                                                            |
| 31.1                             | Certifications                  of Principal Executive Officer required by Rule 13a-14(a)/15d-14(a)                  under                  the Exchange Act                                                           |
| 31.2                             | Certifications                  of Principal Financial Officer required by Rule 13a-14(a)/15d-14(a)                  under                  the Exchange Act                                                           |
| 32.1                             | Certifications                  of Principal Executive Officer pursuant to 18 U.S.C. Section 1350,                  as                  adopted pursuant to Section 906 of Sarbanes-Oxley Act of                  2002 |
| 32.2                             | Certifications                  of Principal Financial Officer pursuant to 18 U.S.C. Section 1350,                  as                  adopted pursuant to Section 906 of Sarbanes-Oxley Act of                  2002 |

----

*Index*

**SIGNATURES**

|                                              | Atlantic                  BancGroup, Inc.              |
|---------------------------------------------------|--------------------------------------------------------|
|                                              |                                                   |
|                                              |                                                   |
|                                              |                                                   |
|                                              |                                                   |
| Date:  August                  10, 2007 | /s/                  Barry W. Chandler                 |
|                                              | Barry                  W. Chandler                     |
|                                              | President                  and Chief Executive Officer |
|                                              |                                                   |
|                                              |                                                   |
|                                              |                                                   |
| Date:  August                  10, 2007 | /s/                  David L. Young                    |
|                                              | David                  L. Young                        |
|                                              | Executive                  Vice President,             |
|                                              | Chief                  Financial Officer, and          |
|                                              | Corporate                  Secretary                   |
|                                              |                                                   |