# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

# FORM 10-Q

(Mark One)

| | QUARTERLY REPORT PUSUSANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | ---------------------------------------------------------------------------------------

| | For the Quarterly Period ended June 30, 2008
| | --------------------------------------------

| | OR
| | --

| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
| | ----------------------------------------------------------------------------------------

| | For the Transition Period from ___________ to _____________
| | -----------------------------------------------------------

Commission file number
333-127242

Atlantic Bancshares, Inc.(Exact name of registrant as specified in its charter)

|South Carolina               |  | 20-3047433         
|---------------------------- |  | -------------------
|(State or other jurisdiction |  | (I.R.S. Employer   
|of incorporation)            |  | Identification No.)

One Sheridan Park CircleP. O. Box 3077Bluffton, South Carolina 29910
(Address of principal executive offices)

(843) 815-7111(Registrants telephone number, including area code)

______________________________

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.      Yes         
No

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated
filer.  See definition of large accelerated filer, accelerated filer and
smaller reporting company in Rule 12b-2 of the Exchange Act.

| |  | 
| |  | 
| |  | 
| |  | 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes         No

Indicate the number of shares
outstanding of each of the issuers classes of common stock, as of the latest
practicable date: 1,251,577 shares of common stock, no par value per share, were issued
and outstanding as of August 4, 2008.

---

# ATLANTIC BANCSHARES,
INC.

# INDEX

|                                                                                | 
|------------------------------------------------------------------------------- | 
|PART I - FINANCIAL INFORMATION                                                  | 
|                                                                                | 
|Item 1.    Financial Statements (Unaudited)                                     | 
|                                                                                | 
|Condensed Balance Sheets - June 30, 2008 and December 31, 2007                  | 
|                                                                                | 
|Condensed Statement of Operations - Six months ended June 30, 2008 and 2007 and | 
|Three months ended June 30, 2008 and 2007                                       | 
|                                                                                | 
|Condensed Statement of Shareholders' Equity -                                   | 
|Six months ended June 30, 2008 and 2007                                         | 
|                                                                                | 
|Condensed Statement of Cash Flows - Three months ended March 31, 2008 and 2007  | 
|                                                                                | 
|Notes to Condensed Financial Statements                                         | 
|                                                                                | 
|Item 2.    Management's Discussion and Analysis or Plan of Operation            | 
|                                                                                | 
|Item 3.    Quantitative and Qualitative Disclosures About Market Risk           | 
|                                                                                | 
|Item 4.    Controls and Procedures                                              | 
|                                                                                | 
|PART II - OTHER INFORMATION                                                     | 
|                                                                                | 
|Item 1.    Legal Proceedings                                                    | 
|                                                                                | 
|Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds          | 
|                                                                                | 
|Item 3.    Defaults Upon Senior Securities                                      | 
|                                                                                | 
|Item 4.    Submission of Matters to a Vote of Security Holders                  | 
|                                                                                | 
|Item 5.    Other Information                                                    | 
|                                                                                | 
|Item 6.    Exhibits                                                             | 

-2-

---

# ATLANTIC BANCSHARES,
INC.

# Consolidated Balance
Sheets

# PART I  FINANCIAL
INFORMATIONItem 1  Financial Statements.

|                                                             | June 30, | December 31,
|------------------------------------------------------------ | -------- | ------------
|
|
|Assets:                                                      |          |             
|Cash and cash equivalents:                                   |          |             
|Cash and due from banks                                      |          |             
|                                                             |          |             
|Total cash and cash equivalents                              |          |             
|                                                             |          |             
|Securities available for sale                                |          |             
|Nonmarketable equity securities                              |          |             
|                                                             |          |             
|Loans receivable                                             |          |             
|Less allowance for loan losses                               |          |             
|                                                             |          |             
|Loans, net                                                   |          |             
|                                                             |          |             
|Accrued interest receivable                                  |          |             
|Premises, furniture and equipment, net                       |          |             
|Deferred tax asset                                           |          |             
|Other assets                                                 |          |             
|                                                             |          |             
|Total assets                                                 |          |             
|                                                             |          |             
|Liabilities:                                                 |          |             
|Deposits:                                                    |          |             
|Noninterest bearing transaction accounts                     |          |             
|Interest-bearing transaction accounts                        |          |             
|Savings and money market                                     |          |             
|Time deposits $100,000 and over                              |          |             
|Other time deposits                                          |          |             
|                                                             |          |             
|Total deposits                                               |          |             
|                                                             |          |             
|Advances from Federal Home Loan Bank                         |          |             
|Federal funds purchased                                      |          |             
|Accrued interest payable                                     |          |             
|Other liabilities                                            |          |             
|                                                             |          |             
|Total liabilities                                            |          |             
|                                                             |          |             
|Commitments and contingencies                                |          |             
|                                                             |          |             
|Shareholders equity:                                        |          |             
|Preferred stock, no par value; 10,000,000 shares authorized; |          |             
|No shares issued and outstanding                             |          |             
|Common stock, no par value; 10,000,000 shares authorized;    |          |             
|1,251,577 shares issued and outstanding                      |          |             
|Capital surplus                                              |          |             
|Accumulated other comprehensive income (loss)                |          |             
|Deficit                                                      |          |             
|                                                             |          |             
|Total shareholders' equity                                   |          |             
|                                                             |          |             
|Total liabilities and shareholders' equity                   |          |             
|                                                             |          |             

See notes to condensed consolidated financial statements.

-3-

---

# ATLANTIC BANCSHARES,
INC.

# Condensed Statements
of Operations (Unaudited)

|                                                    | For the six months ended | For the three months ended
|--------------------------------------------------- | ------------------------ | --------------------------
|
|
|Interest income:                                    |                          |                           
|Loans, including fees                               |                          |                           
|Securities, available for sale, taxable             |                          |                           
|Nonmarketable equity securities                     |                          |                           
|Federal funds sold                                  |                          |                           
|Interest bearing deposits with other banks          |                          |                           
|                                                    |                          |                           
|Total                                               |                          |                           
|                                                    |                          |                           
|Interest expense:                                   |                          |                           
|Time deposits $100,000 and over                     |                          |                           
|Other deposits                                      |                          |                           
|Other borrowings                                    |                          |                           
|                                                    |                          |                           
|Total                                               |                          |                           
|                                                    |                          |                           
|Net interest income                                 |                          |                           
|                                                    |                          |                           
|Provision for loan losses                           |                          |                           
|                                                    |                          |                           
|Net interest income after provision for loan losses |                          |                           
|                                                    |                          |                           
|Other operating income:                             |                          |                           
|Service fees on deposit accounts                    |                          |                           
|Residential mortgage origination fees               |                          |                           
|Other income                                        |                          |                           
|                                                    |                          |                           
|Total                                               |                          |                           
|                                                    |                          |                           
|Noninterest expense:                                |                          |                           
|Salaries and employee benefits                      |                          |                           
|Net occupancy                                       |                          |                           
|Professional fees                                   |                          |                           
|Marketing                                           |                          |                           
|Furniture and equipment                             |                          |                           
|Data processing and related costs                   |                          |                           
|Other operating                                     |                          |                           
|                                                    |                          |                           
|Total                                               |                          |                           
|                                                    |                          |                           
|Loss before income tax benefit                      |                          |                           
|                                                    |                          |                           
|Income tax benefit                                  |                          |                           
|                                                    |                          |                           
|Net loss                                            |                          |                           
|                                                    |                          |                           
|Losses per share                                    |                          |                           
|Basic loss per share                                |                          |                           
|                                                    |                          |                           

See notes to condensed consolidated financial statements.

-4-

---

# ATLANTIC BANCSHARES,
INC.

# Consolidated
Statements of Changes in Shareholders Equity and Comprehensive IncomeFor the six months
ended June 30, 2008 and 2007 (Unaudited)

|                         |  |  |  | Accumulated |  |  
|------------------------ |  |  |  | ----------- |  | -
|
|
|
|
|December 31, 2006        |  |  |  | 1,251,577   |  | $
|                         |  |  |  |             |  |  
|Net loss                 |  |  |  | -           |  |  
|                         |  |  |  |             |  |  
|Other comprehensive      |  |  |  |             |  |  
|income, net of tax       |  |  |  | -           |  |  
|                         |  |  |  |             |  |  
|Total comprehensive loss |  |  |  | -           |  |  
|                         |  |  |  |             |  |  
|Stock based compensation |  |  |  | -           |  |  
|                         |  |  |  |             |  |  
|June 30, 2007            |  |  |  | 1,251,577   |  | $
|                         |  |  |  |             |  |  
|December 31, 2007        |  |  |  | 1,251,577   |  | $
|                         |  |  |  |             |  |  
|Net loss                 |  |  |  | -           |  |  
|                         |  |  |  |             |  |  
|Other comprehensive      |  |  |  |             |  |  
|income, net of tax       |  |  |  | -           |  |  
|                         |  |  |  |             |  |  
|Total comprehensive      |  |  |  |             |  |  
|income                   |  |  |  | -           |  |  
|                         |  |  |  |             |  |  
|Stock based compensation |  |  |  | -           |  |  
|                         |  |  |  |             |  |  
|June 30, 2008            |  |  |  | 1,251,577   |  | $
|                         |  |  |  |             |  |  

See notes to condensed consolidated financial statements.

-5-

---

# ATLANTIC BANCSHARES,
INC.

# Condensed Statements
of Cash Flows (Unaudited)

|                                                                  | Six months ended
|----------------------------------------------------------------- | ----------------
|
|Cash flows from operating activities:                             |                 
|Net loss                                                          |                 
|Adjustments to reconcile net loss to net cash provided            |                 
|(used) by operating activities:                                   |                 
|Provision for loan losses                                         |                 
|Depreciation and amortization expense                             |                 
|Accretion on securities available for sale                        |                 
|Stock-based compensation expense                                  |                 
|Deferred income tax benefit                                       |                 
|Decrease (increase)  in interest receivable                       |                 
|Increase (decrease) in interest payable                           |                 
|Decrease (increase) in other assets                               |                 
|Increase  in other liabilities                                    |                 
|                                                                  |                 
|Net cash provided (used) by operating activities                  |                 
|                                                                  |                 
|Cash flows from investing activities:                             |                 
|Net increase in loans receivable, net                             |                 
|Purchase of premises, furniture and equipment                     |                 
|Purchase of securities available for sale                         |                 
|Purchase of nonmarketable equity securities                       |                 
|Repayments, maturities and calls of securities available for sale |                 
|Repayments of nonmarketable equity securities                     |                 
|                                                                  |                 
|Net cash used by investing activities                             |                 
|                                                                  |                 
|Cash flows from financing activities:                             |                 
|Net (decrease) increase in demand deposits, interest-bearing      |                 
|transaction accounts and savings accounts                         |                 
|Net increase in certificate of deposit and other time deposits    |                 
|Net decrease in federal funds purchased                           |                 
|Net increase in FHLB advances                                     |                 
|                                                                  |                 
|Net cash provided by financing activities                         |                 
|                                                                  |                 
|Net decrease in cash and cash equivalents                         |                 
|                                                                  |                 
|Cash and cash equivalents, beginning of  the period               |                 
|                                                                  |                 
|Cash and cash equivalents, end of the period                      |                 
|                                                                  |                 
|Cash paid for:                                                    |                 
|Interest                                                          |                 
|                                                                  |                 
|Income taxes                                                      |                 
|                                                                  |                 

See notes to condensed consolidated financial statements.

-6-

---

# ATLANTIC BANCSHARES,
INC.

# Note 1  Basis of
Presentation

The accompanying unaudited
consolidated condensed financial statements for Atlantic Bancshares, Inc.
(Company) were prepared in accordance with instructions for Form 10-Q and,
therefore, do not include all disclosures necessary for a complete presentation of
financial condition, results of operations, and cash flows in conformity with generally
accepted accounting principles. All adjustments, consisting only of normal recurring
accruals, which are, in the opinion of management, necessary for fair presentation of the
interim consolidated financial statements have been included. The results of operations
for the six month period ended June 30, 2008 are not necessarily indicative of the results
that may be expected for the entire year. These consolidated financial statements do not
include all disclosures required by generally accepted accounting principles and should be
read in conjunction with the Companys audited consolidated financial statements and
related notes for the year ended December 31, 2007.

# Note 2  Recently
Issued Accounting Pronouncements

The following is a summary of recent
authoritative pronouncements that could impact the accounting, reporting, and / or
disclosure of financial information by the Company.

In December 2007, the FASB issued
SFAS No. 141(R), Business Combinations, (SFAS 141(R)) which
replaces SFAS 141. SFAS 141(R) establishes principles and requirements for how an acquirer
in a business combination recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any controlling interest;
recognizes and measures goodwill acquired in the business combination or a gain from a
bargain purchase; and determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the business
combination. FAS 141(R) is effective for acquisitions by the Company taking place on or
after January 1, 2009. Early adoption is prohibited. Accordingly, a calendar year-end
company is required to record and disclose business combinations following existing
accounting guidance until January 1, 2009. The Company will assess the impact of SFAS
141(R) if and when a future acquisition occurs.

In December 2007, the FASB issued
SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements 
an amendment of ARB No. 51 (SFAS 160). SFAS 160 establishes new
accounting and reporting standards for the noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. Before this statement, limited guidance existed for
reporting noncontrolling interests (minority interest). As a result, diversity in practice
exists. In some cases minority interest is reported as a liability and in others it is
reported in the mezzanine section between liabilities and equity. Specifically, SFAS 160
requires the recognition of a noncontrolling interest (minority interest) as equity in the
consolidated financials statements and separate from the parents equity. The amount
of net income attributable to the noncontrolling interest will be included in consolidated
net income on the face of the income statement. SFAS 160 clarifies that changes in a
parents ownership interest in a subsidiary that do not result in deconsolidation are
equity transactions if the parent retains its controlling financial interest. In addition,
this statement requires that a parent recognize gain or loss in net income when a
subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of
the noncontrolling equity investment on the deconsolidation date. SFAS 160 also includes
expanded disclosure requirements regarding the interests of the parent and its
noncontrolling interests. SFAS 160 is effective for the Company on January 1, 2009.
Earlier adoption is prohibited. The Company is currently evaluating the impact, if any,
the adoption of SFAS 160 will have on its financial position, results of operations and
cash flows.

In March 2008, the FASB issued SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities
(SFAS 161). SFAS 161 requires enhanced disclosures about an entitys
derivative and hedging activities and thereby improving the transparency of financial
reporting. It is intended to enhance the current disclosure framework in SFAS 133 by
requiring that objectives for using derivative instruments be disclosed in terms of
underlying risk and accounting designation. This disclosure better conveys the purpose of
derivative use in terms of the risks that the entity is intending to manage. SFAS 161 is
effective for the Company on January 1, 2009. This pronouncement does not impact
accounting measurements but will result in additional disclosures if the Company is
involved in material derivative and hedging activities at that time.

In February 2008, the FASB issued
FASB Staff Position No. 140-3, Accounting for Transfers of Financial Assets and
Repurchase Financing Transactions (FSP 140-3).  This FSP provides
guidance on accounting for a transfer of a financial asset and the transferors
repurchase financing of the asset.  This FSP presumes that an initial transfer of a
financial asset anda repurchase financing are considered part of the
same arrangement (linked transaction) under SFAS No. 140. However, if certain criteria are
met, the initial transfer and repurchase financing are not evaluated as a linked
transaction and are evaluated separately under Statement 140.  FSP 140-3 will be
effective for financial statements issued for fiscal years beginning after November 15,
2008, and interim periods within those fiscal years and earlier application is not
permitted.

-7-

---

# ATLANTIC BANCSHARES,
INC.

Accordingly, this FSP is effective
for the Company on January 1, 2009.  The Company is currently evaluating the impact,
if any, the adoption of FSP 140-3 will have on its financial position, results of
operations and cash flows.

In April 2008, the FASB issued FASB
Staff Position No. 142-3, Determination of the Useful Life of Intangible
Assets (FSP 142-3). This FSP amends the factors that should be
considered in developing renewal or extension assumptions used to determine the useful
life of a recognized intangible asset under SFAS No. 142, Goodwill and Other
Intangible Assets. The intent of this FSP is to improve the consistency between the
useful life of a recognized intangible asset under SFAS No. 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS No. 141(R),
Business Combinations,and other U.S. generally accepted accounting
principles. This FSP is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal years and early
adoption is prohibited. Accordingly, this FSP is effective for the Company on January 1,
2009. The Company does not believe the adoption of FSP 142-3 will have a material impact
on its financial position, results of operations or cash flows.

Effective January 1, 2008, the
Company adopted SFAS No. 157, Fair Value Measurements (SFAS 157)
which provides a framework for measuring and disclosing fair value under generally
accepted accounting principles. SFAS 157 requires disclosures about the fair value of
assets and liabilities recognized in the balance sheet in periods subsequent to initial
recognition, whether the measurements are made on a recurring basis (for example,
available-for-sale investment securities) or on a nonrecurring basis (for example,
impaired loans).

SFAS 157 defines fair value as the
exchange price that would be received for an asset or paid to transfer a liability (an
exit price) in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement date. SFAS 157 also
establishes a fair value hierarchy which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring fair value.
The standard describes three levels of inputs that may be used to measure fair value:

|Level 1 | Quoted prices in active markets for identical assets or liabilities. Level 1 assets
and liabilities include debt and equity securities and derivative contracts that are
traded in an active exchange market, as well as U.S. Treasuries, and money market funds.
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Level 2 | Observable inputs other than Level 1 prices such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilities. Level 2 assets and liabilities include debt securities
with quoted prices that are traded less frequently than exchange-traded instruments,
mortgage-backed securities, municipal bonds, corporate debt securities, and derivative
contracts whose value is determined using a pricing model with inputs that are observable
in the market or can be derived principally from or corroborated by observable market
data. This category generally includes certain derivative contracts and impaired loans.
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Level 3 | Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities. Level 3 assets and liabilities
include financial instruments whose value is determined using pricing models, discounted
cash flow methodologies, or similar techniques, as well as instruments for which the
determination of fair value requires significant management judgment or estimation. For
example, this category generally includes certain private equity investments, retained
residual interests in securitizations, residential mortgage servicing rights, and
highly-structured or long-term derivative contracts.
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-8-

---

# ATLANTIC BANCSHARES,
INC.

Assets and liabilities measured at
fair value on a recurring basis at June 30, 2008 are as follows:

|                              | Quoted | Significant | Significant
|----------------------------- | ------ | ----------- | -----------
|
|
|
|
|Available for Sale Securities |        |             | $          
|                              |        |            
|Total                         |        |             | $          
|                              |        |            

The Company has no liabilities
carried at fair value or measured at fair value on a nonrecurring basis.

The Company is predominantly a cash
flow lender with real estate serving as collateral on a substantial majority of loans.
Loans which are deemed to be impaired are primarily valued on a nonrecurring basis at the
fair values of the underlying real estate collateral. Such fair values are obtained using
independent appraisals, which the Company considers to be level 2 inputs. The aggregate
carrying amount of impaired loans at June 30, 2008 was $1,238,473.

FASB Staff Position No. FAS 157-2
delays the implementation of SFAS 157 until the first quarter of 2009 with respect to
goodwill, other intangible assets, real estate and other assets acquired through
foreclosure and other non-financial assets measured at fair value on a nonrecurring basis.

The Company has no assets or
liabilities whose fair values are measured using level 3 inputs.

Other accounting standards that have
been issued or proposed by the FASB or other standards-setting bodies are not expected to
have a material impact on the Companys financial position, results of operations or
cash flows.

# Note 3  Loss Per
Share

Basic loss per share is computed by
dividing net loss by the weighted-average number of common shares outstanding. Diluted
loss per share is computed by dividing net loss by the weighted-average number of common
shares outstanding and dilutive common share equivalents using the treasury stock method.
There were no dilutive common share equivalents outstanding during the first six months of
2008 and 2007 due to the net loss. As a result, basic and dilutive loss per share and
diluted earnings per share were the same.

# Net loss per share-basic
computation:

|                                          | Six months ended
|----------------------------------------- | ----------------
|
|Net loss per share-basic computation:     |                 
|                                          |                 
|Net loss to common shareholders           |                 
|                                          |                 
|Average common shares outstanding - basic |                 
|                                          |                 
|Basic loss per share                      |                 
|                                          |                 

-9-

---

# ATLANTIC BANCSHARES,
INC.

|                                          | Three months ended
|----------------------------------------- | ------------------
|
|Net loss per share-basic computation:     |                   
|                                          |                   
|Net loss to common shareholders           |                   
|                                          |                   
|Average common shares outstanding - basic |                   
|                                          |                   
|Basic loss per share                      |                   
|                                          |                   

# Item 2 
Managements Discussion and Analysis of Financial Condition and Results of
Operations

The following is our discussion and
analysis of certain significant factors that have affected our financial position and
operating results and those of our subsidiary, Atlantic Community Bank, during the periods
included in the accompanying financial statements. This commentary should be read in
conjunction with the financial statements and the related notes and the other statistical
information included in this report.

This report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements relating to, without limitation, future economic performance, plans and
objectives of management for future operations, and projections of revenues and other
financial items that are based on the beliefs of management, as well as assumptions made
by and information currently available to management. The words may,
will, anticipate, should, would,
believe, contemplate, expect, estimate,
continue, may, and intend, as well as other similar
words and expressions of the future, are intended to identify forward-looking statements.
Our actual results may differ materially from the anticipated results discussed in the
forward-looking statements, and our operating performance each quarter is subject to
various risks and uncertainties that are discussed in detail in our filings with the
Securities and Exchange Commission, including, without limitation:

| |  | significant increases in competitive pressure in the banking and financial services industries;
| | - | -----------------------------------------------------------------------------------------------

| |  | changes in the interest rate environment which could reduce anticipated or actual margins;
| | - | ------------------------------------------------------------------------------------------

| |  | changes in political conditions or the legislative or regulatory environment;
| | - | -----------------------------------------------------------------------------

| |  | general economic conditions, either nationally or regionally and especially in our primary
service area, continuing to be weak resulting in, among other things, a deterioration in credit
quality;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | changes occurring in business conditions and inflation;
| | - | -------------------------------------------------------

| |  | changes in technology;
| | - | ----------------------

| |  | the level of allowance for loan loss;
| | - | -------------------------------------

| |  | the rate of delinquencies and amounts of charge-offs;
| | - | -----------------------------------------------------

| |  | the rates of loan growth;
| | - | -------------------------

| |  | adverse changes in asset quality and resulting credit risk-related losses and expenses;
| | - | ---------------------------------------------------------------------------------------

| |  | the amount of our real  estate-based  loans,  and the  weakness  in the  commercial  real  estate market;
| | - | ---------------------------------------------------------------------------------------------------------

| |  | changes in monetary and tax policies;
| | - | -------------------------------------

| |  | loss of consumer confidence and economic disruptions resulting from terrorist activities;
| | - | -----------------------------------------------------------------------------------------

| |  | changes in the securities markets; and
| | - | --------------------------------------

| |  | other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange
Commission.
| | - | --------------------------------------------------------------------------------------------------------------------

All forward-looking statements in
this report are based on information available to us as of the date of this report. We
undertake no obligation to publicly update or otherwise revise any forward-looking
statements, whether as a result of new information, future events, or otherwise.

Real estate markets continue to show
signs of weakening and property values have been impacted negatively by the current
economic operating environment. Our primary service area, southern Beaufort County and a
portion of Jasper County, are not immune to these pressures. If prevailing economic
conditions locally and nationally continue to decline, our business may be affected
adversely. A sustained economic downturn would likely contribute to reduced deposits, the
deterioration of the quality of the loan portfolio and increased nonperforming loans which
could result in a net loss of earnings, an increase in the provision for loan losses and
an increase in loan charge offs, all of which could have a material adverse effect on our
financial condition and results of operations.

-10-

---

# ATLANTIC BANCSHARES,
INC.

# Overview

The following discussion describes
our results of operations for the quarter ended June 30, 2008 as compared to the quarter
ended June 30, 2007, as well as results for the six months ended June 30, 2008 and 2007,
along with our financial condition as of June 30, 2008 as compared to December 31, 2007.
Like most community banks, we derive most of our income from interest we receive on our
loans and investments. Our primary source of funds for making these loans and investments
is our deposits, on which we pay interest. Consequently, one of the key measures of our
success is our amount of net interest income, or the difference between the income on our
interest-earning assets, such as loans and investments, and the expense on our
interest-bearing liabilities, such as deposits. Another key measure is the spread between
the yield we earn on these interest-earning assets and the rate we pay on our
interest-bearing liabilities.

There are risks inherent in all
loans, so we maintain an allowance for loan losses to absorb probable losses on existing
loans that may become uncollectible. We establish and maintain this allowance by charging
a provision for loan losses against our operating earnings. In the following section we
have included a detailed discussion of this process. In addition to earning interest on
our loans and investments, we earn income through fees and other expenses we charge to our
customers. We describe the various components of this non-interest income, as well as our
non-interest expense, in the following discussion.

# Results of Operations

# Net Interest Income

For the six months ended June 30,
2008, net interest income, the major component of our net income, was $1,441,852 as
compared to $1,093,801 for the same period in 2007. The increase in net interest income
for the first six months of 2008 was primarily due to the growth in our loan portfolio,
which typically provides higher interest yields than other types of interest earning
assets, and increases our net interest spread. The average rate paid on interest-bearing
liabilities for the six months ended June 30, 2008 and 2007 was 4.07% and 4.88%,
respectively, while the average rate realized on interest-earning assets was 6.80% and
7.79%, respectively for the same period. The net interest spread was 2.73% and 2.91%,
respectively, for the six month period ended June 30, 2008 and 2007. The decrease in net
interest spread for the first six months of 2008 is a result of the recent decreases in
the Federal Reserve short-term rates and the resulting decrease in the yields we generated
on our earning assets (from variable rate loan repricing and new loans at lower rates),
which more than offset the benefit we received from the repricing of our rate sensitive
liabilities. The net result was a decrease in net interest spread of 18 basis points
during the six-month period ended June 30, 2008, as compared to the six-month period ended
June 30, 2007.

For the three months ended June 30,
2008, net interest income was $738,863 as compared to $569,313 for the same period in
2007. The average rate paid on interest-bearing liabilities for the three months ended
June 30, 2008 and 2007 was 3.91% and 4.89%, respectively, while the average rate realized
on interest-earning assets was 6.51% and 7.75% for the same periods. The net interest
spread was 2.60% and 2.86% for the three month period ended June 30, 2008 and 2007,
respectively.

# Provision and Allowance
for Loan Losses

We have established an allowance for
loan losses through a provision for loan losses charged to expense on our consolidated
statement of operations. The allowance for loan losses was $1,041,065 and $540,900, or
1.48% and 1.00% of total loans, as of June 30, 2008 and 2007, respectively. For the six
months ended June 30, 2008 and 2007, the provision was $427,950 and $155,530,
respectively. Nonperforming loans at June 30, 2008 totaled $1,035,644. In addition, five
loans totaling $1,238,473 were impaired as of June 30, 2008 and loans totaling $2,847,867
were considered criticized loans. The impaired loans include a $867,066 participation we
hold on a commercial real estate development on the South Carolina coast. The amount of
the impairment on this loan is not easily determinable. Based upon calculations of the
present value of the collateral supporting this loan, we believe our loan on this
development is impaired by approximately $220,000, and we have increased our reserves to
reflect this impairment. However, the actual impairment on this loan may be greater or
less than this amount. Principal payments on this loan totaling $50,900 have been received
during the quarter ended June 30, 2008. In contrast, there was one classified
nonperforming loan totaling $181,670 and $2,127,659 criticized loans at June 30, 2007.

The allowance for loan losses
represents an amount which we believe will be adequate to absorb probable losses on
existing loans that may become uncollectible. Our judgment as to the adequacy of the
allowance for loan losses is based on a number

-11-

---

# ATLANTIC BANCSHARES,
INC.

of assumptions about future events,
which we believe to be reasonable, but which may or may not prove to be accurate. Our
determination of the allowance for loan losses is based on evaluations of the
collectibility of loans, including consideration of factors such as the balance of
impaired loans, the quality, mix, and size of our overall loan portfolio, economic
conditions that may affect the borrowers ability to repay, the amount and quality of
collateral securing the loans, our historical loan loss experience, and a review of
specific problem loans. We also consider subjective issues such as changes in the lending
policies and procedures, changes in the local/national economy, changes in volume or type
of credits, changes in volume/severity of problem loans, quality of loan review and board
of director oversight, concentrations of credit, and peer group comparisons. Due to our
limited operating history, to date the provision for loan losses has been made primarily
as a result of our assessment of general loan loss risk compared to banks of similar size
and maturity. Due to our short operating history, the loans in our loan portfolio and our
lending relationships are of very recent origin. In general, loans do not begin to show
signs of credit deterioration or default until they have been outstanding for some period
of time, a process known as seasoning. As a result, a portfolio of older loans will
usually behave more predictably than a newer portfolio. Because our loan portfolio is new,
the current level of delinquencies and defaults may not be representative of the level
that will prevail when the portfolio becomes more seasoned, which may be higher than
current levels. In addition, the recent downturn in the real estate market has resulted in
an increase loan delinquencies, defaults and foreclosures, and we believe these trends are
likely to continue. In some cases, this downturn has resulted in a significant impairment
to the value of our collateral and our ability to sell the collateral upon foreclosure,
and there is a risk that this trend will continue. The real estate collateral in each case
provides an alternate sources of repayment in the event of default by the borrower and may
deteriorate in value during the time the credit is extended. If real estate values
continue to decline, delinquencies and defaults will likely increase, and it is more
likely that we would be required to increase our allowance for loan losses. Periodically,
we will adjust the amount of the allowance based on changing circumstances. We will charge
recognized losses to the allowance and add subsequent recoveries back to the allowance for
loan losses. There can be no assurance that charge-offs of loans in future periods will
not exceed the allowance for loan losses as estimated at any point in time or that
provisions for loan losses will not be significant to a particular accounting period.

# Noninterest Income

Total noninterest income for the six
months ended June 30, 2008 and 2007 was $118,510 and $183,571, respectively. Decreased
mortgage loan sale volume caused mortgage origination fee income to decrease $95,660 to
$25,524 for the six months ended June 30, 2008 as compared to $121,184 for the six months
ended June 30, 2007. This decrease was partially offset by an increased number of deposit
accounts producing service charges, which totaled $43,118 for the six months ended June
30, 2008 as compared to $27,568 for the six months ended June 30, 2007.

Total noninterest income for the
three months ended June 30, 2008 and 2007 was $52,283 and $98,152, respectively. Decreased
mortgage loan sale volume caused mortgage origination fee income to decrease $58,505 to
$3,385 for the three months ended June 30, 2008 as compared to $61,890 for the three
months ended June 30, 2007. Again, service charges on deposit accounts totaled $22,031 for
the three months ended June 30, 2008 as compared to $14,810 for the three months ended
June 30, 2007. This increase was due primarily to growth in the number of deposit
accounts.

# Noninterest Expense

Total noninterest expense for the six
months ended June 30, 2008 and 2007 was $1,583,644 and $1,555,736, respectively. The
primary component of noninterest expense was salaries and benefits, which were $838,104
and $812,459 for the six months ended June 30, 2008 and 2007, respectively, with this
increase resulting from our continued growth. In addition, net occupancy expense increased
$44,156 to $136,219 for the six months ended June 30, 2008, as compared to the six months
ended June 30, 2007. This increase resulted from the consolidation and relocation of our
original main branch and the operations center to a renovated facility in the same
commercial subdivision on July 21, 2008. Rent expense for the new facility began in March
2008 when the leasehold improvements began to upfit the existing building for the
consolidation. Marketing expense decreased $64,210 to $77,377 for the six months ended
June 30, 2008, as compared to the six months ended June 30, 2007. In early 2008,
management shifted marketing responsibilities from an outside advertising agency to an
in-house position, resulting in a reduction in marketing expenses compared to the prior
year.

Total noninterest expense for the
three months ended June 30, 2008 and 2007 was $808,652 and $799,818, respectively. The
primary component of noninterest expense was salaries and benefits, which were $419,406
and $413,043 for the three months ended June 30, 2008 and 2007, respectively. Net
occupancy expenses increased $34,768 to $77,096 for the three months ended June 30, 2008
and 2007, respectively and were attributable to increased rent expense.

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# ATLANTIC BANCSHARES,
INC.

# Net Loss

The combination of the above factors
resulted in a net loss for the six months ended June 30, 2008 of $297,812, or $.24 per
share, after the recognition of an income tax benefit of $153,420 for the period. For the
period ended June 30, 2007, the net loss was $307,582, or $0.25 per share, after the
recognition of an income tax benefit of $126,312 for the period.

Net loss for the three months ended
June 30, 2008 was $145,137, or $.12 per share, after recognition of an income tax benefit
of $74,769 for the quarter. Net loss for the three months ended June 30, 2007 was
$137,245, or $.11 per share, after recognition of an income tax benefit of $70,710 for the
quarter.

# Assets and Liabilities

During the first six months of 2008,
total assets increased $9,630,579, or 11.65%, to $92,263,319 at June 30, 2008 when
compared to December 31, 2007. Loans receivable increased $4,661,334 to $70,425,793 as of
June 30, 2008 when compared to December 31, 2007. Securities available for sale increased
$4,047,433 to $17,646,549 when compared to December 31, 2007. In March 2008, we entered
into an arbitrage agreement where a $5,000,000 Federal Home Loan Bank advance was obtained
to purchase the same amount of securities available for sale. A $3,000,000 brokered
deposit matured in the quarter ended June 30, 2008 and was repaid with Federal Home Loan
Bank advances. Loan growth was funded from deposit growth of $1,245,325 and additional
borrowings.

# Loans

We experienced moderate loan growth
during the first six months of 2008. Net loans increased by $4,298,119 to $69,384,728
during the period. As shown below, the largest category of loans was real estate mortgage
loans which increased $2,883,214 to $45,573,456 from December 31, 2007 to June 30, 2008.
Balances within the major loans receivable categories as of June 30, 2008 and December 31,
2007 are as follows:

|                                        | June 30, 2008 | December 31, 2007
|--------------------------------------- | ------------- | -----------------
|
|Real estate:                            |               |                  
|Mortgage                                |               |                  
|Construction, land and land development |               |                  
|                                        |               |                  
|Total real estate loans                 |               |                  
|                                        |               |                  
|Commercial and industrial               |               |                  
|Consumer and other                      |               |                  
|Deferred origination fees, net          |               |                  
|                                        |               |                  
|Gross loans                             |               |                  
|Less allowance for loan losses          |               |                  
|                                        |               |                  
|Loans, net                              |               |                  
|                                        |               |                  

# Risk Elements in the
Loan Portfolio

Criticized loans are loans that have
potential weaknesses that deserve close attention and which could, if uncorrected, result
in deterioration of the prospects for repayment or our credit position at a future date.
Classified loans are loans that are inadequately protected by the sound worth and paying
capacity of the borrower or any collateral and as to which there is a distinct possibility
or probability that we will sustain a loss if the deficiencies are not corrected. At June
30, 2008, we had five loans that were impaired totaling $1,238,473.Four of these
loans totaling $1,227,547 are secured by real estate and one loan totaling $10,926 is
secured by an automobile. Included in the allowance for loan losses at June 30, 2008 was
$477,543 related to impaired loans.

Nonaccrual loans totaled $1,035,644
at June 30, 2008. There was one nonaccrual loan totaling $181,670 at June 30, 2007. As of
June 30, 2008 and 2007, we had no loans 90 days or more past due and still accruing
interest.

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# ATLANTIC BANCSHARES,
INC.

The following table depicts the
activity in the allowance for loan losses for the periods ended June 30, 2008 and 2007:

|                                                    | June 30,
|--------------------------------------------------- | --------
|
|Balance, January 1,                                 |         
|Provision for loan losses for the period            |         
|Net loans (charged-off) recovered during the period |         
|                                                    |         
|Balance, end of period                              |         
|                                                    |         
|Gross loans outstanding, end of period              |         
|                                                    |         
|Allowance for loan losses to loans outstanding      |         
|                                                    |         

# Deposits

Total deposits were $64,714,427 at
June 30, 2008, as compared to $63,469,102 at December 31, 2007. The largest category of
deposits was other time deposits which totaled $24,091,428 at June 30, 2008, as compared
to $27,311,987 at December 31, 2007. Brokered certificates of deposits represent
$15,396,000 of these other time deposits. Savings and money market accounts totaled
$17,200,939 at June 30, 2008, as compared to $17,712,595 at December 31, 2007. Time
deposits $100,000 and over accounts increased $4,925,725 to $14,882,107 at June 30, 2008.
Existing competition and new entrants to our market have created increased competition for
local core deposits which has slowed our total deposit growth rate.

Balances within the major deposit
categories as of June 30, 2008 and December 31, 2007 are as follows:

|                                          | June 30, 2008 | December 31, 2007
|----------------------------------------- | ------------- | -----------------
|Non-interest bearing transaction accounts |               |                  
|Interest-bearing transaction accounts     |               |                  
|Savings and money market                  |               |                  
|Time deposit $100,000 and over            |               |                  
|Other time deposits                       |               |                  
|                                          |               |                  
|Total deposits                            |               |                  
|                                          |               |                  

# Other Borrowings

Other borrowings are comprised of Federal
Home Loan Bank of Atlanta (FHLBA) advances. FHLBA advances are collateralized
by pledged FHLBA stock, certain commercial and residential loans and by a portion of our
investment portfolio. FHLBA advances increased $10,000,000 to $15,000,000 at June 30,
2008, as compared to December 31, 2007. During the quarter ended March 31, 2008, we
entered into an arbitrage agreement where a $5,000,000 FHLBA advance was obtained to
purchase the same amount of securities available for sale. During the quarter ended June
30, 2008, we replaced a $3,000,000 brokered certificate of deposit with $3,000,000 in
FHLBA advances.

FHLB advances as of June 30, 2008 and
December 31, 2007 are as follows:

| |                        | June 30, 2008 | December 31, 2007
| | ---------------------- | ------------- | -----------------
|
| | Daily                  |               |                  
| | 11/30/2009             |               |                  
| | 03/12/2010             |               |                  
| | 05/28/2010             |               |                  
| | 05/31/2011             |               |                  
| | 11/29/2017             |               |                  
| |                        |               |                  
| | Total other borrowings |               |                  
| |                        |               |                  

-14-

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# ATLANTIC BANCSHARES,
INC.

# Liquidity

Liquidity represents the ability of a company
to convert assets into cash or cash equivalents without significant loss, and the ability
to raise additional funds by increasing liabilities. Liquidity management involves
monitoring our sources and uses of funds in order to meet our day-to-day cash flow
requirements while maximizing profits. Liquidity management is made more complicated
because different balance sheet components are subject to varying degrees of management
control. For example, the timing of maturities of our investment portfolio is fairly
predictable and subject to a high degree of control at the time investment decisions are
made. However, net deposit inflows and outflows are far less predictable and are not
subject to the same degree of control.

Our primary sources of liquidity are
deposits, scheduled repayments on our loans, and interest on and maturities of our
investments. We plan to meet our future cash needs through the liquidation of temporary
investments and the generation of deposits. Occasionally, we might sell investment
securities in connection with the management of our interest sensitivity gap or to manage
cash availability. We may also utilize our cash and due from banks, security repurchase
agreements, federal funds sold, and other borrowings to meet liquidity requirements as
needed. In addition, we have the ability, on a short-term basis, to purchase federal funds
from other financial institutions. As of June 30, 2008, we had lines of credit to purchase
federal funds from unrelated banks totaling $7,400,000, consisting of a $2,800,000 line
secured by investment securities, and $4,600,000 of unsecured lines. As of June 30, 2008,
$2,539,600 was outstanding on the secured line of credit and $4,860,400 remained unused on
lines of credit. The lenders have reserved the right to withdraw the unsecured lines at
their option. These lines of credit are available on various structures for general
corporate purposes.

# Capital Resources

Total shareholders equity
decreased $421,795 during the first six months of 2008 to $9,560,463. The decrease is
primarily attributable to the net loss for the period of $297,812, in addition to $179,483
related to unrealized losses on securities offset by $55,500 for stock-based compensation
expense.

The Federal Reserve and bank
regulatory agencies require bank holding companies and financial institutions to maintain
capital at adequate levels based on a percentage of assets and off-balance sheet
exposures, adjusted for risk weights ranging from 0% to 100%. The Federal Reserve
guidelines contain an exemption from the capital requirements for small bank holding
companies, which in 2006 were amended to cover most bank holding companies with less
than $500 million in total assets that do not have a material amount of debt or equity
securities outstanding registered with the SEC. Although our class of common stock is
registered under Section 12 of the Securities Exchange Act, we believe that because our
stock is not listed on any exchange or otherwise actively traded, the Federal Reserve
Board will interpret its new guidelines to mean that we qualify as a small bank holding
company. Nevertheless, our bank remains subject to these capital requirements. Failure to
meet minimum capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct material
effect on the banks financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the bank must meet specific capital
guidelines that involve quantitative measures of the banks assets, liabilities and
certain off-balance sheet items as calculated under regulatory accounting practices. The
banks capital amounts and classifications are also subject to qualitative judgments
by the regulators about components, risk weightings, and other factors. Regardless, our
bank is well capitalized under these minimum capital requirements as set per
bank regulatory agencies.

Under the capital adequacy
guidelines, regulatory capital is classified into two tiers. These guidelines require an
institution to maintain a certain level of Tier 1 and Tier 2 capital to risk-weighted
assets. Tier 1 capital consists of common shareholders equity, excluding the
unrealized gain or loss on securities available for sale, minus certain intangible assets.
In determining the amount of risk-weighted assets, all assets, including certain
off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100% based on
the risks believed to be inherent in the type of asset. Tier 2 capital consists of Tier 1
capital plus the general reserve for loan losses, subject to certain limitations. We are
also required to maintain capital at a minimum level based on total average assets, which
is known as the Tier 1 leverage ratio. To be considered adequately capitalized
under these capital guidelines, we must maintain a minimum total risk-based capital of 8%,
with at least 4% being Tier 1 capital. In addition, we must maintain a minimum Tier 1
leverage ratio of at least 4%. To be considered well-capitalized, we must
maintain total risk-based capital of at least 10%, Tier 1 capital of at least 6%, and a
leverage ratio of at least 5%.

The bank is also required to maintain
capital at a minimum level based on quarterly average assets, which is known as the
leverage ratio. Only the strongest banks are allowed to maintain capital at the minimum
requirement of 3%. All others are

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# ATLANTIC BANCSHARES,
INC.

subject to maintaining ratios 1% to
2% above the minimum. The bank exceeded its minimum regulatory capital ratios as of June
30, 2008, as well as the ratios to be considered well capitalized.

The following table summarizes the
banks risk-based capital at June 30, 2008:

|                                                         | 
|-------------------------------------------------------- | 
|Shareholders' equity                                     | 
|Add-unrealized net loss on available-for-sale securities | 
|Less-disallowed deferred tax assets                      | 
|                                                         | 
|Tier 1 capital                                           | 
|                                                         | 
|Plus - allowance for loan losses(1)                      | 
|                                                         | 
|Total capital                                            | 
|                                                         | 
|Risk-weighted assets                                     | 
|                                                         | 
|Risk-based capital ratios:                               | 
|Tier 1 capital (to risk-weighted assets)                 | 
|Total capital (to risk-weighted assets)                  | 
|Tier 1 capital (to total average assets)                 | 

__________________________    (1)Limited to 1.25% of risk-weighted assets

# Off-Balance Sheet Risk

Through the operations of our bank,
we make contractual commitments to extend credit in the ordinary course of our business
activities. These commitments are legally binding agreements to lend money to our
customers at predetermined interest rates for a specified period of time. At June 30,
2008, we had issued commitments to extend credit of $10,855,988 through various types of
lending arrangements. We had $263,840 of unused credit under pre-arranged overdraft plans
and overdraft protection plans offered on deposit accounts. There were also $236,073
outstanding commercial letters of credit at June 30, 2008.

The following table sets forth the
length of time until maturity for unused commitments to extend credit and standby letters
of credit at June 30, 2008.

|                                     | Within | After Three | One | Greater | 
|------------------------------------ | ------ | ----------- | --- | ------- | 
|
|
|Unused commitments to extend credit  |        |             | $   | 721,799 | 
|                                     |        |             |     |         | 
|Standby commercial letters of credit |        |             |     | 25,000  | 
|                                     |        |            
|Totals                               |        |             | $   | 746,799 | 
|                                     |        |            

Based on historical experience, many
of the commitments and letters of credit will expire unfunded. Accordingly, the amounts
shown in the table above do not necessarily reflect our need for funds in the periods
shown.

We evaluate each customers
credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by us upon extension of credit, is based on our credit evaluation of the
borrower. Collateral varies but may include accounts receivable, inventory, property,
plant and equipment, commercial and residential real estate.

# Critical Accounting
Policies

We have adopted various accounting
policies which govern the application of accounting principles generally accepted in the
United States in the preparation of our financial statements. Our significant accounting
policies are described in the notes to the financial statements at December 31, 2007, as
filed on our annual report on Form 10-KSB. Certain accounting policies

-16-

---

# ATLANTIC BANCSHARES,
INC.

involve significant judgments and
assumptions by us which have a material impact on the carrying value of certain assets and
liabilities. We consider these accounting policies to be critical accounting policies. The
judgments and assumptions we use are based on historical experience and other factors,
which we believe to be reasonable under the circumstances. Because of the nature of the
judgments and assumptions we make, actual results could differ from these judgments and
estimates which could have a material impact on our carrying values of assets and
liabilities and our results of operations.

We believe the allowance for loan
losses is a critical accounting policy that requires the most significant judgments and
estimates used in preparation of our financial statements. Refer to the portions of the
discussion in this report on Form 10-Q and in our Form 10-KSB that address our allowance
for loan losses for a description of our processes and methodology for determining our
allowance for loan losses.

# Item 3.   Quantitative and
Qualitative Disclosures About Market Risk.

Not applicable.

# Item 4.   Controls and
Procedures

As of the end of the period covered
by this report, we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures as defined in
Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that our current disclosure controls and procedures
are effective as of June 30, 2008. There have been no significant changes in our internal
controls over financial reporting during the fiscal quarter ended June 30, 2008 that have
materially affected, or are reasonably likely to materially affect, our internal controls
over financial reporting.

The design of any system of controls
and procedures is based in part upon certain assumptions about the likelihood of future
events. There can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions, regardless of how remote.

-17-

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# ATLANTIC BANCSHARES,
INC.

# PART II  OTHER
INFORMATION

# Item 1.   Legal Proceedings

There are no pending legal
proceedings to which we are a party or of which any of our property is the subject.

# Item 2.   Unregistered
Sales of Equity Securities and Use of Proceeds

Not applicable

# Item 3.   Default Upon Senior
Securities

Not applicable

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

There were two matters submitted to a
vote of security holders during the quarter ended June 30, 2008 at our annual meeting of
shareholders held on May 9, 2008. The matters were the election of the board of directors
for a one year term and to ratify the appointment of Elliott Davis, LLC as our independent
registered public accounting firm for fiscal year 2008. The following describes the
matters voted upon at the annual meeting and sets forth the number of votes cast for and
those withheld or abstained (there were no broker non-votes).

Proposal #1  Election of the
Board of Directors to serve for a one-year term

Our directors are elected for
one-year terms at each annual meeting. The current directors are listed below. Each
director was nominated for election and stood for election at the annual meeting on May 9,
2008 for a one-year term. Votes for the election of the directors were as follows:

|                              | Voting Shares in | 
|----------------------------- | ---------------- | 
|
|
|Gary C. Davis                 |                  | 
|Frederick Anthony Nimmer, III |                  | 
|Robyn Josselson Shirley       |                  | 
|Mark S. Simpson               |                  | 
|Brian J. Smith                |                  | 
|Robert P. Trask               |                  | 
|Allen B. Ward                 |                  | 
|Edgar L. Woods                |                  | 
|Gary C. Davis                 |                  | 

Proposal #2  Ratify the
appointment of Elliott Davis, LLC as our independent registered public accounting firm for
fiscal year 2008

The vote of the shareholders to
ratify the appointment of Elliott Davis as out independent registered public accounting
firm for fiscal year 2008 was 815,267 shares voted in favor, 16,189 shares voted against,
and 600 shares abstained.

# Item 5.   Other Information

Not applicable

# Item 6.   Exhibits

31.1         Rule 15d-14(a) Certification of the Chief Executive Officer.

31.2         Rule 15d-14(a) Certification of the Chief Financial Officer.

32           
Section 1350 Certifications.

-18-

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# ATLANTIC BANCSHARES,
INC.

# SIGNATURES

In accordance with the requirements
of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

|Date:  August 11, 2008 |  | By:   /s/  Robert P. Trask           
|---------------------- |  | -------------------------------------
|                       |  | Robert P. Trask                      
|                       |  | President and Chief Executive Officer

|Date:  August 11, 2008 |  | By:   /s/  Michelle M. Pennell
|---------------------- |  | ------------------------------
|                       |  | Michelle M. Pennell           
|                       |  | Principal Financial Officer   

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# ATLANTIC BANCSHARES,
INC.

# EXHIBIT INDEX

ExhibitNumber
              Description

31.1         Rule 15d-14(a) Certification of the Chief Executive Officer.

31.2         Rule 15d-14(a) Certification of the Chief Financial Officer.

32           
Section 1350 Certifications.

-20-