SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                       OR

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

                         Commission File Number 0-25505

                            ATLANTIC BANCGROUP, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


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

        1315 South Third Street, Jacksonville Beach, Florida       32250
        ----------------------------------------------------       -----
               (Address of principal executive offices)          (Zip Code)

    Registrant's telephone number, including area code: (904) 247-9494
                                                        --------------

    Securities registered pursuant to Section 12(b) of the Act: None
    Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $0.01 per share
              Warrants to Purchase Common Stock at $10.00 per share
                                (Title of Class)

Check  whether  the issuer  has (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such  shorter  period  that the issuer was  required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. YES X NO

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best of  issuer's  knowledge,  in  definitive  proxy or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

The issuer's revenues for its most recent fiscal year were $6,908,000.

The  aggregate  market  value  of  the  common  stock  of  the  issuer  held  by
non-affiliates  of the  issuer  (365,680  shares)  at  February  28,  2002,  was
approximately  $4.6 million  based on the initial bid quoted price of $12.60 per
share as quoted on the "Over the Counter  Bulletin  Board." For the  purposes of
this response,  directors,  executive officers, and holders of 5% or more of the
issuer's common stock (which includes  presently  exercisable  warrants totaling
100,760 are considered the affiliates of the issuer at that date.

As of February 28, 2002, there were issued and outstanding 632,500 shares of the
issuer's common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy  Statement for the Annual  Meeting of  Shareholders  to be
held on April 25, 2002, filed as Exhibit 99.1 herein, are incorporated into Part
III, Items 9 through 13 of this Annual Report on Form 10-KSB.

<PAGE>

                    ATLANTIC BANCGROUP, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

                                                                            Page

PART I.........................................................................1

Item 1.       Description of Business..........................................1
              General..........................................................1
              Lending Activities...............................................3
              Deposit Activities...............................................4
              Investments......................................................4
              Correspondent Banking............................................5
              Interest and Usury...............................................5
              Supervision and Regulation.......................................5
              Primary Service Area............................................11
              Competition.....................................................12
              Common Stock....................................................13
              Warrants........................................................13
              Preferred Stock.................................................13
              Indemnification of Directors and Officers.......................13
              Employees.......................................................14

Item 2.       Description of Properties.......................................15

Item 3.       Legal Proceedings...............................................15

Item 4.       Submission of Matters to a Vote of Security Holders.............15

PART II.......................................................................16

Item 5.       Market Price for the Registrant's Common Equity and
                  Related Stockholder Matters.................................16
              Dividends.......................................................16

Item 6.       Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.........................16
              Selected Financial Data.........................................17
              General.........................................................18
              Forward-Looking Statements......................................18
              Results of Operations...........................................19
              Net Income......................................................19
              Comparison of Years Ended December 31, 2001 and 2000............22
              Net Interest Income.............................................22
              Provision for Credit Losses.....................................23


<PAGE>




                                                                            Page

           Other Income.......................................................23
           Other Expenses.....................................................23
           Loans Receivable...................................................23
           Classification of Assets...........................................25
           Allowance for Credit Losses........................................26
           Securities.........................................................27
           Deposits...........................................................30
           Liquidity and Capital Resources....................................32
           Interest Rate Sensitivity..........................................35
           Other Borrowings...................................................36
           Future Accounting Requirements.....................................37
           Impact of Inflation................................................37

Item 7.    Financial Statements...............................................38

Item 8.    Changes in and Disagreements with Accountants
                   on Accounting and Financial Disclosure.....................60

PART III   ...................................................................60

Item 9.    Directors, Executive Officers, Promoters and Control Persons;
                   Compliance with Section 16(a) of the Exchange Act..........60

Item 10.   Executive Compensation.............................................60

Item 11.   Security Ownership of Certain Beneficial Owners and Management.....60

Item 12.   Certain Relationships and Related Transactions.....................60

Item 13.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K...61

SIGNATURES....................................................................63

EXHIBIT INDEX.................................................................64


<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

General

Atlantic BancGroup, Inc. On October 23, 1998, Atlantic BancGroup, Inc.
("Atlantic") was incorporated in the State of Florida. On April 3, 1999, the
shareholders of Oceanside Bank ("Oceanside") approved the Agreement and Plan of
Reorganization ("Reorganization") whereby Oceanside became a wholly-owned
subsidiary of Atlantic. The Reorganization was completed on May 5, 1999.
Atlantic is a registered bank holding company under the Bank Holding Company Act
of 1956, as amended (the "BHC Act"), and now owns all of the voting shares of
Oceanside.

Atlantic presently has no significant operations other than Oceanside, our
wholly-owned subsidiary. Oceanside is a state-chartered bank and is Atlantic's
primary source of income. Atlantic does not have trust powers and, accordingly,
no trust services are provided.

As is the case with banking institutions generally, our operations are
materially and significantly influenced by general economic conditions and by
related monetary and fiscal policies of financial institution regulatory
agencies, including the Federal Reserve and the State of Florida Department of
Banking and Finance. Deposit flows and costs of funds are influenced by interest
rates on competing investments and general market rates of interest. Lending
activities are affected by the demand for financing of real estate and other
types of loans, which in turn is affected by the interest rates at which such
financing may be offered and other factors affecting local demand and
availability of funds. We face strong competition in attracting deposits (our
primary source for funding loans) and in originating loans.

Our corporate headquarters is located at 1315 South Third Street, Jacksonville
Beach, Florida. Atlantic and Oceanside are referred to hereinafter as Atlantic.

Oceanside Mortgage. On July 20, 1999, Oceanside Mortgage Group, Inc. ("Oceanside
Mortgage") was incorporated as a wholly-owned subsidiary of Atlantic for the
purpose of conducting mortgage banking operations. On May 25, 2000, the board of
directors voted to merge the mortgage banking operations of Oceanside Mortgage
into Oceanside. This transaction was approved by the federal and state
regulators and was completed during the quarter ended September 30, 2000.

Oceanside Bank. Oceanside Bank, a state-chartered commercial bank opened July
21, 1997, and operates as a community bank within our primary service area in
East Duval and Northeast St. Johns Counties ("PSA"), providing general
commercial banking services to businesses and individuals. The principal
business of Oceanside is to receive demand and time deposits from the public and
to make loans and other investments. Oceanside operates from a main office
located at 1315 South Third Street, Jacksonville Beach, Florida, and a branch
office located at 560 Atlantic Boulevard, Neptune Beach, Florida. Oceanside
opened a new branch located at 13799 Beach Boulevard, Jacksonville, Florida, in
the third quarter of 2001. Oceanside draws most of our customer deposits and
conducts a significant portion of our lending transactions from and within our
PSA in the "beaches area" of Jacksonville, Florida.


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<PAGE>


We operate Oceanside as a locally-owned and operated institution that emphasizes
providing prompt, efficient, and personalized service to individuals, small and
medium-sized businesses, professionals and other local organizations. Generally,
customers have one account officer to serve all of their banking needs and have
ready access to senior management when necessary. In addition, our board of
directors is responsible for maintaining a visible profile for, and providing
business to, Oceanside within our local community.

Our principal strategy is to:

o    Expand our commercial and small business customer base within the PSA;

o    Make real estate mortgage loans within the PSA, as well as throughout Duval
     and the surrounding counties; and

o    Expand our consumer loan base within the PSA.

Our belief is that the most profitable deposit relationships are characterized
by high deposit balances, low frequency of transactions and low distribution
requirements. Being a community bank with local management, we are
well-positioned to establish these relationships with smaller commercial
customers and households.

Our source of funds for loans and other investments are demand, time, savings,
and other deposits, amortization and prepayment of loans, sales to other lenders
or institutions of loans or participations in loans, and borrowings. Our
principal sources of income are interest and fees collected on loans, and to a
lesser extent, interest and dividends collected on other investments. Our
principal expenses are interest paid on savings and other deposits, interest
paid on other borrowings, employee compensation, office expenses, and other
overhead and operational expenses. We offer several deposit accounts, including
demand deposit accounts, negotiable order of withdrawal accounts ("NOW"
accounts), money market accounts, certificates of deposit, and various
retirement accounts. In addition, we have joined an electronic banking network
so that our customers may use the automated teller machines (the "ATMs") of
other financial institutions and operates a drive-in teller service and 24-hour
depository. As part of the strategy to offer innovative services to our
customers, we now offer on-line banking ("Internet Banking") and Dial-a-Bank
("Telephone Banking").

Our efforts are focused on filling the void created by the increasing number of
locally-owned community banks that have been acquired by large regional holding
companies, negatively impacting the personal nature of the delivery, quality,
and availability of banking services available in the PSA and surrounding areas.



                                       2
<PAGE>


Lending Activities

We offer a wide range of loans to individuals and small businesses and other
organizations that are located in, or conduct a substantial portion of their
business in, our PSA. At December 31, 2001, our consolidated total loans were
$61.7 million, or 73.6%, of total Atlantic consolidated assets. The interest
rates charged on loans vary with the degree of risk, maturity, and amount of the
loan, and are further subject to competitive pressures, money market rates,
availability of funds, and government regulations. We have no foreign loans or
loans for highly leveraged transactions.

Loans are concentrated in three major areas: real estate loans, commercial
loans, and consumer and other loans. A majority of our loans are made on a
secured basis. As of December 31, 2001, approximately 62% of our total loan
portfolio consisted of loans secured by mortgages on real estate. Of the loans
secured by mortgages on real estate, approximately 40% are secured by nonfarm
nonresidential properties and 29% are secured by construction, land development,
and other land loans. The remaining 31% was secured by 1-4 and multifamily
residential properties.

Real estate loans are secured by mortgages and consist primarily of loans to
individuals and businesses for the purchase, improvement of, refinance of, or
investment in real estate and for the construction of single-family residential
units or the development of single-family residential building lots. These real
estate loans may be made at fixed or variable interest rates. We generally do
not make fixed-rate commercial real estate loans for terms exceeding two years.
Loans in excess of two years are generally adjustable rate loans. Residential
real estate loans generally are repayable in monthly installments, based on up
to a 30-year amortization schedule, with variable interest rates.

Commercial and agricultural loans include loans to individuals and
small-to-medium-sized businesses located primarily in Duval and St. Johns
Counties for working capital, equipment purchases, and various other business
purposes. A majority of commercial loans are secured by real estate, equipment,
or similar assets, but these loans may also be made on an unsecured basis.
Commercial loans may be made at variable or fixed rates of interest. Commercial
lines of credit are typically granted on a one-year basis, with loan covenants.
Other commercial loans with terms or amortization schedules of longer than one
year will normally be made at interest rates which vary with the prime lending
rate and will become payable in full in three to five years. Commercial loans
not secured by real estate amounted to approximately 28% of Atlantic's total
loan portfolio as of December 31, 2001.

Consumer loans and other loans consist primarily of loans to individuals for
various consumer purposes, but include some business purpose loans which are
payable on an installment basis. The majority of these loans are for terms of
less than five years and are secured by liens on various personal assets of the
borrowers; however, consumer loans may also be made on an unsecured basis.
Consumer loans are made at fixed and variable interest rates, and are often
based on up to a five-year amortization schedule. Consumer and other loans
represent approximately 10% of the total loan portfolio at December 31, 2001.


                                       3
<PAGE>


Loan originations are derived from a number of sources. Loan originations can be
attributed to direct solicitation by our loan officers, existing customers and
borrowers, advertising, walk-in customers and, in some instances, referrals from
brokers.

Certain credit risks are inherent in making loans. These include prepayment
risks, risks resulting from uncertainties in the future value of collateral,
risks resulting from changes in economic and industry conditions, and risks
inherent in dealing with individual borrowers. In particular, longer maturities
increase the risk that economic conditions will change and adversely affect
collectibility. We attempt to minimize credit losses through various means. In
particular, on larger loans, we generally rely on the cash flow of a debtor as
the source of repayment and secondarily on the value of the underlying
collateral. In addition, shorter loan terms are utilized in order to reduce the
risk of a decline in the value of such collateral.

Deposit Activities

Deposits are our major source of funds for loans and other investment
activities. The majority of our regular savings, demand, NOW and money market
deposit accounts are considered core deposits. These accounts comprised
approximately 58.2% of our consolidated total deposits. Approximately 41.8% of
our consolidated deposits at December 31, 2001, were certificates of deposit.
Our goal is generally to maintain the rates paid on our deposits at a
competitive level. Time deposits of $100,000 and over made up approximately
13.9% of our consolidated total deposits at December 31, 2001.

Investments

We are permitted to invest a portion of our assets in U.S. Government agency,
state, county, and municipal obligations, certificates of deposit,
collateralized mortgage obligations ("CMO's"), and federal funds sold. Our
investments are managed in relation to loan demand and deposit growth, and are
generally used to provide for the investment of excess funds at minimal risks
while providing liquidity to fund increases in loan demand or to offset
fluctuations in deposits.

Our total investment portfolio may be invested in U.S. Treasury and general
obligations of its agencies and state, county, and municipal obligations because
such securities generally represent a minimal investment risk. Occasionally, we
have purchase certificates of deposits of national and state banks. These
investments may exceed $100,000 in any one institution (the limit of FDIC
insurance for deposit accounts). CMO's are secured with Federal National
Mortgage Association ("FNMA") and General National Mortgage Association ("GNMA")
mortgage-backed securities and generally have a shorter life than the stated
maturity. Federal funds sold is the excess cash Atlantic has available over and
above daily cash needs. This money is invested on an overnight basis with
approved correspondent banks.

We monitor changes in financial markets that may affect our portfolio
investments. We also monitor our daily cash position to ensure that all
available funds earn interest at the earliest possible date.




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<PAGE>

A portion of the investment account is designated as primary reserves and
invested in liquid securities that can be readily converted to cash with minimum
risk of market loss. These investments usually consist of U.S. Treasury
obligations, U.S. government agencies, and federal funds. The remainder of the
investment account (or secondary reserves) may be placed in investment
securities of different types and longer maturities. Daily surplus funds are
sold in the federal funds market for one business day. The maturities of our
securities are staggered whenever possible so as to produce a steady cash flow
in the event we need cash, or economic conditions change to a more favorable
rate environment.

Correspondent Banking

Correspondent banking involves one bank providing services to another bank which
cannot provide that service for itself from an economic or practical standpoint.
We purchase correspondent services offered by larger banks, including check
collections, purchase of federal funds, security safekeeping, investment
services, coin and currency supplies, overline and liquidity loan participations
and sales of loans to or participation with correspondent banks. We also sell
loan participations to correspondent banks with respect to loans that would
exceed our lending limit.

Interest and Usury

Like other commercial banks, we are subject to state and federal statutes that
affect the interest rates that may be charged on loans. These laws do not, under
present market conditions, deter us from continuing the process of originating
loans.

Supervision and Regulation

Both Atlantic and Oceanside are subject to comprehensive regulation,
examination, and supervision by the Federal Reserve, the Florida Department of
Banking and Finance ("Department") and the Federal Deposit Insurance Corporation
("FDIC") and are subject to other laws and regulations applicable to bank
holding companies and banks. Such regulations include limitations on loans to
any single borrower and to our directors, officers, and employees; restrictions
on the opening and closing of branch offices; the maintenance of required
capital and liquidity ratios; the granting of credit under equal and fair
conditions; disclosure of the costs and terms of such credit; and restrictions
as to permissible investments. Both companies are examined periodically by the
Federal Reserve, or the Department and the FDIC, each of whom will submit
periodic reports regarding its financial condition and other matters. These
agencies have a broad range of powers to enforce regulations under their
respective jurisdictions, and to take discretionary actions determined to be for
the protection of the safety and soundness of Atlantic and Oceanside, including
the issuance of cease and desist orders and the removal of directors and
officers.

Bank Holding Company Regulation. Atlantic is a bank holding company, registered
with the Federal Reserve under the BHC Act. As such, Atlantic is subject to the
supervision, examination and reporting requirements of the BHC Act and the
regulations of the Federal Reserve. The





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<PAGE>

BHC Act requires that a bank holding company obtain the prior approval of the
Federal Reserve before (i) acquiring direct or indirect ownership or control of
more than 5% of the voting shares of any bank, (ii) taking any action that
causes a bank to become a subsidiary of the bank holding company, or (iii)
merging or consolidating with any other bank holding company.

The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience, and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy and consideration of convenience and needs issues includes the parties'
performance under the CRA.

Except as authorized by the Gramm-Leach-Bliley Act of 1999, the BHC Act
generally prohibits a bank holding company from engaging in activities other
than banking, or managing or controlling banks or other permissible
subsidiaries, and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In determining whether a particular
activity is permissible, the Federal Reserve must consider whether the
performance of such an activity can reasonably be expected to produce benefits
to the public, such as greater convenience, increased competition, or gains in
efficiency that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices. For example, factoring accounts receivable, acquiring or
servicing loans, leasing personal property, conducting securities brokerage
activities, performing certain data processing services, acting as agent or
broker in selling credit life insurance and certain other types of insurance in
connection with credit transactions, and certain insurance underwriting
activities have all been determined by regulations of the Federal Reserve to be
permissible activities of bank holding companies. Despite prior approval, the
Federal Reserve has the power to order a holding company or its subsidiaries to
terminate any activity or terminate its ownership or control of any subsidiary,
when it has reasonable cause to believe that continuation of such activity or
such ownership or control constitutes a serious risk to the financial safety,
soundness, or stability of any bank subsidiary of that bank holding company.

Gramm-Leach-Bliley Act. Enacted in 1999, the Gramm-Leach-Bliley Act reforms and
modernizes certain areas of financial services regulation. The law permits the
creation of financial services holding companies that can offer a full range of
financial products under a regulatory structure based on the principle of
functional regulation. The legislation eliminates the legal barriers to
affiliations among banks and securities firms, insurance companies, and other
financial services companies. The law also provides financial organizations with
the opportunity to structure these new financial affiliations through a holding
company structure or a




                                       6
<PAGE>

financial subsidiary. The law reserves the role of the Federal Reserve Board as
the supervisor for bank holding companies. At the same time, the law also
provides a system of functional regulation which is designed to utilize the
various existing federal and state regulatory bodies. The law also sets up a
process for coordination between the Federal Reserve Board and the Secretary of
the Treasury regarding the approval of new financial activities for both bank
holding companies and national bank financial subsidiaries.

The law also includes a minimum federal standard of financial privacy. Financial
institutions are required to have written privacy policies that must be
disclosed to customers. The disclosure of a financial institution's privacy
policy must take place at the time a customer relationship is established and
not less than annually during the continuation of the relationship. The act also
provides for the functional regulation of bank securities activities. The law
repeals the exemption that banks were afforded from the definition of "broker,"
and replaces it with a set of limited exemptions that allow the continuation of
some historical activities performed by banks. In addition, the act amends the
securities laws to include banks within the general definition of dealer.
Regarding new bank products, the law provides a procedure for handling products
sold by banks that have securities elements. In the area of CRA activities, the
law generally requires that financial institutions address the credit needs of
low-to-moderate income individuals and neighborhoods in the communities in which
they operate. Bank regulators are required to take the CRA ratings of a bank or
of the bank subsidiaries of a holding company into account when acting upon
certain branch and bank merger and acquisition applications filed by the
institution. Under the law, financial holding companies and banks that desire to
engage in new financial activities are required to have satisfactory or better
CRA ratings when they commence the new activity.

FDIC Regulations. Our deposit accounts are insured by the Bank Insurance Fund
("BIF") of the FDIC up to a maximum of $100,000 per insured depositor. The FDIC
issues regulations, conducts periodic examinations, requires the filing of
reports, and generally supervises the operations of its insured banks. The
approval of the FDIC is required prior to a merger or consolidation or the
establishment or relocation of an office facility. This supervision and
regulation is intended primarily for protection of depositors and not
stockholders.

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%. Under the risk-based standard, capital is classified
into two tiers. Tier 1 capital consists of common shareholders' equity,
excluding the unrealized gain (loss) on available-for-sale securities, minus
certain intangible assets. Tier 2 capital consists of the general allowance for
credit losses except for certain limitations. An institution's qualifying
capital base for purposes of its risk-based capital ratio consists of the sum of
its Tier 1 and Tier 2 capital. The regulatory minimum requirements are 4% for
Tier 1 and 8% for total risk-based capital. At December 31, 2001, Oceanside's
Tier 1 and total risk-based capital ratios were 9.75% and 10.83%, respectively.

Bank holding companies and banks are also required to maintain capital at a
minimum level based on total assets, which is known as the leverage ratio. The
minimum requirement for the leverage ratio is 3%, but all but the highest rated
institutions are required to maintain ratios 100




                                       7
<PAGE>

to 200 basis points above the minimum. At December 31, 2001, our leverage ratio
was 8.67%. The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") contains "prompt corrective action" provisions pursuant to which
banks are to be classified into one of five categories based upon capital
adequacy, ranging from "well capitalized" to "critically undercapitalized" and
which require (subject to certain exceptions) the appropriate federal banking
agency to take prompt corrective action with respect to an institution which
becomes "significantly undercapitalized" or "critically undercapitalized."

The FDIC has issued regulations to implement the "prompt corrective action"
provisions of FDICIA. In general, the regulations define the five capital
categories as follows:

o    an institution is "well capitalized" if it has a total risk-based capital
     ratio of 10% or greater, has a Tier 1 risk-based capital ratio of 6% or
     greater, has a leverage ratio of 5% or greater and is not subject to any
     written capital order or directive to meet and maintain a specific capital
     level for any capital measures;

o    an institution is "adequately capitalized" if it has a total risk-based
     capital ratio of 8% or greater, has a Tier 1 risk-based capital ratio of 4%
     or greater, and has a leverage ratio of 4% or greater;

o    an institution is "undercapitalized" if it has a total risk-based capital
     ratio of less than 8%, has a Tier 1 risk-based capital ratio that is less
     than 4% or has a leverage ratio that is less than 4%;

o    an institution is "significantly undercapitalized" if it has a total
     risk-based capital ratio that is less than 6%, a Tier 1 risk-based capital
     ratio that is less than 3% or a leverage ratio that is less than 3%; and

o    an institution is "critically undercapitalized" if its "tangible equity" is
     equal to or less than 2% of its total assets.

The FDIC also, after an opportunity for a hearing, has authority to downgrade an
institution from "well capitalized" to "adequately capitalized" or to subject an
"adequately capitalized" or "undercapitalized" institution to the supervisory
actions applicable to the next lower category, for supervisory concerns.

The "prompt corrective action" provisions of FDICIA also provide that in general
no institution may make a capital distribution if it would cause the institution
to become "undercapitalized." Capital distributions include cash (but not stock)
dividends, stock purchases, redemptions, and other distributions of capital to
the owners of an institution.

FDICIA also contains a number of consumer banking provisions, including
disclosure requirements and substantive contractual limitations with respect to
deposit accounts.

As of December 31, 2001, Oceanside met the capital requirements of a "well
capitalized" institution.


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<PAGE>


Maximum Legal Interest Rates. Like the laws of many states, Florida law contains
provisions on interest rates that may be charged by banks and other lenders on
certain types of loans. Numerous exceptions exist to the general interest
limitations imposed by Florida law. The relative importance of these interest
limitation laws to the financial operations of Oceanside will vary from time to
time, depending on a number of factors, including conditions in the money
markets, the costs and availability of funds, and prevailing interest rates.

Bank Branching. Banks in Florida are permitted to branch state wide. Such branch
banking, however, is subject to prior approval by the Department and the FDIC.
Any such approval would take into consideration several factors, including the
bank's level of capital, the prospects and economics of the proposed branch
office, and other conditions deemed relevant by the Department and the FDIC for
purposes of determining whether approval should be granted to open a branch
office.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1996,
provides for nationwide interstate banking and branching. Under the law,
interstate acquisitions of banks or bank holding companies in any state by bank
holding companies in any other state is permissible. Interstate branching and
consolidation of existing bank subsidiaries in different states is permissible.
Florida has a law that allows out-of-state bank holding companies (located in
states that allow Florida bank holding companies to acquire banks and bank
holding companies in that state) to acquire Florida banks and Florida bank
holding companies. The law essentially provides for out-of-state entry by
acquisition only (and not by interstate branching) and requires the acquired
Florida bank to have been in existence for at least three years.

Dividend Restrictions. In addition to dividend restrictions placed on Oceanside
by the FDIC based on Oceanside's minimum capital requirements, the Florida
Financial Institutions Code prohibits the declaration of dividends in certain
circumstances. Section 658.37, Florida Statutes, prohibits the declaration of
any dividend until a bank has charged off bad debts, depreciation, and other
worthless assets, and has made provision for reasonably-anticipated future
losses on loans and other assets. Such dividend is limited to the aggregate of
the net profits of the dividend period combined with a bank's retained net
profits of the preceding two years. A bank may declare a dividend from retained
net profits accruing prior to the preceding two years with the approval of the
Department. However, a bank will be required, prior to the declaration of a
dividend on its common stock, to carry 20% of its net profits for such preceding
period as is covered by the dividend to its surplus fund, until the surplus fund
equals at least the amount of the bank's common and preferred stock then issued
and outstanding. In no event may a bank declare a dividend at any time in which
its net income from the current year, combined with the retained net income from
the preceding two years is a loss or which would cause the capital accounts of
the bank to fall below the minimum amount required by law, regulation, order, or
any written agreement with the Department or the FDIC. We currently do not
intend to pay a dividend. Instead, we are using our earnings to support our
growth.

Change of Control. Federal law restricts the amount of voting stock of a bank
holding company and a bank that a person may acquire without the prior approval
of banking regulators. The overall effect of such laws is to make it more
difficult to acquire a bank holding company and a


                                       9
<PAGE>

bank by tender offer or similar means than it might be to acquire control of
another type of corporation. Consequently, shareholders of Atlantic may be less
likely to benefit from the rapid increases in stock prices that may result from
tender offers or similar efforts to acquire control of other companies. Federal
law also imposes restrictions on acquisitions of stock in a bank holding company
and a state bank. Under the federal Change in Bank Control Act and the
regulations thereunder, a person or group must give advance notice to the
Federal Reserve before acquiring control of any bank holding company and the
FDIC before acquiring control of any state bank (such as Oceanside). Upon
receipt of such notice, the FDIC may approve or disapprove the acquisition. The
Change in Bank Control Act creates a rebuttable presumption of control if a
member or group acquires a certain percentage or more of a bank holding
company's or state bank's voting stock, or if one or more other control factors
set forth in the Act are present.

Enforcement Powers. Congress has provided the federal bank regulatory agencies
with an array of powers to enforce laws, rules, regulations and orders. Among
other things, the agencies may require that institutions cease and desist from
certain activities, may preclude persons from participating in the affairs of
insured depository institutions, may suspend or remove deposit insurance, and
may impose civil money penalties against institution-affiliated parties for
certain violations.

Effect of Governmental Policies. Our business and earnings and businesses are
affected by the policies of various regulatory authorities of the United States,
especially the Federal Reserve. The Federal Reserve, among other things,
regulates the supply of credit and deals with general economic conditions within
the United States. The instruments of monetary policy employed by the Federal
Reserve for those purposes influence in various ways the overall level of
investments, loans, other extensions of credit, and deposits, and the interest
rates paid on liabilities and received on assets.

Federal Securities Regulation. As a publicly traded company with our common
stock registered under the Securities Exchange Act of 1934, we are required to
file periodic public disclosure reports with the Securities and Exchange
Commission, and the regulations promulgated thereunder.

One required form, a Form 10-KSB, is an annual report that must contain a
complete overview of our business, financial, management, regulatory, legal,
ownership and organizational status. We must file Form 10-KSB by the 90th day of
each fiscal year.

Similarly, a Form 10-QSB, must contain our information on a quarterly basis.
Although Form 10-KSB requires the inclusion of audited financial statements,
unaudited statements are sufficient for inclusion on Form 10-QSB. Additionally,
any significant non-recurring events that occur during the subject quarter, as
well as changes in securities, any defaults, and the submission of any matters
to a vote of security holders, must also be reported on Form 10-QSB.

In addition to the annual and quarterly reports, if any of the six significant
events listed below occurs in a period between the filing of Form 10-KSB or a
Form 10-QSB, such event must be reported on a Form 8-K within 15 days of the
event:

                                       10
<PAGE>


o    a change in control;

o    an acquisition or disposition of significant assets;

o    bankruptcy or receivership;

o    a change in certifying accountant;

o    any resignation of directors; or

o    a change in fiscal year end.

When communicating with shareholders, proxy solicitations for our Annual
Meetings of Shareholders, or any Special Meeting, will be required to contain
certain detailed disclosures regarding the current status of Atlantic.

Individual directors, officers and owners of more than 10% of our stock, will
also be required to file individual disclosures of the amount of our securities
(stock options or warrants) they beneficially own and of any transactions
involving such securities. The initial status of all such persons will be
reported on individual Form 3s. Subsequent securities transactions will be
reported on Form 4 as they occur, and an annual report of ownership is filed on
Form 5. In certain instances, the filing of a Form 4 or a Form 5 can relieve the
reporting individual of their duty to file the other.

The National Association of Securities Dealers has adopted a rule requiring the
audit committees of Boards of Directors of reporting companies to undertake
certain organizational and operational steps. The Securities and Exchange
Commission has adopted a similar rule. These standards will require Atlantic's
audit committee to be comprised of a majority of independent, non-employee
directors who are financially literate. Furthermore, the audit committee is
required to adopt a formal charter defining the scope of its operations. The
Securities and Exchange Commission's rule also requires auditors to review the
financial statements contained in Form 10-QSBs.

The foregoing is necessarily a general description of certain provisions of
federal and state law and does not purport to be complete. Proposals to change
the laws and regulations governing the banking industry are frequently
introduced in Congress, in the state legislatures, and before the various bank
regulatory agencies. The likelihood and timing of any such changes and the
impact such changes might have on Atlantic or Oceanside cannot be determined at
this time.

Primary Service Area

Our PSA encompasses the easternmost portion of Duval County, Florida, and the
northeastern-most portion of St. Johns County, Florida, and is bounded by the
St. Johns River to the north. The PSA generally continues south along the
Intercoastal Waterway to Atlantic Boulevard, then


                                       11
<PAGE>

west to St. Johns Bluff Road (which is the westernmost boundary), then south to
J. Turner Butler Boulevard. The PSA then continues eastward along J. Turner
Butler Boulevard. At the Intercoastal Waterway, the PSA runs south to the State
Road 210 in northern St. Johns County. The PSA includes the communities and
municipalities of Ponte Vedra Beach, Jacksonville Beach, Atlantic Beach, and
Neptune Beach, Florida, and that portion of the City of Jacksonville known as
Mayport (the home of the Mayport U.S. Naval Air Station). Duval and St. Johns
Counties enjoy an abundant and educated work force, attractive business
environment, favorable cost-of-living comparisons to other metropolitan areas in
the United States, and a good relationship between the private and public
sectors. With the opening of the Beach Boulevard branch in the third quarter of
2001, Atlantic has expanded our service area covered by our branch network to
include the Hodges and San Pablo areas of Duval County, which extends west of
the Intercoastal Waterway. This area is one of the fastest growing in our PSA.

In general, commercial real estate in the PSA consists of small shopping centers
and office buildings. The type of residential real estate within our PSA varies,
with a number of condominiums and townhouses located along the beaches, a
greater concentration of apartments in the Mayport area and single-family
housing dispersed throughout our PSA. New residential growth in our PSA consists
primarily of working professionals with families.

Because we are a local financial institution, all policies and procedures are
tailored to the local market instead of to statewide or regional markets. This
is not the case for the majority of the financial institutions currently
operating in our PSA.

We believe that our PSA is a desirable market in which to operate an
independent, locally-owned bank. Furthermore, since we have a large base of
local shareholders and communicate frequently with our shareholders, additional
opportunities exist for marketing that might not be found with other financial
institutions in our PSA. Our broad base of shareholders from the beaches and
surrounding areas of Jacksonville, and the favorable economic environment of our
PSA, should provide us with the opportunity to gain market share.

Competition

The business of banking is highly competitive. We compete with other banks and
credit unions in our PSA and with banks, savings and loan associations, and
credit unions elsewhere in the Jacksonville market. As of December 31, 2001,
there were in excess of ten banks and credit unions operating in our PSA serving
customers from over twenty locations.

To be competitive, our practice is to:

o    review and act upon loan requests quickly with a locally-based loan
     committee;

o    maintain flexible, but prudent lending policies;

o    personalize service with emphasis on establishing long-term banking
     relationships with our customers; and


                                       12
<PAGE>


o    maintain a strong ratio of employees to customers to enhance the level of
     service.

Common Stock

Atlantic has 10,000,000 shares of its $0.01 par value common stock authorized.
As of February 28, 2002, there were 632,500 shares outstanding. The holders of
common stock are entitled to one vote for each share held of record on all
matters to be voted on by stockholders. Upon liquidation, dissolution, or
winding-up of Atlantic, the holders of common stock are entitled to receive pro
rata all assets remaining legally available for distribution to shareholders.
The holders of common stock have no right to cumulate their votes in the
election of directors. The common stock has no preemptive or other subscription
rights, and there are no conversion rights or redemption or sinking fund
provisions with respect to such shares. All the outstanding shares of common
stock are fully paid and non-assessable.

Warrants

Subscribers to the initial offering of Atlantic's common stock received warrants
to purchase common stock ("warrants") equal to the number of shares of common
stock purchased. Each warrant gives the holder the right to purchase one share
of common stock at $10.00 per share at any time during the five year period
beginning on the date of the opening of Oceanside; provided, however, that at
any time after one year following the date Oceanside commenced business, the
board of directors of Atlantic, by written notice to each warrant holder may
shorten the period during which the warrant may be exercised to a period ending
no sooner than 30 days after such notice is mailed. The warrants may be
exercised by delivery to Atlantic of a check for the purchase price of the
number of shares of common stock being purchased. The warrants are separately
transferable. Holders of the warrants do not have any of the rights or
privileges of shareholders of Atlantic (except to the extent they otherwise own
common stock) prior to the exercise of the warrants. The warrants are entitled
to the benefit of adjustments in the exercise price and in the number of shares
of common stock deliverable upon the exercise thereof upon the occurrence of
certain events, including stock dividends, stock splits, reclassification,
reorganizations, consolidations, and mergers. The foregoing is a summary of the
principal terms of the warrants and does not purport to be complete. At February
28, 2002, there were 556,360 warrants outstanding.

Preferred Stock

In addition to the 10,000,000 shares of authorized common stock, Atlantic's
Articles of Incorporation authorize up to 2,000,000 shares of preferred stock.
The board of directors is further authorized to establish designations, powers,
preferences, rights, and other terms for preferred stock by resolution. No
shares of preferred stock have been issued.

Indemnification of Directors and Officers

Atlantic's Bylaws afford indemnification rights to our officers and directors to
the fullest extent permitted or required by the Florida Business Corporation
Act.


                                       13
<PAGE>


Under Section 607.0850 of the Florida Business Corporation Act, officers and
directors of a Florida corporation may be entitled to indemnification by the
corporation against liability incurred in connection with any threatened,
pending, or completed action, suit, or other type of proceeding, whether civil,
criminal, administrative, or investigative and whether formal or informal;
provided, however, that such officer or director acted in good faith and in a
manner reasonably believed to be in, or not opposed to, the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such conduct was unlawful. Such indemnification
includes obligations to pay a judgment, settlement, penalty, fine, and expenses
actually and reasonably incurred with respect to a proceeding. In addition,
Florida law provides that officers and directors shall be indemnified by a
Florida corporation against expenses actually and reasonably incurred by such
officer or director, to the extent that such officer or director has been
successful on the merits or otherwise in defense of any proceeding (as defined
in Section 607.0850) or in defense of any claim, issue, or matter therein.

In addition, Section 607.0831 of the Florida Business Corporation Act provides
that a director is not personally liable for monetary damages to a corporation
or any other person for any statement, vote, decision, or failure to act,
regarding corporate management or policy, by a director, unless such director
breached or failed to perform such duties as a director and such breach or
failure to perform constitutes:

o    a violation of the criminal law, unless the director had reasonable cause
     to believe the conduct was lawful or had no reasonable cause to believe the
     conduct was unlawful;

o    a transaction from which the director derived an improper personal benefit,
     either directly or indirectly;

o    a circumstance involving a director's liability for unlawful distributions
     under the Florida Business Corporation Act;

o    in proceedings by or in the right of the corporation to procure a judgment
     or by or in the right of a shareholder, conscious disregard for the best
     interest of the corporation, or willful misconduct; or

o    in a proceeding by or in the right of someone other than the corporation or
     a shareholder, recklessness or an act or omission which was committed in
     bad faith or with malicious purpose or in a manner exhibiting wanton and
     willful disregard of human rights, safety, or property.



                                       14
<PAGE>
Employees

Atlantic and Oceanside have approximately 43 full-time employees and 3 part-time
employees. No significant changes in the number of our full-time employees are
currently anticipated. Because we believe that one of the primary deficiencies
of large regional banks is the constant turnover of personnel and therefore a
lack of continuing personal relationships with local customers, our goal is to
maintain a competently trained staff of local bankers who have settled in the
community on a permanent basis. To maintain a skilled and knowledgeable staff,
we allocate funds for continuing on-the-job and educational training, and
employees are encouraged to enroll in various banking courses and other seminars
to improve their overall knowledge of the banking business.

ITEM 2.  DESCRIPTION OF PROPERTIES.

On October 29, 1996, Oceanside purchased from an unaffiliated entity the
two-story, 3,100 square-foot building at 1315 South Third Street, Jacksonville
Beach, Florida, as our main office ("Main Office"). The Main Office includes
three inside teller stations, four drive-up teller windows, an automated teller
machine, and on-site parking. The Main Office is a former Barnett Bank branch
office. Oceanside purchased the facility for $850,000 and used a portion of the
proceeds of the initial offering of Atlantic's common stock to add 2,200 square
feet to the facility. Oceanside originally acquired the Main Office with funds
drawn on a line of credit with Columbus Bank and Trust Company, which was repaid
out of the proceeds of the offering.

On June 3, 1998, Oceanside purchased from SouthTrust Bank, N.A., a 1,968 square
foot building located at 560 Atlantic Boulevard, Neptune Beach, Florida. This
facility was formerly a branch office of SouthTrust Bank, N.A. Oceanside
purchased this building for $426,650 and spent $49,963 on renovations and
upgrades. This facility includes two offices, three inside teller windows,
general lobby space, three drive-up teller windows, an ATM, and on-site parking.
The capital structure of Oceanside at the time supported this purchase.

On August 13, 1999, Atlantic purchased from an unaffiliated individual, a 4,960
square foot office building located at 710 Third Street North, Jacksonville
Beach, Florida. The building served as the location for Oceanside's operations
center, Oceanside's mortgage department, and holding company offices, until the
branch at 13799 Beach Boulevard was opened in 2001 (see below). The building has
been put on the market for sale.

On September 27, 2000, Oceanside executed a lease for our latest branch
location, which opened in the third quarter of 2001. This branch is located at
13799 Beach Boulevard, Jacksonville, Florida. The lease, which commenced upon
execution, covers approximately 9,000 square feet. In addition to the branch,
other operations of Atlantic and Oceanside were relocated to this facility. Rent
commences in May 2002, which was one year from the date of completion of the
landlord's work, and expires ten years thereafter, with two five-year renewal
options. No rent was paid in the first year after completion of the landlord's
work. Annual rent in years two through ten will be $148,500 (subject to
inflation adjustments).

ITEM 3.  LEGAL PROCEEDINGS.

There are no material legal proceedings to which Atlantic or its subsidiary is a
party.

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

No matters were submitted to a vote of Atlantic security holders during the
fourth quarter of the year ended December 31, 2001.

                                       15
<PAGE>



                                     PART II

ITEM 5. MARKET PRICE FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER
     MATTERS.

Prior to October 28, 1999, the shares of Atlantic common stock were not actively
traded, and such trading activity, as it occurred, took place in privately
negotiated transactions. On October 28, 1999, Atlantic's common stock was
approved for trading on the Over-the-Counter Bulletin Board ("OTC BB") under the
symbol "ATBC.OB". The initial bid quote by the OTC BB was $10.00 per share.
During 2001 and 2000, the reported periodic high, low, and closing quotes during
each quarter follow:
<TABLE>
<CAPTION>

                                     2001                                    2000
                  -------------------------------------     -------------------------------------
                  4th Qtr   3rd Qtr   2nd Qtr   1st Qtr     4th Qtr   3rd Qtr   2nd Qtr   1st Qtr
                  -------   -------   -------   -------     -------   -------   -------   -------
<S>                <C>       <C>       <C>       <C>         <C>       <C>       <C>       <C>
         High      $23.00    $23.00    $11.25    $10.50      $ 9.13    $ 9.75    $12.50    $11.98
         Low       $11.00    $11.25    $10.50    $ 8.50      $ 9.00    $ 9.13    $10.00    $10.00
         Close     $11.95    $23.00    $11.25    $10.50      $ 9.00    $ 9.75    $11.48    $11.25
</TABLE>

Please note that information above represents offers made to buy our stock and
may not represent actual transactions or sales.

Dividends

Atlantic anticipates that for the foreseeable future, earnings will be retained
for business development and growth. Accordingly, we do not anticipate paying
dividends on our common stock in the foreseeable future. The payment of future
dividends will be at the sole discretion of the board of directors and will
depend on, among other things, future earnings, capital requirements, and our
general financial and business condition.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS.

Management's discussion and analysis of earnings and related financial data are
presented herein to assist investors in understanding Atlantic's financial
condition and results of operations for the periods ended, December 31, 2001 and
2000. This discussion should be read in conjunction with the financial
statements and related footnotes of Atlantic presented elsewhere herein.
Selected Financial Data (dollars and shares in thousands)


                                       16
<PAGE>


<TABLE>
<CAPTION>
                                                                                    At or for the
                                                                              Period Ended December 31,
                                                                  -----------------------------------------------
                                                                  2001      2000       1999       1998       1997
                                                                  ----      ----       ----       ----       ----
<S>                                                           <C>        <C>        <C>        <C>        <C>
Statements of Operations Data:
     Total interest income                                    $   6,082  $   5,277  $   3,704  $   2,287  $     346
     Total interest expense                                       2,558      2,217      1,210        867         85
     Net interest income before provision for credit losses       3,524      3,060      2,494      1,420        261
     Provision for credit losses                                    108          -        221        334        186
     Net interest income after provision for credit losses        3,416      3,060      2,273      1,086         75
     Noninterest income                                             826        547        362        196         33
     Noninterest expense                                          3,379      2,929      2,167      1,450        501
     Cumulative effect of a change in accounting principle            -          -        (59)         -          -
     Income tax provision (benefit)                                 226        226        (90)         -          -
     Net income (loss)                                              637        452        499       (168)      (393)

Statements of Financial Condition Data:
     Total assets                                             $  83,901  $  74,375  $  54,161  $  45,571  $  18,314
     Earning assets                                              74,408     64,319     47,144     38,977     14,688
     Investment securities                                       12,423      7,515      6,109      7,858      2,072
     Loans, net (before allowance for credit losses)             61,604     49,983     40,935     25,998      9,269
     Allowance for credit losses                                    766        682        738        520        186
     Deposit accounts                                            73,493     65,002     43,889     40,374     13,020
     Stockholders' equity                                         6,967      6,020      5,404      5,050      5,265

Share Data:
     Earnings per share
         Basic                                                $    1.05  $    0.76  $    0.84  $   (0.28)  $  (0.70)
         Fully diluted                                        $    0.91  $    0.76  $    0.84  $   (0.28)  $  (0.70)
     Book value per share (period end)                        $   11.08  $   10.09  $    9.08  $    8.49   $   8.85
     Common shares outstanding (period end)                         629        597        595        595        595
     Weighted average shares outstanding
         Basic                                                      607        596        595        595        560
         Fully diluted                                              698        596        595        595        560

Performance Ratios:
     Return on average assets                                     0.79%      0.70%      1.06%    (0.55)%    (7.38)%
     Return on average equity                                     9.77%      8.18%      9.83%    (3.27)%   (17.20)%
     Interest-rate spread during the period                       4.11%      4.28%      5.03%      4.31%      4.46%
     Net interest margin                                          4.89%      5.31%      5.96%      5.31%      6.20%
     Noninterest expenses to average assets                       4.20%      4.56%      4.59%      4.71%      9.41%

Asset Quality Ratios:
     Allowance for credit losses to period end loans              1.24%      1.36%      1.80%      2.00%      2.01%
     Net charge-offs to average loans                             0.04%      0.12%      0.01%          -          -
     Nonperforming assets to period end loans                         -          -          -          -          -
     Nonperforming assets to period end total assets                  -          -          -          -          -

Capital and Liquidity Ratios (Oceanside):
     Average equity to average assets (Consolidated)              8.11%      8.59%     10.75%     16.69%     42.92%
     Leverage (Oceanside)                                         8.67%      8.83%     11.09%     12.92%     35.00%
     Risk-based capital (Oceanside):
         Tier 1                                                   9.75%     10.48%     12.54%     17.42%     53.27%
         Total                                                   10.83%     11.64%     13.79%     18.68%     54.53%
     Average loans to average deposits (Consolidated)            79.82%     83.16%     80.92%     69.30%     66.14%

</TABLE>


                                       17
<PAGE>




General

At December 31, 2001, we had grown to approximately $83.9 million in total
assets, $60.8 million in net loans, $73.5 million in deposits, and $7.0 million
in stockholders' equity.

As stated elsewhere herein, Atlantic's results of operations are primarily
dependent upon the results of operations of Oceanside. Oceanside conducts
commercial banking business consisting of attracting deposits from the general
public and applying those funds to the origination of commercial, consumer, and
real estate loans (including commercial loans collateralized by real estate).
Profitability depends primarily on net interest income, which is the difference
between interest income generated from interest-earning assets (i.e., loans and
investments) less the interest expense incurred on interest-bearing liabilities
(i.e., customer deposits and borrowed funds). Net interest income is affected by
the relative amounts of interest-earning assets and interest-bearing
liabilities, and the interest rate earned and paid on these balances. Net
interest income is dependent upon Oceanside's interest-rate spread which is the
difference between the average yield earned on our interest-earning assets and
the average rate paid on our interest-bearing liabilities. When interest-earning
assets approximate or exceed interest-bearing liabilities, any positive interest
rate spread will generate net interest income. The interest rate spread is
impacted by interest rates, deposit flows, and loan demand. Additionally, and to
a lesser extent, Oceanside's profitability is affected by such factors as the
level of noninterest income and expenses, the provision for credit losses, and
the effective tax rate. Noninterest income consists primarily of service fees on
deposit accounts. Noninterest expense consists of compensation and employee
benefits, occupancy and equipment expenses, data processing costs, and other
operating expenses.

Forward-looking Statements

When used in this Form 10-KSB, the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimate," "project," or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties including changes in
economic conditions in Atlantic's market area, changes in policies by regulatory
agencies, fluctuations in interest rates, demand for loans in our market area
and competition, that could cause actual results to differ materially from those
presently anticipated or projected. Readers should not place undue reliance on
any such forward-looking statements, which speak only as to the date made.
Readers are advised that the factors listed above could affect our financial
performance and could cause our actual results for future periods to differ
materially from any opinions or statements expressed with respect to future
periods in any current statements. Atlantic does not undertake, and specifically
disclaims any obligation, to publicly release the result of any revisions which
may be made to any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.


                                       18
<PAGE>



                              Results of Operations

Net Income

Net income in 2001 was $637,000 versus $452,000 in 2000, an increase of
$185,000, or 40.9%. The primary reasons for the change in net income in 2001
over 2000 were as follows:

o    Our income from earning assets grew at a 15% pace as a result of increases
     in average earning assets of 25%, partially offset by the declining rate
     environment throughout 2001.

o    With the decline in mortgage rates throughout 2001 and the related increase
     in mortgage lending activities, we reported mortgage banking fees of
     $227,000 in 2001 versus $85,000 in 2000, an increase of 167%.

o    While the absolute dollar amount of income taxes for 2001 and 2000 remained
     constant at $226,000, the effective tax rate declined in 2001 to 26% from
     33% in 2000 as a greater portion of total interest income was from
     nontaxable sources in 2001 as compared with 2000. Nontaxable interest
     income for 2001 and 2000 was $201,000 and $34,000, respectively, which
     represented 23% and 5% of income before provision for income taxes in 2001
     and 2000, respectively.



                  [Remainder of page intentionally left blank.]

















                                       19
<PAGE>



Table 1.1 - Rate/Volume Analysis (dollars in thousands):
<TABLE>
<CAPTION>

                                                                   Years Ended December 31,
                                             ---------------------------------------------------------------------
                                                   2001                                            2000
                                             --------------------------------     --------------------------------
                                                          Interest   Average                    Interest   Average
                                             Average           and    Yield/      Average            and    Yield/
                                             Balance     Dividends      Rate      Balance      Dividends      Rate
                                             -------     ---------      ----      -------      ---------      ----
<S>                                          <C>          <C>          <C>        <C>           <C>          <C>
Earning assets:
     Loans, net                              $56,135      $ 5,221      9.30%      $45,915       $ 4,523      9.85%
     Investment securities                    10,606          626      5.90%        6,360           405      6.37%
     Other interest-earning assets (1)         5,293          235      4.44%        5,353           349      6.52%
                                             -------      -------                 -------       -------

         Total interest-earning assets        72,034        6,082      8.44%       57,628         5,277      9.16%
                                                          -------                               -------

Noninterest-earning assets                     8,420                                6,666
                                             -------                              -------

         Total assets                        $80,454                              $64,294
                                             =======                              =======

Interest-bearing liabilities:
     Demand deposits                         $24,563          600      2.44%      $19,983           637      3.19%
     Savings                                   1,654           38      2.30%        1,284            32      2.49%
     Certificates of deposit                  29,759        1,728      5.81%       20,934         1,282      6.12%
     Other borrowings                          3,052          192      6.29%        3,220           266      8.26%
                                             -------      -------                 -------       -------

         Total interest-bearing liabilities   59,028        2,558      4.33%       45,421         2,217      4.88%
                                                          -------                               -------

Noninterest-bearing liabilities               14,903                               13,349
Stockholders' equity                           6,523                                5,524
                                             -------                              -------

         Total liabilities and
           stockholders' equity              $80,454                              $64,294
                                             =======                              =======

Net interest income                                       $ 3,524                               $ 3,060
                                                          =======                               =======

Interest-rate spread (2)                                               4.11%                                 4.28%
                                                                       ====                                  ====

Net interest margin (3)                                                4.89%                                 5.31%
                                                                       ====                                  ====

Ratio of average interest-earning assets
  to average interest-bearing liabilities    122.03%                              126.88%
                                             ======                               ======
</TABLE>



(1)  Includes interest-bearing deposits due from other banks and federal funds
     sold.

(2)  Interest-rate spread represents the difference between the average yield on
     interest-earning assets and the average cost of interest-bearing
     liabilities.

(3)  Net interest margin is net interest income divided by average
     interest-earning assets.

                                       20
<PAGE>


Table 1.2 - Rate/Volume Analysis (dollars in thousands):

<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                                                  2001 vs. 2000
                                                                             Increase (Decrease) Due to
                                                                      ------------------------------------------
                                                                                               Rate/
                                                                      Rate        Volume       Volume      Total
                                                                      ----        ------       ------      -----
<S>                                                                 <C>          <C>            <C>        <C>
Interest-earning assets:
     Loans, net                                                     $ (253)      $ 1,007        $ (56)     $   698
     Investment securities                                             (30)          270          (19)         221
     Other interest-earning assets                                    (111)           (4)           1         (114)
                                                                    ------       -------        -----      -------

         Total interest-earning assets                                (394)        1,273          (74)         805
                                                                    ------       -------        -----      -------

Interest-bearing liabilities:
     Demand deposits                                                  (150)          146          (33)         (37)
     Savings                                                            (2)            9           (1)           6
     Certificates of deposit                                           (65)          540          (29)         446
     Other borrowings                                                  (64)          (14)           4          (74)
                                                                    ------       -------        -----      -------

         Total interest-bearing liabilities                           (281)          681          (59)         341
                                                                    ------       -------        -----      -------

Net interest income                                                 $ (113)      $   592        $ (15)     $   464
                                                                    ======      ========        =====      =======
<CAPTION>


Table 2.1 - Weighted Average Yield or Rate:
                                                                            For the Year Ended December 31,
                                                                            -------------------------------
                                                                                    2001         2000
                                                                                    ----         ----
<S>                                                                                 <C>          <C>
Interest-earning assets:
         Loans, net                                                                 9.30%        9.85%
         Investment securities                                                      5.90%        6.37%
         Other interest-earning assets                                              4.44%        6.52%
         All interest-earning assets                                                8.44%        9.16%
Interest-bearing liabilities:
         NOW deposits                                                               0.75%        0.82%
         Money market deposits                                                      3.42%        4.56%
         Savings                                                                    2.30%        2.49%
         Certificates of deposit                                                    5.81%        6.12%
         Other borrowings                                                           6.29%        8.26%
         All interest-bearing liabilities                                           4.33%        4.88%
Interest-rate spread                                                                4.11%        4.28%


</TABLE>


                                       21
<PAGE>


Comparison of Years Ended December 31, 2001 and 2000

Net Interest Income

Net interest income which is our primary source of operating income, and is the
difference between interest earned on loans and securities and interest paid on
deposits and other funding sources. The factors that influence net interest
income include changes in interest rates and changes in the volume and mix of
assets and liability balances.

Net interest income was $3,524,000 and $3,060,000 for 2001 and 2000,
respectively, an increase of 15.2% from 2000 to 2001, which was due to the
increase in average earning assets of 25.0% offset in part by a decline in
interest rate yield. The average balances, interest income and expense, and the
average rates earned and paid for assets and liabilities are found in Tables 1.1
and 2.1 on the preceding pages.

During 2001 and 2000, the average yield on earning assets was 8.44% and 9.16%,
respectively, while the average cost of funds was 4.33% in 2001 and 4.88% in
2000. Our net interest margin declined from 5.31% in 2000 to 4.89% in 2001,
reflecting unfavorable trends in interest rates earned (a decline of 72 basis
points) versus rates paid (a decline of 55 basis points). For 2001, the average
loan-to-interest-bearing deposit ratio declined to 100.3% from 108.8% in 2000,
which reflects the shift in the mix of average earning assets and
interest-bearing deposits as follows:

Table 2.2 - Change in Deposit Mix (dollars in thousands):
<TABLE>
<CAPTION>

                                                                              At December 31,
                                                       ---------------------------------------------------------
                                                                 2001                           2000
                                                                 ----                           ----
                                                                      Percent                              Percent
                                                       Average           to               Average             to
                                                       Balance        Total               Balance          Total
                                                       -------        -----               -------          -----
<S>                                                    <C>              <C>               <C>               <C>
Interest-earning assets:
     Loans, net                                        $56,135          77.9%             $45,915           79.7%
     Investment securities                              10,606          14.7%               6,360           11.0%
     Other                                               5,293           7.4%               5,353            9.3%
                                                       -------          ----              -------           ----

         Total interest-earning assets                 $72,034         100.0%             $57,628          100.0%
                                                       =======         =====              =======          =====

Interest-bearing deposits:
     Demand deposits                                   $24,563          34.9%             $19,983           36.2%
     Savings                                             1,654           2.4%               1,284            2.3%
     Certificates of deposit                            29,759          42.3%              20,934           37.9%
                                                       -------          ----              -------           ----

         Total interest-bearing deposits                55,976          79.6%              42,201           76.4%

Noninterest-bearing deposits                            14,350          20.4%              13,010           23.6%
                                                       -------          ----              -------           ----

         Total deposits                                $70,326         100.0%             $55,211          100.0%
                                                       =======         =====              =======          =====
</TABLE>


                                       22
<PAGE>


Other borrowings decreased from an average of $3,220,000 in 2000 to $3,052,000
in 2001, and the cost of funds decreased from 8.26% to 6.29% during the same
period reflecting the decreasing rate environment.

Provision for Credit Losses

A provision for credit losses of $108,000 was recorded in 2001, which reflects
management's assessment of the needed level of the allowance for credit losses.
Since Oceanside's opening in 1997, only nominal charge-offs and classified loans
have been identified through December 31, 2001. Initial provisions for credit
losses of 1.75% to 2.00% were recorded until some experience with Oceanside's
underwriting policies was developed. As a result of the credit quality of the
loan portfolio, no provision was recorded in 2000.

Other Income

Other income increased $279,000, or 51%, to $826,000 in 2001 from $547,000 in
2000. While fees collected on deposit accounts were consistent with the growth
in the number of deposit accounts, mortgage banking fees represented a growing
share of total other income. Mortgage banking activities increased with the
recent declines in residential mortgage interest rates and as we continued to
develop our mortgage banking department. Mortgage banking fee income represented
approximately half of the overall increase and accounts for 27% of total other
income in 2001 versus 16% in 2000.

Other Expenses

Other expenses totaled $3,379,000 for 2001 and $2,929,000 for 2000, or 4.20% and
4.56% of average assets for respective years. Salaries and employee benefits
accounted for approximately 70% of the total increase of $450,000 in other
expenses for 2001 over 2000 levels. Increases in other expenses reflect the
growth in personnel to support our expansion in branch and mortgage operations.
The increase in other expenses of 15.4% from 2000 to 2001 was less than the
increase in other income of 51.0% for the same period.

Loans Receivable

Average loans receivable, before the allowance for credit losses were
$56,135,000 for the year ended 2001 as compared to $45,915,000 for 2000, an
increase of 22.3%. Management believes the growth in loans was directly
attributable to the addition of the Beach Boulevard branch, community
acceptance, the reputations of our lending team, and favorable economic
conditions in the market area. Table 3 below provides an analysis of our loan
distribution at the end of 2001 and 2000. Loans that are secured by real estate
include residential and nonresidential mortgages, and home equity loans to
individuals.



                                       23
<PAGE>


<TABLE>
<CAPTION>

Table 3 - Loan Portfolio (dollars in thousands):
                                                                                             For the Year
                                                                                          Ended December 31,
                                                                                        ---------------------
                                                                                        2001             2000
                                                                                        ----             ----

<S>                                                                                  <C>             <C>
Real estate loans                                                                    $38,009          $28,773
Commercial and agricultural loans                                                     17,552           15,665
Consumer and other loans                                                               6,166            5,651
                                                                                     -------          -------
         Total loan portfolio                                                         61,727           50,089
Less:
         Deferred fees                                                                  (123)            (106)
         Allowance for credit losses                                                    (766)            (682)
                                                                                     -------          -------

              Loans, net                                                             $60,838          $49,301
                                                                                     =======          =======

<CAPTION>

The following table shows the maturity of loans receivable.


Table 4 - Loan Maturities at December 31, 2001 (dollars in thousands):

                                                  1 Year         1 Through             After
                                                 or Less           5 Years           5 Years            Total
                                                 -------           -------           -------            -----

<S>                                              <C>               <C>               <C>              <C>
Real estate loans                                $10,574           $13,044           $14,391          $38,009
Commercial and agricultural loans                  1,555               764            15,233           17,552
Consumer and other loans                           1,533             4,031               602            6,166
                                                 -------           -------           -------          -------

        Total loan portfolio                     $13,662           $17,839           $30,226          $61,727
                                                 =======           =======           =======          =======

Loans with maturities over one year:
        Fixed rate                                                                                    $33,798
        Variable rate                                                                                  14,267
                                                                                                       ------

             Total maturities greater than one year                                                   $48,065
                                                                                                      =======
</TABLE>



                                       24
<PAGE>



Table 5 - Loans Originated and Repaid (dollars in thousands):
<TABLE>
<CAPTION>
                                                                                     Years Ended December 31,
                                                                                     ------------------------
                                                                                       2001             2000
                                                                                       ----             ----
Originations:
<S>                                                                                 <C>              <C>
        Real estate loans                                                           $ 14,209         $ 14,830
        Commercial and agricultural loans                                              3,982            7,165
        Consumer and other loans                                                       3,150            3,222
                                                                                     -------          -------

             Total                                                                    21,341           25,217

Principal reductions                                                                  (9,703)         (16,162)
                                                                                     -------          -------

Increase in total loans                                                             $ 11,638         $  9,055
                                                                                    ========         ========

</TABLE>

Classification of Assets

Generally, interest on loans accrues and is credited to income based upon the
principal balance outstanding. It is management's policy to discontinue the
accrual of interest income and classify a loan as nonaccrual when principal or
interest is past due 90 days or more and the loan is not adequately
collateralized, or when in the opinion of management, principal or interest is
not likely to be paid in accordance with the terms of the obligation. Consumer
installment loans are generally charged-off after 90 days of delinquency unless
adequately collateralized and in the process of collection. Loans are not
returned to accrual status until principal and interest payments are brought
current and future payments appear reasonably certain. Interest accrued and
unpaid at the time a loan is placed on nonaccrual status is charged against
interest income. Subsequent payments received are applied to the outstanding
principal balance.

Real estate acquired as a result of foreclosure, or by deed in lieu of
foreclosure, is classified as other real estate owned ("OREO"). OREO properties
are recorded at the lower of cost or fair value less estimated selling costs,
and the estimated loss, if any, is charged to the allowance for credit losses at
the time the real estate is transferred to OREO. Further allowances for losses
in OREO are recorded at the time management believes additional deterioration in
value has occurred.

Management has adopted Statement of Financial Accounting Standards No. 114
("SFAS No. 114"), Accounting by Creditors for Impairment of a Loan, which
considers a loan to be impaired if it is probable that Atlantic will be unable
to collect all amounts due under the contractual terms of the loan agreement. If
a loan is considered impaired, its value generally should be measured based on
the present value of expected cash flows discounted at the loan's effective
interest rate. As a practical expedient, however, the loan's value may be based
on:

o    the loan's market price; or

o    the fair value of the loan's collateral, less discounted estimated costs to
     sell, if the collateral is expected to be the sole source of repayment.


                                       25
<PAGE>


If the value of the loan is less than the recorded investment in the loan, a
loss should be recognized by recording a valuation allowance and a corresponding
increase to the provision for credit losses charged to operating expenses.

Situations may occur where:

o    Atlantic receives physical possession of a debtor's assets regardless of
     whether formal foreclosure proceedings have been initiated or completed; or

o    the debtor has effectively surrendered control of the underlying collateral
     in contemplation of foreclosure.

These situations are referred to as "in-substance foreclosures." SFAS No. 114
recognizes the practical problems of accounting for the operation of an asset
the creditor does not possess, and states that a loan for which foreclosure is
probable should continue to be accounted for as a loan.

At December 31, 2001 and 2000, management had not observed any significant
problem loans in our portfolio. Loans past due for 30 days or more (but less
than 89 days) at December 31, 2001, and 2000, totaled $31,000 and $15,000,
respectively. At December 31, 2001, management had classified four loans
totaling approximately $50,000 as substandard, as compared with four substandard
loans totaling $34,000 at December 31, 2000.

At December 31, 2001, only one loan totaling $21,000 was considered impaired. At
December 31, 2000, no loans were considered impaired or nonaccrual.

Allowance for Credit Losses

The amount charged to operations and the related balance in the allowance for
credit losses is based upon periodic evaluations of the loan portfolio by
management. These evaluations consider several factors including but not limited
to, current economic conditions, loan portfolio composition, prior credit loss
experience, trends in portfolio volume, and management's estimation of future
potential losses. Management believes that the allowance for credit losses is
adequate. Table 6 is an analysis of the allowance for credit losses for 2001 and
2000.



                                       26
<PAGE>
<TABLE>
<CAPTION>


Table 6 - Allowance for Credit Losses (dollars in thousands):
                                                                                        2001             2000
                                                                                        ----             ----

<S>                                                                                    <C>              <C>
Balance, at beginning of period                                                        $ 682            $ 738
Provision for credit losses                                                              108               --
Loans charged off                                                                        (24)             (57)
Recoveries                                                                               --                 1
                                                                                       -----            -----

Balance, at end of period                                                              $ 766            $ 682
                                                                                       =====            =====
<CAPTION>

The specific allocations of the allowance for credit losses are based on
management's evaluation of the risks inherent in the specific portfolios for the
dates indicated. Amounts in a particular category may be used to absorb losses
if another category allocation proves to be inadequate. Table 7 reflects the
allocations of the allowance for the years ended 2001 and 2000.

Table 7 - Allocation of Allowance for Credit Losses (dollars in thousands):

                                                                                At December 31,
                                                       --------------------------------------------------------
                                                               2001                                2000
                                                               ----                                ----
                                                                        % of                               % of
                                                                     Loans to                             Loans to
                                                                       Total                              Total
                                                       Amount         Loans               Amount          Loans
                                                       ------         -----               ------          -----

<S>                                                   <C>                <C>             <C>             <C>
Real estate loans                                      $   5             62%              $  --             58%
Commercial and agricultural loans                          3             28                   1             31
Consumer and other loans                                   4             10                   8             11
Unallocated                                              754             --                 673             --
                                                       -----           ----               -----           ----

                                                       $ 766           100%               $ 682           100%
                                                       =====           ===                =====           ===
</TABLE>

Highly leveraged transactions generally include loans and commitments made in
connection with recapitalizations, acquisitions, and leveraged buyouts, and
result in the borrower's debt-to-total assets ratio exceeding 75%. At December
31, 2001 and 2000, there were no loans qualified as highly leveraged
transactions.

Securities

Financial institutions classify their investment securities as either
"held-to-maturity" or "available-for-sale." Securities classified as
held-to-maturity are carried at amortized or accreted cost and include those
securities that a bank has the intent and ability to hold to maturity.
Securities classified as available-for-sale, which are those securities that a
bank intends to hold for an indefinite amount of time, but not necessarily to
maturity, are carried at fair value with the unrealized holding gains or losses,
net of taxes, reported as a component of the stockholders' equity on a bank's
balance sheet. Tables 8.1 and 8.2 set forth the carrying amount of securities at
the dates indicated.

                                       27
<PAGE>

Table 8.1 - Carrying Value of Investment Securities (dollars in thousands):



                                                                At December 31,
                                                                ---------------
                                                               2001        2000
                                                               ----        ----
Securities available-for-sale:
         Mortgage-backed securities (GNMA and FNMA)          $ 8,329     $ 5,326
         Other                                                   186         171
                                                             -------     -------

         Total                                                 8,515       5,497
                                                             -------     -------

Securities held-to-maturity:
         State, county, and municipal bonds                    3,908       2,018
                                                             -------     -------

Balance, end of year                                         $12,423     $ 7,515
                                                             =======     =======


Table 8.2 - Investment Securities at Amortized Cost (dollars in thousands):

                                                              At December 31,
                                                              ---------------
                                                               2001      2000
                                                               ----      ----
Securities available-for-sale:
        Mortgage-backed securities (GNMA and FNMA)          $ 8,424   $ 5,403
        Other                                                   186       171
                                                             -------  -------

         Total                                                8,610     5,574
                                                             -------  -------

Securities held-to-maturity:
         State, county, and municipal bonds                   3,908     2,018
                                                             -------  -------

Balance, end of year                                        $12,518   $ 7,592
                                                             =======  =======




                                       28
<PAGE>


Tables 9.1 and 9.2 set forth the maturities (excluding principal paydowns on
mortgage-backed securities) and the weighted average yields of securities by
contractual maturities at December 31, 2001 and 2000.

Table 9.1 - Analysis of Investment Securities Available-for-Sale
        (dollars in thousands):

<TABLE>
<CAPTION>
                                                         Due in Ten
                                                       Years or More                              Other
                                                   ----------------------             ----------------------
                                                                  Average                            Average
                                                  Amount           Yield              Amount          Yield
                                                  ------           -----              ------          -----
<S>                                              <C>                 <C>          <C>
At December 31, 2001:
         Mortgage-backed securities
             (GNMA and FNMA)                     $ 8,329             5.89%           $    --             -- %
         Other                                        --              -- %               186            5.40%
                                                 -------                            --------

                                                 $ 8,329             5.89%           $   186            5.40%
                                                 =======                             =======

At December 31, 2000:
         Mortgage-backed securities
             (GNMA and FNMA)                     $ 5,326             6.32%           $    --             -- %
         Other                                        --              -- %               171            7.11%
                                                 -------                             -------

                                                 $ 5,326             6.32%           $   171            7.11%
                                                 =======                             =======

<CAPTION>

Table 9.2 - Analysis of Investment Securities Held-to-Maturity
        (dollars in thousands):

                                                         Due in Ten
                                                       Years or More                              Other
                                                   ----------------------             ----------------------
                                                                  Average                            Average
                                                  Amount           Yield              Amount          Yield
                                                  ------           -----              ------          -----
<S>                                              <C>                 <C>                <C>
At December 31, 2001:
         State, county, and
           municipal bonds                       $ 3,908             5.10%            $   --             -- %
                                                 =======                              =======

At December 31, 2000:
         State, county, and
           municipal bonds                       $ 2,018             5.35%            $   --             -- %
                                                 =======                              =======


</TABLE>




                                       29
<PAGE>



Deposits

Deposits are the major source of our funds for lending and other investment
purposes. Deposits are attracted principally from within our PSA through the
offering of a broad variety of deposit instruments including checking accounts,
money market accounts, regular savings accounts, term certificate accounts
(including "jumbo" certificates in denominations of $100,000 or more) and
retirement savings plans.

Maturity terms, service charges and withdrawal penalties are established by
management on a periodic basis. The determination of rates and terms is
predicated on loan funding and liquidity requirements, rates paid by
competitors, growth goals, and federal regulations.

FDIC regulations limit the ability of certain insured depository institutions to
accept, renew, or rollover deposits by offering rates of interest which are
significantly higher than the prevailing rates of interest on deposits offered
by other insured depository institutions having the same type of charter in such
depository institutions' normal market area. Under these regulations, "well
capitalized" depository institutions may accept, renew, or rollover deposits at
such rates without restriction, "adequately capitalized" depository institutions
may accept, renew or rollover deposits at such rates with a waiver from the FDIC
(subject to certain restrictions on payments of rates), and "undercapitalized"
depository institutions may not accept, renew or rollover deposits at such
rates. The regulations contemplate that the definitions of "well capitalized,"
"adequately capitalized" and "undercapitalized" will be the same as the
definitions adopted by the agencies to implement the prompt corrective action
provisions of applicable law. See "Description of Business/Supervision and
Regulation." As of December 31, 2001, Oceanside met the definition of a "well
capitalized" depository institution.

Our primary source of funds is deposit accounts that include both interest- and
noninterest-bearing demand, savings, and time deposits under $100,000. At both
December 31, 2001 and 2000, these core deposits accounted for approximately 86%
of all deposits. At December 31, 2001, the deposit mix had shifted so that the
category of noninterest-bearing demand deposits was no longer the single largest
category of core deposits. At December 31, 2001, time deposits under $100,000
accounted for approximately 32% of these core deposits as compared with money
market deposits at 24% and noninterest-bearing demand deposits at 23%. At both
December 31, 2001 and 2000, jumbo certificates of deposit (time deposits
$100,000 and greater) represented approximately 14% of total deposits. At
December 31, 2001 and 2000, time deposits outstanding in an individual amount of
$100,000 or more totaled $10,203,000 and $9,224,000, respectively. The
maturities of these deposits are reflected in Table 12 herein.

Interest-bearing demand accounts, consisting of NOW and money market accounts,
averaged $24,563,000 for the year ended 2001 and $19,983,000 for the year ended
2000, or approximately 35% and 36% of average total deposits in 2001 and 2000,
respectively. The declining interest rates in the United States economy during
2001 significantly influenced the decrease in the average cost of funds from
4.88% in 2000 to 4.33% in 2001.


                                       30
<PAGE>


Table 10 - Distribution of Deposit Accounts by Type (dollars in thousands):

<TABLE>
<CAPTION>
                                                                       At December 31,
                                                  ----------------------------------------------------------
                                                             2001                                2000
                                                             ----                                ----
                                                                    % of                               % of
                                                  Amount         Deposits             Amount        Deposits
                                                  ------         --------             ------        --------

<S>                                              <C>                <C>             <C>                <C>
Demand deposits                                  $14,532            19.8%           $ 13,729           21.1%
NOW deposits                                      10,662            14.5               9,840           15.2
Money market deposits                             15,340            20.9              13,021           20.0
Savings deposits                                   2,255             3.0               1,213            1.9
                                                 -------           -----             -------          -----

        Subtotal                                  42,789            58.2              37,803           58.2
                                                 -------           -----             -------          -----

Certificates of deposit:
        3.00% - 3.99%                              9,765            13.3                  34            0.1
        4.00% - 4.99%                              7,699            10.5                 308            0.4
        5.00% - 5.99%                              3,901             5.3               1,318            2.0
        6.00% - 6.99%                              8,936            12.2              23,523           36.2
        7.00% - 7.99%                                403             0.5               2,016            3.1
                                                 -------           -----             -------          -----

        Total certificates of deposit (1)         30,704            41.8              27,199           41.8
                                                 -------           -----             -------          -----

        Total deposits                           $73,493           100.0%            $65,002          100.0%
                                                 =======           =====             =======          =====
</TABLE>



(1)  Includes individual retirement accounts ("IRAs") totaling $2,052,000 and
     $1,693,000 in 2001 and 2000, respectively, all of which are in the form of
     certificates of deposit.


Table 11 - Average Deposits and Average Rates (dollars in thousands):

<TABLE>
<CAPTION>
                                                                       At December 31,
                                                  ----------------------------------------------------------
                                                             2001                                2000
                                                             ----                                ----
                                                 Average           Average            Average        Average
                                                 Balance           Rate               Balance        Rate
                                                 -------           ----               -------        ----
<S>                                             <C>                 <C>              <C>            <C>
Demand, money market
    and NOW deposits                            $ 38,913            1.54%            $ 32,993       1.93%
Savings deposits                                   1,654            2.30%               1,284       2.49%
Certificates of deposit                           29,759            5.81%              20,934       6.12%
                                                  ------                               ------
        Total deposits                          $ 70,326            3.36%            $ 55,211       3.53%
                                                ========                             ========
</TABLE>



                                       31
<PAGE>


Table 12 - Maturities of Time Deposits of $100,000 or more
         (dollars in thousands):

                                                      At December 31,
                                                      ---------------
                                                   2001             2000
                                                   ----             ----

Due in three months or less                     $ 5,318          $ 3,743
Over three through twelve months                  3,550            4,234
Over twelve months through three years            1,335            1,247
Over three years                                      -                -
                                                -------          -------

                                                $10,203          $ 9,224
                                                =======          =======


Table 13 - Certificates of Deposits by Rate and Maturity Date
         (dollars in thousands):

<TABLE>
<CAPTION>
                                                                         Year Ending December 31,
                                                        ----------------------------------------------------------
                                                        2002      2003        2004       2005      2006      Total
                                                        ----      ----        ----       ----      ----      -----
<S> <C>     <C>                                     <C>      <C>             <C>    <C>         <C>        <C>
At December 31, 2001:
    2.00% - 2.99%                                    $ 3,679     $    9      $  12    $     -     $   -    $ 3,700
    3.00% - 3.99%                                      5,468        595          1          -         -      6,064
    4.00% - 4.99%                                      5,603      2,077          -          -        19      7,699
    5.00% - 5.99%                                      3,187        679         11         25         -      3,902
    6.00% - 6.99%                                      8,776        160          -          -         -      8,936
    7.00% - 7.99%                                        403          -          -          -         -        403
                                                     -------     ------      -----    -------     -----    -------

      Total certificates of deposit                  $27,116     $3,520      $  24    $    25     $  19    $30,704
                                                     =======     ======      =====    =======     =====    =======

<CAPTION>

                                                                         Year Ending December 31,
                                                        ----------------------------------------------------------
                                                        2001      2002        2003       2004      2005      Total
                                                        ----      ----        ----       ----      ----      -----
<S> <C>     <C>                                   <C>        <C>          <C>       <C>         <C>     <C>
At December 31, 2000:
    3.00% - 3.99%                                    $    34     $    -      $   -    $     -     $   -    $    34
    4.00% - 4.99%                                        308          -          -          -         -        308
    5.00% - 5.99%                                      1,040          -        194         11        73      1,318
    6.00% - 6.99%                                     20,604      2,769        150          -         -     23,523
    7.00% - 7.99%                                      1,613        403          -          -         -      2,016
                                                     -------     ------      -----    -------     -----    -------

      Total certificates of deposit                  $23,599     $3,172      $ 344    $    11     $  73    $27,199
                                                     =======     ======      =====    =======     =====    =======
</TABLE>


Liquidity and Capital Resources

Liquidity. Our principal source of funds comes from Oceanside's operations,
including net increases in deposits, principal and interest payments on loans,
and proceeds from sales and maturities of investment securities.

We use our capital resources principally to fund existing and continuing loan
commitments and to purchase investment securities. At December 31, 2001 and
2000, commitments to originate loans totaled $12.7 million and $8.7 million,
respectively, and we had issued but unused standby letters of credit of $1.2
million at year end for both 2001 and 2000. In addition, scheduled


                                       32
<PAGE>

maturities of  certificates of deposit during the 12 months  following  December
31,  2001 and 2000  totaled  $27.1  million  and  $23.6  million,  respectively.
Management believes that we have adequate resources to fund all our commitments.
If so desired,  we can adjust the rates and terms on certificates of deposit and
other deposit accounts to attract deposits and fund additional commitments.

Liquidity management involves meeting the funds flow requirements of customers
who may either be depositors wanting to withdraw funds, or borrowers needing
assurance that sufficient funds will be available to meet their credit needs.
Liquid assets consist of vault cash, securities, and principal paydowns of other
earning assets.

Our principal sources of asset liquidity are federal funds sold and the
securities portfolio, including principal paydowns from mortgage-backed
securities. In 2001 and 2000, such payments totaled $1,396,000 and $838,000,
respectively.

Other sources of funds are principal paydowns and maturities in the loan
portfolio. The loan maturity schedule (Table 4) illustrates the maturities of
loans receivable at December 31, 2001. We also have sources of liability
liquidity that include core deposits as previously discussed and access to
borrowed funds including overnight federal funds, lines of credit, and
securities sold under agreements to repurchase. At December 31, 2001 and 2000,
our liquidity ratio of liquid assets to transaction deposit accounts was 13.2%
and 35.7%, respectively. Management believes that our liquidity is sufficient to
meet our anticipated needs.

Capital. We place a significant emphasis on maintaining a strong capital base.
The capital resources consist of two major components of regulatory capital,
stockholders' equity and the allowance for credit losses. Current capital
guidelines issued by federal regulatory authorities require a company to meet
minimum risk-based capital ratios in an effort to make regulatory capital more
responsive to the risk exposure related to a company's on and off-balance sheet
items.

Risk-based capital guidelines re-define the components of capital, categorize
assets into risk classes, and include certain off-balance sheet items in the
calculation of capital requirements. The components of risk-based capital are
segregated as Tier I and Tier II capital. Tier I capital is composed of total
stockholders' equity reduced by goodwill and other intangible assets. Tier II
capital is comprised of the allowance for credit losses and any qualifying debt
obligations. Regulators also have adopted minimum requirements of 4% of Tier I
capital and 8% of risk-adjusted assets in total capital.

We are also subject to leverage capital requirements. This requirement compares
capital (using the definition of Tier I capital) to balance sheet assets and is
intended to supplement the risk-based capital ratio in measuring capital
adequacy. The guidelines set a minimum leverage ratio of 3% for depository
institutions that are highly rated in terms of safety and soundness, and which
are not experiencing or anticipating any significant growth. Other depository
institutions are expected to maintain capital levels of at least 1% or 2% above
the minimum. Oceanside's actual capital amounts, capital ratios, and leverage
ratios at December 31, 2001 and 2000, are reflected in the table below.

                                       33
<PAGE>

Table 14 - Capital Ratios (dollars in thousands):
<TABLE>
<CAPTION>
                                                                                         At December 31,
_                                                                                        ---------------
                                                                                        2001             2000
                                                                                        ----             ----
Tier I
<S>                                                                                 <C>              <C>
    Stockholders' equity                                                            $  6,915         $  6,206
    Less, intangible assets                                                               --               --
                                                                                    --------         --------
                                                                                       6,915            6,206
Tier II
    Allowable portion of allowance for credit losses                                     766              682
                                                                                    --------         --------

Risk-based capital                                                                  $  7,681         $  6,888
                                                                                    ========         ========

Risk adjusted assets                                                                $ 70,933          $59,196
                                                                                     =======          =======

    Tier I risk-based capital ratio                                                     9.75%           10.48%
                                                                                       =====            =====

    Total risk-based capital ratio                                                     10.83%           11.64%
                                                                                       =====            =====

Adjusted assets                                                                     $ 79,713          $70,255
                                                                                     =======          =======

    Leverage ratio                                                                     8.67%             8.83%
                                                                                       ====              ====
<CAPTION>

Note: Any unrealized appreciation and depreciation on securities
available-for-sale was excluded from regulatory capital components of risk-based
capital and leverage ratios.

Table 15 - Capital Analysis:
                                                                                           At December 31,
                                                                                           ---------------
                                                                                        2001             2000
                                                                                        ----             ----
<S>                                                                                   <C>               <C>
Average equity as a percentage of average assets                                      8.11%             8.59%
Equity to total assets at end of year                                                 8.30%             8.09%
Return on average equity                                                              9.77%             8.18%
Return on average assets                                                              0.79%             0.70%
Noninterest expenses to average assets                                                4.20%             4.56%
</TABLE>

In 1996, Oceanside commenced the sale of units (consisting of one share of
common stock and one warrant to purchase one share of common stock at a price of
$10.00 per share) at a price of $10.00 per unit. At the end of 1999, warrants
totaling 593,510 remained outstanding. Warrants exercised to purchase common
stock totaled 32,190 in 2001, and 1,500 in 2000, the proceeds of which were
approximately $322,000 and $15,000 in 2001 and 2000, respectively.

Stockholders' equity is adjusted for the effect of unrealized appreciation or
depreciation, net of tax, on securities classified as available-for-sale. As of
December 31, 2001, stockholders' equity increased $947,000 from December 31,
2000, as a result of the net income of $637,000, an increase of $12,000 in
unrealized holding losses on available-for-sale securities, and $322,000 of
proceeds from the exercise of warrants in 2001. The return on average equity for
the years ended December 31, 2001 and 2000, totaled 9.77% and 8.18%,
respectively.


                                       34
<PAGE>
Interest Rate Sensitivity

Our operations are subject to risk resulting from interest rate fluctuations to
the extent that there is a difference between the amount of interest-earning
assets and the amount of interest-bearing liabilities that are
prepaid/withdrawn, mature, or reprice in specified periods.

The principal objective of asset/liability management activities is to provide
consistently higher levels of net interest income while maintaining acceptable
levels of interest rate and liquidity risk and facilitating our funding needs.
We utilize an interest rate sensitivity model as the primary quantitative tool
in measuring the amount of interest rate risk that is present. The traditional
maturity "gap" analysis, which reflects the volume difference between interest
rate sensitive assets and liabilities during a given time period, is reviewed
regularly by management. A positive gap occurs when the amount of interest
sensitive assets exceeds interest sensitive liabilities. This position would
contribute positively to net income in a rising interest rate environment.
Conversely, if the balance sheet has more liabilities repricing than assets, the
balance sheet is liability sensitive or negatively gapped. We continue to
monitor sensitivity in order to avoid overexposure to changing interest rates.

Another method utilized to review our interest sensitivity position is through
"simulation." In simulation, we project the future net interest streams in light
of the current gap position. Various interest rate scenarios are used to measure
levels of interest income associated with potential changes in our operating
environment. We, however, cannot measure levels of interest income associated
with potential changes in Atlantic's operating environment, or the direction of
interest rates, or how the mix of assets and liabilities will change. The use of
this information will help formulate strategies to minimize the unfavorable
effect on net interest income caused by interest rate changes.

Our operations do not subject us to foreign currency exchange or commodity price
risk. Also, we do not use interest rate swaps, caps, or other hedging
transactions. Our overall sensitivity to interest rate risk is low due to our
non-complex balance sheet. We have implemented several strategies to manage
interest rate risk that include originating most residential mortgages for a
third party lender, increasing the volume of variable rate commercial loans,
requiring interest rate calls on commercial loans, and maintaining a short
repricing maturity for a significant portion of our investment portfolio.

The following table provides information about our financial instruments that
are sensitive to changes in interest rates. For securities, loans, and deposits,
the table presents principal cash flows and related weighted average interest
rates by maturity dates or repricing frequency. We have no market risk sensitive
instruments entered into for trading purposes.



                                       35
<PAGE>





Table 16 - Interest Rate Sensitivity at December 31, 2001 (dollars in
thousands):

<TABLE>
<CAPTION>
                                                Under         3 to 12                           Over
                                             3 Months          Months     1 - 5 Years        5 Years         Total
                                             --------          ------     -----------        -------         -----

<S>                                         <C>         <C>              <C>            <C>              <C>
Federal funds sold                           $    270       $      --        $     --       $     --       $   270
Interest-bearing deposits in other banks          111              --              --             --           111
Total loans(1)                                 16,679           4,432          16,742         23,874        61,727
Securities(2)                                     253             425               -         11,745        12,423
                                              -------      ----------         -------        -------       -------

Total rate-sensitive assets                   $17,313       $   4,857        $ 16,742        $35,619       $74,531
                                              =======      ==========         =======        =======       =======

Money market and NOW(2)                       $15,340       $      --        $     --       $ 10,662       $26,002
Savings accounts (2)                                -              --              --          2,255         2,255
Certificates of deposit (2)                    14,370          12,746           3,545             43        30,704
                                              -------      ----------         -------        -------       -------

Total rate-sensitive liabilities              $29,710       $  12,746        $  3,545       $ 12,960       $58,961
                                              =======       =========        ========        =======       =======

Gap (repricing differences)                  $(12,397)      $ (7,889)        $ 13,197       $ 22,659       $15,570
                                             ========       ========         ========        =======       =======

Cumulative Gap                               $(12,397)      $(20,286)        $ (7,089)      $ 15,570
                                             ========       ========         ========        =======

Cumulative Gap/total assets                   -14.78%         -24.18%          -8.45%         18.56%
                                               =====           =====            ====          =====

Total assets                                                                                               $83,901
                                                                                                           =======

</TABLE>

(1)In preparing the table above, adjustable-rate loans were included in the
     period in which the interest rates are next scheduled to adjust rather than
     in the period in which the loans mature. Fixed-rate loans were scheduled
     according to their contractual maturities.
(2)Excludes noninterest-bearing deposit accounts. Money market deposits were
     regarded as maturing immediately, and other core deposits were assumed to
     mature in the over 5-year category. All other time deposits were scheduled
     through the maturity or repricing dates. Investments were scheduled through
     their contractual, repricing, or principal payment dates.

Management anticipates that our one-year gap will remain negative during our
initial growth period; however, management attempts to maintain a range of
positive 20% to negative 20%.

Other Borrowings

A summary follows (dollars in thousands):
                                                            December 31,
                                                            ------------
                                                       2001             2000
                                                       ----             ----

     FHLB of Atlanta advances                       $ 2,300           $ 2,300
     Revolving lines of credit                          744               744
                                                    -------           -------

                                                    $ 3,044           $ 3,044
                                                    =======           =======



                                       36
<PAGE>


FHLB of Atlanta Advances. On December 29, 1999, Oceanside obtained an advance
from FHLB of $2,300,000 collateralized by our FHLB capital stock and assigned
collateral consisting of wholly-owned residential (1-4 units) first mortgage
loans of approximately $2,509,000. On November 17, 2000, this advance was
converted to a 5-year European Convertible advance which afforded us more
favorable terms at the time of conversion. This advance matures on November 17,
2005, and has a fixed interest rate at 6.05%.

Revolving Lines of Credit. On February 11, 1999, Atlantic obtained a revolving
line of credit in the amount of $50,100 from Columbus Bank and Trust Company
("Columbus"). On August 11, 1999, Atlantic obtained two revolving lines of
credit from Columbus totaling $1.0 million, and repaid existing advances under
the line of credit dated February 11, 1999. For the remaining two lines of
credit, principal and interest at 0.50% below prime are due on August 11, 2002.
The proceeds from the lines of credit have been used to acquire real estate,
fund start-up costs for the mortgage banking operations, and provide Atlantic
with additional working capital. At both December 31, 2001 and 2000, $744,000
had been advanced under the lines of credit, which are secured by the common
stock of Atlantic's wholly-owned banking subsidiary, Oceanside Bank.

Future Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This Statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. Management
does not believe that the effect of this new standard will have a material
impact on Atlantic's financial statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 provides one accounting model, based
on the framework established by SFAS No. 121, for long-lived assets to be
disposed of by sale and addresses significant implementation issues. SFAS No.
144 is effective for fiscal years beginning after December 15, 2001. The effect
of this adoption on Atlantic's financial statements, if any, has not been
determined.

Impact of Inflation

The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles, which require the
measurements of financial position and operating results in terms of historical
dollars, without considering changes in the relative purchasing power of money
over time due to inflation. Unlike most industrial companies, substantially all
of the assets and liabilities of Atlantic are monetary in nature. As a result,
interest rates have a more significant impact on our performance than the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or in the same magnitude as the prices of goods and
services, since such prices are affected by inflation to a larger extent than
interest rates. As discussed previously, management seeks to manage the
relationships between interest sensitive assets and liabilities in order to
protect against wide interest rate fluctuations, including those resulting from
inflation.


                                       37
<PAGE>
ITEM 7.  FINANCIAL STATEMENTS





                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors and Stockholders
Atlantic BancGroup, Inc. and Subsidiary
Jacksonville Beach, Florida


We have audited the consolidated statements of financial condition of Atlantic
BancGroup, Inc. and Subsidiary ("Atlantic") as of December 31, 2001 and 2000,
and the related consolidated statements of operations and comprehensive income,
cash flows and changes in stockholders' equity, for each of the two years in the
period ended December 31, 2001. These consolidated financial statements are the
responsibility of Atlantic's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Atlantic as of
December 31, 2001 and 2000, and the results of its consolidated operations and
its cash flows for each of the two years in the period ended December 31, 2001,
in conformity with accounting principles generally accepted in the United States
of America.

/s/  STEVENS, POWELL & COMPANY, P.A.

STEVENS, POWELL & COMPANY, P.A.
Jacksonville, Florida
January 29, 2002



                                       38
<PAGE>




                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                   -----------------------
                                                                                     2001           2000
                                                                                     ----           ----
                                                                            (Dollars in Thousands, Except Per Share Data)
                                                                ASSETS
<S>                                                                               <C>              <C>
Cash and cash equivalents:
     Cash and due from banks                                                      $   4,981      $   6,250
     Federal funds sold                                                                 270          6,715
                                                                                  ---------      ---------
         Total cash and cash equivalents                                              5,251         12,965
Interest-bearing deposits in other banks                                                111            106
Securities available-for-sale                                                         8,515          5,497
Securities held-to-maturity (market value of $3,898 in 2001 and
    $2,051 in 2000)                                                                   3,908          2,018
Loans, net                                                                           60,838         49,301
Facilities                                                                            3,236          2,601
Accrued interest receivable                                                             394            346
Deferred income taxes                                                                   264            237
Other assets                                                                          1,384          1,304
                                                                                  ---------      ---------

         Total assets                                                             $  83,901      $  74,375
                                                                                  =========      =========

                                                              LIABILITIES
Deposits:
     Noninterest-bearing demand deposits                                          $  14,532      $  13,729
     Interest-bearing deposits                                                       10,662          9,840
     Money market deposits                                                           15,340         13,021
     Savings deposits                                                                 2,255          1,213
     Time deposits, $100,000 and over                                                10,203          9,224
     Other time deposits                                                             20,501         17,975
                                                                                  ---------      ---------

         Total deposits                                                              73,493         65,002

Other borrowings                                                                      3,044          3,044
Accrued interest payable on deposits                                                     64             97
Accounts payable and accrued liabilities                                                333            212
                                                                                  ---------      ---------

         Total liabilities                                                           76,934         68,355
                                                                                  ---------      ---------

Commitments and contingencies                                                            --             --
                                                                                  ---------      ---------

                                                         STOCKHOLDERS' EQUITY

Common stock, $0.01 par value, authorized 10,000,000 shares, issued
    and outstanding 629,040 shares in 2001 and 596,850 shares in 2000                     6              6
Additional paid-in capital                                                            4,550          4,228
Retained earnings                                                                     2,471          1,834
Accumulated other comprehensive income
     Net unrealized holding losses on securities                                       ( 60)          ( 48)
                                                                                  ---------      ---------

         Total stockholders' equity                                                   6,967          6,020
                                                                                  ---------      ---------

         Total liabilities and stockholders' equity                               $  83,901      $  74,375
                                                                                  =========      =========

Book value per common share                                                       $   11.08      $   10.09
                                                                                  =========      =========

Common shares outstanding, adjusted for stock dividends                             629,040        596,850
                                                                                  =========      =========

</TABLE>

          See accompanying notes to consolidated financial statements.

                                       39
<PAGE>



                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                -----------------------------------------
                                                                                      2001               2000
                                                                                      ----               ----
                                                                             (Dollars in Thousands, Except Per Share Data)
INTEREST INCOME
<S>                                                                               <C>            <C>
     Interest and fees on loans                                                   $   5,221      $   4,523
     Interest and dividend income from investment securities                            626            405
     Interest on federal funds sold                                                     229            343
     Interest on deposits with other banks                                                6              6
                                                                                  ---------      ---------
         Total interest income                                                        6,082          5,277
                                                                                  ---------      ---------

INTEREST EXPENSE
     Interest on deposits                                                             2,366          1,951
     Other                                                                              192            266
                                                                                  ---------      ---------
         Total interest expense                                                       2,558          2,217
                                                                                  ---------      ---------

NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES                                3,524          3,060

PROVISION FOR CREDIT LOSSES                                                             108             --
                                                                                  ---------      ---------

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES                                 3,416          3,060
                                                                                  ---------      ---------

OTHER INCOME
     Service charges on deposit accounts                                                451            338
     Mortgage banking fees                                                              227             85
     Other income                                                                       148            124
                                                                                  ---------      ---------
         Total other income                                                             826            547
                                                                                  ---------      ---------

OTHER EXPENSES
     Salaries and employee benefits                                                   1,708          1,395
     Expenses of bank premises and fixed assets                                         527            489
     Other operating expenses                                                         1,144          1,045
                                                                                  ---------      ---------
         Total other expenses                                                         3,379          2,929
                                                                                  ---------      ---------

INCOME BEFORE PROVISION FOR INCOME TAXES                                                863            678

PROVISION FOR INCOME TAXES                                                              226            226
                                                                                  ---------      ---------

NET INCOME                                                                              637            452

OTHER COMPREHENSIVE INCOME, NET OF INCOME TAXES:
     Unrealized holding gains (losses) on securities arising during period              (12)           149
                                                                                  ---------      ---------

COMPREHENSIVE INCOME                                                              $     625      $     601
                                                                                  =========      =========


AVERAGE COMMON SHARES OUTSTANDING
     Basic                                                                          606,988        595,510
                                                                                    =======        =======
     Fully diluted                                                                  698,339        595,510
                                                                                    =======        =======

EARNINGS PER SHARE
     Basic                                                                            $1.05          $0.76
                                                                                      =====          =====
     Fully diluted                                                                    $0.91          $0.76
                                                                                      =====          =====

</TABLE>

          See accompanying notes to consolidated financial statements.
                                       40


<PAGE>



                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                   -----------------------------
                                                                                        2001              2000
                                                                                        ----              ----
                                                                                    (Dollars in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                 <C>             <C>
     Net income                                                                     $     637        $     452
     Adjustments to reconcile net income to net cash
        provided by (used in) operating activities:
         Provision for credit losses                                                      108               --
         Depreciation and amortization                                                    267              214
         Net premium amortization and discount accretion                                   12               14
         Deferred income taxes                                                            (19)             (16)
         Amortization of organizational costs                                              --               --
         (Increase) decrease in assets:
              Accrued interest receivable                                                 (48)             (75)
              Other assets                                                                (81)          (1,190)
         Increase (decrease) in liabilities:
              Accounts payable and accrued liabilities                                     88               72
                                                                                    ---------        ---------

                  Net cash provided (used) by operating activities                        964             (529)
                                                                                    ---------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES
     Securities available-for-sale:
         Purchases                                                                     (6,335)              --
         Principal repayments mortgage-backed investment securities                     1,396              838
     Securities held to maturity
         Purchases                                                                         --           (2,018)
     Increase (decrease) in interest-bearing deposits in other banks                       (5)              (6)
     Increase in loans                                                                (11,645)          (9,104)
     Purchases of facilities                                                             (902)            (326)
                                                                                    ---------        ---------

                  Net cash used in investing activities                               (17,491)         (10,616)
                                                                                    ---------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES
     Increase (decrease) in deposits:
         Noninterest-bearing                                                              803            2,645
         Interest-bearing                                                               7,688           18,468
     Proceeds from other borrowings                                                        --                2
     Repayments of other borrowings                                                        --           (1,589)
     Proceeds from stock warrants exercised                                               322               15
                                                                                    ---------        ---------

                  Net cash provided by financing activities                             8,813           19,541
                                                                                    ---------        ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                   (7,714)           8,396

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                         12,965            4,569
                                                                                    ---------        ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                            $   5,251        $  12,965
                                                                                    =========        =========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
     Cash received during the year for interest and dividends                       $   6,034        $   5,219
                                                                                    =========        =========
     Cash paid during the year for interest                                         $   2,591        $   2,079
                                                                                    =========        =========
     Cash paid during the year for income taxes                                     $     203        $     160
                                                                                    =========        =========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       41

<PAGE>



                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>


                                                                                                  Net
                                                                                               Unrealized
                                                  Common Stock     Additional                  Holding          Total
                                                  ------------       Paid-in     Retained      Losses on    Stockholders'
                                               Shares     Amount    Capital      Earnings      Securities       Equity
                                               ------     ------    -------      --------      ----------       ------
                                                                       (Dollars in Thousands)

<S>               <C> <C>                     <C>      <C>            <C>         <C>      <C>             <C>
Balance, December 31, 1999                    595,350  $        6     $ 4,213    $ 1,382   $   (197)       $ 5,404

Stock warrants exercised                        1,500          --          15         --         --             15
Comprehensive income:
     Net income                                    --          --          --        452         --
     Net change in net unrealized
         holding gains (losses) on
         securities                                --          --          --         --        149

       Total comprehensive income                  --          --          --         --         --            601
                                              -------  ----------     -------     ------   --------        -------

Balance, December 31, 2000                    596,850           6       4,228      1,834        (48)         6,020

Stock warrants exercised                       32,190          --         322         --         --            322
Comprehensive income:
     Net income                                    --          --          --        637         --
     Net change in net unrealized
         holding losses on securities              --          --          --         --        (12)

       Total comprehensive income                  --          --          --         --         --            625
                                              -------  ----------     -------     ------   --------        -------


Balance, December 31, 2001                    629,040  $        6     $ 4,550    $ 2,471   $    (60)       $ 6,967
                                              =======  ==========     =======    =======   ========        =======

</TABLE>

          See accompanying notes to consolidated financial statements.



                                       42
<PAGE>



                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

General - The consolidated financial statements include the accounts and
transactions of Atlantic BancGroup, Inc. and its wholly-owned subsidiaries
("Atlantic"), Oceanside Bank ("Oceanside"), which opened July 21, 1997, as a
state-chartered banking organization, and Oceanside Mortgage Group, Inc.
("Oceanside Mortgage"), which was merged into Oceanside during 2000. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The accounting and reporting policies of Atlantic and its
subsidiaries conform with generally accepted accounting principles and with
general practices within the banking industry.

Atlantic provides a wide range of banking services to individual and corporate
customers primarily in Duval and St. Johns County, Florida.

Atlantic and Oceanside are subject to regulations issued by certain regulatory
agencies and undergo periodic examinations by those agencies.

Use of Estimates - In preparing the consolidated financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance sheet
and revenues and expenses for the period. Actual results could differ
significantly from those estimates.

Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for credit losses, the fair value
of financial instruments, and the valuation of real estate acquired in
connection with foreclosures or in satisfaction of loans ("Other Real Estate
Owned"). In connection with the determination of the allowances for credit
losses and foreclosed real estate, management obtains independent appraisals for
significant properties.

Management believes that the allowance for credit losses is adequate. While
management uses available information to recognize losses on loans, including
independent appraisals for significant properties, future additions to the
allowance may be necessary based on changes in economic conditions. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the allowance based on their judgments about information
available to them at the time of their examination.

Recent Accounting Pronouncements - In September 2000, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, a replacement of SFAS No. 125. This statement
revises the standards for securitization and other transfers of financial assets
and collateral and requires certain disclosures and was effective March 31,
2001. The adoption of this pronouncement did not have a material impact on
Atlantic's financial statements.

In July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS 141 requires that all business
combinations initiated after June 30, 2001, be accounted for using the purchase
method. SFAS 142 changes the accounting for goodwill from an amortization method
to an impairment-only approach. Instead of amortization, goodwill and intangible
assets that have indefinite useful lives will not be amortized but rather will
be tested at least annually for impairment applying a fair value-based test.
Intangible assets that have finite useful lives will continue to be amortized
over their useful lives, but without the constraint of an arbitrary ceiling. At
December 31, 2001, Atlantic had no goodwill or intangible assets; thus
management does not believe that the effects of the new standards will have a
material impact on Atlantic's financial statements.


                                       43
<PAGE>




                    ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued)

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 provides one accounting model, based
on the framework established by SFAS No. 121, for long-lived assets to be
disposed of by sale and addresses significant implementation issues. SFAS No.
144 is effective for fiscal years beginning after December 15, 2001. The effect
of this adoption on Atlantic's financial statements, if any, has not been
determined.

On July 6, 2001, the Securities and Exchange Commission released Staff
Accounting Bulletin (SAB) No. 102, Selected Loan Loss Allowance Methodology and
Documentation Issues, which requires companies to have adequate documentation on
the development and application of a systematic methodology in determining
allowance for loan losses. Management believes that it has complied with the
requirements and that the adoption will have no material impact to the financial
statements.

Maintenance of Required Reserves - Depository institutions are required to
maintain reserves against their deposits in accordance with the federal
regulations. Reserve deficiency charges can be assessed against depository
institutions that have deficiencies in their reserve accounts. Under these
regulations, depository institutions are required to set aside a percentage of
the funds held in net transaction accounts as monetary reserves. There are no
reserve requirements for funds held in time accounts or savings accounts.
Required reserves can be held in the form of: vault cash, balances maintained
directly with the Federal Reserve Bank, or pass-through accounts. Current
regulations require that depository institutions maintain minimum reserves of 3%
of net transaction accounts or $1,239,000 plus 10% of net transaction accounts
in excess of $41.3 million. Atlantic was required to maintain reserves on net
transaction accounts of approximately $483,000 and $371,000 at December 31, 2001
and 2000, respectively.

Held-to-Maturity Securities - Bonds, notes, and debentures for which Atlantic
has the positive intent and ability to hold to maturity are reported at cost,
adjusted for the amortization of premiums and the accretion of discounts, which
are recognized in income using the level-yield method over the assets' remaining
lives and adjusted for anticipated prepayments. Should other than a temporary
decline in the fair value of a security occur, the carrying value of such
security would be written down to current market value by a charge to
operations. As of December 31, 2001, no securities were determined to have other
than a temporary decline in fair value below cost.

Available-for-Sale Securities - Available-for-sale securities consist of bonds,
notes and debentures. Unrealized holding gains and losses, net of tax, on
available-for-sale securities are reported as accumulated other comprehensive
income, a separate component of stockholders' equity, until realized. Gains and
losses on the sale of available-for-sale securities are determined using the
specific-identification method. Declines in the fair value of individual
available-for-sale securities below their cost that are other than temporary
would result in a write-down of the individual security to its fair value. The
related write-down would be included in earnings as a realized loss. As of
December 31, 2001, no securities were determined to have other than a temporary
decline in fair value below cost.

Trading Securities - Equity securities held principally for resale in the near
term are classified as trading securities and recorded at their fair values.
Unrealized gains and losses on trading securities are included in other income.

Loans - Loans receivable that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-off are reported at their
outstanding principal adjusted for any charge-offs, the allowance for credit
losses, and , if material, any deferred fees or costs on originated loans and
unamortized premiums or discounts on purchased loans. Loans receivable are
stated at unpaid principal balances, less the allowance for credit losses and
net deferred loan fees. Nonrefundable loan fees and certain direct loan
origination costs, if material, are deferred and the net amount is recognized
into income over the life of the loans as a yield adjustment.



                                       44
<PAGE>


                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued)

The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet contractual principal or interest
obligations or where interest or principal is 90 days or more past due. When a
loan is placed on nonaccrual status, accrual of interest ceases and, in general,
uncollected past due interest (including interest applicable to prior reporting
periods, if any) is reversed and charged against current income. Therefore,
interest income is not recognized unless the financial condition or payment
record of the borrower warrant the recognition of interest income. Interest on
loans that have been restructured is generally accrued according to the
renegotiated terms.

Allowance for Credit Losses - The allowance for credit losses is a valuation
allowance to provide for incurred but not yet realized losses. Atlantic reviews
its loans for impairment on a quarterly basis. Impairment is determined by
assessing the probability that the borrower will not be able to fulfill the
contractual terms of the agreement. If a loan is determined to be impaired, the
amount of the impairment is measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or by use of
the observable market price of the loan or fair value of collateral if the loan
is collateral dependent. Throughout the year management estimates the level of
probable losses to determine whether the allowance for credit losses is
appropriate considering the estimated losses existing in the portfolio. Based on
these estimates, an amount is charged to the provision for credit losses and
credited to the allowance for credit losses in order to adjust the allowance to
a level determined by management to be appropriate relative to losses. The
allowance for credit losses is increased by charges to income (provisions) and
decreased by charge-offs, net of recoveries.

Management's periodic evaluation of the appropriateness of the allowance is
based on Atlantic's past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability to repay,
the estimated value of any underlying collateral and current economic
conditions.

Homogeneous loans are those that are considered to have common characteristics
that provide for evaluation or on an aggregate or pool basis. Atlantic has
identified the following pools for consideration in its methodology for
evaluating the allowance for credit losses: real estate - commercial, real
estate - residential, commercial and other, consumer, commitments - residential,
and commitments - commercial and other. The primary methodology used to
determine the appropriateness of the allowance for losses includes segregating
certain specific, poorly performing loans based on their performance
characteristics from the pools of loans as to type and then applying a loss
factor to the remaining pool balance based on several factors including
classification of the loans as to grade, past loss experience, inherent risks,
economic conditions in the primary market areas and other factors which usually
are beyond the control of Atlantic. Those segregated specific loans are
evaluated using the present value of future cash flows, usually determined by
estimating the fair value of the loan's collateral reduced by any cost of
selling and discounted at the loan's effective interest rate if the estimated
time to receipt of monies is more than three months.

Non-homogeneous loans are those loans that can be included in a particular loan
type, such as commercial loans and multi-family and commercial first mortgage
loans, but which differ in other characteristics to the extent that valuation on
a pool basis is not valid. After segregating specific, poorly performing loans
and applying the methodology as noted in the preceding paragraph for such
specific loans, the remaining loans are evaluated based on payment experience,
known difficulties in the borrowers business or geographic area, loss
experience, inherent risks and other factors usually beyond the control of
Atlantic. These loans are then graded and a factor, based on experience, is
applied to estimate the probable loss.

Estimates of the probability of credit losses involve an exercise of judgment.
While it is possible that in the near term Atlantic may sustain losses which are
substantial in relation to the allowance for credit losses, it is the judgment
of management that the allowance for credit losses reflected in the consolidated
statements of financial condition is appropriate considering the estimated
probable losses in the portfolio.


                                       45
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued)

Interest Rate Risk - Atlantic's asset base is exposed to risk including the risk
resulting from changes in interest rates and changes in the timing of cash
flows. Atlantic monitors the effect of such risks by considering the mismatch of
the maturities of its assets and liabilities in the current interest rate
environment and the sensitivity of assets and liabilities to changes in interest
rates. Atlantic's management has considered the effect of significant increases
and decreases in interest rates and believes such changes, if they occurred,
would be manageable and would not affect the ability of Atlantic to hold its
assets as planned. However, Atlantic is exposed to significant market risk in
the event of significant and prolonged interest rate changes.

Interest on loans is accounted for on the accrual basis. Generally, Atlantic's
policy is to discontinue the accrual of interest on loans delinquent over ninety
days unless fully secured and in the process of collection. The accrued and
unpaid interest is reversed from current income and thereafter interest is
recognized only to the extent payments are received. A nonaccrual loan may be
restored to accrual basis when interest and principal payments are current and
prospects for future recovery are no longer in doubt.

Atlantic has adopted Statement of Financial Accounting Standards No. 114,
Accounting by Creditors for Impairment of a Loan ("SFAS No. 114"), which sets
the standard for recognition of loan impairment and the measurement methods for
certain impaired loans and loans whose terms are modified in troubled debt
restructurings.

Under SFAS No. 114, a loan is impaired when it is probable that a creditor will
be unable to collect the full amount of principal and interest due according to
the contractual terms of the loan agreement. When a loan is impaired, a creditor
has a choice of ways to measure the impairment. The measurement of impairment
may be based on (1) the present value of the expected future cash flows of the
impaired loan discounted at the loan's original effective interest rate, (2) the
observable market price of the impaired loan, or (3) the fair value of the
collateral of a collateral-dependent loan. Creditors may select the measurement
method on a loan-by-loan basis, except that collateral-dependent loans for which
foreclosure is probable must be measured at the fair value of the collateral. A
creditor in a troubled debt restructuring involving a restructured loan should
measure impairment by discounting the total expected future cash flows at the
loan's original effective rate of interest. If the value of the loan is less
than the recorded investment in the loan, a loss should be recognized by
recording a valuation allowance and a corresponding increase to the provision
for credit losses charged to operating expenses.

Facilities - Facilities are stated at cost, less accumulated depreciation and
amortization. Charges to income for depreciation and amortization are computed
on the straight-line method over the assets' estimated useful lives.

When properties are sold or otherwise disposed of, the gain or loss resulting
from the disposition is credited or charged to income. Expenditures for
maintenance and repairs are charged against income and renewals and betterments
are capitalized.

Long-lived Assets - Long-lived assets to be held and used are reviewed for
impairment whenever events or changes in circumstances indicate that the related
carrying amount may not be recoverable. When required, impairment losses on
assets to be held and used are recognized based on the fair value of the asset.
Certain long-lived assets to be disposed of are reported at the lower of
carrying amount or fair value less cost to sell.

Other Real Estate Owned - Real estate properties acquired through, or in lieu
of, loan foreclosure are to be sold and are initially recorded at fair value at
the date of foreclosure establishing a new cost basis. After foreclosure,
valuations are periodically performed by management and the real estate is
carried at the lower of carrying amount or fair value less cost to sell. Revenue
and expenses from operations and changes in the valuation allowance are included
in loss on foreclosed real estate.


                                       46
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued)

Off-Balance Sheet Instruments - In the ordinary course of business, Atlantic has
entered into off-balance sheet financial instruments consisting of commitments
to extend credit and standby letters of credit. Such financial instruments are
recorded in the consolidated financial statements when they become payable.

Transfers of Financial Assets - Transfers of financial assets are accounted for
as sales, when control over the assets has been surrendered. Control over
transferred assets is deemed to be surrendered when (1) the assets have been
isolated from Atlantic, (2) the transferee obtains the right (free of conditions
that constrain it from taking advantage of that right) to pledge or exchange the
transferred assets, and (3) Atlantic does not maintain effective control over
the transferred assets through an agreement to repurchase them before their
maturity.

Employee Benefits - Pension costs related to the SIMPLE Plan are charged to
salaries and employee benefits expense and are funded as accrued. The accounting
for income and costs associated with the Indexed Retirement Plans is described
at Note 8.

Income Taxes - Provisions for income taxes are based on amounts reported in the
statements of operations, after exclusion of non-taxable income such as interest
on state and municipal securities, and include deferred taxes on temporary
differences in the recognition of income and expense for tax and financial
statement purposes. The principal temporary differences are depreciation and
amortization, provision for credit losses, and unrealized holding gains (losses)
on securities. Deferred taxes are computed on the liability method as prescribed
in SFAS No. 109, Accounting for Income Taxes.

Computation of Per Share Earnings - Basic earnings per share ("EPS") amounts are
computed by dividing net earnings by the weighted average number of common
shares outstanding for the years ended December 31, 2001 and 2000. Diluted EPS
are computed by dividing net earnings by the weighted average number of shares
and all dilutive potential shares outstanding during the period. At December 31,
2001 and 2000, the outstanding warrants totaled 559,820 and 592,010,
respectively. However, for 2000, the warrants were not considered dilutive. For
purposes of computing diluted EPS, the treasury stock method was used for 2001
and 2000. The following information was used in the computation of EPS on both a
basic and diluted basis for the years ended December 31, 2001 and 2000 (dollars
in thousands except per share data):
<TABLE>
<CAPTION>

                                                                                    For the Year Ended December 31,
                                                                                    -------------------------------
                                                                                        2001                2000
                                                                                        ----                ----
<S>                                                                                    <C>                 <C>
     Basic EPS computation:
         Numerator - Net income                                                        $  637              $ 452
                                                                                       ======              =====
         Denominator - Weighted average shares outstanding                                607                596
                                                                                       ======              =====
         Basic EPS                                                                     $ 1.05              $0.76
                                                                                       ======              =====

     Diluted EPS computation:
         Numerator - Net income                                                        $  637              $ 452
                                                                                       ======              =====
         Denominator
              Weighted average shares outstanding                                         607                596
              Warrants                                                                     91                  -
                                                                                       ------              -----
                                                                                          698                596
                                                                                       ======              =====
         Diluted EPS                                                                   $ 0.91              $0.76
                                                                                       ======              =====

</TABLE>

Statements of Cash Flows - For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts on deposit in noninterest bearing
accounts with other commercial banks, and federal funds sold.

Advertising and Business Development - Atlantic expenses advertising and
business development costs as incurred. Advertising and business development
costs for 2001 and 2000 as included in other operating expenses were $58,000 and
$68,000, respectively.


                                       47
<PAGE>


                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued)

Reclassification of Accounts - Certain items in the consolidated financial
statements for 2000 have been reclassified to conform to the classifications
used for the current year.


NOTE 2 - INVESTMENT SECURITIES

The amortized cost and estimated fair value of instruments in debt and equity
securities at December 31, 2001 and 2000, follow (dollars in thousands):
<TABLE>
<CAPTION>

                                      December 31, 2001                                   December 31, 2000
                            ---------------------------------------        ---------------------------------------
                                        Gross      Gross                                 Gross     Gross
                            Amortized Unrealized Unrealized   Fair         Amortized  Unrealized Unrealized   Fair
                               Cost     Gains     Losses      Value           Cost       Gains     Losses     Value
                               ----     -----     ------      -----           ----       -----     ------     -----

<S>                          <C>     <C>          <C>       <C>             <C>      <C>          <C> <C>   <C>
Available-for-sale
   Mortgage-backed securities$ 8,424  $    25     $ (120)   $ 8,329         $ 5,403    $     4    $ ( 81)   $ 5,326
   Other                         186         -         -        186             171          -         -        171
                             -------  -------     ------    -------         -------    -------    ------    -------

     Total available-for-sale   8,610       25     (120)      8,515           5,574          4      ( 81)     5,497
                             -------  -------     ------    -------         -------    -------    ------    -------

Held-to-maturity
   State, county and municipal
     bonds                     3,908       25        (35)     3,898           2,018         33         -      2,051
                             -------  -------     ------    -------         -------    -------    ------    -------

     Total held-to-maturity    3,908       25        (35)     3,898           2,018         33         -      2,051
                             -------  -------     ------    -------         -------    -------    ------    -------

Total investment securities  $12,518  $    50     $ (155)   $12,413         $ 7,592    $    37    $ ( 81)   $ 7,548
                             =======  =======     ======    =======         =======    =======   =======    =======
</TABLE>


The fair value of securities fluctuates during the investment period. No
provision for loss has been made in connection with the decline of fair value
below book value, because the securities are purchased for investment purposes
and the decline is deemed to be temporary. Temporary declines in fair value of
securities available-for-sale at December 31, 2001, of $60,000 (net of deferred
income taxes of $35,000) are regarded as an adjustment to stockholders' equity.
The estimated fair value of securities is determined on the basis of market
quotations. At December 31, 2001, securities with an amortized cost of $950,000
and market value of $955,000 were pledged to secure deposits and for other
operating purposes.

No investment securities were sold during 2001 or 2000.

The cost and estimated fair value of debt and equity securities at December 31,
2001, by contractual maturities, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties (dollars in
thousands).

<TABLE>
<CAPTION>
                                                   Securities Available-for-Sale        Securities Held-to-Maturity
                                                   -----------------------------        ---------------------------
                                                      Amortized          Fair            Amortized          Fair
                                                        Cost             Value             Cost              Value
                                                        ----             -----             ----              -----

<S>                                                   <C>              <C>               <C>               <C>
     Due in ten years or more                         $ 8,424          $ 8,329           $ 3,908           $ 3,898
     Other                                                186              186                 -                 -
                                                      -------          -------           -------           -------

                                                      $ 8,610          $ 8,515           $ 3,908           $ 3,898
                                                      =======          =======           =======           =======
</TABLE>



                                       48
<PAGE>


                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 3 - LOANS

The loan portfolio is classified as follows (dollars in thousands):
<TABLE>
<CAPTION>
                                                                                         2001             2000
                                                                                         ----             ----

<S>                                                                                  <C>              <C>
     Real estate loans                                                               $ 38,009         $ 28,773
     Commercial and agricultural loans                                                 17,552           15,665
     Consumer and other loans                                                           6,166            5,651
                                                                                     --------         --------
         Total loan portfolio                                                          61,727           50,089
     Less, deferred fees                                                                 (123)            (106)
     Less, allowance for credit losses                                                   (766)            (682)
                                                                                     --------         --------

              Loans, net                                                             $ 60,838         $ 49,301
                                                                                     ========         ========
</TABLE>

At December 31, 2001, fixed rate loans (excluding nonaccrual loans) with
maturities over one year totaled approximately $33.8 million.

The following is a summary of the transactions in the allowance for credit
losses (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                         2001             2000
                                                                                         ----             ----

<S>                                                                                    <C>              <C>
     Balance, beginning of period                                                      $  682           $  738
     Provisions charged to operating expenses                                             108               --
     Loans charged-off                                                                    (24)             (57)
     Recoveries                                                                            --                1
                                                                                       ------           ------

     Balance, end of period                                                            $  766           $  682
                                                                                       ======           ======
</TABLE>


At December 31, 2001, only one loan totaling $21,000 was considered impaired. At
December 31, 2000, no loans were considered impaired or nonaccrual.


NOTE 4 - FACILITIES

Facilities are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
                                                                     Accumulated                          Estimated
                                                                 Depreciation and        Net Book         Useful
                                                        Cost        Amortization          Value            Lives
                                                        ----        ------------          -----            -----
<S>                                                  <C>          <C>                  <C>           <C>
December 31, 2001:
     Land and land improvements                       $   946       $      -            $   946
     Bank building and improvements                     1,980            243              1,737       5 - 40 years
     Furniture, fixtures, and equipment                 1,013            460                553       3 - 10 years
                                                      -------       --------            -------

                                                      $ 3,939       $    703            $ 3,236
                                                      =======       ========            =======

December 31, 2000:
     Land and land improvements                       $   946       $      -            $   946
     Bank building and improvements                     1,337            163              1,174       5 - 40 years
     Furniture, fixtures, and equipment                   754            273                481       3 - 10 years
                                                      -------       --------            -------

                                                      $ 3,037       $    436            $ 2,601
                                                      =======       ========            =======
</TABLE>


                                       49
<PAGE>



                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 4 - FACILITIES (Continued)

Depreciation and amortization of facilities totaled $267,000 and $214,000 in
2001 and 2000, respectively.

Atlantic leases property for a branch location at 13799 Beach Boulevard,
Jacksonville, Florida, under a non-cancellable operating lease. Under the terms
of the lease, the lease term commenced in May 2001, with no rent due the first
twelve months. Annual minimum future rental payments are $99,000 in 2002,
$148,500 in the years 2003 through 2010, and $49,500 in 2011.


NOTE 5 - TIME DEPOSITS

Time deposits at December 31, 2001 and 2000, totaled $30,704,000 and
$27,199,000, respectively. Maturities of such deposits follow (dollars in
thousands):

<TABLE>
<CAPTION>
                                                       December 31, 2001                  December 31, 2000
                                                -----------------------------      ----------------------------
                                                Time, $100,000     Other Time      Time, $100,000    Other Time
                                                    And Over       Deposits            And Over       Deposits
                                                    --------       --------            --------       --------

<S>                                                <C>             <C>                <C>             <C>
     Three months or less                          $ 5,318          $ 9,052           $ 3,743          $ 5,363
     Over three through twelve months                3,550            9,196             4,234           10,259
     Over twelve months through three years              -            2,210             1,247            2,269
     Over three years                                1,335               43                 -               84
                                                   -------          -------           -------          -------

                                                   $10,203          $20,501           $ 9,224          $17,975
                                                   =======          =======           =======          =======
</TABLE>


Interest expense on certificates of deposit of $100,000 or more totaled $599,000
and $438,000 for 2001 and 2000, respectively. Interest expense on other time
deposits totaled $1,129,000 and $844,000 for 2001 and 2000, respectively.


NOTE 6 - OTHER BORROWINGS

A summary follows (dollars in thousands):
                                                   December 31,
                                              ---------------------
                                              2001             2000
                                              ----             ----

     FHLB of Atlanta advances              $ 2,300           $ 2,300
     Revolving lines of credit                 744               744
                                           -------           -------

                                           $ 3,044           $ 3,044
                                           =======           =======


FHLB of Atlanta Advances. On December 29, 1999, Atlantic obtained an advance
from FHLB of $2,300,000 collateralized by Atlantic's FHLB capital stock and
assigned collateral consisting of wholly-owned residential (1-4 units) first
mortgage loans of approximately $2,509,000. On November 17, 2000, this advance
was converted to a 5-year European Convertible advance, which afforded Atlantic
more favorable terms at the time of conversion. This advance matures on November
17, 2005, and has a fixed interest rate at 6.05%.



                                       50
<PAGE>


                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 6 - OTHER BORROWINGS (Continued)

Revolving Lines of Credit. On February 11, 1999, Atlantic obtained a revolving
line of credit in the amount of $50,100 from Columbus Bank and Trust Company
("Columbus"). On August 11, 1999, Atlantic obtained two revolving lines of
credit from Columbus totaling $1.0 million, and repaid existing advances under
the line of credit dated February 11, 1999. For the remaining two lines of
credit, principal and interest at 0.50% below prime are due on August 11, 2002.
The proceeds from the lines of credit have been used to acquire real estate,
fund start-up costs for the mortgage banking operations, and provide additional
working capital for Atlantic. At both December 31, 2001 and 2000, $744,000 had
been advanced to Atlantic under the lines of credit, which are secured by the
common stock of Atlantic's wholly-owned banking subsidiary, Oceanside Bank.


NOTE 7 - INCOME TAXES

The provision for income taxes on income is summarized as follows (dollars in
thousands):

                                                    Year Ended December 31,
                                                    -----------------------
                                                    2001              2000
                                                    ----              ----
Current:
     Federal                                       $  209            $  207
     State                                             36                35
                                                   ------            ------
                                                      245               242
                                                   ------            ------

Deferred:
     Federal                                          (16)              (14)
     State                                            ( 3)              ( 2)
                                                   ------            ------
                                                      (19)              (16)
                                                   ------            ------

              Total income tax provision           $  226            $  226
                                                   ======            ======


A reconciliation of the income tax benefit computed at the federal statutory
rate of 34% and the income tax provision (benefit) shown on the statement of
operations, follows (dollars in thousands):

                                                     Year Ended December 31,
                                                     -----------------------
                                                     2001              2000
                                                     ----              ----

     Tax computed at statutory rate                 $  293            $  231
     Increase (decrease) resulting from:
         Nontaxable interest income, net               (60)              (10)
         Other                                          (7)                5
                                                    ------            ------

              Income tax provision                  $  226            $  226
                                                    ======            ======

                                       51
<PAGE>


                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 7 - INCOME TAXES (Continued)

The components of the net deferred income tax assets are as follows
        (dollars in thousands):
                                                   December 31,
                                               ----------------------
                                               2001              2000
                                               ----              ----
     Deferred tax asset:
         Federal                             $  241            $  220
         State                                   41                38

                                             ------            ------
                                                282               258
                                             ------            ------
     Deferred tax liability:
         Federal                                (16)              (18)
         State                                  ( 2)              ( 3)
                                             ------            ------

                                                (18)              (21)
                                             ------            ------

              Net deferred tax asset         $  264            $  237
                                             ======            ======


The tax effects of each type of significant item that gave rise to deferred
taxes are (dollars in thousands):

                                                            December 31,
                                                        ----------------------
                                                        2001              2000
                                                        ----              ----


     Allowance for credit losses                      $  286            $  214
     Net unrealized holding losses on securities          36                29
     Depreciation                                         (6)                1
     Other                                               (52)               (7)
                                                      ------            ------

              Net deferred tax asset                  $  264            $  237
                                                      ======            ======


NOTE 8 - EMPLOYEE BENEFITS AND INDEXED RETIREMENT PLANS

SIMPLE Plan. Atlantic sponsors a SIMPLE Plan that covers substantially all
employees. Atlantic matches each participant's contribution, subject to a
maximum of 3% of the participant's salary. The SIMPLE Plan is a prototype plan
and has been approved by the Internal Revenue Service. The amount included in
salaries and employee benefits as pension expense totaled $36,000 and $23,000
for 2001 and 2000, respectively.

Indexed Retirement Plans. In 2000, Atlantic adopted an Indexed Retirement Plan
("IRP") for Atlantic's seven directors and four of its current or former
officers. The purpose of the IRP is to retain qualified directors and members of
management by offering a retirement benefit. Benefits under the IRP began
vesting over a five-year period, starting with service beginning in 1997. Upon
his resignation from Atlantic, a former officer and director was 60% vested in
the IRP. The remaining ten participants were each 100% vested at the end of
2001.

During 2000, Atlantic purchased a pool of life insurance policies with
$1,100,000 that had previously been invested in overnight federal funds sold.
The policies have cash surrender values that can progressively grow, based on a
fluctuating index of life insurance securities, resulting in an earnings stream.
The portion of that earnings stream equal to what Atlantic had been earning on
its overnight federal funds sold is realized as income by Atlantic. The variable
portion above what is retained by Atlantic is used to fund the IRP for the
eleven participants.


                                       52
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 8 - EMPLOYEE BENEFITS AND INDEXED RETIREMENT PLANS (Continued)

The IRP participants will begin receiving annual cash retirement benefit
payments for a period of fifteen years after reaching age 65 in most cases. The
size of these payments will depend on the growth in value of the purchased pool
of life insurance policies. In addition, the beneficiaries of eight of the
participants will each receive $100,000 death benefits, payable upon the
respective participant's death. The remaining three participants will receive a
larger lump sum payment in their fifteenth year of receiving retirement
benefits. A summary of the activity for the IRP follows (dollars in thousands):

                                                                December 31,
                                                               -------------
                                                               2001     2000
                                                               ----     ----

  Policy income included in other income                     $   64   $   54
  Pension expense included in other operating expenses          (52)     (44)
  Life insurance expense included in other operating expenses    (6)      (5)
  Deferred income tax benefit                                    20       16
                                                             ------   ------

      Net after income tax benefit                           $   26   $   21
                                                             ======   ======


NOTE 9 - COMMITMENTS AND CONTINGENCIES

Credit-Related Financial Instruments. Atlantic is a party to credit related
financial instruments with off-balance sheet risk in the normal course of
business to meet the financing needs of its customers. These financial
instruments include commitments to extend credit, standby letters of credit, and
commercial letters of credit. Such commitments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the consolidated statements of financial condition. Atlantic's exposure to
credit loss is represented by the contractual amount of these commitments.
Atlantic follows the same credit policies in making commitments as it does for
on-balance sheet instruments.

At December 31, 2001 and 2000, the following financial instruments were
outstanding whose contract amounts represent credit risk for Atlantic (dollars
in thousands):

                                                   December 31,
                                                   ------------
                                               2001              2000
                                               ----              ----

     Commitments to extend credit          $ 12,747           $ 8,669
     Standby letters of credit             $  1,189           $ 1,171


Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. The commitments for equity lines of credit may expire
without being drawn upon. Therefore, the total commitment amounts do not
necessarily represent future cash requirements. The amount of collateral
obtained, if it is deemed necessary by Atlantic, is based on management's credit
evaluation of the customer.

Unfunded commitments under commercial lines-of-credit, revolving credit lines,
and overdraft protection agreements are commitments for possible future
extensions of credit to existing customers. These lines-of-credit are generally
uncollateralized and usually do not contain a specified maturity date and may
not be drawn upon to the total extent to which Atlantic is committed.


                                       53
<PAGE>


                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)

Commercial and standby letters-of-credit are conditional commitments issued by
Atlantic to guarantee the performance of a customer to a third party. Those
letters-of-credit are primarily issued to support public and private borrowing
arrangements. Approximately $62,000 of the $98,000 of letters-of-credit issued
have expiration dates within one year. The credit risk involved in issuing
letters-of-credit is essentially the same as that involved in extending loan
facilities to customers. Atlantic generally holds collateral supporting those
commitments if deemed necessary.

Collateral Requirements. To reduce credit risk related to the use of
credit-related financial instruments, Atlantic might deem it necessary to obtain
collateral. The amount and nature of the collateral obtained is based on
Atlantic's credit evaluation of the customer. Collateral held varies but may
include cash, securities, accounts receivable, inventory, property, plant and
equipment, and real estate.

If the counterparty does not have the right and ability to redeem the collateral
or Atlantic is permitted to sell or repledge the collateral on short notice,
Atlantic records the collateral in its statement of financial condition at fair
value with a corresponding obligation to return it.

Litigation. Atlantic is a party to litigation and claims arising in the normal
course of business. Management, after consultation with legal counsel, believes
that the liabilities, if any, arising from such litigation and claims will not
be material to the financial position of Atlantic.

Other. At December 31, 2001, Atlantic had $5,800,000 unfunded lines of credit
from other banks for the purchase of overnight federal funds.


NOTE 10 - CONCENTRATIONS OF CREDIT

Substantially all of Atlantic's loans, commitments, and standby letters of
credit have been granted to customers in northeast Florida. The concentrations
of credit by type of loan are set forth in Note 3. The distribution of
commitments to extend credit approximates the distribution of loans outstanding.
Standby letters of credit were granted primarily to commercial borrowers.
Atlantic, as a matter of policy, does not extend credit to any single borrower
or group of related borrowers in excess of its legal lending limit. Atlantic
does not have any significant concentrations to any one industry or customer.


NOTE 11 - RELATED PARTIES

Atlantic has entered into transactions with its directors, executive officers,
significant stockholders, and their affiliates (Related Parties). Such
transactions were made in the ordinary course of business on substantially the
same terms and conditions, including interest rates and collateral, as those
prevailing at the same time for comparable transactions with other customers,
and did not, in the opinion of management, involve more than normal credit risk
or present other unfavorable features. Total loans to related parties amounted
to $1,499,000 and $441,000 at December 31, 2001 and 2000, respectively. Unfunded
commitments to the same parties totaled approximately $1,155,000 at December 31,
2001.


                                       54
<PAGE>






                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 11 - RELATED PARTIES (Continued)

A summary of activity for 2001 and 2000 for such loans follows
(dollars in thousands):
<TABLE>
<CAPTION>

                                 Beginning                                           End of
                                 of Period         Additions       Reductions        Period
                                 ---------         ---------       ----------        ------

<S>           <C> <C>            <C>               <C>              <C>             <C>
     December 31, 2001           $    441          $ 2,069          $ 1,011         $ 1,499
                                 ========          =======          =======         =======
     December 31, 2000           $    646          $   232          $   437         $   441
                                 ========          =======          =======         =======

</TABLE>

Deposits of insiders and their related interests totaled $6,615,000 and
$4,832,000 at December 31, 2001 and 2000, respectively.


NOTE 12 - STOCKHOLDERS' EQUITY

Preferred Stock. In addition to the 10,000,000 shares of authorized common
stock, Atlantic's articles of incorporation authorize up to 2,000,000 shares of
preferred stock. The board of directors are further authorized to establish
designations, powers, preferences, rights, and other terms for preferred stock
by resolution. No shares of preferred stock have been issued.

Warrants. In connection with Oceanside's 1997 stock offering, each investment
unit consisted of one share of common stock and one transferable warrant to
purchase one share of common stock at $10.00 per share during the five-year
period beginning on the date Atlantic opened for business (July 21, 1997). After
July 21, 1998, the board of directors of Oceanside, by written notice to each
stockholder, may shorten the period during that the warrants may be exercised to
a period ending no sooner than 30 days after such notice is mailed.

A summary of the warrant activity during 2001 and 2000 follows:

                                           Number of            Weighted Average
                                            Warrants            Exercise Price
                                            --------            --------------

     Outstanding at December 31, 1999       593,510                  $ 10.00
     Warrants exercised, 2000                (1,500)                 $ 10.00
                                            -------
     Outstanding at December 31, 2000       592,010                  $ 10.00
     Warrants exercised, 2001               (32,190)                 $ 10.00
                                            -------
     Outstanding at December 31, 2001       559,820                  $ 10.00
                                            =======


All outstanding warrants were fully vested and exercisable at December 31, 2001,
with a remaining contractual life of approximately 7 months.

Dividends. The ability of Atlantic to pay dividends to stockholders depends
primarily on dividends received by Atlantic from its subsidiary, Oceanside.
Oceanside's ability to pay dividends is limited by federal and state banking
regulations based upon Oceanside's profitability and other factors. State
banking statutes further require (i) prior approval, (ii) that at least 20% of
the prior year's earnings be transferred to additional paid-in capital (surplus)
annually until surplus equals or exceeds Oceanside's common stock, and (iii)
that certain minimum capital levels are maintained. At December 31, 2001,
retained earnings of approximately $588,000 were available to pay dividends to
the holding company only (Atlantic) in order to maintain Oceanside's current
regulatory capital classification.


                                       55
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 13 - NONINTEREST OPERATING EXPENSES

Other expenses follow (dollars in thousands):
                                                            2001          2000
                                                            ----          ----

         Advertising and business development            $    58       $    68
         Processing and settlement fees                      215           196
         Professional, legal, and audit fees                 148           154
         ATM expense                                          32            38
         Stationery, printing, and supplies                   85            81
         Dues and subscriptions                               30            22
         Education, training, and conventions                 33            34
         Insurance (excluding group insurance)                54            31
         Telephone                                            91            68
         Director fees                                        57            57
         Postage and freight                                  60            53
         Other miscellaneous expenses                        281           243
                                                         -------       -------
                                                         $ 1,144       $ 1,045
                                                         =======       =======


NOTE 14 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

     Cash, Cash Equivalents, and Short-term Investments. For those short-term
     instruments, the carrying amount is a reasonable estimate of fair value.

     Investment Securities. For securities held as investments, fair value
     equals quoted market price, if available. If a quoted market price is not
     available, fair value is estimated using quoted market prices for similar
     securities.

     Loans Receivable. For loans subject to repricing and loans intended for
     sale within six months, fair value is estimated at the carrying amount plus
     accrued interest, if material.

     The fair value of other types of loans is estimated by discounting the
     future cash flows using the current rates at which similar loans would be
     made to borrowers with similar credit ratings and for the same remaining
     maturities.

     Deposit Liabilities. The fair value of demand deposits, savings accounts,
     and certain money market deposits is the amount payable on demand at the
     reporting date. The fair value of long-term fixed maturity certificates of
     deposit is estimated using the rates currently offered for deposits of
     similar remaining maturities.

     Short-term Debt. For short-term debt, including accounts and demand notes
     payable, the carrying amount is a reasonable estimate of fair value.

     Other Borrowings. For borrowings at a recent market interest rate, the
     carrying amount is a reasonable estimate of fair value. Otherwise, the
     borrowing will be estimated using the rates currently incurred for
     borrowings of similar remaining maturities.

                                       56
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 14 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

     The estimated fair values of Atlantic's financial instruments at December
     31, 2001, follow (dollars in thousands):

                                                   Carrying            Fair
                                                    Amount             Value
                                                    ------             -----
     Financial Assets
         Cash and deposits in other banks         $  5,251          $  5,251
         Investment securities                      12,423            12,413
         Loans, net                                 60,838            65,170
                                                  --------          --------

              Total assets valued                 $ 78,512          $ 82,834
                                                  ========          ========

     Financial Liabilities
         Deposits                                 $ 73,780          $ 74,044
         Other borrowings                            3,044             2,816
                                                  --------          --------

              Total liabilities valued            $ 76,824          $ 76,860
                                                  ========          ========


While these estimates of fair value are based on management's judgment of the
most appropriate factors, there is no assurance that, were Atlantic to have
disposed of such items at December 31, 2001, the estimated fair values would
necessarily have been achieved at that date, since market values may differ
depending on various circumstances. The estimated fair values at December 31,
2001, should not necessarily be considered to apply at subsequent dates.


NOTE 15 - REGULATORY CAPITAL MATTERS

The Federal Reserve Board and other bank regulatory agencies have adopted
risk-based capital guidelines for banks and bank holding companies. The main
objectives of the risk-based capital framework are to provide a more consistent
system for comparing capital positions of banking organizations and to take into
account the different risks among banking organizations' assets, liabilities,
and off-balance sheet items. Bank regulatory agencies have supplemented the
risk-based capital standard with a leverage ratio for Tier I capital to total
reported assets.

Failure to meet the capital adequacy guidelines and the framework for prompt
corrective actions could initiate actions by the regulatory agencies, which
could have a material effect on the consolidated financial statements.



                                       57
<PAGE>


                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 15 - REGULATORY CAPITAL MATTERS (Continued)

As of December 31, 2001, the most recent notification from the FDIC, Oceanside
was categorized as well capitalized under the regulatory framework for prompt
corrective action. To remain categorized as well capitalized, it will have to
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
as disclosed in the table below. There are no conditions or events since the
most recent notification that management believes have changed the prompt
corrective action category.



<TABLE>

<CAPTION>
                                                                                                    To Be Well
                                                                                                   Capitalized
                                                                                                   Under Prompt
                                                                  For Capital                    Corrective Action
                                         Actual                  Adequacy Purposes                  Provisions
                                    Amount     Ratio           > Amount   > Ratio               > Amount   > Ratio
                                    ------     -----           --------   -------               --------   -------
                                                              (dollars in thousands)
<S>                                <C>         <C>              <C>         <C>                  <C>        <C>
As of December 31, 2001:
     Total Risk-Based Capital
     (To Risk-Weighted Assets)     $ 7,681     10.83%           $ 5,675     8.00%                $ 7,093    10.00%
     Tier I Capital
     (To Risk-Weighted Assets)     $ 6,915      9.75%           $ 2,837     4.00%                $ 4,256     6.00%
     Tier I Capital
     (To Average Assets)           $ 6,915      8.67%           $ 3,189     4.00%                $ 3,986     5.00%

As of December 31, 2000:
     Total Risk-Based Capital
     (To Risk-Weighted Assets)     $ 6,888     11.64%           $ 4,736     8.00%                $ 5,920    10.00%
     Tier I Capital
     (To Risk-Weighted Assets)     $ 6,206     10.48%           $ 2,368     4.00%                $ 3,552     6.00%
     Tier I Capital
     (To Average Assets)           $ 6,206      8.83%           $ 2,810     4.00%                $ 3,513     5.00%

</TABLE>


                                      58
<PAGE>






                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 16 - PARENT COMPANY FINANCIAL INFORMATION

Presented below are condensed financial statements for Atlantic BancGroup, Inc.
 (parent only):
<TABLE>
<CAPTION>

Condensed Balance Sheets as of December 31:                                        2001       2000
                                                                                   ----       ----
                                                                             (Dollars In Thousands)
Assets
<S>                                                                             <C>        <C>
     Cash and cash equivalents                                                  $   287    $    11
     Investment in and advances to subsidiary bank                                6,855      6,158
     Investment in mortgage banking subsidiary                                       --         --
     Other assets                                                                   563        597
                                                                                -------    -------
     Total                                                                      $ 7,705    $ 6,766
                                                                                =======    =======

Liabilities and Stockholders' Equity
     Liabilities                                                                $   738    $   746
     Stockholders' equity                                                         6,967      6,020
                                                                                -------    -------
     Total                                                                      $ 7,705    $ 6,766
                                                                                =======    =======
<CAPTION>

Condensed Statements of Operations and Stockholders' Equity
Years Ended December 31:                                                           2001       2000
                                                                                   ----       ----
                                                                             (Dollars In Thousands)
<S>                                                                             <C>        <C>
Equity in net income of subsidiary bank                                         $   709    $   541
Equity in net loss of mortgage banking subsidiary                                    --         --
Other income                                                                         62        205
Other expenses                                                                     (134)      (294)
                                                                                -------    -------
Net income                                                                          637        452
Stockholders' Equity:
     Beginning of  year                                                           6,020      5,404
     Stock warrants exercised and rounding                                          322         15
     Net change in unrealized holding gains (losses)
         on securities in subsidiary bank                                           (12)       149
                                                                                -------    -------

     End of year                                                                $ 6,967    $ 6,020
                                                                                =======    =======
<CAPTION>

Condensed Statements of Cash Flows
Years Ended December 31:                                                          2001     2000
                                                                                  ----     ----
                                                                             (Dollars In Thousands)
Operating Activities
<S>                                                                             <C>        <C>
Net income                                                                        $ 637      $ 452
Adjustment to reconcile net income to net cash
     provided by operating activities:
     Equity in undistributed earnings of subsidiaries                              (709)      (541)
     Other                                                                           29         84
                                                                                  -----      -----
Net Cash Used In Operating Activities                                               (43)        (5)
Net Cash Used by Investing Activities:
     Purchase of facilities                                                          (3)       (11)
Net Cash Provided by Financing Activities:
     Proceeds from other borrowings                                                  --          2
     Advances to mortgage banking subsidiary                                         --         --
     Proceeds from stock warrants exercised                                         322         15
                                                                                  -----      -----
Increase in Cash and Cash Equivalents                                               276          1
Cash and Cash Equivalents:
     Beginning of year                                                               11         10
                                                                                  -----      -----
     End of year                                                                  $ 287      $  11
                                                                                  =====      =====



</TABLE>

                                       59
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
     FINANCIAL DISCLOSURE.

None.


                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
     COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

The information contained under the section captioned "Election of Directors" in
the registrant's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on April 25, 2002, filed as Exhibit 99.1 herein (the
"Proxy Statement"), is incorporated herein by reference.

                      SECTION 16(a) REPORTING REQUIREMENTS

The information contained under the section captioned "Section 16(a) Reporting
Requirements" in the registrant's definitive Proxy Statement and is incorporated
herein by reference (see Exhibit 99.1).


ITEM 10. EXECUTIVE COMPENSATION.

The information contained in the sections captioned "Committees of the Board of
Directors," and "Executive Compensation" and "Benefits" under "Election of
Directors" in the Proxy Statement, is incorporated herein by reference (see
Exhibit 99.1).


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information contained in the section captioned "Securities Ownership of
Management" under "Election of Directors" in the Proxy Statement, is
incorporated herein by reference (see Exhibit 99.1).


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information contained in the section captioned "Certain Relationships and
Related Transactions" under "Election of Directors" in the Proxy Statement is
incorporated herein by reference (see Exhibit 99.1).



                                       60
<PAGE>



ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

         (a)      Exhibits

               2.1  Agreement and Plan of Reorganization dated November 19,
                    1998, approved April 3, 1999, and completed May 5, 1999
                    (Incorporated by reference to Exhibit 2.1 to Atlantic's Form
                    10-KSB for year ended December 31, 1999)

               3.1  Articles of Incorporation of Atlantic BancGroup, Inc.
                    included in the Registration Statement on Form 8-A filed
                    with the Securities and Exchange Commission on May 17, 1999
                    (Incorporated by reference to Exhibit 3.1 to Atlantic's Form
                    10-KSB for year ended December 31, 1999)

               3.2  Bylaws of Atlantic BancGroup, Inc. (Incorporated by
                    reference to Exhibit 3.2 to Atlantic's Form 10-KSB for year
                    ended December 31, 1999)

               4.1  Specimen Stock Certificate of Atlantic BancGroup, Inc.
                    included in the Registration Statement on Form 8-A filed
                    with the Securities and Exchange Commission on May 17, 1999
                    (Incorporated by reference to Exhibit 4.1 to Atlantic's Form
                    10-KSB for year ended December 31, 1999)

               4.2  Form of Common Stock Warrant (Incorporated by reference to
                    Exhibit 4.2 to Atlantic's Form 10-KSB for year ended
                    December 31, 1999)

               10.1 Software License Agreement dated as of October 6, 1997,
                    between Oceanside and File Solutions, Inc. (Incorporated by
                    reference to Exhibit 10.1 to Atlantic's Form 10-KSB for year
                    ended December 31, 1999)

               10.2 File Solutions Software Maintenance Agreement dated as of
                    July 15, 1997, between Oceanside and SPARAK Financial
                    Systems, Inc. (Incorporated by reference to Exhibit 10.2 to
                    Atlantic's Form 10-KSB for year ended December 31, 1999)

               10.3 Remote Data Processing Agreement dated as of March 3, 1997,
                    between Oceanside and Bankers Data Services, Inc.
                    (Incorporated by reference to Exhibit 10.3 to Atlantic's
                    Form 10-KSB for year ended December 31, 1999)

               10.4 Lease dated September 27, 2000, between MANT EQUITIES, LLC
                    and Oceanside Bank (Incorporated by reference to Exhibit
                    10.4 to Atlantic's Form 10-KSB for year ended December 31,
                    2000)


                                       61
<PAGE>


               11   The computation of per share earnings is shown in the
                    consolidated financial statements of Atlantic BancGroup,
                    Inc. and Subsidiary for December 31, 2001 and 2000,
                    contained in Item 7, on Page 47 of the Notes to Consolidated
                    Financial Statements

               21.1 Subsidiary of the Registrant

               99.1 Atlantic BancGroup, Inc. Proxy Statement for the Annual
                    Meeting of Shareholders to be held on April 25, 2002

     (b)  Reports on Form 8-K

          No current reports on Form 8-K were filed by Atlantic during the last
          fiscal quarter covered by this report.


                                       62
<PAGE>


                                   SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities
          Exchange Act of 1934, the Registrant has caused this report to be duly
          signed on its behalf by the undersigned, thereunto duly authorized, in
          the City of Jacksonville Beach, State of Florida, on the 21st of
          March, 2002.

                                  ATLANTIC BANCGROUP, INC.

                                  /s/     Barry W. Chandler
                                  -------------------------
                                  Barry W. Chandler
                                  President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the 21st of March, 2002.

Signature                          Title
---------                          -----

/s/Donald F. Glisson, Jr.     Chairman of the Board
-------------------------
   Donald F. Glisson, Jr.

/s/Barry W. Chandler          President and Chief Executive Officer
-------------------------
   Barry W. Chandler

/s/David L. Young             Executive Vice President, Chief Financial Officer,
-------------------------     and Corporate Secretary
   David L. Young

/s/Frank J. Cervone           Director
-------------------------
   Frank J. Cervone

/s/Jimmy Dubberly             Director
-------------------------
   Jimmy Dubberly

/s/Robin H. Scheiderman       Director
-------------------------
   Robin H. Scheiderman

/s/G. Keith Watson            Director
-------------------------
   G. Keith Watson

/s/Conrad L. Williams         Director
-------------------------
   Conrad L. Williams

/s/Dennis M. Wolfson          Director
-------------------------
   Dennis M. Wolfson



                                       63
<PAGE>







                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                                   Form 10-KSB
                     For Fiscal Year Ended December 31, 2001

                                  EXHIBIT INDEX
                                  -------------

Exhibit
-------
  No.                            Exhibit
  ---               ----------------------------------

21.1                Subsidiary of the Registrant

99.1                Atlantic BancGroup, Inc. Proxy Statement for the Annual
                    Meeting of Shareholders to be held on April 25, 2002






                                       64