U. S. SECURITIES AND
                               EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   for the fiscal year ended December 31, 2005

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

                        Commission File Number 001-15061

                            ATLANTIC BANCGROUP, INC.
                 (Name of small business issuer in its charter)

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

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

    Issuer's telephone number: (904) 247-9494

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

    Securities registered pursuant to Section 12(g) of the Exchange Act:

                     Common Stock, par value $0.01 per share
                                (Title of Class)

Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. [ ]

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 there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant'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. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X]

The issuer's revenues for its most recent fiscal year were $12,128,000.

The aggregate market value of the common stock of the issuer held by
non-affiliates of the issuer (1,009,036 shares) at February 28, 2006, was
approximately $27.3 million based on the initial bid quoted price of $27.10 per
share as quoted on the NASDAQ SmallCap Market.

As of February 28, 2006, there were issued and outstanding 1,247,516 shares of
the issuer's common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on April 27, 2006, are incorporated into Part III, Items
9 through 13 of this Annual Report on Form 10-KSB.

<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS

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

          Forward-Looking Statements.................................................................1

Item 1.   Description of Business....................................................................2
          General....................................................................................2
          Competition................................................................................3
          Lending Activities.........................................................................4
          Deposit Activities.........................................................................5
          Investment Activities......................................................................5
          Correspondent Banking......................................................................5
          Interest and Usury.........................................................................5
          Supervision and Regulation.................................................................6
          Future Legislative Developments...........................................................10
          Common Stock..............................................................................10
          Preferred Stock...........................................................................10
          Indemnification of Directors and Officers.................................................11
          Employees.................................................................................11
          Website Availability of Reports Filed with the Securities and Exchange Commission.........11

Item 2.   Description of Properties.................................................................12

Item 3.   Legal Proceedings.........................................................................12

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

PART II.............................................................................................13

Item 5.   Market for Common Equity and
              Related Stockholder Matters...........................................................13

Item 6.   Management's Discussion and Analysis......................................................13
          Selected Financial Data...................................................................14
          Overview..................................................................................15
          Comparison of Years Ended December 31, 2005 and 2004......................................16
          Comparison of Years Ended December 31, 2004 and 2003......................................18
          Loan Portfolio............................................................................22
          Classification of Assets and Nonaccrual or Impaired Loans.................................24
          Allowance for Loan Losses.................................................................25
          Securities................................................................................26
          Deposits..................................................................................27
          Short-Term and Long-Term Debt.............................................................29
          Liquidity.................................................................................30
          Off-Balance Sheet Arrangements and Contractual Obligations................................31
          Capital Resources.........................................................................31
          Related Party Transactions................................................................33
          Interest Rate Sensitivity.................................................................33
          Recent Accounting Pronouncements Impacting Future Periods.................................34
          Impact of Inflation.......................................................................35
          Quantitative and Qualitative Disclosures About Market Risk................................36
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Item 7.   Financial Statements......................................................................37

Item 8.   Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure................................................62

Item 8A.  Controls and Procedures...................................................................62


Item 8B.  Other Information.........................................................................62

PART III  ..........................................................................................62

Item 9.   Directors and Executive Officers of the Registrant........................................62
              Compliance with Section 16(a) of the Exchange Act.....................................62
              Code of Ethics........................................................................62
              Financial Expert......................................................................63
              Audit Committee Charter...............................................................63

Item 10.  Executive Compensation....................................................................63

Item 11.  Security Ownership of Certain Beneficial Owners and Management
              and Related Stockholder Matters.......................................................63

Item 12.  Certain Relationships and Related Transactions............................................63

Item 13.  Exhibits and Reports on Form 8-K..........................................................63

Item 14.  Principal Accountant Fees and Services....................................................64

SIGNATURES..........................................................................................65

EXHIBIT INDEX.......................................................................................66
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<PAGE>

                                     PART I

FORWARD-LOOKING STATEMENTS

Atlantic BancGroup, Inc. ("Atlantic" or the "Holding Company"), and our
wholly-owned banking subsidiary (Oceanside Bank), may from time to time make
written or oral statements, including statements contained in this report that
may constitute forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934 (the "Exchange Act"). The words "expect,"
"anticipate," "intend," "consider," "plan," "believe," "seek," "should,"
"estimate," and similar expressions are intended to identify such
forward-looking statements, but other statements may constitute forward-looking
statements. These statements should be considered subject to various risks and
uncertainties. Such forward-looking statements are made based upon management's
belief as well as assumptions made by, and information currently available to,
management pursuant to "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Our actual results may differ materially from the
results anticipated in forward-looking statements due to a variety of factors.
Such factors are described below and include, without limitation:

o     unanticipated deterioration in the financial condition of borrowers
      resulting in significant increases in loan losses and provisions for those
      losses,

o     increased competition with other financial institutions,

o     lack of sustained growth in the economy in our trade area,

o     rapid fluctuations or unanticipated changes in interest rates, and

o     changes in the legislative and regulatory environment.

Many of such factors are beyond our ability to control or predict. 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. We do not
undertake, and specifically disclaim any obligation, to publicly release the
result of any revisions that 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.

Unless this Form 10-KSB indicates otherwise or the context otherwise requires,
the terms "we," "our," "us," "Atlantic," "Holding Company," or "Oceanside" as
used herein refer collectively to Atlantic BancGroup, Inc. and our subsidiary
Oceanside Bank, which we sometimes refer to as "Oceanside," "our bank
subsidiary," or "our bank." References herein to the fiscal years 2003, 2004,
and 2005 mean our fiscal years ended December 31, 2003, 2004, and 2005,
respectively.


                                      -1-
<PAGE>

ITEM 1. DESCRIPTION OF BUSINESS.

General

Atlantic BancGroup, Inc. On October 23, 1998, Atlantic BancGroup, Inc. ("Holding
Company" or "Atlantic") was incorporated in the State of Florida. On April 3,
1999, the shareholders of Oceanside Bank ("Oceanside" or "Bank") approved the
Agreement and Plan of Reorganization ("Reorganization") whereby Oceanside became
a wholly-owned subsidiary of the Holding Company. The Reorganization was
completed on May 5, 1999. The Holding Company 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. Our corporate offices are
located at 1315 South Third Street, Jacksonville Beach, Florida.

Atlantic presently has no significant operations other than Oceanside, our
wholly-owned subsidiary. Oceanside, which is our primary source of income, is a
state-chartered commercial bank. Oceanside 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, the Federal Deposit Insurance
Corporation, and the State of Florida Department of Financial Services. 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.

Oceanside Bank. Oceanside Bank opened July 21, 1997, and operates as a community
bank within our assessment area. Oceanside provides 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 three branch offices that are located
at 560 Atlantic Boulevard, Neptune Beach, Florida; 13799 Beach Boulevard,
Jacksonville, Florida; and 1790 Kernan Boulevard South, Jacksonville, Florida.
The Kernan Boulevard Branch was opened December 15, 2003, and serves the growing
East Jacksonville market.

Oceanside Bank has defined its assessment area based on various factors,
including its size, banking offices, geographic boundaries, lending expertise,
management, and competition. Duval County and three census tracts in the Ponte
Vedra area of St. Johns County have been designated as the institution's
assessment area. Oceanside draws most of our customer deposits and conducts a
significant portion of our lending transactions from and within our assessment
area, which includes the "Beaches and West Beaches area" of Jacksonville,
Florida. Duval and St. Johns County enjoy an abundant and educated work force,
an 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.

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

We believe that our assessment area 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 assessment area. Our broad base of shareholders from the
Beaches and surrounding areas of Jacksonville, and the favorable economic
environment of our assessment area, should provide us with the opportunity to
gain market share.

As a locally-owned and operated institution, we emphasize 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.


                                      -2-
<PAGE>

Our principal strategy is to:

o     Expand our commercial and small business customer base within our
      assessment area,

o     Make real estate mortgage loans within our assessment area, as well as
      throughout Duval and the surrounding counties, and

o     Expand our consumer loan base within our assessment area.

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 sources of funds for loans and other investments include demand, time,
savings, and other deposits, amortization and repayment of loans, sales to other
lenders or institutions of loans or participations in loans, and other
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, savings, certificates of
deposit, and various retirement accounts. During 2003, 2004, and 2005, we also
obtained funds from customer repurchase agreements, which have been classified
as other borrowings.

We have automated teller machines (the "ATMs") located at each of our offices,
and we are a member of an electronic banking network so that our customers may
use the ATMs of other financial institutions. We also operate drive-in tellers
and 24-hour depositories at each of our offices. As part of the strategy to
offer innovative services to our customers, we 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 in our assessment area and surrounding
areas.

Competition

The banking industry in general, and our market in particular, is characterized
by significant competition for both deposits and lending opportunities. In our
market area, we compete with other commercial banks, savings and loan
associations, credit unions, finance companies, mutual funds, insurance
companies, brokerage and investment banking firms, and various other nonbank
competitors. Competition for deposits may have the effect of increasing the
rates of interest we will pay on deposits, which would increase our cost of
money and possibly reduce our net earnings. Competition for loans may have the
effect of lowering the rate of interest we will receive on our loans, which
would lower our return on invested assets and possibly reduce our net earnings.
Many of our competitors have been in existence for a significantly longer period
of time than us, are larger and have greater financial and other resources and
lending limits than us, and may offer certain services that we do not provide at
this time. However, we feel the market is rich with opportunity to provide
tailor-made custom banking products and services that cannot be provided by the
large institutions that offer many banking products and services on an
impersonal basis. As larger financial institutions have in recent years acquired
community banks, we are able to cater to those customers looking for more
personalized service.

Our profitability depends upon our ability to compete in this market area. At
the present time, we are unable to predict to what degree competition may
adversely affect our financial condition and operating results.

Our response to this highly competitive environment dictates that we:

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

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


                                      -3-
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Lending Activities

We offer a wide range of loans to individuals and small businesses and other
organizations that are located, or conduct a substantial portion of their
business, in our assessment area. At December 31, 2005, our consolidated total
loans were $152.9 million, or 71.5%, of our total 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.

Our loan portfolio is 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, 2005, approximately 89% of our total loan
portfolio consisted of loans secured by mortgages on real estate. Of the total
loans secured by mortgages on real estate, approximately 46% are secured by
nonfarm nonresidential properties and 28% are construction, land development,
and other land loans, secured by real estate. The remaining 26% are secured by
1-4 family and multifamily residential properties.

Our 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 1-4 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 three to
five years. Loans in excess of three to five years are generally adjustable rate
loans. Residential real estate loans ordinarily are repayable in monthly
installments, based on up to a 30-year amortization schedule, with variable
interest rates.

We also solicit, accept applications for, and negotiate terms and conditions for
fixed-rate and other residential mortgage loans on behalf of our customers that
we broker to third-party correspondent mortgage lenders. During 2005, 2004, and
2003, we brokered loans totaling $12.7 million, $9.1 million and $15.9 million,
respectively, which were closed by the correspondent mortgage lender. We
recorded brokering fees of $114,000, $106,000, and $183,000 in 2005, 2004, and
2003, respectively. Our ability to solicit, process, and broker residential
mortgage loans is highly dependent on the general economy and interest rate
environment as well as competition from other local and national mortgage
bankers and brokers.

Our 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 that 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 8% of our total loan
portfolio as of December 31, 2005.

Our 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 an amortization schedule of up to five years. Consumer and other loans
represent approximately 3% of our total loan portfolio at December 31, 2005.

Loan originations are derived from a number of sources. Loan originations can be
attributed to direct solicitation by our loan officers, referrals from 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 loan 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.


                                      -4-
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Deposit Activities

Deposits are our major source of funds for loans and other investment
activities. In 2005, our regular savings, demand, NOW, and money market deposit
accounts comprised approximately 50% of our consolidated total deposits.
Approximately 34% of our consolidated deposits at December 31, 2005, were
certificates of deposit (or time deposits) of less than $100,000. Time deposits
of $100,000 and over made up approximately 16% of our consolidated total
deposits at December 31, 2005. Generally, our goal is to maintain the rates paid
on our deposits at a competitive level. We do not currently have any brokered
deposits.

Investment Activities

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
purchase certificates of deposits of national and state banks. These investments
may exceed $100,000 in any one institution (the current 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 we have available over and above
daily cash needs. We invest this money 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.

A portion of our 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 our
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 that
cannot provide those services for itself from an economic, regulatory, 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 have ongoing banking relationships with several
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.


                                      -5-
<PAGE>

Supervision and Regulation

Both the Holding Company and Oceanside are subject to comprehensive regulation,
examination, and supervision by the Federal Reserve, the Florida Department of
Financial Services ("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. The Holding Company is examined periodically by
the Federal Reserve, and the Bank is regularly examined by the Department and
the FDIC. Both the Bank and the Holding Company submit periodic reports
regarding their financial condition and other matters to their respective
regulators. 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 the Holding
Company and Oceanside, including the issuance of cease and desist orders and the
removal of directors and officers.

The following is a brief summary of certain statutes, rules, and regulations
affecting us and our subsidiary bank. This summary is qualified in its entirety
by reference to the particular statutory and regulatory provisions referred to
below and is not intended to be an exhaustive description of the statutes or
regulations applicable to our business and subsidiary bank. Supervision,
regulation, and examination of banks by regulatory agencies are intended
primarily for the protection of depositors, rather than shareholders.

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 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 or bank holding company, (ii) acquiring all or substantially all of the
assets of a bank, 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 to
substantially 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 Community Reinvestment Act ("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.

Under federal law, federally insured banks are subject, with some exceptions, to
certain restrictions on any extension of credit to their parent holding
companies or other affiliates, on investment in the stock or other securities of
affiliates, and on the taking of such stock or securities as collateral from any
borrower. In addition, banks are


                                      -6-
<PAGE>

prohibited from engaging in certain tie-in arrangements in connection with any
extension of credit or the providing of any property or service.

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 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 and Other Banking 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. Beginning April 1, 2006, the FDIC will begin insuring retirement
accounts up to $250,000. 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
loan 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, 2005, Oceanside's Tier 1
and total risk-based capital ratios were 10.62% and 11.52%, respectively. At
December 31, 2005, Atlantic's Tier 1 and total risk-based capital ratios were
10.71% and 11.60%, respectively.

Bank holding companies and banks are also required to maintain capital at a
minimum level based on average total assets, which is known as the leverage
ratio. The minimum requirement for the leverage ratio is 3%; however, all but
the highest rated institutions are required to maintain ratios 100 to 200 basis
points above the minimum. At December 31, 2005, Oceanside's and Atlantic's
leverage ratios were 8.93% and 9.01%, respectively.

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 that becomes "significantly
undercapitalized" or "critically undercapitalized."


                                      -7-
<PAGE>

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.

After an opportunity for a hearing, the FDIC has the 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, 2005, Oceanside met the capital requirements of a
"well-capitalized" institution.

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 1994,
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 are 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 a 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


                                      -8-
<PAGE>

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 cash 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 or bank holding company by tender offer or similar
means than 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 10% or more of a bank holding company's or state bank's
voting stock, and 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 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.

Corporate Governance. The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act" or
"SOX"), which became law on July 30, 2002, added new legal requirements for
public companies affecting corporate governance, accounting and corporate
reporting. Some of the principal provisions of the Act include:

o     the creation of an independent accounting oversight board to oversee the
      audit of public companies and auditors who perform such audits;

o     auditor independence provisions which restrict non-audit services that
      independent accountants may provide to their audit clients;

o     additional corporate governance and responsibility measures which (a)
      require the chief executive officer and chief financial officer to certify
      financial statements and internal controls and to forfeit salary and
      bonuses in certain situations, and (b) protect whistleblowers and
      informants;

o     expansion of the authority and responsibilities of the company's audit,
      nominating and compensation committees;

o     mandatory disclosure by analysts of potential conflicts of interest; and

o     enhanced penalties for fraud and other violations.

USA Patriot Act. As part of the USA Patriot Act, signed into law on October 26,
2001, Congress adopted the International Money Laundering Abatement and
Financial Anti-Terrorism Act of 2001 (the "Act"). The Act authorizes the
Secretary of the Treasury, in consultation with the heads of other government
agencies, to adopt special measures applicable to financial institutions such as
banks, bank holding companies, broker-dealers and insurance companies. Among its
other provisions, the Act requires each financial institution: (i) to establish
an anti-money laundering program; (ii) to establish due diligence policies,
procedures and controls that are reasonably designed to detect and report
instances of money laundering in United States private banking accounts and
correspondent accounts maintained for non-United States persons or their
representatives; and (iii) to avoid establishing, maintaining, administering, or
managing correspondent accounts in the United States for, or on behalf of, a
foreign shell bank that does not have a physical presence in any country. In
addition, the Act expands the circumstances under which funds in a bank account
may be forfeited and requires covered financial institutions to respond under
certain circumstances to requests for information from federal banking agencies
within 120 hours.


                                      -9-
<PAGE>

Treasury regulations implementing the due diligence requirements were issued in
2002. These regulations required minimum standards to verify customer identity,
encouraged cooperation among financial institutions, federal banking agencies,
and law enforcement authorities regarding possible money laundering or terrorist
activities, prohibited the anonymous use of "concentration accounts," and
required all covered financial institutions to have in place an anti-money
laundering compliance program.

The Act also amended the Bank Holding Company Act and the Bank Merger Act to
require the federal banking agencies to consider the effectiveness of a
financial institution's anti-money laundering activities when reviewing an
application under these acts.

Check 21. On October 28, 2003, President Bush signed into law the Check Clearing
for the 21st Century Act, also known as Check 21. This law gives "substitute
checks," such as a digital image of a check and copies made from that image, the
same legal standing as the original paper check. Some of the major provisions
include:

o     allowing check truncation without making it mandatory;

o     demanding that every financial institution communicate to accountholders
      in writing a description of its substitute check processing program and
      their rights under the law;

o     legalizing substitutions for and replacements of paper checks without
      agreement from consumers;

o     retaining in place the previously mandated electronic collection and
      return of checks between financial institutions only when individual
      agreements are in place;

o     requiring that when accountholders request verification, financial
      institutions produce the original check (or a copy that accurately
      represents the original) and demonstrate that the account debit was
      accurate and valid; and

o     requiring recrediting of funds to an individual's account on the next
      business day after a consumer proves that the financial institution has
      erred.

This new legislation will likely continue to affect bank capital spending as
many financial institutions assess whether technological or operational changes
are necessary to stay competitive and take advantage of the new opportunities
presented by Check 21.

Future Legislative Developments

Various legislative acts, including proposals to modify the bank regulatory
system, expand the powers of banking institutions and financial holding
companies and limit the investments that a depository institution may make with
insured funds, are from time to time introduced in Congress and the Florida
legislature. Such legislation may change banking statutes and the environment in
which we and our banking subsidiary operate in substantial and unpredictable
ways. We cannot determine the ultimate effect that potential legislation, if
enacted, or implementing regulations with respect thereto, would have upon our
financial condition or results of operations or that of our banking subsidiary.

Common Stock

We have 10,000,000 shares of our $0.01 par value common stock authorized. As of
February 28, 2006, there were 1,247,516 shares outstanding. Holders of our
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, holders of our 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 of the outstanding shares of common stock are fully
paid and non-assessable.

Preferred Stock

In addition to the 10,000,000 shares of authorized common stock, our 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.


                                      -10-
<PAGE>

Indemnification of Directors and Officers

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

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.

Employees

At December 31, 2005, we had approximately 47 full-time employees and 4
part-time employees for a full-time employee equivalent of 50. 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 the 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.

The employees are not represented by a collective bargaining unit. We consider
relations with employees to be good.

Website Availability of Reports Filed with the Securities and Exchange
Commission

We maintain an Internet website located at www.oceansidebank.com on which, among
other things, we make available, free of charge, various reports that we file
with, or furnish to, the SEC, including our Annual Report on Form 10-KSB,
Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K, and amendments to
those reports. These reports are made available as soon as reasonably
practicable after these reports are filed with, or furnished to, the SEC.


                                      -11-
<PAGE>

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 real property 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 Atlantic's initial offering. Improvements totaling
approximately $460,000, net of disposals, have been made through December 31,
2005.

On June 3, 1998, Oceanside purchased from SouthTrust Bank, N.A., a 1,968
square-foot building and real estate 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 $427,000 and spent $90,000 on
renovations and upgrades, net of disposals. This facility includes two offices,
three inside teller windows, general lobby space, three drive-up teller windows,
an ATM, and on-site parking. There is no outstanding mortgage loan on this
property.

On September 27, 2000, Oceanside executed a lease for our third banking
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.
Building improvements totaled $935,000, net of disposals. Rent commenced 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. Oceanside
acquired an additional 2,200 square feet of rental space during 2004 adjacent to
the operations area for its loan operations department. Building improvements
were completed during the fourth quarter of 2005 and totaled $113,000. Scheduled
annual rent payments for 2005 through 2011 for the branch and operations are:
$195,000 (2006), $219,000 (2007 - 2010), and $76,000 (2011). Scheduled rent
payments for 2007 - 2011 include inflation adjustments.

On August 22, 2002, Oceanside executed a lease for our newest branch location,
which opened December 15, 2003. This branch is located at the intersection of
Kernan and Atlantic Boulevards, at 1790 Kernan Boulevard South, Jacksonville,
Florida. The lease covers approximately 42,000 square feet of land, with the
square footage of the building at approximately 3,200 square feet at a cost of
approximately $1,388,000 for building improvements. Rent commenced in September
2003. The lease is for twenty years with two ten-year renewal options. Scheduled
annual rent payments for 2006 through September 2023 are $89,000, including
inflation adjustments.

We believe all of our facilities are in good condition and well-maintained.

ITEM 3. LEGAL PROCEEDINGS.

We are periodically parties to or otherwise involved in legal proceedings
arising in the normal course of business, such as claims to enforce liens,
claims involving the making and servicing of real property loans, and other
issues incident to our operations. We do not believe that there are any pending
or threatened proceedings against us, which, if determined adversely, would have
a material effect on our consolidated financial position.

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

No matters were submitted to a vote of Atlantic's security holders during the
fourth quarter of the year ended December 31, 2005.


                                      -12-
<PAGE>

                                     PART II

ITEM 5. MARKET FOR 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 quotation on the Over-the-Counter Bulletin Board and on August 29,
2003, Atlantic common stock commenced its listing on the NASDAQ SmallCap Market
under the symbol "ATBC." During 2005, 2004, and 2003, the reported periodic high
and low quotes during each quarter follow:

<TABLE>
<CAPTION>

                       2005                                 2004                                 2003
        ----------------------------------   ----------------------------------   ----------------------------------
        4th Qtr  3rd Qtr  2nd Qtr  1st Qtr   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>       <C>     <C>      <C>      <C>
High     $29.05   $25.95   $25.57   $28.00    $27.95   $28.75   $27.25   $21.00    $18.50  $19.00   $35.00   $15.10
Low      $25.55   $24.00   $23.25   $24.50    $25.50   $23.51   $18.00   $18.15    $16.93  $16.02   $14.25   $13.00
</TABLE>

Please note that the information above represents offers made to buy our stock
and may not represent actual transactions or sales. The source of data used to
prepare the above chart was taken from historical prices provided by Commodity
Systems, Inc.

At December 31, 2005, there were approximately 650 shareholders of record with
shares held by individuals and in nominee names.

At February 28, 2006, the quoted market price for the common stock of Atlantic
was $27.10. We anticipate that for the foreseeable future, earnings will be
retained for business development and growth. Accordingly, we do not anticipate
paying cash 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.

Furthermore, the ability to pay dividends to our stockholders depends primarily
on dividends received from our banking subsidiary, Oceanside. Oceanside's
ability to pay dividends is limited by federal and state banking regulations
based upon Oceanside's profitability and other factors. At December 31, 2005,
retained earnings of Oceanside totaling approximately $2.6 million were
available to pay dividends to the Holding Company in order to maintain
Oceanside's current regulatory capital classification.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.

Management's discussion and analysis is included to provide the shareholders
with an expanded narrative of our results of operations, changes in financial
condition, liquidity, and capital adequacy. This narrative should be reviewed in
conjunction with the audited consolidated financial statements and notes
included in this report. Since our primary asset is our wholly-owned subsidiary,
Oceanside Bank, most of the discussion and analysis relates to Oceanside.


                                      -13-
<PAGE>

SELECTED FINANCIAL DATA (dollars and shares in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                At or for the
                                                                           Period Ended December 31,
                                                           ----------------------------------------------------
                                                               2005       2004       2003       2002       2001
                                                               ----       ----       ----       ----       ----
<S>                                                        <C>        <C>        <C>        <C>        <C>
Statements of Operations Data:
     Total interest income                                 $ 11,261   $  8,241   $  6,837   $  6,331   $  6,082
     Total interest expense                                   4,358      2,278      1,790      1,894      2,558
     Net interest income before provision for loan losses     6,903      5,963      5,047      4,437      3,524
     Provision for loan losses                                  334        362        319        196        108
     Net interest income after provision for loan losses      6,569      5,601      4,728      4,241      3,416
     Noninterest income                                         867        923        880        916        826
     Noninterest expense                                      5,313      4,889      4,158      4,010      3,379
     Income tax provision                                       645        469        463        294        226
     Net income                                               1,478      1,166        987        853        637

Selected End of Period Balances:
     Total assets                                          $213,880   $184,317   $145,717   $112,251   $ 83,901
     Interest-earning assets                                195,014    166,829    124,675    101,905     74,408
     Securities and stock, at cost                           38,966     29,419     23,308     17,205     12,423
     Loans, net (before allowance for loan losses)          152,803    129,801     99,482     79,107     61,604
     Allowance for loan losses                                1,552      1,296      1,220        970        766
     Deposit accounts                                       168,480    146,352    113,378     83,524     73,493
     Other borrowings                                        29,138     23,004     18,800     15,873      3,044
     Stockholders' equity                                    15,232     14,033     12,920     12,154      6,967

Selected Average Balances for the Period:
     Total assets                                          $193,249   $159,951   $126,806   $ 99,748   $ 80,454
     Interest-earning assets                                179,001    147,353    115,741     89,483     72,034
     Securities and deposits                                 34,202     27,064     21,915     14,335     10,606
     Loans, net                                             141,587    114,236     88,922     70,845     56,135
     Deposit accounts                                       123,694    104,174     77,477     62,727     55,976
     Other borrowings                                        22,450     14,608     13,959     10,164      3,052
     Stockholders' equity                                    14,596     13,445     12,653      9,557      6,523

Share Data:
     Earnings per share
         Basic                                             $   1.18   $   0.93   $   0.79   $   0.87   $   0.87
         Fully diluted                                     $   1.18   $   0.93   $   0.79   $   0.83   $   0.70
     Book value per share (period end)                     $  12.21   $  11.25   $  10.36   $   9.74   $   8.32
     Common shares outstanding (period end)                   1,248      1,248      1,248      1,248        837
     Weighted average shares outstanding
         Basic                                                1,248      1,248      1,248        980        728
         Fully diluted                                        1,248      1,248      1,248      1,025        906

Performance Ratios:
     Return on average assets                                  0.76%      0.73%      0.78%      0.86%      0.79%
     Return on average equity                                 10.13       8.67       7.80       8.93       9.77
     Interest-rate spread during the period                    3.40       3.76       4.05       4.61       4.28
     Net interest margin                                       3.95       4.13       4.46       5.09       5.06
     Noninterest expenses to average assets                    2.75       3.06       3.28       4.02       4.20

Asset Quality Ratios:
     Allowance for loan losses to period end loans             1.02%      1.00%      1.23%      1.23%      1.24%
     Net charge-offs to average loans                          0.06       0.25       0.08      -0.01       0.04
     Nonperforming assets to period end loans                  0.13       0.07       0.04       0.01       0.03
     Nonperforming assets to period end total assets           0.09       0.05       0.03       0.01       0.03

Capital and Liquidity Ratios:
     Average equity to average assets (Consolidated)           7.55%      8.41%      9.98%      9.58%      8.11%
     Leverage (4.00% required minimum) (Oceanside)             8.93       8.02       8.12       9.00       8.67
     Risk-based capital (Oceanside):
         Tier 1                                               10.62       9.55       9.42       9.67       9.75
         Total                                                11.52      10.43      10.46      10.73      10.83
     Average loans to average deposits (Consolidated)         91.18      87.10      89.22      88.53      79.82

Full-time Employee Equivalents (End of Period)                   50         48         47         43         42
</TABLE>


                                      -14-
<PAGE>

                                    OVERVIEW

How We Earn Income. As stated elsewhere herein, our 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 factors that influence net interest income include changes in
interest rates and changes in the volume and mix of assets and liability
balances. 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 loan losses, and the effective tax rate. Noninterest income
consists primarily of service fees on deposit accounts and mortgage banking
operations. Noninterest expense consists of compensation and employee benefits,
occupancy and equipment expenses, data processing costs, and other operating
expenses.

Critical Accounting Policies and Use of Significant Estimates. Our consolidated
financial statements include the accounts of the Holding Company and our banking
subsidiary. All significant intercompany accounts and transactions have been
eliminated in consolidation. The accounting and reporting policies conform with
accounting principles generally accepted in the United States of America and to
general practices within the banking industry. Our significant accounting
policies are described in Note 1 of the Notes to Consolidated Financial
Statements. The majority of these accounting policies do not require our
management to make difficult, subjective, or complex judgments. However, we
believe the allowance for loan losses is a critical policy.

Allowance for Loan Losses. The allowance for loan losses is a valuation
allowance for probable or incurred credit losses. Loan losses are charged
against the allowance when management believes the uncollectibility of a loan
balance is confirmed. Subsequent recoveries, if any, are credited to the
allowance.

Allocations of the allowance may be made for specific loans, but the entire
allowance is available for any loan that, in management's judgment, should be
charged-off.

The allowance consists of specific and general components. The specific
component relates to loans that are individually classified as impaired or loans
otherwise classified as substandard or doubtful (impaired). The general
component covers non-classified loans and is based on historical loss experience
adjusted for current factors.

A loan is impaired when full payment under the loan terms is not expected.
Commercial loans and commercial real estate loans are individually evaluated for
impairment. If a loan is impaired, a portion of the allowance is allocated so
that the loan is reported, net, at the present value of estimated future cash
flows using the loan's existing rate or at the fair value of collateral if
repayment is expected solely from the collateral and accrual of interest is
discontinued. Large groups of smaller balance homogeneous loans, such as
consumer and residential real estate loans, are collectively evaluated for
impairment, and accordingly, they are not separately identified for impairment
disclosures.

The allowance for loan losses is evaluated on a regular basis by management and
is based upon management's periodic review of the collectibility of the loans in
light of historical experience, the nature and volume of the loan portfolio,
adverse situations that may affect the borrower's ability to repay, estimated
value of any underlying collateral and prevailing economic conditions. There is
no precise method of predicting specific loan losses or amounts that ultimately
may be charged-off. Also, this evaluation is inherently subjective as it
requires estimates that are susceptible to significant revision as more
information becomes available. The determination that a loan may be
uncollectible, in whole or in part, is a matter of judgment. Similarly, the
adequacy of the allowance for loan losses can be determined only on a judgmental
basis, after full review, including, consideration of economic conditions and
their effect on particular industries and specific borrowers; a review of
borrowers' financial data, together with industry data, their competitive
situation, the borrowers' management capabilities and other factors; a
continuing evaluation of the loan portfolio, including monitoring any loans that
are identified as being of less than acceptable quality; a detailed analysis, on
a quarterly basis, of all impaired loans; and an evaluation of the underlying
collateral for secured lending.


                                      -15-
<PAGE>

We maintain a formalized loan review process supported by a credit analysis and
control system. We will maintain the allowance for loan losses at a level
sufficient to absorb estimated uncollectible loans and, expect to make periodic
additions to the allowance for loan losses.

Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates. Material estimates
that are particularly susceptible to significant change in the near term relate
to the determination of the allowance for loan losses and valuation of other
real estate owned ("OREO").

The determination of the adequacy of the allowance for loan losses is based on
estimates that may be affected by significant changes in the economic
environment and market conditions. In connection with the determination of the
estimated losses on loans and to support the carrying value of OREO, we obtain
independent appraisals for significant collateral.

Our loans are generally secured by specific items of collateral including real
property, consumer assets, and business assets. Although we have a diversified
loan portfolio, a substantial portion of our debtors' ability to honor their
contracts is dependent on local, state, and national economic conditions that
may affect the value of the underlying collateral or the income of the debtor.

While we use available information to recognize losses on loans, further
reductions in the carrying amounts of loans or OREO may be necessary based on
changes in economic conditions. In addition, regulatory agencies, as an integral
part of their examination process, periodically review the estimated losses on
loans and the carrying value of OREO. Such agencies may require us to recognize
additional losses based on their judgments about information available to them
at the time of their examination.

Interest Rate Risk. Our asset base is exposed to risk including the risk
resulting from changes in interest rates and changes in the timing of cash
flows. Management monitors the effect of such risks by considering the mismatch
of the maturities of our assets and liabilities in the current interest rate
environment and the sensitivity of assets and liabilities to changes in interest
rates. We have considered the effect of significant increases and decreases in
interest rates and believe such changes, if they occurred, would be manageable
and would not affect our ability to hold assets as planned. However, we are
exposed to significant market risk in the event of significant and prolonged
interest rate changes.

Regulatory Environment. We are subject to regulations of certain federal and
state agencies and, accordingly, are periodically examined by those regulatory
authorities. As a consequence of the extensive regulation of commercial banking
activities, our business is particularly susceptible to being affected by
federal and state legislation and regulations.

              COMPARISON OF YEARS ENDED DECEMBER 31, 2005 AND 2004

Highlights. As of December 31, 2005, we had grown to approximately $213.9
million in total assets, $152.9 million in total loans, $168.5 million in
deposits, and $15.2 million in stockholders' equity.

Net income in 2005 was $1,478,000 versus $1,166,000 in 2004, an increase of
$312,000, or 26.8%. The primary reasons for the change in net income in 2005
over 2004 were as follows:

o     Interest and fees on loans totaled $9,870,000 in 2005 compared with
      $7,280,000 in 2004, an increase of $2,590,000, or 35.6%.

o     Our income from average interest-earning assets grew 36.6% as a result of
      increases in average interest-earning assets of 21.5%, and improved yields
      that increased from 5.68% to 6.38%.

o     Our total interest expense rose 91.3% as our cost of funding increased in
      2005 from 1.92% to 2.98%. Our average 2005 interest-bearing deposits and
      other borrowings continued to grow at a pace of 23.0% over 2004.

o     Partially offsetting the positive gain in net interest income of $940,000,
      noninterest expenses grew $424,000 reflecting increased expenses related
      to our expansion of the operations area and related personnel costs.


                                      -16-
<PAGE>

Interest Income. Interest income was $11,261,000 and $8,241,000 in 2005 and
2004, respectively. The increase of 36.6% was attributable to growth in our most
significant interest-earning asset, loans, which grew 23.9% from average levels
in 2004 to 2005. Average loans accounted for 79.1% of our average
interest-earning assets in 2005 versus 77.5% in 2004. Our overall yield on
interest-earning assets of 6.97% also benefited from the rising interest rate
environment in 2005.

Interest Expense. Interest expense was $4,358,000 and $2,278,000 in 2005 and
2004, respectively. As a result of the increasing interest rate environment and
our growth in average interest-bearing liabilities of $27.4 million, or 23.0%,
during this period, interest expense increased 91.3%. Our cost of funds rose to
2.98% in 2005 compared with 1.92% in 2004. Interest expense from other
borrowings outpaced interest expense from deposits (121.3% compared with 86.0%,
respectively) as the growth in other borrowings outpaced deposit growth.
Customer repurchase agreements and the junior subordinated debentures issued in
2005 contributed to the growth, with the average cost of funds for other
borrowings at 3.37% in 2005 and 2.34% in 2004.

Net Interest Income. Net interest income (before provision for loan losses) was
$6,903,000 and $5,963,000 for 2005 and 2004, respectively, an increase of 15.8%
from 2004 to 2005, which was due to the increase in average interest-earning
assets of 21.5%, partially offset by increases in our cost of funds and the
growth in interest-bearing liabilities. The average balances, interest income
and expense, and the average rates earned and paid for assets and liabilities
are found in the following tables.

During 2005 and 2004, the average yield (on a tax-equivalent basis) on
interest-earning assets was 6.38% and 5.68%, respectively, while the average
cost of funds was 2.98% in 2005 and 1.92% in 2004. Our net interest margin was
lower (3.95% in 2005 compared with 4.13% in 2004), which reflects the faster
growth in interest-bearing deposits (23.0%) over interest-earning assets (21.5%)
and cost of funds (106 basis points) versus yield on interest-earning assets (70
basis points). The increase in loan yields from 6.37% to 6.97% was more than
offset by the increase in volume of certificates of deposit and increases in our
cost of funds, which contributed to the declines in interest-rate spread and net
interest margin.

Provision for Loan Losses. A provision for loan losses of $334,000 was recorded
in 2005, reflecting our assessment of the needed level of the allowance for loan
losses. This assessment is based on management's evaluation of probable loan
losses and considers the overall quality of the loan portfolio. The decrease in
the provision for loan losses in 2005 versus the 2004 level of $362,000 was due
to lower net charge-offs offset partially by the overall growth in the loan
portfolio. Net charge-offs in 2005 were $78,000 as compared with $286,000 in
2004, a decrease of $208,000.

Noninterest Income. Noninterest income decreased $56,000, or 6.1%, to $867,000
in 2005 from $923,000 in 2004. A summary of changes for 2005 compared with 2004
follows:

o     Service charges on deposit accounts declined by 5.7%, which reflects a
      continuing trend in competitive pressures on fees for basic checking
      services.

o     Mortgage banking fees increased $8,000, or 7.5%, as brokered mortgage
      loans increased from $9.1 million in 2004 to $12.7 million in 2005. This
      increase reflects the continued growth of new home sales, generally
      favorable interest rates, and the demand for refinancing of mortgages.

o     No sales of SBA loans were completed in 2005. A gain on the sale of SBA
      loans was recorded in 2004 totaling $33,000.

o     Other income remained relatively flat in 2005 versus 2004.

Noninterest Expenses. Total noninterest expenses increased to $5,313,000 in 2005
compared to $4,889,000 for 2004. This increase of $424,000, or 8.7%, reflects
higher expenses due to growth in our operations. The more significant increases
during 2005 over 2004 follow:

o     Salaries and employee benefits grew 10.4% reflecting the increase in the
      average number of full-time equivalent employees of approximately 2.1% and
      increases in salaries, bonuses, commissions, and SIMPLE plan
      contributions.

o     Expenses of bank premises and fixed assets and other operating expenses
      increased $120,000, or 13.3%, in 2005 versus 2004, reflecting increased
      maintenance, utilities, and property taxes resulting, in part, from the
      new loan operations office added at the Beach Boulevard branch, increased
      property values, and higher utility rates.

o     While processing and settlement fees, legal fees, and professional costs
      for SOX 404 compliance rose at double-digit rates, other operating expense
      grew at a relatively modest overall pace of 3.6% in 2005 over 2004.


                                      -17-
<PAGE>

Provision for Income Taxes. The income tax provision was $645,000 for 2005, an
effective rate of 30.4%. This compares with an effective rate of 28.7% for 2004.
The effective tax rates in 2005 and 2004 differ from the federal and state
statutory rates principally due to nontaxable investment income. While
tax-exempt income increased 31.4% in 2005 over 2004, this growth did not keep
pace with the growth in overall interest income, contributing to the rise in the
effective tax rate.

              COMPARISON OF YEARS ENDED DECEMBER 31, 2004 AND 2003

Highlights. As of December 31, 2004, we had grown to approximately $184.3
million in total assets, $129.9 million in total loans, $146.4 million in
deposits, and $14.0 million in stockholders' equity.

Net income in 2004 was $1,166,000 versus $987,000 in 2003, an increase of
$179,000, or 18.1%. The primary reasons for the change in net income in 2004
over 2003 were as follows:

o     Our income from average interest-earning assets grew at 20.5% as a result
      of increases in average interest-earning assets of 27.3%.

o     While our cost of funding stabilized in 2004, our 2004 growth in deposits
      and other borrowings continued to grow at a pace of 29.9% over 2003.

o     Partially offsetting positive gains in net interest income and noninterest
      income of $873,000 and $43,000, respectively, noninterest expenses grew
      $731,000 reflecting increased expenses related to our branch network.

Interest Income. Interest income was $8,241,000 and $6,837,000 in 2004 and 2003,
respectively. The increase of 20.5% was attributable to growth in our most
significant interest-earning asset, loans, which grew 28.5% from average levels
in 2003 to 2004. Average loans accounted for 77.5% of our average
interest-earning assets in 2004 versus 76.9% in 2003.

Interest Expense. Interest expense was $2,278,000 and $1,790,000 in 2004 and
2003, respectively. Our growth in average interest-bearing liabilities of $27.3
million, or 29.9%, contributed to the increase in interest expense of 27.3%. Our
cost of funds was relatively stable in 2004 versus 2003, with a slight decline
to 1.92% from 1.96%.

Net Interest Income. Net interest income, which is our primary source of
operating income, 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 $5,963,000 and $5,047,000 for 2004 and 2003,
respectively, an increase of 18.1% from 2003 to 2004, which was due to the
increase in average interest-earning assets of 27.3% and the favorable impact
from a moderate decline in our cost of funds. The average balances, interest
income and expense, and the average rates earned and paid for assets and
liabilities are found in the following tables.

During 2004 and 2003, the average yield (on a tax-equivalent basis) on
interest-earning assets was 5.68% and 6.01%, respectively, while the average
cost of funds was 1.92% in 2004 and 1.96% in 2003. Our net interest margin was
lower (4.13% in 2004 compared with 4.46% in 2003), which reflects the decline in
the average yield on interest-earning assets of 33 basis points. The decline in
loan yields from 6.85% to 6.37% and the increase in volume of certificates of
deposit contributed to the declines in interest-rate spread and net interest
margin.

Provision for Loan Losses. A provision for loan losses of $362,000 was recorded
in 2004, reflecting our assessment of the needed level of the allowance for loan
losses. This assessment is based on management's evaluation of potential loan
losses and considers the overall quality of the loan portfolio. The increase in
the provision for loan losses in 2004 over the 2003 level of $319,000 reflects
the growth in average loans of 28.5% and the increase in net charge-offs
experienced during 2004. Net charge-offs in 2004 were $286,000 as compared with
$69,000 in 2003, an increase of $217,000.

During 2004, we took a deed in lieu of foreclosure on a residential real estate
property (referred to as OREO, Other Real Estate Owned) that was essentially
cross-collateralized with a commercial lending relationship. This OREO was sold
for $675,000 in December 2004; and after net expenses on the sale of the OREO,
no gain or loss was recognized on the recorded investment of $641,000. At that
time, we were able to measure the loss on the cross-collateralized commercial
lending relationship and loan charge-offs totaling $275,000 were recorded along
with a corresponding increase in the provision for loan losses in the fourth
quarter of 2004.


                                      -18-
<PAGE>

Noninterest Income. Noninterest income increased $43,000, or 4.9%, to $923,000
in 2004 from $880,000 in 2003. A summary of changes for 2004 compared with 2003
follows:

o     Service charges on deposit accounts grew at a pace of 3.9%, which is
      consistent with the growth in the number of deposit accounts of
      approximately 7.2% from year end 2003 to 2004.

o     Mortgage banking fees declined $77,000, or 42.1%, as mortgage loan
      originations slowed from $15.9 million in 2003 to $9.1 million in 2004.
      The recent slowdown reflects the stabilization of new home sales and
      interest rates, and the decreased demand for refinancing of mortgages.

o     A gain on the sale of SBA loans was recorded in 2004 totaling $33,000. No
      sales of SBA loans were completed in 2003.


o     Other income increased $66,000, or 41.8%. Increases in the cash values of
      life insurance policies funding our indexed retirement plans for certain
      officers and directors contributed an additional $41,000 and wire transfer
      fees added another $18,000 to the overall increase in noninterest income.

Noninterest Expenses. Total noninterest expenses increased to $4,889,000 in 2004
compared to $4,158,000 for 2003. This increase of $731,000, or 17.6%, reflects
higher expenses due to growth in our operations. The more significant increases
during 2004 over 2003 follow:

o     Salaries and employee benefits grew 9.6% reflecting the increase in the
      average number of full-time equivalent employees of approximately 9.1% and
      increases in group insurance of $51,000.

o     Expenses of bank premises and fixed assets and other operating expenses
      increased $213,000, or 30.9%, in 2004 versus 2003, reflecting the new
      Kernan Boulevard branch, which opened December 2003.

o     Higher costs for corporate governance, including professional and audit
      fees, ($22,000) and regulatory examination fees ($27,000). Although
      pension expenses increased $100,000 in 2004 over 2003, reflecting
      revisions in estimates and amendments to the indexed retirement plans, the
      overall impact on earnings reflected a moderate decline of $16,000 after
      giving consideration to policy income and deferred income tax benefits
      partially offset by life insurance expense.

Provision for Income Taxes. The income tax provision was $469,000 for 2004, an
effective rate of 28.7%. This compares with an effective rate of 31.9% for 2003.
The effective tax rates in 2004 and 2003 differ from the federal and state
statutory rates principally due to nontaxable investment income. Tax-exempt
income increased 5.5% in 2004 over 2003.

                         [Remainder of page left blank.]


                                      -19-
<PAGE>

Rate/Volume Analysis (dollars in thousands):

<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
                                                  2005                           2004                           2003
                                     ----------------------------    ----------------------------   ----------------------------
                                                Interest  Average              Interest   Average             Interest   Average
                                     Average       and     Yield/    Average      and      Yield/   Average      and      Yield/
                                     Balance    Dividends   Rate     Balance   Dividends    Rate    Balance   Dividends    Rate
                                     -------    ---------   ----     -------   ---------    ----    -------   ---------    ----
<S>                                 <C>         <C>          <C>    <C>        <C>          <C>    <C>        <C>          <C>
Interest-earning assets:
 Loans (1)                          $ 141,587   $   9,870    6.97%  $ 114,236  $   7,280    6.37%  $  88,922  $   6,087    6.85%
 Securities and deposits (2)           34,202       1,297    4.28      27,064        884    3.74      21,915        695    3.72
 Other interest-earning assets (3)      3,212          94    2.93       6,053         77    1.27       4,904         55    1.12
                                    ---------   ---------           ---------  ---------           ---------  ---------
   Total interest-earning
     assets (2)                       179,001      11,261    6.38%    147,353      8,241    5.68%    115,741      6,837    6.01%
                                                ---------                      ---------                      ---------
Noninterest-earning assets             14,248                          12,598                         11,065
                                    ---------                       ---------                      ---------

     Total assets                   $ 193,249                       $ 159,951                      $ 126,806
                                    =========                       =========                      =========

Interest-bearing liabilities:
 Demand deposits                    $  42,319         879    2.08%  $  39,079        476    1.22%  $  30,940        368    1.19%
 Savings                                6,231          47    0.75       6,213         35    0.56       4,723         36    0.76
 Certificates of deposit               75,144       2,675    3.56      58,882      1,425    2.42      41,814      1,103    2.64
 Other borrowings                      22,450         757    3.37      14,608        342    2.34      13,959        283    2.03
                                    ---------   ---------           ---------  ---------           ---------  ---------
   Total interest-bearing
     liabilities                      146,144       4,358    2.98%    118,782      2,278    1.92%     91,436      1,790    1.96
                                                ---------                      ---------                      ---------
Noninterest-bearing
liabilities                            32,509                          27,724                         22,717
Stockholders' equity                   14,596                          13,445                         12,653
                                    ---------                       ---------                      ---------
     Total liabilities and
     stockholders' equity           $ 193,249                       $ 159,951                      $ 126,806
                                    =========                       =========                      =========
Net interest income (before
  provision for loan losses)                    $   6,903                      $   5,963                      $   5,047
                                                =========                      =========                      =========
Interest-rate spread (4)                                     3.40%                          3.76%                          4.05%
                                                           ======                         ======                         ======

Net interest margin (2) (5)                                  3.95%                          4.13%                          4.46%
                                                           ======                         ======                         ======
Ratio of average
interest-earning
  assets to average
  interest-bearing
  liabilities                          122.48%                         124.05%                        126.58%
                                    =========                       =========                      =========
</TABLE>

--------------------------------------------------------------------------------

(1)   Average loan balances include nonaccrual loans, which are not material.
      Average loans are net of deferred fees. Loan fees (in thousands) were
      $664, $568, and $547 in 2005, 2004, and 2003, respectively. Loan yields
      have been reported in total since a substantial portion of loans are
      secured by real estate.

(2)   Tax-exempt income has been adjusted to a tax-equivalent basis using an
      incremental rate of 37.6%.

(3)   Includes federal funds sold.

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

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


                                      -20-
<PAGE>

Rate/Volume Analysis (dollars in thousands):

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                         2005 vs. 2004
                                                    Increase (Decrease) Due to
                                             -----------------------------------------
                                                                     Rate/
                                               Rate      Volume     Volume     Total
                                               ----      ------     ------     -----
<S>                                          <C>        <C>        <C>        <C>
Interest-earning assets:
     Loans (1)                               $    683   $  1,743   $    164   $  2,590
     Securities and other deposits                142        233         38        413
     Other interest-earning assets (2)            100        (36)       (47)        17
                                             --------   --------   --------   --------
         Total interest-earning assets            925      1,940        155      3,020
                                             --------   --------   --------   --------

Interest-bearing liabilities:
     Demand deposits                              336         39         28        403
     Savings                                       12         --         --         12
     Certificates of deposit                      671        394        185      1,250
     Other borrowings                             151        184         80        415
                                             --------   --------   --------   --------
         Total interest-bearing liabilities     1,170        617        293      2,080
                                             --------   --------   --------   --------

Net interest income                          $   (245)  $  1,323   $   (138)  $    940
                                             ========   ========   ========   ========
</TABLE>
<TABLE>
<CAPTION>

                                                     Year Ended December 31,
                                                         2004 vs. 2003
                                                    Increase (Decrease) Due to
                                             -----------------------------------------
                                                                     Rate/
                                               Rate      Volume     Volume     Total
                                               ----      ------     ------     -----
<S>                                          <C>        <C>        <C>        <C>
Interest-earning assets:
     Loans (1)                               $   (420)  $  1,733   $   (120)  $  1,193
     Securities and other deposits                 21        163          5        189
     Other interest-earning assets (2)              7         13          2         22
                                             --------   --------   --------   --------
         Total interest-earning assets           (392)     1,909       (113)     1,404
                                             --------   --------   --------   --------

Interest-bearing liabilities:
     Demand deposits                                8         97          3        108
     Savings                                       (8)        11         (4)        (1)
     Certificates of deposit                      (90)       450        (38)       322
     Other borrowings                              43         13          3         59
                                             --------   --------   --------   --------
         Total interest-bearing liabilities       (47)       571        (36)       488
                                             --------   --------   --------   --------

Net interest income                          $   (345)  $  1,338   $    (77)  $    916
                                             ========   ========   ========   ========
</TABLE>

--------------------------------------------------------------------------------

(1)   Average loan balances include nonaccrual loans, which are not material.

(2)   Includes federal funds sold.


                                      -21-
<PAGE>

Weighted Average Yield or Rate:

                                             For the Year Ended December 31,
                                             -------------------------------
                                               2005       2004       2003
                                               ----       ----       ----
Interest-earning assets:
         Loans, net                            6.97%      6.37%      6.85%
         Investment securities                 4.28       3.74       3.72
         Other interest-earning assets         2.93       1.27       1.12
         All interest-earning assets           6.38       5.68       6.01
Interest-bearing liabilities:
         NOW deposits                          0.53       0.28       0.33
         Money market deposits                 2.41       1.52       1.53
         Savings                               0.75       0.56       0.76
         Certificates of deposit               3.56       2.42       2.64
         Other borrowings                      3.37       2.34       2.03
         All interest-bearing liabilities      2.98       1.92       1.96
Interest-rate spread                           3.40       3.76       4.05
Net interest margin                            3.95       4.13       4.46

Change in Mix of Deposits and Other Borrowings (dollars in thousands):

<TABLE>
<CAPTION>
                                                            At December 31,
                                      -------------------------------------------------------------
                                             2005                 2004                 2003
                                      -------------------  -------------------  -------------------
                                                Percent              Percent              Percent
                                      Average      to      Average      to      Average      to
                                      Balance    Total     Balance    Total     Balance    Total
                                      -------    -----     -------    -----     -------    -----
<S>                                   <C>          <C>     <C>          <C>     <C>          <C>
Interest-earning assets:
   Loans, net                         $141,587      79.1%  $114,236      77.5%  $ 88,922      76.9%
   Investment securities                34,202      19.1%    27,064      18.4%    21,915      18.9%
   Other                                 3,212       1.8%     6,053       4.1%     4,904       4.2%
                                      --------  --------   --------  --------   --------  --------

     Total interest-earning assets    $179,001     100.0%  $147,353     100.0%  $115,741     100.0%
                                      ========  ========   ========  ========   ========  ========

Interest-bearing deposits:
   Demand deposits                    $ 42,319      23.8%  $ 39,079      26.8%  $ 30,940      27.2%
   Savings                               6,231       3.5%     6,213       4.3%     4,723       4.2%
   Certificates of deposit              75,144      42.3%    58,882      40.4%    41,814      36.8%
                                      --------  --------   --------  --------   --------  --------

     Total interest-bearing deposits   123,694      69.6%   104,174      71.5%    77,477      68.2%

Noninterest-bearing deposits            31,583      17.8%    26,979      18.5%    22,194      19.5%
                                      --------  --------   --------  --------   --------  --------

     Total deposits                   $155,277      87.4%  $131,153      90.0%  $ 99,671      87.7%
                                      ========             ========             ========

Other borrowings                      $ 22,450      12.6%  $ 14,608      10.0%  $ 13,959      12.3%
                                      ========  --------   ========  --------   ========  --------

     Total deposits and
       other borrowings               $177,727     100.0%  $145,761     100.0%  $113,630     100.0%
                                      ========  ========   ========  ========   ========  ========
</TABLE>

                                 LOAN PORTFOLIO

Average loans receivable were $141,587,000 for the year 2005 as compared to
$114,236,000 for 2004, an increase of 23.9%. The year-to-year average increase
in 2004 over 2003 was 28.5%. Management believes the growth in loans was
directly attributable to the growth in our branch network, community acceptance,
the reputations of our lending team, and favorable economic conditions in our
market area. The following provides an analysis of our loan distribution at the
end of 2001 - 2005. Loans that are secured by real estate include residential
and nonresidential mortgages, and home equity loans to individuals.


                                      -22-
<PAGE>

Loan Portfolio (dollars in thousands):

<TABLE>
<CAPTION>
                                                                   At December 31,
                            --------------------------------------------------------------------------------------------
                                 2005     %        2004      %       2003      %       2002       %       2001       %
                                 ----     -        ----      -       ----      -       ----       -       ----       -
<S>                         <C>         <C>   <C>          <C>   <C>         <C>   <C>          <C>   <C>          <C>
Real estate
   Construction, land
      development,
      and other land        $  37,905    25%  $  27,246     21%  $ 17,295     17%  $ 14,033      18%  $ 11,043      18%
   1-4 family residential      31,997    21%     19,283     15%    17,335     18%    14,892      19%    11,531      19%
   Multifamily residential      3,051     2%      2,513      2%     2,003      2%     2,770       3%       240       0%
   Commercial                  62,612    41%     60,869     47%    51,554     52%    35,628      45%    28,419      46%
                            ---------   ---   ---------   ----   --------   ----   --------    ----   --------    ----
     Total real estate        135,565    89%    109,911     85%    88,187     89%    67,323      85%    51,233      83%
Commercial                     11,901     8%     13,817     11%     4,750      5%     4,776       6%     4,328       7%
Consumer and other loans        5,400     3%      6,147      4%     6,622      6%     7,105       9%     6,166      10%
                            ---------   ---   ---------   ----   --------   ----   --------    ----   --------    ----
   Total loans                152,866   100%    129,875    100%    99,559    100%    79,204     100%    61,727     100%
                                        ===               ====              ====               ====               ====
Less:
   Less, deferred fees            (63)              (74)              (77)              (97)              (123)
   Less, allowance for
      loan losses              (1,552)           (1,296)           (1,220)             (970)              (766)
                            ---------         ---------          --------          --------           --------

                            $ 151,251         $ 128,505          $ 98,262          $ 78,137           $ 60,838
                            =========         =========          ========          ========           ========
</TABLE>

The following tables show the maturity data for loans receivable.

Contractual Loan Maturities at December 31, 2005 (dollars in thousands):

<TABLE>
<CAPTION>
                                                  1 Year          1 Through      After
                                                 or Less           5 Years       5 Years        Total
                                                 -------           -------       -------        -----
<S>                                              <C>               <C>           <C>         <C>
Real estate loans                                $23,051           $34,153       $78,361     $135,565
Commercial and agricultural loans                  4,445             5,803         1,653       11,901
Consumer and other loans                           1,035             3,048         1,317        5,400
                                                 -------           -------       -------     --------

        Total loan portfolio                     $28,531           $43,004       $81,331     $152,866
                                                 =======           =======       =======     ========

Loans with maturities over one year:
        Fixed rate                                                                           $ 29,030
        Variable rate                                                                          95,305
                                                                                             --------

             Total maturities greater than one year                                          $124,335
                                                                                             ========

Loan Maturities or Next Repricing Date at December 31, 2005 (dollars in thousands):

         Three months or less                                                                $ 70,599
         Over three months through twelve months                                               20,763
         Over one year through three years                                                     41,697
         Over three through five years                                                         10,801
         Over five years                                                                        9,006
                                                                                             --------

                                                                                             $152,866
                                                                                             ========
</TABLE>


                                      -23-
<PAGE>

Loans Originated and Repaid (dollars in thousands):

<TABLE>
<CAPTION>
                                                         Years Ended December 31,
                                         ---------------------------------------------------------
                                             2005        2004        2003        2002        2001
                                             ----        ----        ----        ----        ----
<S>                                      <C>         <C>         <C>         <C>         <C>
Originations:
     Real estate loans                   $ 59,259    $ 44,680    $ 30,769    $ 18,127    $ 14,209
     Commercial and agricultural loans      4,364      11,360       7,981       9,083       3,982
     Consumer and other loans               2,263       3,390       2,172       3,731       3,150
                                         --------    --------    --------    --------    --------
         Total                             65,886      59,430      40,922      30,941      21,341
Principal reductions                      (42,895)    (29,114)    (20,567)    (13,464)     (9,703)
                                         --------    --------    --------    --------    --------

Increase in total loans                  $ 22,991    $ 30,316    $ 20,355    $ 17,477    $ 11,638
                                         ========    ========    ========    ========    ========
</TABLE>

           CLASSIFICATION OF ASSETS AND NONACCRUAL OR IMPAIRED LOANS

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. 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. 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.

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 loan 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,
Accounting by Creditors for Impairment of a Loan ("SFAS No. 114"), which
considers a loan to be impaired if it is probable that we 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.

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 loan losses charged to operating expenses.

Situations may occur where:

o     we receive 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, 2005, 2004, and 2003, loans past due for 30 days or more (but
less than 89 days) totaled $193,000, $195,000, and $176,000, respectively. At
December 31, 2005, management had classified eighteen loans totaling
approximately $1.4 million as substandard, as compared with nineteen substandard
loans totaling $1.4 million at December 31, 2004, and fourteen substandard loans
totaling $1.1 million at December 31, 2003.

At December 31, 2005, one loan past due more than 90 days, totaling $202,000,
was considered impaired and nonaccrual. At December 31, 2005, no other loans
were past due 90 days or more.


                                      -24-
<PAGE>

                            ALLOWANCE FOR LOAN LOSSES

The amount charged to operations and the related balance in the allowance for
loan 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 loan losses is
adequate. The following is an analysis of the allowance for loan losses for 2001
- 2005.

Allowance for Loan Losses (dollars in thousands):

<TABLE>
<CAPTION>
                                                    Years Ended December 31,
                                   -----------------------------------------------------------
                                       2005         2004         2003         2002        2001
                                       ----         ----         ----         ----        ----
<S>                                <C>          <C>          <C>          <C>         <C>
Balance, at beginning of period    $  1,296     $  1,220     $    970     $    766    $    682
Provision for loan losses               334          362          319          196         108
                                   --------     --------     --------     --------    --------
Loans charged off
     Real estate                        (36)          --           --           (4)         --
     Commercial                          --           --           --          (30)        (16)
     Installment and other loans        (50)        (294)         (73)         (16)         (8)
                                   --------     --------     --------     --------    --------
                                        (86)        (294)         (73)         (50)        (24)
                                   --------     --------     --------     --------    --------
Recoveries
     Real estate                          1           --           --           --          --
     Commercial                          --           --           --           58          --
     Installment and other loans          7            8            4           --          --
                                   --------     --------     --------     --------    --------
                                          8            8            4           58          --
                                   --------     --------     --------     --------    --------

Balance, at end of period          $  1,552     $  1,296     $  1,220     $    970    $    766
                                   ========     ========     ========     ========    ========

Net charge-offs to average loans       0.06%        0.25%        0.08%      -0.01%        0.04%
                                   ========     ========     ========     ========    ========
</TABLE>

The specific allocations of the allowance for loan 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.

Allocation of Allowance for Loan Losses (dollars in thousands):

<TABLE>
<CAPTION>
                                                                      At December 31,
                           -----------------------------------------------------------------------------------------------------
                                  2005                  2004               2003                 2002                 2001
                           ------------------   ------------------  -------------------  -------------------  ------------------
                                        % of                 % of                % of                % of                 % of
                                     Loans to             Loans to             Loans to            Loans to             Loans to
                                       Total                Total                Total               Total                Total
                            Amount     Loans     Amount     Loans     Amount     Loans    Amount     Loans     Amount     Loans
                            ------     -----     ------     -----     ------     -----    ------     -----     ------     -----
<S>                        <C>           <C>    <C>          <C>    <C>           <C>    <C>           <C>    <C>           <C>
Real estate loans          $    134       89%   $    234      85%   $     43       89%   $     95       85%   $      5       83%
Commercial and
   agricultural loans           219        8          77      11         375        5         172        6           3        7
Consumer and other loans         37        3          39       4          15        6          14        9           4       10
Unallocated                   1,162       --         946      --         787       --         689       --         754       --
                           --------   ------    --------   -----    --------   ------    --------   ------    --------   ------

                           $  1,552      100%   $  1,296     100%   $  1,220      100%   $    970      100%   $    766      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, 2005, 2004, 2003, 2002, and 2001, there were no loans qualified as highly
leveraged transactions. Loans restructured and in compliance with modified terms
are commonly referred to as "troubled debt restructurings." At December 31,
2005, 2004, 2003, 2002, and 2001, we had no restructured loans.


                                      -25-
<PAGE>

                                   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. The following tables set forth the carrying amount of securities
at the dates indicated.

Carrying Value of Investment Securities (dollars in thousands):

<TABLE>
<CAPTION>
                                                                    At December 31,
                                                             ----------------------------
                                                               2005      2004      2003
                                                               ----      ----      ----
<S>                                                          <C>       <C>       <C>
Securities available-for-sale:
         Mortgage-backed securities (GNMA and FNMA)          $32,440   $22,970   $19,077

Securities held-to-maturity:
         Tax-exempt state, county, and municipal bonds         5,850     5,856     3,899
                                                             -------   -------   -------

Balance, end of year                                         $38,290   $28,826   $22,976
                                                             =======   =======   =======
</TABLE>

Investment Securities at Amortized Cost (dollars in thousands):

<TABLE>
<CAPTION>
                                                                   At December 31,
                                                             ---------------------------
                                                               2005      2004      2003
                                                               ----      ----      ----
<S>                                                          <C>       <C>       <C>
Securities available-for-sale:
         Mortgage-backed securities (GNMA and FNMA)          $33,056   $23,139   $19,161

Securities held-to-maturity:
         Tax-exempt state, county, and municipal bonds         5,850     5,856     3,899
                                                             -------   -------   -------

Balance, end of year                                         $38,906   $28,995   $23,060
                                                             =======   =======   =======
</TABLE>

The following tables set forth the maturities (excluding principal paydowns on
mortgage-backed securities) and the weighted average yields of securities by
contractual maturities at December 31, 2005, 2004, and 2003.

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

<TABLE>
<CAPTION>
                                       Due in One            Due in Five           Due in Ten
                                     to Five Years           to Ten Years         Years or More               Total
                                  --------------------   --------------------   -------------------    --------------------
                                             Average                Average                Average                Average
                                   Amount     Yield       Amount     Yield       Amount     Yield       Amount     Yield
                                   ------     -----       ------     -----       ------     -----       ------     -----
<S>                               <C>            <C>     <C>            <C>     <C>            <C>     <C>            <C>
At December 31, 2005:
     Mortgage-backed securities
         (GNMA and FNMA)          $  8,191       3.25%   $ 11,152       4.61%   $ 13,097       4.04%   $ 32,440       4.04%
                                  ========               ========               ========               ========

At December 31, 2004:
     Mortgage-backed securities
         (GNMA and FNMA)          $  9,753       3.13%   $  5,552       4.28%   $  7,665       3.42%   $ 22,970       3.50%
                                  ========               ========               ========               ========

At December 31, 2003
     Mortgage-backed securities
         (GNMA and FNMA)          $ 12,566       3.08%   $  1,881       4.27%   $  4,630       4.78%   $ 19,077       3.61%
                                  ========               ========               ========               ========
</TABLE>


                                      -26-
<PAGE>

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

<TABLE>
<CAPTION>
                                     Due in One          Due in Five           Due in Ten
                                    to Five Years        to Ten Years          Years or More             Total
                                 ------------------    ------------------    --------------------   ---------------
                                            Average               Average               Average                Average
                                  Amount     Yield      Amount     Yield      Amount     Yield       Amount     Yield
                                  ------     -----      ------     -----      ------     -----       ------     -----
<S>                              <C>          <C>      <C>            <C>    <C>            <C>     <C>            <C>
At December 31, 2005:
     Tax-exempt state, county,
         and municipal bonds     $     --     --%      $    626       4.73%  $  5,224       4.72%   $  5,850       4.72%
                                 ========              ========              ========               ========

At December 31, 2004:
     Tax-exempt state, county,
         and municipal bonds     $     --     --%      $    274       4.70%  $  5,582       4.72%   $  5,856       4.72%
                                 ========              ========              ========               ========

At December 31, 2003:
     Tax-exempt state, county,
         and municipal bonds     $     --     --%      $     --         --%  $  3,899       5.10%   $  3,899       5.10%
                                 ========              ========              ========               ========
</TABLE>

                                    DEPOSITS

Deposits are the major source of our funds for lending and other investment
purposes. Deposits are attracted principally from within our assessment area
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.

The 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, 2005,
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 (referred
to as "core deposits"). At December 31, 2005, 2004, and 2003, these core
deposits accounted for approximately 84%, 86%, and 85%, respectively, of all
deposits. At December 31, 2005, time deposits under $100,000 accounted for
approximately 40% of these core deposits as compared with money market deposits
at 27% and noninterest-bearing demand deposits at 24%. This compares with 2004
levels of 35%, 29%, and 22%, respectively, and with 2003 levels of 29%, 27%, and
26%, respectively. At December 31, 2005, 2004, and 2003, jumbo certificates of
deposit (time deposits $100,000 and greater) represented approximately 16%, 14%,
and 15%, respectively, of total deposits. At December 31, 2005, 2004, and 2003,
time deposits outstanding in an individual amount of $100,000 or more totaled
$27,234,000, $20,380,000, and $16,671,000, respectively.

Interest-bearing demand accounts, consisting of NOW and money market accounts,
averaged $42,319,000 for the year ended 2005, $39,079,000 for the year ended
2004, and $30,940,000 for the year ended 2003, or approximately 27%, 30%, and
31% of average total deposits in 2005, 2004, and 2003, respectively.


                                      -27-
<PAGE>

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

<TABLE>
<CAPTION>
                                                                   At December 31,
                                          -----------------------------------------------------------------
                                                 2005                   2004                   2003
                                          -------------------    -------------------    -------------------
                                                      % of                   % of                   % of
                                          Amount    Deposits     Amount    Deposits     Amount    Deposits
                                          ------    --------     ------    --------     ------    --------
<S>                                      <C>           <C>      <C>           <C>      <C>           <C>
Demand deposits                          $ 33,682       20.0%   $ 27,782       19.0%   $ 25,474       22.5%
NOW deposits                                6,264        3.7      10,293        7.0      11,675       10.3
Money market deposits                      38,358       22.8      36,701       25.1      26,539       23.4
Savings deposits                            6,059        3.6       6,626        4.5       5,428        4.8
                                         --------   --------    --------   --------    --------   --------

     Subtotal                              84,363       50.1      81,402       55.6      69,116       61.0
                                         --------   --------    --------   --------    --------   --------

Certificates of deposit:
     1.00% - 1.99%                            178        0.1       9,927        6.8          98        0.1
     2.00% - 2.99%                         11,561        6.9      36,800       25.2      18,136       16.0
     3.00% - 3.99%                         26,523       15.7       7,926        5.4      19,169       16.9
     4.00% - 4.99%                         34,282       20.3       9,268        6.3       2,951        2.6
     5.00% - 5.99%                         11,573        6.9       1,029        0.7       3,362        3.0
     6.00% - 6.99%                             --         --          --         --         546        0.4
                                         --------   --------    --------   --------    --------   --------

     Total certificates of deposit (1)     84,117       49.9      64,950       44.4      44,262       39.0
                                         --------   --------    --------   --------    --------   --------

     Total deposits                      $168,480      100.0%   $146,352      100.0%   $113,378        100%
                                         ========   ========    ========   ========    ========   ========
</TABLE>

--------------------------------------------------------------------------------

(1)   Includes individual retirement accounts (in thousands) totaling $2,535,
      $2,658, and $2,218, in 2005, 2004, and 2003, respectively, all of which
      were in the form of certificates of deposit.

Average Deposits and Average Rates (dollars in thousands):

<TABLE>
<CAPTION>
                                                   At December 31,
                          -----------------------------------------------------------------
                                 2005                   2004                   2003
                         -------------------     -------------------    -------------------
                          Average    Average     Average    Average     Average    Average
                          Balance      Rate      Balance      Rate      Balance      Rate
                          -------      ----      -------      ----      -------      ----
<S>                       <C>            <C>     <C>            <C>     <C>            <C>
Demand, money market
   and NOW deposits       $ 73,902       1.19%   $ 66,058       0.72%   $ 53,134       0.69%
Savings deposits             6,231       0.75       6,213       0.56       4,723       0.76
Certificates of deposit     75,144       3.56      58,882       2.42      41,814       2.64
                          --------               --------               --------

        Total deposits    $155,277       2.32%   $131,153       1.48    $ 99,671       1.51%
                          ========               ========               ========
</TABLE>

Time Deposits of $100,000 or more with remaining maturities or next repricing
date of (dollars in thousands):

                                                           December 31,
                                                -------------------------------
                                                   2005        2004        2003
                                                   ----        ----        ----

Due in three months or less                     $ 7,929     $ 6,603     $ 6,923
Over three through twelve months                 10,142       6,672       8,019
Over twelve months through three years            3,750       4,885       1,167
Over three years                                  5,413       2,220         562
                                                -------     -------     -------

                                                $27,234     $20,380     $16,671
                                                =======     =======     =======


                                      -28-
<PAGE>

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

<TABLE>
<CAPTION>
                                                          Year Ending December 31,
                                      ----------------------------------------------------------------
                                          2006       2007       2008       2009        2010+     Total
                                          ----       ----       ----       ----        -----     -----
<S>                                   <C>        <C>        <C>        <C>         <C>        <C>
At December 31, 2005:
     1.00% - 1.99%                    $    178   $     --   $     --   $     --    $     --   $    178
     2.00% - 2.99%                      11,454         57         50         --          --     11,561
     3.00% - 3.99%                      22,158      3,235        544        580           6     26,523
     4.00% - 4.99%                      14,296      9,141      8,033      1,850         962     34,282
     5.00% - 5.99%                       1,425        754        819      4,479       4,096     11,573
                                      --------   --------   --------   --------    --------   --------
      Total certificates of deposit   $ 49,511   $ 13,187   $  9,446   $  6,909    $  5,064   $ 84,117
                                      ========   ========   ========   ========    ========   ========
</TABLE>
<TABLE>
<CAPTION>

                                                          Year Ending December 31,
                                      ----------------------------------------------------------------
                                          2005       2006       2007       2008        2009      Total
                                          ----       ----       ----       ----        ----      -----
<S>                                   <C>        <C>        <C>        <C>         <C>        <C>
At December 31, 2004:
     1.00% - 1.99%                    $  9,902   $     25   $     --   $     --    $     --   $  9,927
     2.00% - 2.99%                      30,417      6,267         65         51          --     36,800
     3.00% - 3.99%                         801      3,298      2,815        442         570      7,926
     4.00% - 4.99%                         100         39      3,374      3,814       1,941      9,268
     5.00% - 5.99%                          24         --        509         --         496      1,029
                                      --------   --------   --------   --------    --------   --------
      Total certificates of deposit   $ 41,244   $  9,629   $  6,763   $  4,307    $  3,007   $ 64,950
                                      ========   ========   ========   ========    ========   ========
</TABLE>
<TABLE>
<CAPTION>

                                                          Year Ending December 31,
                                      ----------------------------------------------------------------
                                          2004       2005       2006       2007        2008      Total
                                          ----       ----       ----       ----        ----      -----
<S>                                   <C>        <C>        <C>        <C>         <C>        <C>
At December 31, 2003:
     0.00% - 0.99%                    $     98   $     --   $     --   $     --    $     --   $     98
     1.00% - 1.99%                      17,532        599          5         --          --     18,136
     2.00% - 2.99%                      12,452      5,431      1,091         10         185     19,169
     3.00% - 3.99%                       1,233        283        198        752         485      2,951
     4.00% - 4.99%                       2,082         98         37        797         348      3,362
     5.00% - 5.99%                          12         26         --        508          --        546
                                      --------   --------   --------   --------    --------   --------
      Total certificates of deposit   $ 33,409   $  6,437   $  1,331   $  2,067    $  1,018   $ 44,262
                                      ========   ========   ========   ========    ========   ========
</TABLE>

                          SHORT-TERM AND LONG-TERM DEBT

Other Borrowings (dollars in thousands):

                                                          December 31,
                                               ---------------------------------
                                                  2005         2004         2003
                                                  ----         ----         ----
Customer repurchase agreements                 $23,745      $20,704      $16,500
FHLB of Atlanta advances                         2,300        2,300        2,300
Junior subordinated debentures                   3,093           --           --
                                               -------      -------      -------

                                               $29,138      $23,004      $18,800
                                               =======      =======      =======

Customer Repurchase Agreements. Atlantic has sold securities under an agreement
to repurchase with a par value of $23,954,000 and a fair value of $24,021,000,
which effectively collateralizes overnight borrowings totaling $23,745,000.

FHLB of Atlanta Advances. Atlantic has obtained an advance from FHLB of
$2,300,000 collateralized by Atlantic's FHLB capital stock in the amount of
$472,000 and a blanket lien on eligible wholly-owned residential (1-4 units)
first mortgage loans totaling approximately $5.8 million. This advance matures
on November 17, 2010.

Junior Subordinated Debentures. On September 15, 2005, Atlantic issued
$3,093,000 of fixed-rate junior subordinated debentures (the "debt securities")
to Atlantic BancGroup Statutory Trust I, a statutory trust created under the
laws of the State of Delaware. These debt securities are subordinated to
effectively all borrowings of Atlantic and are due and payable in thirty years.

Other Short-term Borrowings. Atlantic purchases federal funds for liquidity
needs during the year. At December 31, 2005, 2004, and 2003 no federal fund
purchases existed.


                                      -29-
<PAGE>

Selected Data for Other Borrowings (dollars in thousands):

<TABLE>
<CAPTION>
                                                                     2005       2004       2003
                                                                     ----       ----       ----
<S>                                                               <C>        <C>        <C>
Interest rate at end of period
   Customer repurchase agreements (federal funds rate less
        25 basis points)                                            4.000%     2.000%      1.25%
     FHLB of Atlanta advances (fixed rate)                          4.450%     6.050%     6.050%
     Junior subordinated debentures (fixed rate for five years)     5.886%       N/A        N/A

Average balances during the period
     Customer repurchase agreements                               $18,254    $11,986    $11,282
     FHLB of Atlanta advances                                     $ 2,300    $ 2,300    $ 2,300
     Junior subordinated debentures                               $   907        N/A        N/A
     Other short-term borrowings (federal funds purchased)        $   863    $   322    $   377

Weighted average interest rate
     Customer repurchase agreements                                  2.96%      1.64%      1.21%
     FHLB of Atlanta advances                                        5.91%     6.050%     6.050%
     Junior subordinated debentures                                  5.89%       N/A        N/A
     Other short-term borrowings (federal funds purchased)           3.24%      2.17%      1.59%

Short-term borrowings (customer repurchase agreements
   and federal funds purchased)
     Balance at end of period                                     $23,745    $20,704    $16,500
     Weighted average interest rate at end of period                 4.00%      2.00%      1.25%
     Maximum amount outstanding at
        month end during the period                               $30,770    $22,494    $21,099
     Average amount outstanding during the period                 $19,117    $11,986    $11,282
     Weighted average interest rate during the period                2.98%      1.65%      1.22%
</TABLE>

Interest Expense for Other Borrowings (dollars in thousands):

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                  -----------------------------
                                                                     2005       2004       2003
                                                                     ----       ----       ----
<S>                                                               <C>        <C>        <C>
   Customer repurchase agreements                                 $   541    $   196    $   136
   FHLB of Atlanta advances                                           136        139        141
   Junior subordinated debentures                                      52         --         --
   Other short-term borrowings (federal funds purchased)               28          7          6
                                                                  -------    -------    -------

                                                                  $   757    $   342    $   283
                                                                  =======    =======    =======
</TABLE>

                                    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, purchase
investment securities, and meet other contractual obligations.

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
interest-earning assets. Our principal sources of asset liquidity are federal
funds sold and the securities portfolio, including principal paydowns from
mortgage-backed securities. In 2005, 2004, and 2003, principal paydowns from
mortgage-backed securities totaled $6,872,000, $6,841,000, and $8,851,000,
respectively.

Other sources of funds are principal paydowns and maturities in the loan
portfolio. The contractual loan maturity table herein illustrates the maturities
of loans receivable at December 31, 2005.


                                      -30-
<PAGE>

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 customer repurchase agreements. At December 31,
2005, 2004, and 2003, our liquidity ratio of liquid assets to transaction
deposit accounts was 19.1%, 24.3%, and 27.0%, respectively. Management believes
that our liquidity is sufficient to meet our anticipated needs. While we have
elected not to accept brokered deposits, we have the ability to supplement our
liquidity if we decided to pursue brokered deposits as have other community
banks.

           OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

Contractual Commitments (dollars in thousands)

<TABLE>
<CAPTION>
                                                               December 31,
                                                      ---------------------------
                                                         2005      2004      2003
                                                         ----      ----      ----
<S>                                                   <C>       <C>       <C>
Commitments to originate loans
     Residential real estate                          $ 9,524   $ 5,539   $ 4,493
     Commercial real estate, construction, and land
       development secured by real estate              13,649     6,993     8,723
     Other unused commitments                           4,861     4,745     4,434
                                                      -------   -------   -------
         Total commitments to originate loans          28,034    17,277    17,650
Financial standby letters of credit                     1,714     1,772     1,614
                                                      -------   -------   -------

         Total contractual commitments                $29,748   $19,049   $19,264
                                                      =======   =======   =======
</TABLE>

Contractual Obligations (dollars in thousands)

<TABLE>
<CAPTION>

                                      1 Year    Years 2    Years 4     After
                                     or Less     and 3      and 5     5 Years     Total
                                     -------     -----      -----     -------     -----
<S>                                  <C>        <C>        <C>        <C>        <C>
Deposits without a stated maturity   $ 84,363   $     --   $     --   $     --   $ 84,363
Certificates of deposit and
   other time deposits                 49,511     22,633     11,874         99     84,117
Short-term borrowings                  23,745         --         --         --     23,745
Federal Home Loan Bank advances            --         --      2,300         --      2,300
Junior subordinated debentures             --         --         --      3,093      3,093
Operating leases                          270        582        615      1,288      2,755
                                     --------   --------   --------   --------   --------

     Total contractual obligations   $157,889   $ 23,215   $ 14,789   $  4,480   $200,373
                                     ========   ========   ========   ========   ========
</TABLE>

Management believes that we have adequate resources to fund all our commitments
and contractual obligations. 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. Other alternative funding sources include additional
FHLB borrowings and brokered deposits, if necessary.

                                CAPITAL RESOURCES

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 loan 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 1 and total risk-based capital. Tier 1 capital is composed of
total stockholders' equity reduced by goodwill and other intangible assets.
Total risk-based capital is comprised of the allowance for loan losses and any
qualifying debt obligations. Regulators also have adopted minimum requirements
of 4% of Tier 1 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 1 capital) to balance sheet assets and is
intended to supplement the risk-based capital ratio in measuring capital
adequacy.


                                      -31-
<PAGE>

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. Our actual capital amounts, capital ratios, and leverage ratios at
December 31, 2005, 2004, and 2003, are reflected in the table below.

Capital Ratios (dollars in thousands):

<TABLE>
<CAPTION>
                                                              Bank Only                  Consolidated
                                                 --------------------------------    --------------------
                                                           At December 31,              At December 31,
                                                 --------------------------------    --------------------
                                                     2005        2004        2003        2005        2004
                                                     ----        ----        ----        ----        ----
<S>                                              <C>         <C>         <C>         <C>         <C>
Tier 1 capital
   Stockholders' equity                          $ 18,068    $ 13,918    $ 10,918    $ 15,232    $ 14,033
   Plus, qualifying trust preferred securities         --          --          --       3,000          --
   Less, unrealized gains on AFS sec                  384         105          52         384         105
   Less, intangible assets                             --          --          --          --          --
                                                 --------    --------    --------    --------    --------
                                                   18,452      14,023      10,970      18,616      14,138
Tier 2 capital
   Allowable portion of allowance
       loan losses                                  1,552       1,296       1,220       1,552       1,296
                                                 --------    --------    --------    --------    --------

Total risk-based capital                         $ 20,004    $ 15,319    $ 12,190    $ 20,168    $ 15,434
                                                 ========    ========    ========    ========    ========

Total risk-weighted assets                       $173,688    $146,830    $116,505    $173,831    $148,893
                                                 ========    ========    ========    ========    ========

   Tier 1 risk-based capital ratio                  10.62%       9.55%       9.42%      10.71%       9.50%
                                                 ========    ========    ========    ========    ========

   Total risk-based capital ratio                   11.52%      10.43%      10.46%      11.60%      10.37%
                                                 ========    ========    ========    ========    ========

Average total assets for
   leverage capital purposes                     $206,620    $174,830    $135,068    $206,610    $175,944
                                                 ========    ========    ========    ========    ========

   Tier 1 leverage ratio                             8.93%       8.02%       8.12%       9.01%       8.04%
                                                 ========    ========    ========    ========    ========
</TABLE>

Note: At December 31, 2003, Atlantic's consolidated assets were less than $150
million and risk-based capital ratios were not reported.

Trust Preferred Securities. On September 15, 2005, Atlantic entered into a
transaction commonly referred to as trust preferred securities. Subject to
percentage limitations, the proceeds from the issuance of trust preferred
securities are considered Tier 1 capital for regulatory purposes, which totaled
$3.0 million (net of Atlantic's investment in the unconsolidated subsidiary).
However, as a result of the issuance of FIN 46 and FIN 46R, the trust subsidiary
is not consolidated in these financial statements and therefore the proceeds
received by Atlantic from the trust subsidiary is reported as junior
subordinated debentures. On February 28, 2005, the Federal Reserve Board issued
a new rule which provides that, notwithstanding the deconsolidation of such
trusts, junior subordinated debentures, such as those issued by Atlantic, may
continue to constitute up to 25% of a bank holding company's Tier 1 capital,
subject to certain new limitations which will not become effective until March
31, 2009, and which, in any event, are not expected to affect the treatment of
Atlantic's junior subordinated debentures as Tier 1 capital for regulatory
purposes.

During 2005, 2004, and 2003, the Holding Company used a portion of the proceeds
from the trust preferred securities and warrants exercised to provide additional
capital to Oceanside totaling $2.8 million, $1.8 million, and $1.0 million,
respectively. This amount has been eliminated in consolidation.


                                      -32-
<PAGE>

Capital Analysis:

<TABLE>
<CAPTION>
                                                              For the Year Ended December 31,
                                                              -------------------------------
                                                         2005             2004              2003
                                                         ----             ----              ----
<S>                                                     <C>               <C>               <C>
Average equity as a percentage of average assets         7.55%            8.41%             9.98%
Equity to total assets at end of year                    7.12             7.61              8.87
Return on average equity                                10.13             8.67              7.80
Return on average assets                                 0.76             0.73              0.78
Noninterest expenses to average assets                   2.75             3.06              3.28
</TABLE>

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, 2005, stockholders' equity increased $1,199,000 from December 31,
2004, as a result of the net income of $1,478,000, and an increase of $279,000
in unrealized holding losses on available-for-sale securities. As of December
31, 2004, stockholders' equity increased $1,113,000 from December 31, 2003, as a
result of the net income of $1,166,000 and an increase of $53,000 in unrealized
holding losses on available-for-sale securities. The return on average equity
for the years ended December 31, 2005, 2004, and 2003, totaled 10.13%, 8.67%,
and 7.80%, respectively. The increase in return on average equity is
attributable primarily to the increases in net income in 2005 and 2004.

                           RELATED PARTY TRANSACTIONS

We have entered into transactions with our directors, executive officers,
significant stockholders, and their affiliates (insiders). 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. The following table summarizes the significant end of
period insider transactions (dollars in millions):

<TABLE>
<CAPTION>
                                                        2005             2004              2003
                                                        ----             ----              ----
<S>                                                   <C>              <C>               <C>
Loans                                                 $  2.3           $  2.0            $  1.4
Unfunded loan commitments                             $  1.3           $  1.1            $  1.1
Deposits and customer repurchase agreements           $ 36.7           $ 22.0            $ 17.0
</TABLE>

                            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.

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 lenders, 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.


                                      -33-
<PAGE>

Interest Rate Sensitivity at December 31, 2005 (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                          $  3,241     $     --      $     --     $     --     $  3,241
Interest-bearing deposits in other banks           4           --            --           --            4
Loans(1)                                      70,599       20,763        52,498        9,006      152,866
Securities(2)                                     34           69        17,372       20,815       38,290
                                            --------     --------      --------     --------     --------

Total rate-sensitive assets                 $ 73,878     $ 20,832      $ 69,870     $ 29,821     $194,401
                                            ========     ========      ========     ========     ========

Money market and NOW accounts(2)            $ 38,358     $     --      $     --     $  6,264     $ 44,622
Savings accounts (2)                              --           --            --        6,059        6,059
Certificates of deposit (2)                   20,760       28,726        22,620       12,011       84,117
                                            --------     --------      --------     --------     --------

Total rate-sensitive liabilities            $ 59,118     $ 28,726      $ 22,620     $ 24,334     $134,798
                                            ========     ========      ========     ========     ========

Gap (repricing differences)                 $ 14,760     $ (7,894)     $ 47,250     $  5,487     $ 59,603
                                            ========     ========      ========     ========     ========

Cumulative Gap                              $ 14,760     $  6,866      $ 54,116     $ 59,603
                                            ========     ========      ========     ========

Cumulative Gap/total assets                     6.90%        3.21%        25.30%       27.87%
                                            ========     ========      ========     ========

Total assets                                                                                     $213,880
                                                                                                 ========
</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. Nonaccrual loans are
      excluded if material.

(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.

            RECENT ACCOUNTING PRONOUNCEMENTS IMPACTING FUTURE PERIODS

Consolidation of Variable Interest Entities. In December 2003, the FASB issued
FIN 46R, Consolidation of Variable Interest Entities, an Interpretation of ARB
No. 51, which revised FIN 46 and required the adoption of FIN 46 or FIN 46R for
periods ending after December 15, 2003. FIN 46 and FIN 46R do not apply to
securitization structures that are QSPEs as defined within SFAS No. 140.
Atlantic adopted the provisions of FIN 46R in 2005 in connection with the trust
preferred securities transaction on September 15, 2005. The Company's
securitization structure, as of December 31, 2005, met QSPE standards, and
therefore, was not affected by the adoption of FIN 46 or FIN 46R. Additionally,
in August 2005, the FASB issued three proposed amendments to SFAS 140, which
would amend the requirements for QSPE status. These amendments are not expected
to have a material impact on financial condition, results of operations, or
liquidity of Atlantic.

Meaning of Other Than Temporary Impairment. In March 2004, the Financial
Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) released
Issue 03-01, Meaning of Other Than Temporary Impairment, which addressed
other-than-temporary impairment for certain debt and equity investments. The
recognition and measurement requirements of Issue 03-01, and other disclosure
requirements not already implemented, were effective for periods beginning after
June 15, 2004. In September 2004, the FASB staff issued FASB Staff Position
(FSP) EITF 03-1-1, which delayed the effective date for certain measurement and
recognition guidance contained in Issue 03-01. The FSP requires the application
of pre-existing other-than-temporary guidance during the period of delay until a
final consensus is reached. The adoption of the effective provisions of this
EITF did not have a material impact on Atlantic's financial position, results of
operations, or liquidity. Management is in the process of assessing the impact
the delayed provisions will have on its financial position, results of
operations, and liquidity, when adopted.

Exchanges of Nonmonetary Assets. In December 2004, the FASB issued SFAS 153,
Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting
for Nonmonetary Transactions. This Statement amends the principle that exchanges
of nonmonetary assets should be measured based on the fair value of the assets
exchanged and more broadly provides for exceptions regarding exchanges of
nonmonetary assets that do not have commercial substance. This


                                      -34-
<PAGE>

Statement is effective for nonmonetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005. The adoption of this standard is not
expected to have a material impact on financial condition, results of
operations, or liquidity of Atlantic.

Share-Based Payments. In December 2004, the FASB revised SFAS 123, Accounting
for Stock-Based Compensation. SFAS 123R establishes accounting requirements for
share-based compensation to employees and carries forward prior guidance on
accounting for awards to non-employees. The provisions of this Statement became
effective July 1, 2005, for all equity awards granted after the effective date.
SFAS 123R requires an entity to recognize compensation expense based on the
estimated fair value of the number of awards expected to actually vest,
exclusive of awards expected to be forfeited. The adoption of this Standard is
not expected to have a material effect on financial condition, the results of
operations, or liquidity of Atlantic.

In March 2005, the SEC released Staff Accounting Bulletin ("SAB") No. 107, which
addresses the application of SFAS No. 123(R). This SAB is intended to assist
issuers with their initial implementation of SFAS No. 123(R) by providing
interpretive guidance related to share-based compensation regarding the
interaction between SFAS No. 123(R) and certain Securities and Exchange
Commission rules and regulations. It does not change or amend the provisions of
SFAS No. 123(R) or these SEC rules and regulations. SAB No. 107 also delayed the
effective date of SFAS No. 123(R) for public companies to annual, rather than
interim, periods beginning after June 15, 2005. The adoption of SFAS No. 123(R),
as interpreted by SAB No. 107, is not expected to have a material impact on the
financial position, results of operations, or liquidity of Atlantic.

In May 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections,
which replaces APB Opinion No. 20, Accounting Changes, and SFAS 3, Reporting
Accounting Changes in Interim Financial Statements-An Amendment of APB Opinion
No. 28. SFAS 154 changes the requirements for the accounting and reporting of a
change in accounting principle. It applies to all voluntary changes in
accounting principle as well as to changes required by an accounting
pronouncement that does not include specific transition provisions. SFAS 154
eliminates the requirement in APB Opinion No. 20 to include the cumulative
effect changes in accounting principle in the income statement in the period of
change. Instead, to enhance comparability of prior period financial statements,
SFAS 154 requires that changes in accounting principle be retrospectively
applied. Under retrospective application, the new accounting principle is
applied as of the beginning of the first period presented as if that principle
had always been used. The cumulative effect of the change is reflected in the
carrying value of assets and liabilities as of the first period presented and
the offsetting adjustments are recorded to opening retained earnings. Each
period presented is adjusted to reflect the period specific effects of applying
the change. Although retrospective application is similar to restating prior
periods, SFAS 154 gives the treatment a new name to differentiate it from
restatement for correction of an error. Only direct effects of the change will
be included in the retrospective application; all indirect effects will be
recognized in the period of change. If it is impracticable to determine the
cumulative effect for all periods, the new accounting principle should be
applied as if it were adopted prospectively from the earliest date practicable.
SFAS 154 is effective for accounting changes and corrections of errors made in
fiscal years beginning after the date SFAS 154 was issued. The changes required
by SFAS 154 are not expected to have a material impact on the financial
condition, results of operations, or liquidity of Atlantic.

                               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 with 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.


                                      -35-
<PAGE>

           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Oceanside's earnings are dependent, to a large degree, on its net interest
income, which is the difference between interest income earned on all
interest-earning assets, primarily loans and securities, and interest paid on
all interest-bearing liabilities, primarily deposits. Market risk is the risk of
loss from adverse changes in market prices and interest rates. Oceanside's
market risk arises primarily from inherent interest rate risk in its lending,
investing, and deposit gathering activities. Oceanside seeks to reduce its
exposure to market risk through actively monitoring and managing its interest
rate risk. Management relies upon static "gap" analysis to determine the degree
of mismatch in the maturity and repricing distribution of interest-earning
assets and interest-bearing liabilities which quantifies, to a large extent, the
degree of market risk inherent in Oceanside's balance sheet. Gap analysis is
further augmented by simulation analysis to evaluate the impact of varying
levels of prevailing interest rates and the sensitivity of specific
interest-earning assets and interest-bearing liabilities to changes in those
prevailing rates. Simulation analysis consists of evaluating the impact on net
interest income given changes from 200 basis points below the current prevailing
rates to 200 basis points above the current prevailing rates. Management makes
certain assumptions as to the effect varying levels of interest rates have on
certain interest-earning assets and interest-bearing liabilities, which
assumptions consider both historical experience and consensus estimates of
outside sources.

With respect to the primary interest-earning assets, loans and securities,
certain features of individual types of loans and specific securities introduce
uncertainty as to their expected performance at varying levels of interest
rates. In some cases, prepayment options exist whereby the borrower may elect to
repay the obligation at any time prior to maturity. These prepayment options
make anticipating the performance of those instruments difficult given changes
in prevailing interest rates. Management believes that assumptions used in its
simulation analysis about the performance of financial instruments with such
prepayment options are appropriate. However, the actual performance of these
financial instruments may differ from management's estimates due to several
factors, including the diversity and financial sophistication of the customer
base, the general level of prevailing interest rates and the relationship to
their historical levels, and general economic conditions. The difference between
those assumptions and actual results, if significant, could cause the actual
results to differ from those indicated by the simulation analysis.

Deposits are the primary funding source for interest-earning assets and the
associated market risk is considered by management in its simulation analysis.
Generally, it is anticipated that deposits will be sufficient to support funding
requirements. However, the rates paid for deposits at varying levels of
prevailing interest rates have a significant impact on net interest income.

The following table illustrates the results of simulation analysis used by
Oceanside to determine the extent to which market risk would affect net interest
margin for the next twelve and twenty-four months if prevailing interest rates
increased or decreased the specified amounts from current prevailing rates. As
noted above, this model uses estimates and assumptions in both balance sheet
growth and asset and liability account rate reactions to changes in prevailing
interest rates. Because of the inherent use of these estimates and assumptions
in the simulation model used to derive this market risk information, the actual
results of the future impact of market risk on Oceanside's net interest margin
may differ from that found in the table.

Change in Prevailing Interest Rates                2006            2007
-----------------------------------                ----            ----
     + 200 basis points                           0.14%            0.32%
       Prevailing rates                             --                --
     - 200 basis points                          (0.25%)          (0.49%)

We do not engage in trading or hedging activities and do not invest in
interest-rate derivatives or enter into interest rate swaps. We actively monitor
and manage our interest rate risk exposure. The primary objective in managing
interest-rate risk is to limit, within established guidelines, the adverse
impact of changes in interest rates on our net interest income and capital,
while adjusting our asset-liability structure to obtain the maximum yield-cost
spread on that structure. We rely primarily on the asset-liability structure to
control interest rate risk. However, a sudden and substantial change in interest
rates could adversely impact our earnings, to the extent that the interest rates
borne by assets and liabilities do not change at the same speed, to the same
extent, or on the same basis.


                                      -36-
<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 accompanying consolidated statements of financial condition
of Atlantic BancGroup, Inc. and Subsidiary ("Atlantic") as of December 31, 2005
and 2004, and the related consolidated statements of operations and
comprehensive income, cash flows, and stockholders' equity, for each of the two
years in the period ended December 31, 2005. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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, 2005 and 2004, and the results of its consolidated operations and
its cash flows for each of the two years in the period ended December 31, 2005,
in conformity with U.S. generally accepted accounting principles.


/s/  Stevens, Powell & Company, P.A.

STEVENS, POWELL & COMPANY, P.A.
Jacksonville, Florida
February 8, 2006


                                      -37-
<PAGE>

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

<TABLE>
<CAPTION>
                                                                           December 31,
                                                                     -------------------------
                                                                         2005          2004
                                                                     -----------   -----------
                                                           (Dollars in Thousands, Except Per Share Data)
<S>                                                                  <C>           <C>
                                     ASSETS
Cash and cash equivalents:
     Cash and due from banks                                         $    11,746   $    10,569
     Federal funds sold                                                    3,241         7,604
                                                                     -----------   -----------
         Total cash and cash equivalents                                  14,987        18,173

Securities available-for-sale                                              8,486         2,265
Securities pledged for customer repurchase agreements                     23,954        20,705
Securities held-to-maturity (fair value of $5,983 in 2005 and
    $6,118 in 2004)                                                        5,850         5,856
Stock in FHLB and correspondent banks, at cost                               676           593
Loans, net                                                               151,251       128,505
Facilities                                                                 4,154         4,155
Accrued interest receivable                                                  841           589
Deferred income taxes                                                        851           641
Investment in unconsolidated subsidiary                                       93            --
Cash surrender value of bank-owned life insurance                          2,453         2,363
Other assets                                                                 284           472
                                                                     -----------   -----------

         Total assets                                                $   213,880   $   184,317
                                                                     ===========   ===========

                                   LIABILITIES
Deposits:
     Noninterest-bearing demand deposits                             $    33,682   $    27,782
     Interest-bearing deposits                                             6,264        10,293
     Money market deposits                                                38,358        36,701
     Savings deposits                                                      6,059         6,626
     Time deposits, $100,000 and over                                     27,234        20,380
     Other time deposits                                                  56,883        44,570
                                                                     -----------   -----------
         Total deposits                                                  168,480       146,352

Other borrowings                                                          29,138        23,004
Accrued interest payable on deposits                                         160            97
Accounts payable and accrued liabilities                                     870           831
                                                                     -----------   -----------
         Total liabilities                                               198,648       170,284
                                                                     -----------   -----------

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

                              STOCKHOLDERS' EQUITY

Common stock, $0.01 par value, authorized 10,000,000 shares, issued
    and outstanding 1,247,516 shares in 2005 and 2004                         12            12
Additional paid-in capital                                                11,788        11,788
Retained earnings                                                          3,816         2,338
Accumulated other comprehensive income:
     Net unrealized holding losses on securities                            (384)         (105)
                                                                     -----------   -----------
         Total stockholders' equity                                       15,232        14,033
                                                                     -----------   -----------

         Total liabilities and stockholders' equity                  $   213,880   $   184,317
                                                                     ===========   ===========

Book value per common share                                          $     12.21   $     11.25
                                                                     ===========   ===========

Common shares outstanding                                              1,247,516     1,247,516
                                                                     ===========   ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      -38-
<PAGE>

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

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                       -------------------------
                                                                          2005          2004
                                                                       -----------   -----------
                                                             (Dollars in Thousands, Except Per Share Data)
<S>                                                                    <C>           <C>
INTEREST INCOME
     Interest and fees on loans                                        $     9,870   $     7,280
     Interest and dividends from investments and deposits                    1,297           884
     Interest on federal funds sold                                             94            77
                                                                       -----------   -----------
         Total interest income                                              11,261         8,241
                                                                       -----------   -----------

INTEREST EXPENSE
     Interest on deposits                                                    3,601         1,936
     Other                                                                     757           342
                                                                       -----------   -----------
         Total interest expense                                              4,358         2,278
                                                                       -----------   -----------

NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES                         6,903         5,963

PROVISION FOR LOAN LOSSES                                                      334           362
                                                                       -----------   -----------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                          6,569         5,601
                                                                       -----------   -----------

NONINTEREST INCOME
     Service charges on deposit accounts                                       528           560
     Mortgage banking                                                          114           106
     Gain on sale of SBA loans                                                  --            33
     Other income                                                              225           224
                                                                       -----------   -----------
         Total noninterest income                                              867           923
                                                                       -----------   -----------

NONINTEREST EXPENSES
     Salaries and employee benefits                                          2,610         2,365
     Expenses of bank premises and fixed assets                              1,023           903
     Other operating expenses                                                1,680         1,621
                                                                       -----------   -----------
         Total noninterest expenses                                          5,313         4,889
                                                                       -----------   -----------

INCOME BEFORE PROVISION FOR INCOME TAXES                                     2,123         1,635

PROVISION FOR INCOME TAXES                                                     645           469
                                                                       -----------   -----------

NET INCOME                                                                   1,478         1,166

OTHER COMPREHENSIVE INCOME
Unrealized holding losses on securities arising during period (net of
         income tax benefit of $168 in 2005 and $32 in 2004)                  (279)          (53)
                                                                       -----------   -----------

COMPREHENSIVE INCOME                                                   $     1,199   $     1,113
                                                                       ===========   ===========

AVERAGE COMMON SHARES OUTSTANDING
     Basic                                                               1,247,516     1,247,516
                                                                       ===========   ===========
     Fully diluted                                                       1,247,516     1,247,516
                                                                       ===========   ===========

EARNINGS PER SHARE
     Basic                                                                   $1.18         $0.93
                                                                             =====         =====
     Fully diluted                                                           $1.18         $0.93
                                                                             =====         =====
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      -39-
<PAGE>

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

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                        -------------------
                                                                          2005       2004
                                                                        --------   --------
                                                                       (Dollars in Thousands)
<S>                                                                     <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                         $  1,478   $  1,166
     Adjustments to reconcile net income to net cash
        provided by (used in) operating activities:
         Provision for loan losses                                           334        362
         Depreciation and amortization                                       351        344
         Net premium amortization and discount accretion                     139        231
         Deferred income taxes                                               136        (78)
         Policy income from indexed retirement plan                          (90)       (98)
         Pension expense from indexed retirement plan                        153        160
         Increase in other assets                                            (64)      (299)
         Increase (decrease) in other liabilities                           (229)       316
                                                                        --------   --------
                  Net cash provided by operating activities                2,208      2,104
                                                                        --------   --------

CASH FLOWS FROM INVESTING ACTIVITIES
     Securities available-for-sale:
         Purchases                                                       (16,922)   (11,044)
         Principal repayments on mortgage-backed investment securities     6,872      6,841
     Securities held-to-maturity
         Purchases                                                            --     (1,962)
     Purchases of FHLB stock                                                 (83)      (261)
     Increase in loans                                                   (23,080)   (31,246)
     Proceeds from sale of foreclosed real estate                             --        641
     Purchase of bank-owned life insurance for indexed retirement plan        --       (950)
     Purchases of facilities                                                (350)      (320)
                                                                        --------   --------
                  Net cash used in investing activities                  (33,563)   (38,301)
                                                                        --------   --------

CASH FLOWS FROM FINANCING ACTIVITIES
     Increase in deposits:
         Noninterest-bearing                                               5,900      2,308
         Interest-bearing                                                 16,228     30,666
     Junior subordinated debentures, net                                   3,000         --
     Proceeds from other borrowings                                        3,041      4,204
                                                                        --------   --------
                  Net cash provided by financing activities               28,169     37,178
                                                                        --------   --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                      (3,186)       981

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                            18,173     17,192
                                                                        --------   --------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                $ 14,987   $ 18,173
                                                                        ========   ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

     Cash received during the year for interest and dividends           $ 11,009   $  8,128
                                                                        ========   ========
     Cash paid during the year for interest                             $  4,295   $  2,247
                                                                        ========   ========
     Cash paid during the year for income taxes                         $    645   $    557
                                                                        ========   ========

NONCASH TRANSACTIONS

     Loans transferred to foreclosed real estate during the year        $     --   $    641
                                                                        ========   ========
     Increase in cash surrender value of bank-owned life insurance      $     90   $     98
                                                                        ========   ========
     Increase in deferred compensation arrangements                     $    153   $    160
                                                                        ========   ========
     Net change in unrealized holding losses on securities
        available-for-sale, net of income taxes                         $   (279)  $    (53)
                                                                        ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      -40-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                       Net
                                                                                   Unrealized
                                         Common Stock      Additional             Holding Gains      Total
                                     --------------------    Paid-in   Retained    (Losses) on    Stockholders'
                                       Shares    Amount      Capital   Earnings     Securities       Equity
                                     ---------  ---------   ---------  ---------  -------------   -------------
                                                               (Dollars in Thousands)
<S>                                  <C>        <C>         <C>        <C>           <C>            <C>

Balance, December 31, 2003           1,247,516  $      12   $  11,788  $   1,172     $     (52)     $  12,920

Comprehensive income:
     Net income                             --         --          --      1,166
     Change in net unrealized
       holding losses on securities         --         --          --         --           (53)

       Total comprehensive income           --         --          --         --            --          1,113
                                     ---------  ---------   ---------  ---------     ---------      ---------

Balance, December 31, 2004           1,247,516         12      11,788      2,338          (105)        14,033

Comprehensive income:
     Net income                             --         --          --      1,478
     Change in net unrealized
       holding losses on securities         --         --          --         --          (279)

       Total comprehensive income           --         --          --         --            --          1,199
                                     ---------  ---------   ---------  ---------     ---------      ---------

Balance, December 31, 2005           1,247,516  $      12   $  11,788  $   3,816     $    (384)     $  15,232
                                     =========  =========   =========  =========     =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      -41-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES


General - Atlantic BancGroup, Inc. (the "Holding Company") is a bank holding
company registered with the Federal Reserve and owns 100% of the outstanding
stock of Oceanside Bank ("Oceanside"). Oceanside is a state-chartered commercial
bank, which opened July 21, 1997. Oceanside's deposits are insured by the
Federal Deposit Insurance Corporation. The Holding Company's primary business
activities are the operations of Oceanside, and it operates in only one
reportable industry segment: banking. Collectively, the entities are referred to
as "Atlantic."

Competition - Oceanside, through four banking offices, provides a variety of
banking services to individuals and businesses located primarily in East Duval
and Northeast St. Johns Counties of Florida. Atlantic funds its loans primarily
by offering time, savings and money market, and demand deposit accounts to both
commercial enterprises and individuals. Atlantic competes with other banking and
financial institutions in its primary markets including Internet-based
institutions. Commercial banks, savings banks, savings and loan associations,
mortgage bankers and brokers, credit unions, and money market funds actively
compete for deposits and loans. Such institutions, as well as consumer finance,
mutual funds, insurance companies, and brokerage and investment banking firms,
may be considered competitors of Atlantic with respect to one or more of the
services it renders.

Basis of Presentation - The accompanying consolidated financial statements
include the accounts of the Holding Company and its wholly-owned subsidiary,
Oceanside. All significant intercompany accounts and transactions have been
eliminated in consolidation. The accounting and reporting policies of Atlantic
conform with U.S. generally accepted accounting principles and to general
practices within the banking industry.

Regulatory Environment - Atlantic is subject to regulations of certain federal
and state agencies and, accordingly, it is periodically examined by those
regulatory authorities. As a consequence of the extensive regulation of
commercial banking activities, Atlantic's business is particularly susceptible
to being affected by federal legislation and regulations.

Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates. Material estimates
that are particularly susceptible to significant change in the near term relate
to the determination of the allowance for loan losses and valuation of other
real estate owned ("OREO").

The determination of the adequacy of the allowance for loan losses is based on
estimates that may be affected by significant changes in the economic
environment and market conditions. In connection with the determination of the
estimated losses on loans, management obtains independent appraisals for
significant collateral.

Atlantic's loans are generally secured by specific items of collateral including
real property, consumer assets, and business assets. Although Atlantic has a
diversified loan portfolio, a substantial portion of its debtors' ability to
honor their contracts is dependent on local, state, and national economic
conditions that may affect the value of the underlying collateral or the income
of the debtor.

While management uses available information to recognize losses on loans,
further reductions in the carrying amounts of loans may be necessary based on
changes in economic conditions. In addition, regulatory agencies, as an integral
part of their examination process, periodically review the estimated losses on
loans. Such agencies may require us to recognize additional losses based on
their judgments about information available to them at the time of their
examination.

Cash and Cash Equivalents - For purposes of the statements of cash flows, cash
and cash equivalents include cash and due from banks and federal funds sold, all
of which mature within ninety days.


                                      -42-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

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

Oceanside is required by law or regulation to maintain cash reserves with the
Federal Reserve Bank. The reserve balances were approximately $803,000 and
$808,000 at December 31, 2005 and 2004, respectively.

Investment Securities - Debt securities are classified as held-to-maturity when
Atlantic has the positive intent and ability to hold the securities to maturity.
Securities held-to-maturity are carried at amortized cost. The amortization of
premiums and accretion of discounts are recognized in interest income using
methods approximating the interest method over the period to maturity.

Debt securities not classified as held-to-maturity are classified as
available-for-sale. Securities available-for-sale are carried at fair value with
unrealized gains and losses reported in other comprehensive income. Realized
gains (losses) on securities available-for-sale are included in noninterest
income and, when applicable, are reported as a reclassification adjustment, net
of tax, in other comprehensive income. Gains and losses on sales of securities
are determined on the specific-identification method.

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 noninterest income. During 2005 and
2004, Atlantic did not engage in trading securities.

Declines in the fair value of individual held-to-maturity and available-for-sale
securities below their cost that are other than temporary result in write-downs
of the individual securities to their fair value. The related write-downs are
included in earnings as realized losses. As of December 31, 2005, no securities
were determined to have other than a temporary decline in fair value below cost.

Atlantic does not purchase, sell, or utilize off-balance sheet derivative
financial instruments or derivative commodity instruments for hedging purposes.

Securities Purchased Under Agreements to Resell And Securities Sold Under
Agreements to Repurchase - Securities purchased under agreements to resell and
securities sold under agreements to repurchase are generally accounted for as
collateralized financing transactions and are recorded at the amounts at which
the securities were acquired or sold plus accrued interest. Securities,
generally U.S. government and Federal agency securities, pledged as collateral
under these financing arrangements cannot be sold or repledged by the secured
party. The fair value of collateral either received from or provided to a third
party is continually monitored, and additional collateral is obtained or
requested to be returned as appropriate.

Loans Held-for-Sale - Residential loans held-for-sale are valued at the lower of
cost or market as determined by outstanding commitments from investors or
current investor yield requirements. Gains and losses resulting from sales of
residential mortgage loans are recognized when Atlantic funds the loan and has a
commitment from the purchaser. Atlantic had no significant loans held-for-sale
as of December 31, 2005 or 2004. Loans originated for sale in 2005 and 2004
totaled $12.7 million and $9.1 million, respectively. The income from mortgage
banking operations totaled $114,000 and $106,000 for 2005 and 2004,
respectively.

There were no sales of SBA loans in 2005. Oceanside recognized a gain in the
amount of $33,000 on the sale of an SBA loan in 2004. No loan servicing was
retained in this transaction. Oceanside does not classify SBA loans (or the
SBA-guaranteed portion) as held-for-sale, as the intent is to generally hold SBA
loans to maturity in Oceanside's held-for-investment portfolio.

Loans Held-for-Investment - Loans originated with the intent and ability to hold
for the foreseeable future or until maturity or payoff are categorized as loans
held-for-investment. These loans are reported at their outstanding principal
adjusted for any charge-offs, the allowance for loan losses, and any deferred
fees or capitalized costs. Loan origination fees are capitalized and certain
direct origination costs are deferred. Both are recognized as an adjustment of
the yield of the related loan over the estimated life of the loan.


                                      -43-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

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

The accrual of interest on loans is discontinued at the time the loan is ninety
days delinquent unless the loan is well collateralized and in process of
collection. In all cases, loans are placed on nonaccrual or charged-off at an
earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans placed on nonaccrual or
charged-off is reversed against interest income. The interest on these loans is
accounted for on the cash-basis or cost-recovery method, until qualifying for
return to accrual. Loans are returned to accrual status when all the principal
and interest amounts contractually due are brought current and future payments
are reasonably assured.

Allowance for Loan Losses and Impaired Loans - The allowance for loan losses is
established as probable losses are estimated through a provision for loan losses
charged to earnings. Loan losses are charged against the allowance when
management believes the uncollectibility of a loan balance is confirmed.
Subsequent recoveries, if any, are credited to the allowance.

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

A loan is considered impaired when, based on current information and events, it
is probable that Atlantic will be unable to collect the scheduled payments of
principal or interest when due. Factors considered by management in determining
impairment include payment status, collateral value, and the probability of
collecting scheduled principal and interest payments when due. Loans that
experience insignificant payment delays and payment shortfalls generally are not
classified as impaired. Management determines the significance of payment delays
and payment shortfalls on a case-by-case basis, taking into consideration all of
the circumstances surrounding the loan and the borrower, including the length of
the delay, the reasons for the delay, the borrower's prior payment record, and
the amount of the shortfall in relation to the principal and interest owed.
Impairment is measured on a loan-by-loan basis for commercial loans by either
the present value of expected future cash flows discounted at the loan's
effective interest rate, the loan's obtainable market price, or the fair value
of the collateral if the loan is collateral dependent.

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.

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 estimated useful lives of assets. 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.


                                      -44-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

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

Foreclosed Assets - Assets 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 foreclosed asset is carried at the lower of
carrying amount or fair value less cost to sell. Subsequent changes in value are
reported as adjustments to the carrying amount, not to exceed the initial
carrying value of the foreclosed assets at the time of the transfer. Revenue and
expenses from operations and changes in the valuation allowance are included in
gains or loss on foreclosed assets.

During 2004, Oceanside took a deed in lieu of foreclosure on a residential real
estate property (referred to as OREO) that was essentially cross-collateralized
with a commercial lending relationship. This OREO was sold for $675,000 in
December 2004; and after net expenses on the sale of the OREO, no gain or loss
was recognized on the recorded investment of $641,000. At that time, Oceanside
was able to measure the loss on the cross-collateralized commercial lending
relationship and loan charge-offs totaling $275,000 were recorded along with a
corresponding increase in the provision for loan losses in the fourth quarter of
2004.

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, which may include standby letters of credit. Such financial
instruments are recorded in the 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 (i) the assets have been
isolated from Atlantic, (ii) 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 (iii) Atlantic does not maintain effective
control over the transferred assets through an agreement to repurchase them
before their maturity.

Employee Benefits - Pension costs are charged to salaries and employee benefits
expense when accrued. The accounting for income and costs associated with the
Indexed Retirement Plans is more fully described at Note 8.

Income Taxes - Deferred income tax assets and liabilities are recorded to
reflect the tax consequences on future years of temporary differences between
revenues and expenses reported for financial statement purposes and those
reported for income tax purposes. Deferred tax assets and liabilities are
measured using the enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be realized or
settled. Valuation allowances are provided against assets that are not likely to
be realized.

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, 2005 and 2004. Diluted EPS
are computed by dividing net earnings by the weighted average number of shares
and all dilutive potential shares outstanding during the period. Atlantic has no
dilutive potential shares outstanding for 2005 or 2004. For purposes of
computing diluted EPS, the treasury stock method is used. The following
information was used in the computation of EPS on both a basic and diluted basis
for the years ended December 31, 2005 and 2004 (dollars in thousands except per
share data):

<TABLE>
<CAPTION>
                                                                        For the Year Ended December 31,
                                                                            2005                2004
                                                                            ----                ----
<S>                                                                        <C>                <C>
     Basic EPS computation:
         Numerator - Net income                                            $1,478             $1,166
                                                                           ======             ======
         Denominator - Weighted average shares outstanding (rounded)        1,248              1,248
                                                                           ======             ======
         Basic EPS                                                         $ 1.18             $ 0.93
                                                                           ======             ======

     Diluted EPS computation:
         Numerator - Net income                                            $1,478             $1,166
                                                                           ======             ======
         Denominator - Weighted average shares outstanding (rounded)        1,248              1,248
                                                                           ======             ======
         Diluted EPS                                                       $ 1.18             $ 0.93
                                                                           ======             ======
</TABLE>


                                      -45-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

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

Advertising and Business Development - Atlantic expenses advertising and
business development costs as incurred. Advertising and business development
costs for 2005 and 2004 as included in other operating expenses were $75,000 and
$81,000, respectively.

Reclassification of Accounts - Certain items in the financial statements for
2004 have been reclassified to conform to the classifications used for the
current year.

Recent Accounting Pronouncements - Consolidation of Variable Interest Entities.
In January 2003, the Financial Accounting Standards Board ("FASB") completed its
re-deliberations of the project related to the consolidation of variable
interest entities which culminated with the issuance of FASB Interpretation No.
46 ("FIN 46"), Consolidation of Variable Interest Entities. FIN 46 states that
if a business enterprise has a controlling financial interest in a variable
interest entity, the assets, liabilities, and results of the activities of the
variable interest entity should be included in the consolidated financial
statements of the business enterprise. FIN 46 explains how to identify variable
interest entities and how an enterprise assesses its interests in a variable
interest entity to determine whether to consolidate that entity. FIN 46 also
requires existing unconsolidated variable interest entities to be consolidated
by their primary beneficiaries if the entities do not effectively disperse risks
among the parties involved. Variable interest entities that effectively disperse
risks will not be consolidated unless a single party holds an interest or a
combination of interests that effectively recombines risks that were previously
dispersed. FIN 46 applies immediately to variable interest entities created
after January 31, 2003, and to variable interest entities in which an enterprise
obtains an interest after that date. FIN 46 originally applied in the first
fiscal year or interim period beginning after June 15, 2003, to variable
interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003. However, in December 2003, the FASB issued FIN
46R, Consolidation of Variable Interest Entities, an Interpretation of ARB No.
51, which revised FIN 46 and required the adoption of FIN 46 or FIN 46R for
periods ending after December 15, 2003. FIN 46 and FIN 46R do not apply to
securitization structures that are QSPEs as defined within SFAS No. 140.
Atlantic adopted the provisions of FIN 46R in 2005 in connection with the trust
preferred securities transaction on September 15, 2005. The Company's
securitization structure, as of December 31, 2005, met QSPE standards, and
therefore, was not affected by the adoption of FIN 46 or FIN 46R. Additionally,
in August 2005, the FASB issued three proposed amendments to SFAS 140, which
would amend the requirements for QSPE status. These amendments are not expected
to have a material impact on financial condition, results of operations, or
liquidity of Atlantic.

Accounting for Certain Loans or Debt Securities Acquired in a Transfer. In
December 2003, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 03-3, Accounting for Certain Loans or Debt
Securities Acquired in a Transfer. SOP 03-3 requires acquired loans, including
debt securities, to be recorded at the amount of the purchaser's initial
investment and prohibits carrying over valuation allowances from the seller for
those individually-evaluated loans that have evidence of deterioration in credit
quality since origination, and it is probable all contractual cash flows on the
loan will be unable to be collected. SOP 03-3 also requires the excess of all
undiscounted cash flows expected to be collected at acquisition over the
purchaser's initial investment to be recognized as interest income on a
level-yield basis over the life of the loan. Subsequent increases in cash flows
expected to be collected are recognized prospectively through an adjustment of
the loan's yield over its remaining life, while subsequent decreases are
recognized as impairment. Loans carried at fair value, mortgage loans held for
sale, and loans to borrowers in good standing under revolving credit agreements
are excluded from the scope of SOP 03-3. The guidance was effective for loans
acquired in fiscal years beginning after December 15, 2004, and the adoption of
SOP 03-3 did not have a material impact on financial condition, results of
operations, or liquidity of Atlantic.

Meaning of Other Than Temporary Impairment. In March 2004, the Financial
Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) released
Issue 03-01, Meaning of Other Than Temporary Impairment, which addressed
other-than-temporary impairment for certain debt and equity investments. The
recognition and measurement requirements of Issue 03-01, and other disclosure
requirements not already implemented, were effective for periods beginning after
June 15, 2004. In September 2004, the FASB staff issued FASB Staff Position


                                      -46-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

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

(FSP) EITF 03-1-1, which delayed the effective date for certain measurement and
recognition guidance contained in Issue 03-01. The FSP requires the application
of pre-existing other-than-temporary guidance during the period of delay until a
final consensus is reached. The adoption of the effective provisions of this
EITF did not have a material impact on Atlantic's financial position, results of
operations, or liquidity. Management is in the process of assessing the impact
the delayed provisions will have on its financial position, results of
operations, and liquidity, when adopted.

Exchanges of Nonmonetary Assets. In December 2004, the FASB issued SFAS 153,
Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting
for Nonmonetary Transactions. This Statement amends the principle that exchanges
of nonmonetary assets should be measured based on the fair value of the assets
exchanged and more broadly provides for exceptions regarding exchanges of
nonmonetary assets that do not have commercial substance. This Statement is
effective for nonmonetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005. The adoption of this standard is not expected to have a
material impact on financial condition, results of operations, or liquidity of
Atlantic.

Share-Based Payments. In December 2004, the FASB revised SFAS 123, Accounting
for Stock-Based Compensation. SFAS 123R establishes accounting requirements for
share-based compensation to employees and carries forward prior guidance on
accounting for awards to non-employees. The provisions of this Statement became
effective July 1, 2005, for all equity awards granted after the effective date.
SFAS 123R requires an entity to recognize compensation expense based on the
estimated fair value of the number of awards expected to actually vest,
exclusive of awards expected to be forfeited. The adoption of this Standard is
not expected to have a material effect on financial condition, the results of
operations, or liquidity of Atlantic.

In March 2005, the SEC released Staff Accounting Bulletin ("SAB") No. 107, which
addresses the application of SFAS No. 123(R). This SAB is intended to assist
issuers with their initial implementation of SFAS No. 123(R) by providing
interpretive guidance related to share-based compensation regarding the
interaction between SFAS No. 123(R) and certain Securities and Exchange
Commission rules and regulations. It does not change or amend the provisions of
SFAS No. 123(R) or these SEC rules and regulations. SAB No. 107 also delayed the
effective date of SFAS No. 123(R) for public companies to annual, rather than
interim, periods beginning after June 15, 2005. The adoption of SFAS No. 123(R),
as interpreted by SAB No. 107, is not expected to have a material impact on the
financial position, results of operations, or liquidity of Atlantic.

In May 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections,
which replaces APB Opinion No. 20, Accounting Changes, and SFAS 3, Reporting
Accounting Changes in Interim Financial Statements-An Amendment of APB Opinion
No. 28. SFAS 154 changes the requirements for the accounting and reporting of a
change in accounting principle. It applies to all voluntary changes in
accounting principle as well as to changes required by an accounting
pronouncement that does not include specific transition provisions. SFAS 154
eliminates the requirement in APB Opinion No. 20 to include the cumulative
effect changes in accounting principle in the income statement in the period of
change. Instead, to enhance comparability of prior period financial statements,
SFAS 154 requires that changes in accounting principle be retrospectively
applied. Under retrospective application, the new accounting principle is
applied as of the beginning of the first period presented as if that principle
had always been used. The cumulative effect of the change is reflected in the
carrying value of assets and liabilities as of the first period presented and
the offsetting adjustments are recorded to opening retained earnings. Each
period presented is adjusted to reflect the period specific effects of applying
the change. Although retrospective application is similar to restating prior
periods, SFAS 154 gives the treatment a new name to differentiate it from
restatement for correction of an error. Only direct effects of the change will
be included in the retrospective application; all indirect effects will be
recognized in the period of change. If it is impracticable to determine the
cumulative effect for all periods, the new accounting principle should be
applied as if it were adopted prospectively from the earliest date practicable.
SFAS 154 is effective for accounting changes and corrections of errors made in
fiscal years beginning after the date SFAS 154 was issued. The changes required
by SFAS 154 are not expected to have a material impact on the financial
condition, results of operations, or liquidity of Atlantic.


                                      -47-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 2 - INVESTMENT SECURITIES

The amortized cost and estimated fair value of instruments in debt and equity
securities at December 31, 2005 and 2004, follow (dollars in thousands):

<TABLE>
<CAPTION>
                                             December 31, 2005                               December 31, 2004
                               ----------------------------------------------  ----------------------------------------------
                                             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>
Available-for-sale
   Mortgage-backed securities  $   33,056  $       29  $      645  $   32,440  $   23,139  $      127  $      296  $   22,970
                               ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------

Held-to-maturity
   State, county and
     municipal bonds                5,850         193          60       5,983       5,856         288          26       6,118
                               ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------
Total investment securities    $ 38,906 $         222  $      705  $   38,423  $   28,995  $      415  $      322  $   29,088
                               ==========  ==========  ==========  ==========  ==========  ==========  ==========  ==========
</TABLE>

Management evaluates securities for other-than-temporary impairment at least on
a monthly basis, and more frequently when economic or market concerns warrant
such evaluation. Consideration is given to (i) the length of time and the extent
to which the fair value has been less than cost, (ii) the financial condition
and near-term prospects of the issuer, and (iii) the intent and ability of
Atlantic to retain its investment in the issuer for a period of time sufficient
to allow for any anticipated recovery in fair value.

The unrealized losses on investment securities available for sale were caused by
interest rate changes. It is expected that the securities would not be settled
at a price less than the par value of the investments. Because the decline in
fair value is attributable to changes in interest rates and not credit quality,
and because Atlantic has the ability and intent to hold these investments until
a market price recovery or maturity, these investments are not considered
other-than-temporarily impaired. Temporary decreases in fair value of securities
available-for-sale at December 31, 2005, of $384,000 (net of deferred income
taxes of $232,000) 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, 2005, securities with an amortized cost of $879,000 and fair
value of $940,000 were pledged to secure deposits of public funds from the state
of Florida and treasury tax and loan deposits with the Federal Reserve.

At December 31, 2005, securities were sold under an agreement to repurchase with
a fair value of $24.0 million, which effectively collateralizes overnight
customer repurchase agreements totaling $23.7 million (see Note 6). There were
no securities of a single issuer (which were non-governmental or non-government
sponsored) that exceeded 10% of stockholders' equity at December 31, 2005.

The cost and estimated fair value of debt and equity securities at December 31,
2005, 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 one to five years       $ 8,453          $ 8,191           $    --           $    --
     Due in five to ten years        11,268           11,152               626               655
     Due in ten years or more        13,335           13,097             5,224             5,328
                                    -------          -------           -------           -------
                                    $33,056          $32,440           $ 5,850           $ 5,983
                                    =======          =======           =======           =======
</TABLE>


                                      -48-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 3 - LOANS

The loan portfolio is composed of the following (dollars in thousands):

                                                       2005          2004
                                                       ----          ----

      Real estate loans                           $ 135,565     $ 109,911
      Commercial loans                               11,901        13,817
      Consumer and other loans                        5,400         6,147
                                                  ---------     ---------
          Total loan portfolio                      152,866       129,875
      Less, deferred fees                               (63)          (74)
      Less, allowance for loan losses                (1,552)       (1,296)
                                                  ---------     ---------
               Loans, net                         $ 151,251     $ 128,505
                                                  =========     =========

At December 31, 2005 and 2004, fixed-rate loans (excluding nonaccrual loans)
with maturities over one year totaled approximately $29.0 million and $17.5
million, respectively.

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

                                                          2005       2004
                                                          ----       ----

      Balance, beginning of period                     $ 1,296    $ 1,220
      Provisions charged to operating expenses             334        362
      Loans charged-off                                    (86)      (294)
      Recoveries                                             8          8
                                                       -------    -------
      Balance, end of period                           $ 1,552    $ 1,296
                                                       =======    =======

Interest income recognized or received on impaired loans for 2005 and 2004 was
not material. At December 31, 2005 and 2004, impaired loans, all collateral
dependent, were as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                              2005    2004
                                                                              ----    ----
<S>                                                                          <C>     <C>
      Average balance during year                                            $ 195   $ 158
                                                                             =====   =====

      Total impaired loans (excluding SBA-guaranteed portion of loan)        $ 202   $  13
      Total related allowance for loan losses                                 (202)    (13)
                                                                             -----   -----
      Amount of impaired loans without a specific allowance for loan losses  $  --   $  --
                                                                             =====   =====
</TABLE>

Nonaccrual and past due loans at December 31, 2005 and 2004, were as follows
(dollars in thousands):

<TABLE>
<CAPTION>
                                                                                 2005  2004
                                                                                 ----  ----
<S>                                                                              <C>   <C>
      Nonaccrual loans
         Impaired loans (excluding SBA-guaranteed portion of loans)              $202  $ 13
         SBA-guaranteed portion of loans (past due but not considered impaired)    --    77
      Past due ninety days or more, but still accruing                             --    --
                                                                                 ----  ----
                                                                                 $202  $ 90
                                                                                 ====  ====
</TABLE>


                                      -49-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 4 - FACILITIES

Facilities. A summary follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                  Accumulated                         Estimated
                                                               Depreciation and        Net Book        Useful
                                                        Cost      Amortization           Value          Lives
                                                        ----      ------------           -----          -----
<S>                                                   <C>           <C>                 <C>           <C>
December 31, 2005:
     Land and land improvements                       $   750       $     --            $   750
     Bank building and improvements                     3,400            519              2,881       5 - 40 years
     Furniture, fixtures, and equipment                 1,919          1,396                523       3 - 10 years
                                                      -------       --------            -------
                                                      $ 6,069       $  1,915            $ 4,154
                                                      =======       ========            =======

December 31, 2004:
     Land and land improvements                       $   750       $     --            $   750
     Bank building and improvements                     3,262            421              2,841       5 - 40 years
     Furniture, fixtures, and equipment                 1,707          1,143                564       3 - 10 years
                                                      -------       --------            -------
                                                      $ 5,719       $  1,564            $ 4,155
                                                      =======       ========            =======
</TABLE>

Depreciation and amortization of facilities totaled $351,000 and $344,000 in
2005 and 2004, respectively.

Operating Leases. Atlantic leases property for a branch location and its
operations center at 13799 Beach Boulevard, Jacksonville, Florida, under a
noncancelable operating lease dated September 27, 2000, that expires in 2011,
subject to two five-year renewal options. On August 22, 2002, Atlantic entered
into a 20-year noncancelable operating lease agreement for a new branch at the
corner of Kernan Boulevard South and Atlantic Boulevard, Jacksonville, Florida.
Lease payments commenced in September 2003, and the branch opened December 15,
2003. All other operating leases, consisting principally of computer and other
equipment, are not material.

Total rent expense for 2005 and 2004 was $336,000 and $294,000, respectively.
The future annual rental payments for the branch leases (including renewal
options and inflation adjustments) are due as follows: $270,000 for 2006,
$299,000 for 2007 - 2010, $160,000 for 2011, $96,000 for 2012 - 2022, and
$69,000 in 2023.

NOTE 5 - TIME DEPOSITS

Time deposits at December 31, 2005 and 2004, totaled $84,117,000 and
$64,950,000, respectively. The scheduled maturities (or the next repricing date)
of time deposits were as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                    December 31, 2005                  December 31, 2004
                                              ------------------------------      ------------------------------
                                              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                          $ 7,929          $12,831           $ 6,603          $16,757
     Over three through twelve months               10,142           18,584             6,672           11,193
     Over twelve months through three years          3,750           18,870             4,885           11,502
     Over three years                                5,413            6,598             2,220            5,118
                                                   -------          -------           -------          -------
                                                   $27,234          $56,883           $20,380          $44,570
                                                   =======          =======           =======          =======
</TABLE>

Time deposits of less than $100,000 with a remaining maturity of one year or
less totaled $31,415,000 at December 31, 2005. Time deposits of $100,000 or more
with a remaining maturity of one year or less totaled $18,071,000 at December
31, 2005.


                                      -50-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 5 - TIME DEPOSITS (Continued)

Interest expense on certificates of deposit of $100,000 or more totaled $845,000
and $567,000 for 2005 and 2004, respectively. Interest expense on other time
deposits totaled $1,831,000 and $858,000 for 2005 and 2004, respectively.

Oceanside did not accept brokered deposits during 2005 and 2004.

NOTE 6 - OTHER BORROWINGS

A summary follows (dollars in thousands):

                                                           December 31,
                                                         2005         2004
                                                         ----         ----

      Customer repurchase agreements                  $23,745      $20,704
      FHLB of Atlanta advances                          2,300        2,300
      Junior subordinated debentures                    3,093           --
                                                      -------      -------
                                                      $29,138      $23,004
                                                      =======      =======

Customer Repurchase Agreements. Atlantic has sold securities under an agreement
to repurchase with a par value of $23,954,000 and a fair value of $24,021,000,
which effectively collateralizes overnight borrowings totaling $23,745,000. The
interest rate is based on the then current federal fund rate less 0.25%. The
interest rate on this overnight borrowing was 4.00% at December 31, 2005. The
average balance of customer repurchase agreements for 2005 and 2004 were
$18,254,000 and $11,986,000, respectively, at a weighted average interest rate
of 2.96% and 1.64%, respectively. Interest of $541,000 and $196,000 was recorded
in 2005 and 2004, respectively.

FHLB of Atlanta Advances. Atlantic has obtained an advance from FHLB of
$2,300,000 collateralized by Atlantic's FHLB capital stock in the amount of
$472,000 and a blanket lien on eligible wholly-owned residential (1-4 units)
first mortgage loans totaling approximately $5.8 million. This advance matures
on November 17, 2010, and has a fixed interest rate at 4.45%. Interest of
$136,000 and $139,000 was recorded in 2005 and 2004, respectively.

Junior Subordinated Debentures. On September 15, 2005, Atlantic participated in
a pooled offering of trust preferred securities. Atlantic formed Atlantic
BancGroup Statutory Trust I (the "Trust"), a wholly-owned statutory trust
subsidiary for the purpose of issuing the trust preferred securities. The Trust
used the proceeds from the issuance of $3,000,000 in trust preferred securities
to acquire fixed/floating rate junior subordinated deferrable interest
debentures of Atlantic in the amount of $3,093,000. The trust preferred
securities essentially mirror the debt securities, carrying a cumulative
preferred dividend at a fixed rate of 5.886% equal to the interest rate on the
debt securities, both payable quarterly for five years. Beginning September 15,
2010, the quarterly rates vary based on the three month LIBOR plus 150 basis
points. The debt securities and the trust preferred securities each have 30-year
lives. The trust preferred securities and the debt securities are callable by
Atlantic or the Trust, at their respective option after five years, and at
varying premiums and sooner in specific events, subject to prior approval by the
Federal Reserve Board, if then required. Atlantic has treated the trust
preferred securities as Tier 1 capital up to the maximum amount allowed, and the
remainder, if any, as Tier 2 capital for federal regulatory purposes (see Note
15). There are no required principal payments on the junior subordinated
debentures over the next five years.

Under new accounting guidance, FASB Interpretation Nos. 46 and 46R, the Trust is
not consolidated with Atlantic. Accordingly, Atlantic does not report the
securities issued by the Trust as liabilities, and instead reports as
liabilities the junior subordinated debentures issued by Atlantic and held by
the Trust.

At December 31, 2005, Atlantic's investment in the statutory trust of $93,000
has been included in Other Assets in the Condensed Consolidated Statements of
Financial Condition as an investment in an unconsolidated subsidiary.


                                      -51-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 6 - OTHER BORROWINGS (Continued)

Other Short-term Borrowings. Atlantic purchases federal funds for liquidity
needs during the year. At December 31, 2005 and 2004, no federal fund purchases
existed. The average federal funds purchased during 2005 and 2004, were $863,000
and $322,000, respectively, at a weighted average interest rate of 3.24% and
2.17%, respectively. Interest of $28,000 and $7,000 was recorded in 2005 and
2004, respectively.

NOTE 7 - INCOME TAXES

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

                                                      Year Ended December 31,
                                                          2005       2004
                                                          ----       ----
      Current:
          Federal                                        $ 434      $ 467
          State                                             75         80
                                                         -----      -----
                                                           509        547
                                                         -----      -----
      Deferred:
          Federal                                          116        (67)
          State                                             20        (11)
                                                         -----      -----
                                                           136        (78)
                                                         -----      -----
               Total income tax provision                $ 645      $ 469
                                                         =====      =====

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

                                                 2005                2004
                                                 ----                ----
                                                      % of               % of
                                            Amount   Pretax    Amount   Pretax
                                            ------   ------    ------   ------

      Tax computed at statutory rate        $  722     34.0%   $  556     34.0%
      Increase (decrease) resulting from:
          Nontaxable interest income, net      (99)    (4.6)      (75)    (4.6)
          Other                                 22      1.0       (12)    (0.7)
                                            ------   ------    ------   ------
               Income tax provision         $  645     30.4%   $  469     28.7%
                                            ======   ======    ======   ======

The components of the net deferred income tax assets are as follows (dollars in
thousands):

                                                           December 31,
                                                         2005        2004
                                                        -----        ----
      Deferred tax asset:
          Federal                                     $   880       $ 608
          State                                           151         104
                                                      -------       -----
                                                        1,031         712
                                                      -------       -----
      Deferred tax liability:
          Federal                                        (154)        (61)
          State                                           (26)        (10)
                                                      -------       -----
                                                         (180)        (71)
                                                      -------       -----
               Net deferred tax asset                 $   851       $ 641
                                                      =======       =====


                                      -52-
<PAGE>


                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 7 - INCOME TAXES (Continued)

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

                                                            December 31,
                                                           2005      2004
                                                           ----      ----

      Allowance for loan losses                           $ 527     $ 442
      Indexed retirement plans                              242       185
      Net unrealized holding losses on securities           232        63
      Depreciation                                         (180)     (220)
      Other, net                                             30       171
                                                          -----     -----
               Net deferred tax asset                     $ 851     $ 641
                                                          =====     =====

Income taxes of $168,000 for 2005 and $32,000 for 2004 have been netted in the
caption "Unrealized holding losses on securities arising during period" found in
the Consolidated Statements of Operations and Comprehensive Income.

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 $53,000 and $47,000
for 2005 and 2004, respectively.

Indexed Retirement Plans. Atlantic has 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
2004.

Atlantic has purchased a pool of life insurance policies with $2,050,000 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.

Under the IRP as amended, the current participants will begin receiving annual
cash retirement benefit payments for the rest of their lives 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 90% of the death benefits gains,
payable upon the respective participant's death, with the remaining 10% plus the
policy cash value payable to Atlantic. The beneficiaries of the remaining three
participants will receive annual cash benefit payments for an additional twenty
years following the participant's death. A summary of the activity for the IRP
follows (dollars in thousands):
                                                                  December 31,
                                                                  2005    2004
                                                                  ----    ----

    Policy income included in other income                       $ 103   $  98
    Pension expense included in other operating expenses          (155)   (160)
    Life insurance expense included in other operating expenses    (13)    (11)
    Deferred income tax benefit                                     58      63
                                                                 -----   -----
        Net after income tax benefit                             $  (7)  $ (10)
                                                                 =====   =====


                                      -53-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

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.

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 may not be
fully collateralized but generally contain a specified maturity date. Certain
conditions may exist that would prevent the customer from drawing upon the total
amount to which Atlantic is committed.

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. Of the letters of credit, approximately $1,514,000 of the
$1,714,000 issued and outstanding at December 31, 2005 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.

At December 31, 2005 and 2004, the following financial instruments were
outstanding whose contract amounts represent credit risk for Atlantic (dollars
in thousands):

<TABLE>
<CAPTION>
                                                                          December 31,
                                                                          2005     2004
                                                                          ----     ----
<S>                                                                    <C>      <C>
      Commitments to extend credit (including unused lines of credit)  $28,034  $17,277
      Standby letters of credit                                        $ 1,714  $ 1,772
</TABLE>

Derivative Loan Commitments. At December 31, 2005, Atlantic did not have any
material amounts of commitments to originate residential mortgage loans that
will be sold to investors at a specified time in the future.

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. Access to the collateral is generally achieved by
either (i) maintaining possession of the collateral, (ii) placing a recorded
lien in the appropriate jurisdiction, or (iii) other means such as an
assignment.

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.


                                      -54-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)

Exposure to Transactions with Correspondent Banks and Related Limitations on
Interbank Liabilities. In the ordinary course of business, Oceanside may incur a
loss if a correspondent bank defaults upon an obligation, which may include
overnight federal funds, loan participations, and other interbank transactions.
Management monitors its risks with these correspondents and places certain
limitations upon the exposure.

Litigation. Atlantic may periodically be a party to or otherwise involved in
legal proceedings arising in the normal course of business, such as claims to
enforce liens, claims involving the making and servicing of real property loans,
and other issues incident to Atlantic's operations. Management, after
consultation with legal counsel, does not believe that there are any pending or
threatened proceedings against Atlantic which, if determined adversely, would
have a material effect on Atlantic's consolidated financial position.

Change of Control Agreements. Atlantic has entered into agreements with its
three executive officers that would provide certain benefits in the event of (i)
a change of control (as defined in the agreement) and, within three years of the
change in control, (ii) the executive officer is terminated (without cause) or
resigns. The change of control benefits include cash payments equal to 2.99
times the executive officer's base annual compensation (as defined in the
agreement) and continuation of health benefits for six months.

Other. At December 31, 2005, Atlantic had $10.8 million of available 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, including Duval and
St. Johns counties. Atlantic's loans are generally secured by specific items of
collateral including real property, consumer assets, and business assets.
Although Atlantic has a diversified loan portfolio, a substantial portion of its
debtors' ability to honor their contracts is dependent on local, state, and
national economic conditions, which can be affected by a number of events
domestically and internationally.

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. As a state-chartered bank, Oceanside's 15% legal lending limit was
approximately $2.7 million at December 31, 2005 ($4.5 million for loans
qualifying for the 25% limit). Atlantic does not have any significant
concentrations to any one industry or customer.


                                      -55-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 11 - RELATED PARTIES

Atlantic has entered into transactions with its directors, executive officers,
significant stockholders, and their affiliates (insiders). 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.

A summary of activity for 2005 and 2004 for such loans follows (dollars in
thousands):

                                                       2005          2004
                                                       ----          ----

      Beginning of year balance                     $ 1,964       $ 1,431
      Additions                                       1,501         3,715
      Reductions                                     (1,142)       (3,182)
                                                    -------       -------
      End of year balance                           $ 2,323       $ 1,964
                                                    =======       =======

Unfunded commitments to the same parties totaled $1,257,000 at December 31,
2005. At December 31, 2005 and 2004, deposits and customer repurchase agreements
with insiders totaled approximately $36.7 million and $22.0 million,
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 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.

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, 2005,
retained earnings of approximately $2,636,000 were available to pay cash
dividends to the holding company only (Atlantic) in order to maintain
Oceanside's current regulatory capital classification. Atlantic's dividend
policy is to retain accumulated earnings to support its growth.


                                      -56-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004


NOTE 13 - OTHER OPERATING EXPENSES

Other operating expenses follow (dollars in thousands):

                                                           2005       2004
                                                           ----       ----

      Processing and settlement fees                     $  509     $  420
      Professional, legal, and audit fees                   250        230
      Pension expense                                       155        160
      Stationery, printing, and supplies                    127        107
      Postage, freight, and courier                          88         95
      Director fees                                          99         90
      Telephone                                              80         85
      Advertising and business development                   75         81
      Regulatory assessments                                 60         70
      Insurance (excluding group insurance)                  72         68
      Dues and subscriptions                                 55         50
      Other miscellaneous expenses                          110        165
                                                         ------     ------
                                                         $1,680     $1,621
                                                         ======     ======

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 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.

      Federal Home Loan Bank and Correspondent Banks' Stock - Fair value of
      Atlantic's investment in Federal Home Loan Bank and correspondent banks'
      stock is its cost.

      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. 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,
      certain money market deposits, and customer repurchase agreements 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.

      Other Borrowings - For short-term debt, including accounts and demand
      notes payable, the carrying amount is a reasonable estimate of fair value.
      The fair value of customer repurchase agreements is the amount payable on
      demand at the reporting date.

      Off-Balance Sheet Instruments - Fair values for off-balance-sheet lending
      commitments are based on rates currently charged to enter into similar
      agreements, taking into account the remaining terms of the agreements and
      the counterparties' credit standing.


                                      -57-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

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

The estimated fair values of Atlantic's financial instruments at December 31,
2005, follow (dollars in thousands):

                                                       Carrying      Fair
                                                        Amount      Value
                                                        ------      -----
      Financial Assets
          Cash and deposits in other banks             $ 14,987   $ 14,987
          Investment securities                          38,290     38,423
          Stock in FHLB and correspondent bank              676        676
          Loans, net                                    151,251    149,789
                                                       --------   --------
               Total assets valued                     $205,204   $203,875
                                                       ========   ========

      Financial Liabilities
          Deposits                                     $168,480   $160,683
          Other borrowings                               29,138     28,961
                                                       --------   --------
               Total liabilities valued                $197,618   $189,644
                                                       ========   ========

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, 2005, 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,
2005, 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 with
consolidated assets over $150 million. 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 1 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.


                                      -58-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 15 - REGULATORY CAPITAL MATTERS (Continued)

As of December 31, 2005, 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 1 risk-based, and Tier 1 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, 2005:
------------------------
  Total capital to risk-weighted assets:
     Atlantic                                      $ 20,168     11.60%  $ 13,906      8.00%       N/A       N/A
     Oceanside                                     $ 20,004     11.52%  $ 13,895      8.00%  $ 17,369     10.00%

  Tier 1 capital to risk-weighted assets:
     Atlantic                                      $ 18,616     10.71%  $  6,953      4.00%       N/A       N/A
     Oceanside                                     $ 18,452     10.62%  $  6,948      4.00%  $ 10,421      6.00%

  Tier 1 capital to average assets:
     Atlantic                                      $ 18,616      9.01%  $  8,264      4.00%       N/A       N/A
     Oceanside                                     $ 18,452      8.93%  $  8,265      4.00%  $ 10,331      5.00%

As of December 31, 2004:
------------------------
  Total capital to risk-weighted assets:
     Atlantic                                      $ 15,434     10.37%  $ 11,911      8.00%       N/A       N/A
     Oceanside                                     $ 15,319     10.43%  $ 11,746      8.00%  $ 14,683     10.00%

  Tier 1 capital to risk-weighted assets:
     Atlantic                                      $ 14,138      9.50%  $  5,956      4.00%       N/A       N/A
     Oceanside                                     $ 14,023      9.55%  $  5,873      4.00%  $  8,810      6.00%

  Tier 1 capital to average assets:
     Atlantic                                      $ 14,138      8.04%  $  7,038      4.00%       N/A       N/A
     Oceanside                                     $ 14,023      8.02%  $  6,993      4.00%  $  8,742      5.00%
</TABLE>

Trust Preferred Securities. On September 15, 2005, Atlantic entered into a
transaction commonly referred to as trust preferred securities. Subject to
percentage limitations, the proceeds from the issuance of trust preferred
securities are considered Tier 1 capital for regulatory purposes, which totaled
$3.0 million (net of Atlantic's investment in the unconsolidated subsidiary).
However, as a result of the issuance of FIN 46 and FIN 46R, the trust subsidiary
is not consolidated in these financial statements and therefore the proceeds
received by Atlantic from the trust subsidiary is reported as junior
subordinated debentures. On February 28, 2005, the Federal Reserve Board issued
a new rule which provides that, notwithstanding the deconsolidation of such
trusts, junior subordinated debentures, such as those issued by Atlantic, may
continue to constitute up to 25% of a bank holding company's Tier 1 capital,
subject to certain new limitations which will not become effective until March
31, 2009, and which, in any event, are not expected to affect the treatment of
Atlantic's junior subordinated debentures as Tier 1 capital for regulatory
purposes.


                                      -59-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

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:                      2005       2004
                                                                 ----       ----
                                                            (Dollars In Thousands)
<S>                                                          <C>        <C>
Assets
     Cash and cash equivalents                               $    186   $     37
     Investment in and advances to subsidiary bank             18,069     13,918
     Other assets                                                 127        101
                                                             --------   --------
     Total                                                   $ 18,382   $ 14,056
                                                             ========   ========

Liabilities and Stockholders' Equity
     Liabilities                                             $  3,149   $     23
     Stockholders' equity                                      15,233     14,033
                                                             --------   --------
     Total                                                   $ 18,382   $ 14,056
                                                             ========   ========
</TABLE>
<TABLE>
<CAPTION>

Condensed Statements of Operations and Stockholders' Equity
Years Ended December 31:                                         2005       2004
                                                                 ----       ----
<S>                                                          <C>        <C>
                                                           (Dollars In Thousands)

Equity in net income of subsidiary bank                      $  1,590   $  1,253
Other income                                                        1         13
Other expenses (net of income tax benefit)                       (113)      (100)
                                                             --------   --------
Net income                                                      1,478      1,166
Stockholders' Equity:
     Beginning of  year                                        14,033     12,920
     Net change in unrealized holding losses on securities
        in subsidiary bank and rounding                          (278)       (53)
                                                             --------   --------
     End of year                                             $ 15,233   $ 14,033
                                                             ========   ========
</TABLE>
<TABLE>
<CAPTION>

Condensed Statements of Cash Flows
Years Ended December 31:                                         2005       2004
                                                                 ----      -----
                                                           (Dollars In Thousands)
<S>                                                          <C>        <C>
Operating Activities
Net income                                                   $  1,478   $  1,166
Adjustment to reconcile net income to net cash
   provided by operating activities:
     Equity in undistributed earnings of subsidiary bank       (1,590)    (1,253)
     Other                                                        101        (23)
                                                             --------   --------
Net Cash Used In Operating Activities                             (11)      (110)
                                                             --------   --------

Investing Activities
     Capital contributions to subsidiary bank                  (2,840)    (1,800)
                                                             --------   --------
Net Cash Used In Investing Activities                          (2,840)    (1,800)
                                                             --------   --------

Financing Activities
     Issuance of Trust Preferred Securities                     3,000         --
                                                             --------   --------
Net Cash Provided In Financing Activities                       3,000         --
                                                             --------   --------

Increase (Decrease) in Cash and Cash Equivalents                  149     (1,910)
Cash and Cash Equivalents:
     Beginning of year                                             37      1,947
                                                             --------   --------
     End of year                                             $    186   $     37
                                                             ========   ========
</TABLE>


                                      -60-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004

NOTE 17 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following represents the quarterly unaudited results of operations for the
years ended December 31, 2005 and 2004 (dollars in thousands, except for per
share data):

                                                         2005
                                        --------------------------------------
                                        First  Second   Third  Fourth    Total
                                        -----  ------   -----  ------    -----
Total interest income                  $2,410  $2,649  $3,061  $3,141  $11,261
Total interest expense                    812     988   1,234   1,324    4,358
Provision for loan losses                  30     143     139      22      334
Net interest income after
   provisions for loan losses           1,568   1,518   1,688   1,795    6,569
Noninterest income                        205     216     223     223      867
Noninterest expense                     1,360   1,261   1,322   1,370    5,313
Provision for income taxes                133     125     181     206      645
Net income                             $  280  $  348  $  408  $  442  $ 1,478
Basic and dilutive earnings per share  $ 0.22  $ 0.28  $ 0.33  $ 0.35  $  1.18

                                                        2004
                                        --------------------------------------
                                        First  Second   Third  Fourth    Total
                                        -----  ------   -----  ------    -----
Total interest income                  $1,830  $1,973  $2,082  $2,356  $ 8,241
Total interest expense                    449     514     578     737    2,278
Provision for loan losses                  95      40      --     227      362
Net interest income after
   provisions for loan losses           1,286   1,419   1,504   1,392    5,601
Noninterest income                        197     216     301     209      923
Noninterest expense                     1,210   1,197   1,250   1,232    4,889
Provision for income taxes                 79     128     173      89      469
Net income                             $  194  $  310  $  382  $  280  $ 1,166
Basic and dilutive earnings per share  $ 0.16  $ 0.24  $ 0.31  $ 0.22  $  0.93


                                      -61-
<PAGE>

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE.

Neither Atlantic nor Oceanside has had any disagreements with its Accountants.

ITEM 8A. CONTROLS AND PROCEDURES.

Background of Internal Controls and Internal Audits. Oceanside is the sole
financial subsidiary of Atlantic. Oceanside has in place extensive policies and
operating procedures for loans, operations, accounting and compliance. All
audits, whether internal or external are reported directly to the joint Audit
Committee of Oceanside and Atlantic, and the minutes of the Audit Committee
meetings are subsequently reported to the Boards of Directors of Oceanside and
Atlantic.

The joint Audit Committee of Oceanside and Atlantic maintains an audit calendar
prepared by the internal auditor for planning purposes. This audit calendar is
submitted to the Boards of Oceanside and Atlantic for approval. Annually
Atlantic engages an external Certified Public Accounting firm to perform an
independent audit conducted in accordance with generally accepted auditing
standards.

Periodically, Oceanside and Atlantic undergo regulatory examinations that
include tests of the policies and operating procedures for loans, operations,
accounting and compliance. The results of these examinations are presented by
the regulators to the Boards of Oceanside and Atlantic.

Evaluation of Disclosure Controls and Procedures. Atlantic's Chief Executive
Officer and Chief Financial Officer have evaluated the effectiveness of
Atlantic's disclosure controls and procedures (as such term is defined in Rules
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"). Based on their evaluation, they
have concluded that, as of the Evaluation Date, Atlantic's disclosure controls
and procedures are effective in bringing to their attention on a timely basis
material information relating to Atlantic (including its consolidated
subsidiary) required to be included in Atlantic's periodic filings under the
Exchange Act.

Changes in Internal Controls. Since the Evaluation Date, there have not been any
significant changes in Atlantic's internal controls or in other factors that
could significantly affect those controls.

ITEM 8B. OTHER INFORMATION.

The  Company  did not  fail to file any Form  8-K to  disclose  any  information
required to be disclosed therein during the fourth quarter of 2005.

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information  contained under the section  captioned  "Election of Directors"
beginning on page 6 of  Atlantic's  definitive  Proxy  Statement  for the Annual
Meeting of Shareholders to be held on April 27, 2006, is incorporated  herein by
reference.

                COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The information contained under the section captioned "Section 16(a) Beneficial
Ownership Compliance" at page 11 of Atlantic's definitive Proxy Statement is
incorporated herein by reference.

                                 CODE OF ETHICS

In 2003, Atlantic adopted a Code of Ethics policy that applies to its principal
executive and financial officers (Incorporated by reference to Exhibit 14 to
Atlantic's Form 10-KSB for year ended December 31, 2003).


                                      -62-
<PAGE>

                                FINANCIAL EXPERT

Atlantic has at least one audit committee financial expert. The information
contained in the section captioned "Report of the Audit Committee" at page 3 in
Atlantic's definitive Proxy Statement is incorporated herein by reference.

                             AUDIT COMMITTEE CHARTER

The Company has adopted an Audit Committee Charter which was amended in March
2001.

ITEM 10. EXECUTIVE COMPENSATION.

The information contained in the sections captioned "Board of Directors
Meetings," at page 3 and "Executive Compensation" at page 8 and "Benefits" at
page 9 under "Executive Compensation" in the definitive Proxy Statement, is
incorporated herein by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS.

The information contained in the section captioned "Beneficial Stock Ownership
of Directors and Executive Officers" at page 7 under "Election of Directors" in
the definitive Proxy Statement, is incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information contained in the section captioned "Certain Relationships and
Related Transactions" at page 9 in the definitive Proxy Statement is
incorporated herein by reference.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

      (a)   Exhibits

            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)

            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)


                                      -63-
<PAGE>

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

            10.5  Lease dated August 22, 2002, between PROPERTY MANAGEMENT
                  SUPPORT, INC., and Oceanside (Incorporated by reference to
                  Exhibit 10.5 to Atlantic's Form 10-KSB for year ended December
                  31, 2002).

            11    The computation of per share earnings is shown in the
                  consolidated financial statements of Atlantic BancGroup, Inc.
                  and Subsidiary for December 31, 2005 and 2004, contained in
                  Item 7, on Page 45 of the Notes to Consolidated Financial
                  Statements

            14    Code of Ethics for Senior Officers Policy (Incorporated by
                  reference to Exhibit 14 to Atlantic's Form 10-KSB for year
                  ended December 31, 2003).

            21.1  Subsidiary of the Registrant

            31.1  Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
                  Officer

            31.2  Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
                  Officer

            32.1  Section 1350 of Chapter 63 of Title 18 of the U.S.C. for Chief
                  Executive Officer

            32.2  Section 1350 of Chapter 63 of Title 18 of the U.S.C. for Chief
                  Financial Officer

      (b)   Reports on Form 8-K

            A Form 8-K was filed by the Company on November 4, 2005, which
            reported a press release announcing the financial results for the
            quarter ended September 30, 2005.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information contained in the section captioned "Ratification of the
Appointment of the Independent Auditor for the Fiscal Year Ending December 31,
2005," at page 10 in the definitive Proxy Statement is incorporated herein by
reference.


                                      -64-
<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 16th of March, 2006.

                                      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 16th of March, 2006

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


                                      -65-
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                                   Form 10-KSB
                     For Fiscal Year Ended December 31, 2005

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

Exhibit
   No.                                  Exhibit
-------      --------------------------------------------------------------
21.1         Subsidiary of the Registrant

31.1         Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2         Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.1         Section 1350 of Chapter 63 of Title 18 of the U.S.C. for Chief
             Executive Officer

32.2         Section 1350 of Chapter 63 of Title 18 of the U.S.C. for Chief
             Financial Officer


                                      -66-