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, 2002

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

                         Commission File Number 0-25505

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

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

The issuer's revenues for its most recent fiscal year were $7,247,000.

The aggregate market value of the common stock of the issuer held by
non-affiliates of the issuer (844,757 shares) at February 28, 2003, was
approximately $11.8 million based on the initial bid quoted price of $14.00 per
share as quoted on the "Over the Counter Bulletin Board."

As of February 28, 2003, there were issued and outstanding 1,039,607 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 24, 2003, filed as Exhibit 99.1 herein, are
incorporated into Part III, Items 9 through 13 of this Annual Report on Form
10-KSB.
<PAGE>

                    ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

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

Item 1.  Description of Business .........................................    1
         General .........................................................    1
         Lending Activities ..............................................    2
         Deposit Activities ..............................................    4
         Investments .....................................................    4
         Correspondent Banking ...........................................    4
         Interest and Usury ..............................................    5
         Supervision and Regulation ......................................    5
         Recent Legislation ..............................................   11
         Primary Service Area ............................................   13
         Competition .....................................................   14
         Common Stock ....................................................   14
         Warrants ........................................................   15
         Preferred Stock .................................................   15
         Indemnification of Directors and Officers .......................   15
         Employees .......................................................   16

Item 2.  Description of Properties .......................................   16

Item 3.  Legal Proceedings ...............................................   17

Item 4.  Submission of Matters to a Vote of Security Holders .............   17

PART II ..................................................................   18

Item 5.  Market Price for the Registrant's Common Equity and
             Related Stockholder Matters .................................   18
         Dividends .......................................................   18

Item 6.  Management's Discussion and Plan of Operations ..................   18
         Selected Financial Data .........................................   19
         Special Note Regarding Forward-Looking Statements ...............   20
         General .........................................................   20
         Results of Operations ...........................................   21
         Net Income ......................................................   21
         Comparison of Years Ended December 31, 2002 and 2001 ............   24
         Net Interest Income .............................................   24
         Provision for Loan Losses .......................................   25

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                                                                            Page
                                                                            ----

         Noninterest Income ..............................................   25
         Noninterest Expenses ............................................   26
         Loans Receivable ................................................   26
         Classification of Assets ........................................   27
         Allowance for Loan Losses .......................................   29
         Securities ......................................................   30
         Deposits ........................................................   32
         Liquidity and Capital Resources .................................   34
         Interest Rate Sensitivity .......................................   37
         Other Borrowings ................................................   39
         Future Accounting Pronouncements ................................   39
         Impact of Inflation .............................................   40
         Quantitative and Qualitative Disclosures About Market Risk ......   40

Item 7.  Financial Statements ............................................   41

Item 8.  Changes in and Disagreements with Accountants
             on Accounting and Financial Disclosure ......................   63

PART III .................................................................   63

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16(a) of the Exchange Act ...........   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 ................................   64

Item 14. Controls and Procedures .........................................   65

SIGNATURES ...............................................................   66
         Certifications ..................................................   67

EXHIBIT INDEX ............................................................   71

<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

General

Atlantic BancGroup, Inc. On October 23, 1998, Atlantic BancGroup, Inc. (the
"Holding Company") was incorporated in the State of Florida. On April 3, 1999,
the shareholders of Oceanside Bank ("Oceanside") approved the Agreement and Plan
of Reorganization ("Reorganization") whereby Oceanside became a wholly-owned
subsidiary of 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. Collectively, the entities are referred to as
"Atlantic." Our corporate headquarters is located at 1315 South Third Street,
Jacksonville Beach, Florida.

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

As is the case with banking institutions generally, our operations are
materially and significantly influenced by general economic conditions and by
related monetary and fiscal policies of financial institution regulatory
agencies, including the Federal Reserve and the State of Florida Department of
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 primary service area in East Duval and Northeast St. Johns
Counties ("PSA"). 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 two branch offices located at 560
Atlantic Boulevard, Neptune Beach, Florida, and 13799 Beach Boulevard,
Jacksonville, Florida. Oceanside draws most of our customer deposits and
conducts a significant portion of our lending transactions from and within our
PSA in the "Beaches and West Beaches area" of Jacksonville, Florida.

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


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<PAGE>

Our principal strategy is to:

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

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

o     Expand our consumer loan base within our PSA.

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

Our source of funds for loans and other investments are demand, time, savings,
and other deposits, amortization and repayment of loans, sales to other lenders
or institutions of loans or participations in loans, and borrowings. Our
principal sources of income are interest and fees collected on loans, and to a
lesser extent, interest and dividends collected on other investments. Our
principal expenses are interest paid on savings and other deposits, interest
paid on other borrowings, employee compensation, office expenses, and other
overhead and operational expenses. We offer several deposit accounts, including
demand deposit accounts, negotiable order of withdrawal accounts ("NOW"
accounts), money market accounts, certificates of deposit, and various
retirement accounts. During 2002, we also obtained funds from customer
repurchase agreements, which have been classified as other borrowings secured
with pledged securities from our investment portfolio.

We are a member of an electronic banking network so that our customers may use
the automated teller machines (the "ATMs") of other financial institutions and
we also operate a drive-in teller service and 24-hour depository. 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 PSA and surrounding areas.

Lending Activities

We offer a wide range of loans to individuals and small businesses and other
organizations that are located in, or conduct a substantial portion of their
business in, our PSA. At December 31, 2002, our consolidated total loans were
$79.2 million, or 70.6%, 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, 2002, approximately 64% of our total loan
portfolio consisted of loans secured by mortgages


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on real estate. Of the total loans secured by mortgages on real estate,
approximately 37% are secured by nonfarm nonresidential properties and 28% are
secured by construction, land development, and other land loans. The remaining
35% are secured by 1-4 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 single-family residential
units or the development of single-family residential building lots. These real
estate loans may be made at fixed or variable interest rates. We generally do
not make fixed-rate commercial real estate loans for terms exceeding two years.
Loans in excess of two years are generally adjustable rate loans. Residential
real estate loans ordinarily are repayable in monthly installments, based on up
to a 30-year amortization schedule, with variable interest rates.

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 which vary with the prime lending
rate and will become payable in full in three to five years. Commercial loans
not secured by real estate amounted to approximately 27% of our total loan
portfolio as of December 31, 2002.

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 9% of our total loan portfolio at December 31, 2002.

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.

Deposit Activities

Deposits are our major source of funds for loans and other investment
activities. In 2002, our


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<PAGE>

regular savings, demand, NOW and money market deposit accounts comprised
approximately 58.7% of our consolidated total deposits. Approximately 25.9% of
our consolidated deposits at December 31, 2002, were certificates of deposit (or
time deposits) of less than $100,000. Time deposits of $100,000 and over made up
approximately 15.4% of our consolidated total deposits at December 31, 2002.
Generally, our goal is to maintain the rates paid on our deposits at a
competitive level. We do not currently accept brokered deposits.

Investments

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

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


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<PAGE>

Interest and Usury

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

Supervision and Regulation

Both 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. Both companies are examined periodically by the
Federal Reserve, or the Department and the FDIC, each of whom will submit
periodic reports regarding their financial condition and other matters. These
agencies have a broad range of powers to enforce regulations under their
respective jurisdictions, and to take discretionary actions determined to be for
the protection of the safety and soundness of the Holding Company and Oceanside,
including the issuance of cease and desist orders and the removal of directors
and officers.

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


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Federal Reserve must consider whether the performance of such an activity can
reasonably be expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency that outweigh
possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest, or unsound banking practices. For
example, factoring accounts receivable, acquiring or servicing loans, leasing
personal property, conducting securities brokerage activities, performing
certain data processing services, acting as agent or broker in selling credit
life insurance and certain other types of insurance in connection with credit
transactions, and certain insurance underwriting activities have all been
determined by regulations of the Federal Reserve to be permissible activities of
bank holding companies. Despite prior approval, the Federal Reserve has the
power to order a holding company or its subsidiaries to terminate any activity
or terminate its ownership or control of any subsidiary, when it has reasonable
cause to believe that continuation of such activity or such ownership or control
constitutes a serious risk to the financial safety, soundness, or stability of
any bank subsidiary of that bank holding company.

Gramm-Leach-Bliley Act. Enacted in 1999, the Gramm-Leach-Bliley Act reforms and
modernizes certain areas of financial services regulation. The law permits the
creation of financial services holding companies that can offer a full range of
financial products under a regulatory structure based on the principle of
functional regulation. The legislation eliminates the legal barriers to
affiliations among banks and securities firms, insurance companies, and other
financial services companies. The law also provides financial organizations with
the opportunity to structure these new financial affiliations through a holding
company structure or a financial subsidiary. The law reserves the role of the
Federal Reserve Board as the supervisor for bank holding companies. At the same
time, the law also provides a system of functional regulation which is designed
to utilize the various existing federal and state regulatory bodies. The law
also sets up a process for coordination between the Federal Reserve Board and
the Secretary of the Treasury regarding the approval of new financial activities
for both bank holding companies and national bank financial subsidiaries.

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

FDIC Regulations. Our deposit accounts are insured by the Bank Insurance Fund
("BIF") of the


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<PAGE>

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

The Federal Reserve and bank regulatory agencies require bank holding companies
and financial institutions to maintain capital at adequate levels based on a
percentage of assets and off-balance sheet exposures, adjusted for risk weights
ranging from 0% to 100%. Under the risk-based standard, capital is classified
into two tiers. Tier 1 capital consists of common shareholders' equity,
excluding the unrealized gain (loss) on available-for-sale securities, minus
certain intangible assets. Tier 2 capital consists of the general allowance for
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, 2002, Oceanside's Tier 1
and total risk-based capital ratios were 9.67% and 10.73%, respectively.

Bank holding companies and banks are also required to maintain capital at a
minimum level based on total assets, which is known as the leverage ratio. The
minimum requirement for the leverage ratio is 3%, but all but the highest rated
institutions are required to maintain ratios 100 to 200 basis points above the
minimum. At December 31, 2002, our leverage ratio was 9.00%.

The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
contains "prompt corrective action" provisions pursuant to which banks are to be
classified into one of five categories based upon capital adequacy, ranging from
"well capitalized" to "critically undercapitalized" and which require (subject
to certain exceptions) the appropriate federal banking agency to take prompt
corrective action with respect to an institution which becomes "significantly
undercapitalized" or "critically undercapitalized."

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

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

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

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

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


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

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

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

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

As of December 31, 2002, 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 is permissible. Interstate branching and
consolidation of existing bank subsidiaries in different states is permissible.
Florida has a law that allows out-of-state bank holding companies (located in
states that allow Florida bank holding companies to acquire banks and bank
holding companies in that state) to acquire Florida banks and Florida bank
holding companies. The law essentially provides for out-of-state entry by
acquisition only (and not by interstate branching) and requires the acquired
Florida bank to have been in existence for at least three years.

Dividend Restrictions. In addition to dividend restrictions placed on Oceanside
by the FDIC based on Oceanside's minimum capital requirements, the Florida
Financial Institutions Code prohibits the declaration of dividends in certain
circumstances. Section 658.37, Florida Statutes, prohibits the declaration of
any dividend until a bank has charged off bad debts, depreciation, and other
worthless assets, and has made provision for reasonably-anticipated future
losses on loans


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<PAGE>

and other assets. Such dividend is limited to the aggregate of the net profits
of the dividend period combined with a bank's retained net profits of the
preceding two years. A bank may declare a dividend from retained net profits
accruing prior to the preceding two years with the approval of the Department.
However, a bank will be required, prior to the declaration of a dividend on its
common stock, to carry 20% of its net profits for such preceding period as is
covered by the dividend to its surplus fund, until the surplus fund equals at
least the amount of the bank's common and preferred stock then issued and
outstanding. In no event may a bank declare a dividend at any time in which its
net income from the current year, combined with the retained net income from the
preceding two years is a loss or which would cause the capital accounts of the
bank to fall below the minimum amount required by law, regulation, order, or any
written agreement with the Department or the FDIC. We currently do not intend to
pay a dividend. Instead, we are using our earnings to support our growth.

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

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


                                       9
<PAGE>

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

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

In addition to the annual and quarterly reports, if any of nine specified events
occurs in a period between the filing of Form 10-KSB or a Form 10-QSB, such
event must be reported on a Form 8-K within a specified number of days after the
event occurred. The more common events (and the time for filing the Form 8-K)
follow:

o     a change in control (15 calendar days);

o     an acquisition or disposition of significant assets (15 calendar days);

o     bankruptcy or receivership (15 calendar days);

o     a change in certifying accountant (5 business days);

o     any resignation of directors (5 business days); or

o     a change in fiscal year end (15 calendar days).

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

Individual directors, officers and owners of more than 10% of our stock, are
required to file individual disclosures of the amount of our securities (stock
options or warrants) they beneficially own and of any transactions involving
such securities. The initial status of all such persons will be reported on
individual Form 3s. Subsequent securities transactions will be reported on Form
4 as they occur, and an annual report of ownership containing transactions
reported late or not required to be reported as they occur is filed on Form 5.

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


                                       10
<PAGE>

Recent Legislation

The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act"), which became law on July
30, 2002, added new legal requirements for public companies affecting corporate
governance, accounting and corporate reporting.

The Sarbanes-Oxley Act provides for, among other things:

o     a prohibition on personal loans made or arranged by the issuer to its
      directors and executive officers (except for loans made by a bank subject
      to Regulation O);

o     independence requirements for audit committee members;

o     independence requirements for company auditors;

o     certification of financial statements on Forms 10-KSB and 10-QSB reports
      by the chief executive officer and the chief financial officer;

o     the forfeiture by the chief executive officer and the chief financial
      officer of bonuses or other incentive-based compensation and profits from
      the sale of an issuer's securities by such officers in the twelve month
      period following initial publication of any financial statements that
      later require restatement due to corporate misconduct;

o     disclosure of off-balance sheet transactions;

o     two-business day filing requirements for insiders filing Form 4s;

o     disclosure of a code of ethics for financial officers and filing a Form
      8-K for a change in or waiver of such code;

o     the reporting of securities violations "up the ladder" by both in-house
      and outside attorneys;

o     restrictions on the use of non-GAAP financial measures in press releases
      and SEC filings;

o     the formation of a public accounting oversight board; and

o     various increased criminal penalties for violations of securities laws.

The Sarbanes-Oxley Act contains provisions which became effective upon enactment
on July 30, 2002 and provisions which will become effective from within 30 days
to one year from enactment. The SEC has been delegated the task of enacting
rules to implement various provisions. In addition, each of the national stock
exchanges has proposed new corporate governance rules, including rules
strengthening director independence requirements for boards, the adoption of
corporate governance codes and charters for the nominating, corporate governance
and audit committees.

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,


                                       11
<PAGE>

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.

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.

The Gramm-Leach-Bliley Financial Modernization Act of 1999 ("Modernization Act")
became effective in early 2000. The Modernization Act:

o     allows bank holding companies meeting management, capital, and Community
      Reinvestment Act standards to engage in a substantially broader range of
      non-banking activities than was previously permissible, including
      insurance underwriting and making merchant banking investments in
      commercial and financial companies;

o     allows insurers and other financial services companies to acquire banks;

o     removes various restrictions that previously applied to bank holding
      company ownership of securities firms and mutual fund advisory companies;
      and

o     establishes the overall regulatory structure applicable to bank holding
      companies that also engage in insurance and securities operations.

The Modernization Act modified other financial laws, including laws related to
financial privacy and community reinvestment.

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


                                       12
<PAGE>

Primary Service Area

Our PSA encompasses the easternmost portion of Duval County, Florida, and the
northeastern-most portion of St. Johns County, Florida, and is bounded by the
St. Johns River to the north. Our PSA continues south along the Intercoastal
Waterway to Atlantic Boulevard, then west to St. Johns Bluff Road (which is the
westernmost boundary), then south to J. Turner Butler Boulevard. Our PSA then
continues eastward along J. Turner Butler Boulevard. At the Intercoastal
Waterway, our PSA runs south to the State Road 210 in northern St. Johns County.

Our PSA includes the communities and municipalities of Ponte Vedra Beach,
Jacksonville Beach, Atlantic Beach, and Neptune Beach, Florida, and that portion
of the City of Jacksonville known as Mayport (the home of the Mayport U.S. Naval
Air Station). Duval and St. Johns Counties enjoy an abundant and educated work
force, attractive business environment, favorable cost-of-living comparisons to
other metropolitan areas in the United States, and a good relationship between
the private and public sectors. With the opening of the Beach Boulevard branch
in the third quarter of 2001, we have expanded the service area covered by our
branch network to include the Hodges and San Pablo areas of Duval County, which
extend west of the Intercoastal Waterway. These areas are some of the fastest
growing in our PSA.

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

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

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

Competition

The 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


                                       13
<PAGE>

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.

Common Stock

We have 10,000,000 shares of our $0.01 par value common stock authorized. As of
February 28, 2003, there were 1,039,607 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.

Warrants

Subscribers to the initial offering of Atlantic's common stock received warrants
to purchase common stock ("warrants") equal to the number of shares of common
stock purchased. Each warrant gave the holder the right to purchase one share of
common stock at $10.00 per share at any time during the five year period
beginning on the date of the opening of Oceanside. During 2002, all outstanding
warrants were either exercised or expired.

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.


                                       14
<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, 2002, we had approximately 40 full-time employees and 3
part-time employees. No significant changes in the number of our full-time
employees are currently


                                       15
<PAGE>

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.

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.

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 $426,650 and spent $49,963 on renovations
and upgrades. This facility includes two offices, three inside teller windows,
general lobby space, three drive-up teller windows, an ATM, and on-site parking.
There is no outstanding mortgage loan on this property.

On August 13, 1999, Atlantic purchased from an unaffiliated individual, a 4,960
square foot office building located at 710 Third Street North, Jacksonville
Beach, Florida. The building served as the location for Oceanside's operations
center, Oceanside's mortgage department, and holding company offices, until the
branch at 13799 Beach Boulevard was opened in 2001 (see below). The building was
sold in 2002, netting proceeds of $538,000 and a gain of $16,000.

On September 27, 2000, Oceanside executed a lease for our latest branch
location, which opened in the third quarter of 2001. This branch is located at
13799 Beach Boulevard, Jacksonville, Florida. The lease, which commenced upon
execution, covers approximately 9,000 square feet. In addition to the branch,
other operations of Atlantic and Oceanside were relocated to this facility. Rent
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. Annual rent in years two through ten will be $148,500 (subject to
inflation adjustments).

On August 22, 2002, Oceanside executed a lease for a future branch location,
which is expected to open during the first quarter of 2004. This branch will be
located at the intersection of Kernan


                                       16
<PAGE>

and Atlantic Boulevards, Jacksonville, Florida. The lease covers approximately
42,000 square feet of land, with the square footage of the building to be
determined upon completion of the construction. Rent is expected to commence in
the first quarter of 2004 or when the building is occupied. The lease is for
twenty years with two ten-year renewal options. Annual rent in years two through
twenty will be $75,000 (subject to inflation adjustments).

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, 2002.


                                       17
<PAGE>

                                     PART II

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

Prior to October 28, 1999, the shares of Atlantic common stock were not actively
traded, and such trading activity, as it occurred, took place in privately
negotiated transactions. On October 28, 1999, Atlantic's common stock was
approved for quotation on the Over-the-Counter Bulletin Board ("OTC BB") under
the symbol "ATBC.OB". During 2002 and 2001, the reported periodic high and low
quotes during each quarter follow:

<TABLE>
<CAPTION>
                                 2002                                       2001
              ----------------------------------------    ----------------------------------------
              4th Qtr    3rd Qtr     2nd Qtr   1st Qtr    4th Qtr    3rd Qtr    2nd Qtr    1st Qtr
              -------    -------     -------   -------    -------    -------    -------    -------
<S>            <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
      High     $13.50     $13.35     $13.50     $12.60     $23.00     $23.00     $11.25     $10.50
      Low      $12.50     $12.25     $12.25     $11.95     $11.00     $11.25     $10.50     $ 8.50
</TABLE>

Please note that 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.

Dividends

As of February 28, 2003, there were approximately 683 holders of record of our
common stock. We anticipate that for the foreseeable future, earnings will be
retained for business development and growth. Accordingly, we do not anticipate
paying dividends on our common stock in the foreseeable future. The payment of
future dividends will be at the sole discretion of the board of directors and
will depend on, among other things, future earnings, capital requirements, and
our general financial and business condition.

ITEM 6. MANAGEMENT'S DISCUSSION AND PLAN OF OPERATIONS.

Management's discussion and analysis of earnings and related financial data are
presented herein to assist investors in understanding our financial condition
and results of operations for the periods ended, December 31, 2002 and 2001.
This discussion should be read in conjunction with the financial statements and
related footnotes presented elsewhere herein.


                                       18
<PAGE>

Selected Financial Data (dollars and shares in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                    At or for the
                                                                              Period Ended December 31,
                                                              -----------------------------------------------------------
                                                                2002         2001        2000        1999          1998
                                                              --------     -------     -------     --------      --------
<S>                                                           <C>          <C>         <C>         <C>           <C>
Statements of Operations Data:
     Total interest income                                    $  6,331     $ 6,082     $ 5,277     $  3,704      $  2,287
     Total interest expense                                      1,894       2,558       2,217        1,210           867
     Net interest income before provision for loan losses        4,437       3,524       3,060        2,494         1,420
     Provision for loan losses                                     196         108          --          221           334
     Net interest income after provision for loan losses         4,241       3,416       3,060        2,273         1,086
     Noninterest income                                            916         826         547          362           196
     Noninterest expense                                         4,010       3,379       2,929        2,167         1,450
     Cumulative effect of a change in accounting principle          --          --          --          (59)           --
     Income tax provision (benefit)                                294         226         226          (90)           --
     Net income (loss)                                             853         637         452          499          (168)

Statements of Financial Condition Data:
     Total assets                                             $112,251     $83,901     $74,375     $ 54,161      $ 45,571
     Earning assets                                            101,688      74,408      64,319       47,144        38,977
     Investment securities                                      16,988      12,237       7,344        5,938         7,803
     Loans, net (before allowance for loan losses)              79,107      61,604      49,983       40,935        25,998
     Allowance for loan losses                                     970         766         682          738           520
     Deposit accounts                                           83,524      73,493      65,002       43,889        40,374
     Stockholders' equity                                       12,154       6,967       6,020        5,404         5,050

Share Data:
     Earnings per share
         Basic                                                $   1.04     $  1.05     $  0.76     $   0.84      $  (0.28)
         Fully diluted                                        $   1.04     $  0.91     $  0.76     $   0.84      $  (0.28)
     Book value per share (period end)                        $  11.69     $ 11.08     $ 10.09     $   9.08      $   8.49
     Common shares outstanding (period end)                      1,040         629         597          595           595
     Weighted average shares outstanding
         Basic                                                     817         607         596          595           595
         Fully diluted                                             817         698         596          595           595

Performance Ratios:
     Return on average assets                                     0.86%       0.79%       0.70%        1.06%        (0.55)%
     Return on average equity                                     8.93        9.77        8.18         9.83         (3.27)
     Interest-rate spread during the period                       4.48        4.11        4.28         5.03          4.31
     Net interest margin                                          4.96        4.89        5.31         5.96          5.31
     Noninterest expenses to average assets                       4.02        4.20        4.56         4.59          4.71

Asset Quality Ratios:
     Allowance for loan losses to period end loans                1.23%       1.24%       1.36%        1.80%         2.00%
     Net charge-offs to average loans                            -0.01        0.04        0.12         0.01            --
     Nonperforming assets to period end loans                     0.01        0.03          --           --            --
     Nonperforming assets to period end total assets              0.01        0.03          --           --            --

Capital and Liquidity Ratios (Oceanside):
     Average equity to average assets (Consolidated)              9.58%       8.11%       8.59%       10.75%        16.69%
     Leverage (Oceanside)                                         9.00        8.67        8.83        11.09         12.92
     Risk-based capital (Oceanside):
         Tier 1                                                   9.67        9.75       10.48        12.54         17.42
         Total                                                   10.73       10.83       11.64        13.79         18.68
     Average loans to average deposits (Consolidated)            89.08       79.82       83.16        80.92         69.30
</TABLE>


                                       19
<PAGE>

Special Note Regarding Forward-looking Statements

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

General

At December 31, 2002, we had grown to approximately $112.3 million in total
assets, $78.1 million in net loans, $83.5 million in deposits, and $12.2 million
in stockholders' equity.

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 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.


                                       20
<PAGE>

                              Results of Operations

Net Income

Net income in 2002 was $853,000 versus $637,000 in 2001, an increase of
$216,000, or 33.9%. The primary reasons for the change in net income in 2002
over 2001 were as follows:

o     Our income from average earning assets grew at a 4% pace as a result of
      increases in average earning assets of 24%, partially offset by the
      declining rate environment throughout 2002.

o     The declining rate environment in 2002 was most pronounced on our cost of
      funds, which declined from 4.33% to 2.60%. All types of interest-bearing
      liabilities showed significant declines in the average yields, with an
      overall decline in interest expense of $664,000, or 26%, based on average
      balances in 2002. This helped maintain our interest-rate spread and net
      interest margin at levels exceeding 2001.

                 [Remainder of page intentionally left blank.]


                                       21
<PAGE>

Table 1.1 - Rate/Volume Analysis (dollars in thousands):

<TABLE>
<CAPTION>
                                                                       Years Ended December 31,
                                                                       ------------------------
                                                                2002                                2001
                                                 --------------------------------     --------------------------------
                                                              Interest    Average                  Interest    Average
                                                 Average        and       Yield/      Average        and       Yield/
                                                 Balance     Dividends     Rate       Balance     Dividends     Rate
                                                 -------     ---------     ----       -------     ---------     ----
<S>                                              <C>           <C>         <C>        <C>           <C>         <C>
Earning assets
     Loans, net                                  $70,845       $5,566      7.86%      $56,135       $5,221      9.30%
     Investment securities and other stock        14,293          695      4.86        10,606          626      5.90
     Other interest-earning assets (1)             4,345           70      1.61         5,293          235      4.44
                                                 -------       ------                 -------       ------

         Total interest-earning assets            89,483        6,331      7.08        72,034        6,082      8.44
                                                               ------                               ------

Noninterest-earning assets                        10,265                                8,420
                                                 -------                              -------

         Total assets                            $99,748                              $80,454
                                                 =======                              =======

Interest-bearing liabilities
     Demand deposits                             $27,028          450      1.66       $24,563          600      2.44
     Savings                                       3,509           60      1.71         1,654           38      2.30
     Certificates of deposit                      32,190        1,232      3.83        29,759        1,728      5.81
     Other borrowings                             10,164          152      1.50         3,052          192      6.29
                                                 -------       ------                 -------       ------

         Total interest-bearing liabilities       72,891        1,894      2.60        59,028        2,558      4.33
                                                               ------                               ------

Noninterest-bearing liabilities                   17,300                               14,903
Stockholders' equity                               9,557                                6,523
                                                 -------                              -------

         Total liabilities and
           stockholders' equity                  $99,748                              $80,454
                                                 =======                              =======

Net interest income                                            $4,437                               $3,524
                                                               ======                               ======

Interest-rate spread (2)                                                   4.48%                                4.11%
                                                                           ====                                 ====

Net interest margin (3)                                                    4.96%                                4.89%
                                                                           ====                                 ====

Ratio of average interest-earning assets
  to average interest-bearing liabilities         122.76%                              122.03%
                                                  ======                               ======
</TABLE>

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

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

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

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


                                       22
<PAGE>

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

<TABLE>
<CAPTION>
                                                          Year Ended December 31,
                                                               2002 vs. 2001
                                                        Increase (Decrease) Due to
                                                ------------------------------------------
                                                                           Rate/
                                                  Rate        Volume      Volume     Total
                                                -------      -------      ------     -----
<S>                                             <C>          <C>          <C>        <C>
Interest-earning assets:
     Loans, net                                 $  (811)     $ 1,368      $(212)     $ 345
     Investment securities and other stock         (110)         218        (39)        69
     Other interest-earning assets                 (150)         (42)        27       (165)
                                                -------      -------      -----      -----

         Total interest-earning assets           (1,071)       1,544       (224)       249
                                                -------      -------      -----      -----

Interest-bearing liabilities:
     Demand deposits                               (192)          60        (18)      (150)
     Savings                                         (9)          43        (12)        22
     Certificates of deposit                       (588)         141        (49)      (496)
     Other borrowings                              (147)         447       (340)       (40)
                                                -------      -------      -----      -----

         Total interest-bearing liabilities        (936)         691       (419)      (664)
                                                -------      -------      -----      -----

Net interest income                             $  (135)     $   853      $ 195      $ 913
                                                =======      =======      =====      =====

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

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

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

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

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


                                       23
<PAGE>

Table 2.1 - Weighted Average Yield or Rate:

                                                For the Year Ended December 31,
                                                -------------------------------
                                                       2002        2001
                                                       ----        ----
Interest-earning assets:
         Loans, net                                    7.86%       9.30%
         Investment securities                         4.86        5.90
         Other interest-earning assets                 1.61        4.44
         All interest-earning assets                   7.08        8.44
Interest-bearing liabilities:
         NOW deposits                                  0.60        0.75
         Money market deposits                         2.00        3.42
         Savings                                       1.71        2.30
         Certificates of deposit                       3.83        5.81
         Other borrowings                              1.50        6.29
         All interest-bearing liabilities              2.60        4.33
Interest-rate spread                                   4.48        4.11

Comparison of Years Ended December 31, 2002 and 2001

Net Interest Income

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

Net interest income was $4,437,000 and $3,524,000 for 2002 and 2001,
respectively, an increase of 25.9% from 2001 to 2002, which was due to the
increase in average earning assets of 24.2% and the favorable impact from
declining interest rates on 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 preceding Tables 1.1 and 2.1.

During 2002 and 2001, the average yield on earning assets was 7.08% and 8.44%,
respectively, while the average cost of funds was 2.60% in 2002 and 4.33% in
2001. Our net interest margin increased from 4.89% in 2001 to 4.96% in 2002,
reflecting trends in interest rates earned versus rates paid, which had a
favorable inpact of 37 basis points. Also, the net interest margin improved in
part with the favorable shift in average loans to 79.2% of all average earning
assets in 2002 versus 77.9% in 2001.

For 2002, the average loan-to-interest-bearing deposit ratio increased to 112.9%
from 100.3% in 2001, which reflects the shift in the mix of average earning
assets and interest-bearing deposits as follows:


                                       24
<PAGE>

Table 2.2 - Change in Deposit Mix (dollars in thousands):

<TABLE>
<CAPTION>
                                                       At December 31,
                                            ---------------------------------------
                                                   2002                 2001
                                            -----------------    ------------------
                                                      Percent               Percent
                                            Average     to       Average      to
                                            Balance    Total     Balance     Total
                                            -------   -------    -------    -------
<S>                                         <C>        <C>       <C>        <C>
Interest-earning assets:
     Loans, net                             $70,845     79.2%    $56,135     77.9%
     Investment securities                   14,293     16.0%     10,606     14.7%
     Other                                    4,345      4.8%      5,293      7.4%
                                            -------    -----     -------    -----

         Total interest-earning assets      $89,483    100.0%    $72,034    100.0%
                                            =======    =====     =======    =====

Interest-bearing deposits:
     Demand deposits                        $27,028     34.0%    $24,563     34.9%
     Savings                                  3,509      4.4%      1,654      2.4%
     Certificates of deposit                 32,190     40.5%     29,759     42.3%
                                            -------    -----     -------    -----

         Total interest-bearing deposits     62,727     78.9%     55,976     79.6%

Noninterest-bearing deposits                 16,807     21.1%     14,350     20.4%
                                            -------    -----     -------    -----

         Total deposits                     $79,534    100.0%    $70,326    100.0%
                                            =======    =====     =======    =====
</TABLE>

Other borrowings increased from an average of $3,052,000 in 2001 to $10,164,000
in 2002, and the cost of funds decreased from 6.29% to 1.50% during the same
period reflecting the decreasing rate environment and the growth in lower
costing customer repurchase agreements. Customer repurchase agreements averaged
$7.4 million in 2002 for an average cost of approximately 1.11%.

Provision for Loan Losses

A provision for loan losses of $196,000 was recorded in 2002, which reflects
management's assessment of the needed level of the allowance for loan losses.
The increase in the provision for loan losses in 2002 over the 2001 level of
$108,000 reflects the growth in average loans of 26.2%.

Noninterest Income

Noninterest income increased $90,000, or 10.9%, to $916,000 in 2002 from
$826,000 in 2001. Fees collected on deposit accounts were consistent with the
growth in the number of deposit accounts and the branch expansion. Other income
rose $40,000, or 27.0%, principally due to increased cash values in life
insurance policies funding the indexed retirement plans for certain officers and
directors, the gain of $16,000 on the sale of the former operations building,
and increased miscellaneous fees consistent with the overall growth of Atlantic.


                                       25
<PAGE>

Noninterest Expenses

Total noninterest expenses increased to $4,010,000 in 2002 compared to
$3,379,000 for 2001. This increase of $631,000, or 18.7%, reflects higher
expenses due in part to the Beach Boulevard branch opening. Our explanation of
the more significant increases during 2002 follows:

o     Salaries and employee benefits grew 17.0% reflecting the increase in the
      average number of full-time equivalent employees of approximately 10.5%
      and increases in group insurance, benefits, and compensation rates.

o     Expenses of bank premises and fixed assets rose 32.6% consistent with the
      growth of banking operations; specifically the increased building lease
      costs and other branch facilities costs, including higher depreciation
      ($307,000 versus $267,000).

o     Other operating expenses grew by 14.8%, or $169,000, due principally to
      the expansion of Oceanside's branch network and higher advertising costs,
      professional fees, indexed retirement plan pension expense, and directors'
      fees. The largest increases were for pension expense and data processing
      costs.

Loans Receivable

Average loans receivable (before the allowance for loan losses) were $70,845,000
for the year ended 2002 as compared to $56,135,000 for 2001, an increase of
26.2%. Management believes the growth in loans was directly attributable to the
addition of the Beach Boulevard branch, community acceptance, the reputations of
our lending team, and favorable economic conditions in the market area. Table 3
below provides an analysis of our loan distribution at the end of 2002 and 2001.
Loans that are secured by real estate include residential and nonresidential
mortgages, and home equity loans to individuals.

Table 3 - Loan Portfolio (dollars in thousands):

                                                              For the Year
                                                           Ended December 31,
                                                        -----------------------
                                                          2002           2001
                                                        --------       --------

Real estate loans                                       $ 50,580       $ 38,009
Commercial and agricultural loans                         21,519         17,552
Consumer and other loans                                   7,105          6,166
                                                        --------       --------
         Total loan portfolio                             79,204         61,727
Less:
         Less, unearned income                               (97)          (123)
         Less, allowance for loan losses                    (970)          (766)
                                                        --------       --------

              Loans, net                                $ 78,137       $ 60,838
                                                        ========       ========

The following table shows the maturity of loans receivable.


                                       26
<PAGE>

Table 4 - Loan Maturities at December 31, 2002 (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                                        $16,609      $10,736      $23,235      $50,580
Commercial and agricultural loans                            398          940       20,181       21,519
Consumer and other loans                                   1,495        4,808          802        7,105
                                                         -------      -------      -------      -------

        Total loan portfolio                             $18,502      $16,484      $44,218      $79,204
                                                         =======      =======      =======      =======

Loans with maturities over one year:
        Fixed rate                                                                              $18,874
        Variable rate                                                                            41,828
                                                                                                -------

             Total maturities greater than one year                                             $60,702
                                                                                                =======
</TABLE>

Table 5 - Loans Originated and Repaid (dollars in thousands):

                                                        Year Ended December 31,
                                                       ------------------------
                                                          2002           2001
                                                        --------       --------
Originations:
        Real estate loans                               $ 18,127       $ 14,209
        Commercial and agricultural loans                  9,083          3,982
        Consumer and other loans                           3,731          3,150
                                                        --------       --------

             Total                                        30,941         21,341

Principal reductions                                     (13,464)        (9,703)
                                                        --------       --------

Increase in total loans                                 $ 17,477       $ 11,638
                                                        ========       ========

Classification of Assets

Generally, interest on loans accrues and is credited to income based upon the
principal balance outstanding. It is management's policy to discontinue the
accrual of interest income and classify a loan as nonaccrual when principal or
interest is past due 90 days or more and the loan is not adequately
collateralized, or when in the opinion of management, principal or interest is
not likely to be paid in accordance with the terms of the obligation. 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


                                       27
<PAGE>

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, 2002 and 2001, loans past due for 30 days or more (but less than
89 days) totaled $47,000 and $31,000, respectively. At December 31, 2002,
management had classified ten loans totaling approximately $1.1 million as
substandard, as compared with four substandard loans totaling $50,000 at
December 31, 2001.

At December 31, 2002, one loan totaling $8,000 was considered impaired or
nonaccrual. At December 31, 2001, only one loan totaling $21,000 was past due 90
days or more but was well-secured and in process of collection.

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


                                       28
<PAGE>

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. Table 6 is an analysis of the allowance
for loan losses for 2002 and 2001.

Table 6 - Allowance for Loan Losses (dollars in thousands):

                                                           2002            2001
                                                          -----           -----

Balance, at beginning of period                           $ 766           $ 682
Provision for loan losses                                   196             108
Loans charged off                                           (50)            (24)
Recoveries                                                   58              --
                                                          -----           -----

Balance, at end of period                                 $ 970           $ 766
                                                          =====           =====

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. Table 7 reflects the
allocations of the allowance for the years ended 2002 and 2001.

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

                                                     At December 31,
                                         ---------------------------------------
                                                2002                 2001
                                         ------------------    -----------------
                                                     % of                 % of
                                                   Loans to             Loans to
                                                     Total                Total
                                         Amount      Loans     Amount     Loans
                                         ------    --------    ------   --------

Real estate loans                         $ 95         64%      $  5        62%
Commercial and agricultural loans          172         27          3        28
Consumer and other loans                    14          9          4        10
Unallocated                                689         --        754        --
                                          ----       ----       ----       ---

                                          $970        100%      $766       100%
                                          ====       ====       ====       ===

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, 2002 and 2001, there were no loans qualified as highly leveraged
transactions.

Securities

Financial institutions classify their investment securities as either
"held-to-maturity" or "available-for-sale." Securities classified as
held-to-maturity are carried at amortized or accreted cost and include those
securities that a bank has the intent and ability to hold to maturity.


                                       29
<PAGE>

Securities classified as available-for-sale, which are those securities that a
bank intends to hold for an indefinite amount of time, but not necessarily to
maturity, are carried at fair value with the unrealized holding gains or losses,
net of taxes, reported as a component of the stockholders' equity on a bank's
balance sheet. Tables 8.1 and 8.2 set forth the carrying amount of securities at
the dates indicated.

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

                                                               At December 31,
                                                             -------------------
                                                               2002        2001
                                                             -------     -------
Securities available-for-sale:
         Mortgage-backed securities (GNMA and FNMA)          $13,084     $ 8,329

Securities held-to-maturity:
         State, county, and municipal bonds                    3,904       3,908
                                                             -------     -------

Balance, end of year                                         $16,988     $12,237
                                                             =======     =======

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

                                                               At December 31,
                                                             -------------------
                                                               2002        2001
                                                             -------     -------
Securities available-for-sale:
        Mortgage-backed securities (GNMA and FNMA)           $12,814     $ 8,424

Securities held-to-maturity:
         State, county, and municipal bonds                    3,904       3,908
                                                             -------     -------

Balance, end of year                                         $16,718     $12,332
                                                             =======     =======

Tables 9.1 and 9.2 set forth the maturities (excluding principal paydowns on
mortgage-backed securities) and the weighted average yields of securities by
contractual maturities at December 31, 2002 and 2001.


                                       30
<PAGE>

Table 9.1 - 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, 2002:
     Mortgage-backed securities
         (GNMA and FNMA)            $3,486    3.75%     $3,812     4.11%     $5,786    5.73%    $13,084     4.73%
                                    ======              ======               ======             =======

At December 31, 2001:
     Mortgage-backed securities
         (GNMA and FNMA)            $   --    0.00%     $   --     0.00%     $8,329    5.89%    $ 8,329     5.89%
                                    ======              ======               ======             =======
</TABLE>

Table 9.2 - 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, 2002:
     State, county, and
         municipal bonds            $   --    0.00%     $   --     0.00%     $3,904    5.10%    $ 3,904     5.10%
                                    ======              ======               ======             =======

At December 31, 2001:
     State, county, and
         municipal bonds            $   --    0.00%     $   --     0.00%     $3,908    5.10%    $ 3,908     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 PSA through the
offering of a broad variety of deposit instruments including checking accounts,
money market accounts, regular savings accounts, term certificate accounts
(including "jumbo" certificates in denominations of $100,000 or more) and


                                       31
<PAGE>

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, 2002,
Oceanside met the definition of a "well capitalized" depository institution.

Our primary source of funds is deposit accounts that include both interest- and
noninterest-bearing demand, savings, and time deposits under $100,000. At
December 31, 2002 and 2001, these core deposits accounted for approximately 85%
and 86% of all deposits, respectively. At December 31, 2002, the deposit mix had
improved with favorable increases in the mix of noninterest-bearing demand
deposits and money market deposits. At December 31, 2002, time deposits under
$100,000 accounted for approximately 31% of these core deposits as compared with
money market deposits at 30% and noninterest-bearing demand deposits at 26%.
This compares with 2001 levels of 32%, 24%, and 23%, respectively. At both
December 31, 2002 and 2001, jumbo certificates of deposit (time deposits
$100,000 and greater) represented approximately 15% and 14%, respectively, of
total deposits. At December 31, 2002 and 2001, time deposits outstanding in an
individual amount of $100,000 or more totaled $12,854,000 and $10,203,000,
respectively. The maturities of these deposits are reflected in Table 12 herein.

Interest-bearing demand accounts, consisting of NOW and money market accounts,
averaged $27,028,000 for the year ended 2002 and $24,563,000 for the year ended
2001, or approximately 34% and 35% of average total deposits in 2002 and 2001,
respectively. The declining interest rates in the United States economy during
2002 was the most significant factor in improving our net interest margins as
average cost of funds for deposits decreased from 3.36% in 2001 to 2.19% in
2002.


                                       32
<PAGE>

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

<TABLE>
<CAPTION>
                                                           At December 31,
                                              ------------------------------------------
                                                      2002                   2001
                                              -------------------    -------------------
                                                           % of                  % of
                                               Amount    Deposits     Amount    Deposits
                                              -------    --------    -------    --------
<S>                                           <C>         <C>        <C>         <C>
Demand deposits                               $18,172      21.8%     $14,532      19.8%
NOW deposits                                    5,552       6.6       10,662      14.5
Money market deposits                          21,215      25.4       15,340      20.9
Savings deposits                                4,107       4.9        2,255       3.0
                                              -------     -----      -------     -----

        Subtotal                               49,046      58.7       42,789      58.2
                                              -------     -----      -------     -----

Certificates of deposit:
        1.00% - 1.99%                           3,500       4.2           --       0.0
        2.00% - 2.99%                          14,671      17.6           --       0.0
        3.00% - 3.99%                           9,131      10.9        9,765      13.3
        4.00% - 4.99%                           5,762       6.9        7,699      10.5
        5.00% - 5.99%                           1,244       1.5        3,901       5.3
        6.00% - 6.99%                             170       0.2        8,936      12.2
        7.00% - 7.99%                              --       0.0          403       0.5
                                              -------     -----      -------     -----

        Total certificates of deposit (1)      34,478      41.3       30,704      41.8
                                              -------     -----      -------     -----

        Total deposits                        $83,524     100.0%     $73,493     100.0%
                                              =======     =====      =======     =====
</TABLE>

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

(1)   Includes individual retirement accounts ("IRAs") totaling $2,007,000 and
      $2,052,000 in 2002 and 2001, respectively, all of which are in the form of
      certificates of deposit.

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

                                                    At December 31,
                                        ----------------------------------------
                                                2002                 2001
                                        ------------------    ------------------
                                        Average    Average    Average    Average
                                        Balance     Rate      Balance     Rate
                                        -------    -------    -------    -------
Demand, money market
    and NOW deposits                    $43,835     1.03%     $38,913     1.54%
Savings deposits                          3,509     1.71        1,654     2.30
Certificates of deposit                  32,190     3.83       29,759     5.81
                                        -------               -------

        Total deposits                  $79,534     2.19      $70,326     3.36
                                        =======               =======


                                       33
<PAGE>

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

                                                             At December 31,
                                                         -----------------------
                                                           2002            2001
                                                         -------         -------

Due in three months or less                              $ 3,450         $ 5,318
Over three through twelve months                           6,556           3,550
Over twelve months through three years                     2,745           1,335
Over three years                                             103              --
                                                         -------         -------

                                                         $12,854         $10,203
                                                         =======         =======

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

<TABLE>
<CAPTION>
                                                          Year Ending December 31,
                                        ----------------------------------------------------------
                                         2003        2004      2005    2006      2007       Total
                                        -------     ------     ----    ----     ------     -------
At December 31, 2002:
<S>                                     <C>         <C>        <C>      <C>     <C>        <C>
    1.00% - 1.99%                       $ 3,500     $   --     $ --     $--     $   --     $ 3,500
    2.00% - 2.99%                        14,086        585       --      --         --      14,671
    3.00% - 3.99%                         7,575      1,187      335      --         34       9,131
    4.00% - 4.99%                         2,563      2,034      315      36        814       5,762
    5.00% - 5.99%                           706         12       26      --        500       1,244
    6.00% - 6.99%                           170         --       --      --         --         170
                                        -------     ------     ----     ---     ------     -------

      Total certificates of deposit     $28,600     $3,818     $676     $36     $1,348     $34,478
                                        =======     ======     ====     ===     ======     =======

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

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

Liquidity and Capital Resources

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

We use our capital resources principally to fund existing and continuing loan
commitments and to purchase investment securities. At December 31, 2002 and
2001, commitments to originate loans totaled $14.0 million and $12.7 million,
respectively, and we had issued but unused standby letters of credit of $1.3
million and $1.2 million at December 31, 2002 and 2001, respectively. In
addition, scheduled maturities of certificates of deposit during the 12 months


                                       34
<PAGE>

following December 31, 2002 and 2001 totaled $28.6 million and $27.1 million,
respectively. Management believes that we have adequate resources to fund all
our commitments. If so desired, we can adjust the rates and terms on
certificates of deposit and other deposit accounts to attract deposits and fund
additional commitments.

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

Our principal sources of asset liquidity are federal funds sold and the
securities portfolio, including principal paydowns from mortgage-backed
securities. In 2002 and 2001, such payments totaled $3,828,000 and $1,396,000,
respectively.

Other sources of funds are principal paydowns and maturities in the loan
portfolio. The loan maturity schedule (Table 4) illustrates the maturities of
loans receivable at December 31, 2002. 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, 2002 and 2001, our liquidity ratio of
liquid assets to transaction deposit accounts was 26.4% and 13.2%, respectively.
Management believes that our liquidity is sufficient to meet our anticipated
needs.

Capital. We place a significant emphasis on maintaining a strong capital base.
The capital resources consist of two major components of regulatory capital,
stockholders' equity and the allowance for 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 I and Tier II capital. Tier I capital is composed of total
stockholders' equity reduced by goodwill and other intangible assets. Tier II
capital is comprised of the allowance for loan losses and any qualifying debt
obligations. Regulators also have adopted minimum requirements of 4% of Tier I
capital and 8% of risk-adjusted assets in total capital.

We are also subject to leverage capital requirements. This requirement compares
capital (using the definition of Tier I capital) to balance sheet assets and is
intended to supplement the risk-based capital ratio in measuring capital
adequacy. The guidelines set a minimum leverage ratio of 3% for depository
institutions that are highly rated in terms of safety and soundness, and which
are not experiencing or anticipating any significant growth. Other depository
institutions are expected to maintain capital levels of at least 1% or 2% above
the minimum. Oceanside's actual capital amounts, capital ratios, and leverage
ratios at December 31, 2002 and 2001, are reflected in the table below.


                                       35
<PAGE>

Table 14 - Capital Ratios - Oceanside Only (dollars in thousands):

                                                         At December 31,
                                                       --------------------
                                                         2002         2001
                                                       -------      -------
Tier I
    Stockholders' equity                               $ 8,920      $ 6,915
    Less, intangible assets                                 --           --
                                                       -------      -------
                                                         8,920        6,915
Tier II
    Allowable portion of allowance for loan losses         970          766
                                                       -------      -------

Risk-based capital                                     $ 9,890      $ 7,681
                                                       =======      =======

Risk adjusted assets                                   $92,213      $70,933
                                                       =======      =======

    Tier I risk-based capital ratio                       9.67%        9.75%
                                                       =======      =======

    Total risk-based capital ratio                       10.73%       10.83%
                                                       =======      =======

Adjusted assets                                        $99,119      $79,713
                                                       =======      =======

    Leverage ratio                                        9.00%        8.67%
                                                       =======      =======

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

During 2002, the Holding Company used a portion of the proceeds from warrants
exercised to provide additional capital to Oceanside totaling $1.1 million. This
amount has been eliminated in consolidation.

Table 15 - Capital Analysis:

                                                                At December 31,
                                                               ----------------
                                                                2002       2001
                                                               -----       ----
Average equity as a percentage of average assets                9.58%      8.11%
Equity to total assets at end of year                          10.83       8.30
Return on average equity                                        8.93       9.77
Return on average assets                                        0.86       0.79
Noninterest expenses to average assets                          4.02       4.20

In 1996, Oceanside commenced the sale of units (consisting of one share of
common stock and one warrant to purchase one share of common stock at a price of
$10.00 per share) at a price of $10.00 per unit.


                                       36
<PAGE>

During July 2002, the remaining unexercised warrants expired. A summary of the
activity for our warrants follows:

      Warrants Exercised
      ------------------
      1997                                                             300
      1998                                                              20
      1999                                                             600
      2000                                                           1,500
      2001                                                          32,190
      2002                                                         410,567
                                                                   -------
      Total warrants exercised                                     445,177
      Unexercised warrants expired                                 149,253
                                                                   -------

      Total warrants issued during initial stock offering          594,430
                                                                   =======

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, 2002, stockholders' equity increased $5.2 million from December 31,
2001, as a result of the net income of $853,000, an increase of $228,000 in
unrealized holding gains on available-for-sale securities, and $4.1 million of
proceeds from the exercise of warrants in 2002. The return on average equity for
the years ended December 31, 2002 and 2001, totaled 8.93% and 9.77%,
respectively. The decline in return on average equity is attributable to the
significant increase in capital from the warrant proceeds and not an unfavorable
trend in earnings as the return on average assets improved from 79 basis points
in 2001 to 86 basis points in 2002.

Interest Rate Sensitivity

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

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

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


                                       37
<PAGE>

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

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

Table 16 - Interest Rate Sensitivity at December 31, 2002 (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                             $ 5,588        $     --        $    --        $    --        $  5,588
Interest-bearing deposits in other banks             5              --             --             --               5
Loans(1)                                        26,798          10,869         36,324          5,213          79,204
Securities(2)                                      147             273          3,486         13,082          16,988
                                               -------        --------        -------        -------        --------

Total rate-sensitive assets                    $32,538        $ 11,142        $39,810        $18,295        $101,785
                                               =======        ========        =======        =======        ========

Money market and NOW accounts(2)               $21,215        $     --        $    --        $ 5,552        $ 26,767
Savings accounts (2)                                --              --             --          4,107           4,107
Certificates of deposit (2)                      9,990          18,610          4,494          1,384          34,478
                                               -------        --------        -------        -------        --------

Total rate-sensitive liabilities               $31,205        $ 18,610        $ 4,494        $11,043        $ 65,352
                                               =======        ========        =======        =======        ========

Gap (repricing differences)                    $ 1,333        $ (7,468)       $35,316        $ 7,252        $ 36,433
                                               =======        ========        =======        =======        ========

Cumulative Gap                                 $ 1,333        $ (6,135)       $29,181        $36,433
                                               =======        ========        =======        =======

Cumulative Gap/total assets                       1.19%         -5.47%          26.00%         32.46%
                                               =======        ========        =======        =======

Total assets                                                                                                $112,251
                                                                                                            ========
</TABLE>

--------------------------------------------------------------------------------
(1)   In preparing the table above, adjustable-rate loans were included in the
      period in which the interest rates are next scheduled to adjust rather
      than in the period in which the loans mature. Fixed-rate loans were
      scheduled according to their contractual maturities.

(2)   Excludes noninterest-bearing deposit accounts. Money market deposits were
      regarded as maturing immediately, and other core deposits were assumed to
      mature in the over 5-year category. All other time deposits were scheduled
      through the maturity or repricing dates. Investments were scheduled
      through their contractual, repricing, or principal payment dates.


                                       38
<PAGE>

Other Borrowings

A summary follows (dollars in thousands):

                                                         December 31,
                                                         ------------
                                                       2002          2001
                                                     -------        ------

      Repurchase agreement                           $13,573        $   --
      FHLB of Atlanta advances                         2,300         2,300
      Revolving lines of credit                           --           744
                                                     -------        ------

                                                     $15,873        $3,044
                                                     =======        ======

FHLB of Atlanta Advances. We obtained an advance from FHLB of $2,300,000
collateralized by our FHLB capital stock and a blanket lien on wholly-owned
residential (1-4 units) first mortgage loans totaling approximately $7.6
million. This advance matures on November 17, 2005, and has a fixed interest
rate at 6.05%.

Customer Repurchase Agreements. We have securities under agreements to
repurchase with a par value of $15,671,000 and a fair value of $16,079,000
securing overnight borrowings totaling $13,573,000. The interest rate on this
overnight borrowing was 1.25%.

Revolving Lines of Credit. We had entered into two lines of credit with Columbus
Bank and Trust Company, requiring annual payments of principal and interest at
0.50% below prime. The proceeds from the lines of credit were used to acquire
real estate, fund start-up costs for the mortgage banking operations, and
provide additional working capital for us. During 2002, we used proceeds from
recently exercised warrants and the sale of our former operations center to pay
off the outstanding balances under these lines of credit. As of December 31,
2002, these lines of credit had not been renewed.

Future Accounting Pronouncements

In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial
Institutions - an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9 ("SFAS 147"). Except for transactions between two or more
mutual enterprises, SFAS 147 removes acquisitions of financial institutions from
the scope of both Statement 72 and Interpretation 9 and requires that those
transactions be accounted for in accordance with SFAS 141, Business
Combinations, and SFAS 142, Goodwill and Other Intangible Assets. Thus, the
requirement in paragraph 5 of Statement 72 to recognize (and subsequently
amortize) any excess of the fair value of liabilities assumed over the fair
value of tangible and identifiable intangible assets acquired as an
unidentifiable intangible asset no longer applies to acquisitions within the
scope of SFAS 147. In addition, SFAS 147 amends SFAS 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, to include in its scope long-term
customer-relationship intangible assets of financial institutions such as
depositor- and borrower-relationship intangible assets and credit cardholder
intangible assets. Consequently, those intangible assets are subject to the same
undiscounted cash flow recoverability test and impairment loss recognition and
measurement provisions that Statement 144 requires for other long-lived assets
that are held and used. For us, SFAS 147 becomes effective for acquisitions on
or after October 1, 2002, and the adoption of SFAS 147 is not expected to
materially affect the financial statements. In November 2002, the FASB issued
FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness to Others ("FIN
45"), which expands previously issued accounting guidance and disclosure
requirements for certain guarantees. FIN 45 requires us to recognize an initial
liability for the fair value of an obligation assumed by issuing a guarantee.
The provision for initial recognition


                                       39
<PAGE>

and measurement of the liability will be applied on a prospective basis to
guarantees issued or modified after December 31, 2002. The adoption of FIN 45 is
not expected to materially affect the financial statements.

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.

Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates.
Our market risk arises primarily from interest rate risk inherent in our lending
and deposit taking activities. We have little or no risk related to trading
accounts, commodities or foreign exchange.

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 increase 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.


                                       40
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

                          INDEPENDENT AUDITORS' REPORT

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

We have audited the consolidated statements of financial condition of Atlantic
BancGroup, Inc. and Subsidiary ("Atlantic") as of December 31, 2002 and 2001,
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, 2002. These consolidated financial statements are the
responsibility of Atlantic's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Atlantic as of
December 31, 2002 and 2001, and the results of its consolidated operations and
its cash flows for each of the two years in the period ended December 31, 2002,
in conformity with accounting principles generally accepted in the United States
of America.


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

STEVENS, POWELL & COMPANY, P.A.
Jacksonville, Florida
January 31, 2003


                                       41
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                            ------------------------
                                                                               2002           2001
                                                                            ----------     ---------
                                                                             (Dollars in Thousands,
                                                                             Except Per Share Data)
<S>                                                                         <C>            <C>
                                               ASSETS
Cash and cash equivalents:
     Cash and due from banks                                                $    6,286     $   4,981
     Federal funds sold                                                          5,588           270
                                                                            ----------     ---------
         Total cash and cash equivalents                                        11,874         5,251
Interest-bearing deposits in other banks                                             5           111
Securities available-for-sale                                                   13,084         8,329
Securities held-to-maturity (fair value of $4,096 in 2002 and
    $3,898 in 2001)                                                              3,904         3,908
Stock in FHLB and correspondent bank, at cost                                      217           186
Loans, net                                                                      78,137        60,838
Facilities                                                                       2,834         3,236
Accrued interest receivable                                                        430           394
Deferred income taxes                                                              327           264
Other assets                                                                     1,439         1,384
                                                                            ----------     ---------

         Total assets                                                       $  112,251     $  83,901
                                                                            ==========     =========

                                            LIABILITIES
Deposits:
     Noninterest-bearing demand deposits                                    $   18,172     $  14,532
     Interest-bearing deposits                                                   5,552        10,662
     Money market deposits                                                      21,215        15,340
     Savings deposits                                                            4,107         2,255
     Time deposits, $100,000 and over                                           12,854        10,203
     Other time deposits                                                        21,624        20,501
                                                                            ----------     ---------

         Total deposits                                                         83,524        73,493

Other borrowings                                                                15,873         3,044
Accrued interest payable on deposits                                                71            64
Accounts payable and accrued liabilities                                           629           333
                                                                            ----------     ---------

         Total liabilities                                                     100,097        76,934
                                                                            ----------     ---------

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

                                        STOCKHOLDERS' EQUITY

Common stock, $0.01 par value, authorized 10,000,000 shares, issued
    and outstanding 1,039,607 shares in 2002 and 629,040 shares in 2001             10             6
Additional paid-in capital                                                       8,651         4,550
Retained earnings                                                                3,325         2,471
Accumulated other comprehensive income:
     Net unrealized holding gains (losses) on securities                           168           (60)
                                                                            ----------     ---------

         Total stockholders' equity                                             12,154         6,967
                                                                            ----------     ---------

         Total liabilities and stockholders' equity                         $  112,251     $  83,901
                                                                            ==========     =========

Book value per common share                                                 $    11.69     $   11.08
                                                                            ==========     =========

Common shares outstanding                                                    1,039,607       629,040
                                                                            ==========     =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       42
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                               ----------------------
                                                                                 2002          2001
                                                                               --------     ---------
                                                                               (Dollars in Thousands,
                                                                               Except Per Share Data)
<S>                                                                            <C>          <C>
INTEREST INCOME
     Interest and fees on loans                                                $  5,566     $   5,221
     Interest and dividend income from investment securities                        695           626
     Interest on federal funds sold                                                  69           229
     Interest on deposits with other banks                                            1             6
                                                                               --------     ---------
         Total interest income                                                    6,331         6,082
                                                                               --------     ---------

INTEREST EXPENSE
     Interest on deposits                                                         1,742         2,366
     Other                                                                          152           192
                                                                               --------     ---------
         Total interest expense                                                   1,894         2,558
                                                                               --------     ---------

NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES                              4,437         3,524

PROVISION FOR LOAN LOSSES                                                           196           108
                                                                               --------     ---------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                               4,241         3,416
                                                                               --------     ---------

NONINTEREST INCOME
     Service charges on deposit accounts                                            515           451
     Mortgage banking fees                                                          213           227
     Other income                                                                   188           148
                                                                               --------     ---------
         Total noninterest income                                                   916           826
                                                                               --------     ---------

NONINTEREST EXPENSES
     Salaries and employee benefits                                               1,998         1,708
     Expenses of bank premises and fixed assets                                     699           527
     Other operating expenses                                                     1,313         1,144
                                                                               --------     ---------
         Total noninterest expenses                                               4,010         3,379
                                                                               --------     ---------

INCOME BEFORE PROVISION FOR INCOME TAXES                                          1,147           863

PROVISION FOR INCOME TAXES                                                          294           226
                                                                               --------     ---------

NET INCOME                                                                          853           637

OTHER COMPREHENSIVE INCOME, NET OF INCOME TAXES:
     Unrealized holding gains (losses) on securities arising during period          228           (12)
                                                                               --------     ---------

COMPREHENSIVE INCOME                                                           $  1,081     $     625
                                                                               ========     =========

AVERAGE COMMON SHARES OUTSTANDING
     Basic                                                                      816,898       606,988
                                                                               ========     =========
     Fully diluted                                                              816,898       698,339
                                                                               ========     =========

EARNINGS PER SHARE
     Basic                                                                     $   1.04     $    1.05
                                                                               ========     =========
     Fully diluted                                                             $   1.04     $    0.91
                                                                               ========     =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       43
<PAGE>

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

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                         ----------------------
                                                                           2002          2001
                                                                         --------      --------
                                                                         (Dollars in Thousands)
<S>                                                                      <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                          $    853      $    637
     Adjustments to reconcile net income to net cash
        provided by (used in) operating activities:
         Provision for loan losses                                            196           108
         Depreciation and amortization                                        307           267
         Net premium amortization and discount accretion                       74            12
         Deferred income taxes                                                (70)          (19)
         Gain on sale of assets                                               (16)           --
         Increase in other assets                                             (90)         (129)
         Increase in other liabilities                                        172            88
                                                                         --------      --------

                  Net cash provided by operating activities                 1,426           964
                                                                         --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES
     Securities available-for-sale:
         Purchases                                                         (8,287)       (6,320)
         Principal repayments mortgage-backed investment securities         3,828         1,396
     Purchases of FHLB stock                                                  (31)          (15)
     (Increase) decrease in interest-bearing deposits in other banks          106            (5)
     Increase in loans                                                    (17,495)      (11,645)
     Proceeds from sale of assets                                             538            --
     Purchases of facilities                                                 (427)         (902)
                                                                         --------      --------

                  Net cash used in investing activities                   (21,768)      (17,491)
                                                                         --------      --------

CASH FLOWS FROM FINANCING ACTIVITIES
     Increase (decrease) in deposits:
         Noninterest-bearing                                                3,640           803
         Interest-bearing                                                   6,391         7,688
     Proceeds from other borrowings                                        13,573            --
     Repayments of other borrowings                                          (744)           --
     Proceeds from stock warrants exercised                                 4,105           322
                                                                         --------      --------

                  Net cash provided by financing activities                26,965         8,813
                                                                         --------      --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                        6,623        (7,714)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                              5,251        12,965
                                                                         --------      --------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                 $ 11,874      $  5,251
                                                                         ========      ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
     Cash received during the year for interest and dividends            $  6,295      $  6,034
                                                                         ========      ========
     Cash paid during the year for interest                              $  1,887      $  2,591
                                                                         ========      ========
     Cash paid during the year for income taxes                          $    285      $    203
                                                                         ========      ========

NONCASH TRANSACTIONS
     Net change in unrealized holding gains (losses) on securities
        available-for-sale, net of income taxes                          $    228      $    (12)
                                                                         ========      ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       44
<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, 2000                  596,850       $ 6       $4,228       $1,834       $ (48)        $ 6,020

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

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

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

Stock warrants exercised                    410,567         4        4,101           --          --           4,105
Rounding                                         --        --           --            1          --               1
Comprehensive income:
     Net income                                  --        --           --          853          --
     Net change in net unrealized
       holding gains on securities               --        --           --           --         228

       Total comprehensive income                --        --           --           --          --           1,081
                                          ---------       ---       ------       ------       -----         -------

Balance, December 31, 2002                1,039,607       $10       $8,651       $3,325       $ 168         $12,154
                                          =========       ===       ======       ======       =====         =======
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       45
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

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 three 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. 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. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The accounting and reporting policies of Atlantic conform with
accounting principles generally accepted in the United States of America 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.

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.

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 Atlantic 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.


                                       46
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

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 at December 31, 2002 and 2001 were
approximately $461,000 and $483,000, 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 2002 and
2001, 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, 2002, 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.

Loans Held-for-Investment - Loans originated with the intent and ability to hold
for the foreseeable future or until maturity or payoff are classified 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.

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 - The allowance for loan losses is established as
losses are estimated to have occurred through a provision for loan losses
charged to earnings. Loan losses are charged against the allowance when
management believes the 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.


                                       47
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

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

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.

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. At December 31, 2002 and 2001, Atlantic had no
significant loans held-for-sale.

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

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

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. Revenue and expenses from
operations and changes in the valuation allowance are included in loss on
foreclosed assets.

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.


                                       48
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

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

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

Employee Benefits - Pension costs 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 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, 2002 and 2001. Diluted EPS
are computed by dividing net earnings by the weighted average number of shares
and all dilutive potential shares outstanding during the period. During the year
ended December 31, 2002, all warrants were either exercised or expired and
Atlantic no longer has any dilutive warrants outstanding. At December 31, 2001,
the outstanding warrants totaled 559,820. For purposes of computing diluted EPS,
the treasury stock method was used for 2002 and 2001. The following information
was used in the computation of EPS on both a basic and diluted basis for the
years ended December 31, 2002 and 2001 (dollars in thousands except per share
data):

<TABLE>
<CAPTION>
                                                               For the Year Ended December 31,
                                                                        2002      2001
                                                                      --------   -----
<S>                                                                   <C>        <C>
      Basic EPS computation:
          Numerator - Net income                                      $    853   $ 637
                                                                      ========   =====
          Denominator - Weighted average shares outstanding                817     607
                                                                      ========   =====
          Basic EPS                                                   $   1.04   $1.05
                                                                      ========   =====

      Diluted EPS computation:
          Numerator - Net income                                      $    853   $ 637
                                                                      ========   =====
          Denominator
               Weighted average shares outstanding                         817     607
               Warrants                                                     --      91
                                                                      --------   -----
                                                                           817     698
                                                                      ========   =====
          Diluted EPS                                                 $   1.04   $0.91
                                                                      ========   =====
</TABLE>

Advertising and Business Development - Atlantic expenses advertising and
business development costs as incurred. Advertising and business development
costs for 2002 and 2001 as included in other operating expenses were $53,000 and
$58,000, respectively.

Reclassification of Accounts - Certain items in the financial statements for
2001 have been reclassified to conform to the classifications used for the
current year.


                                       49
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

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

Recent Accounting Pronouncements - In October 2002, the FASB issued SFAS No.
147, Acquisitions of Certain Financial Institutions - an amendment of FASB
Statements No. 72 and 144 and FASB Interpretation No. 9 ("SFAS 147"). Except for
transactions between two or more mutual enterprises, SFAS 147 removes
acquisitions of financial institutions from the scope of both Statement 72 and
Interpretation 9 and requires that those transactions be accounted for in
accordance with SFAS 141, Business Combinations, and SFAS 142, Goodwill and
Other Intangible Assets. Thus, the requirement in paragraph 5 of Statement 72 to
recognize (and subsequently amortize) any excess of the fair value of
liabilities assumed over the fair value of tangible and identifiable intangible
assets acquired as an unidentifiable intangible asset no longer applies to
acquisitions within the scope of SFAS 147. In addition, SFAS 147 amends SFAS
144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include
in its scope long-term customer-relationship intangible assets of financial
institutions such as depositor- and borrower-relationship intangible assets and
credit cardholder intangible assets. Consequently, those intangible assets are
subject to the same undiscounted cash flow recoverability test and impairment
loss recognition and measurement provisions that Statement 144 requires for
other long-lived assets that are held and used. For Atlantic, SFAS 147 becomes
effective for acquisitions on or after October 1, 2002, and the adoption of SFAS
147 is not expected to materially affect the financial statements.

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others ("FIN 45"), which expands previously issued
accounting guidance and disclosure requirements for certain guarantees. FIN 45
requires Atlantic to recognize an initial liability for the fair value of an
obligation assumed by issuing a guarantee. The provision for initial recognition
and measurement of the liability will be applied on a prospective basis to
guarantees issued or modified after December 31, 2002. The adoption of FIN 45 is
not expected to materially affect the financial statements.

NOTE 2 - INVESTMENT SECURITIES

The amortized cost and estimated fair value of instruments in debt and equity
securities at December 31, 2002 and 2001, follow (dollars in thousands):

<TABLE>
<CAPTION>
                                                   December 31, 2002                                December 31, 2001
                                  ---------------------------------------------   -------------------------------------------
                                                 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      $12,814       $270       $    --     $13,084    $ 8,424       $25       $(120)     $ 8,329
                                   -------       ----       -------     -------    -------       ---       -----      -------

     Total available-for-sale       12,814        270            --      13,084      8,424        25        (120)       8,329
                                   -------       ----       -------     -------    -------       ---       -----      -------

Held-to-maturity
   State, county and municipal
     bonds                           3,904        192            --       4,096      3,908        25         (35)       3,898
                                   -------       ----       -------     -------    -------       ---       -----      -------

     Total held-to-maturity          3,904        192            --       4,096      3,908        25         (35)       3,898
                                   -------       ----       -------     -------    -------       ---       -----      -------

Total investment securities        $16,718       $462       $    --     $17,180    $12,332       $50       $(155)     $12,227
                                   =======       ====       =======     =======    =======       ===       =====      =======
</TABLE>


                                       50
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

NOTE 2 - INVESTMENT SECURITIES (Continued)

The fair value of securities fluctuates during the investment period. During
2002 and 2001, no provision for loss has been made in connection with any
decline of fair value below book value for certain securities, because the
securities are purchased for investment purposes and the decline is not deemed
to be other than temporary. Temporary increases in fair value of securities
available-for-sale at December 31, 2002, of $168,000 (net of deferred income
taxes of $102,000) 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, 2002, securities with an amortized cost of
$16,718,000 and market value of $17,180,000 were pledged to secure overnight
purchase agreements and deposits of public funds.

The cost and estimated fair value of debt and equity securities at December 31,
2002, 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        $ 3,453     $ 3,486              $   --     $   --
      Due in five to ten years          3,785       3,812                  --         --
      Due in ten years or more          5,576       5,786               3,904      4,096
                                      -------     -------              ------     ------

                                      $12,814     $13,084              $3,904     $4,096
                                      =======     =======              ======     ======
</TABLE>

NOTE 3 - LOANS

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

                                                    2002           2001
                                                  --------       --------

      Real estate loans                           $ 50,580       $ 38,009
      Commercial and agricultural loans             21,519         17,552
      Consumer and other loans                       7,105          6,166
                                                  --------       --------
          Total loan portfolio                      79,204         61,727
      Less, deferred fees                              (97)          (123)
      Less, allowance for loan losses                 (970)          (766)
                                                  --------       --------

               Loans, net                         $ 78,137       $ 60,838
                                                  ========       ========

At December 31, 2002, fixed rate loans (excluding nonaccrual loans) with
maturities over one year totaled approximately $18.9 million.

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

                                                          2002       2001
                                                         -----      -----

      Balance, beginning of period                       $ 766      $ 682
      Provisions charged to operating expenses             196        108
      Loans charged-off                                    (50)       (24)
      Recoveries                                            58         --
                                                         -----      -----

      Balance, end of period                             $ 970      $ 766
                                                         =====      =====


                                       51
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

NOTE 3 - LOANS (Continued)

Interest income recognized or received on impaired loans for 2002 and 2001 was
not material. At December 31, 2002 and 2001, impaired loans, all collateral
dependent, were as follows (dollars in thousands):

                                                               2002   2001
                                                               ----   ----

      Average balance during year                               $47    $--
                                                                ===    ===

      Total impaired loans                                      $ 8    $--
      Total related allowance for loan losses                     2     --
                                                                ---    ---
      Amount of impaired loans without a specific allowance
         for loan losses                                        $ 6    $--
                                                                ===    ===

Nonaccrual and past due loans at December 31, 2002 and 2001, were as follows
(dollars in thousands):

                                                               2002   2001
                                                               ----   ----

      Nonaccrual loans (and considered impaired)                $ 8    $--
      Past due ninety days or more, but still accruing           --     21
                                                                ---    ---

                                                                $ 8    $21
                                                                ===    ===

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, 2002:
     Land and land improvements                $  750        $   --        $  750
     Bank building and improvements             1,888           261         1,627        5 - 40 years
     Furniture, fixtures, and equipment         1,137           680           457        3 - 10 years
                                               ------        ------        ------

                                               $3,775        $  941        $2,834
                                               ======        ======        ======

December 31, 2001:
     Land and land improvements                $  946        $   --        $  946
     Bank building and improvements             1,980           243         1,737        5 - 40 years
     Furniture, fixtures, and equipment         1,013           460           553        3 - 10 years
                                               ------        ------        ------

                                               $3,939        $  703        $3,236
                                               ======        ======        ======
</TABLE>

Depreciation and amortization of facilities totaled $307,000 and $267,000 in
2002 and 2001, respectively.

Operating Leases. Atlantic leases property for a branch location at 13799 Beach
Boulevard, Jacksonville, Florida, under a noncancellable operating lease. Under
the terms of the lease, the lease term commenced in May 2001, with no rent due
the first twelve months. Annual minimum future rental payments are $154,000 in
2003, $156,000 (plus an inflation adjustment) in the years 2004 through 2010,
and $52,000 (plus an inflation adjustment) in 2011.


                                       52
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

NOTE 4 - FACILITIES (Continued)

Atlantic entered into a 20-year noncancellable operating lease agreement for a
new branch at the corner of Kernan Boulevard and Atlantic Boulevard,
Jacksonville, Florida. The lease was executed in August 2002, and will commence
upon completion of the branch construction, which is expected in 2004. Upon
commencement, the minimum annual rental for this lease will be $75,000, subject
to an inflation clause.

All other operating leases are not material. Total rent expense for 2002 and
2001 was $180,000 and $75,000, respectively.

NOTE 5 - TIME DEPOSITS

Time deposits at December 31, 2002 and 2001, totaled $34,478,000 and
$30,704,000, respectively. Maturities of such deposits follow (dollars in
thousands):

<TABLE>
<CAPTION>
                                                      December 31, 2002             December 31, 2001
                                                ----------------------------  ----------------------------
                                                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                          $ 3,450        $ 6,540        $ 5,318        $ 9,052
      Over three through twelve months                6,556         12,053          3,550          9,196
      Over twelve months through three years          2,745          1,749          1,335          2,210
      Over three years                                  103          1,282             --             43
                                                    -------        -------        -------        -------

                                                    $12,854        $21,624        $10,203        $20,501
                                                    =======        =======        =======        =======
</TABLE>

Interest expense on certificates of deposit of $100,000 or more totaled $516,000
and $599,000 for 2002 and 2001, respectively. Interest expense on other time
deposits totaled $716,000 and $1,129,000 for 2002 and 2001, respectively.

NOTE 6 - OTHER BORROWINGS

A summary follows (dollars in thousands):

                                                         December 31,
                                                       2002          2001
                                                     -------        ------

      Repurchase agreement                           $13,573        $   --
      FHLB of Atlanta advances                         2,300         2,300
      Revolving lines of credit                           --           744
                                                     -------        ------

                                                     $15,873        $3,044
                                                     =======        ======

FHLB of Atlanta Advances. Atlantic has obtained an advance from FHLB of
$2,300,000 collateralized by Atlantic's FHLB capital stock and a blanket lien on
wholly-owned residential (1-4 units) first mortgage loans totaling approximately
$7.6 million. This advance matures on November 17, 2005, and has a fixed
interest rate at 6.05%.


                                       53
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

NOTE 6 - OTHER BORROWINGS (Continued)

Customer Repurchase Agreements. Atlantic has securities under agreements to
repurchase with a par value of $15,671,000 and a fair value of $16,079,000
securing overnight borrowings totaling $13,573,000. The interest rate on this
overnight borrowing was 1.25%.

Revolving Lines of Credit. Atlantic had entered into two lines of credit with
Columbus Bank and Trust Company, requiring annual payments of principal and
interest at 0.50% below prime. The proceeds from the lines of credit were used
to acquire real estate, fund start-up costs for the mortgage banking operations,
and provide additional working capital for Atlantic. During 2002, Atlantic used
proceeds from the recently exercised warrants and sale of Atlantic's former
operations center to pay off the outstanding balances under these lines of
credit. As of December 31, 2002, these lines of credit had not been renewed.

NOTE 7 - INCOME TAXES

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

                                                        Year Ended December 31,
                                                          2002          2001
                                                         -----         -----
Current:
     Federal                                             $ 311         $ 209
     State                                                  53            36
                                                         -----         -----
                                                           364           245
                                                         -----         -----

Deferred:
     Federal                                               (60)          (16)
     State                                                 (10)           (3)
                                                         -----         -----
                                                           (70)          (19)
                                                         -----         -----

              Total income tax provision                 $ 294         $ 226
                                                         =====         =====

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

<TABLE>
<CAPTION>
                                                        2002                  2001
                                                        ----                  ----
                                                             % of                  % of
                                                  Amount    Pretax      Amount    Pretax
                                                  ------    ------      ------    ------
<S>                                               <C>        <C>        <C>        <C>
      Tax computed at statutory rate              $ 390      34.0%      $ 293      34.0%
      Increase (decrease) resulting from:
          Nontaxable interest income, net           (63)     (5.5)        (60)     (7.0)
          Other                                     (33)     (2.9)         (7)     (0.8)
                                                  -----      ----       -----      ----

               Income tax provision (benefit)     $ 294      25.6%      $ 226      26.2%
                                                  =====      ====       =====      ====
</TABLE>


                                       54
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

NOTE 7 - INCOME TAXES (Continued)

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

                                                           December 31,
                                                          2002       2001
                                                         -----      -----
      Deferred tax asset:
          Federal                                        $ 380      $ 241
          State                                             65         41
                                                         -----      -----

                                                           445        282
                                                         -----      -----
      Deferred tax liability:
          Federal                                         (101)       (16)
          State                                            (17)        (2)
                                                         -----      -----

                                                          (118)       (18)
                                                         -----      -----

               Net deferred tax asset                    $ 327      $ 264
                                                         =====      =====

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

                                                           December 31,
                                                          2002       2001
                                                         -----      -----
      Allowance for loan losses                          $ 356      $ 286
      Indexed retirement plans                             106         36
      Net unrealized holding losses on securities         (102)        36
      Depreciation                                         (16)        (6)
      Other                                                (17)       (88)
                                                         -----      -----

               Net deferred tax asset                    $ 327      $ 264
                                                         =====      =====

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 $40,000 and $36,000
for 2002 and 2001, 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
2002.

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


                                       55
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

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

The IRP participants will begin receiving annual cash retirement benefit
payments for a period of fifteen years after reaching age 65 in most cases. The
size of these payments will depend on the growth in value of the purchased pool
of life insurance policies. In addition, the beneficiaries of eight of the
participants will each receive 90% of the death benefits, payable upon the
respective participant's death, with the remaining 10% payable to Oceanside. The
remaining three participants will receive a larger lump sum payment in their
fifteenth year of receiving retirement benefits. A summary of the activity for
the IRP follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                       2002      2001
                                                                      -----      ----
<S>                                                                   <C>        <C>
      Policy income included in other income                          $  78      $ 64
      Pension expense included in other operating expenses             (147)      (52)
      Life insurance expense included in other operating expenses        (7)       (6)
      Deferred income tax benefit                                        44        20
                                                                      -----      ----

          Net after income tax benefit                                $ (32)     $ 26
                                                                      =====      ====
</TABLE>

NOTE 9 - COMMITMENTS AND CONTINGENCIES

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

At December 31, 2002 and 2001, the following financial instruments were
outstanding whose contract amounts represent credit risk for Atlantic (dollars
in thousands):

                                                        December 31,
                                                      2002           2001
                                                    -------        -------

      Commitments to extend credit                  $14,025        $12,747
      Standby letters of credit                     $ 1,298        $ 1,189

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.


                                       56
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)

Commercial and standby letters-of-credit are conditional commitments issued by
Atlantic to guarantee the performance of a customer to a third party. Those
letters-of-credit are primarily issued to support public and private borrowing
arrangements. Approximately $1,237,000 of the $1,298,000 of letters-of-credit
issued and outstanding at December 31, 2002, have expiration dates within one
year. The credit risk involved in issuing letters-of-credit is essentially the
same as that involved in extending loan facilities to customers. Atlantic
generally holds collateral supporting those commitments if deemed necessary.

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

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

Litigation. Atlantic 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.

Other. At December 31, 2002, Atlantic had $5.2 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. 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 $1.5
million at December 31, 2002 ($2.5 million for loans qualifying for the 25%
limit). Atlantic does not have any significant concentrations to any one
industry or customer.


                                       57
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

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 2002 and 2001 for such loans
follows (dollars in thousands):

                                                    2002            2001
                                                  -------         -------

      Beginning of year balance                   $ 1,499         $   441
      Additions                                       821           2,069
      Reductions                                     (161)         (1,011)
                                                  -------         -------

      End of year balance                         $ 2,159         $ 1,499
                                                  =======         =======

Unfunded commitments to the same parties totaled $785,000 at December 31, 2002.
At December 31, 2002 and 2001, deposits and customer repurchase agreements with
insiders totaled approximately $14.9 million and $6.6 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 are further authorized to establish
designations, powers, preferences, rights, and other terms for preferred stock
by resolution. No shares of preferred stock have been issued.

Warrants. In connection with Oceanside's initial stock offering, each investment
unit consisted of one share of common stock and one transferable warrant to
purchase one share of common stock at $10.00 per share during the five-year
period beginning on the date Atlantic opened for business. A summary of the
warrant activity during 2002 and 2001 follows:

                                                                 Number of
                                                                 Warrants
                                                                 ---------

      Outstanding at December 31, 2000                            592,010
      Warrants exercised, 2001                                    (32,190)
                                                                 --------
      Outstanding at December 31, 2001                            559,820
      Warrants exercised, 2002                                   (410,567)
      Unexercised warrants expired                               (149,253)
                                                                 --------
      Outstanding at December 31, 2002                                 --
                                                                 ========

Total proceeds received during 2002 and 2001 totaled $4.1 million and $0.3
million, respectively.


                                       58
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

NOTE 12 - STOCKHOLDERS' EQUITY (Continued)

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, 2002,
retained earnings of approximately $2,155,000 were available to pay dividends to
the holding company only (Atlantic) in order to maintain Oceanside's current
regulatory capital classification.

NOTE 13 - OTHER OPERATING EXPENSES

Other operating expenses follow (dollars in thousands):

                                                        2002         2001
                                                       ------       ------

      Processing and settlement fees                   $  375       $  300
      Other miscellaneous expenses                        319          355
      Professional, legal, and audit fees                 176          149
      Pension expense                                     147           52
      Telephone                                            86           91
      Director fees                                        84           57
      Advertising and business development                 53           58
      Insurance (excluding group insurance)                38           50
      Regulatory assessments                               35           32
                                                       ------       ------

                                                       $1,313       $1,144
                                                       ======       ======

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 Stock - Fair value of Atlantic's investment in
      Federal Home Loan Bank 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.


                                       59
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

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

      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.

The estimated fair values of Atlantic's financial instruments at December 31,
2002, follow (dollars in thousands):

                                                     Carrying       Fair
                                                      Amount        Value
                                                     --------     --------
      Financial Assets
          Cash and deposits in other banks           $ 11,874     $ 11,874
          Investment securities                        16,988       17,180
          Stock in FHLB and correspondent bank            217          217
          Loans, net                                   78,137       79,671
                                                     --------     --------

               Total assets valued                   $107,216     $108,942
                                                     ========     ========

      Financial Liabilities
          Deposits                                   $ 83,524     $ 83,772
          Other borrowings                             15,873       15,962
                                                     --------     --------

               Total liabilities valued              $ 99,397     $ 99,734
                                                     ========     ========

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, 2002, 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,
2002, should not necessarily be considered to apply at subsequent dates.


                                       60
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

NOTE 15 - REGULATORY CAPITAL MATTERS

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

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

As of December 31, 2002, the most recent notification from the FDIC, Oceanside
was categorized as well capitalized under the regulatory framework for prompt
corrective action. To remain categorized as well capitalized, it will have to
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
as disclosed in the table below. There are no conditions or events since the
most recent notification that management believes have changed the prompt
corrective action category.

<TABLE>
<CAPTION>
                                                                                                        To Be Well
                                                                                                       Capitalized
                                                                                                       Under Prompt
                                                                    For Capital                     Corrective Action
                                                                 Adequacy Purposes                      Provisions
                                        Actual          (greater than or  (greater than or  (greater than or  (greater than or
                                   Amount     Ratio     equal to) Amount   equal to) Ratio  equal to) Amount   equal to) Ratio
                                   ------     -----     ----------------   ---------------  ----------------   ---------------
                                                              (dollars in thousands)
<S>                                <C>        <C>             <C>               <C>              <C>               <C>
As of December 31, 2002:
     Total Risk-Based Capital
     (To Risk-Weighted Assets)     $9,890     10.73%          $7,377            8.00%            $9,221            10.00%
     Tier I Capital
     (To Risk-Weighted Assets)     $8,920      9.67%          $3,689            4.00%            $5,533             6.00%
     Tier I Capital
     (To Average Assets)           $8,920      9.00%          $3,965            4.00%            $4,956             5.00%

As of December 31, 2001:
     Total Risk-Based Capital
     (To Risk-Weighted Assets)     $7,681     10.83%          $5,675            8.00%            $7,093            10.00%
     Tier I Capital
     (To Risk-Weighted Assets)     $6,915      9.75%          $2,837            4.00%            $4,256             6.00%
     Tier I Capital
     (To Average Assets)           $6,915      8.67%          $3,189            4.00%            $3,986             5.00%
</TABLE>


                                       61
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

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:                       2002          2001
                                                                --------      -------
                                                                (Dollars In Thousands)
<S>                                                             <C>           <C>
Assets
     Cash and cash equivalents                                  $  3,043      $   287
     Investment in and advances to subsidiary bank                 9,088        6,855
     Other assets                                                     23          563
                                                                --------      -------
     Total                                                      $ 12,154      $ 7,705
                                                                ========      =======

Liabilities and Stockholders' Equity
     Liabilities                                                $     --      $   738
     Stockholders' equity                                         12,154        6,967
                                                                --------      -------
     Total                                                      $ 12,154      $ 7,705
                                                                ========      =======
</TABLE>

<TABLE>
<CAPTION>
Condensed Statements of Operations and Stockholders' Equity
Years Ended December 31:                                          2002          2001
                                                                --------      -------
                                                                (Dollars In Thousands)
<S>                                                             <C>           <C>
Equity in net income of subsidiary bank                         $    905      $   709
Other income                                                          40           62
Other expenses (net of income tax benefit)                           (92)        (134)
                                                                --------      -------
Net income                                                           853          637
Stockholders' Equity:
     Beginning of  year                                            6,967        6,020
     Stock warrants exercised and rounding                         4,106          322
     Net change in unrealized holding gains (losses)
        on securities in subsidiary bank                             228          (12)
                                                                --------      -------
     End of year                                                $ 12,154      $ 6,967
                                                                ========      =======
</TABLE>

<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
Years Ended December 31:                                          2002          2001
                                                                --------      -------
                                                                (Dollars In Thousands)
<S>                                                             <C>           <C>
Operating Activities
Net income                                                      $    853      $   637
Adjustment to reconcile net income to net cash
   provided by operating activities:
     Equity in undistributed earnings of subsidiary bank            (905)        (709)
     Other                                                             9           29
                                                                --------      -------
Net Cash Used In Operating Activities                                (43)         (43)
                                                                --------      -------

Investing Activities
     Proceeds from sale of assets                                    538           --
     Capital contributions to subsidiary bank                     (1,100)          --
     Purchase of facilities                                           --           (3)
                                                                --------      -------
Net Cash Used In Investing Activities                               (562)          (3)
                                                                --------      -------

Financing Activities
     Repayment of other borrowings                                  (744)          --
     Proceeds from stock warrants exercised                        4,105          322
                                                                --------      -------
Net Cash Provided by Financing Activities                          3,361          322
                                                                --------      -------

Increase in Cash and Cash Equivalents                              2,756          276
Cash and Cash Equivalents:
     Beginning of year                                               287           11
                                                                --------      -------
     End of year                                                $  3,043      $   287
                                                                ========      =======
</TABLE>


                                       62
<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.

                                    PART III

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

The information contained under the section captioned "Election of Directors"
beginning on page 5 of Atlantic's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on April 24, 2003, filed as Exhibit 99.1
herein (the "Proxy Statement"), is incorporated herein by reference.

                      SECTION 16(a) REPORTING REQUIREMENTS

The information contained under the section captioned "Section 16(a) Beneficial
Ownership Compliance" at page 11 of Atlantic's definitive Proxy Statement is
incorporated herein by reference (see Exhibit 99.1).

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 (see Exhibit 99.1).

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 8 under "Election of Directors" in
the definitive Proxy Statement, is incorporated herein by reference (see Exhibit
99.1).

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information contained in the section captioned "Certain Relationships and
Related Transactions" at page 9 in the definitive Proxy Statement is
incorporated herein by reference (see Exhibit 99.1).


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<PAGE>

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

      (a)   Exhibits

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

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

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

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

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

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

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

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

            10.4  Lease dated September 27, 2000, between MANT EQUITIES, LLC and
                  Oceanside (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.


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<PAGE>

            11    The computation of per share earnings is shown in the
                  consolidated financial statements of Atlantic BancGroup, Inc.
                  and Subsidiary for December 31, 2002 and 2001, contained in
                  Item 7, on Page 41 of the Notes to Consolidated Financial
                  Statements

            21.1  Subsidiary of the Registrant

            99.1  Atlantic BancGroup, Inc. Proxy Statement for the Annual
                  Meeting of Shareholders to be held on April 24, 2003

      (b)   Reports on Form 8-K

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

ITEM 14. 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 subsequently 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.


                                       65
<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 20th of March, 2003.

                                        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 20th of March, 2003.

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
    David L. Young                      Secretary


/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


                                       66
<PAGE>

                                  CERTIFICATION

I, Barry W. Chandler, certify that:

1.    I have reviewed this annual report on Form 10-KSB of Atlantic BancGroup,
      Inc.;

2.    Based on my knowledge, the annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this annual
      report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
      have:

      a)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

      b)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

      c)    presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):

      a)    all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officers and I have indicated in this
      annual report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date: March 20, 2003


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


                                       67
<PAGE>

                                  CERTIFICATION

I, David L. Young, certify that:

1.    I have reviewed this annual report on Form 10-KSB of Atlantic BancGroup,
      Inc.;

2.    Based on my knowledge, the annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this annual
      report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
      have:

      a)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

      b)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

      c)    presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):

      a)    all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officers and I have indicated in this
      annual report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date: March 20, 2003


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


                                       68
<PAGE>

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Annual Report of Atlantic BancGroup, Inc., on Form 10-KSB
for the year ended December 31, 2002, as filed with the Securities and Exchange
Commission ("Report"), I, Barry W. Chandler, President and Chief Executive
Officer of Atlantic BancGroup, Inc., certify, pursuant to 18 U.S.C. ss. 1350, as
added by ss. 906 of the Sarbanes-Oxley Act of 2002, that:

      1.    To my knowledge, the Report fully complies with the requirements of
            Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

      2.    The information contained in the Report fairly presents, in all
            material respects, the financial condition and results of operations
            of Atlantic BancGroup, Inc. and Subsidiary as of and for the period
            covered by the Report.


Date: March 20, 2003                    /s/ Barry W. Chandler
                                        ----------------------------------------
                                        Barry W. Chandler
                                        President and Chief Executive Officer


                                       69
<PAGE>

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Annual Report of Atlantic BancGroup, Inc., on Form 10-KSB
for the year ended December 31, 2002, as filed with the Securities and Exchange
Commission ("Report"), I, David L. Young, Executive Vice President, Chief
Financial Officer, and Corporate Secretary of Atlantic BancGroup, Inc., certify,
pursuant to 18 U.S.C. ss. 1350, as added by ss. 906 of the Sarbanes-Oxley Act of
2002, that:

      1.    To my knowledge, the Report fully complies with the requirements of
            Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

      2.    The information contained in the Report fairly presents, in all
            material respects, the financial condition and results of operations
            of Atlantic BancGroup, Inc. and Subsidiary as of and for the period
            covered by the Report.


Date: March 20, 2003                    /s/ David L. Young
                                        ----------------------------------------
                                        David L. Young
                                        Executive Vice President,
                                        Chief Financial Officer, and
                                        Corporate Secretary


                                       70
<PAGE>

                     ATLANTIC BANCGROUP, INC. AND SUBSIDIARY

                                   Form 10-KSB
                     For Fiscal Year Ended December 31, 2002

                                  EXHIBIT INDEX

Exhibit
  No.                                      Exhibit

10.5              Lease dated August 22, 2002, between PROPERTY MANAGEMENT
                  SUPPORT, INC., and Oceanside.

21.1              Subsidiary of the Registrant

99.1              Atlantic BancGroup, Inc. Proxy Statement for the Annual
                  Meeting of Shareholders to be held on April 24, 2003.


                                       71