##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 000-50962
 ATLANTIC COAST FEDERAL CORPORATION
  
 FEDERAL(State or other jurisdiction of
    
    59-3764686incorporation or organization)
    
    (I.R.S. Employer Identification Number)505 Haines AvenueWaycross, Georgia
    
    31501(Address of principal Executive Offices)
    
    (Zip Code)
  þ o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer þ
 o þ
  Class
    
    Outstanding at May 5, 2006Common Stock, $0.01 Par Value
    
    14,143,850




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##### Table of Contents



ATLANTIC COAST FEDERAL CORPORATION
 Form 10-Q Quarterly Report
 Table of Contents
 Page NumberPART I.Item 1.
    
    Financial Statements
    
    
    2Item 2.
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    25Item 4.
    
    Controls and Procedures
    
    
    26PART II.Item 1.
    
    Legal Proceedings
    
    
    27Item 1A
    
    Risk Factors
    
    
    27Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 3.
    
    Defaults Upon Senior Securities
    
    
    27Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    27Item 5.
    
    Other Information
    
    
    27Item 6.
    
    Exhibits
    
    
    27Form 10-Q
    
    Signature Page
    
    
    28Ex-31.1
    
    Section 302 Certification of CEOEx-31.2
    
    Section 302 Certification of CFOEx-32
    
    Section 906 Certification of CEO and CFOEx-31.1 Section 302 CertificationEx-31.2 Section 302 CertificationEx-32 Section 906 Certification




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##### Table of Contents



PART I
 
 ITEM 1- FINANCIAL STATEMENTS
 ATLANTIC COAST FEDERAL CORPORATION
CONSOLIDATED BALANCE SHEETS
As of March 31, 2006 (unaudited) and December 31, 2005
 2006
    
    
    2005ASSETSCash and due from financial institutions
    
    $
    12,644,279
    
    
    $
    22,041,346Short-term interest bearing deposits
    
    
    34,940,317
    
    
    
    15,917,657Total cash and cash equivalents
    
    
    47,584,596
    
    
    
    37,959,003Other interest bearing deposits in other financial institutions
    
    
    1,800,000
    
    
    
    1,800,000Securities available for sale
    
    
    69,061,342
    
    
    
    71,964,998Real estate mortgages held for sale
    
    
    55,000
    
    
    
    99,853Loans, net of allowance for loan losses of $4,507,750 at March 31,
2006 and $4,586,736 at December 31, 2005
    
    
    599,294,769
    
    
    
    580,440,609Federal Home Loan Bank stock
    
    
    7,302,300
    
    
    
    7,074,400Accrued interest receivable
    
    
    3,004,071
    
    
    
    2,722,398Land, premises and equipment
    
    
    14,709,108
    
    
    
    14,485,195Bank owned life insurance
    
    
    20,730,181
    
    
    
    20,526,254Other real estate owned
    
    
    132,162
    
    
    
    310,000Goodwill
    
    
    2,661,190
    
    
    
    2,661,190Other assets
    
    
    4,184,504
    
    
    
    3,804,603Total assets
    
    $
    770,519,223
    
    
    $
    743,848,503LIABILITIES AND STOCKHOLDERS EQUITYDepositsNon-interest-bearing demand
    
    $
    41,584,402
    
    
    $
    38,454,438Interest-bearing demand
    
    
    68,537,562
    
    
    
    79,738,995Savings and money market
    
    
    117,061,274
    
    
    
    100,259,277Time
    
    
    302,930,047
    
    
    
    297,868,790Total deposits
    
    
    530,113,285
    
    
    
    516,321,500Securities sold under agreements to repurchase
    
    
    12,000,000
    
    
    
    Federal Home Loan Bank advances
    
    
    129,000,000
    
    
    
    129,000,000Accrued expenses and other liabilities
    
    
    5,367,429
    
    
    
    5,610,335Total liabilities
    
    
    676,480,714
    
    
    
    650,931,835Commitments and contingencies
    
    
    
    
    
    
    Preferred stock: $0.01 par value; 2,000,000 shares authorized
none issued
    
    
    
    
    
    
    Common stock: $0.01 par value; 18,000,000 shares authorized;
shares issued: 14,805,969 at March 31, 2006 and at December 31,
2005; shares outstanding: 14,141,350 at March 31, 2006 and
at December 31, 2005
    
    
    148,060
    
    
    
    148,060Additional paid in capital
    
    
    57,149,959
    
    
    
    56,876,105Unearned employee stock ownership plan(ESOP) shares of 360,778
at March 31, 2006 and 372,416 at December 31, 2005
    
    
    (3,607,780
    )
    
    
    (3,724,160
    )Retained earnings
    
    
    49,842,062
    
    
    
    49,193,384Accumulated other comprehensive income (loss)
    
    
    109,122
    
    
    
    26,193Treasury stock, at cost, 664,619 shares at March 31, 2006
and at December 31, 2005
    
    
    (9,602,914
    )
    
    
    (9,602,914
    )Total stockholders equity
    
    
    94,038,509
    
    
    
    92,916,668Total liabilities and stockholders equity
    
    $
    770,519,223
    
    
    $
    743,848,503
  2




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##### Table of Contents



ATLANTIC COAST FEDERAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
 Three MonthsEnded March 31,2006
    
    
    2005Interest and dividend incomeLoans, including fees
    
    $
    9,407,213
    
    
    $
    7,842,180Securities and interest-bearing deposits
in other financial institutions
    
    
    1,107,665
    
    
    
    528,141Securities purchased under agreements to resell
    
    
    
    
    
    
    72,411Total interest and dividend
income
    
    
    10,514,878
    
    
    
    8,442,732Interest expenseDeposits
    
    
    3,851,923
    
    
    
    2,425,251Federal Home Loan Bank advances
    
    
    1,326,949
    
    
    
    1,052,350Securities sold under agreements to repurchase
    
    
    57,380
    
    
    
    Total interest expense
    
    
    5,236,252
    
    
    
    3,477,601Net interest income
    
    
    5,278,626
    
    
    
    4,965,131Provision for loan losses
    
    
    76,380
    
    
    
    523,240Net interest income after provision for loan losses
    
    
    5,202,246
    
    
    
    4,441,891Noninterest incomeService charges and fees
    
    
    1,341,763
    
    
    
    895,733Net loss on available for sale securities
    
    
    (176,653
    )
    
    
    Gain on sale of real estate mortgages held for sale
    
    
    3,124
    
    
    
    11,399Gain on sale of foreclosed assets
    
    
    2,961
    
    
    
    852Commission income
    
    
    81,147
    
    
    
    99,244Interchange fees
    
    
    195,414
    
    
    
    180,442Bank owned life insurance earnings
    
    
    203,927
    
    
    
    50,952Other
    
    
    (13,451
    )
    
    
    48,0141,638,232
    
    
    
    1,286,636Noninterest expenseCompensation and benefits
    
    
    2,627,017
    
    
    
    2,231,464Occupancy and equipment
    
    
    507,724
    
    
    
    373,612Data processing
    
    
    365,423
    
    
    
    249,073Advertising
    
    
    215,830
    
    
    
    106,709Outside professional services
    
    
    493,200
    
    
    
    605,218Interchange charges
    
    
    166,469
    
    
    
    147,049Collection expense and repossessed asset losses
    
    
    82,673
    
    
    
    79,344Telephone
    
    
    122,894
    
    
    
    116,365Other
    
    
    652,632
    
    
    
    598,1185,233,862
    
    
    
    4,506,952Income before income tax expense
    
    
    1,606,616
    
    
    
    1,221,575Income tax expense
    
    
    499,680
    
    
    
    439,183Net income
    
    $
    1,106,936
    
    
    $
    782,392Earnings per common share:Basic
    
    $
    0.08
    
    
    $
    0.06Diluted
    
    $
    0.08
    
    
    $
    0.06Dividends declared per common share
    
    $
    0.09
    
    
    $
    0.05
  3




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ATLANTIC COAST FEDERAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 ACCUMULATEDADDITIONAL
    
    
    UNEARNED
    
    
    
    
    
    
    OTHERCOMMON
    
    
    PAID IN
    
    
    ESOP
    
    
    RETAINED
    
    
    COMPREHENSIVE
    
    
    TREASURY
    
    
    TOTALSTOCK
    
    
    CAPITAL
    
    
    STOCK
    
    
    EARNINGS
    
    
    INCOME(LOSS)
    
    
    STOCK
    
    
    EQUITYFor the three months ended March
31, 2006Balance at January 1, 2006
    
    $
    148,060
    
    
    $
    56,876,105
    
    
    $
    (3,724,160
    )
    
    $
    49,193,384
    
    
    $
    26,193
    
    
    $
    (9,602,914
    )
    
    $
    92,916,668ESOP shares earned, 11,638 shares
    
    
    
    
    
    
    53,066
    
    
    
    116,380
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169,446Management restricted stock expense
    
    
    
    
    
    
    145,241
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145,241Stock options expense
    
    
    
    
    
    
    75,547
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,547Dividends declared ( $.09 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (458,258
    )
    
    
    
    
    
    
    
    
    
    
    (458,258
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,106,936
    
    
    
    
    
    
    
    
    
    
    
    1,106,936Other comprehensive income(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,929
    
    
    
    
    
    
    
    82,929Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,189,865Balance at March 31, 2006
(unaudited)
    
    $
    148,060
    
    
    $
    57,149,959
    
    
    $
    (3,607,780
    )
    
    $
    49,842,062
    
    
    $
    109,122
    
    
    $
    (9,602,914
    )
    
    $
    94,038,509For the three months ended March 31, 2005Balance at January 1, 2005
    
    $
    145,475
    
    
    $
    56,332,850
    
    
    $
    (4,189,680
    )
    
    $
    46,412,522
    
    
    $
    (904
    )
    
    $
    
    
    
    $
    98,700,263ESOP shares earned, 11,638 shares
    
    
    
    
    
    
    36,457
    
    
    
    116,380
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    152,837Dividend declared ($.05 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (290,950
    )
    
    
    
    
    
    
    
    
    
    
    (290,950
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    782,392
    
    
    
    
    
    
    
    
    
    
    
    782,392Other comprehensive income(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174,104
    
    
    
    
    
    
    
    174,104Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    956,496Balance at March 31, 2005
(unaudited)
    
    $
    145,475
    
    
    $
    56,369,307
    
    
    ($
    4,073,300
    )
    
    $
    46,903,964
    
    
    $
    173,200
    
    
    $
    
    
    
    $
    99,518,646
  4




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##### Table of Contents



ATLANTIC COAST FEDERAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Three MonthsEnded March 31,2006
    
    
    2005Cash flows from operating activitiesNet income
    
    $
    1,106,936
    
    
    $
    782,392Adjustments to reconcile net income to
to net cash from operating activities:Provision for loan losses
    
    
    76,380
    
    
    
    523,240Net loss on available for sale securities
    
    
    176,653
    
    
    
    Gain on sale of real estate mortgages held for sale
    
    
    (3,124
    )
    
    
    (11,399
    )Loans originated for sale
    
    
    (235,000
    )
    
    
    (1,936,921
    )Proceeds from loan sales
    
    
    282,977
    
    
    
    1,259,774Gain on sale of other real estate owned
    
    
    (2,961
    )
    
    
    (852
    )Loss on disposal of equipment
    
    
    30,297
    
    
    
    ESOP compensation expense
    
    
    169,446
    
    
    
    152,837Share-based compensation expense
    
    
    220,788
    
    
    
    Net depreciation and amortization
    
    
    487,407
    
    
    
    434,232Net change in accrued interest receivable
    
    
    (281,673
    )
    
    
    (208,412
    )Increase in bank owned life insurance
    
    
    (203,927
    )
    
    
    (50,951
    )Net change in other assets
    
    
    (156,130
    )
    
    
    75,404Net change in accrued expenses
and other liabilities
    
    
    (287,041
    )
    
    
    350,672Net cash from operating activites
    
    
    1,381,028
    
    
    
    1,370,016Cash flows from investing activitiesNet change in securities purchased under
agreements to resell
    
    
    
    
    
    
    11,800,000Proceeds from maturities and payments
of securites available for sale
    
    
    4,605,571
    
    
    
    10,948,755Proceeds from the sales of securities
available for sale
    
    
    
    
    
    
    Purchase of securities available for sale
    
    
    (2,059,437
    )
    
    
    (8,000,000
    )Loans purchased
    
    
    (7,782,005
    )
    
    
    (17,499,749
    )Net change in loans
    
    
    (11,420,604
    )
    
    
    (13,465,317
    )Expenditures on premises and equipment
    
    
    (525,603
    )
    
    
    (1,167,688
    )Proceeds from the sale of other real estate owned
    
    
    276,879
    
    
    
    157,546Purchase of FHLB stock
    
    
    (227,900
    )
    
    
    (663,000
    )Purchase of bank owned life insurance
    
    
    
    
    
    
    (10,000,000
    )Net change in other investments
    
    
    
    
    
    
    900,000Net cash from investing activities
    
    
    (17,133,099
    )
    
    
    (26,989,453
    )
  5




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ATLANTIC COAST FEDERAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Three MonthsEnded March 31,2006
    
    
    2005Cash flows from financing activitiesNet increase in deposits
    
    $
    13,791,785
    
    
    $
    25,759,617FHLB advances
    
    
    
    
    
    
    10,000,000Net change in securities sold under
agreements to repurchase
    
    
    12,000,000
    
    
    
    Repayment of FHLB advances
    
    
    
    
    
    
    (657,144
    )Dividends paid
    
    
    (414,123
    )
    
    
    Net cash from financing activities
    
    
    25,377,662
    
    
    
    35,102,473Net change in cash and cash equivalents
    
    
    9,625,591
    
    
    
    9,483,036Cash and equivalents beginning of period
    
    
    37,959,003
    
    
    
    25,707,885Cash and equivalents at end of period
    
    $
    47,584,594
    
    
    $
    35,190,921Supplemental information:Interest paid
    
    $
    5,160,967
    
    
    $
    3,407,687Income taxes paid
    
    
    765,000
    
    
    
    Supplemental noncash disclosures:Loans transferred to other real estate
    
    $
    96,080
    
    
    $
    523,959Other real estate exchanged for loans
    
    
    
    
    
    
    290,950
  6




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##### Table of Contents



ATLANTIC COAST FEDERAL CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
 NOTE 1. BASIS OF PRESENTATION
    NOTE 2. USE OF ESTIMATES
  NOTE 3. IMPACT OF CERTAIN ACCOUNTING PRONOUNCEMENTS
  7




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ATLANTIC COAST FEDERAL CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
 NOTE
3. IMPACT OF CERTAIN ACCOUNTING PRONOUNCEMENTS (Continued)
  NOTE 4. AVAILABLE FOR SALE SECURITIES
   Gross
    
    
    GrossUnrealized
    
    
    UnrealizedFair Value
    
    
    Gains
    
    
    LossesMarch 31, 2006Government-sponsored enterprises
    
    $
    31,924,591
    
    
    $
    
    
    
    $
    (245,225
    )State and municipal
    
    
    3,995,100
    
    
    
    2,700
    
    
    
    (30,305
    )Mortgage-backed
    
    
    33,141,651
    
    
    
    485
    
    
    
    (529,664
    )$
    69,061,342
    
    
    $
    3,185
    
    
    $
    (805,194
    )December 31, 2005Government-sponsored enterprises
    
    $
    32,078,971
    
    
    $
    405
    
    
    $
    (262,687
    )State and municipal
    
    
    5,361,261
    
    
    
    551
    
    
    
    (39,479
    )Mortgage-backed
    
    
    34,524,766
    
    
    
    30,570
    
    
    
    (390,525
    )$
    71,964,998
    
    
    $
    31,526
    
    
    $
    (692,691
    )
  8




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##### Table of Contents



ATLANTIC COAST FEDERAL CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
 NOTE 4. AVAILABLE FOR SALE SECURITIES (Continued)
  NOTE 5. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
   Average daily balance
    
    $
    5,034,000Average interest rate
    
    
    4.53
    %Maximum month-end balance
    
    $
    12,000,000Weighted average interest rate at period end
    
    
    4.53
    %
  NOTE 6. DIVIDENDS
   NOTE 7. EARNINGS PER COMMON SHARE
  9




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ATLANTIC COAST FEDERAL CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
 NOTE
7. EARNINGS PER COMMON SHARE (Continued)
 2006
    
    
    2005BasicNet income
    
    $
    1,106,936
    
    
    $
    782,392Weighted average common shares outstanding
    
    
    14,141,350
    
    
    
    14,547,500Less: Average unallocated ESOP shares
    
    
    (372,416
    )
    
    
    (418,968
    )Average unvested restricted stock awards
    
    
    (258,469
    )
    
    
    Average Shares
    
    
    13,510,465
    
    
    
    14,128,532Basic earnings per common share
    
    $
    0.08
    
    
    $
    0.06DilutedNet Income
    
    $
    1,106,936
    
    
    $
    782,392Weighted average common shares outstanding
per common share
    
    
    13,510,465
    
    
    
    14,128,532Add: Dilutive effects of full vesting of stock awards
    
    
    69,686
    
    
    
    Average shares and dilutive potential common shares
    
    
    13,580,151
    
    
    
    14,128,532Diluted earnings per common share
    
    $
    0.08
    
    
    $
    0.06
  10




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ATLANTIC COAST FEDERAL CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
 NOTE 8. COMPREHENSIVE INCOME (LOSS)
  2006
    
    
    2005Unrealized holding gains and (losses)
on securities available for sale
    
    $
    (317,496
    )
    
    $
    (178,619
    )Less reclassification adjustments for (gains)
losses recognized in income
    
    
    176,653
    
    
    
    Net unrealized gains and (losses)
    
    
    (140,843
    )
    
    
    (178,619
    )Tax effect
    
    
    50,719
    
    
    
    67,875Net-of-tax amount
    
    
    (90,124
    )
    
    
    (110,744
    )Change in fair value of derivatives used
for cash flow hedges
    
    
    279,118
    
    
    
    459,433Tax effect
    
    
    (106,065
    )
    
    
    (174,585
    )Net-of-tax amount
    
    
    173,053
    
    
    
    284,848Other comprehensive income (loss)
    
    $
    82,929
    
    
    $
    174,104
 11




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##### Table of Contents



ATLANTIC COAST FEDERAL CORPORATION
 
 ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
 This Form 10-Q contains forward-looking statements that are statements that are not historical
or current facts. When used in this filing and in future filings by Atlantic Coast Federal
Corporation with the Securities and Exchange Commission, in Atlantic Coast Federal Corporations
press releases or other public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases, anticipate, would be, will
allow, intends to, will likely result, are expected to, will continue, is anticipated,
estimated, projected, or similar expressions are intended to identify, forward looking
statements. Such statements are subject to risks and uncertainties, including but not limited to
changes in economic conditions in Atlantic Coast Federal Corporations market area, changes in
policies by regulatory agencies, fluctuations in interest rates, demand for loans in Atlantic Coast
Federal Corporations market area, changes in the position of banking regulators on the adequacy of
our allowance for loan losses, and competition, all or some of which could cause actual results to
differ materially from historical earnings and those presently anticipated or projected.
 Atlantic Coast Federal Corporation wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made, and advise readers that
various factors, including regional and national economic conditions, substantial changes in levels
of market interest rates, credit and other risks of lending and investing activities, and
competitive and regulatory factors, could affect Atlantic Coast Federal Corporations financial
performance and could cause Atlantic Coast Federal Corporations actual results for future periods
to differ materially from those anticipated or projected.
 Atlantic Coast Federal Corporation does not undertake, and specifically disclaims any
obligation, to update any forward-looking statements to reflect occurrences or unanticipated events
or circumstances after the date of such statements.
 Critical Accounting Policies
   12




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13




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Comparison of Financial Condition at March 31, 2006 and December 31, 2005
 General.
  March 31,
    
    
    December 31,
    
    
    Increase(decrease)2006
    
    
    2005
    
    
    Dollars
    
    Percentage(Dollars in Thousands)AssetsCash and cash equivalents
    
    $
    47,585
    
    
    $
    37,959
    
    
    $
    9,626
    
    
    
    25.4
    %Other interest bearing investments
    
    
    1,800
    
    
    
    1,800
    
    
    
    
    
    
    
    0.0
    %Securitites available for sale
    
    
    69,061
    
    
    
    71,965
    
    
    
    (2,904
    )
    
    
    -4.0
    %Loans
    
    
    603,803
    
    
    
    585,028
    
    
    
    18,775
    
    
    
    3.2
    %Allowance for loan losses
    
    
    (4,508
    )
    
    
    (4,587
    )
    
    
    79
    
    
    
    -1.7
    %Loans, net
    
    
    599,295
    
    
    
    580,441
    
    
    
    18,854
    
    
    
    3.2
    %Loans held for sale
    
    
    55
    
    
    
    100
    
    
    
    (45
    )
    
    
    -45.0
    %Other assets
    
    
    52,723
    
    
    
    51,584
    
    
    
    1,139
    
    
    
    2.2
    %Total assets
    
    $
    770,519
    
    
    $
    743,849
    
    
    $
    26,670
    
    
    
    3.6
    %Liabilities and Stockholders equityDepositsNon-interest bearing
    
    $
    41,584
    
    
    $
    38,454
    
    
    $
    3,130
    
    
    
    8.1
    %Interest bearing transaction accounts
    
    
    68,538
    
    
    
    79,739
    
    
    
    (11,201
    )
    
    
    -14.0
    %Savings and money-market
    
    
    117,061
    
    
    
    100,260
    
    
    
    16,801
    
    
    
    16.8
    %Time
    
    
    302,930
    
    
    
    297,869
    
    
    
    5,061
    
    
    
    1.7
    %Total deposits
    
    
    530,113
    
    
    
    516,322
    
    
    
    13,791
    
    
    
    2.7
    %Securities sold under agreements to repurchase
    
    
    12,000
    
    
    
    
    
    
    
    12,000
    
    
    
    100.0
    %Federal Home Loan Bank advances
    
    
    129,000
    
    
    
    129,000
    
    
    
    
    
    
    
    0.0
    %Accrued expenses and other liabilities
    
    
    5,367
    
    
    
    5,610
    
    
    
    (243
    )
    
    
    -4.3
    %Total liabilities
    
    
    676,480
    
    
    
    650,932
    
    
    
    25,548
    
    
    
    3.9
    %Stockholders equity
    
    
    94,039
    
    
    
    92,917
    
    
    
    1,122
    
    
    
    1.2
    %Total liabilities and stockholders equity
    
    $
    770,519
    
    
    $
    743,849
    
    
    $
    26,670
    
    
    
    3.6
    %
 Cash and cash equivalents
 Securities available for sale
 Loans
 As of
    
    
    
    
    
    
    As ofMarch
    
    
    % of total
    
    
    December
    
    
    % of total
    
    
    Increase(decrease)31, 2006
    
    
    loans
    
    
    31, 2005
    
    
    loans
    
    
    Dollars
    
    
    Percentage(Dollars In Thousands)Commercial non-mortgage
    
    $
    9,690
    
    
    
    1.6
    %
    
    $
    8,430
    
    
    
    1.5
    %
    
    $
    1,260
    
    
    
    14.9
    %Commercial real estate and multifamily
    
    
    69,363
    
    
    
    11.6
    %
    
    
    66,726
    
    
    
    11.5
    %
    
    
    2,637
    
    
    
    4.0
    %Construction loans
    
    
    37,081
    
    
    
    6.2
    %
    
    
    26,820
    
    
    
    4.6
    %
    
    
    10,261
    
    
    
    38.3
    %One- to four- family residential mortgages
    
    
    326,103
    
    
    
    54.3
    %
    
    
    324,681
    
    
    
    55.9
    %
    
    
    1,422
    
    
    
    0.4
    %Consumer and other loansAutomobile
    
    
    29,272
    
    
    
    4.9
    %
    
    
    31,133
    
    
    
    5.4
    %
    
    
    (1,861
    )
    
    
    -6.0
    %Unsecured
    
    
    17,519
    
    
    
    2.9
    %
    
    
    18,188
    
    
    
    3.1
    %
    
    
    (669
    )
    
    
    -3.7
    %Home equity
    
    
    84,193
    
    
    
    14.0
    %
    
    
    79,016
    
    
    
    13.6
    %
    
    
    5,177
    
    
    
    6.6
    %Land
    
    
    12,619
    
    
    
    2.1
    %
    
    
    12,650
    
    
    
    2.2
    %
    
    
    (31
    )
    
    
    -0.2
    %Other
    
    
    14,231
    
    
    
    2.4
    %
    
    
    13,525
    
    
    
    2.3
    %
    
    
    706
    
    
    
    5.2
    %Total loans
    
    
    600,071
    
    
    
    
    
    
    
    581,169
    
    
    
    
    
    
    
    18,902
    
    
    
    3.3
    %Allowance for loan losses
    
    
    (4,508
    )
    
    
    -0.8
    %
    
    
    (4,587
    )
    
    
    -0.8
    %
    
    
    79
    
    
    
    -1.7
    %Net deferred loan (fees) costs
    
    
    3,185
    
    
    
    0.5
    %
    
    
    3,164
    
    
    
    0.5
    %
    
    
    21
    
    
    
    0.7
    %Premiums on purchased loans
    
    
    547
    
    
    
    0.1
    %
    
    
    695
    
    
    
    0.1
    %
    
    
    (148
    )
    
    
    -21.3
    %Loans, net
    
    $
    599,295
    
    
    
    
    
    
    $
    580,441
    
    
    
    
    
    
    $
    18,854
    
    
    
    3.2
    %
  14




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15




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Allowance for loan losse
 2006
    
    
    2005(In Thousands)Beginning balance
    
    $
    4,587
    
    
    $
    3,956Loans charged-off
    
    
    (373
    )
    
    
    (348
    )Recoveries
    
    
    218
    
    
    
    218Net charge-offs
    
    
    (155
    )
    
    
    (130
    )Provision for loan losses
    
    
    76
    
    
    
    523Ending balance
    
    $
    4,508
    
    
    $
    4,349
   16




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##### Table of Contents



Deposits
 Securities sold under agreements to repurchase.
   Stockholders equity
 Balance at December 31, 2005
    
    $
    92,917Increases to stockholders equity:Net income for the three months ended
March 31, 2006
    
    
    1,107Net other comprehensive income
    
    
    83ESOP shares allocated to employees
    
    
    169Management restricted stock earned under Recognition Plan
    
    
    145Stock options earned under Stock Option Plan
    
    
    76Total increases to stockholders equity
    
    
    1,580Decreases to stockholders equity:Dividends
    
    
    (458
    )Treasury stock purchased at cost
    
    
    Total decreases to stockholders equity
    
    
    (458
    )Balance at March 31, 2006
    
    $
    94,039
 17




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##### Table of Contents



Comparison of Results of Operation for the Three Months Ended March 31, 2006 and 2005
 General
 18




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##### Table of Contents



Average Balances, Net Interest Income, Yields Earned and Rates Paid
 For the three months ended March 31,2006
    
    
    2005(Dollars in Thousands)Average Balance
    
    
    Interest
    
    
    Average Yield /Cost
    
    
    Average Balance
    
    
    Interest
    
    
    Average Yield /CostINTEREST-EARNING ASSETSLoans receivable( 1)
    
    $
    590,299
    
    
    $
    9,407
    
    
    
    6.37
    %
    
    $
    531,441
    
    
    $
    7,842
    
    
    
    5.90
    %Securites (2)
    
    
    71,445
    
    
    
    737
    
    
    
    4.13
    %
    
    
    52,479
    
    
    
    345
    
    
    
    2.63
    %Other interest-earning assets (3)
    
    
    31,754
    
    
    
    371
    
    
    
    4.67
    %
    
    
    35,752
    
    
    
    256
    
    
    
    2.86
    %Total interest-earning assets
    
    
    693,498
    
    
    
    10,515
    
    
    
    6.07
    %
    
    
    619,672
    
    
    
    8,443
    
    
    
    5.45
    %Non-interest earning assets
    
    
    57,911
    
    
    
    
    
    
    
    
    
    
    
    33,993Total assets
    
    $
    751,409
    
    
    
    
    
    
    
    
    
    
    $
    653,665INTEREST-BEARING LIABILITIESSavings deposits
    
    $
    53,120
    
    
    $
    53
    
    
    
    0.40
    %
    
    $
    66,760
    
    
    $
    74
    
    
    
    0.44
    %Interest bearing demand accounts
    
    
    75,433
    
    
    
    459
    
    
    
    2.43
    %
    
    
    34,979
    
    
    
    104
    
    
    
    1.19
    %Money market accounts
    
    
    49,702
    
    
    
    384
    
    
    
    3.09
    %
    
    
    57,241
    
    
    
    338
    
    
    
    2.36
    %Time deposits
    
    
    301,154
    
    
    
    2,956
    
    
    
    3.93
    %
    
    
    251,059
    
    
    
    1,910
    
    
    
    3.04
    %Federal Home Loan Bank advances
    
    
    129,000
    
    
    
    1,327
    
    
    
    4.11
    %
    
    
    101,874
    
    
    
    1,052
    
    
    
    4.13
    %Securities sold under agreements to repurchase
    
    
    5,034
    
    
    
    57
    
    
    
    4.53
    %
    
    
    
    
    
    
    
    
    
    
    Total interest-bearing liabilities
    
    
    613,443
    
    
    
    5,236
    
    
    
    3.41
    %
    
    
    511,913
    
    
    
    3,478
    
    
    
    2.72
    %Non-interest bearing liabilities
    
    
    45,361
    
    
    
    
    
    
    
    
    
    
    
    42,123Total liabilities
    
    
    658,804
    
    
    
    
    
    
    
    
    
    
    
    554,036Stockholders equity
    
    
    92,605
    
    
    
    
    
    
    
    
    
    
    
    99,629Total liabilities and stockholders equity
    
    $
    751,409
    
    
    
    
    
    
    
    
    
    
    $
    653,665Net interest income
    
    
    
    
    
    $
    5,279
    
    
    
    
    
    
    
    
    
    
    $
    4,965Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.66
    %
    
    
    
    
    
    
    
    
    
    
    2.73
    %Net earning assets
    
    $
    80,055
    
    
    
    
    
    
    
    
    
    
    $
    107,759Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.04
    %
    
    
    
    
    
    
    
    
    
    
    3.21
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    
    
    
    
    113.05
    %
    
    
    
    
    
    
    
    
    
    
    121.05
    %
 
 (1)
    
    Calculated net of deferred loan fees and loss reserve. Nonaccrual loans included as loans carrying a zero yield(2)
    
    Calculated based on carrying value. Not full tax equivalents, as the numbers would not change materially from those presented in the table.(3)
    
    Includes Federal Home Loan Bank stock at cost and term deposits with other financial institutions.(4)
    
    Net interest income divided by average interest-earning assets. 19




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##### Table of Contents



Rate/Volume Analysis
 Increase/(Decrease)
    
    
    TotalDue to
    
    
    IncreaseVolume
    
    
    Rate
    
    
    (Decrease)(In Thousands)INTEREST-EARNING ASSETSLoans receivable
    
    $
    909
    
    
    $
    656
    
    
    $
    1,565Securites
    
    
    152
    
    
    
    240
    
    
    
    392Other interest-earning assets
    
    
    (31
    )
    
    
    146
    
    
    
    115Total interest-earning assets
    
    
    1,030
    
    
    
    1,042
    
    
    
    2,072INTEREST-BEARING LIABILITIESSavings deposits
    
    
    (14
    )
    
    
    (7
    )
    
    
    (21
    )Interest bearing demand accounts
    
    
    186
    
    
    
    169
    
    
    
    355Money market accounts
    
    
    (48
    )
    
    
    94
    
    
    
    46Time deposits
    
    
    426
    
    
    
    620
    
    
    
    1,046Federal Home Loan Bank advances
    
    
    279
    
    
    
    (4
    )
    
    
    275Securities sold under agreements to repurchase
    
    
    57
    
    
    
    
    
    
    
    57Total interest-bearing liabilities
    
    
    886
    
    
    
    872
    
    
    
    1,758Net interest income
    
    $
    144
    
    
    $
    170
    
    
    $
    314
 Interest income.
  20




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##### Table of Contents



Interest expense.
 Net interest income.
 Net Interest
    
    
    Net InterestComparative Quarters
    
    Spread
    
    
    Margin1st quarter-2006
    
    
    2.66
    %
    
    
    3.04
    %2005
    
    
    2.73
    %
    
    
    3.21
    %decline
    
    
    0.07
    %
    
    
    0.17
    %4th quarter-2005
    
    
    2.65
    %
    
    
    3.06
    %2004
    
    
    2.80
    %
    
    
    3.34
    %decline
    
    
    0.15
    %
    
    
    0.28
    %3rd quarter-2005
    
    
    2.42
    %
    
    
    2.86
    %2004
    
    
    3.12
    %
    
    
    3.50
    %decline
    
    
    0.70
    %
    
    
    0.64
    %2nd quarter-2005
    
    
    2.66
    %
    
    
    3.11
    %2004
    
    
    3.48
    %
    
    
    3.71
    %decline
    
    
    0.82
    %
    
    
    0.60
    %1st quarter-2005
    
    
    2.73
    %
    
    
    3.21
    %2004
    
    
    3.62
    %
    
    
    3.87
    %decline
    
    
    0.89
    %
    
    
    0.66
    %
 21




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##### Table of Contents



Provision for loan losses.
   22




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##### Table of Contents



Non-interest income
 Increase(decrease)2006
    
    
    2005
    
    
    Dollars
    
    
    Percentage(Dollars in Thousands)Service charges and fees
    
    $
    1,342
    
    
    $
    896
    
    
    $
    446
    
    
    
    49.8
    %Net loss on available for sale securities
    
    $
    (177
    )
    
    
    
    
    
    
    (177
    )
    
    
    -100.0
    %Gain on sale of real estate mortgages
held for sale
    
    
    3
    
    
    
    11
    
    
    
    (8
    )
    
    
    -72.7
    %Gain on sale of foreclosed assets
    
    
    3
    
    
    
    1
    
    
    
    2
    
    
    
    200.0
    %Commission income
    
    
    81
    
    
    
    99
    
    
    
    (18
    )
    
    
    -18.2
    %Interchange fees
    
    
    195
    
    
    
    181
    
    
    
    14
    
    
    
    7.7
    %Bank owned life insurance earnings
    
    
    204
    
    
    
    51
    
    
    
    153
    
    
    
    300.0
    %Other
    
    
    (13
    )
    
    
    48
    
    
    
    (61
    )
    
    
    -127.1
    %$
    1,638
    
    
    $
    1,287
    
    
    $
    351
    
    
    
    27.3
    %
     Non-interest expense
 23




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##### Table of Contents



Increase(decrease)2006
    
    
    2005
    
    
    Dollars
    
    
    Percentage(Dollars in Thousands)Compensation and benefits
    
    $
    2,627
    
    
    $
    2,231
    
    
    $
    396
    
    
    
    17.7
    %Occupancy and equipment
    
    
    508
    
    
    
    374
    
    
    
    134
    
    
    
    35.8
    %Data processing
    
    
    365
    
    
    
    249
    
    
    
    116
    
    
    
    46.6
    %Advertising
    
    
    216
    
    
    
    107
    
    
    
    109
    
    
    
    101.9
    %Outside professional services
    
    
    493
    
    
    
    605
    
    
    
    (112
    )
    
    
    -18.5
    %Interchange charges
    
    
    166
    
    
    
    147
    
    
    
    19
    
    
    
    12.9
    %Collection
expense and repossessed asset losses
    
    
    83
    
    
    
    79
    
    
    
    4
    
    
    
    5.1
    %Telephone
    
    
    123
    
    
    
    117
    
    
    
    6
    
    
    
    5.1
    %Other
    
    
    653
    
    
    
    598
    
    
    
    55
    
    
    
    9.2
    %$
    5,234
    
    
    $
    4,507
    
    
    $
    727
    
    
    
    16.1
    %
   Income tax expense.
 24




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
        25




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of disclosure controls and procedures
 Changes in internal controls
 26




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##### Table of Contents



ATLANTIC COAST FEDERAL CORPORATION
 FORM 10-Q
 March 31, 2006
 
 Part II  Other Information
 
   
   
   
   
   
   
   31.1
    
    Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232.
    
    Certification of Chief Executive Officer and Chief
Financial Officer
of Atlantic Coast Federal Corporation pursuant to Section 906
 27




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##### Table of Contents



ATLANTIC COAST FEDERAL CORPORATION
 FORM 10-Q
 March 31, 2006
 Part II  Other Information
 
 Signatures
  ATLANTIC COAST FEDERAL CORPORATION

                  (Registrant)Date:  May 15, 2006
    /s/   Robert J. Larison, JrRobert J. Larison, Jr., President and ChiefExecutive OfficerDate:  May 15, 2006
    /s/   Jon C. Parker, Sr.Jon C. Parker, Sr., Vice President andChief Financial Officer 28