<PAGE>

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

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 2004

                                       OR

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


Commission File Number 333-113923

                       ATLANTIC COAST FEDERAL CORPORATION
             (Exact name of registrant as specified in its charter)

           FEDERAL                                        59-3764686
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                      Identification Number)

505 Haines Avenue
Waycross, Georgia                                           31501
(Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code (912)284-2213

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES     [ ]     NO    [x]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.

           Class                                  Outstanding at August 31, 2004
Common Stock,  $.01 Par Value                                 1,000

<PAGE>

                       ATLANTIC COAST FEDERAL CORPORATION

                           Form 10-Q Quarterly Report

                                Table of Contents


                                     PART I.

                                                                     Page Number

Item 1.      Financial Statements ..........................................  1
Item 2.      Management's Discussion and Analysis of
               Financial Condition and Results of Operations................  8
Item 3.      Quantitative and Qualitative Disclosures About Market Risk..... 24
Item 4.      Controls and Procedures........................................ 24

                                    PART II.

Item 1.      Legal Proceedings.............................................. 25
Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds.... 25
Item 3.      Defaults Upon Senior Securities................................ 25
Item 4.      Submission of Matters to a Vote of Security Holders............ 25
Item 5.      Other Information.............................................. 25
Item 6.      Exhibits and Reports on Form 8-K............................... 25

Form 10-Q    Signature Page................................................. 26

<PAGE>
<TABLE>
<CAPTION>

                                                       Part I
                                         ATLANTIC COAST FEDERAL CORPORATION
                                            ITEM 1 - FINANCIAL STATEMENTS


                                         ATLANTIC COAST FEDERAL CORPORATION
                                             CONSOLIDATED BALANCE SHEETS
                                      As of June 30, 2004 and December 31, 2003


                                                                                   June 30,           December 31,
                                                                                     2004                 2003
                                                                                     ----                 ----
                                                                                  (Unaudited)
<S>                                                                             <C>                <C>
ASSETS
Cash and due from financial institutions                                        $     9,102,735    $      6,674,213
Short-term interest-bearing deposits in other financial institutions                 20,520,582           2,303,756
                                                                                ---------------    ----------------
   Total cash and cash equivalents                                                   29,623,317           8,977,969

Other interest-bearing deposits in other financial institutions                               -             500,000
Securities available for sale                                                        21,861,078          26,038,755
Real estate mortgages held-for-sale                                                           -             487,183
Loans, net of allowance for loan losses of $ 3,817,736 at June 30, 2004
(unaudited) and $6,593,329 at December 31, 2003                                     499,422,659         435,613,584
Federal Home Loan Bank stock                                                          4,548,600           3,081,500
Accrued interest receivable                                                           1,821,664           2,040,953
Land, premises and equipment, net                                                    10,626,823          10,597,421
Bank owned life insurance                                                             4,839,274           4,750,300
Other real estate owned                                                                 291,463           1,078,986
Goodwill                                                                              2,661,190           2,661,190
Other assets                                                                          3,932,482           3,212,561
                                                                                ---------------    ----------------

   Total assets                                                                 $   579,628,550    $    499,040,402
                                                                                ===============    ================

LIABILITIES AND EQUITY
Deposits:
   Non-interest-bearing demand                                                  $    34,800,907    $     27,179,395
   Interest bearing demand                                                           27,720,789          14,955,497
   Savings and money market                                                         153,209,291         137,633,423
   Time                                                                             224,648,720         212,487,510
                                                                                ---------------    ----------------
     Total deposits                                                                 440,379,707         392,255,825
Federal Home Loan Bank advances                                                      90,971,429          60,971,429
Accrued expenses and other liabilities                                                3,258,285           2,594,773
                                                                                ---------------    ----------------
   Total liabilities                                                                534,609,421         455,822,027

Commitments and contingencies                                                                 -                   -

Preferred stock: $.01 par value; 1,000,000 shares authorized,
  none issued                                                                                 -                   -
Common stock: $.01 par value; 9,000,000 shares authorized;
  1,000 shares issued and outstanding as of June 30, 2004(unaudited)
  and December 31, 2003                                                                      10                  10
Retained earnings                                                                    44,915,184          43,220,688
Accumulated other comprehensive income(loss)                                            103,935              (2,323)
                                                                                ---------------    ----------------
   Total equity                                                                      45,019,129          43,218,375
                                                                                ---------------    ----------------

   Total liabilities and equity                                                 $   579,628,550    $    499,040,402
                                                                                ===============    ================


               The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                                        1
<PAGE>
<TABLE>
<CAPTION>

                                       ATLANTIC COAST FEDERAL CORPORATION
                                        CONSOLIDATED STATEMENTS OF INCOME
                        For the Three Months and Six Months Ended June 30, 2004 and 2003
                                                   (Unaudited)


                                                         Three Months Ended              Six Months Ended
                                                              June 30,                       June 30,
                                                     ----------------------------   ---------------------------
                                                         2004           2003           2004            2003
                                                         ----           ----           ----            ----
<S>                                                  <C>             <C>            <C>            <C>
INTEREST AND DIVIDEND INCOME
Loans                                                $  7,473,113    $  7,808,047   $ 14,826,174   $ 15,591,893
Securities and interest-bearing deposits
  in other financial institutions                         196,741         240,584        383,648        478,520
                                                     ------------    ------------   ------------   ------------
     Total interest and dividend income                 7,669,854       8,048,631     15,209,822     16,070,413

INTEREST EXPENSE
Deposits                                                1,922,402       2,569,360      3,908,423      5,120,985
Federal Home Loan Bank advances                           882,436         521,008      1,707,619      1,054,901
                                                     ------------    ------------   ------------   ------------
     Total interest expense                             2,804,838       3,090,368      5,616,042      6,175,886
                                                     ------------    ------------   ------------   ------------

NET INTEREST INCOME                                     4,865,016       4,958,263      9,593,780      9,894,527
Provision for loan losses                                 108,781       2,855,136      1,652,831      3,911,798
                                                     ------------    ------------   ------------    -----------

NET INTEREST INCOME AFTER
  PROVISION FOR LOAN LOSSES                             4,756,235       2,103,127      7,940,949      5,982,729

NONINTEREST INCOME
Service charges and fees                                1,014,352         918,167      1,872,751      1,712,695
Gain on the sale of loans held for sale                     2,076          33,852        168,513        105,777
Gain(loss)on the sale of securities available
  for sale                                                      -            (590)         8,444          2,410
Gain(loss) on sale of foreclosed assets                    18,885         (46,147)        55,049        (37,143)
Commission income                                          81,968         181,610        168,256        245,716
Interchange fees                                          166,069         209,526        320,487        396,883
Other                                                      48,334          87,387         92,761        120,756
                                                     ------------    ------------   ------------   ------------
      Total noninterest income                          1,331,684       1,383,805      2,686,261      2,547,094

NONINTEREST EXPENSE
Compensation and benefits                               1,833,711       1,687,776      3,819,548      3,430,074
Occupancy and equipment                                   348,753         307,413        694,545        584,879
Data processing                                           265,228         328,615        554,573        694,317
Advertising                                                91,278         136,551        177,868        226,501
Outside professional services                             441,357         334,953        738,191        602,260
Interchange charges                                       176,473         213,411        432,577        398,838
Collection expense and repossessed asset losses            38,282          63,712         87,995        135,556
Telephone                                                 135,980         141,122        270,054        284,319
Other                                                     637,565         629,468      1,228,441      1,263,061
                                                     ------------    ------------   ------------   ------------
     Total noninterest expense                          3,968,627       3,843,021      8,003,792      7,619,805
                                                     ------------    ------------   ------------   ------------

INCOME BEFORE INCOME TAX EXPENSE                        2,119,292        (356,089)     2,623,418        910,018
Income tax expense                                        765,380        (207,149)       928,922        256,814
                                                     ------------    -------------  ------------   ------------
NET INCOME                                           $  1,353,912    $   (148,940)   $ 1,694,496   $    653,204
                                                     ============    ============   ============   ============

BASIC AND DILUTED EARNINGS PER
  COMMON SHARE                                       $    1,353.91   $    (148.94)   $  1,694.50   $     653.20
                                                     =============   ============   ============   ============


             The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                                      2
<PAGE>
<TABLE>
<CAPTION>

                                             Atlantic Coast Federal CORPORATION
                                        Consolidated Statements of Changes in Equity
                              For the Three Months and Six Months Ended June 30, 2004 and 2003
                                                         (Unaudited)

                                                                                  Accumulated
                                                                                    Other
                                                 Common          Retained        Comprehensive         Total
                                                  Stock          Earnings        Income(loss)         Equity
                                                  -----          --------        ------------         ------
<S>                                          <C>               <C>              <C>               <C>
Balance at January 1, 2004                   $            10   $   43,220,688   $        (2,323)  $   43,218,375

  Comprehensive income:
     Net income for the three months
       ended March 31, 2004                                -          340,584                 -          340,584
     Changes in net unrealized gain on
       securities available for sale, net of
       tax of $26,378                                      -                -            43,038                -
     Change in fair value of cash flow hedge,
       net of income tax expense (benefit)
       of $(204,000)                                       -                -          (320,000)               -
                                                                                ---------------
     Other comprehensive income(loss)                      -                -          (276,962)        (276,962)
                                                                                                  --------------
       Total comprehensive income                          -                -                 -           63,622*
                                             ---------------   --------------   ---------------   ---------------
  Balance at March 31, 2004                               10       43,561,272          (279,285)      43,281,997

  Comprehensive income:
     Net income for the three months
       ended June 30, 2004                                 -        1,353,912                 -        1,353,912
     Change in net unrealized gain(loss) on
       securities available for sale, net of
       tax of $(91,512)                                    -                -          (149,309)               -
     Change in fair value cash flow hedge, net
       of income tax expense (benefit)
       of $330,259                                         -                -           532,529                -
                                                                                ---------------
     Other comprehensive income                            -                -           383,220          383,220
                                                                                                  --------------
       Total comprehensive income                          -                -                 -        1,737,132*
                                             ---------------   --------------   ---------------   ---------------

  Balance at June 30, 2004                   $            10   $   44,915,184   $       103,935   $   45,019,129
                                             ===============   ==============   ===============   ==============

  Balance at January 1, 2003                 $             -   $   38,853,464   $        71,014   $   38,924,478

  Common stock issuance 1,000 shares                      10              (10)                -                -

  Dividends declared and paid to MHC                       -          (50,000)                -          (50,000)

  Comprehensive income:
     Net income for the three months
       ended March 31, 2003                                -          802,144                 -          802,144
     Changes in net unrealized gain(loss)
       on securities available for sale, net
       of tax of $(15,983)                                 -                -           (25,409)               -
                                                                                ---------------
     Other comprehensive income(loss)                      -                -           (25,409)         (25,409)
                                                                                                  --------------
       Total comprehensive income                          -                -                 -          776,735*
                                             --------------    --------------   ---------------   ---------------

  Balance at March 31, 2003                               10       39,605,598            45,605       39,651,213

  Comprehensive income:
     Net loss for the three months
       ended June 30, 2003                                 -         (148,940)                -         (148,940)
     Changes in net unrealized gain on
       securities available for sale, net of
       tax of $68,624                                      -                -            92,437                -
                                                                                ---------------
     Other comprehensive income                            -                -            92,437           92,437
                                                                                                  ---------------
       Total comprehensive income(loss)                    -                -                 -          (56,503)*
                                             ---------------   --------------   ---------------   --------------

  Balance at June 30, 2003                   $            10   $   39,456,658   $       138,042   $   39,594,710
                                             ===============   ==============   ===============   ==============


*Total comprehensive income was $1,800,754 and $720,232 for the six months ended June 30,2004 and 2003,
respectively.


              The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                                       3
<PAGE>
<TABLE>
<CAPTION>

                                         ATLANTIC COAST FEDERAL CORPORATION
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   For the Six Months Ended June 30, 2004 and 2003
                                                     (Unaudited)


                                                                                          2004            2003
                                                                                          ----            ----
<S>                                                                                 <C>              <C>
Cash flows from operating activities:
   Net income                                                                       $   1,694,496    $      653,204
   Adjustments to reconcile net income to net cash
     from operating activities:
   Provision for loan losses                                                            1,652,831         3,911,798
   Gain on the sale of loans held for sale                                               (168,513)         (105,777)
   Loans originated for sale                                                          (10,328,352)       (6,523,817)
   Proceeds from loan sales                                                            10,826,788         9,076,941
   (Gain)loss on sale of other real estate owned                                          (55,049)           37,143
   Gain on the sale of securities available for sale                                       (8,444)           (2,410)
   Net depreciation and amortization                                                      631,682           686,454
   Net change in accrued interest receivable                                              219,289           (60,225)
   Increase in bank owned life insurance                                                  (88,974)         (109,994)
   Net change in other assets                                                            (442,258)        1,704,606
   Increase in accrued expenses and other liabilities                                     663,511            91,616
                                                                                    -------------    --------------
     Net cash from operating activities                                                 4,597,007         9,359,539
                                                                                    -------------    --------------

Cash flows from investing activities
   Proceeds from calls, maturities and payments
     of securities available for sale                                                   3,744,273         8,156,798
    Proceeds from sales of securities available for sale                               38,415,170         2,000,000
   Purchases of securities available for sale                                         (38,219,408)      (25,317,250)
   Net change in loans                                                                (65,437,771)      (30,684,972)
   Expenditures on land, premises and equipment                                          (586,403)         (756,899)
   Proceeds from the sale of other real estate owned                                      975,698            91,488
   Cash received for net liabilities assumed in acquisition of branches                         -         9,143,226
   (Purchase) redemption of Federal Home Loan Bank stock                               (1,467,100)           65,800
   Purchase of Bank owned life insurance                                                        -        (2,947,198)
   Net change in other investments                                                        500,000           839,939
                                                                                    -------------    --------------
     Net cash from investing activities                                               (62,075,541)      (39,409,068)
                                                                                    -------------    --------------

Cash flows from financing activities:
   Net increase in deposits                                                            48,123,882        31,763,539
   Federal Home Loan Bank advances                                                     30,000,000                 -
   Repayment of Federal Home Loan Bank advances                                                 -        (3,157,143)
   Dividends paid                                                                               -           (50,000)
                                                                                    -------------    --------------
     Net cash from financing activities                                                78,123,882        28,556,396
                                                                                    -------------    --------------

Net increase (decrease) in cash and cash equivalents                                   20,645,348        (1,493,133)

Cash and cash equivalents at beginning of the period                                    8,977,969        13,975,305
                                                                                    -------------    --------------

Cash and cash equivalents at end of the period                                      $  29,623,317    $   12,482,172
                                                                                    =============    ==============

Cash paid during the period for:
   Interest                                                                         $   5,549,972    $    6,182,164
                                                                                    =============    ==============
   Income taxes                                                                     $     950,000    $      754,000
                                                                                    =============    ==============

Loans transferred to other real estate                                              $     133,126    $      233,140
                                                                                    =============    ==============


               The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                                        4
<PAGE>

                       ATLANTIC COAST FEDERAL CORPORATION
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004
                                   (Unaudited)


NOTE 1. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Atlantic Coast
Federal Corporation (or the "Company") and its wholly owned subsidiary, Atlantic
Coast Federal (the "Bank") and the Bank's wholly owned subsidiary First
Community Financial Services, Inc. ("First Community"). All significant
inter-company balances and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and with instructions for Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, all adjustments
(all of which are normal and recurring in nature) considered necessary for a
fair presentation have been included. Operating results for the three-month and
six-month periods ending June 30, 2004 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2004. The 2003
Atlantic Coast Federal Corporation consolidated financial statements, as
presented in the Company's Form S-1 filed with the SEC on March 25, 2004,
should be read in conjunction with these statements.

NOTE 2-USE OF ESTIMATES

The preparation of consolidated financial statements, in conformity with
accounting principles generally acceptable in the United States of America,
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and the
reported amounts of income and expenses during the reported periods. Actual
results could differ from current estimates. Estimates associated with the
allowance for loan losses, realization of deferred tax assets, valuation of
intangible assets, including goodwill and the fair values of securities and
other financial instruments are particularly susceptible to material change in
the near term.

NOTE 3-IMPACT OF CERTAIN ACCOUNTING PRONOUNCEMENTS

The Emerging Issues Task Force (EITF) has issued EITF Abstracts Issue No.
03-01(EITF No. 03-01) to provide application guidance for assessing when an
investment is impaired, whether the impairment is other than temporary, and the
measurement of an impairment loss. The provisions of EITF No 03-01 are effective
for the Company's applicable investments for reporting periods beginning after
June 15, 2004. Management is presently evaluating the impact of implementing
EITF No. 03-01 but does not expect a material impact on the Company's financial
condition or results of operations upon adoption.


                                        5
<PAGE>

NOTE 4 - FEDERAL HOME LOAN BANK ADVANCES

At June 30, 2004 the sum of individual advances from the Federal Home Loan Bank
of Atlanta totaled $90,971,429 and had both variable and fixed interest rates.
At June 30, 2004 these rates ranged from 1.23% to 6.93% with an average interest
rate of 3.72%.

The advances mature as follows:

                               June 30,
                                 2004
                                 ----

        2005              $     1,314,300
        2006                   11,314,300
        2007                            -
        2008                            -
        2009                    5,000,000
        Thereafter             73,342,829
                          ---------------

                          $    90,971,429

The Company has a borrowing capacity of 30% of total assets with the Federal
Home Loan Bank of Atlanta. The Company had mortgage loans pledged as collateral
for FHLB advances of approximately $289,471,000 at June 30, 2004. At June 30,
2004, Atlantic Coast Federal Corporation owned $4,548,600 of FHLB stock, which
also secures debts to the FHLB.

NOTE 5 -INTEREST RATE  SWAPS

Effective November 17, 2003 the Company entered into an interest rate swap
agreement to make fixed payments in exchange for variable interest payments. The
interest rate swap is used to mitigate overall risk to changes in interest rates
during the life of the swap and is a component of the Company's asset liability
management strategy to reduce the risk that changes in interest rates will
change net interest margin. The notional amount of the interest rate swap does
not represent amounts exchanged by the parties. The amount exchanged is
determined by reference to the notional amount and the other terms of the
interest rate swap. The interest rate swap has a maturity date of November 14,
2005.

This interest rate swap has been designated as a cash flow hedge of a certain
FHLB advance and was determined to be fully effective during 2003. The Company
expects the hedge to remain fully effective during the remaining term of the
swap.


                                        6
<PAGE>

                       ATLANTIC COAST FEDERAL CORPORATION
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004
                                   (Unaudited)


NOTE 5 -INTEREST RATE  SWAPS(Continued)

Summary information about the interest rate swap was as follows at December 31,
2003:

Notional amounts                                                $ 5,000,000
Weighted average pay rates                                            2.38%
Weighted average receive rates                                        1.23%
Maturity                                                          1.9 years

The estimated fair value of the interest rate swap was not material to the
consolidated financial statements as of December 31, 2003.


                                        7
<PAGE>

                       ATLANTIC COAST FEDERAL CORPORATION
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004
                                   (Unaudited)


NOTE 5 -INTEREST RATE SWAPS (Continued)

During the six months ending June 30, 2004, the Company entered into additional
interest rate swap agreements to make fixed interest payments in exchange for
variable interest payments. These interest rate swaps have also been designated
as cash flow hedges of certain Federal Home Loan Bank advances and were
determined to fully effective since origination. As such, no amount of
ineffectiveness has been included in net income. Therefore, the aggregate fair
value of the swaps are recorded in other liabilities with changes in fair value
recorded in other comprehensive income(loss). The amount included in accumulated
other comprehensive income would be reclassified to current earnings should the
hedges no longer be considered effective. The Company expects the hedges to
remain fully effective during the remaining term of the swaps.

Summary information about all interest rate swaps as of June 30, 2004 follows:

Notional amounts                                                 $ 20,000,000
Weighted average pay rates                                              3.16%
Weighted average receive rates                                          1.20%
Maturity                                                            7.5 years
Unrealized gain related to interest rate swaps                       $342,788

NOTE 6-EARNINGS PER COMMON SHARE

Basic earnings per common share is computed by dividing net income by the
weighted average number of shares of common stock outstanding. For the three and
six month periods ended June 30, 2004 and 2003 the weighted average number of
common shares outstanding used in the computation of basic earnings per share
was 1,000. There were no potential dilutive common shares.

NOTE 7-MINORITY STOCK OFFERING

On February 25, 2003, the Board of Directors of Atlantic Coast Federal
Corporation adopted a resolution to sell common stock in an amount equal to 40%
("Minority Stock Offering") of the consolidated pro forma market value of the
Company and the Bank after giving effect to the offering. A subscription
offering of the shares of common stock of the Company will be offered initially
to the Company's eligible deposit account holders and the Company's tax
qualified employee benefit plan, then to the other members of the Bank. Any
shares of the Company's common stock not sold in the subscription offering will
be offered to the general public, giving preference to the Bank's market area.

Upon completion of the Minority Stock Offering, Atlantic Coast Federal, MHC(the
"MHC") will own 60% of the outstanding stock of the Company, with the remaining
40% held by the public. The Company will continue to own 100% of the federal
stock savings association. The federal stock savings association may not pay
dividends to the


                                        8
<PAGE>

Company if the dividends would cause the federal stock savings association to
fall below the "adequately-capitalized" capital threshold.

The Company intends to contribute approximately 50% of the proceeds of the
Minority Stock Offering to the Bank. The Company will also lend its employee
stock ownership plan cash to enable the plan to buy up to 8% of the shares
issued in the Minority Stock Offering to persons other than the MHC. The balance
will be retained as the Company's initial capitalization and may be used for
general business purposes including investment in securities, repurchasing
shares of its common stock, paying dividends, or pursuing acquisitions. The
funds received by the Bank will be used for general business purposes including
originating loans and purchasing securities and may also be used for growth
through expansion of the branch office network or acquisitions.

Effective August 12, 2004, the Company received approval from the Office of
Thrift Supervision to proceed with its planned Minority Stock Offering equal to
40% of the consolidated pro forma market value of the Company and its
subsidiaries, after giving effect to the offering. The offering is expected to
close in 2004 and net proceeds from the offering is anticipated to be
approximately$56.8 million. Offering costs are deferred and will be deducted
from the proceeds of the shares sold in the stock offering. If the offering is
not completed, all costs will be charged to expense. At June 30, 2004 and
December 31, 2003, $620,000 and $191,000 of costs had been incurred.


                                        9
<PAGE>

                                     Part 1

                       ATLANTIC COAST FEDERAL CORPORATION
         ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL AND
                        CONDITION RESULTS OF OPERATIONS


                                  June 30, 2004


FORWARD-LOOKING STATEMENTS

        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.

GENERAL

        On November 1, 2000, Atlantic Coast Federal converted its charter from a
federally-chartered credit union to a federally-chartered thrift. On that date
the name was changed from Atlantic Coast Federal Credit Union to Atlantic Coast
Federal, and we became a taxable organization.


                                       10
<PAGE>

        On May 30, 2002, Atlantic Coast Federal adopted a plan of mutual holding
company reorganization to reorganize into a three-tier mutual holding company.
The reorganization became effective on January 1, 2003. Following the
reorganization, Atlantic Coast Federal became a wholly-owned subsidiary of
Atlantic Coast Federal Corporation, which became a wholly-owned subsidiary of
Atlantic Coast Federal, MHC. The transaction was accounted for at historical
cost.

        Our principal business has historically consisted of attracting deposits
from the general public and the business community and making loans secured by
various types of collateral, including real estate and general business assets.
Atlantic Coast Federal Corporation is significantly affected by prevailing
economic conditions as well as government policies and regulations concerning,
among other things, monetary and fiscal affairs, housing and financial
institutions. Deposit flows are influenced by a number of factors, including
interest rates paid on competing investments, account maturities, fee
structures, and level of personal income and savings. Lending activities are
influenced by the demand for funds, the number and quality of lenders, and
regional economic cycles. Sources of funds for lending activities of Atlantic
Coast Federal Corporation include deposits, borrowings, payments on loans,
maturities of securities and income provided from operations. Atlantic Coast
Federal Corporation's earnings are primarily dependent upon Atlantic Coast
Federal Corporation's net interest income, the difference between interest
income and interest expense.

        Interest income is a function of the balances of loans and investments
outstanding during a given period and the yield earned on such loans and
investments. Interest expense is a function of the amount of deposits and
borrowings outstanding during the same period and interest rates paid on such
deposits and borrowings. Atlantic Coast Federal Corporation's earnings are also
affected by Atlantic Coast Federal Corporation's provisions for loan losses,
service charges, gains from sales of loans, commission income, interchange fees,
other income, operating expenses and income taxes.

CRITICAL ACCOUNTING POLICIES

        Certain of our accounting policies are important to the portrayal of our
financial condition, since they require management to make difficult, complex or
subjective judgments, some of which may relate to matters that are inherently
uncertain. Estimates associated with these policies are susceptible to material
changes as a result of changes in facts and circumstances. Facts and
circumstances which could affect these judgments include, but without
limitation, changes in interest rates, in the performance of the economy or in
the financial condition of borrowers. Management believes that its critical
accounting policies include determining the allowance for loan losses,
determining the fair value of securities, accounting for deferred income taxes,
and the valuation of intangible assets including goodwill. Atlantic Coast
Federal Corporation's accounting policies are discussed in detail in Note 1 of
the Notes to the Consolidated Financial Statements included in the Company's
Form S-1 filed on March 25, 2004.

        The allowance for loan losses is a valuation allowance for probable
incurred credit losses, increased by the provision for loan losses and decreased
by charge-offs less recoveries. Management estimates the allowance balance
required using the past loan loss experience, the nature and volume of the
portfolio, information about specific borrower situations and estimated
collateral values, economic conditions and other factors. Allocations of the
allowance may be made for specific loans, but the entire


                                       11
<PAGE>

allowance is available for any loan that, in management's judgment, should be
charged-off. Loan losses are charged against the allowance when management
believes the uncollectibility of a loan balance is confirmed.

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

        We believe that the allowance for loan losses and related provision
expense are particularly susceptible to material change in the near term as a
result of significant changes in individual borrower circumstances on larger
dollar loans. The allowance for loan losses was $3.8 million at June 30, 2004
and $6.6 million at December 31, 2003. The decrease in the allowance for loan
losses from December 31, 2003 to June 30, 2004 was primarily due to a $4.0
million charge-off occurring in the first quarter of 2004 on one impaired loan
relationship. The allowance for loan losses as a percentage of total loans was
0.76% at June 30, 2004 and 1.49% as of December 31, 2003. Provision for loan
losses totaled $109,000 and $2.9 million for the three months ended June 30,
2004 and 2003. Provision for loan losses totaled $1.7 million and $3.9 million
for the six months ending June 30, 2004 and 2003, respectively. This data
demonstrates the manner in which the allowance for loan losses and related
provision expense can change over long term and short term periods. Changes in
economic conditions, the nature and size of the loan portfolio and individual
borrower conditions can dramatically impact our required level of allowance for
loan losses in relatively short periods of time. The amount of allowance for
loan losses allocated to individually evaluated loan relationships decreased
$2.4 million to $1.7 million at June 30, 2004 from $4.1 million at December 31,
2003, primarily due to the charge-off of the impaired loan noted above.
Management anticipates that large individual specific reserve allocations may
continue to be required in future periods as changes in borrower conditions can
change in relatively short time periods.

        Securities available for sale are carried at fair value, with unrealized
holding gains and losses reported separately in accumulated other comprehensive
income, net of tax. Atlantic Coast Federal Corporation obtains market values
from a third party on a monthly basis in order to adjust the securities to fair
value. Other comprehensive income(loss) resulting from changes in the fair
market value of Atlantic Coast Federal Corporation's available for sale
securities portfolio totaled $(106,000) and $67,000 for the six months ended
June 30, 2004 and 2003 respectively. Additionally, securities available for sale
and held to maturity are required to be written down to fair value when a
decline in fair value is not temporary; therefore, future changes in the fair
value of securities could have a significant impact on Atlantic Coast Federal
Corporation's operating results. In determining whether a market value decline
is other than temporary, management considers the reason for the decline, the
extent of the decline and the duration of the decline.

        Atlantic Coast Federal Corporation assesses the carrying value of
intangible assets including goodwill annually in order to determine if such
intangible assets are impaired. In reviewing the carrying value of intangible
assets, Atlantic Coast Federal Corporation assesses the recoverability of such
assets by evaluating the fair value of Atlantic Coast Federal Corporation's
community banking segment which is the Company's only business segment. Any
impairment would be required to be recorded


                                       12
<PAGE>

during the period identified. Atlantic Coast Federal Corporation's goodwill
totaled $2.7 million as of June 30, 2004; therefore, if Atlantic Coast Federal
Corporation's goodwill was determined to be impaired, Atlantic Coast Federal
Corporation's financial results could be materially impacted.

        After converting to a federally-chartered savings association, Atlantic
Coast Federal became a taxable organization. Income tax expense is the total of
the current year income tax due or refundable and the change in deferred tax
assets and liabilities. Deferred tax assets and liabilities are the expected
future tax amounts for the temporary difference between carrying amounts and tax
bases of assets and liabilities, computed using enacted tax rates. A valuation
allowance, if needed, reduces deferred tax assets to the amount expected to be
realized. The Internal Revenue Code and applicable regulations are subject to
interpretation with respect to the determination of the tax basis of assets and
liabilities for credit unions that convert charters and become a taxable
organization. Since Atlantic Coast Federal's transition to a federally-chartered
thrift, Atlantic Coast Federal Corporation has recorded income tax expense based
upon management's interpretation of the applicable tax regulations. Positions
taken by Atlantic Coast Federal Corporation in preparing our federal and state
tax returns are subject to the review of taxing authorities, and the review of
the positions we have taken by taxing authorities could result in a material
adjustment to our financial statements.

BUSINESS STRATEGY

        We have concentrated our lending efforts on the origination of
one-to-four family mortgage loans along with various consumer loans and other
secured commercial loans (including commercial real estate and construction
lending) for portfolio retention. Our business strategy emphasizes retail
deposits along with Federal Home Loan Bank (FHLB) advances as our principal
sources of funds.

        Our primary objective is to remain an independent, community oriented
financial institution serving customers in our primary market area. The board of
directors has sought to accomplish this objective through the adoption of a
strategy designed to maintain profitability, a strong capital position and high
asset quality. This strategy primarily involves (i) emphasizing the origination
of one- to four-family residential mortgage loans, multi-family loans,
commercial real estate loans and commercial construction loans, (ii) maintaining
a portfolio of securities with various types of investments, (iii) controlling
operating expenses while providing high quality customer service, (iv)
purchasing residential mortgage loans for the purpose of interest rate risk
management, and (v) increasing non-interest income through revisions to our
service fee structure.

        In connection with the stock offering, we anticipate receiving
approximately $56.8 million in net proceeds. We anticipate utilizing the net
proceeds as described in "How We Intend to Use the Proceeds" on page 9 of Form
S-1 filed with the SEC on March 25, 2004. We anticipate the proceeds will result
in an immediate increase in assets, and we anticipate future growth through
normal expansion of products and services into new and existing markets,
although no specific plans exist at the time. Our results of operations may be
significantly impacted by our ability to effectively utilize the proceeds from
the stock offering. Should we not be able to invest a significant portion of the
proceeds in assets with favorable yields our financial performance could be
negatively impacted.


                                       13
<PAGE>

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2004 AND DECEMBER 31, 2003.

        GENERAL. Total assets increased $80.6 million, or 16.2%, to $579.7
million at June 30, 2004 from $499.0 million at December 31, 2003. Asset growth
was primarily comprised of $63.8 million in net loans and $20.7 million of cash
and cash equivalents. Securities available for sale declined $4.2 million. The
asset growth was funded by increased deposits of $48.1 million and additional
Federal Home Loan Bank(FHLB) borrowings of $30.0 million.

        ASSETS. Our net loan portfolio increased $63.8 million, or 14.7%, to
$499.4 million at June 30, 2004 from $435.6 million at December 31, 2003. New
loans originations totaled $126.6 million in the first six months of 2004 of
which $84.7 million or 66.9% was for one-to-four family mortgages or residential
construction loans, $16.1 million or 12.7% for home equity and second mortgage
loans and $11.9 or 9.4% for installment auto loans. We also sold approximately
$10.0 million of residential mortgage loans, and we expect that we will continue
to sell certain long term fixed rate mortgages in future periods as a part of
our overall asset/liability management and liquidity strategies. We believe our
lending strategy will continue to focus on the origination of residential
mortgage loans and decreasing originations of consumer loans such as credit card
and automobile loans. In addition, we anticipate increasing our commercial
lending focus, particularly related to commercial real estate lending.

        Securities available for sale decreased $4.2 million, or 16.1%, to $21.9
million at June 30, 2004 from $26.0 million at December 31, 2003. The decrease
is primarily due to the redemption of $3.0 million of FHLB bonds that were
called prior to maturity and $1.7 million of state and county municipal bonds
that either matured or were sold for liquidity purposes. Proceeds from these
securities available for sale transactions were used to fund loan growth.
Decisions about future investments in securities available for sale will
continue to be made on the basis of liquidity and funding requirements. The
Company currently anticipates that short-term investments may be utilized in the
future as liquidity levels increase as a result of the proceeds from the stock
offering until such funds can be redeployed into loans or other long-term
investments.

        The investment in FHLB stock increased approximately $1.5 million in
order to maintain required investment levels following the Company's additional
borrowings (see Borrowings below).

        Our allowance for loan losses at June 30, 2004 was $3.8 million or .76%
of loans, compared to the $6.6 million or 1.49% of loans at December 31, 2003.
Net charge offs for the six months ended June 30, 2004 and June 30, 2003 were
$4.4 million and $987,000. Net charge-offs for the six months ended June 30,
2004 consisted of gross charge-offs of $4.9 million and recoveries of $422,000.
The remaining change in the balance of the allowance for loan losses from
December 31, 2003 to June 30, 2004 is related to provision for loan losses of
$1.7 million for the six months ending June 30, 2004. The increase in net
charge-offs, the decline in the allowance for loan losses and the decline in the
percentage of the allowance for loan losses to total loans were all primarily
due to a charge-off totaling $4.0 million on an individual problem loan
situation discussed below. Individual borrower conditions may change in a
relatively short time period and thereby require changes in our loan loss
allocations for such loans. In addition, as a loan is identified as a loss, it
is then charged off. Identification of such changes necessary for loss
allocations as well as charge-offs of loans may cause our allowance for loan
losses to total loans ratio to fluctuate such as the change discussed above.


                                       14
<PAGE>

        During 2003 management identified significant concerns relative to the
collectibility of a $4.8 million loan made to finance the acquisition of land
and the construction of a water treatment plant for commercial and industrial
customers. Based on estimates of expected cash flows and estimates of collateral
value management allocated approximately $2.8 million of the allowance for loan
losses to this loan relationship. During 2003, no portion of the loan
relationship was charged-off as the borrower continued to perform under the
terms of its agreement. In May 2004, management learned that key business
permits had been revoked by the municipality where the borrower operated during
the quarter ending March 31, 2004 and thus its operations ceased during the
first quarter of 2004. Accordingly, management determined that it was
appropriate to record additional provisions for loan losses totaling
approximately $1.4 million for this loan relationship in the first quarter of
2004 and charge-off approximately $4.0 million of the relationship as of March
31, 2004. The additional provision for loan losses is primarily a result of
there no longer being any expected future operating cash flows as the borrower
is in the process of declaring bankruptcy. As of June 30, 2004, the remaining
balance of this loan relationship is approximately $949,000, and management has
allocated approximately $209,000 of the allowance for loan losses to this
remaining balance. The remaining balance represents management's current
estimate of the fair value of the underlying collateral; however, management
determined that it was appropriate to provide an allowance for loan losses
allocation to this balance in recognition of the uncertainty of the ultimate
value that will be obtained from the collateral.

        The allowance for loan losses consists of general allowance allocations
made for pools of homogeneous loans and specific allocations on individual loans
for which management has significant concerns regarding the borrowers' ability
to repay the loans in accordance with the terms of the loans. Nonperforming
loans totaled approximately $4.0 million and $7.6 million at June 30, 2004 and
December 31, 2003, and total impaired loans were approximately $3.9 million and
$11.4 million at June 30, 2004 and December 31, 2003, respectively. The decrease
in impaired loans is primarily result of the loan charge-off discussed above and
improved financial condition and performance of other loans totaling $3.9
million. As of June 30, 2004 and December 31, 2003, all nonperforming loans were
classified as non-accrual, and we did not have any restructured loans or loans
90 days past due and accruing as of June 30, 2004 and December 31, 2003. The
decrease in nonperforming loans is primarily related to the $4.0 million
charge-off discussed above. All non-performing loans, excluding small balance
homogeneous loans, are also reported as impaired loans at June 30, 2004 and
December 31, 2003.

        In August 2001, we entered into a sale and servicing agreement whereby a
pool of leases totaling $2,011,000 was purchased. The leases are collateralized
by small equipment and automobiles. In addition, each lease was backed by a
surety bond obtained by the seller and provided as part of the purchase
agreement for the pool of leases. The surety bonds obligated the insurance
company to pay even in the event there was fraud. At December 31, 2001, the
remaining balance on the pool of leases was $1,924,000. Scheduled payments have
not been received since December 2001. We have filed claims with the surety on
the surety bonds for past due payments. At December 31, 2001, management had not
made any provision for loan losses with respect to these leases.

        During 2002, the surety did not perform on the claims made on it.
Therefore, in early 2002, we placed the leases on nonaccrual status. The surety
has alleged that most,


                                       15
<PAGE>

if not all, of the leases sold by the seller were fraudulent or fictitious. The
surety has filed a suit against the seller of the leases. Subsequent to the suit
against the seller, the surety later named Atlantic Coast Federal Corporation as
a defendant. The seller of the leases has since filed bankruptcy and we do not
expect recovery from the seller. We have filed a suit against the surety,
asserting, among other things, breach of contract and bad faith in issuing their
bond surety and then failing to perform. In 2002, we were informed by, among
other things the bankruptcy trustee that certain leases included in the lease
pool purchased by Atlantic Coast Federal Corporation were fictitious. As a
result, we charged-off approximately $260,000 during 2002. As of December 31,
2002, the remaining balance on these leases was approximately $1,664,000 and
were classified as impaired. At December 31, 2002, management had allocated
approximately $667,000 of the allowance for loan losses with respect to these
leases.

        During 2003, management has continued to pursue collection on the surety
bonds under the terms of those bonds. During December 2003, we charged-off an
additional $664,000 of the leases. At June 30, 2004 and December 31, 2003, the
remaining balance on these leases is approximately $1,000,000, and management
has allocated approximately $150,000 of the allowance for loan losses with
respect to these leases. Legal costs incurred on this matter for the six months
ended June 30, 2004 and June 30, 2003 were $213,000 and $125,000. Management
continues to vigorously pursue collection on the surety bonds under the terms of
those bonds. There can be no assurance, however, that we will recover the
balance of the lease payments of $1.9 million due as of December 2001. The
previous charge-offs on these leases and the current level of allowance for loan
loss allocation for the remaining balance of these leases are indicative of our
best estimate of the probable losses incurred, based on consultation with legal
counsel. Collection of any amount, including the $850,000 net amount included in
our financial statements as of June 30, 2004, or the gross amount of $1.9
million, cannot be assured. We believe that there is a possibility that no
amount will be collected in the future; therefore, we may incur additional
losses up to the $850,000 net amount remaining as an asset. Additionally, we
anticipate we will incur additional legal costs as we pursue collection on the
surety bonds.

        DEPOSITS. Total deposits increased by $48.1 million, or 12.3%, to $440.4
million at June 30, 2004 from $392.3 million at December 31, 2003. A portion of
this growth was from new and existing depositors who were establishing or
expanding subscription rights for the stock offering. Such deposits totaled
approximately $76.9 million in the first quarter of 2004, and while the majority
were withdrawn in the second quarter, approximately $18.6 million remained at
the Company as of June 30, 2004. Normal deposit growth included growth of $13.2
million from a new tiered, interest checking product as well as certificate of
deposit growth of $12.2 million. We expect future deposit growth as we expand
our products and services in new and existing markets.

        BORROWINGS. Federal Home Loan Bank advances increased $30.0 million, or
49.2% to $91.0 million at June 30, 2004 from $61.0 million at December 31, 2003.
The additional borrowings are 10-year notes. Two of the notes total $15 million
and are at an average fixed rate of 3.69%. These notes convert to a LIBOR based
variable rate if the three-month LIBOR reaches 7.0% for one note and 7.5% for
the other, or are redeemable at our option. The remaining new borrowings total
$15 million at a rate of LIBOR plus 22 basis points. These additional $15.0
million of borrowings have scheduled maturities occurring between January 21,
2014 and June 18, 2014. Approximately $10 million were used for liquidity
purposes to replace a large block of maturing certificates of deposits that had
been originated at premium rates during a deposit promotion program in 2003.


                                       16
<PAGE>

The remaining funds were used to fund loan growth during the first six months of
2004. Management expects that Federal Home Loan Bank advances will continue to
provide the Company with a significant additional funding source to meet the
needs of its lending activities.

        EQUITY. Total equity increased $1.8 million, or 4.2%, to $45.0 million
at June 30, 2004 from $43.2 million at December 31, 2003. The increase in equity
is primarily due to the Company's net income of $1.7 million. Equity was also
impacted by other comprehensive income of $104,000 resulting from an increase in
market value of interest rate swaps being used to hedge the cash flows of
certain FHLB advances of $213,000, net of tax, partially offset by a decrease in
the market value of securities available for sale of $109,000, net of tax. The
equity to assets ratio was 7.77% at June 30, 2004 compared to 8.66% at December
31, 2003. The decrease was a result of strong loan growth as well as the noted
deposit activity related to our stock offering that increased deposits and
concurrently cash and short-term investments. As a result, our regulatory
capital ratios declined, however, we remained in excess of all minimum capital
requirements to be "well capitalized" as of June 30, 2004. Total risk based
capital to risk weighted assets was 10.6%, tier 1 capital to risk weighted
assets was 10.0% and Tier 1 capital to total adjusted total assets was 7.2% as
of June 30, 2004. These ratios as of December 31, 2003 were 12.4%, 11.7% and
8.1%.

COMPARISON OF RESULTS OF OPERATION FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND
2003

        GENERAL. Net income for the six months ended June 30, 2004 was $1.7
million, which was $1.0 million higher than net income for the same period in
2003. Net interest income decreased compared to prior year primarily due to a
lower interest rate environment. However, a lower provision for loan losses
combined with higher non-interest income more than offset the decline in net
interest income as well as the increased non-interest expenses.

        NET INTEREST INCOME. Net interest income decreased $301,000 for the six
months ended June 30, 2004 compared to the same period in 2003. For the six
months ended June 30, 2004, average interest-earning assets increased to $506.4
million from $451.4 million for the same period a year ago primarily as a result
of loan growth. Offsetting this increase in average interest-earning assets was
a 112 basis point decline in the yield on interest earning assets to 6.00% for
the six months ending June 30, 2004 from 7.12% for the comparable period in
2003. This decline was partially offset by a decrease of 58 basis points in the
cost of funds on interest bearing liabilities to 2.46% for the six months ending
June 30, 2004 from 3.04% for the same period in 2003. Atlantic Coast Federal
Corporation continues to utilize its asset/liability management strategy to
reduce the impact of changes in interest rates on Atlantic Coast Federal
Corporation's net interest income. Atlantic Coast Federal Corporation expects
that its net interest margin may decline in the near future as a result of the
continued low interest rate environment during recent periods. Increases in net
interest income resulting from increases in average interest earnings assets are
anticipated to partially offset the decline in net interest income resulting
from decreases in our net interest margin; however, growth in average interest
earning assets is not assured and the degree to which such growth will result in
growth in net interest income cannot be assured.

        The following table details the relative interest rates and average
balances of Atlantic Coast Federal Corporation's interest-earning assets and
interest-bearing liabilities for the six months ended June 30, 2004 and 2003:


                                       17
<PAGE>

                     DISTRIBUTION OF ASSETS AND LIABILITIES;
                    INTEREST RATES AND INTEREST DIFFERENTIALS
                            ( dollars in thousands )


                                                      AVERAGE YIELD/
           AVERAGE BALANCE                                RATE
---------------------------------------    -------------------------------------
       2004                  2003                 2004              2003
-----------------     -----------------    -----------------   -----------------


      $461,822             $397,484               6.43%             7.85%
        30,211               32,683               1.58%             2.10%
        14,405               18,742               2.01%             1.45%
-----------------     -----------------    -----------------   -----------------

       506,438              448,909               6.02%             7.16%
-----------------     -----------------    -----------------   -----------------


     $  92,970            $  73,948                .68%             1.12%
        68,999               65,873               1.21%             1.81%
       215,769              224,349               2.94%             3.67%

        79,296               42,992               4.31%             4.91%
-----------------     -----------------    -----------------   -----------------

     $ 457,034            $ 407,162               2.45%             3.03%
=================     =================    =================   =================

                                                  3.57%             4.13%
                                          ==================   =================


                                                  3.79%             4.38%
                                          ==================   =================


       110.81%              110.25%
=================     ================

<PAGE>

                             INTEREST-EARNING ASSETS
                               Loans Receivable(1)
                                  Securities(2)
                             Other earning assets(3)


                          Total Interest earning assets


                          INTEREST BEARING LIABILITIES
                                Savings deposits
                              Money market accounts
                                  Time deposits
                             FHLB advances and other
                                   borrowings


                       Total interest bearing liabilities


                               Net Interest Spread



                                  Net Margin(4)


                       Average interest earning assets to
                      average interest bearing liabilities




                INTEREST                        VARIANCE ATTRIBUTABLE TO
       ---------------------------              --------------------------
            2004          2003       VARIANCE     VOLUME(5)       RATE
       -------------  -----------  -----------  -------------  -----------


         $  14,826     $  15,592    $    (766)  $     2,292    $ (3,058)
               239           343         (104)          (24)        (80)
               145           136            9           (36)         45
       -------------  -----------  -----------  -------------  -----------

            15,210        16,071         (861)        2,232      (3,093)
       -------------  -----------  -----------  -------------  -----------


         $     318     $     412    $     (94)  $        96    $   (190)
               419           595         (176)           27        (203)
             3,171         4,114         (943)         (153)       (790)

             1,708         1,055          653           796        (143)
       -------------  -----------  -----------  -------------  -----------

         $   5,616     $   6,176    $    (560)  $       766    $ (1,326)
       -------------  -----------  -----------  -------------  -----------

         $   9,594     $   9,895    $    (301)  $     1,466    $ (1,767)
       =============  ===========  ===========  =============  ===========


(1) Calculated net of deferred fees and allowance for loan losses. 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
(5) Variances not solely  attributable to rate or volume have been allocated
proportionately to the change due to volume and the change due to rate.


                                       18
<PAGE>

        INTEREST INCOME. Interest income decreased $860,000, or 5.4%, to $15.2
million for the six months ended June 30, 2004 from $16.1 million for the six
months ended June 30, 2003 primarily due to a decline in interest income from
loans. Although average loans outstanding were $63.5 million higher for the six
months ended June 30, 2004 as compared to the same six months in 2003, interest
income was $766,000 less as overall yields were lower. The weighted average
yield on loans decreased from 7.72% for the six months ended June 30, 2003 to
6.37% for the six months ended June 30, 2004. This decline is primarily due to a
historically low interest rate environment that caused the majority of our first
mortgage customers to refinance mortgages to lower rates. Also contributing to
the decrease in yields, although to a lesser extent, was the sale of the credit
card portfolio in July of 2003 and a reduction in indirect automobile lending in
2004, both of which had higher rates due to their risk. Interest income on other
interest-earning assets, including securities available for sale decreased
$94,000 for the six months ended June 30, 2004 as compared to the same period
for 2003. The weighted average yield on other interest-earning assets decreased
from 1.9% for the first six months of 2003 to 1.8% for the first six months of
2004 due to the lower interest rates offered on short-term investments. We
expect our interest income will increase as average interest earning assets and
interest rates on such assets increase. Growth in interest earnings assets is
anticipated due to the proceeds from the stock offering as well as general
growth from existing markets and possibly new markets. Our interest income could
be adversely impacted by continued low interest rates or decreases in average
interest earning assets.

        INTEREST EXPENSE. Interest expense decreased $559,000 to $5.6 million
for the first six months of 2004 from $6.2 million for the first six months of
2003. The decrease in interest expense was due to a decrease in the Company's
cost of funds during the first six months of 2004 resulting from the continued
low interest rate environment partially offset by increased borrowings. The cost
of funds was 2.46% for the six months ended June 30, 2004 compared to 3.04% for
the six months ended June 30, 2003. Although average interest bearing deposits
outstanding increased $13.7 million for the six months ended June 30, 2004 as
compared to the same six months in 2003, interest expense on deposits was $1.2
million less due to the repricing of deposit accounts to lower interest rates
consistent with the continued low interest rate environment.

        Interest expense on Federal Home Loan Bank advances increased $653,000
to $1.7 million for the six months ended June 30, 2004 from $1.1 million for the
six months ended June 30, 2003. The increase resulted from an increase in
average Federal Home Loan Bank advances of $36.1 million to $79.1 million for
the six months ended June 30, 2004 from $43.0 million for the same period in
2003. This increase in interest expense due to increased levels of borrowings
was partially offset by a 60 basis point decrease in the cost of Federal Home
Loan Bank advances, from 4.91% for the first six months of 2003 to 4.31% for the
first six months of 2004. We expect interest expense to increase as interest
rates and average interest bearing liabilities increase.

        PROVISION FOR LOAN LOSSES. We establish provisions for loan losses,
which are charged to operations, at a level required to reflect probable
incurred credit losses in the loan portfolio. In evaluating the level of the
allowance for loan losses, management considers historical loss experience, the
types of loans and the amount of loans in the loan portfolio, adverse situations
that may affect borrowers' ability to repay, estimated value of any underlying
collateral, and prevailing economic conditions. Large groups of smaller balance
homogenous loans, such as residential real estate, small commercial real

                                       19
<PAGE>

estate, home equity and consumer loans, are evaluated in the aggregate using
historical loss factors adjusted for current economic conditions and other
relevant data. Larger non-homogeneous loans such as commercial loans for which
management has concerns about the borrowers' ability to repay are evaluated
individually, and specific allowance allocations are provided for such loans
when necessary.

        Based on management's evaluation of these factors, provisions of $1.7
million and $3.9 million were made during the six months ended June 30, 2004 and
the six months ended June 30, 2003. The majority of the provision expense for
both six month periods is related to one problem loan relationship of which $4.0
million was charged-off during the quarter ending March 31, 2004. The provision
expense for the six months ending June 30, 2003 included allowance for loan
losses of $2.3 million for this problem loan situation, and management
classified several other loan relationships totaling $12.2 million and provided
specific allowance allocations totaling $1.6 million on these loan
relationships. Consumer loan losses declined in the first six months of 2004 as
a result of the sale of our credit card portfolio and the continued decline of
our automobile loan portfolio. Accordingly, the amount of general allowance
allocations made for smaller balance homogeneous loans decreased during the six
months ended June 30, 2004 compared to the six months ending June 30, 2003.

        Management assesses the allowance for loan losses on a quarterly basis
and makes provisions for loan losses as necessary in order to maintain the
allowance for loan losses based on all known and inherent losses that are both
probable and can be reasonably estimated. While management uses available
information to recognize losses on loans, future loan loss provisions may be
necessary based on changes in economic conditions and changes in borrower
situations. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowance for loan losses and
may require us to recognize additional provisions based on their judgment of
information available to them at the time of their examination. The allowance
for loan losses as of June 30, 2004 is maintained at a level that represents
management's best estimate of probable incurred losses in the loan portfolio.

        NON-INTEREST INCOME. Non-interest income increased $139,000 to $2.7
million for the six months ended June 30, 2004 from $2.5 million for the same
period in 2003. The majority of the increase in non-interest income is from
additional deposit service charges and fees of $160,000 and increased loan sale
gains of $63,000 due to the sale of $10 million in 15 year fixed mortgages
completed as part of the Company's asset/liability management strategy.
Although, management anticipates sales of certain mortgage loans to continue as
part of the asset/liability strategy, there can be no assurance that gains will
continue to be realized on such sales. These increases were offset by declines
of $77,000 in commissions earned from the sale of investment and insurance
products to customers and $76,000 in credit card interchange fees resulting from
the sale of the credit card portfolio in July 2003.

        We anticipate our non-interest income will be positively impacted by the
future growth of the Company into new and existing markets. However,
non-interest income for the year ending December 31, 2003 was positively
impacted by the sale of our credit card loan portfolio, and we currently do not
anticipate significant gains from the sale of assets.

                                       20
<PAGE>

        NON-INTEREST EXPENSE. Non-interest expense increased $383,000 million to
$8.0 million for the six months ended June 30, 2004 compared to $7.6 million for
the six months ended June 30, 2003. The increase in non-interest expense is
primarily due to increases of $390,000 in compensation and benefits related to
our overall growth and expansion including the acquisition of new branches and
expenses associated with additional personnel needed to operate the new
branches. We anticipate non-interest expense will increase in future periods as
a result of additional growth and expansion.

        INCOME TAX EXPENSE. Income tax expense increased to $929,000 for the six
months ended June 30, 2004 from $257,000 for the six months ended June 30, 2003.
The increase is primarily due to an increase in income before income taxes when
comparing the two periods. We anticipate that income tax expense will continue
to vary as income before income taxes varies.

COMPARISON OF RESULTS OF OPERATION FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND
2003

        GENERAL. Net income for the three months ended June 30, 2004 was $1.4
million, which was $1.5 million higher than the net loss of $149,000 for the
same period in 2003. A significantly lower provision for loan losses in the
second quarter of 2004 compared to the same quarter in 2003 offset small
declines in net interest income and non-interest income as well as higher
non-interest expenses.

        NET INTEREST INCOME. Net interest income decreased $93,000 for the three
months ended June 30, 2004 compared to the same period in 2003. For the three
months ended June 30, 2004, average interest-earning assets increased to $522.0
million from $462.3 million for the same period a year ago primarily as a result
of loan growth. Offsetting this increase in average interest-earning assets was
a 108 basis point decline in the yield on interest earning assets to 5.88% for
the three months ending June 30, 2004 from 6.96% for the comparable period in
2003. This decline was partially offset by a decrease of 56 basis points in the
cost of funds on interest bearing liabilities to 2.36% for the three months
ending June 30, 2004 from 2.92% for the same period in 2003. Atlantic Coast
Federal Corporation continues to utilize its asset/liability management strategy
to reduce the impact of changes in interest rates on Atlantic Coast Federal
Corporation's net interest income. Atlantic Coast Federal Corporation expects
that its net interest margin may decline in the near future as a result of the
continued low interest rate environment during recent periods. Increases in net
interest income resulting from increases in average interest earnings assets are
anticipated to partially offset the decline in net interest income resulting
from decreases in our net interest margin; however, growth in average interest
earning assets is not assured and the degree to which such growth will result in
growth in net interest income cannot be assured.

        The following table details the relative interest rates and average
balances of Atlantic Coast Federal Corporation's interest-earning assets and
interest-bearing liabilities for the three months ended June 30, 2004 and 2003:

                                       21
<PAGE>

                     DISTRIBUTION OF ASSETS AND LIABILITIES;
                    INTEREST RATES AND INTEREST DIFFERENTIALS
                             (dollars in thousands )


                                                 AVERAGE YIELD/
               AVERAGE BALANCE                        RATE
      --------------------------------  --------------------------------
            2004             2003            2004             2003
      ---------------  ---------------  ---------------  ---------------


         $  475,318      $  401,648          6.29%            7.78%
             32,473          36,006          1.34%            1.90%
             14,170          24,652          2.47%            1.12%
      ---------------  ---------------  ---------------  ---------------

            521,961         462,306          5.88%            6.96%
      ---------------  ---------------  ---------------  ---------------


         $  101,814      $   75,624          0.55%            1.09%
             67,406          71,821          1.17%            1.68%
            220,285         231,374          2.88%            3.56%

             83,169          42,286          4.24%            4.93%
      ---------------  ---------------  ---------------  ---------------

         $  472,674      $  421,105          2.36%            2.92%
      ===============  ===============  ===============  ===============

                                             3.52%            4.04%

             49,287          41,201          0.21%            0.25%
      ---------------  ---------------  ---------------  ---------------

         $  521,961      $  462,306          3.73%            4.29%
      ===============  ===============  ===============  ===============


            110.43%          109.78%
      ===============  ===============

<PAGE>

                             INTEREST-EARNING ASSETS
                               Loans Receivable(1)
                                  Securities(2)
                             Other earning assets(3)


                          Total Interest earning assets


                          INTEREST BEARING LIABILITIES
                                Savings deposits
                              Money market accounts
                                  Time deposits
                             FHLB advances and other
                                   borrowings


                       Total interest bearing liabilities


                               Net Interest Spread

                              Interest free source


                                  Net Margin(4)

                         Average interest earning assets
                     to average interest bearing liabilities


               INTEREST                           VARIANCE ATTRIBUTABLE TO
     ------------------------------               -------------------------
          2004            2003         VARIANCE     VOLUME(5)       RATE
     --------------  --------------  -----------  ------------  -----------


        $  7,473      $    7,808      $   (335)      $  1,29    $  (1,633)
             109             171           (62)          (15)         (47)
              87              69            18           (39)          57
     --------------  --------------  -----------  ------------  -----------

           7,669            8048          (379)        1,244       (1,623)
     --------------  --------------  -----------  ------------  -----------


        $    140      $      206      $    (66)      $    60    $    (126)
             197             302          (105)          (17)         (88)
           1,586           2,061          (475)          (95)        (380)

             882             521           361           442          (81)
     --------------  --------------  -----------  ------------  -----------

           2,805           3,090          (285)          390         (675)
     --------------  --------------  -----------  ------------  -----------

           4,864           4,958           (94)          854         (948)
     ==============  ==============  ===========  ============  ===========



        $  4,864      $    4,958      $    (94)      $   854    $    (948)
     ==============  ==============  ===========  ============  ===========


(1) Calculated net of deferred fees and allowance for loan losses. 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
(5) Variances not solely  attributable  to rate or volume have been allocated
proportionately to the change due to volume and the change due to rate.


                                       22
<PAGE>

INTEREST INCOME. Interest income decreased $379,000, or 4.7%, to $7.7 million
for the three months ended June 30, 2004 from $8.1 million for the three months
ended June 30, 2003 primarily due to a decline in interest income from loans.
Although average loans outstanding were $73.7 million higher for the three
months ended June 30, 2004 as compared to the same three months in 2003,
interest income was $335,000 less as overall yields were lower. The weighted
average yield on loans decreased from 7.78% for the three months ended June 30,
2003 to 6.29% for the three months ended June 30, 2004. This decline is
primarily due to a historically low interest rate environment that caused the
majority of our first mortgage customers to refinance mortgages to lower rates.
Also contributing to the decrease in yields, although to a lesser extent, was
the sale of the credit card portfolio in July of 2003 and a reduction in
indirect automobile lending in 2004, both of which had higher rates due to their
risk. Interest income on other interest-earning assets, including securities
available for sale decreased $44,000 for the three months ended June 30, 2004 as
compared to the same period for 2003. The weighted average yield on other
interest-earning assets increased slightly from 1.6% for the first three months
of 2003 to 1.7% for the first three months of 2004 due to the increase in the
mix to higher yielding other earning assets. We expect our interest income will
increase as average interest earning assets and interest rates on such assets
increase. Growth in interest earnings assets is anticipated due to the proceeds
from the stock offering as well as general growth from existing markets and
possibly new markets. Our interest income could be adversely impacted by
continued low interest rates or decreases in average interest earning assets.

        INTEREST EXPENSE. Interest expense decreased $285,000 to $2.8 million
for the three months ending June 30, 2004 from $3.1 million for the same period
in 2003. The decrease in interest expense was due to a decrease in the Company's
cost of funds in the second quarter of 2004 resulting from the continued low
interest rate environment partially offset by increased borrowings. The cost of
funds was 2.36% for the three months ended June 30, 2004 compared to 2.92% for
the three months ended June 30, 2003. Although average interest bearing deposits
outstanding increased $10.7 million for the three months ended June 30, 2004 as
compared to the same three months in 2003, interest expense on deposits was
$646,000 less due to the repricing of deposit accounts to lower interest rates
consistent with the continued low interest rate environment.

        Interest expense on Federal Home Loan Bank advances increased $361,000
to $882,000 for the three months ended June 30, 2004 from $521,000 for the three
months ended June 30, 2003. The increase resulted from an increase in average
Federal Home Loan Bank advances of $40.9 million to $83.2 million for the three
months ended June 30, 2004 from $42.3 million for the same period in 2003. This
increase in interest expense due to increased levels of borrowings was partially
offset by a 69 basis point decrease in the cost of Federal Home Loan Bank
advances, from 4.93% for the second quarter of 2003 to 4.24% for the same
quarter in 2004. We expect interest expense to increase as interest rates and
average interest bearing liabilities increase.


                                       23
<PAGE>

        PROVISION FOR LOAN LOSSES. We establish provisions for loan losses,
which are charged to operations, at a level required to reflect probable
incurred credit losses in the loan portfolio. In evaluating the level of the
allowance for loan losses, management considers historical loss experience, the
types of loans and the amount of loans in the loan portfolio, adverse situations
that may affect borrowers' ability to repay, estimated value of any underlying
collateral, and prevailing economic conditions. Large groups of smaller balance
homogenous loans, such as residential real estate, small commercial real estate,
home equity and consumer loans, are evaluated in the aggregate using historical
loss factors adjusted for current economic conditions and other relevant data.
Larger non-homogeneous loans such as commercial loans for which management has
concerns about the borrowers' ability to repay are evaluated individually, and
specific allowance allocations are provided for such loans when necessary.

        Based on management's evaluation of these factors, provisions of
$109,000 and $2.9 million were made during the three months ended June 30, 2004
and for the same period in 2003. The provision expense for the second quarter of
2003 included $2.3 million for the problem loan relationship discussed in the
"Comparison of Financial Condition at June 30, 2004 and December 31, 2003".
Consumer loan losses declined in the second quarter of 2004 as compared to the
same quarter in 2003 as a result of the sale of our credit card portfolio and
the continued decline of our automobile loan portfolio. Accordingly, the amount
of general allowance allocations made for smaller balance homogeneous loans
decreased during the three months ended June 30, 2004 compared to the three
months ended June 30, 2003.

        Management assesses the allowance for loan losses on a quarterly basis
and makes provisions for loan losses as necessary in order to maintain the
allowance for loan losses based on all known and inherent losses that are both
probable and can be reasonably estimated. While management uses available
information to recognize losses on loans, future loan loss provisions may be
necessary based on changes in economic conditions and changes in borrower
situations. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowance for loan losses and
may require us to recognize additional provisions based on their judgment of
information available to them at the time of their examination. The allowance
for loan losses as of June 30, 2004 is maintained at a level that represents
management's best estimate of probable incurred losses in the loan portfolio.

        NON-INTEREST INCOME. Non-interest income decreased $52,000 to $1.3
million for the three months ended June 30, 2004 from $1.4 million for the same
period in 2003. Service charges and fees increased $96,000 for the three months
ended June 30,2004 as compared to the same period in 2003, primarily due to
increases in transaction charges and the growth of service charges for
commercial checking accounts as that deposit type continues to grow. This
increase was offset by decreases in several non-interest income categories.
Commission income decreased $100,000 for the three months ended June 30, 2004
compared to the same period in 2003 primarily due to a non-recurring commission
payment of

                                       24
<PAGE>

$105,000 the Company received in 2003. Also interchange fees earned from
customer card transactions decreased $44,000 for the three months ended June 30,
2004 as compared to the same period in 2003 primarily due to the sale of the
credit card portfolio in July of 2003. We expect interchange fees in 2004 will
continue to lag 2003 as the full year impact from the sale of the credit card
business is realized.

        NON-INTEREST EXPENSE. Non-interest expense increased $126,000 to $4.0
million for the three months ended June 30, 2004 compared to $3.8 million for
the three months ended June 30, 2003. The increase in non-interest expense is
due in part to increases of $146,000 in compensation and benefits, and $41,000
in occupancy and equipment costs, related to our overall growth and expansion
including the acquisition of new branches and expenses associated with
additional personnel and occupancy needed to operate the new branches. Outside
professional service expenses increased $106,000 for the second quarter of 2004
as compared to the same period in 2003 primarily due to increased legal costs of
$42,000 associated with the lease pool receivables discussed in "Comparison of
Financial Condition at June 30, 2004 and December 31, 2003" and $25,000 for the
outsourcing of document preparation for mortgage loan documents. Offsetting
these increases was a decrease of $63,000 of data processing costs primarily due
to reduced depreciation expense for computer equipment. The Company also had
decreased costs in the second quarter of 2004 as compared to the same quarter in
2003 for expenses associated with the credit card business that was sold in July
2003. Namely interchange charges and collection expense decreased $37,000 and
$25,000, respectively. Finally advertising expense decreased $45,000 for the
three months ended June 30, 2004 as compared to the same period in 2003 due a
change in the timing of when certain media promotions will be conducted. We
anticipate non-interest expense will increase in future periods as a result of
additional growth and expansion.

        INCOME TAX EXPENSE. Income tax expense increased to $765,000 for the
three months ended June 30, 2004 compared to a tax benefit of $207,000 for the
same period in 2003. The increase is due to an increase in income before income
taxes when comparing the two periods. We anticipate that income tax expense will
continue to vary as income before income taxes varies.

LIQUIDITY

        Management maintains a liquidity position that it believes will
adequately provide funding for loan demand and deposit run-off that may occur in
the normal course of business. Atlantic Coast Federal Corporation relies on a
number of different sources in order to meet its potential liquidity demands.
The primary sources are increases in deposit accounts and cash flows from loan
payments and the securities portfolio.

        In addition to these primary sources of funds, management has several
secondary sources available to meet potential funding requirements. As of June
30, 2004 and December 31, 2003, Atlantic Coast Federal Corporation had
additional borrowing capacity of $99.8 million and $88 million with the Federal

                                       25
<PAGE>

Home Loan Bank of Atlanta. Additionally, Atlantic Coast Federal Corporation has
existing lines of credit available in excess of $20 million with other financial
institutions. Atlantic Coast Federal Corporation has classified its entire
securities portfolio as available for sale, providing an additional source of
liquidity. Management believes that Atlantic Coast Federal Corporation's
security portfolio is of high quality and the securities would therefore be
marketable. The Company also can utilize brokers to obtain certificates of
deposits at costs and terms that are comparable to certificate of deposits
originated in its branch network. As of June 30, 2004 and December 31, 2003 the
Atlantic Coast Federal Corporation had no certificates of deposits obtained
through brokers but in August 2004 purchased broker deposits of $13.3 million to
replace maturing branch originated certificates of deposits. These certificate
of deposits have a weighted average maturity of 17.7 months and a weighted
average rate of 2.56%. In addition, Atlantic Coast Federal Corporation has
historically sold mortgage loans in the secondary market to reduce interest rate
risk and to create an additional source of liquidity. The stock offering will
increase our liquidity until such time that we deploy the net proceeds from cash
and other short term investments to loans consistent with our business plan as
well as increase our regulatory capital.

        In the first six months of 2004, cash and cash equivalents have
increased $20.6 million from $9.0 million as of December 31, 2003 to $29.6
million as of June 30, 2004. Cash from operating activities of $4.6 million
combined with cash from financing activities of $78.1 million exceeded cash used
for investing activities of $62.1 million. Primary sources of cash were
increases in deposits of $48.1 million and additional FHLB borrowings of $30.0
million. Deposit growth occurred in March 2004 principally from new or existing
depositors who were establishing or expanding subscription rights for the stock
offering. While the majority of these deposits were withdrawn in April 2004,
approximately $18.6 million were retained. The remaining deposit growth occurred
through normal operations. Primary uses of cash included net originations of
portfolio loans of $65.4 million and purchases of securities available for sale
of $38.2 million. Due to the short term nature of the acquired deposits other
investing activities were limited.

        During first six months of 2003, cash and cash equivalents decreased
$1.5 million from $14.0 million as of December 31, 2002 to $12.5 million as of
June 30, 2003. Cash from operating activities of $9.4 million and cash from
financing activities of $28.6 million were offset by cash used for investing
activities of $39.4 million for the six months ending June 30, 2003. Primary
sources of cash through June 30, 2003 included proceeds from sales of loans of
$9.1 million, proceeds from sales and maturities of available for sale
securities totaling $10.2 million, increases in deposits of $31.8 million, and
cash received for net liabilities assumed in branch acquisitions of $9.1
million. Primary uses of cash included net originations of portfolio loans and
originations of loans held for sale totaling $37.2 million, purchases of
securities available for sale of $25.3 million, repayment of FHLB advances of
$3.2 million and purchases of bank owned life insurance of $2.9 million.

                                       26
<PAGE>

        Our stock offering will provide significant additional liquidity and
capital resources. As our liquidity positions have historically been maintained
to provide for loan demand and deposit run-off, the stock offering proceeds may
provide excess liquidity in the near term. The additional liquidity and capital
resources from the stock offering will help provide for the future growth of
Atlantic Coast Federal Corporation.

        As of June 30, 2004, management is not aware of any current
recommendations by regulatory authorities, which, if they were implemented,
would have or reasonably likely to have a material adverse affect on the
Atlantic Coast Federal Corporation's liquidity, capital resources or operations.

ITEM 4 - CONTROLS AND PROCEDURES

        An evaluation was performed under the supervision and with the
participation of the Company's management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures (as defined in Rule 13a-15(e)
or 15d-15(e)) promulgated under the Securities and Exchange Act of 1934, as
amended) as of June 30, 2004. Based on such evaluation, our Chief Executive
Officer and Chief Financial Officer, have concluded that our disclosure controls
and procedures are designed to ensure that information required to be disclosed
by us in the reports that we file or submit under the Securities Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and regulations and are operating in an effective manner.

        No change in our internal controls over financial reporting( as defined
in Rules 13a-15(f) or 15(d)-15(f)) under the Securities Exchange Act of 1934)
occurred during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.


                                       27
<PAGE>

                       ATLANTIC COAST FEDERAL CORPORATION

                                    FORM 10-Q

                                  June 30, 2004

                           Part II - Other Information

Item 1.    LEGAL PROCEEDINGS

           There are no material pending legal proceedings to which the Company
           or its subsidiaries is a party other than ordinary routine litigation
           incidental to their respective businesses.

Item 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

           None

Item 3.    DEFAULTS UPON SENIOR SECURITIES

           None

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

           None

Item 5.    OTHER INFORMATION

           None

Item 6.    EXHIBITS AND REPORTS ON FORM 8-K

           a.         Exhibits

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

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

                      32.1       Certification of Chief Executive Officer
                                 Pursuant to 18 U.S.C. Section 1350, as Adopted
                                 Pursuant to Section 906 of the Sarbanes-Oxley
                                 Act of 2002.

                      32.2       Certification of Chief Financial Officer
                                 Pursuant to 18 U.S.C. Section 1350, as Adopted
                                 Pursuant to Section 906 of the Sarbanes-Oxley
                                 Act of 2002.

           b.         Reports on Form 8-K

                      None


                                       28
<PAGE>

                       ATLANTIC COAST FEDERAL CORPORATION

                                    FORM 10-Q

                                  June 30, 2004

                           Part II - Other Information

                                   Signatures




Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                        ATLANTIC COAST FEDERAL CORPORATION
                                                   (Registrant)




Date: September 27, 2004             /s/ Robert J. Larison, Jr.
                                     -------------------------------------------
                                     Robert J. Larison Jr - President and Chief
                                     Executive Officer



Date:  September 27, 2004            /s/ Jon C. Parker
                                     -------------------------------------------
                                     Jon C. Parker - Chief Financial Officer



                                       29