##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 000-50962
 ATLANTIC COAST FEDERAL CORPORATION
  FEDERAL
(State or other jurisdiction of
incorporation or organization)
    
    59-3764686
(I.R.S. Employer
Identification Number)
 505 Haines Avenue
Waycross, Georgia
(Address of principal executive offices)
    
    31501
(Zip Code)
  þ o
 o þ
 o o
  Class
Common Stock, $.01 Par Value
    
    Outstanding at October 31, 2005
14,520,838




---



Page NumberPART I.Item 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    35Item 4. Controls and Procedures
    
    
    36PART II.Item 1. Legal Proceedings
    
    
    37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 3. Defaults Upon Senior Securities
    
    
    37Item 4. Submission of Matters to a Vote of Security Holders
    
    
    37Item 5. Other Information
    
    
    38Item 6. Exhibits
    
    
    38Form 10-Q Signature Page
    
    
    39Ex-31.1 Section 302 CertificationEx-31.2 Section 302 CertificationEx-32.1 Section 906 CertificationEx-32.2 Section 906 Certification
 
  2




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##### Table of Contents



September 30,
    
    
    December 31,2005
    
    
    2004ASSETSCash and due from financial institutions
    
    $
    14,115,266
    
    
    $
    7,422,031Short-term interest-bearing deposits
    
    
    38,014,198
    
    
    
    18,285,854Total cash and cash equivalents
    
    
    52,129,464
    
    
    
    25,707,885Other interest bearing deposits in other financial institutions
    
    
    1,800,000
    
    
    
    900,000Securities purchased under agreements to resell
    
    
    
    
    
    
    11,800,000Securities available for sale
    
    
    71,568,718
    
    
    
    53,363,310Real estate mortgages held for sale
    
    
    106,400
    
    
    
    80,545Loans, net of allowance for loan losses of $4,251,663 at September 30,
2005 and $3,956,230 at December 31, 2004
    
    
    557,164,662
    
    
    
    517,711,074Federal Home Loan Bank stock
    
    
    7,074,400
    
    
    
    5,511,400Accrued interest receivable
    
    
    2,656,210
    
    
    
    2,277,147Land, premises and equipment, net
    
    
    13,892,396
    
    
    
    10,515,101Bank owned life insurance
    
    
    20,315,096
    
    
    
    4,923,555Other real estate owned
    
    
    310,000
    
    
    
    306,679Goodwill
    
    
    2,661,190
    
    
    
    2,661,190Other assets
    
    
    3,492,577
    
    
    
    1,919,999Total assets
    
    $
    733,171,113
    
    
    $
    637,677,885LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Non-interest-bearing demand
    
    $
    41,292,776
    
    
    $
    34,798,817Interest bearing demand
    
    
    79,427,278
    
    
    
    30,581,713Savings and money market
    
    
    108,221,460
    
    
    
    124,259,438Time
    
    
    273,205,605
    
    
    
    246,042,229Total deposits
    
    
    502,147,119
    
    
    
    435,682,197Federal Home Loan Bank advances
    
    
    129,000,000
    
    
    
    100,314,286Accrued expenses and other liabilities
    
    
    4,531,913
    
    
    
    2,981,139Total liabilities
    
    
    635,679,032
    
    
    
    538,977,622Commitments and contingencies
    
    
    
    
    
    
    Preferred stock: $.01 par value; 2,000,000 shares authorized,
none issued
    
    
    
    
    
    
    Common stock: $.01 par value; 18,000,000 shares authorized; issued and outstanding
of 14,805,969 at September 30, 2005 and 14,547,500 at December 31, 2004
    
    
    148,060
    
    
    
    145,475Additional paid in capital
    
    
    59,636,723
    
    
    
    56,332,850Unearned employee stock ownership plan (ESOP) shares of 384,054
at September 30, 2005 and 418,968 shares at December 31, 2004
    
    
    (3,840,540
    )
    
    
    (4,189,680
    )Unearned management restricted stock plan shares of 258,469 at September
30, 2005 and 0 shares at December 31, 2004
    
    
    (3,035,550
    )
    
    
    Retained earnings
    
    
    48,518,012
    
    
    
    46,412,522Accumulated other comprehensive income (loss)
    
    
    113,401
    
    
    
    (904
    )Treasury
stock, at cost, 285,131 shares at September 31, 2005 and 0 shares at
December 31, 2004
    
    
    (4,048,025
    )
    
    
    Total stockholders equity
    
    
    97,492,081
    
    
    
    98,700,263Total liabilities and stockholders equity
    
    $
    733,171,113
    
    
    $
    637,677,885
 
 3




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004INTEREST AND DIVIDEND INCOMELoans
    
    $
    8,330,514
    
    
    $
    7,762,489
    
    
    $
    24,532,289
    
    
    $
    22,588,663Securities and interest-bearing deposits
in other financial institutions
    
    
    1,076,299
    
    
    
    333,291
    
    
    
    2,464,245
    
    
    
    716,937Securities purchased under agreements to resell
    
    
    
    
    
    
    
    
    
    
    72,412
    
    
    
    Total interest and dividend income
    
    
    9,406,813
    
    
    
    8,095,780
    
    
    
    27,068,946
    
    
    
    23,305,600INTEREST EXPENSEDeposits
    
    
    3,227,839
    
    
    
    2,073,437
    
    
    
    8,547,046
    
    
    
    5,981,860Federal Home Loan Bank advances
    
    
    1,355,530
    
    
    
    1,011,756
    
    
    
    3,636,035
    
    
    
    2,719,374Total interest expense
    
    
    4,583,369
    
    
    
    3,085,193
    
    
    
    12,183,081
    
    
    
    8,701,234NET INTEREST INCOME
    
    
    4,823,444
    
    
    
    5,010,587
    
    
    
    14,885,865
    
    
    
    14,604,366Provision for loan losses
    
    
    442,095
    
    
    
    674,415
    
    
    
    1,542,384
    
    
    
    2,327,245NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    
    4,381,349
    
    
    
    4,336,172
    
    
    
    13,343,481
    
    
    
    12,277,121NONINTEREST INCOMEService charges and fees
    
    
    1,640,849
    
    
    
    1,051,564
    
    
    
    3,769,943
    
    
    
    2,924,315Gain on the sale of loans held for sale
    
    
    49,161
    
    
    
    6,027
    
    
    
    113,795
    
    
    
    174,540Gain(loss) on the sale of securities available
for sale
    
    
    (211
    )
    
    
    (46,978
    )
    
    
    (211
    )
    
    
    (38,535
    )Gain(loss) on sale of foreclosed assets
    
    
    (1,221
    )
    
    
    27,285
    
    
    
    40,505
    
    
    
    82,334Commission income
    
    
    126,176
    
    
    
    63,988
    
    
    
    328,416
    
    
    
    232,245Interchange fees
    
    
    187,950
    
    
    
    163,322
    
    
    
    561,186
    
    
    
    483,809Other
    
    
    256,110
    
    
    
    42,808
    
    
    
    526,781
    
    
    
    135,568Total noninterest income
    
    
    2,258,814
    
    
    
    1,308,016
    
    
    
    5,340,415
    
    
    
    3,994,276NONINTEREST EXPENSECompensation and benefits
    
    
    2,402,174
    
    
    
    1,880,779
    
    
    
    6,985,955
    
    
    
    5,700,328Occupancy and equipment
    
    
    459,640
    
    
    
    360,515
    
    
    
    1,267,672
    
    
    
    1,055,060Data processing
    
    
    436,648
    
    
    
    276,810
    
    
    
    978,133
    
    
    
    831,383Advertising
    
    
    166,162
    
    
    
    127,228
    
    
    
    445,723
    
    
    
    305,096Outside professional services
    
    
    526,903
    
    
    
    424,254
    
    
    
    1,775,286
    
    
    
    1,162,444Interchange charges
    
    
    161,313
    
    
    
    54,455
    
    
    
    462,709
    
    
    
    487,331Collection expense and repossessed asset losses
    
    
    83,925
    
    
    
    61,528
    
    
    
    246,733
    
    
    
    149,523Telephone
    
    
    162,541
    
    
    
    131,817
    
    
    
    411,762
    
    
    
    401,870Other
    
    
    714,055
    
    
    
    741,399
    
    
    
    2,023,432
    
    
    
    1,969,540Total noninterest expense
    
    
    5,113,361
    
    
    
    4,058,785
    
    
    
    14,597,405
    
    
    
    12,062,575INCOME BEFORE INCOME TAX EXPENSE
    
    
    1,526,802
    
    
    
    1,585,403
    
    
    
    4,086,491
    
    
    
    4,208,822Income tax expense(benefit)
    
    
    (387,683
    )
    
    
    581,455
    
    
    
    487,151
    
    
    
    1,510,377NET INCOME
    
    $
    1,914,485
    
    
    $
    1,003,948
    
    
    $
    3,599,340
    
    
    $
    2,698,445Earnings per common share:Basic
    
    $
    0.14
    
    
    $
    0.12
    
    
    $
    0.25
    
    
    $
    0.31Diluted
    
    $
    0.14
    
    
    $
    0.12
    
    
    $
    0.25
    
    
    $
    0.31Dividends declared per common share:
    
    $
    0.07
    
    
    $
    
    
    
    $
    0.18
    
    
    $
    
 
 4




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##### Table of Contents



ADDITIONAL
    
    
    UNEARNED
    
    
    UNEARNED
    
    
    
    
    
    
    OTHERCOMMON
    
    
    PAID IN
    
    
    ESOP
    
    
    RESTRICTED
    
    
    RETAINED
    
    
    COMPREHENSIVE
    
    
    TREASURY
    
    
    TOTALSTOCK
    
    
    CAPITAL
    
    
    STOCK
    
    
    STOCK AWARDS
    
    
    EARNINGS
    
    
    INCOME(LOSS)
    
    
    STOCK
    
    
    EQUITYFor the nine months ended September 30, 2005Balance at January 1, 2005
    
    $
    145,475
    
    
    $
    56,332,850
    
    
    ($
    4,189,680
    )
    
    $
    
    
    
    $
    46,412,522
    
    
    ($
    904
    )
    
    $
    
    
    
    $
    98,700,263ESOP shares earned, 34,914 shares
    
    
    
    
    
    
    98,323
    
    
    
    349,140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    447,463Management restricted stock granted
    
    
    2,585
    
    
    
    3,176,584
    
    
    
    
    
    
    
    (3,179,169
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Management restricted stock expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143,619
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143,619Stock options expense
    
    
    
    
    
    
    28,966
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,966Dividends declared/paid( $.18 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,493,850
    )
    
    
    
    
    
    
    
    
    
    
    (1,493,850
    )Treasury stock purchased at cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,048,025
    )
    
    
    (4,048,025
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,599,340
    
    
    
    
    
    
    
    
    
    
    
    3,599,340Other comprehensive income(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,305
    
    
    
    
    
    
    
    114,305Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,713,645Balance at September 30, 2005(unaudited)
    
    $
    148,060
    
    
    $
    59,636,723
    
    
    ($
    3,840,540
    )
    
    ($
    3,035,550
    )
    
    $
    48,518,012
    
    
    $
    113,401
    
    
    ($
    4,048,025
    )
    
    $
    97,492,081For the nine months ended September 30, 2004Balance at January 1, 2004
    
    $
    10
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    43,220,688
    
    
    ($
    2,323
    )
    
    $
    
    
    
    $
    43,218,375Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,698,445
    
    
    
    
    
    
    
    
    
    
    
    2,698,445Other comprehensive income(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,104
    )
    
    
    
    
    
    
    (37,104
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,661,341Balance at September 30, 2004(unaudited)
    
    $
    10
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    45,919,133
    
    
    ($
    39,427
    )
    
    $
    
    
    
    $
    45,879,716
 
 5




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##### Table of Contents



Nine MonthsEnded September 30,2005
    
    
    2004Cash flows from operating activitiesNet income
    
    $
    3,599,340
    
    
    $
    2,698,445Adjustments to reconcile net income
to net cash from operating activitiesProvision for loan losses
    
    
    1,542,384
    
    
    
    2,327,246Gain on sale of real estate mortgages held for sale
    
    
    (113,795
    )
    
    
    (174,540
    )Gain on the sale of other real estate owned
    
    
    (40,505
    )
    
    
    (82,334
    )Loans originated for sale
    
    
    (9,164,089
    )
    
    
    (10,636,272
    )Proceeds from loan sales
    
    
    9,252,029
    
    
    
    11,120,665(Gain) loss on the sale of securities
available for sale
    
    
    211
    
    
    
    38,535ESOP compensation expense
    
    
    447,463
    
    
    
    Share-based compensation expense
    
    
    172,585
    
    
    
    Net depreciation and amortization
    
    
    1,391,664
    
    
    
    915,765Net change in accrued interest receivable
    
    
    (379,063
    )
    
    
    (53,994
    )Increase in bank owned life insurance
    
    
    (391,541
    )
    
    
    (129,900
    )Net change in other assets
    
    
    (1,217,170
    )
    
    
    (1,922,971
    )Net change in accrued expenses
and other liabilities
    
    
    1,174,638
    
    
    
    2,054,232Net cash from operating activities
    
    
    6,274,151
    
    
    
    6,154,877Cash flows from investing activitiesNet change in securities purchased under
agreements to resell
    
    
    11,800,000
    
    
    
    (10,300,000
    )Proceeds from maturities and payments
of securities available for sale
    
    
    23,915,634
    
    
    
    5,354,351Proceeds from sales of securities available for sale
    
    
    1,210,000
    
    
    
    1,976,964Purchase of securities available for sale
    
    
    (43,678,308
    )
    
    
    (2,103,310
    )Loans purchased
    
    
    (27,279,491
    )
    
    
    (6,437,739
    )Proceeds from sales of loans from portfolio
    
    
    
    
    
    
    9,565,463Net change in loans
    
    
    (14,771,453
    )
    
    
    (77,836,329
    )Expenditures on premises and equipment
    
    
    (4,152,035
    )
    
    
    (769,933
    )Proceeds from the sale of other real estate owned
    
    
    581,184
    
    
    
    1,020,477Purchase of FHLB stock
    
    
    (1,563,000
    )
    
    
    (1,467,100
    )Purchase of bank-owned life insurance
    
    
    (15,000,000
    )
    
    
    Net change in other investments
    
    
    (900,000
    )
    
    
    500,000Net cash from investing activities
    
    
    (69,837,469
    )
    
    
    (80,497,156
    )
  6




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##### Table of Contents



Nine MonthsEnded September 30,2005
    
    
    2004Cash flows from financing activitiesNet increase in deposits
    
    $
    66,464,922
    
    
    $
    52,271,249FHLB advances
    
    
    30,000,000
    
    
    
    55,000,000Repayment of FHLB advances
    
    
    (1,314,286
    )
    
    
    (25,657,144
    )Stock subscriptions received
    
    
    
    
    
    
    38,326,522Treasury stock purchased
    
    
    (4,048,025
    )
    
    
    Dividends paid
    
    
    (1,117,714
    )
    
    
    Net cash from financing activities
    
    
    89,984,897
    
    
    
    119,940,627Net change in cash and cash equivalents
    
    
    26,421,579
    
    
    
    45,598,348Cash and cash equivalents at beginning of period
    
    
    25,707,885
    
    
    
    8,995,824Cash and cash equivalents at end of period
    
    $
    52,129,464
    
    
    $
    54,594,172Supplemental information:Interest paid
    
    $
    11,910,639
    
    
    $
    8,594,524Income taxes paid
    
    
    942,700
    
    
    
    1,498,000Supplemental non-cash disclosures:Loans transferred to other real estate
    
    $
    544,000
    
    
    $
    133,126
  7




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##### Table of Contents



8




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##### Table of Contents



2005
    
    $
    10,000,0002006
    
    
    5,000,0002007
    
    
    2,000,0002008
    
    
    8,000,0002009
    
    
    5,000,000Thereafter
    
    
    99,000,000$
    129,000,000
       9




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##### Table of Contents



For the three-months
    
    
    For the nine-monthsended September 30,
    
    
    ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004BasicNet income
    
    $
    1,914,485
    
    
    $
    1,003,948
    
    
    $
    3,599,340
    
    
    $
    2,698,445Weighted average common shares
outstanding
    
    
    14,732,808
    
    
    
    8,728,500
    
    
    
    14,609,948
    
    
    
    8,728,500Less: Average unallocated ESOP shares
    
    
    418,968
    
    
    
    
    
    
    
    418,968
    
    
    
    Average unvested restricted stock
awards
    
    
    258,469
    
    
    
    
    
    
    
    87,103
    
    
    
    Average shares
    
    
    14,055,371
    
    
    
    8,728,500
    
    
    
    14,103,877
    
    
    
    8,728,500Basic earnings per common share
    
    $
    0.14
    
    
    $
    0.12
    
    
    $
    0.25
    
    
    $
    0.31DilutedNet income
    
    $
    1,914,485
    
    
    $
    1,003,948
    
    
    $
    3,599,340
    
    
    $
    2,698,445Weighted average common shares
outstanding for basic earnings per common
share
    
    
    14,055,371
    
    
    
    8,728,500
    
    
    
    14,103,877
    
    
    
    8,728,500Add: Dilutive effects of assumed
exercises of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Add: Dilutive effects of full vesting of
stock awards
    
    
    37,532
    
    
    
    
    
    
    
    12,511
    
    
    
    Average shares and dilutive potential
common shares
    
    
    14,092,903
    
    
    
    8,728,500
    
    
    
    14,116,388
    
    
    
    8,728,500Diluted earnings per common share
    
    $
    0.14
    
    
    $
    0.12
    
    
    $
    0.25
    
    
    $
    0.31
   The Recognition Plan
  10




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##### Table of Contents



Weighted -AverageGrant-dateShares
    
    
    Fair-valueOutstanding at January 1, 2005
    
    
    0
    
    
    $
    0.00Granted July 1, 2005
    
    
    258,469
    
    
    
    12.30Vested
    
    
    0
    
    
    
    0Forfeited
    
    
    0
    
    
    
    0Non-vested at September 30, 2005
    
    
    258,469
    
    
    $
    12.30
  The Stock Option Plan
  11




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##### Table of Contents



Risk-free interest rate
    
    
    4.07
    %Expected term of stock options (years)
    
    
    6.0Expected stock price volatility
    
    
    23.79
    %Expected dividends
    
    
    2.65
    %
   Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    Shares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at January 1, 2005
    
    
    0
    
    
    $
    0.00
    
    
    
    
    
    
    
    Granted
    
    
    360,100
    
    
    
    13.73
    
    
    
    
    
    
    
    Vested
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    Forfeited
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    Non-vested at September 30, 2005
    
    
    360,100
    
    
    $
    13.73
    
    
    
    9.8
    
    
    $
    61,217Exercisable at September 30, 2005
    
    
    0
    
    
    $
    0.00
    
    
    
    0
    
    
    $
    0.00
 12




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##### Table of Contents



For the three-months
    
    
    For the nine-monthsended September 30,
    
    
    ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income
    
    $
    1,914,485
    
    
    $
    1,003,948
    
    
    $
    3,599,340
    
    
    $
    2,698,445Other comprehensive incomeUnrealized
holding gains and (losses) on securities available for sale
    
    
    (94,176
    )
    
    
    74,049
    
    
    
    (241,313
    )
    
    
    (88,913
    )Less reclassification adjustments for
(gains) losses
recognized in income
    
    
    211
    
    
    
    46,978
    
    
    
    211
    
    
    
    38,535Net unrealized gains and (losses)
    
    
    (93,965
    )
    
    
    121,027
    
    
    
    (241,102
    )
    
    
    (50,378
    )Tax effect
    
    
    35,707
    
    
    
    (45,989
    )
    
    
    91,619
    
    
    
    19,146Net-of-tax amount
    
    
    (58,258
    )
    
    
    75,038
    
    
    
    (149,483
    )
    
    
    (31,232
    )Change in fair value of derivatives used
for cash
flow hedges
    
    
    306,411
    
    
    
    (352,256
    )
    
    
    425,466
    
    
    
    (9,469
    )Tax effect
    
    
    (116,437
    )
    
    
    133,856
    
    
    
    (161,678
    )
    
    
    3,597Net-of-tax amount
    
    
    189,974
    
    
    
    (218,400
    )
    
    
    263,788
    
    
    
    (5,872
    )Other comprehensive income (loss)
    
    
    131,716
    
    
    
    (143,362
    )
    
    
    114,305
    
    
    
    (37,104
    )Total comprehensive income(loss)
    
    $
    2,046,201
    
    
    $
    860,586
    
    
    $
    3,713,645
    
    
    $
    2,661,341
 13




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14




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##### Table of Contents



Forward-Looking Statements
 This Form 10-Q contains forward-looking statements that are statements that are not historical
or current facts. When used in this filing and in future filings by Atlantic Coast Federal
Corporation with the Securities and Exchange Commission, in Atlantic Coast Federal Corporations
press releases or other public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases, anticipate, would be, will
allow, intends to, will likely result, are expected to, will continue, is anticipated,
estimated, projected, or similar expressions are intended to identify, forward looking
statements. Such statements are subject to risks and uncertainties, including but not limited to
changes in economic conditions in Atlantic Coast Federal Corporations market area, changes in
policies by regulatory agencies, fluctuations in interest rates, demand for loans in Atlantic Coast
Federal Corporations market area, changes in the position of banking regulators on the adequacy of
our allowance for loan losses, and competition, all or some of which could cause actual results to
differ materially from historical earnings and those presently anticipated or projected.
 Atlantic Coast Federal Corporation wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made, and advise readers that
various factors, including regional and national economic conditions, substantial changes in levels
of market interest rates, credit and other risks of lending and investing activities, and
competitive and regulatory factors, could affect Atlantic Coast Federal Corporations financial
performance and could cause Atlantic Coast Federal Corporations actual results for future periods
to differ materially from those anticipated or projected.
 Atlantic Coast Federal Corporation does not undertake, and specifically disclaims any
obligation, to update any forward-looking statements to reflect occurrences or unanticipated events
or circumstances after the date of such statements.
 Critical Accounting Policies
   15




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16




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##### Table of Contents



Comparison of financial condition at September 30, 2005 and December 31, 2004
 General.
  September 30,
    
    
    December 31,
    
    
    Increase(decrease)2005
    
    
    2004
    
    
    Dollars
    
    
    Percentage(Dollars in thousands)AssetsCash and cash equivalents
    
    $
    52,130
    
    
    $
    25,708
    
    
    $
    26,422
    
    
    
    102.8
    %Other interest bearing investments
    
    
    1,800
    
    
    
    12,700
    
    
    
    (10,900
    )
    
    
    -85.8
    %Securitites available for sale
    
    
    71,569
    
    
    
    53,363
    
    
    
    18,206
    
    
    
    34.1
    %Loans
    
    
    561,417
    
    
    
    521,667
    
    
    
    39,750
    
    
    
    7.6
    %Allowance for loan loss
    
    
    (4,252
    )
    
    
    (3,956
    )
    
    
    (296
    )
    
    
    7.5
    %Loans, net
    
    
    557,165
    
    
    
    517,711
    
    
    
    39,454
    
    
    
    7.6
    %Loans held for sale
    
    
    106
    
    
    
    81
    
    
    
    25
    
    
    
    30.9
    %Other assets
    
    
    50,401
    
    
    
    28,115
    
    
    
    22,286
    
    
    
    79.3
    %Total assets
    
    $
    733,171
    
    
    $
    637,678
    
    
    $
    95,493
    
    
    
    15.0
    %Liabilities and stockholders equityDepositsNon-interest bearing
    
    $
    41,293
    
    
    $
    34,799
    
    
    $
    6,494
    
    
    
    18.7
    %Interest bearing transaction accounts
    
    
    79,427
    
    
    
    30,582
    
    
    
    48,845
    
    
    
    159.7
    %Savings and money-market
    
    
    108,221
    
    
    
    124,259
    
    
    
    (16,038
    )
    
    
    -12.9
    %Time
    
    
    273,206
    
    
    
    246,042
    
    
    
    27,164
    
    
    
    11.0
    %Total deposits
    
    
    502,147
    
    
    
    435,682
    
    
    
    66,465
    
    
    
    15.3
    %Federal Home Loan Bank advances
    
    
    129,000
    
    
    
    100,314
    
    
    
    28,686
    
    
    
    28.6
    %Accrued expenses and other liabilities
    
    
    4,532
    
    
    
    2,982
    
    
    
    1,550
    
    
    
    52.0
    %Total liabilities
    
    
    635,679
    
    
    
    538,978
    
    
    
    96,701
    
    
    
    17.9
    %Stockholders equity
    
    
    97,492
    
    
    
    98,700
    
    
    
    (1,208
    )
    
    
    -1.2
    %Total liabilities and stockholders equity
    
    $
    733,171
    
    
    $
    637,678
    
    
    $
    95,493
    
    
    
    15.0
    %
 17




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##### Table of Contents



Cash and cash equivalents
 Securities available for sale
 Loans
 Increase(decrease)As of
    
    
    
    
    
    
    As ofSeptember
    
    
    % of total
    
    
    December
    
    
    % of total30,2005
    
    
    loans
    
    
    31, 2004
    
    
    loans
    
    
    Dollars
    
    
    Percentage(Dollars In Thousands)Commercial non-mortgage
    
    $
    6,179
    
    
    
    1.1
    %
    
    $
    3,711
    
    
    
    0.7
    %
    
    $
    2,468
    
    
    
    66.5
    %Commercial real estate and multifamily
    
    
    68,482
    
    
    
    12.3
    %
    
    
    65,220
    
    
    
    12.6
    %
    
    
    3,262
    
    
    
    5.0
    %Construction loans
    
    
    12,538
    
    
    
    2.2
    %
    
    
    16,853
    
    
    
    3.2
    %
    
    
    (4,315
    )
    
    
    -25.6
    %One to four family residential mortgages
    
    
    318,636
    
    
    
    57.1
    %
    
    
    303,544
    
    
    
    58.4
    %
    
    
    15,092
    
    
    
    5.0
    %Consumer and other loansAutomobile
    
    
    32,967
    
    
    
    5.9
    %
    
    
    31,385
    
    
    
    6.0
    %
    
    
    1,582
    
    
    
    5.0
    %Unsecured
    
    
    18,635
    
    
    
    3.3
    %
    
    
    18,871
    
    
    
    3.6
    %
    
    
    (236
    )
    
    
    -1.3
    %Home equity
    
    
    75,403
    
    
    
    13.5
    %
    
    
    60,076
    
    
    
    11.6
    %
    
    
    15,327
    
    
    
    25.5
    %Land
    
    
    11,690
    
    
    
    2.1
    %
    
    
    12,078
    
    
    
    2.3
    %
    
    
    (388
    )
    
    
    -3.2
    %Other
    
    
    13,065
    
    
    
    2.3
    %
    
    
    7,638
    
    
    
    1.5
    %
    
    
    5,427
    
    
    
    71.1
    %Total loans
    
    
    557,595
    
    
    
    
    
    
    
    519,376
    
    
    
    
    
    
    
    38,219
    
    
    
    7.4
    %Allowance for loan losses
    
    
    (4,252
    )
    
    
    -0.8
    %
    
    
    (3,956
    )
    
    
    -0.8
    %
    
    
    (296
    )
    
    
    7.5
    %Net deferred loan (fees) costs
    
    
    3,042
    
    
    
    0.5
    %
    
    
    1,473
    
    
    
    0.3
    %
    
    
    1,569
    
    
    
    106.5
    %Premiums on purchased loans
    
    
    780
    
    
    
    0.1
    %
    
    
    818
    
    
    
    0.2
    %
    
    
    (38
    )
    
    
    -4.6
    %Loans, net
    
    $
    557,165
    
    
    
    
    
    
    $
    517,711
    
    
    
    
    
    
    $
    39,454
    
    
    
    7.6
    %
  18




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##### Table of Contents



Allowance for Loan Losse
 2005
    
    
    2004(In Thousands)Beginning balance
    
    $
    3,956
    
    
    $
    6,593Loans charged-off
    
    
    (1,832
    )
    
    
    (5,437
    )Recoveries
    
    
    586
    
    
    
    634Net charge-offs
    
    
    (1,246
    )
    
    
    (4,803
    )Provision for loan losses
    
    
    1,542
    
    
    
    2,327Ending balance
    
    $
    4,252
    
    
    $
    4,117
   19




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Other assets
 Deposits
 Borrowings
 20




---



##### Table of Contents



Stockholders Equity
 Balance at December 31, 2004
    
    $
    98,700,263Increases to stockholders equity:Net income for the nine months ended September
30, 2005
    
    
    3,599,340Net other comprehensive income
    
    
    114,305ESOP shares allocated to employees
    
    
    447,463Management restricted stock earned under Recognition Plan
    
    
    143,619Stock options earned under Stock Option Plan
    
    
    28,966Total increases to stockholders equity
    
    
    4,333,693Decreases to stockholders equity:Dividends
    
    
    (1,493,850
    )Treasury stock purchased at cost
    
    
    (4,048,025
    )Total decreases to stockholders equity
    
    
    (5,541,875
    )Balance at September 30, 2005
    
    $
    97,492,081
    21




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##### Table of Contents



Comparison of Results of Operation for the Three Months Ended September 30, 2005 and 2004
 General
 Average Balances, Net Interest Income, Yields Earned and Rates Paid
 22




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##### Table of Contents



For the three months ended September 30,2005
    
    
    2004
    
    
    2003AverageBalance
    
    
    Interest
    
    
    Average Yield /Cost
    
    
    Average Balance
    
    
    Interest
    
    
    Average Yield /Cost
    
    
    Average Balance
    
    
    Interest
    
    
    Average Yield /CostINTEREST-EARNING ASSETSLoans receivable(1)
    
    $
    548,855
    
    
    
    8,331
    
    
    
    6.07
    %
    
    $
    507,738
    
    
    
    7,762
    
    
    
    6.12
    %
    
    $
    407,578
    
    
    
    7,383
    
    
    
    7.25
    %Securities(2)
    
    
    69,487
    
    
    
    596
    
    
    
    3.43
    %
    
    
    20,512
    
    
    
    104
    
    
    
    2.04
    %
    
    
    36,853
    
    
    
    165
    
    
    
    1.79
    %Other interest-earning assets(3)
    
    
    55,355
    
    
    
    480
    
    
    
    3.47
    %
    
    
    45,159
    
    
    
    229
    
    
    
    2.03
    %
    
    
    2,723
    
    
    
    56
    
    
    
    8.16
    %Total interest-earning assets
    
    
    673,696
    
    
    
    9,407
    
    
    
    5.59
    %
    
    
    573,409
    
    
    
    8,096
    
    
    
    5.65
    %
    
    
    447,154
    
    
    
    7,604
    
    
    
    6.80
    %Non-interest earning assets
    
    
    50,998
    
    
    
    
    
    
    
    
    
    
    
    37,965
    
    
    
    
    
    
    
    
    
    
    
    45,786Total assets
    
    $
    724,694
    
    
    
    
    
    
    
    
    
    
    $
    611,374
    
    
    
    
    
    
    
    
    
    
    $
    492,940INTEREST-BEARING LIABILITIESSavings deposits
    
    $
    59,367
    
    
    
    61
    
    
    
    0.41
    %
    
    $
    78,577
    
    
    
    72
    
    
    
    0.37
    %
    
    $
    75,337
    
    
    
    187
    
    
    
    0.99
    %Interest bearing demand accounts
    
    
    71,734
    
    
    
    431
    
    
    
    2.40
    %
    
    
    28,170
    
    
    
    72
    
    
    
    1.02
    %
    
    
    14,579
    
    
    
    32
    
    
    
    0.88
    %Money market accounts
    
    
    53,079
    
    
    
    358
    
    
    
    2.70
    %
    
    
    58,073
    
    
    
    248
    
    
    
    1.71
    %
    
    
    59,931
    
    
    
    182
    
    
    
    1.21
    %Time deposits
    
    
    267,901
    
    
    
    2,377
    
    
    
    3.55
    %
    
    
    231,088
    
    
    
    1,682
    
    
    
    2.91
    %
    
    
    221,956
    
    
    
    1,875
    
    
    
    3.38
    %Federal Home Loan Bank advances
    
    
    129,008
    
    
    
    1,356
    
    
    
    4.20
    %
    
    
    91,958
    
    
    
    1,012
    
    
    
    4.40
    %
    
    
    43,643
    
    
    
    539
    
    
    
    4.94
    %Total interest-bearing liabilities
    
    
    581,089
    
    
    
    4,583
    
    
    
    3.16
    %
    
    
    487,867
    
    
    
    3,085
    
    
    
    2.53
    %
    
    
    415,446
    
    
    
    2,816
    
    
    
    2.71
    %Non-interest bearing liabilities
    
    
    43,527
    
    
    
    
    
    
    
    
    
    
    
    77,205
    
    
    
    
    
    
    
    
    
    
    
    35,565Total liabilities
    
    
    624,616
    
    
    
    
    
    
    
    
    
    
    
    565,072
    
    
    
    
    
    
    
    
    
    
    
    451,011Stockholders equity
    
    
    100,078
    
    
    
    
    
    
    
    
    
    
    
    46,302
    
    
    
    
    
    
    
    
    
    
    
    41,929Total liabilities and stockholders equity
    
    $
    724,694
    
    
    
    
    
    
    
    
    
    
    $
    611,374
    
    
    
    
    
    
    
    
    
    
    $
    492,940Net interest income
    
    
    
    
    
    $
    4,824
    
    
    
    
    
    
    
    
    
    
    $
    5,011
    
    
    
    
    
    
    
    
    
    
    $
    4,789Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.42
    %
    
    
    
    
    
    
    
    
    
    
    3.12
    %
    
    
    
    
    
    
    
    
    
    
    4.09
    %Net earning assets
    
    $
    92,607
    
    
    
    
    
    
    
    
    
    
    $
    85,542
    
    
    
    
    
    
    
    
    
    
    $
    31,708Net interest margin(4)
    
    
    
    
    
    
    
    
    
    
    2.86
    %
    
    
    
    
    
    
    
    
    
    
    3.50
    %
    
    
    
    
    
    
    
    
    
    
    4.28
    %Average interest-earning assets to average interest-bearing liabilities
    
    
    
    
    
    
    115.94
    %
    
    
    
    
    
    
    
    
    
    
    117.53
    %
    
    
    
    
    
    
    
    
    
    
    107.63
    %
 
 (1)
    
    Calculated net of deferred loan fees and loss reserve. Nonaccrual loans included as loans carrying a zero yield(2)
    
    Calculated based on carrying value. Not full tax equivalents, as the numbers would not change materially from those presented in the table.(3)
    
    Includes Federal Home Loan Bank stock at cost and term deposits with other financial institutions.(4)
    
    Net interest income divided by average interest-earning assets. 23




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##### Table of Contents



Rate/Volume Analysis
 Three Months Ended September 30,2005 vs. 2004
    
    
    2004 vs. 2003Increase/(Decrease)
    
    
    Total
    
    
    Increase/(Decrease)
    
    
    TotalDue to
    
    
    Increase
    
    
    Due to
    
    
    IncreaseVolume
    
    
    Rate
    
    
    (Decrease)
    
    
    Volume
    
    
    Rate
    
    
    (Decrease)( in Thousands)Interest-Earning AssetsLoans receivable
    
    $
    624
    
    
    $
    (56
    )
    
    $
    568
    
    
    $
    1,641
    
    
    $
    (1,262
    )
    
    $
    379Securities
    
    
    382
    
    
    
    110
    
    
    
    492
    
    
    
    (81
    )
    
    
    20
    
    
    
    (61
    )Other interest-earning assets
    
    
    60
    
    
    
    191
    
    
    
    251
    
    
    
    245
    
    
    
    (71
    )
    
    
    174Total interest-earning assets
    
    
    1,066
    
    
    
    245
    
    
    
    1,311
    
    
    
    1,805
    
    
    
    (1,313
    )
    
    
    492Interest-Bearing Liabilities:Savings deposits
    
    
    (19
    )
    
    
    8
    
    
    
    (11
    )
    
    
    8
    
    
    
    (123
    )
    
    
    (115
    )Interest bearing demand accounts
    
    
    192
    
    
    
    167
    
    
    
    359
    
    
    
    34
    
    
    
    6
    
    
    
    40Money market accounts
    
    
    (23
    )
    
    
    134
    
    
    
    111
    
    
    
    (6
    )
    
    
    71
    
    
    
    65Time deposits
    
    
    293
    
    
    
    402
    
    
    
    695
    
    
    
    75
    
    
    
    (268
    )
    
    
    (193
    )FHLB advances
    
    
    391
    
    
    
    (47
    )
    
    
    344
    
    
    
    537
    
    
    
    (64
    )
    
    
    473Total interest-bearing liabilities
    
    
    834
    
    
    
    664
    
    
    
    1,498
    
    
    
    648
    
    
    
    (378
    )
    
    
    270Net interest income
    
    $
    232
    
    
    $
    (419
    )
    
    $
    (187
    )
    
    $
    1,157
    
    
    $
    (935
    )
    
    $
    222
 Interest Income.
  24




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##### Table of Contents



Interest Expense.
 Net Interest Income.
 Provision for Loan Losses.
 25




---



##### Table of Contents



Non-interest income
 For the three months ended September 30,
    
    
    Increase(decrease)2005
    
    
    2004
    
    
    Dollars
    
    
    Percentage(Dollars in Thousands)Service charges and fees
    
    $
    1,641
    
    
    $
    1,052
    
    
    
    589
    
    
    
    56.0
    %Gain on sale of real estate mortgages
held for sale
    
    
    49
    
    
    
    6
    
    
    
    43
    
    
    
    716.7
    %Gain(loss) on sale of securities
available for sale
    
    
    
    
    
    
    (47
    )
    
    
    47
    
    
    
    100.0
    %Gain(loss) on sale of foreclosed assets
    
    
    (1
    )
    
    
    27
    
    
    
    (28
    )
    
    
    -103.7
    %Commission income
    
    
    126
    
    
    
    64
    
    
    
    62
    
    
    
    96.9
    %Interchange fees
    
    
    188
    
    
    
    163
    
    
    
    25
    
    
    
    15.3
    %Other
    
    
    256
    
    
    
    43
    
    
    
    213
    
    
    
    495.3
    %$
    2,259
    
    
    $
    1,308
    
    
    $
    951
    
    
    
    72.7
    %
   26




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##### Table of Contents



Non-interest expense
 For the three months ended September 30,
    
    
    Increase(decrease)2005
    
    
    2004
    
    
    Dollars
    
    
    Percentage(Dollars in Thousands)Compensation and benefits
    
    $
    2,402
    
    
    $
    1,881
    
    
    $
    521
    
    
    
    27.7
    %Occupancy and equipment
    
    
    460
    
    
    
    361
    
    
    
    99
    
    
    
    27.4
    %Data processing
    
    
    437
    
    
    
    277
    
    
    
    160
    
    
    
    57.8
    %Advertising
    
    
    166
    
    
    
    127
    
    
    
    39
    
    
    
    30.7
    %Outside professional services
    
    
    527
    
    
    
    424
    
    
    
    103
    
    
    
    24.3
    %Interchange charges
    
    
    161
    
    
    
    54
    
    
    
    107
    
    
    
    198.1
    %Collection expense and repossessed
asset losses
    
    
    84
    
    
    
    62
    
    
    
    22
    
    
    
    35.5
    %Telephone
    
    
    162
    
    
    
    132
    
    
    
    30
    
    
    
    22.7
    %Other
    
    
    714
    
    
    
    741
    
    
    
    (27
    )
    
    
    -3.6
    %$
    5,113
    
    
    $
    4,059
    
    
    $
    1,054
    
    
    
    26.0
    %
  27




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##### Table of Contents



Income Tax Expense.
 28




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##### Table of Contents



Comparison of Results of Operation for the Nine Months Ended September 30, 2005 and 2004
 General
 Average Balances, Net Interest Income, Yields Earned and Rates Paid
 For the nine months ended September 30,2005
    
    
    2004
    
    
    2003Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield /Cost
    
    
    Balance
    
    
    Interest
    
    
    Yield /Cost
    
    
    Balance
    
    
    Interest
    
    
    Yield /CostINTEREST-EARNING ASSETSLoans receivable(1)
    
    $
    542,462
    
    
    
    24,532
    
    
    
    6.03
    %
    
    $
    476,461
    
    
    
    22,589
    
    
    
    6.32
    %
    
    $
    399,941
    
    
    
    22,975
    
    
    
    7.66
    %Securities(2)
    
    
    60,221
    
    
    
    1,400
    
    
    
    3.10
    %
    
    $
    26,590
    
    
    
    325
    
    
    
    1.63
    %
    
    
    32,764
    
    
    
    495
    
    
    
    2.01
    %Other interest-earning assets(3)
    
    
    47,234
    
    
    
    1,137
    
    
    
    3.21
    %
    
    $
    25,825
    
    
    
    392
    
    
    
    2.03
    %
    
    
    17,512
    
    
    
    203
    
    
    
    1.55
    %Total interest-earning assets
    
    
    649,917
    
    
    
    27,069
    
    
    
    5.55
    %
    
    
    528,876
    
    
    
    23,306
    
    
    
    5.88
    %
    
    
    450,216
    
    
    
    23,674
    
    
    
    7.01
    %Non-interest earning assets
    
    
    43,116
    
    
    
    
    
    
    
    
    
    
    
    33,846
    
    
    
    
    
    
    
    
    
    
    
    32,578Total assets
    
    $
    693,033
    
    
    
    
    
    
    
    
    
    
    $
    562,722
    
    
    
    
    
    
    
    
    
    
    $
    482,794INTEREST-BEARING LIABILITIESSavings deposits
    
    $
    62,943
    
    
    
    203
    
    
    
    0.43
    %
    
    $
    79,435
    
    
    
    313
    
    
    
    0.53
    %
    
    $
    75,014
    
    
    
    613
    
    
    
    1.09
    %Interest bearing demand accounts
    
    
    54,421
    
    
    
    813
    
    
    
    1.99
    %
    
    
    25,357
    
    
    
    189
    
    
    
    0.99
    %
    
    
    14,652
    
    
    
    136
    
    
    
    1.24
    %Money market accounts
    
    
    56,070
    
    
    
    1,088
    
    
    
    2.59
    %
    
    
    58,046
    
    
    
    626
    
    
    
    1.44
    %
    
    
    53,417
    
    
    
    659
    
    
    
    1.65
    %Time deposits
    
    
    260,556
    
    
    
    6,444
    
    
    
    3.30
    %
    
    
    220,912
    
    
    
    4,853
    
    
    
    2.93
    %
    
    
    223,560
    
    
    
    5,990
    
    
    
    3.57
    %Federal Home Loan Bank advances
    
    
    116,249
    
    
    
    3,636
    
    
    
    4.17
    %
    
    
    83,639
    
    
    
    2,719
    
    
    
    4.34
    %
    
    
    43,218
    
    
    
    1,594
    
    
    
    4.92
    %Total interest-bearing liabilities
    
    
    550,239
    
    
    
    12,183
    
    
    
    2.95
    %
    
    
    467,389
    
    
    
    8,701
    
    
    
    2.48
    %
    
    
    409,864
    
    
    
    8,992
    
    
    
    2.92
    %Non-interest bearing liabilities
    
    
    42,321
    
    
    
    
    
    
    
    
    
    
    
    50,200
    
    
    
    
    
    
    
    
    
    
    
    32,036Total liabilities
    
    
    592,560
    
    
    
    
    
    
    
    
    
    
    
    517,589
    
    
    
    
    
    
    
    
    
    
    
    441,900Stockholders equity
    
    
    100,473
    
    
    
    
    
    
    
    
    
    
    
    45,133
    
    
    
    
    
    
    
    
    
    
    
    40,894Total liabilities and stockholders equity
    
    $
    693,033
    
    
    
    
    
    
    
    
    
    
    $
    562,722
    
    
    
    
    
    
    
    
    
    
    $
    482,794Net interest income
    
    
    
    
    
    $
    14,886
    
    
    
    
    
    
    
    
    
    
    $
    14,604
    
    
    
    
    
    
    
    
    
    
    $
    14,682Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.60
    %
    
    
    
    
    
    
    
    
    
    
    3.40
    %
    
    
    
    
    
    
    
    
    
    
    4.10
    %Net earning assets
    
    $
    99,678
    
    
    
    
    
    
    
    
    
    
    $
    61,487
    
    
    
    
    
    
    
    
    
    
    $
    40,353Net interest margin(4)
    
    
    
    
    
    
    
    
    
    
    3.05
    %
    
    
    
    
    
    
    
    
    
    
    3.68
    %
    
    
    
    
    
    
    
    
    
    
    4.35
    %Average
interest-earning assets to average interest-bearing liabilities
    
    
    
    
    
    
    118.12
    %
    
    
    
    
    
    
    
    
    
    
    113.16
    %
    
    
    
    
    
    
    
    
    
    
    109.85
    %
 
 (1)
    
    Calculated net of deferred loan fees and loss reserve. Nonaccrual loans included as loans carrying a zero yield(2)
    
    Calculated based on carrying value. Not full tax equivalents, as the numbers would not change materially from those presented in the table.(3)
    
    Includes Federal Home Loan Bank stock at cost and term deposits with other financial institutions.(4)
    
    Net interest income divided by average interest-earning assets. 29




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##### Table of Contents



Rate/Volume Analysis
 Nine Months Ended September 30,2005 vs. 2004
    
    
    2004 vs. 2003Increase/(Decrease)
    
    
    Total
    
    
    Increase/(Decrease)
    
    
    TotalDue to
    
    
    Increase
    
    
    Due to
    
    
    IncreaseVolume
    
    
    Rate
    
    
    (Decrease)
    
    
    Volume
    
    
    Rate
    
    
    (Decrease)(In Thousands)Interest-Earning AssetsLoans receivable
    
    $
    3,024
    
    
    $
    (1,080
    )
    
    $
    1,944
    
    
    $
    3,993
    
    
    $
    (4,379
    )
    
    $
    (386
    )Securities
    
    
    659
    
    
    
    416
    
    
    
    1,075
    
    
    
    (84
    )
    
    
    (86
    )
    
    
    (170
    )Other interest-earning assets
    
    
    416
    
    
    
    329
    
    
    
    745
    
    
    
    115
    
    
    
    73
    
    
    
    188Total interest-earning assets
    
    
    4,099
    
    
    
    (335
    )
    
    
    3,764
    
    
    
    4,024
    
    
    
    (4,392
    )
    
    
    (368
    )Interest-Bearing Liabilities:Savings deposits
    
    
    (59
    )
    
    
    (52
    )
    
    
    (111
    )
    
    
    34
    
    
    
    (334
    )
    
    
    (300
    )Interest bearing demand accounts
    
    
    331
    
    
    
    293
    
    
    
    624
    
    
    
    84
    
    
    
    (31
    )
    
    
    53Money market accounts
    
    
    (22
    )
    
    
    484
    
    
    
    462
    
    
    
    54
    
    
    
    (87
    )
    
    
    (33
    )Time deposits
    
    
    935
    
    
    
    655
    
    
    
    1,590
    
    
    
    (70
    )
    
    
    (1,066
    )
    
    
    (1,136
    )FHLB advances
    
    
    1,022
    
    
    
    (105
    )
    
    
    917
    
    
    
    1,334
    
    
    
    (208
    )
    
    
    1,126Total interest-bearing liabilities
    
    
    2,207
    
    
    
    1,275
    
    
    
    3,482
    
    
    
    1,436
    
    
    
    (1,726
    )
    
    
    (290
    )Net interest income
    
    $
    1,892
    
    
    $
    (1,610
    )
    
    $
    282
    
    
    $
    2,588
    
    
    $
    (2,666
    )
    
    $
    (78
    )
 Interest Income.
  30




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##### Table of Contents



Interest Expense.
 Net Interest Income.
 Provision for Loan Losses.
 31




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##### Table of Contents



Non-interest income
 For the nine months endedSeptember 30,2005
    
    
    2004
    
    
    Increase(decrease)(Dollars in Thousands)
    
    
    Dollars
    
    
    PercentageService charges and fees
    
    $
    3,770
    
    
    $
    2,924
    
    
    $
    846
    
    
    
    28.9
    %Gain on sale of real estate mortgages
held for sale
    
    
    114
    
    
    
    175
    
    
    
    (61
    )
    
    
    -34.9
    %Gain(loss) on sale of securities
available for sale
    
    
    
    
    
    
    (39
    )
    
    
    39
    
    
    
    100.0
    %Gain(loss) on sale of foreclosed assets
    
    
    40
    
    
    
    82
    
    
    
    (42
    )
    
    
    -51.2
    %Commission income
    
    
    328
    
    
    
    232
    
    
    
    96
    
    
    
    41.4
    %Interchange fees
    
    
    561
    
    
    
    484
    
    
    
    77
    
    
    
    15.9
    %Other
    
    
    527
    
    
    
    136
    
    
    
    391
    
    
    
    287.5
    %$
    5,340
    
    
    $
    3,994
    
    
    $
    1,346
    
    
    
    33.7
    %
  32




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##### Table of Contents



Non-interest expense
 For the nine months endedSeptember 30,2005
    
    
    2004
    
    
    Increase(decrease)(Dollars in Thousands)
    
    
    Dollars
    
    
    PercentageCompensation and benefits
    
    $
    6,986
    
    
    $
    5,700
    
    
    $
    1,286
    
    
    
    22.6
    %Occupancy and equipment
    
    
    1,268
    
    
    
    1,055
    
    
    
    213
    
    
    
    20.2
    %Data processing
    
    
    978
    
    
    
    831
    
    
    
    147
    
    
    
    17.7
    %Advertising
    
    
    446
    
    
    
    305
    
    
    
    141
    
    
    
    46.2
    %Outside professional services
    
    
    1,775
    
    
    
    1,162
    
    
    
    613
    
    
    
    52.8
    %Interchange charges
    
    
    462
    
    
    
    487
    
    
    
    (25
    )
    
    
    -5.1
    %Collection expense and repossessed
asset losses
    
    
    247
    
    
    
    150
    
    
    
    97
    
    
    
    64.7
    %Telephone
    
    
    412
    
    
    
    402
    
    
    
    10
    
    
    
    2.5
    %Other
    
    
    2,023
    
    
    
    1,970
    
    
    
    53
    
    
    
    2.7
    %$
    14,597
    
    
    $
    12,062
    
    
    $
    2,535
    
    
    
    21.0
    %
   Income Tax Expense
 33




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##### Table of Contents



34




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##### Table of Contents



35




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##### Table of Contents



36




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##### Table of Contents



Legal proceedings
  
 Unregistered Sales of Equity Securities and Use of Proceeds
  MaximumTotal Number of
    
    
    Number of SharesShares Purchased
    
    
    that May Yet Beas Part of Publicly
    
    
    Purchased UnderTotal Number of
    
    
    Average Price
    
    
    Announced Plans
    
    
    the Plans orPeriod
    
    Shares Purchased
    
    
    Paid per Share
    
    
    or Programs
    
    
    ProgramsJuly 1, 2005 through July 31, 2005
    
    
    0
    
    
    $
    
    
    
    
    
    
    
    
    285,131August 1, 2005 through August 31, 2005
    
    
    103,350
    
    
    
    13.95
    
    
    
    103,350
    
    
    
    181,781September 1, 2005 through September
30, 2005
    
    
    181,781
    
    
    
    14.34
    
    
    
    181,781
    
    
    
    0Total
    
    
    285,131
    
    
    $
    14.20
    
    
    
    285,131
    
    
    
    0
  
 Defaults Upon Senior Securities
  
   37




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##### Table of Contents



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.
 38




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##### Table of Contents



ATLANTIC COAST FEDERAL CORPORATION(Registrant)Date: November 14, 2005
    
    /s/   Robert J. Larison, JrRobert J. Larison, Jr., President and ChiefExecutive OfficerDate: November 14, 2005
    
    /s/    Jon C. Parker, Sr.Jon C. Parker, Sr., Vice President andChief Financial Officer
 39