As filed with the Securities and Exchange Commission on November 10, 2010

Registration No. 333-167632

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

PRE-EFFECTIVE AMENDMENT NO. 4 TO THE
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

ATLANTIC COAST FINANCIAL CORPORATION AND
ATLANTIC COAST FEDERAL EMPLOYEES’ SAVINGS AND PROFIT SHARING PLAN AND TRUST

(Exact Name of Registrant as Specified in Its Charter)

Maryland		6712		Being Applied For
(State or Other Jurisdiction of Incorporation or Organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant’s Principal Executive Offices)

(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Agent for Service)

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: þ

If this Form is filed to register additional shares for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o
Non-accelerated filer o		Smaller reporting company þ
(Do not check if a smaller reporting company)

CALCULATION OF REGISTRATION FEE

Title of each class of

Amount to be

Proposed maximum

Proposed maximum

Amount of

securities to be registered

registered

offering price per share

aggregate offering price

registration fee

Common Stock, $0.01 par value per share

4,065,417 shares

$10.00

$40,654,170(1)

$2,899(3)

Participation Interests

437,706 interests

(2)

(1)		Estimated solely for the purpose of calculating the registration fee.
(2)		The securities of Atlantic Coast Financial Corporation to be purchased by the Atlantic Coast Bank 401(k) Plan are included in the amount shown for common stock. However, pursuant to Rule 457(h) of the Securities Act of 1933, as amended, no separate fee is required for the participation interests. Pursuant to such rule, the amount being registered has been calculated on the basis of the number of shares of common stock that may be purchased with the current assets of such plan.
(3)		Previously paid. Pursuant to Rule 457(p), filing fee to be paid is offset by $9,543 previously paid by Atlantic Coast Financial Corporation on June 28, 2007 under Registration Statement No. 333-144149. No shares were sold pursuant to the previously referenced Registration Statement.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

PROSPECTUS SUPPLEMENT

 

Interests in

 

ATLANTIC COAST BANK

Employees’ Savings & Profit Sharing Plan and Trust

 

Offering of Participation Interests in up to 437,706 Shares of

 

ATLANTIC COAST FINANCIAL CORPORATION

Common Stock

 

 

 

 

In connection with the adoption of the Plan of Conversion and Reorganization of Atlantic Coast Federal, MHC, Atlantic Coast Financial Corporation is allowing participants in the Atlantic Coast Bank Employees’ Savings & Profit Sharing Plan and Trust (the “Plan”) to invest all or a portion of their accounts in stock units representing an ownership interest in the common stock of Atlantic Coast Financial Corporation. Based upon the value of the Plan assets at June 30, 2010, the trustee of the Plan could acquire (through purchase of new shares or exchange of existing shares of Atlantic Coast Federal Corporation for shares of Atlantic Coast Financial Corporation) up to 437,706 shares of common stock of Atlantic Coast Financial Corporation, at the purchase price of $10.00 per share. This prospectus supplement relates to the initial election of Plan participants to direct the trustee of the Plan to invest all or a portion of their Plan accounts in stock units representing an ownership interest in the Atlantic Coast Financial Corporation Stock Fund at the time of the stock offering.

 

 

Atlantic Coast Financial Corporation’s prospectus, dated          , 2010, accompanies this prospectus supplement. It contains detailed information regarding the conversion and stock offering of Atlantic Coast Financial Corporation common stock and the financial condition, results of operations and business of Atlantic Coast Bank. This prospectus supplement provides information regarding the Plan. You should read this prospectus supplement together with the prospectus and keep both for future reference.

 

 

 

For a discussion of risks that you should consider, see “Risk Factors” beginning on page 21 of the prospectus.

 

 

 

The interests in the Plan and the offering of common stock of Atlantic Coast Financial Corporation have not been approved or disapproved by the Office of Thrift Supervision, the Securities and Exchange Commission or any other federal or state agency. Any representation to the contrary is a criminal offense.

 

 

 

The securities offered in this prospectus supplement are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

 

 

 

     This prospectus supplement may be used only in connection with offers and sales by Atlantic Coast Financial Corporation, in the stock offering, of stock units representing an interest in shares of common stock acquired by the Plan. No one may use this prospectus supplement to reoffer or resell interests in shares of common stock of Atlantic Coast Financial Corporation acquired through the Plan.

     You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. Atlantic Coast Financial Corporation, Atlantic Coast Bank and the Plan have not authorized anyone to provide you with information that is different.

     This prospectus supplement does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make an offer or solicitation in that jurisdiction. Neither the delivery of this prospectus supplement and the prospectus nor any sale of common stock or stock units representing an ownership interest in common stock of Atlantic Coast Financial Corporation shall under any circumstances imply that there has been no change in the affairs of Atlantic Coast Bank or the Plan since the date of this prospectus supplement, or that the information contained in this prospectus supplement or incorporated by reference is correct as of any time after the date of this prospectus supplement.

     The date of this prospectus supplement is                          , 2010.

TABLE OF CONTENTS

THE OFFERING			1
Securities Offered			1
Atlantic Coast Financial Corporation Stock Fund			1
Purchase Priorities			2
Purchases in the Offering and Oversubscriptions			3
Composition of and Purpose of Stock Units			4
Value of Plan Assets			4
Election to Purchase Stock Units in the Stock Offering			4
How to Order Stock in the Offering			5
Order Deadline			6
Irrevocability of Transfer Direction			6
Future Direction to Purchase Common Stock			6
Voting Rights of Common Stock			7
DESCRIPTION OF THE PLAN			8
Introduction			8
Eligibility and Participation			8
Contributions Under the Plan			9
Limitations on Contributions			9
Benefits Under the Plan			10
Withdrawals and Distributions from the Plan			10
Investment of Contributions and Account Balances			11
Performance History and Description of Funds			12
Administration of the Plan			18
Amendment and Termination			18
Merger, Consolidation or Transfer			19
Federal Income Tax Consequences			19
Notice of Your Rights Concerning Employer Securities.			20
Additional Employee Retirement Income Security Act (“ERISA”) Considerations			21
Securities and Exchange Commission Reporting and Short-Swing Profit Liability			21
Financial Information Regarding Plan Assets			22
LEGAL OPINION			23

THE OFFERING

Securities Offered		Atlantic Coast Financial Corporation is offering participants of the Atlantic Coast Bank Employees’ Savings & Profit Sharing Plan and Trust (the “Plan”) the opportunity to purchase common stock of Atlantic Coast Financial Corporation through the purchase of stock units. The stock units represent indirect ownership of Atlantic Coast Financial Corporation’s common stock. At the stock offering purchase price of $10.00 per share, the Plan may acquire up to 437,706 shares of Atlantic Coast Financial Corporation common stock in the stock offering, based on the fair market value of the Plan’s assets as of June 30, 2010.
		Only employees of Atlantic Coast Bank may become participants in the Plan and only participants may purchase stock units through the Plan. Your investment in stock units in connection with the stock offering is subject to the purchase priorities listed below.
		Information with regard to the Plan is contained in this prospectus supplement and information with regard to the financial condition, results of operations and business of Atlantic Coast Financial Corporation is contained in the accompanying prospectus. The address of the principal executive office of Atlantic Coast Financial Corporation and Atlantic Coast Bank is 505 Haines Avenue, Waycross, Georgia 31501.
		All questions about this prospectus supplement should be addressed to Christi Stone, Vice President Human Resources, Atlantic Coast Bank, 930 N. University Blvd, Jacksonville, FL 32211; telephone number (904) 998-5500; or e-mail StoneC@atlanticcoastbank.net.
		Questions about the common stock being offered or about the prospectus may be directed to the Stock Information Center at (877) 643-8197.
Atlantic Coast Financial Corporation Stock Fund		In connection with the stock offering, you may elect to transfer all or part of your account balances in the Plan (other than from the Atlantic Coast Federal Corporation Stock Fund) to the Atlantic Coast Financial Corporation Stock Fund, to be used to purchase stock units representing an ownership interest in the common stock of Atlantic Coast Financial Corporation issued in the stock offering. The Atlantic Coast Financial Corporation Stock Fund is a new fund in the Plan established to hold shares of common stock of Atlantic Coast Financial Corporation. It is different from the Atlantic Coast Federal Corporation Stock Fund, which presently holds shares of Atlantic Coast Federal Corporation, the mid-tier holding company of Atlantic

		Coast Bank that will be eliminated in the reorganization of Atlantic Coast Federal, MHC into Atlantic Coast Financial Corporation, the newly formed stock holding company of Atlantic Coast Bank. At the close of the reorganization and offering, shares of Atlantic Coast Federal Corporation held in the Atlantic Coast Federal Corporation Stock Fund will be exchanged for shares of Atlantic Coast Financial Corporation pursuant to the exchange ratio (discussed in greater detail in the accompanying prospectus) and the Atlantic Coast Federal Corporation Stock Fund will be merged into and become part of the Atlantic Coast Financial Corporation Stock Fund.
Purchase Priorities		All Plan participants are eligible to transfer funds to the Atlantic Coast Financial Corporation Stock Fund pursuant to the offering. However, such directions are subject to the purchase priorities in the Plan of Conversion and Reorganization of Atlantic Coast Federal, MHC, which provides for a subscription offering and a community offering. In the offering, the purchase priorities are as follows and apply in case more shares are ordered than are available for sale (an “oversubscription”):
		Subscription Offering:

	(1)		Depositors of Atlantic Coast Bank with $50 or more as of March 31, 2009, get first priority.
	(2)		Atlantic Coast Bank’s tax-qualified plans, including the employee stock ownership plan and the 401(k) plan, get second priority.
	(3)		Depositors of Atlantic Coast Bank with $50 or more on deposit as of September 30, 2010, get third priority.
	(4)		Depositors of Atlantic Coast Bank as of November 3, 2010, get fourth priority.

Community Offering:

	(5)		Natural persons residing in the Georgia counties of Chatham, Coffee and Ware and the Florida counties of Clay, Duval, Flagler, Nassau and St. Johns get fifth priority.
	(6)		Public stockholders of Atlantic Coast Federal Corporation as of November 8, 2010 get sixth priority.
	(7)		Other members of the general public get seventh priority.

		If you fall into subscription offering categories (1), (3) or (4), you

		have subscription rights to purchase stock units representing an ownership interest in shares of Atlantic Coast Financial Corporation common stock in the subscription offering and you may use funds in the Plan to pay for the stock units. You may also be able to purchase stock units representing an ownership interest in shares of Atlantic Coast Financial Corporation common stock in the subscription offering even though you are ineligible to purchase through subscription offering categories (1), (3) or (4) through subscription offering category (2), reserved for its tax-qualified employee plans.
Purchases in the Offering and Oversubscriptions		The trustee of the Plan will purchase common stock of Atlantic Coast Financial Corporation in the stock offering in accordance with your directions. Once you make your election, the amount that you elect to transfer from your existing investment options for the purchase of stock units in connection with the stock offering will be sold from your existing investment options and proceeds transferred to the Atlantic Coast Financial Corporation Stock Fund (which will be an interest bearing account during the offering period) and held by the fund pending the formal completion of the stock offering several weeks later. After the end of the stock offering period, we will determine whether all or any portion of your order will be filled (if the offering is oversubscribed you may not receive any or all of your order, depending on your purchase priority, as described above). The amount that can be used toward your order will be applied to the purchase of common stock of Atlantic Coast Financial Corporation. Following the completion of the offering, the purchased common stock will be transferred to the Atlantic Coast Financial Corporation Stock Fund and will be denominated in stock units in the Atlantic Coast Financial Corporation Stock Fund.
		In the event the offering is oversubscribed, i.e., there are more orders for common stock of Atlantic Coast Financial Corporation than shares available for sale in the offering, and the trustee is unable to use the full amount allocated by you to purchase ownership interests in common stock of Atlantic Coast Financial Corporation sold in the offering, the amount that cannot be invested in common stock of Atlantic Coast Financial Corporation, and any interest earned on such amount, will be reinvested in the existing funds of the Plan, in accordance with your then existing investment election (in proportion to your investment direction for future contributions). The prospectus describes the allocation procedures in the event of an oversubscription. If you choose not to direct the investment of your account balances towards the purchase of any stock units in connection with the offering, your account balances will remain in the investment funds of the Plan as previously directed by you.

Composition of and Purpose of Stock Units		The Atlantic Coast Financial Corporation Stock Fund will invest in the common stock of Atlantic Coast Financial Corporation. In addition, the Atlantic Coast Financial Corporation Stock Fund will maintain a cash component for liquidity purposes. Liquidity is required in order to facilitate daily transactions such as investment transfers or distributions from the Atlantic Coast Financial Corporation Stock Fund. For purchases in the offering, there will be no cash component. A stock unit will be valued at $10.00. After the offering, stock units will consist of a percentage interest in both the common stock of Atlantic Coast Financial Corporation and cash held in the Atlantic Coast Financial Corporation Stock Fund. Unit values (similar to the stock’s share price) and the number of units (similar to number of shares) are used to communicate the dollar value of a participant’s account. Following the stock offering, each day the stock unit value of the Atlantic Coast Financial Corporation Stock Fund will be determined by dividing the total market value of the fund at the end of the day by the total number of units held in the fund by all participants as of the previous day’s end. The change in stock unit value reflects the day’s change in stock price, any cash dividends accrued and the interest earned on the cash component of the fund, less any investment management fees. The market value and stock unit holdings of your account in the Atlantic Coast Financial Corporation Stock Fund is reported to you on your quarterly statements.
Value of Plan Assets		As of June 30, 2010, the market value of the assets of the Plan was approximately $4,377,062, all of which is eligible to purchase or acquire common stock of Atlantic Coast Financial Corporation in the offering. The Plan administrator informed each participant of the value of his or her account balance under the Plan as of June 30, 2010.
Election to Purchase Stock Units in the Stock Offering		In connection with the stock offering, the Plan will permit you to direct the trustee to transfer all or part of the funds which represent your current beneficial interest in the assets of the Plan (other than amounts invested in the Atlantic Coast Federal Corporation Stock Fund) to the Atlantic Coast Financial Corporation Stock Fund. You may not transfer amounts that you have invested in the Atlantic Coast Federal Corporation Stock Fund into the Atlantic Coast Financial Corporation Stock Fund. This exchange will take place automatically. The shares of common stock of Atlantic Coast Federal Corporation currently held by the Plan will be exchanged for Atlantic Coast Financial Corporation common stock pursuant to the exchange ratio. The trustee of the Plan will subscribe for Atlantic Coast Financial Corporation common stock offered for sale in connection with the stock offering, in accordance with each participant’s direction. In order to purchase stock units through the

		Plan, you must purchase stock units representing an ownership interest in common stock of Atlantic Coast Financial Corporation in at least 25 shares in the offering through the Plan at the $10.00 purchase price (e.g., a $250 initial investment). The prospectus also describes maximum purchase limits for investors in the stock offering.
How to Order Stock in the Offering		Enclosed is a Special Investment Election Form on which you can elect to purchase stock units in the Atlantic Coast Financial Corporation Stock Fund in connection with the stock offering. Please note the following stipulations concerning this election:

	•		You can elect to transfer all or a portion of your current account (other than amounts you have invested in the Atlantic Coast Federal Corporation Stock Fund) to the Atlantic Coast Financial Corporation Stock Fund.
	•		Your election is subject to a minimum purchase of 25 stock units, which equals $250.
	•		Your election, plus any order you placed outside the Plan, are together subject to a maximum purchase limit of no more than 5% of the stock sold in the offering.
	•		The election period to purchase stock units in the offering closes at 2:00 p.m., Eastern Time, on Tuesday, December 14, 2010.
	•		During the stock offering period, you will continue to have the ability to transfer amounts that are not directed to purchase stock units in the Atlantic Coast Financial Corporation Stock Fund among all other investment funds. However, you will not be permitted to change the investment amounts that you designated to be transferred to the Atlantic Coast Financial Corporation Stock Fund on your Special Investment Election Form.
	•		The amount you elect to transfer to the Atlantic Coast Financial Corporation Stock Fund will be held separately until the completion of the offering. Therefore, this money is not available for distributions, loans, or withdrawals until the offering is completed, which is expected to be several weeks after the closing of the subscription offering period.

		If you wish to use all or part of your account balance in the Plan to purchase common stock of Atlantic Coast Financial Corporation issued in the stock offering, you should indicate that decision on the Special Investment Election Form.

		If you do not wish to make an election, you should check Box E in Section D of the Special Investment Election Form and return the form to Christi Stone, Vice President Human Resources, at Atlantic Coast Bank, 930 N. University Blvd, Jacksonville, FL 32211, to be received no later than 2:00 p.m., Eastern Time, on Tuesday, December 14, 2010. You may return your Special Investment Election Form by hand delivery or by mailing it to Christi Stone at the above address in the enclosed self-addressed envelope, so long as it is received by the specified time.
Order Deadline		If you wish to purchase stock units representing an ownership interest in common stock of Atlantic Coast Financial Corporation with all or part of your Plan account balance, you must return your Special Investment Election Form to Christi Stone, Vice President Human Resources, at Atlantic Coast Bank, 930 N. University Blvd, Jacksonville, FL 32211, to be received no later than 2:00 p.m., Eastern Time, on Tuesday, December 14, 2010.
Irrevocability of Transfer Direction		Once you make an election to transfer amounts to the Atlantic Coast Financial Corporation Stock Fund in connection with the stock offering, you may not change your election. Your election is irrevocable. You will, however, continue to have the ability to transfer amounts not directed towards the purchase of stock units among all of the other investment funds on a daily basis. You may also continue to transfer funds into and out of the Atlantic Coast Federal Corporation Stock Fund which will purchase shares of Atlantic Coast Federal Corporation in the open market (but not in the offering) or sell the shares in your account until the completion of the offering. After the completion of the stock offering, Atlantic Coast Federal Corporation common stock will stop trading and Atlantic Coast Financial Corporation common stock will trade on the open market.
Future Direction to Purchase Common Stock		You will be able to purchase stock units representing an ownership interest in stock after the offering through your investment in the Atlantic Coast Financial Corporation Stock Fund. You may direct that your future contributions or your account balance in the Plan be transferred to the Atlantic Coast Financial Corporation Stock Fund. After the offering, to the extent that shares are available, the trustee of the Plan will acquire common stock of Atlantic Coast Financial Corporation at your election in open market transactions at the prevailing price. Special restrictions may apply to transfers directed to and from the Atlantic Coast Financial Corporation Stock Fund by the participants who are subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, relating to the purchase and sale of securities by officers, directors and principal

		shareholders of Atlantic Coast Financial Corporation. In addition, if you are an officer of Atlantic Coast Bank that is restricted by the Office of Thrift Supervision from selling shares acquired in the stock offering for one year, the stock units that you purchased in the stock offering will not be tradable for one year. However, any stock units that you held in the Atlantic Coast Federal Corporation Stock Fund prior to the stock offering are freely tradable and not subject to this one-year trading restriction.
Voting Rights of Common Stock		The Plan provides that you may direct the trustee as to how to vote any shares of Atlantic Coast Financial Corporation common stock held by the Atlantic Coast Financial Corporation Stock Fund, and the interest in such shares that is credited to your account. If the trustee does not receive your voting instructions, the Plan administrator will exercise these rights as it determines in its discretion and will direct the trustee accordingly. All voting instructions will be kept confidential.

DESCRIPTION OF THE PLAN

Introduction

     Atlantic Coast Bank (formerly Atlantic Coast Federal) adopted the Atlantic Coast Federal 401(k) Plan and Trust, dated August 7, 2002, and amended it into the Atlantic Coast Federal (now Atlantic Coast Bank) Employees’ Savings & Profit Sharing Plan and Trust, effective June 1, 2003 (referred to as the “Plan”). The Plan was further amended and restated, effective January 1, 2010. The Plan is a tax-qualified plan with a cash or deferred compensation feature established in accordance with the requirements under Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”).

     Atlantic Coast Bank intends that the Plan, in operation, will comply with the requirements under Section 401(a) and Section 401(k) of the Code. Atlantic Coast Bank will adopt any amendments to the Plan that may be necessary to ensure the continuing qualified status of the Plan under the Code and applicable Treasury Regulations.

     Employee Retirement Income Security Act of 1974 (“ERISA”). The Plan is an “individual account plan” other than a “money purchase pension plan” within the meaning of ERISA. As such, the Plan is subject to all of the provisions of Title I (Protection of Employee Benefit Rights) and Title II (Amendments to the Code Relating to Retirement Plans) of ERISA, except to the funding requirements contained in Part 3 of Title I of ERISA which by their terms do not apply to an individual account plan (other than a money purchase plan). The Plan is not subject to Title IV (Plan Termination Insurance) of ERISA. The funding requirements contained in Title IV of ERISA are not applicable to participants or beneficiaries under the Plan.

     Reference to Full Text of Plan. The following portions of this prospectus supplement summarize certain provisions of the Plan. They are not complete and are qualified in their entirety by the full text of the Plan. Copies of the Plan are available to all employees by filing a request with the Plan administrator c/o Atlantic Coast Bank, Attn: Christi Stone, Vice President, Human Resources, 930 N. University Blvd, Jacksonville, Florida 32211; telephone number: (904) 998-5500; fax: (904) 744-4214; email: StoneC@atlanticcoastbank.net. You are urged to read carefully the full text of the Plan.

Eligibility and Participation

     Employees of Atlantic Coast Bank who have completed three consecutive months of service are eligible to become participants in the Plan on the first day of the month coinciding with or following the date they satisfy the period of service requirement. Leased employees are not eligible to participate in the Plan. The Plan year is January 1 to December 31 (the “Plan Year”).

     As of June 30, 2010, there were approximately 153 employees, former employees and beneficiaries participating in the Plan.

Contributions Under the Plan

     Salary Deferrals. You are permitted to defer on a pre-tax basis up to 75% of your salary (expressed in terms of whole percentages), subject to certain restrictions imposed by the Code, and to have that amount contributed to the Plan on your behalf. For purposes of the Plan, “salary” means your basic salary plus commissions, overtime, bonuses, incentives and personal leave. In 2010, the annual salary of each participant taken into account under the Plan is limited to $245,000. (Limits established by the Internal Revenue Service are subject to increase pursuant to an annual cost-of-living adjustment, as permitted by the Code). You may elect to modify the amount contributed to the Plan by filing a new elective deferral agreement with the Plan administrator once per calendar quarter.

     Employer Matching Contributions. Atlantic Coast Bank will make matching contributions to each contributing participant’s account in a amount equal to 50% of your salary deferrals, up to 6% of your salary.

     Rollover Contributions. You are permitted to make rollover contributions to the Plan.

Limitations on Contributions

     Limitations on Employee Salary Deferrals. For the Plan Year beginning January 1, 2010, the amount of your before-tax contributions may not exceed $16,500 per calendar year. Salary deferrals in excess of this limit are known as excess deferrals. If you defer amounts in excess of this limitation, your gross income for federal income tax purposes will include the excess in the year of the deferral. In addition, unless the excess deferral is distributed before April 15 of the following year, it will be taxed again in the year distributed. Income on the excess deferral distributed by April 15 of the immediately succeeding year will be treated, for federal income tax purposes, as earned and received by you in the tax year in which the contribution is made.

     Catch-up Contributions. If you have made the maximum amount of regular before-tax contributions allowed by the Plan or other legal limits and you have attained at least age 50 (or will reach age 50 prior to the end of the Plan Year), you are also eligible to make an additional catch-up contribution. You may authorize your employer to withhold a specified dollar amount of your compensation for this purposes. For 2010, the maximum catch-up contribution is $5,500.

Benefits Under the Plan

     Vesting. At all times, you have a fully vested, nonforfeitable interest in the elective deferrals you have made and any earnings related thereto. Employer contributions vest in accordance with the following schedule:

Completed		Vested
Years of Employment		Percentage
Less than 2		0%
2 but less than 3		20%
3 but less than 4		40%
4 but less than 5		60%
5 but less than 6		80%
6 or more		100%

     However, a participant will become 100% in his or her employer contributions made to the Plan upon the earlier of: (i) attainment of the normal retirement age (60); (ii) disability; or (iii) death.

Withdrawals and Distributions from the Plan

     Applicable federal law requires the Plan to impose substantial restrictions on the right of a Plan participant to withdraw amounts held for his or her benefit under the Plan prior to the participant’s termination of employment with the employer.

     Withdrawals upon Termination. You may request a distribution from your account following your termination of employment. Following your termination, you may elect to leave your account balance in the Plan and defer commencement of receipt of your vested balance until no later than April 1 of the calendar year following the calendar year in which you attain age 70¹/2.

     Withdrawal upon Disability. If you are disabled in accordance with the definition of disability under the Plan, you will be entitled to the same withdrawal rights as if you had terminated employment.

     Withdrawal upon Death. If you die while you are a participant in the Plan, the value of your entire account will be payable to your beneficiary in accordance with the Plan.

     In-Service Distribution. In-service withdrawals of employee pre-tax elective deferrals, employer matching contributions, and rollover contributions are permitted in the event of financial hardship or your attainment of age 59 ¹/2.

     Loans. The employer may, in its discretion, make loans available to Plan participants.

     Form of Distribution. You will have the right to elect to be paid your benefit under the Plan in either a lump sum or various forms of installments offered under the Plan.

Investment of Contributions and Account Balances

     All amounts credited to your accounts under the Plan are held in the Plan trust which is administered by the trustee appointed by Atlantic Coast Bank’s Board of Directors. Prior to the effective date of the offering, you were provided the opportunity to direct the investment of your account into one of the following funds:

1. Target Retirement 2015 Fund

2. Target Retirement 2025 Fund

3. Target Retirement 2035 Fund

4. Target Retirement 2045 Fund

5. Income Plus Asset Allocation Fund

6. Growth & Income Asset Allocation Fund

7. Growth Asset Allocation Fund

8. Stable Value Fund

9. Short Term Investment Fund (Money Market)

10. Long Treasury Index Fund (Government Bond)

11. Aggregate Bond Index Fund

12. S&P 500 Stock Fund

13. S&P Value Stock Fund

14. S&P Growth Stock Fund

15. S&P MidCap Stock Fund

16. Russell 2000 Stock Fund

17. Nasdaq 100 Stock Fund

18. US REIT Index Fund

19. International Stock Fund

20. Atlantic Coast Bank Certificate of Deposit Fund

21. Personal Choice Retirement Account

22. Atlantic Coast Federal Corporation Stock Fund

Performance History and Description of Funds

     The following table provides performance data with respect to the investment funds available under the Plan through March 31, 2010:

Performance Return as of March 31, 2010
														Trail				Trail				Trail
		Monthly				Year-to-				Last 12				3 Yr				5 Yr				10 Yr
Stock Funds		Returns				Date				Months				Annual’d				Annual’d				Annual’d
Target Retirement Funds (10)
Target Retirement 2015 Fund			3.52	%			3.22	%			30.78	%			-0.71	%			n/a				n/a
Target Retirement 2025 Fund			4.55	%			3.93	%			39.07	%			-2.06	%			n/a				n/a
Target Retirement 2035 Fund			5.47	%			4.38	%			46.65	%			-3.23	%			n/a				n/a
Target Retirement 2045 Fund			5.65	%			4.46	%			47.40	%			-2.95	%			n/a				n/a
Asset Allocation Funds (2)(8)
Income Plus			1.41	%			2.43	%			17.22	%			3.22	%			4.56	%			3.99	%
Growth & Income			3.34	%			3.46	%			30.40	%			0.23	%			3.82	%			2.28	%
Growth			5.27	%			4.44	%			44.71	%			-3.23	%			2.71	%			-0.19	%
Fixed Income Funds
Stable Value Fund (7)			0.19	%			0.54	%			2.10	%			2.75	%			3.18	%			3.99	%
Short Term Investment Fund (money mkt) (5)			0.00	%			-0.04	%			-0.03	%			1.95	%			2.81	%			2.68	%
Bond Funds
Long Treasury Index Fund (gov’t bond) (5)			-1.94	%			0.80	%			-7.63	%			5.46	%			4.79	%			6.46	%
Aggregate Bond Index Fund (9)			-0.18	%			1.62	%			7.16	%			5.66	%			4.87	%			5.70	%
Stock Funds
S&P 500 Stock Fund (5)			5.97	%			5.24	%			48.97	%			-4.67	%			1.35	%			-1.19	%
S&P Value Stock Fund (4)			6.31	%			6.91	%			53.64	%			-8.00	%			0.38	%			0.85	%
S&P Growth Stock Fund (4)			5.67	%			3.63	%			45.43	%			-1.08	%			2.42	%			-3.31	%
S&P Midcap Stock Fund (5)			7.05	%			8.92	%			63.10	%			-1.40	%			4.57	%			5.46	%
Russell 2000 Stock Fund (4)			8.07	%			8.68	%			61.91	%			-4.33	%			2.89	%			3.21	%
Nasdaq 100 Stock Fund (3)			7.65	%			5.25	%			58.45	%			3.21	%			5.37	%			-8.12	%
US REIT Index Fund (6)			10.09	%			9.51	%			108.85	%			-12.60	%			2.43	%			n/a
International Stock Fund (1)(2)			6.23	%			0.69	%			53.80	%			-7.35	%			3.28	%			0.43	%
Other Investments
Atlantic Coast Bank Certificate of Deposit Fund			0.10	%			0.30	%			1.00	%			n/a				3.10	%			n/a
Personal Choice Ret. Account (11)			n/a				n/a				n/a				n/a				n/a				n/a
Atlantic Coast Federal Corporation Stock Fund			51.4	%			60.4	%			-13.10	%			n/a				-32.40	%			n/a

Effective November 4, 2005, State Street Global Advisors (“SSGA”) assumed Investment Manager responsibilities for all Funds from Barclays Global Investors (“BGI”) and became the provider of benchmark index returns. Historical returns of the index funds reflect BGI management prior to November 4, 2005, and SSGA’s management thereafter. Unit values are determined as of the last business day of each month. Pursuant to the Trust agreement under which SSGA operates these funds, SSGA uses industry standard fair value pricing practices when and if it is deemed necessary. Investment fund returns are shown net of fees. Benchmark indices are not investment funds and have no fees. Dividends and interest are automatically reinvested. Total expenses charged to each fund, as a percentage of each fund’s estimated average assets per year, are for investment management services, trustee services, recordkeeping and administration.

As of January 1, 2008, they are as follows: International Stock Fund 0.624%; Nasdaq 100 Stock Fund 0.624%; Russell 2000 Stock Fund 0.624%; S&P MidCap Stock Fund 0.624%; S&P Growth Stock Fund 0.624%; S&P Value Stock Fund 0.624%; S&P 500 Stock Fund 0.624%; Long Treasury Index Fund 0.624%; Aggregate Bond Index Fund 0.624%; REIT Fund 0.624%; Stable Value Fund 0.624%; Short Term Investment Fund 0.460%; Target Retirement Funds 0.930%; Asset Allocation Funds 0.930%.

All funds except Nasdaq 100 Stock Fund, US REIT Index Fund, Short Term Investment Fund and Government Short Term Investment Fund may engage in securities lending.

Effective October 2008, the Lehman Brothers indexes were rebranded under the Barclays Capital name. Past performance is no guarantee of future performance. See following notes.

(1)		Prior to September 30, 1999, this Fund was limited to no more than 25% exposure to Japan.
(2)		The Asset Allocation Funds and the International Stock Fund were first offered July 2, 1997. Returns prior to inception are simulated using the returns of market indices for, or actual funds of, the Fund’s investment components, and are net of fees.
(3)		The Nasdaq 100 Stock Fund was first offered on May 1, 2002, while BGI’s underlying Nasdaq 100 Fund was initially offered on August 7, 2000. Returns shown for periods prior to May 1, 2002 are based on returns of the then-existing BGI funds (when available), and on the (hypothetical) returns of the Nasdaq 100 index for periods prior to the inception date of the BGI fund. All returns are net of fees.
(4)		The Russell 2000, S&P Growth and S&P Value Stock Funds were first offered on January 4, 2000. Returns prior to January 4, 2000 are hypothetical and are based on the returns of the then-existing BGI funds, and are net of fees. Effective December 16, 2005 the S&P 500/Barra Growth and S&P 500/Barra Value indexes were reconstituted as the S&P 500/Citigroup Growth and S&P 500/Citigroup Value Indexes. Additional information can be found at www.styleindices.standardandpoors.com.
(5)		The S&P MidCap, S&P 500, Long Treasury Index, and Short Term Investment Funds were first offered on June 17, 1997. Results prior to that date are hypothetical, based on previous investment returns of the then-existing BGI funds, and are net of fees.
(6)		The US REIT Index Fund was first offered on January 1, 2005. Returns shown for periods prior to that date are hypothetical and are based on the returns of the then-existing BGI fund for the MSCI US REIT index, and are net of fees.
(7)		The Stable Value Fund is a separately managed account; historical return data represents its actual performance.
(8)		The Asset Allocation Funds are designed investment vehicles utilizing various asset classes represented by index funds and, under BGI management, were managed on an exclusive basis. Only hypothetical results are available from January 1, 1992 to July 2, 1997 (the inception date of the Asset Allocation Funds). Note that SSGA changed certain allocations and underlying indexes (see fund descriptions for information on same).
(9)		The Aggregate Bond Index Fund became available effective April 30, 2006. Results prior to that date are based on historical investment returns of the then-existing SSGA fund, and are net of PSI fees which would have been levied.
(10)		The Target Retirement Funds first became available effective August 1, 2007. Results prior to that date are based on historical investment returns of the then-existing SSGA fund, and are net of PSI fees which would have been levied.
(11)		This fund is self-directed brokerage account administered through Charles Schwab and Company, Inc. As a result, there is no historical data availability.

The following is a description of each of the Plan’s investment funds:

Target Retirement 2015, 2025, 2035, 2045 Funds. The funds seek to offer investment strategies with asset allocations which become more conservative as you near retirement. You simply select the fund with a date closest to when you expect to retire and invest accordingly. Each fund seeks to achieve its objective by investing is a set of underlying SSGA collective trust funds representing various asset classes. Each Fund is managed to a specific retirement year (target date) included in its name.

Income Plus Asset Allocation Fund. This fund is an asset allocation fund that invests approximately 70% of its portfolio in a combination of stable value investments and U.S. bonds. The balance is invested in U.S. and international stocks. Its objective is to preserve principal over short periods of time and to offer some potential for growth over time. The fund diversifies among a broad range of stable value securities to reduce short-term risk and among a broad range of large U.S. and international companies to capture growth potential. The fund is structured to take advantage of market opportunities with a small flexible component.

Growth & Income Asset Allocation Fund. This fund is an asset allocation fund that invests in U.S. domestic and international stocks, U.S. domestic bonds, and stable value investments. Its objective is to provide a balance between the pursuit of growth and protection from risk over time. The fund diversifies among U.S. and international stocks, U.S. bonds and stable value investments to pursue long-term appreciation and short-term stability and takes advantage of market opportunities with a small flexible component. The fund invests in a portfolio of approximately 60% U.S. and international stocks. The remaining 40% of the fund is held in U.S. fixed income and stable value investments such as Guaranteed Investment Contracts (“GICs”), Synthetic GICs and Bank Investment Contracts.

Growth Asset Allocation Fund. This fund is an asset allocation fund that invests the majority of its assets in stock—both domestic and international. Its objective is to pursue high growth over time. The fund diversifies among a broad range of domestic and international stocks and takes advantage of market opportunities with a large flexible component. The fund invests approximately 55% of its portfolio in U.S. equities. The fund also invests 25% of its assets in a tactical component which, over the long term, is normally invested in the S&P 500, such that the total allocation in U.S. domestic equities could be 80%. As markets change, the fund manager may shift a portion of the tactical components to various fixed income securities. The fund invests another 20% of its portfolio in international stocks. The international component represents the markets of up to 20 economically developed countries, which are weighted to reduce risk. Stock investments include the S&P 500 Index and the MSCI Europe, Australia and Far East Index.

Stable Value Fund. This fund invests primarily in fully benefit-responsive GICs, Synthetic GICs and Bank Investment Contracts that provides a liquidity guarantee by the issuer and prior to maturity, at contract value, permit withdrawals, transfers and loans by employees without penalty or adjustment. Its objective is short- to intermediate-term: to achieve a stable return over short to intermediate periods of time while preserving principal.

Short Term Investment Fund (Money Market). This fund invests in a broad range of high-quality, short-term instruments. Its objective is to achieve competitive, short-term rates of return while preserving principal. The fund invests in short-term instruments issued by banks, corporations, and the U.S. Government and its agencies. These instruments include certificates of deposit and U.S. Treasury bills. The fund seeks to match the total rate of return of a Citigroup Three-Month Treasury Bill.

Long Treasury Index Fund (Government Bond). This fund invests in U.S. Treasury bonds with a maturity of 20 years or more. Its objective is to earn a higher level of income over the long-term along with the potential for capital appreciation. The fund’s goal is to match the performance of the Barclays Capital U.S. Long Treasury Bond Index. This index invests in U.S. Treasury bonds with 20 years or more to maturity. The fund is not exposed to credit risk since it invests only in bonds backed by the full faith and credit of the U.S. Government. The fund is exposed to interest rate risk, however, since the long maturity of the bonds means that the fund’s value may fluctuate substantially in response to changes in long-term interest rates.

Aggregate Bond Index Fund. The fund invests primarily in U.S. Treasury securities with a maturity of 10 years or longer. The fund invests in a well diversified portfolio that is representative of the U.S. Long Treasury bond market. The fund buys and holds securities, trading only when there is a change to the composition of the Index or when cash flow activity occurs in the fund. The Fund seeks to match the total rate of return of the Barclays Capital U.S. Aggregate Bond Index

S&P 500 Stock Fund. This fund invests in the stocks of a broad array of established U.S. companies. Its objective is long-term: to earn higher returns by investing in the largest companies in the U.S. economy. The S&P 500 Stock Fund is an index fund whose goal is to match the performance of the S&P 500 Index by investing in most or all of the same stocks. The S&P 500 Index represents almost 75% of the value of all publicly traded common stocks in the U.S. Because the S&P 500 Index includes 500 established companies of different sizes and different sectors of the U.S. economy (industrial, utilities, financial, and transportation), this fund is broadly diversified in common stocks.

S&P Value Stock Fund. This fund invests in most or all of the stocks held in the S&P/BARRA Value Index. Its objective is long-term: to earn higher returns by investing in a diversified portfolio of large-capitalization value stocks. The S&P 500 Value Stock Fund is an index fund whose goal is to match the performance of the S&P/BARRA Value Index by investing in most of the same stocks. The S&P/BARRA Value Index represents approximately 50% of the market capitalization of the S&P 500 Stock Index. The S&P/BARRA Value and Growth Indexes are constructed by dividing the stocks in the S&P 500 by a single attribute: market price to book value ratio. The S&P/BARRA Value Index includes companies with lower price to book value ratios.

S&P Growth Stock Fund. This fund invests in most or all of the stocks held in the S&P/BARRA Growth Index. Its objective is long-term: to earn higher returns by investing in a diversified portfolio of large-capitalization growth stocks. The S&P 500 Growth Stock Fund is an index fund whose goal is to match the performance of the S&P/BARRA Growth Index by investing in most of the same stocks. The S&P/BARRA Growth Index represents

approximately 50% of the market capitalization of the S&P 500 Stock Index. The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks in the S&P 500 by a single attribute: market price to book value ratio. The S&P/BARRA Growth Index includes companies with higher price to book value ratios.

S&P MidCap Stock Fund. This fund invests in the stocks of mid-sized U.S. companies. Its objective is long-term: to earn higher returns which reflect the growth potential of such companies. The fund invests in the stocks of mid-sized companies which are expected to grow faster than larger, more established companies. It is an index fund whose goal is to match the performance of the Standard & Poor’s MidCap 400 Index (the “MidCap Index”) by investing in many of the same stocks as the MidCap Index. MidCap refers to a company’s size as measured by its market capitalization. The MidCap Index includes 400 stocks which represent the middle tier of the U.S. stock market (the S&P 500 represents the largest tier).

Russell 2000 Stock Fund. This fund invests in the stocks of a broad array of small U.S. companies. Its objective is long-term: to earn higher returns that reflect the growth potential of such companies. The Russell 2000 Stock Fund is an index fund whose goal is to match the performance of the Russell 2000 Index. The Russell 2000 Stock Fund invests in most or all of the same stocks held in the Russell 2000 Index. The Russell 2000 is one of the better known indices used to measure the performance of U.S. small company stocks. These 2000 companies make a up a subset of the smallest companies held in the Russell 3000 Index. Companies of this size generally have greater investment risk and potentially higher returns than mid- and large-capitalization stocks. Because this is an index of 2000 companies, it is broadly diversified in terms of industries and economic sectors.

Nasdaq 100 Stock Fund. This fund invests in the stocks of the 100 largest and most actively traded non-financial companies on the Nasdaq Stock Market. Its objective is long term and offers investors the opportunity to share in the potential of substantial capital growth. The Nasdaq 100 Stock Fund is an index fund whose goal is to match the performance of the Nasdaq 100 Index by investing in most of the same stock. The Nasdaq 100 Index reflects Nasdaq’s largest non-financial companies across major industry groups, including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. This is a higher risk fund as the securities included in the index tend to be concentrated in specific industries that tend to experience a high degree of volatility.

US REIT Index Fund. The fund invests primarily in equity shares of real estate investment trusts (REITs). REIT’s invest in loans secured by real estate and invest directly in real estate properties such as apartments, office buildings, and shopping malls. REITs generate income from rentals or lease payments and offer the potential for growth from property appreciation and the potential for capital gains from the sale of properties. The fund seeks to match the performance of the Dow Jones/Wilshire REIT Index while providing daily liquidity. This market capitalization weighted index is comprised of 90 publicly traded REITs. To be included in the index a company must be an equity owner and operator of commercial (or residential) real estate and must generate at least 75% of its revenue from such assets. Minimum requirements for market capitalization and liquidity also apply. The fund typically invests in all securities in the Dow Jones/Wilshire REIT Index in proportion to their weighting in the Index. As such the fund

seeks to maintain sector and security weightings that closely match the Index. This replication process results in low turnover, accurate tracking and low costs.

International Stock Fund. This fund invests in approximately 1,000 foreign stocks in approximately 20 countries. Its long-term objective is to offer the potential return of investing in the stocks of established non-U.S. companies, as well as the potential risk-reduction derived from broad diversification. The fund invests in the stocks of established companies based in Europe, Australia, and the Far East.

Personal Choice Retirement Account. This fund is a self-directed brokerage account option administered through an alliance with Charles Schwab and Company, Inc. The Personal Choice Retirement Account offers a wide range of investments, including more than 2,000 mutual funds from over 300 fund families, as well as individual securities.

Atlantic Coast Bank Certificate of Deposit Fund. This fund was established in 2004. Fund assets are invested in certificates of deposit of Atlantic Coast Bank. In addition, this fund also maintains a small cash component for liquidity purposes. Liquidity is required in order to facilitate daily transactions such as investment transfers or distributions from the fund. An appropriate cash liquidity level is established as a percentage of the entire investment fund and is based on the plan’s provisions, estimated activity levels, and maturity of Certificates held in the fund.

Atlantic Coast Federal Corporation Stock Fund (Current Employer Stock Fund). The Atlantic Coast Federal Corporation Stock Fund consists primarily of common stock of Atlantic Coast Federal Corporation, a federally chartered majority-owned subsidiary of Atlantic Coast Federal, MHC, a mutual holding company. Investments in the Atlantic Coast Federal Corporation Stock Fund involves special risks common to investments in the shares of common stock of Atlantic Coast Federal Corporation. Following the offering, Atlantic Coast Federal Corporation will cease to exist, but will be succeeded by a new Maryland corporation, Atlantic Coast Financial Corporation which will be 100% owned by its public shareholders. Shares of Atlantic Coast Federal Corporation which were held in the Atlantic Coast Federal Corporation Stock Fund prior to the conversion and offering will be converted into new shares of common stock of Atlantic Coast Financial Corporation, in accordance with the exchange ratio. As soon as practicable after the closing of the stock offering, the Atlantic Coast Federal Corporation Stock Fund will be merged into the Atlantic Coast Financial Stock Fund.

Atlantic Coast Financial Corporation Stock Fund (New Employer Stock Fund) In connection with the stock offering, you may, in the manner described earlier, direct the trustee to invest all or a portion of your Plan account in the Atlantic Coast Financial Corporation Stock Fund, which consists primarily of common stock of Atlantic Coast Financial Corporation. Subsequent to the stock offering, you may elect to invest all or a portion of your contributions in the Atlantic Coast Financial Corporation Stock Fund; you may also elect to transfer into the Atlantic Coast Financial Corporation Stock Fund all or a portion of your accounts currently invested in other funds under the Plan. After the offering, the trustee will, to the extent practicable, use all amounts held by it in the Atlantic Coast Financial Corporation Stock Fund to purchase shares of common stock of Atlantic Coast Financial Corporation, taking into consideration cash amounts needed to maintain liquidity in the account. It is expected that all

purchases will be made at prevailing market prices. Performance of the Atlantic Coast Financial Corporation Stock Fund depends on a number of factors, including the financial condition and profitability of Atlantic Coast Financial Corporation and Atlantic Coast Bank and the market conditions for shares of Atlantic Coast Financial Corporation common stock generally. Investments in the Atlantic Coast Financial Corporation Stock Fund involves special risks common to investments in the shares of common stock of Atlantic Coast Financial Corporation.

For a discussion of material risks you should consider, see “Risk Factors” section of the accompanying prospectus and the section of the prospectus supplement called “Notice of Your Rights Concerning Employer Securities” (see below).

An investment in any of the investment options listed above is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. As with any mutual fund or stock investment, there is always a risk that you may lose money on your investment in any of the investment options listed above.

Administration of the Plan

     The Trustee and Custodian. The trustee of the Plan is Reliance Trust Company. Reliance Trust Company serves as trustee for all the investments funds under the Plan, including during the offering period for Atlantic Coast Financial Corporation common stock. Following the offering period, Reliance Trust Company will also serve as the trustee of the Atlantic Coast Financial Corporation Stock Fund.

     Plan Administrator. Pursuant to the terms of the Plan, the Plan is administered by the Plan administrator, Atlantic Coast Bank. The address of the Plan administrator is 505 Haines Avenue, Waycross, Georgia 31501, telephone number (912) 283-4711. The Plan administrator is responsible for the administration of the Plan, interpretation of the provisions of the Plan, prescribing procedures for filing applications for benefits, preparation and distribution of information explaining the Plan, maintenance of Plan records, books of account and all other data necessary for the proper administration of the Plan, preparation and filing of all returns and reports relating to the Plan which are required to be filed with the U.S. Department of Labor and the Internal Revenue Service, and for all disclosures required to be made to participants, beneficiaries and others under Sections 104 and 105 of ERISA.

     Reports to Plan Participants. The Plan administrator will furnish you a statement at least quarterly showing the balance in your account as of the end of that period, the amount of contributions allocated to your account for that period, and any adjustments to your account to reflect earnings or losses (if any).

Amendment and Termination

     It is the intention of Atlantic Coast Bank to continue the Plan indefinitely. Nevertheless, Atlantic Coast Bank may terminate the Plan at any time. If the Plan is terminated in whole or in

part, then regardless of other provisions in the Plan, you will have a fully vested interest in your accounts. Atlantic Coast Bank reserves the right to make any amendment or amendments to the Plan which do not cause any part of the trust to be used for, or diverted to, any purpose other than the exclusive benefit of participants or their beneficiaries; provided, however, that Atlantic Coast Bank may make any amendment it determines necessary or desirable, with or without retroactive effect, to comply with ERISA.

Merger, Consolidation or Transfer

     In the event of the merger or consolidation of the Plan with another plan, or the transfer of the trust assets to another plan, the Plan requires that you would receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit you would have been entitled to receive immediately before the merger, consolidation or transfer.

Federal Income Tax Consequences

     The following is a brief summary of the material federal income tax aspects of the Plan. You should not rely on this summary as a complete or definitive description of the material federal income tax consequences relating to the Plan. Statutory provisions change, as do their interpretations, and their application may vary in individual circumstances. Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws. Please consult your tax advisor with respect to any distribution from the Plan and transactions involving the Plan.

     As a “tax-qualified retirement plan,” the Code affords the Plan special tax treatment, including:

     (1) the sponsoring employer is allowed an immediate tax deduction for the amount contributed to the Plan each year;

     (2) participants pay no current income tax on amounts contributed by the employer on their behalf; and

     (3) earnings of the Plan are tax-deferred, thereby permitting the tax-free accumulation of income and gains on investments.

     Atlantic Coast Bank will administer the Plan to comply with the requirements of the Code as of the applicable effective date of any change in the law.

     Lump-Sum Distribution. A distribution from the Plan to a participant or the beneficiary of a participant will qualify as a lump-sum distribution if it is made within one taxable year, on account of the participant’s death, disability or severance from employment, or after the participant attains age 59 ¹/2, and consists of the balance credited to the participant under the Plan and all other profit sharing plans, if any, maintained by Atlantic Coast Bank. The portion of any lump-sum distribution required to be included in your taxable income for federal income tax purposes consists of the entire amount of the lump-sum distribution, less the amount of after-tax

contributions, if any, you have made to this Plan and any other profit sharing plans maintained by Atlantic Coast Bank, which is included in the distribution.

     Atlantic Coast Financial Corporation Common Stock Included in Lump-Sum Distribution. If a lump-sum distribution includes Atlantic Coast Financial Corporation common stock, the distribution generally will be taxed in the manner described above, except that the total taxable amount may be reduced by the amount of any net unrealized appreciation with respect to Atlantic Coast Financial Corporation common stock; that is, the excess of the value of Atlantic Coast Financial Corporation common stock at the time of the distribution over its cost or other basis of the securities to the trust. The tax basis of Atlantic Coast Financial Corporation common stock, for purposes of computing gain or loss on its subsequent sale, equals the value of Atlantic Coast Financial Corporation common stock at the time of distribution, less the amount of net unrealized appreciation. Any gain on a subsequent sale or other taxable disposition of Atlantic Coast Financial Corporation common stock, to the extent of the amount of net unrealized appreciation at the time of distribution, will constitute long-term capital gain, regardless of the holding period of Atlantic Coast Financial Corporation common stock. Any gain on a subsequent sale or other taxable disposition of Atlantic Coast Financial Corporation common stock, in excess of the amount of net unrealized appreciation at the time of distribution, will be considered long-term capital gain. The recipient of a distribution may elect to include the amount of any net unrealized appreciation in the total taxable amount of the distribution, to the extent allowed by regulations to be issued by the Internal Revenue Service.

     Distributions: Rollovers and Direct Transfers to Another Qualified Plan or to an IRA. You may roll over virtually all distributions from the Plan to another qualified plan or to an individual retirement account in accordance with the terms of the other plan or account.

Notice of Your Rights Concerning Employer Securities.

     Federal law provides specific rights concerning investments in employer securities. Because you may in the future have investments in the Atlantic Coast Financial Corporation Stock Fund under the Plan, you should take the time to read the following information carefully.

     Your Rights Concerning Employer Securities. The Plan must allow you to elect to move any portion of your account that is invested in the Atlantic Coast Federal Corporation Stock Fund and Atlantic Coast Financial Corporation Stock Fund from that investment into other investment alternatives under the Plan. You may contact the Plan administrator shown above for specific information regarding this right, including how to make this election. In deciding whether to exercise this right, you will want to give careful consideration to the information below that describes the importance of diversification. All of the investment options under the Plan are available to you if you decide to diversify out of either the Atlantic Coast Federal Corporation Stock Fund or the Atlantic Coast Financial Corporation Stock Fund.

     The Importance of Diversifying Your Retirement Savings. To help achieve long-term retirement security, you should give careful consideration to the benefits of a well-balanced and diversified investment portfolio. Spreading your assets among different types of investments can help you achieve a favorable rate of return, while minimizing your overall risk of losing money. This is because market or other economic conditions that cause one category of assets, or one

particular security, to perform very well often cause another asset category, or another particular security, to perform poorly. If you invest more than 20% of your retirement savings in any one company or industry, your savings may not be properly diversified. Although diversification is not a guarantee against loss, it is an effective strategy to help you manage investment risk.

     In deciding how to invest your retirement savings, you should take into account all of your assets, including any retirement savings outside of the Plan. No single approach is right for everyone because, among other factors, individuals have different financial goals, different time horizons for meeting their goals, and different tolerance for risk. Therefore, you should carefully consider the rights described here and how these rights affect the amount of money that you invest in employer common stock through the Plan.

     It is also important to periodically review your investment portfolio, your investment objectives, and the investment options under the Plan to help ensure that your retirement savings will meet your retirement goals.

Additional Employee Retirement Income Security Act (“ERISA”) Considerations

     As noted above, the Plan is subject to certain provisions of ERISA, including special provisions relating to control over the Plan’s assets by participants and beneficiaries. The Plan’s feature that allows you to direct the investment of your account balances is intended to satisfy the requirements of Section 404(c) of ERISA relating to control over plan assets by a participant or beneficiary. The effect of this is two-fold. First, you will not be deemed a “fiduciary” because of your exercise of investment discretion. Second, no person who otherwise is a fiduciary, such as Atlantic Coast Bank, the Plan administrator, or the Plan’s trustee is liable under the fiduciary responsibility provision of ERISA for any loss which results from your exercise of control over the assets in your Plan account.

     Because you will be entitled to invest all or a portion of your account balance in the Plan (other than amounts invested in the Atlantic Coast Federal Corporation Stock Fund) in Atlantic Coast Financial Corporation common stock, the regulations under Section 404(c) of the ERISA require that the Plan establish procedures that ensure the confidentiality of your decision to purchase, hold, or sell employer securities, except to the extent that disclosure of such information is necessary to comply with federal or state laws not preempted by ERISA. These regulations also require that your exercise of voting and similar rights with respect to the common stock be conducted in a way that ensures the confidentiality of your exercise of these rights.

Securities and Exchange Commission Reporting and Short-Swing Profit Liability

     Section 16 of the Securities Exchange Act of 1934 imposes reporting and liability requirements on officers, directors, and persons beneficially owning more than 10% of public companies such as Atlantic Coast Financial Corporation Section 16(a) of the Securities Exchange Act of 1934 requires the filing of reports of beneficial ownership. Within 10 days of becoming an officer, director or person beneficially owning more than 10% of the shares of Atlantic Coast Financial Corporation, a Form 3 reporting initial beneficial ownership must be filed with the Securities and Exchange Commission. Changes in beneficial ownership, such as

purchases, sales and gifts generally must be reported periodically, either on a Form 4 within two business days after the change occurs, or annually on a Form 5 within 45 days after the close of Atlantic Coast Financial Corporation’s fiscal year. Discretionary transactions in and beneficial ownership of the common stock through the Atlantic Coast Financial Corporation Stock Fund of the Plan by officers, directors and persons beneficially owning more than 10% of the common stock of Atlantic Coast Financial Corporation generally must be reported to the Securities and Exchange Commission by such individuals.

     In addition to the reporting requirements described above, Section 16(b) of the Securities Exchange Act of 1934 provides for the recovery by Atlantic Coast Financial Corporation of profits realized by an officer, director or any person beneficially owning more than 10% of Atlantic Coast Financial Corporation’s common stock resulting from non-exempt purchases and sales of Atlantic Coast Financial Corporation common stock within any six-month period.

     The Securities and Exchange Commission has adopted rules that provide exemptions from the profit recovery provisions of Section 16(b) for all transactions in employer securities within an employee benefit plan, provided certain requirements are met. These requirements generally involve restrictions upon the timing of elections to acquire or dispose of employer securities for the accounts of Section 16(b) persons.

     Except for distributions of common stock due to death, disability, retirement, termination of employment or under a qualified domestic relations order, persons affected by Section 16(b) are required to hold shares of common stock distributed from the Plan for six months following such distribution and are prohibited from directing additional purchases of units within the Atlantic Coast Financial Corporation Stock Fund for six months after receiving such a distribution.

Financial Information Regarding Plan Assets

     Financial information representing the net assets available for Plan benefits and the change in net assets available for Plan benefits at March 31, 2010, is available upon written request to the Plan administrator at the address shown above.

LEGAL OPINION

     The validity of the issuance of the common stock has been passed upon by Luse Gorman Pomerenk & Schick, P.C., Washington, D.C., which firm is acting as special counsel to Atlantic Coast Bank and Atlantic Coast Financial Corporation in connection with Atlantic Coast Financial Corporation’s stock offering.

PROSPECTUS

 

ATLANTIC COAST FINANCIAL CORPORATION

(Proposed Holding Company for Atlantic Coast Bank)

Up to 2,300,000 Shares of Common Stock

(Subject to increase to up to 2,645,000 shares)

 

 

Atlantic Coast Financial Corporation, a Maryland corporation, is offering shares of common stock for sale at $10.00 per share in connection with the conversion of Atlantic Coast Federal, MHC from the mutual to the stock form of organization. The shares of common stock we are offering represent the ownership interest in Atlantic Coast Federal Corporation currently owned by Atlantic Coast Federal, MHC. Atlantic Coast Federal Corporation’s common stock is currently traded on the Nasdaq Global Market under the trading symbol “ACFC.” For a period of 20 trading days after the completion of the conversion offering, we expect our shares of common stock will trade on the Nasdaq Global Market under the symbol “ACFCD,” and, thereafter, our trading symbol will revert to “ACFC.”

 

In the conversion offering, we are offering the shares of common stock to eligible depositors of Atlantic Coast Bank in a “subscription offering.” Depositors of Atlantic Coast Bank with aggregate account balances of at least $50 as of the close of business on March 31, 2009 will have first priority rights to buy our shares of common stock. Shares of common stock not purchased are expected to be offered for sale to the general public in a “community offering.” We also may offer for sale shares of common stock not purchased in the subscription offering or the community offering through a “syndicated community offering.’’

 

We are offering up to 2,300,000 shares of common stock for sale on a best efforts basis in the conversion offering. We may sell up to 2,645,000 shares of common stock because of demand for the shares of common stock or changes in market conditions, without resoliciting purchasers. We must sell a minimum of 1,700,000 shares to complete the conversion offering. In addition to the shares we are selling in the conversion offering, we also will simultaneously issue up to 1,235,145 shares of common stock to existing public stockholders of Atlantic Coast Federal Corporation in exchange for their existing shares. The number of shares to be issued in the exchange may be increased up to 1,420,417 shares of common stock if we sell 2,645,000 shares of common stock in the conversion offering.

 

The minimum order is 25 shares. The subscription and community offerings are expected to expire at 2:00 p.m., Eastern Time, on December 21, 2010. We may extend this expiration date without notice to you until February 4, 2011. Once submitted, orders are irrevocable unless the conversion offering is terminated or is extended, with Office of Thrift Supervision approval, beyond February 4, 2011, or the number of shares of common stock to be sold is increased to more than 2,645,000 shares or decreased to less than 1,700,000 shares. If the conversion offering is extended past February 4, 2011, or if the number of shares to be sold is increased to more than 2,645,000 shares or decreased to less than 1,700,000 shares, we will resolicit subscribers, and you will have the opportunity to maintain, change or cancel your order. If you do not provide us with a written indication of your intent, your funds will be returned to you, with interest. Funds received in the subscription and the community offering prior to the completion of the conversion offering will be held in a segregated account at Atlantic Coast Bank and will earn interest at 0.10% per annum.

 

Stifel, Nicolaus & Company, Incorporated, our conversion advisor and selling agent, will assist us in selling our shares of common stock on a best efforts basis in the subscription and community offerings. Stifel, Nicolaus & Company, Incorporated is not required to purchase any shares of common stock that are being offered for sale.

 

OFFERING SUMMARY

Price: $10.00 per Share

 

 

This investment involves a degree of risk, including the possible loss of principal. Please read “Risk Factors” beginning on page 22.

These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Neither the Securities and Exchange Commission, the Office of Thrift Supervision, nor any state securities regulator has approved or disapproved of these securities or determined if this Prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

Stifel Nicolaus Weisel

For assistance, please contact the Stock Information Center, toll-free, at (877) 643-8197.

 

The date of this prospectus is [Prospectus Date].

 

TABLE OF CONTENTS

		Page
SUMMARY			1
RISK FACTORS			21
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF ATLANTIC COAST FEDERAL CORPORATION AND SUBSIDIARY			39
RECENT DEVELOPMENTS			41
FORWARD-LOOKING STATEMENTS			54
HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING			55
OUR DIVIDEND POLICY			57
MARKET FOR THE COMMON STOCK			57
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE			59
CAPITALIZATION			61
PRO FORMA DATA			63
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			72
BUSINESS OF ATLANTIC COAST FINANCIAL CORPORATION			113
BUSINESS OF ATLANTIC COAST FEDERAL CORPORATION AND ATLANTIC COAST BANK			114
SUPERVISION AND REGULATION			144
TAXATION			154
MANAGEMENT			156
BENEFICIAL OWNERSHIP OF COMMON STOCK			180
SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS			182
THE CONVERSION OFFERING			183
FUTURE SUPPLEMENTAL OFFERING			211
COMPARISON OF STOCKHOLDERS’ RIGHTS FOR EXISTING STOCKHOLDERS OF ATLANTIC COAST FEDERAL CORPORATION			213
RESTRICTIONS ON ACQUISITION OF ATLANTIC COAST FINANCIAL CORPORATION			220
DESCRIPTION OF CAPITAL STOCK OF ATLANTIC COAST FINANCIAL CORPORATION FOLLOWING THE CONVERSION			224
CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			226
TRANSFER AGENT			226
EXPERTS			227
LEGAL MATTERS			227
WHERE YOU CAN FIND ADDITIONAL INFORMATION			227
ATLANTIC COAST FEDERAL CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS			F-1
EX-1.1
EX-10.26
EX-23.2

SUMMARY

     The following summary explains the significant aspects of the conversion offering, and the exchange of existing shares of Atlantic Coast Federal Corporation common stock for shares of Atlantic Coast Financial Corporation common stock. It may not contain all of the information that is important to you. For additional information before making an investment decision, you should read this entire document carefully, including the consolidated financial statements and the notes to the consolidated financial statements, and the section entitled “Risk Factors.”

The Companies

     Atlantic Coast Financial Corporation

     Atlantic Coast Financial Corporation is a Maryland corporation that will own all of the outstanding common stock of Atlantic Coast Bank upon completion of the conversion offering, and will be the successor to Atlantic Coast Federal Corporation.

     Atlantic Coast Financial Corporation’s executive offices will be located at 12724 Gran Bay Parkway West, Jacksonville, Florida 32258, and its telephone number at this address is (800) 342-2824.

     Atlantic Coast Federal, MHC

     Atlantic Coast Federal, MHC is the federally chartered mutual holding company of Atlantic Coast Federal Corporation. Atlantic Coast Federal, MHC’s principal business activity is the ownership of 8,728,500 shares of common stock of Atlantic Coast Federal Corporation, or 65.1% of the outstanding shares as of November 8, 2010. Upon completion of the conversion offering, Atlantic Coast Federal, MHC will no longer exist.

     Atlantic Coast Federal, MHC’s executive offices are located at 505 Haines Avenue, Waycross, Georgia 31501, and its telephone number at this address is (800) 342-2824.

     Atlantic Coast Federal Corporation

     Atlantic Coast Federal Corporation is a federally chartered corporation that owns all of the outstanding common stock of Atlantic Coast Bank. At June 30, 2010, Atlantic Coast Federal Corporation had consolidated assets of $901.4 million, deposits of $575.0 million and stockholders’ equity of $53.2 million. After the completion of the conversion offering, Atlantic Coast Federal Corporation will cease to exist, but will be succeeded by Atlantic Coast Financial Corporation, a Maryland corporation. As of November 8, 2010, Atlantic Coast Federal Corporation had 13,415,874 shares of common stock outstanding. As of that date, Atlantic Coast Federal, MHC owned 8,728,500 shares of common stock of Atlantic Coast Federal Corporation, representing 65.1% of the outstanding shares of common stock. The remaining shares were owned by the public.

     Atlantic Coast Federal Corporation’s executive offices are located at 505 Haines Avenue, Waycross, Georgia 31501, and its telephone number at this address is (800) 342-2824.

Atlantic Coast Bank

     Atlantic Coast Bank is a federally chartered savings bank headquartered in Waycross, Georgia. Atlantic Coast Bank was founded in 1939 as a credit union. Atlantic Coast Bank conducts business from its main office located in Waycross, Georgia, and its eleven branch offices located in southeast Georgia

and northeast Florida. Our principal business consists of attracting retail deposits from the general public and investing those funds primarily in permanent loans secured by first mortgages on owner-occupied, one- to four-family residences, home equity loans, and, to a lesser extent, automobile and other consumer loans. We also have originated multi-family residential loans and commercial construction and residential construction loans, but will no longer emphasize the origination of such loans. Instead, our new strategy is to increase our mortgage banking activity, warehouse lending and originating commercial business and owner-occupied commercial real estate loans to small businesses. Loans are obtained principally through retail staff, brokers and wholesale purchases. We also invest in investment securities, primarily those issued by U.S. government-sponsored agencies and entities, including Fannie Mae, Freddie Mac and Ginnie Mae. Revenues are derived principally from interest on loans and other interest earning assets, such as investment securities. To a lesser extent, revenue is generated from service charges and other income.

     Atlantic Coast Bank is subject to comprehensive regulation and examination by the Office of Thrift Supervision. Atlantic Coast Bank’s executive offices are located at 505 Haines Avenue, Waycross, Georgia 31501, and its telephone number at this address is (800) 342-2824. In conjunction with the conversion, we intend to relocate our domicile to Jacksonville, Florida. Its website address is www.AtlanticCoastBank.net. Information on this website is not and should not be considered to be a part of this prospectus.

Our Current Organizational Structure

     In January 2003, Atlantic Coast Bank completed its conversion from a mutual savings bank into the two-tier mutual holding company structure and became a wholly owned subsidiary of Atlantic Coast Federal Corporation. On October 4, 2004, Atlantic Coast Federal Corporation completed a minority stock offering in which it sold 5,819,000 shares or 40.0% of its common stock to eligible depositors and Atlantic Coast Bank’s Employee Stock Ownership Plan, with 60.0% of the 14,547,500 shares outstanding owned by Atlantic Coast Federal, MHC, our mutual holding company parent. As a result of stock repurchases, Atlantic Coast Federal, MHC currently owns 65.1% of our outstanding shares. In October 2007, Atlantic Coast Financial Corporation attempted a “second step” conversion and public stock offering of Atlantic Coast Federal, MHC’s ownership interest in Atlantic Coast Federal Corporation. However on December 7, 2007, the board of directors of Atlantic Coast Federal Corporation and Atlantic Coast Federal, MHC terminated the conversion and offering due to the decline in the economy of Atlantic Coast Bank’s primary market areas of northeastern Florida and southeastern Georgia.

     Pursuant to the terms of Atlantic Coast Federal, MHC’s plan of conversion and reorganization, Atlantic Coast Federal, MHC will convert from the mutual holding company to the stock holding company corporate structure. As part of the conversion, we are offering for sale in a subscription offering and possibly in a community offering and a syndicated community offering the majority ownership interest in Atlantic Coast Federal Corporation that is currently held by Atlantic Coast Federal, MHC. Upon the completion of the conversion offering, Atlantic Coast Federal, MHC and Atlantic Coast Federal Corporation will cease to exist, and we will complete the transition of our organization from being partially owned by public stockholders to being fully owned by public stockholders. Upon completion of the conversion, public stockholders of Atlantic Coast Federal Corporation will receive shares of common stock of Atlantic Coast Financial Corporation in exchange for their shares of Atlantic Coast Federal Corporation.

     The following diagram shows our current organizational structure, which is commonly referred to as the “two-tier” mutual holding company structure:

     After the conversion offering is completed, we will be organized as a fully public holding company, as follows:

        

Business Strategy

     Our business strategy is as follows:

•

Continuing our proactive approach to reducing non-performing assets by aggressive resolution and disposition initiatives through:

	•		Aggressive charge-off policy;
	•		Loan work out programs;
	•		Enhanced collection practices;
	•		Non-performing asset sales;
	•		Credit Risk Management;

•

Increasing revenue through an expansion of our mortgage banking strategy and an increased emphasis on commercial lending to small businesses;

	•		Growing our core deposit base; and
	•		Expanding through acquisition opportunities.

Future Supervisory Agreements with the Office of Thrift Supervision

     Following our most recent examination, we were informed by the Office of Thrift Supervision that it would require Atlantic Coast Bank and Atlantic Coast Federal Corporation to enter into supervisory agreements with the agency containing provisions substantially similar to those contained in the existing memorandum of understanding in addition to other operating restrictions as noted below. We were also informed that in a separate agreement, the Office of Thrift Supervision will impose an Individual Minimum Capital Requirement for Atlantic Coast Bank that will require us to achieve and maintain levels of capital greater than those required for a federal savings bank to be classified as well-capitalized. We anticipate, based upon discussions with the Office of Thrift Supervision, that the Individual Minimum Capital Requirement will require that Atlantic Coast Bank reach a core capital level of 7% by March 31, 2011 or June 30, 2011 and a risk based capital level of 11% by March 31, 2011 or June 30, 2011 and maintain these levels until the Office of Thrift Supervision removes the requirement. Until the Individual Minimum Capital Requirement is finalized, we will not know with certainty the precise capital levels we will be required to reach and maintain or the exact date when we will need to meet such requirements.

     Based on our current appraisal, we will be unable to reach the core capital requirement of 7% upon completion of the conversion. Based upon Atlantic Coast Bank’s pro forma regulatory capital at June 30, 2010 and the assumptions set forth in “Historical and Pro Forma Regulatory Capital Compliance,” core capital would range from 6.35% at the minimum of the offering range to 6.73% at the adjusted maximum of the offering range. Also, under Office of Thrift Supervision policy, we will likely not commence a supplemental offering until six months after the completion of our conversion offering, unless we obtain a waiver from the Office of Thrift Supervision. As a result, we will likely need to reduce our asset size following the conversion in order to meet our Individual Minimum Capital Requirement, which may reduce our earnings. Until the supervisory agreements and Individual Minimum Capital Requirement are finalized, which we anticipate will be before the end of 2010, we will not know with certainty the scope of the requirements and restrictions that will be placed upon Atlantic Coast Federal Corporation and Atlantic Coast Bank. In the event we are in material non-compliance with the terms of the supervisory agreements and Individual Minimum Capital Requirement, the Office of Thrift Supervision has the authority to subject us to the terms of a more restrictive enforcement order such as a cease and desist order, to impose civil money penalties on us and our directors and officers, and to remove directors and officers from their positions with Atlantic Coast Federal Corporation and Atlantic Coast Bank.

     The Office of Thrift Supervision has informed us that the supervisory agreements will subject us to the following additional operating restrictions: (1) Atlantic Coast Federal Corporation and Atlantic Coast Bank may not increase their assets in any quarter greater than the amount of interest credited on its deposit accounts without prior written approval from the Office of Thrift Supervision; (2) Atlantic Coast Federal Corporation and Atlantic Coast Bank may not add any new director to their Boards of Directors, employ any new senior executive officer or change the duties of any senior executive officer without providing 30 days advance written notice to the Office of Thrift Supervision; (3) Atlantic Coast Federal Corporation and Atlantic Coast Bank may not make any payment or enter into an agreement to make a payment, to an officer or employee that is contingent upon their termination of service, subject to certain exceptions; (4) prior written approval of the Office of Thrift Supervision must be obtained before the payment of any dividend or other capital distribution by Atlantic Coast Federal Corporation or Atlantic Coast Bank; (5) Atlantic Coast Federal Corporation and Atlantic Coast Bank may not enter into, renew or revise any contractual arrangement related to compensation or benefits with any director or officer unless they receive prior approval of the Office of Thrift Supervision; (6) Atlantic Coast Federal Corporation and Atlantic Coast Bank may not enter into any third party contracts outside of the normal course of business without providing 30 days advance written notice to the Office of Thrift Supervision and receiving a written notice of non-objection; (7) Atlantic Coast Federal Corporation and Atlantic Coast Bank are not eligible to have applications or notices processed by the Office of Thrift Supervision on an expedited basis, which would make executing future mergers and acquisitions more difficult; (8) Atlantic Coast Federal Corporation and Atlantic Coast Bank may not engage in transactions with any affiliate or subsidiary without providing 30 days advance written notice to the Office of Thrift Supervision and receiving a written notice of non-objection; and (9) Atlantic Coast Bank may not increase the level of brokered deposits, excluding interest credited, without the prior written approval of the Office of Thrift Supervision.

Future Supplemental Offering

     In order to further increase our capital, we intend to initiate a public offering of shares of our common stock. Under Office of Thrift Supervision policy, we may not commence the supplemental offering until six months after the completion of our conversion offering, unless we obtain a waiver from the Office of Thrift Supervision. We anticipate issuing up to $80.0 million of common stock in the supplemental offering, subject to market conditions at the time of the offering. We intend to conduct the supplemental offering to raise more capital than we can raise in the conversion offering alone because the size of the conversion offering is limited by an independent appraisal subject to Office of Thrift Supervision regulations. The additional capital that we could raise in the supplemental offering will better position us to grow our franchise and execute our business plan. The initiation of the supplemental offering is contingent on the completion of the conversion offering.

     We intend to market shares of our common stock in the supplemental offering first to those persons who purchased shares of common stock in the conversion offering, followed by stockholders as of a record date proximate to the supplemental offering who did not purchase shares in the conversion offering, and then the general public. The number of shares to be offered and the price per share of the supplemental offering will be determined in the future based upon market conditions prevailing at that time.

     The following table presents summary pro forma financial information relating to stockholders’ equity and dilution using June 30, 2010 financial information assuming the completion of the second-step conversion at the midpoint of the offering range with a supplemental offering ranging between $50.0 million and $80.0 million at a price of $10.00 per share with certain assumed expenses of the supplemental offering.

     The following summary pro forma information is for illustrative purposes only and may not be representative of the financial effects of the offering at the dates on which the offering actually occurs. The price per share, the net offering proceeds and the amount of shares offered may vary from the assumptions used below. The pro forma stockholders’ equity is not intended to represent the fair market value of the shares of common stock and may be different than the amounts that would be available for distribution to stockholders if we liquidated. No assurance can be given that the supplemental offering will be completed. However, if the supplemental offering is completed, substantial dilution of ownership, book value per share and earnings per share will occur to those stockholders who do not participate in the supplemental offering by purchasing at least their proportionate interest. If a stockholder purchases less than his or her proportionate interest, such stockholder will experience less dilution than a stockholder not purchasing shares in the supplemental offering.

Proposed Supplemental Offering Summary
(Dollars in thousands, except per share data)

Supplemental Offering Amount		$	50,000			$	80,000
Total pro forma tangible stockholders’ equity			116,410				145,210
Pro forma tangible stockholders’ equity per share		$	14.42			$	13.11
Offering price to pro forma tangible stockholders’ equity per share			69.36	%			76.26	%
Pro forma tangible stockholders’ equity per share dilution			(35.50	%)			(41.33	%)
Pro forma tangible equity to tangible assets			12.06	%			14.61	%

     Please see “Future Supplemental Offering” and “Risk Factors” for a more detailed discussion of our plans for the supplemental offering.

Our Market Area

     We conduct business from our headquarters and 11 full-service branch offices in northeastern Florida and southeastern Georgia. We have branches located in Waycross, Douglas and Garden City (Savannah area), Georgia, and in Jacksonville Beach, Orange Park, Neptune Beach, Westside, Southside and Julington Creek in the Jacksonville metropolitan area. Our primary lending area is in the Jacksonville metropolitan area with our deposit customers residing in both the Jacksonville metropolitan and southeastern Georgia markets.

     Our Florida market area has demonstrated strong population growth and stable household income levels despite the impact of the economic downturn. Over the past 10 years, the Jacksonville metropolitan area population has grown at a rate of 10% and is estimated to continue that trend and exceed state and national population growth trends according to estimates from SNL Financial. The economy in the Jacksonville metropolitan market area is diverse with aviation and aerospace, supply chain logistics, finance and insurance, information technology, life sciences and manufacturing being the most prominent. Our Georgia market has demonstrated a decrease in population and limited growth trends as it is a largely agricultural-based economy. However, despite such decreases in growth since 2000, our Georgia market area household income levels are estimated to grow at rates above state and national levels and has remained a stable banking market.

     See “Business of Atlantic Coast Federal Corporation and Atlantic Coast Bank—Market Area” for information with respect to the markets in which we operate.

Reasons for the Conversion and Offering

     Our primary reasons for converting to the fully public stock form of ownership and undertaking the stock offering are to:

	•		increase our capital position;
	•		eliminate the uncertainties associated with the mutual holding company structure under the recently enacted financial reform legislation;
	•		support internal growth through increased lending in the communities we serve;
	•		enable us to enhance existing products and services to meet the needs of our market;
	•		improve the liquidity of our shares of common stock and enhance stockholder returns through more flexible capital management strategies; and
	•		support acquisitions of financial institutions as opportunities arise, although we do not currently have any agreements to acquire a financial institution or other entity.

     As a fully converted stock holding company, we will have greater flexibility in structuring future mergers and acquisitions, including the form of consideration that we can use to pay for an acquisition. Our current mutual holding company structure limits our ability to offer shares of our common stock as consideration for a merger or acquisition since Atlantic Coast Federal, MHC is required to own a majority of our shares of common stock. Potential sellers often want stock for at least part of the purchase price. Our new stock holding company structure will enable us to offer stock or cash consideration, or a combination of stock and cash, and will therefore enhance our ability to compete with other bidders when acquisition opportunities arise. We do not currently have any agreement or understanding as to any specific acquisition.

Terms of the Conversion Offering

     Pursuant to Atlantic Coast Federal, MHC’s plan of conversion and reorganization, our organization will convert from a partially public to a fully public holding company structure. In connection with the conversion, we are selling shares that represent the 65.1% ownership interest in Atlantic Coast Federal Corporation currently held by Atlantic Coast Federal, MHC.

     We are offering between 1,700,000 and 2,300,000 shares of common stock to eligible depositors of Atlantic Coast Bank, to our tax-qualified employee benefit plans and, to the extent shares remain available, to residents of the Georgia counties of Chatham, Coffee and Ware and the Florida counties of Clay, Duval, Flagler, Nassau and St. Johns, to our existing public stockholders and to the general public in a community offering and, if necessary and feasible, a syndicated community offering. The number of shares of common stock to be sold may be increased to up to 2,645,000 shares as a result of demand for the shares of common stock in the conversion offering or changes in market conditions. Unless the number of shares of common stock to be offered is increased to more than 2,645,000 shares or decreased to fewer than 1,700,000 shares, or the conversion offering is extended beyond February 4, 2011, subscribers will not have the opportunity to change or cancel their stock orders once submitted. If the conversion offering is extended past February 4, 2011, or if the number of shares to be sold is increased to more than 2,645,000 shares or decreased to less than 1,700,000 shares, subscribers will have the right to maintain, change or cancel their orders during a resolicitation period. If we do not receive a written response from a

subscriber regarding any resolicitation, the subscriber’s order will be canceled and all funds received will be returned promptly with interest, and deposit account withdrawal authorizations will be canceled.

     The purchase price of each share of common stock to be offered for sale in the conversion offering is $10.00. All investors will pay the same purchase price per share. Investors will not be charged a commission to purchase shares of common stock in the conversion offering. Stifel, Nicolaus & Company, Incorporated, our conversion advisor and selling agent in the conversion offering, will use its best efforts to assist us in selling shares of our common stock in the subscription and community offerings. Stifel, Nicolaus & Company, Incorporated is not obligated to purchase any shares of common stock in the conversion offering.

How We Determined the Conversion Offering Range, the Exchange Ratio and the $10.00 Per Share Stock Price

     The amount of common stock we are offering for sale in the conversion offering and the exchange ratio are based on an independent appraisal of the estimated market value of Atlantic Coast Financial Corporation, assuming the conversion and exchange are completed. RP Financial, LC., our independent appraiser, has estimated that, as of August 20, 2010, this market value was $30.7 million. Based on Office of Thrift Supervision regulations, this market value forms the midpoint of a valuation range with a minimum of $26.1 million and a maximum of $35.4 million. Based on this valuation and the valuation range, the 65.1% ownership interest of Atlantic Coast Federal, MHC in Atlantic Coast Federal Corporation being sold in the conversion offering and the $10.00 per share price, the number of shares of common stock being offered for sale by Atlantic Coast Financial Corporation will range from 1,700,000 shares to 2,300,000 shares. The $10.00 per share price was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions. The exchange ratio will range from 0.1948 shares at the minimum of the conversion offering range to 0.2635 at the maximum of the conversion offering range, and will preserve the existing percentage ownership of public stockholders of Atlantic Coast Federal Corporation (excluding any new shares purchased by them in the conversion offering and their receipt of cash in lieu of fractional shares). If demand for shares or market conditions warrant, the appraisal can be increased by 15%, without notice to subscribers, which would result in an estimated market value of $40.7 million, a conversion offering of 2,645,000 shares of common stock and an exchange ratio of 0.3030. RP Financial, LC. will update its appraisal before we complete the conversion offering to determine whether any change in the valuation is necessary due to demand for the shares or market conditions.

     The appraisal is based in part on Atlantic Coast Financial Corporation’s financial condition and results of operations, the pro forma effect of the additional capital raised by the sale of shares of common stock in the offering, and an analysis of a peer group of ten publicly traded savings banks and thrift holding companies that RP Financial, LC. considers comparable to Atlantic Coast Financial Corporation The appraisal peer group consists of the following companies. Asset size for all companies is as of June 30, 2010, except as otherwise indicated.

Ticker

Company Name

Symbol

Exchange

Headquarters

Total Assets

(in millions)

First Defiance Financial Corp.

FDEF

NASDAQ

Defiance, OH

$

2,039

BankFinancial Corp.

BFIN

NASDAQ

Burr Ridge, IL

1,566

MutualFirst Financial, Inc.

MFSF

NASDAQ

Munice, IN

1,442

Abington Bancorp, Inc.

ABBC

NASDAQ

Jenkintown, PA

1,268

CFS Bancorp, Inc.

CITZ

NASDAQ

Munster, IN

1,095

Legacy Bancorp, Inc.

LEGC

NASDAQ

Pittsfield, MA

956

First PacTrust Bancorp

FPTB

NASDAQ

Chula Vista, CA

881

Riverview Bancorp, Inc.

RVSB

NASDAQ

Vancouver, WA

863

Fidelity Bancorp, Inc.

FSBI

NASDAQ

Pittsburgh, PA

708

Jefferson Bancshares, Inc.

JFBI

NASDAQ

Morristown, TN

661

(1)

     Our board of directors carefully reviewed the information provided to it by RP Financial, LC. through the appraisal process. RP Financial, LC. helped us understand the regulatory process as it applies to the appraisal and advised the board of directors as to how much capital we would be required to raise under the regulatory appraisal guidelines.

     The following table presents a summary of selected pricing ratios for the peer group companies and Atlantic Coast Financial Corporation (on a pro forma basis) and other information as of and for the twelve months ended June 30, 2010, as reflected in the appraisal report. Compared to the average pricing of the peer group, our pro forma pricing ratios at the midpoint of the conversion offering range indicated a discount of 11.6% on a price-to-book value basis and a discount of 21.5% on a price-to-tangible book value basis. The price-to-earnings multiples were not meaningful for either Atlantic Coast Financial Corporation or the peer group due to operating losses or low earnings.

		Price-to-book				Price-to-tangible
		value ratio				book value ratio
Atlantic Coast Financial Corporation (on a pro forma basis, assuming completion of the conversion)
Adjusted Maximum			54.59	%			54.64	%
Maximum			49.50	%			49.58	%
Midpoint			44.66	%			44.72	%
Minimum			39.48	%			39.54	%
Valuation of peer group companies, all of which are fully converted (on an historical basis)
Averages			50.53	%			56.97	%
Medians			48.02	%			52.17	%

     The independent appraisal does not indicate market value. Do not assume or expect that our valuation as indicated in the appraisal means that after the conversion and offering the shares of our common stock will trade at or above the $10.00 per share purchase price. Furthermore, the pricing ratios presented in the appraisal were utilized by RP Financial, LC. to estimate our market

value and not to compare the relative value of shares of our common stock with the value of the capital stock of the peer group. The value of the capital stock of a particular company may be affected by a number of factors such as financial performance, asset size and market location.

     For a more complete discussion of the amount of common stock we are offering for sale and the independent appraisal, see “The Conversion Offering—Stock Pricing and Number of Shares to be Issued.”

After-Market Stock Price Performance

     The following table presents stock price performance information for all second-step conversions completed between January 1, 2009 and September 21, 2010. None of these companies were included in the group of 10 comparable public companies utilized in RP Financial, LC.’s valuation analysis.

Second-Step Conversion Offerings
Completed Closing Dates between January 1, 2009 and September 21, 2010

										Percentage Price Appreciation (Depreciation)
										From Initial Trading Date
Company Name and		Conversion																				Through October
Ticker Symbol		Date				Exchange				One Day				One Week				One Month				27, 2010
FedFirst Financial Corp. (FFCO)			9/21/10			Nasdaq					13.6	%			12.0	%			12.0	%			15.5	%
Jacksonville Bancorp, Inc. (JXSB)			7/15/10			Nasdaq					6.5	%			5.8	%			1.3	%			2.5	%
Colonial Fin. Services, Inc. (COBK)			7/13/10			Nasdaq					0.5	%			(3.5	%)			(2.0	%)			(2.5	%)
Viewpoint Fin. Group (VPFG)			7/7/10			Nasdaq					(5.0	%)			(4.5	%)			(3.0	%)			(4.7	%)
Oneida Financial Corp. (ONFC)			7/7/10			Nasdaq					(6.3	%)			(6.3	%)			(1.3	%)			(6.3	%)
Fox Chase Bancorp, Inc. (FXCB)			6/29/10			Nasdaq					(4.1	%)			(4.0	%)			3.2	%			(2.3	%)
Oritani Financial Corp. (ORIT)			6/24/10			Nasdaq					3.1	%			(1.4	%)			(0.9	%)			3.2	%
Eagle Bancorp Montana, Inc. (EBMT)			4/5/10			Nasdaq					5.5	%			6.5	%			4.1	%			(3.2	%)
Ocean Shore Holding Co. (OSHC)			12/21/09			Nasdaq					7.5	%			12.3	%			13.1	%			35.5	%
Northwest Bancshares, Inc. (NWBI)			12/18/09			Nasdaq					13.5	%			13.0	%			14.0	%			13.4	%
Average											3.5	%			3.0	%			3.4	%			5.1	%
Median											4.3	%			2.2	%			0.2	%			0.1	%

     Stock price performance is affected by many factors, including, but not limited to: general market and economic conditions; the interest rate environment; the amount of proceeds a company raises in its offering; and numerous factors relating to the specific company, including the experience and ability of management, historical and anticipated operating results, the nature and quality of the company’s assets, and the company’s market area. None of the companies listed in the table above are exactly similar to Atlantic Coast Financial Corporation, the pricing ratios for their stock offerings may have been different from the pricing ratios for Atlantic Coast Financial Corporation shares of common stock and the market conditions in which these offerings were completed may have been different from current market conditions. Furthermore, this table presents only short-term performance with respect to companies that recently completed their second-step conversions and may not be indicative of the longer-term stock price performance of these companies. The performance of these stocks may not be indicative of how our stock will perform.

     Our stock price may trade below $10.00 per share, as the stock prices of many second-step conversions completed since January 1, 2009 have decreased below the initial offering price. Before you make an investment decision, we urge you to carefully read this prospectus, including, but not limited to, the section entitled “Risk Factors” beginning on page 21.

The Exchange of Existing Shares of Atlantic Coast Federal Corporation Common Stock

     If you are currently a stockholder of Atlantic Coast Federal Corporation, your shares will be canceled at the completion of the conversion offering and will become the right to receive shares of common stock of Atlantic Coast Financial Corporation. The number of shares of common stock you receive will be based on the exchange ratio, which will depend upon our final appraised value. The following table shows how the exchange ratio will adjust, based on the valuation of Atlantic Coast Financial Corporation and the number of shares of common stock issued in the conversion offering. The table also shows the number of shares of Atlantic Coast Financial Corporation common stock a hypothetical owner of Atlantic Coast Federal Corporation common stock would receive in exchange for 100 shares of Atlantic Coast Federal Corporation common stock owned at the completion of the conversion offering, depending on the number of shares of common stock issued in the conversion offering.

																										Equivalent								New
																		Total Shares								Value of				Equivalent				Shares to
										Shares of Atlantic Coast								of Common								Shares				Pro Forma				be
		Shares to be Sold in								Financial Corporation to be								Stock to be								Based Upon				Book Value				Received
		The Conversion								Issued for Shares of Atlantic								Issued in								Conversion				Per				for 100
		Offering								Coast Federal Corporation								Conversion				Exchange				Offering				Exchanged				Existing
		Amount				Percent				Amount				Percent				Offering				Ratio				Price (1)				Share (2)				Shares
Minimum			1,700,000				65.1	%			912,933				34.9	%			2,612,933				0.1948			$	1.95			$	4.93				19
Midpoint			2,000,000				65.1				1,074,039				34.9				3,074,039				0.2291				2.29				5.13				22
Maximum			2,300,000				65.1				1,235,145				34.9				3,535,145				0.2635				2.64				5.32				26
15% above Maximum			2,645,000				65.1				1,420,417				34.9				4,065,417				0.3030				3.03				5.55				30

     If you own shares of Atlantic Coast Federal Corporation common stock in a brokerage account in “street name,” your shares will be automatically exchanged within your account, and you do not need to take any action to exchange your shares of common stock. If you own shares in the form of Atlantic Coast Federal Corporation stock certificates, after the completion of the conversion offering, our exchange agent will mail to you a transmittal form with instructions to surrender your stock certificates. New certificates of Atlantic Coast Financial Corporation common stock will be mailed to you within five business days after the exchange agent receives properly executed transmittal forms and your Atlantic Coast Federal Corporation stock certificates. You should not submit a stock certificate until you receive a transmittal form.

     No fractional shares of Atlantic Coast Financial Corporation common stock will be issued to any public stockholder of Atlantic Coast Federal Corporation. For each fractional share that otherwise would be issued, Atlantic Coast Financial Corporation will pay an amount equal to the product obtained by multiplying the fractional share interest to which the holder otherwise would be entitled by the $10.00 per share price. Treasury stock of Atlantic Coast Federal Corporation will be cancelled and will not be a part of the exchange.

     Outstanding options to purchase shares of Atlantic Coast Federal Corporation common stock will convert into and become options to purchase new shares of Atlantic Coast Financial Corporation common stock based upon the exchange ratio. The aggregate exercise price, duration and vesting schedule of these options will not be affected by the conversion. At June 30, 2010, there were 614,345 outstanding options to purchase shares of Atlantic Coast Federal Corporation common stock, 326,039 of which have vested.

Such outstanding options will be converted into options to purchase 119,674 shares of common stock at the minimum of the conversion offering range and 161,879 shares of common stock at the maximum of the conversion offering range. Because Office of Thrift Supervision regulations prohibit us from repurchasing our common stock during the first year following the conversion unless compelling business reasons exist for such repurchases, we may use authorized but unissued shares to fund option exercises that occur during the first year following the conversion. If all existing options were exercised for authorized, but unissued shares of common stock following the conversion, stockholders would experience dilution of approximately 2.54% at the minimum and at the maximum of the conversion offering range.

How We Intend to Use the Proceeds From the Offering

     We intend to invest at least 50% of the net proceeds from the stock offering in Atlantic Coast Bank, loan funds to our employee stock ownership plan to fund its purchase of our shares of common stock in the conversion offering, repay a $5.0 million loan that Atlantic Coast Federal Corporation obtained in June 2010, the proceeds of which were contributed to Atlantic Coast Bank as capital, and retain the remainder of the net proceeds from the offering. For more information on the terms of the $5.0 million loan that Atlantic Coast Federal Corporation obtained in June 2010, please see, “How We Intend to Use the Proceeds from the Offering.” Therefore, assuming we sell 2,000,000 shares of common stock in the conversion offering, and we have net proceeds of $17.9 million, we intend to invest $9.0 million in Atlantic Coast Bank, loan $800,000 to our employee stock ownership plan to fund its purchase of our shares of common stock, use $5.0 million to repay our loan and retain the remaining $3.2 million of the net proceeds.

     We may use the funds we retain for investments, to finance the acquisition of financial institutions or other financial service companies as opportunities arise, to repurchase shares of common stock, and for other general corporate purposes. Atlantic Coast Bank may use the proceeds it receives from us to support increased lending, to expand its branch network, to enhance its products and services, to invest in securities and for other general corporate purposes.

     Please see the section of this prospectus entitled “How We Intend to Use the Proceeds from the Offering” for more information on the proposed use of the proceeds from the offering.

Persons Who May Order Shares of Common Stock in the Conversion Offering

     We are offering the shares of common stock in a “subscription offering” in the following descending order of priority:

	(i)		First, to depositors with accounts at Atlantic Coast Bank with aggregate balances of at least $50 at the close of business on March 31, 2009.
	(ii)		Second, to our tax-qualified employee benefit plans (including Atlantic Coast Bank’s employee stock ownership plan and 401(k) plan), which will receive, without payment therefor, nontransferable subscription rights to purchase in the aggregate up to 10% of the shares of common stock sold in the conversion offering. We expect our employee stock ownership plan to purchase 4% of the shares of common stock sold in the conversion offering.
	(iii)		Third, to depositors with accounts at Atlantic Coast Bank with aggregate balances of at least $50 at the close of business on September 30, 2010.

(iv)

Fourth, to depositors of Atlantic Coast Bank at the close of business on November 3, 2010.

     Shares of common stock not purchased in the subscription offering are expected to be offered for sale to the general public in a “community offering,” with a preference given first to natural persons (including trusts of natural persons) residing in the Georgia counties of Chatham, Coffee and Ware and the Florida counties of Clay, Duval, Flagler, Nassau and St. Johns, and then to Atlantic Coast Federal Corporation’s public stockholders as of November 8, 2010. The community offering is expected to begin concurrently with the subscription offering. In the community offering, we will pay a fee to “assisting brokers,” which are any broker-dealer firm (including Stifel Nicolaus & Company, Incorporated) registered with the Financial Industry Regulatory Authority, whose broker representatives assist in the sale of shares in the community offering and whose name is entered on a subscriber’s stock order form accepted by Atlantic Coast Financial Corporation. We also may offer for sale shares of common stock not purchased in the subscription offering or the community offering through a “syndicated community offering.” We have the right to accept or reject, in our sole discretion, orders received in the community offering or syndicated community offering, if any. Any determination to accept or reject stock orders in the community offering and the syndicated community offering will be based on the facts and circumstances available to management at the time of the determination.

     If we receive orders for more shares than we are offering, we may not be able to fully or partially fill your order. Shares will be allocated first to categories in the subscription offering. A detailed description of the subscription offering, the community offering and the syndicated community offering, as well as a discussion regarding allocation procedures, can be found in the section of this prospectus entitled “The Conversion Offering.”

Limits on How Much Common Stock You May Purchase in the Conversion Offering

     The minimum number of shares of common stock that may be purchased is 25.

     If you are not currently a Atlantic Coast Federal Corporation stockholder —

     No individual may purchase more than 5% of the common stock sold in the conversion offering (which equals 85,000 shares, 100,000 shares, 115,000 shares and 132,250 shares at the minimum, midpoint, maximum and adjusted maximum of the offering, respectively). If any of the following persons purchases shares of common stock, their purchases, in all categories of the conversion offering, when combined with your purchases, cannot exceed the overall purchase limitation of 5% of the common stock sold in the conversion offering:

	•		your spouse or relatives of you or your spouse living in your house;
	•		most companies, trusts or other entities in which you are a trustee, have a substantial beneficial interest or hold a senior position; or
	•		other persons who may be your associates or persons acting in concert with you.

     Unless we determine otherwise, persons having the same address and persons exercising subscription rights through qualifying deposit accounts registered to the same address will be subject to the overall purchase limitation of 5% of the common stock sold in the conversion offering.

     See the detailed description of the purchase limitations in the section of this prospectus headed “The Conversion Offering—Additional Limitations on Common Stock Purchases.”

     If you are currently a Atlantic Coast Federal Corporation stockholder —

     In addition to the above purchase limitations, there is an ownership limitation for stockholders other than our employee stock ownership plan. Shares of common stock that you purchase in the conversion offering individually and together with persons described above, plus any shares you and they receive in exchange for existing shares of Atlantic Coast Federal Corporation common stock, may not exceed 5% of the total shares of common stock to be issued and outstanding after the completion of the conversion offering.

     Subject to Office of Thrift Supervision approval, we may increase or decrease the purchase and ownership limitations at any time.

How You May Purchase Shares of Common Stock in the Subscription Offering and the Community Offering

     In the subscription offering or community offering, you may pay for your shares only by:

	(i)		personal check, bank check or money order made payable directly to Atlantic Coast Financial Corporation; or
	(ii)		authorizing us to withdraw funds from the types of Atlantic Coast Bank deposit accounts permitted on the stock order form.

     Atlantic Coast Bank is not permitted to lend funds to anyone for the purpose of purchasing shares of common stock in the offering. Additionally, you may not use a Atlantic Coast Bank line of credit check or any type of third party check to pay for shares of common stock. Please do not submit cash or wire transfers. You may not designate withdrawal from Atlantic Coast Bank’s accounts with check-writing privileges. You may not authorize direct withdrawal from a Atlantic Coast Bank retirement account. See “—Using Individual Retirement Accounts.”

     To place your order for shares of common stock in the subscription or community offerings you must deliver a signed and completed stock order form, together with full payment payable to Atlantic Coast Financial Corporation or authorization to withdraw funds from one or more of your Atlantic Coast Bank deposit accounts. The stock order form must be received (not postmarked) before 2:00 p.m., Eastern Time, on December 21, 2010, which is the end of the offering period. You may submit you stock order form and payment by mail using the stock order reply envelope provided, or by overnight delivery to our Stock Information Center at the address noted on the Stock Order Form. You may hand-deliver stock order forms to Atlantic Coast Bank’s main banking office, located at 505 Haines Avenue, Waycross, Georgia or to our Deerwood Park office, located at 10328 Deerwood Park Blvd., Jacksonville, Florida. Hand-delivered stock order forms will only be accepted at these two locations. We will not accept stock order forms at our other offices. Please do not mail stock order forms to Atlantic Coast Bank.

     In the community offering only, we have authorized any registered broker-dealer firm to assist in the sale of shares of common stock and to receive a fee paid by us. You are not required to consult a broker representative with regard to the stock offering, however, if you choose to do so before placing an order in the community offering, please complete the section of the stock order form entitled “Assisting Brokers.” The information to provide thereon includes the name of the registered broker-dealer firm and the name of its broker representative, in addition to certain other identifying information.

     Please see “The Conversion Offering— Procedure for Purchasing Shares—Payment for Shares” for a complete description of how to purchase shares in the conversion offering.

Using Individual Retirement Account Funds to Purchase Shares of Common Stock

     You may be able to subscribe for shares of common stock using funds in your individual retirement account (“IRA”) or other types of retirement accounts. If you wish to use some or all of the funds in your Atlantic Coast Bank retirement account, the applicable funds must first be transferred to a

self-directed account maintained by an independent trustee, such as a brokerage firm, and the purchase must be made through that account. If you do not have such an account, you will need to establish one before placing your stock order. An annual administrative fee may be payable to the independent trustee. Because individual circumstances differ and the processing of retirement fund orders takes additional time, we recommend that you contact our Stock Information Center promptly, preferably at least two weeks before the December 21, 2010 conversion offering deadline, for assistance with purchases using your IRA or other retirement account that you may have at Atlantic Coast Bank or elsewhere. Whether you may use such funds for the purchase of shares in the conversion offering may depend on timing constraints and, possibly, limitations imposed by the institution where the funds are held.

     See “The Conversion Offering—Procedure for Purchasing Shares—Payment for Shares” and “—Using Individual Retirement Account Funds” for a complete description of how to use IRA funds to purchase shares in the conversion offering.

Purchases by Officers and Directors

     We expect our directors and executive officers, together with their associates, to subscribe for 185,500 shares of common stock at the minimum of the offering range in the subscription and community offering, representing 10.9% of shares to be sold at the minimum of the conversion offering range. The purchase price paid by them will be the same $10.00 per share price paid by all other persons who purchase shares of common stock in the offering. Following the conversion offering, our directors and executive officers, together with their associates, are expected to beneficially own 338,625 shares of common stock at the minimum of the offering range, or 13.0% of our total outstanding shares of common stock at the minimum of the conversion offering range, which includes shares they currently own that will be exchanged for new shares of Atlantic Coast Financial Corporation.

     See “Subscriptions by Directors and Executive Officers” for more information on the proposed purchases of our shares of common stock by our directors and executive officers.

Deadline for Orders of Shares of Common Stock in the Subscription and Community Offerings

     The deadline for purchasing shares of common stock in the subscription and community offerings is 2:00 p.m., Eastern Time, on December 21, 2010, unless we extend this deadline. If you wish to purchase shares of common stock, a properly completed and signed stock order form, together with full payment, must be received (not postmarked) by this time.

     Although we will make reasonable attempts to provide this prospectus and offering materials to holders of subscription rights, the subscription offering and all subscription rights will expire at 2:00 p.m., Eastern Time, on December 21, 2010, whether or not we have been able to locate each person entitled to subscription rights.

     TO ENSURE THAT EACH PERSON RECEIVES A PROSPECTUS AT LEAST 48 HOURS PRIOR TO THE EXPIRATION DATE OF DECEMBER 21, 2010 IN ACCORDANCE WITH FEDERAL LAW, NO PROSPECTUS WILL BE MAILED ANY LATER THAN FIVE DAYS PRIOR TO DECEMBER 21, 2010 OR HAND-DELIVERED ANY LATER THAN TWO DAYS PRIOR TO DECEMBER 21, 2010.

     See “The Conversion Offering— Procedure for Purchasing Shares—Expiration Date” for a complete description of the deadline for purchasing shares in the conversion offering.

You May Not Sell or Transfer Your Subscription Rights

     Office of Thrift Supervision regulations prohibit you from transferring your subscription rights. If you order shares of common stock in the subscription offering, you will be required to state that you are purchasing the common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights. We intend to take legal action, including reporting persons to federal agencies, against anyone who we believe has sold or transferred his or her subscription rights. We will not accept your order if we have reason to believe that you have sold or transferred your subscription rights. On the order form, you may not add the names of others for joint stock registration who do not have subscription rights or who qualify only in a lower subscription offering priority than you do. You may add only those who were eligible to purchase shares of common stock in the subscription offering at your date of eligibility. In addition, the stock order form requires that you list all deposit accounts, giving all names on each account and the account number at the applicable eligibility date. Failure to provide this information, or providing incomplete or incorrect information, may result in a loss of part or all of your share allocation, if there is an oversubscription.

Delivery of Stock Certificates

     Certificates representing shares of common stock sold in the subscription offering and community offering will be mailed to the certificate registration address noted by purchasers on the stock order form. Stock certificates will be sent to purchasers by first-class mail as soon as practicable after the completion of the conversion offering. We expect trading in the stock to begin on the business day of or on the business day following the completion of the conversion offering. It is possible that until certificates for the common stock are delivered to purchasers, purchasers might not be able to sell the shares of common stock that they ordered, even though our common stock will have begun trading. Your ability to sell the shares of common stock before receiving your stock certificate will depend on arrangements you may make with a brokerage firm. If you are currently a stockholder of Atlantic Coast Federal Corporation, see “The Conversion Offering—Exchange of Existing Stockholders’ Stock Certificates” for a discussion on how you will receive Atlantic Coast Financial Corporation stock certificates in exchange for your Atlantic Coast Federal Corporation stock certificates.

Conditions to Completion of the Conversion Offering

     We cannot complete the conversion offering unless:

	•		The plan of conversion and reorganization is approved by at least a majority of votes eligible to be cast by members of Atlantic Coast Federal, MHC (depositors of Atlantic Coast Bank) as of November 3, 2010;
	•		The plan of conversion and reorganization is approved by at least two-thirds of the outstanding shares of common stock of Atlantic Coast Federal Corporation as of November 8, 2010, including shares held by Atlantic Coast Federal, MHC;
	•		The plan of conversion and reorganization is approved by at least a majority of the outstanding shares of common stock of Atlantic Coast Federal Corporation as of November 8, 2010, excluding those shares held by Atlantic Coast Federal, MHC;

•

We sell at least the minimum number of shares of common stock offered in the conversion offering; and

•

We receive the final approval of the Office of Thrift Supervision to complete the conversion offering.

     Atlantic Coast Federal, MHC intends to vote its ownership interest in favor of the plan of conversion and reorganization. At November 8, 2010, Atlantic Coast Federal, MHC owned 65.1% of the outstanding shares of common stock of Atlantic Coast Federal Corporation. The directors and executive officers of Atlantic Coast Federal Corporation and their affiliates owned 871,235 shares of Atlantic Coast Federal Corporation (including exercisable options), or 6.4% of the outstanding shares of common stock and 18.6% of the outstanding shares of common stock, excluding shares owned by Atlantic Coast Federal, MHC. They intend to vote those shares (excluding the stock options) in favor of the plan of conversion and reorganization.

Steps We May Take if We Do Not Receive Orders for the Minimum Number of Shares

     If we do not receive orders for at least 1,700,000 shares of common stock, we may take several steps in order to issue the minimum number of shares of common stock in the conversion offering range. Specifically, we may:

	(i)		increase the purchase and ownership limitations; and/or
	(ii)		seek regulatory approval to extend the conversion offering beyond February 4, 2011, so long as we resolicit subscriptions that we have previously received in the conversion offering; and/or
	(iii)		increase the purchase of shares by the employee stock ownership plan.

Possible Change in the Conversion Offering Range

     RP Financial, LC. will update its appraisal before we complete the conversion offering. If, as a result of demand for the shares or changes in market conditions, RP Financial, LC. determines that our estimated pro forma market value has increased, we may sell up to 2,645,000 shares in the conversion offering without further notice to you. If our estimated pro forma market value at that time is either below $26.1 million or above $40.7 million, then, after consulting with the Office of Thrift Supervision, we may:

	•		terminate the conversion offering and promptly return all funds;
	•		set a new conversion offering range; and/or
	•		take such other actions as may be permitted by the Office of Thrift Supervision and the Securities and Exchange Commission.

     If we set a new conversion offering range, subscribers will be resolicited and given the right to maintain, change or cancel their orders. If we do not receive a written response from a subscriber regarding any resolicitation, the subscriber’s order will be canceled and all funds received will be returned promptly with interest at 0.10% per annum, and deposit account withdrawal authorizations will be canceled.

Possible Termination of the Conversion Offering

     We may terminate the conversion offering at any time prior to the special meetings of members and stockholders of Atlantic Coast Federal, MHC that are being called to vote upon the conversion, and at any time thereafter with the approval of the Office of Thrift Supervision. If we terminate the conversion offering, we will promptly return your funds with interest at 0.10% per annum, and we will cancel deposit account withdrawal authorizations.

Benefits to Management and Potential Dilution to Stockholders Resulting from the Conversion

     We expect our employee stock ownership plan, which is a tax-qualified retirement plan for the benefit of all of our eligible employees, to purchase up to 4% of the shares of common stock we sell in the subscription and community offerings. These shares, when combined with shares owned by our existing employee stock ownership plan, will be less than 8% of the shares outstanding following the conversion. If we receive orders for more shares of common stock than the maximum of the conversion offering range, the employee stock ownership plan will have first priority to purchase shares over this maximum, up to a total of 4% of the shares of common stock sold in the conversion offering. This would reduce the number of shares available for allocation to eligible account holders. For further information, see “Management—Executive Compensation—Employee Stock Ownership Plan and Trust.”

     Office of Thrift Supervision regulations permit us to implement one or more new stock-based benefit plans no earlier than six months after completion of the conversion. Our current intention is to implement one or more new stock-based incentive plans no earlier than 12 months after completion of the conversion. Stockholder approval of these plans would be required. If implemented within 12 months following the completion of the conversion, the stock-based benefit plans will reserve a number of shares up to 4% of the shares of common stock sold in the conversion offering (reduced by amounts purchased in the this conversion offering by our 401(k) plan using its purchase priority in the conversion offering) for awards of restricted stock to key employees and directors, at no cost to the recipients. If implemented within 12 months following the completion of the conversion, the stock-based benefit plans will also reserve a number of shares up to 10% of the shares of common stock sold in the conversion offering for issuance pursuant to grants of stock options to key employees and directors. The total grants available under the stock-based benefit plans are subject to adjustment as may be required by Office of Thrift Supervision regulations or policy to reflect shares of common stock or stock options reserved for issuance by Atlantic Coast Federal Corporation or Atlantic Coast Bank. Current Office of Thrift Supervision policy would require the aggregate amount of outstanding restricted stock (including shares originally reserved) to be 4% or less of our total outstanding shares following the conversion and outstanding stock options (including shares originally reserved for issuance) to be 10% or less of our total outstanding shares following the conversion. If the stock-based benefit plan is adopted more than one year after the completion of the conversion, awards of restricted stock or grants of stock options under the plan may exceed the percentage limitations set forth above. We have not yet determined the number of shares that would be reserved for issuance under these plans. For a description of our current stock-based benefit plans, see “Management—Benefit Plans.”

     The following table summarizes the number of shares of common stock and the aggregate dollar value of grants that are available under one or more stock-based benefit plans if such plans reserve a number of shares of common stock equal to 4% and 10% of the shares sold in the conversion offering for restricted stock awards and stock options, respectively. The table shows the dilution to stockholders if all such shares are issued from authorized but unissued shares, instead of shares purchased in the open market. A portion of the stock grants shown in the table below may be made to non-management employees. The table also sets forth the number of shares of common stock to be acquired by the employee stock ownership plan for allocation to all employees.

		Number of Shares to be Granted or Purchased												Dilution				Value of Grants (1)
						At								Resulting								At
						Maximum				As a				From				At				Adjusted
		At				as adjusted				Percentage				Issuance of				Minimum				Maximum
		Minimum of				of				of Common				Shares for				of				of
		Conversion				Conversion				Stock to be				Stock-Based				Conversion				Conversion
		Offering				Offering				Sold in the				Benefit Plans				Offering				Offering
		Range				Range				Conversion				(2)				Range				Range
Employee stock ownership plan			68,000				105,800				4.00	%			N/A	(3)		$	680,000			$	1,058,000
Restricted stock awards			68,000				105,800				4.00				2.54	%			680,000				1,058,000
Stock options			170,000				264,500				10.00				6.11	%			481,570				749,266
Total			306,000				476,100				18.00	%			8.35	%		$	1,841,570			$	2,865,266

     We may fund our stock-based benefit plans through open market purchases, as opposed to new issuances of stock; however, if any options previously granted under our existing 2005 Stock Option Plan are exercised during the first year following completion of the conversion, they will be funded with newly issued shares as Office of Thrift Supervision regulations do not permit us to repurchase our shares during the first year following the completion of this conversion except to fund the grants of restricted stock under our stock-based benefit plan or under extraordinary circumstances. We have been advised by the staff of the Office of Thrift Supervision that the exercise of outstanding options and cancellation of treasury shares in the conversion will not constitute an extraordinary circumstance.

     The following table presents information as of June 30, 2010 regarding our employee stock ownership plan, our 2005 Recognition and Retention Plan and 2005 Stock Option Plan and our proposed stock-based benefit plan. The table below assumes that 3,535,145 shares are outstanding after the conversion offering, which includes the sale of 2,300,000 shares in the conversion offering at the maximum of the offering range and the issuance of 1,235,145 shares in exchange for shares of Atlantic Coast Federal Corporation using an exchange ratio of 0.2635. It also assumes that the value of the stock is $10.00 per share.

														Percentage of
						Shares at Maximum								Shares Outstanding
						of Conversion				Estimated Value of				After the
Existing and New Stock Benefit Plans		Participants				Offering Range				Shares				Conversion
Employee Stock Ownership Plan:		Employees
Shares purchased in 2004 offering (1)							122,665	(2)		$	1,226,645				3.47	%
Shares to be purchased in conversion offering							92,000				920,000				2.60
Total employee stock ownership plan shares							214,665			$	2,146,645				6.07	%
Restricted Stock Awards:		Directors, Officers and Employees
2005 Recognition and Retention Plan (1)							75,132	(3)		$	751,319	(4)			2.13	%
New shares of restricted stock							92,000				920,000	(4)			2.60
Total shares of restricted stock							167,132			$	1,671,319				4.73	%(7)
Stock Options:		Directors, Officers and Employees
2005 Stock Option Plan (1)							187,830	(5)		$	532,077				5.31	%
New stock options							230,000				651,536	(6)			6.51
Total stock options							417,830			$	1,183,613				11.82	%(7)
Total of stock benefit plans							799,626			$	5,001,577				22.62	%

Market for Common Stock

     Existing publicly held shares of Atlantic Coast Federal Corporation’s common stock are quoted on the Nasdaq Global Market under the symbol “ACFC.” Upon completion of the conversion offering, the shares of common stock of Atlantic Coast Financial Corporation will replace the existing shares. For a period of 20 trading days after the completion of the conversion offering, we expect our shares of common stock will trade on the Nasdaq Global Market under the symbol “ACFCD,” and, thereafter, our trading symbol will revert to “ACFC.” In order to list our stock on the Nasdaq Global Market, we are required to have at least three broker-dealers who will make a market in our common stock. Atlantic

Coast Federal Corporation currently has more than three market makers, including Stifel, Nicolaus & Company, Incorporated, and Stifel, Nicolaus & Company, Incorporated has advised us that it intends to make a market in our common stock following the offering, but it is under no obligation to do so.

Our Dividend Policy

     Atlantic Coast Federal Corporation suspended payment of its regular quarterly cash dividend on September 25, 2009. Although Atlantic Coast Financial Corporation will consider the payment of dividends in the future, you should not purchase our shares of common stock if you have a desire or need for dividend income. Please see the section of this prospectus entitled “Our Dividend Policy.”

Tax Consequences

     Atlantic Coast Federal, MHC, Atlantic Coast Federal Corporation, Atlantic Coast Bank and Atlantic Coast Financial Corporation have received an opinion of counsel, Luse Gorman Pomerenk & Schick, P.C., regarding the material federal income tax consequences of the conversion. As a general matter, the conversion will not be a taxable transaction for purposes of federal or state income taxes to Atlantic Coast Federal, MHC, Atlantic Coast Federal Corporation (except for cash paid for fractional shares), Atlantic Coast Bank, Atlantic Coast Financial Corporation, persons eligible to subscribe in the subscription offering, or existing stockholders of Atlantic Coast Federal Corporation. Existing stockholders of Atlantic Coast Federal Corporation who receive cash in lieu of fractional share interests in shares of Atlantic Coast Financial Corporation will recognize a gain or loss equal to the difference between the cash received and the tax basis of the fractional share.

How You Can Obtain Additional Information—Stock Information Center

     Our banking personnel may not, by law, assist with investment-related questions about the conversion offering. If you have any questions regarding the conversion offering, please call our Stock Information Center. The toll-free telephone number is (877) 643-8197. The Stock Information Center is open Monday through Friday between 10:00 a.m. and 4:00 p.m., Eastern Time. The Stock Information Center will be closed on weekends and bank holidays.

RISK FACTORS

     You should consider carefully the following risk factors in evaluating an investment in the shares of common stock. An investment in our common stock is subject to risks inherent in our business. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included in this prospectus. In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and results of operations. The value or market price of our common stock could decline due to any of these identified or other risks, and you could lose all or part of your investment.

Risks Related to Our Business

If our non-performing assets increase, our earnings will suffer.

     At September 30, 2010, our non-performing assets totaled $30.2 million, or 3.38% of total assets, which is an increase of $20.6 million, or 214.6%, over non-performing assets of $9.6 million, or 1.03% of total assets at December 31, 2007. Our non-performing assets may continue to increase in future periods. Our non-performing assets adversely affect our net income in various ways. We do not record interest income on non-accrual loans or real estate owned. We must establish an allowance for loan losses for losses inherent in the loan portfolio that are both probable and reasonably estimable through current period provisions for loan losses, which are recorded as a charge to income. From time to time, we also write down the value of properties in our other real estate owned portfolio to reflect changing market values. Additionally, there are legal fees associated with the resolution of problem assets as well as carrying costs such as taxes, insurance and maintenance related to our other real estate owned. Further, the resolution of non-performing assets requires the active involvement of management, which can distract them from our overall supervision of operations and other income-producing activities.

     Following our most recent examination, we were informed by the Office of Thrift Supervision that it would require Atlantic Coast Bank and Atlantic Coast Federal Corporation to enter into supervisory agreements with the agency containing provisions substantially similar to those contained in the existing memorandum of understanding in addition to other operating restrictions as noted below. We were also informed that in a separate agreement, the Office of Thrift Supervision will impose an Individual Minimum Capital Requirement for Atlantic Coast Bank that will require us to achieve and maintain levels of capital greater than those required for a federal savings bank to be classified as well-capitalized. We anticipate, based upon discussions with the Office of Thrift Supervision, that the Individual Minimum Capital Requirement will require that Atlantic Coast Bank reach a core capital level of 7% by March 31, 2011 or June 30, 2011 and a risk based capital level of 11% by March 31, 2011 or June 30, 2011 and maintain these levels until the Office of Thrift Supervision removes the requirement. Until the Individual Minimum Capital Requirement is finalized, we will not know with certainty the precise capital levels we will be required to reach and maintain or the exact date when we will need to meet such requirements.

     Based on our current appraisal, we will be unable to reach the core capital requirement of 7% upon completion of the conversion. Based upon Atlantic Coast Bank’s pro forma regulatory capital at June 30, 2010 and the assumptions set forth in “Historical and Pro Forma Regulatory Capital Compliance,” core capital would range from 6.35% at the minimum of the offering range to 6.73% at the adjusted maximum of the offering range. Also, under Office of Thrift Supervision policy, we may not commence a supplemental offering until six months after the completion of our conversion offering, unless we obtain a waiver from the Office of Thrift Supervision. As a result, we will likely need to reduce our asset size following the conversion in order to meet our Individual Minimum Capital Requirement, which may reduce our earnings. Until the supervisory agreements and Individual Minimum Capital Requirement are finalized, which we anticipate will be before the end of 2010, we will not know with certainty the scope of the requirements and restrictions that will be placed upon Atlantic Coast Federal Corporation and Atlantic Coast Bank. In the event we are in material non-compliance with the terms of the supervisory agreements and Individual Minimum Capital Requirement, the Office of Thrift Supervision has the authority to subject us to the terms of a more restrictive enforcement order such as a cease and desist order, to impose civil money penalties on us and our directors and officers, and to remove directors and officers from their positions with Atlantic Coast Federal Corporation and Atlantic Coast Bank.

     The Office of Thrift Supervision has informed us that the supervisory agreements will subject us to the following additional operating restrictions: (1) Atlantic Coast Federal Corporation and Atlantic Coast Bank may not increase their assets in any quarter greater than the amount of interest credited on its deposit accounts without prior written approval from the Office of Thrift Supervision; (2) Atlantic Coast Federal Corporation and Atlantic Coast Bank may not add any new director to their Boards of Directors, employ any new senior executive officer or change the duties of any senior executive officer without providing 30 days advance written notice to the Office of Thrift Supervision; (3) Atlantic Coast Federal Corporation and Atlantic Coast Bank may not make any payment or enter into an agreement to make a payment, to an officer or employee that is contingent upon their termination of service, subject to certain exceptions; (4) prior written approval of the Office of Thrift Supervision must be obtained before the payment of any dividend or other capital distribution by Atlantic Coast Federal Corporation or Atlantic Coast Bank; (5) Atlantic Coast Federal Corporation and Atlantic Coast Bank may not enter into, renew or revise any contractual arrangement related to compensation or benefits with any director or officer unless they receive prior approval of the Office of Thrift Supervision; (6) Atlantic Coast Federal Corporation and Atlantic Coast Bank may not enter into any third party contracts outside of the normal course of business without providing 30 days advance written notice to the Office of Thrift Supervision and receiving a written notice of non-objection; (7) Atlantic Coast Federal Corporation and Atlantic Coast Bank are not eligible to have applications or notices processed by the Office of Thrift Supervision on an expedited basis, which would make executing future mergers and acquisitions more difficult; (8) Atlantic Coast Federal Corporation and Atlantic Coast Bank may not engage in transactions with any affiliate or subsidiary without providing 30 days advance written notice to the Office of Thrift Supervision and receiving a written notice of non-objection; and (9) Atlantic Coast Bank may not increase the level of brokered deposits, excluding interest credited, without the prior written approval of the Office of Thrift Supervision.

     The restriction on growth will affect our ability to generate new loans or make investments without reducing other assets on our balance sheet, thereby potentially adversely affecting our income. As with the memorandum of understanding, the restriction on brokered deposits may affect our ability to have sufficient liquid assets for our operations or require us to pay higher rates on retail deposits to replace our use of brokered deposits. These limitations and the other restrictions noted above will limit our operations, which may adversely affect our financial performance.

We have experienced net losses for the first six months of 2010 and each of the last two fiscal years and we may not return to profitability in the near future.

     We have experienced net losses of $6.8 million for the first six months of 2010 and $29.3 million and $2.8 million for the years ended December 31, 2009 and 2008, respectively. The losses have been primarily caused by a significant increase in non-performing assets, which necessitated a provision for loan losses of $11.2 million for the six months ended June 30, 2010 and $24.9 million for the year ended December 31, 2009, compared to a provision of $13.9 million for the year ended December 31, 2008. We charged off $14.8 million of loans during the six months ended June 30, 2010 and $21.7 million of loans during 2009 as compared to $9.8 million of loans during 2008. Non-accrual loans (generally loans 90 days or more past due in principal or interest payments) decreased (but increased as a percentage of total loans) to $21.7 million, or 3.64% of total loans at June 30, 2010, compared to $25.5 million, or 3.43% of total loans at December 31, 2008. We experienced other than temporary impairment losses in our investment portfolio of $4.5 million and $81,000 for the year ended December 31, 2009 and for the first six months of 2010, respectively. In addition, during the year ended December 31, 2009, management deemed it appropriate to write off our entire goodwill balance of $2.8 million, and establish a valuation allowance of $16.2 million, or 100% of our net deferred tax asset. As a result of these factors and other conditions such as weakness in our local economy, we may not be able to generate sustainable net income or achieve profitability in the near future.

We may be unable to successfully implement our business strategy and as a result, our financial condition and results of operations may be negatively affected.

     Our future success will depend upon our ability to successfully implement our new business strategy, which includes expanding our mortgage banking activities and an emphasis on originating loans to small businesses, including loans guaranteed by the United States Small Business Administration. While we believe we have the management resources and internal systems in place to successfully implement our strategy, it will take time to fully implement our strategy. We expect that it may take a significant period of time before we can achieve the intended results of our business strategy. During the period we are implementing our plan, our results of operations may be negatively impacted. In addition, even if our strategy is successfully implemented, it may not produce positive results.

     Additionally, our future success in the mortgage banking area will depend on our ability to attract and retain highly skilled and motivated loan originators. We compete against many institutions with greater financial resources to attract these qualified individuals. Our failure to recruit and retain adequate talent could reduce our ability to compete successfully and adversely affect our business and profitability.

The geographic concentration in loans secured by one- to four-family residential real estate may increase credit losses, which could increase the level of provision for loan losses.

     As of June 30, 2010, approximately 64.8% of our total loan portfolio was secured by first or second liens on one- to four-family residential property, primarily in southeastern Georgia and northeastern Florida. We had $110.5 million, or 18.7%, of our loan portfolio secured by one-to four-family residential property in Georgia and $232.9 million, or 39.4%, of such properties in Florida. The downturn in the local and national economy in 2008, 2009 and continuing into 2010, particularly affecting real estate values and employment, have adversely affected our loan customers’ ability to repay their loans. In the event we are required to foreclose on a property securing a mortgage loans or pursue other remedies in order to protect our investment, we may not be able to recover funds in an amount equal to any remaining loan balance as a result of prevailing economic conditions, real estate values and other factors associated with the ownership of real property. In particular, the foreclosure process in Florida often takes many months to complete, thereby potentially increasing our risk of loss due to the property’s deterioration in value during this period. As a result, the market value of the real estate or other collateral underlying the loans may not, at any given time, be sufficient to satisfy the outstanding principal amount of the loans. Consequently, we would sustain loan losses and potentially incur a higher provision for loan loss expense.

Our loan portfolio possesses increased risk due to our number of commercial real estate, commercial business, construction and multi-family loans and consumer loans, which could increase the level of provision for loan losses.

     Our outstanding commercial real estate, commercial business, construction, multi-family, and manufactured home, automobile and other consumer loans accounted for approximately 36.2% of the total loan portfolio as of June 30, 2010. Generally, management considers these types of loans to involve a higher degree of risk compared to first mortgage loans on one- to four-family, owner occupied residential properties. Historically, these loans have had higher risks than loans secured by residential real estate for the following reasons:

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Commercial Real Estate and Commercial Business Loans. Repayment is dependent on income being generated by the rental property or business in amounts sufficient to cover operating expenses and debt service. This risk has been exacerbated by the extended

recession in commercial real estate and commercial land values, particularly in our markets.

	•		Commercial and Multi-Family Construction Loans. Repayment is dependent upon the completion of the project and income being generated by the rental property or business in amounts sufficient to cover operating expenses and debt service.
	•		Single Family Construction Loans. Repayment is dependent upon the successful completion of the project and the ability of the contractor or builder to repay the loan from the sale of the property or obtaining permanent financing.
	•		Multi-Family Real Estate Loans. Repayment is dependent on income being generated by the rental property in amounts sufficient to cover operating expenses and debt service.
	•		Consumer Loans. Consumer loans (such as automobile and manufactured home loans) are collateralized, if at all, with assets that may not provide an adequate source of repayment of the loan due to depreciation, damage or loss.

If these non-residential loans become non-performing, we may have to increase our provision for loan losses which would negatively affect our results of operations.

The loan portfolio possesses increased risk due to portfolio lending during a period of rising real estate values, high sales volume activity and historically low interest rate environment.

     Much of our portfolio lending is in one- to four-family residential properties generally located throughout southeastern Georgia and northeastern Florida. As a result of lending during a period of rising real estate values and historically low interest rates, a significant portion of the loan portfolio is potentially under-collateralized given the recent significant decline in real estate values. Sufficient time has not elapsed to ascertain the magnitude of potential losses resulting from lending during a period of intense changes in the real estate market. Additionally, given the historically low interest rate environment over this same period, the adjustable rate loans have not been subject to an interest rate environment that causes them to adjust to the maximum level and may involve repayment risks resulting from potentially increasing payment obligations by borrowers as a result of re-pricing. At June 30, 2010, there were $268.6 million in adjustable rate loans, which made up 45.4% of the loan portfolio.

High loan-to-value ratios on a portion of our residential mortgage loan portfolio expose us to greater risk of loss.

     Many of our residential mortgage loans are secured by liens on mortgage properties in which the borrowers have little or no equity because of the decline in home values in our market areas. Residential loans with high loan-to-value ratios will be more sensitive to declining property values than those with lower combined loan-to-value ratios and, therefore, may experience a higher incidence of default and severity of losses. In addition, if the borrowers sell their homes, such borrowers may be unable to repay their loans in full from the sale. As a result, these loans may experience higher rates of delinquencies, defaults and losses.

If the allowance for loan losses is not sufficient to cover actual losses, income and capital will be negatively affected.

     Our allowance for loan losses was $10.2 million, or 1.71% of total loans, at June 30, 2010. In the event loan customers do not repay their loans according to their terms and the collateral security for the

payments of these loans is insufficient to pay any remaining loan balance, we may experience significant loan losses. Such credit risk is inherent in the lending business, and failure to adequately assess such credit risk could have a material adverse affect on our financial condition and results of operations. Management makes various assumptions and judgments about the collectability of the loan portfolio, including the creditworthiness of the borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of the loans. In determining the amount of the allowance for loan losses, management reviews the loan portfolio and our historical loss and delinquency experience, as well as overall economic conditions. For larger balance non-homogeneous real estate loans the estimate of impairment is based on the underlying collateral if collateral dependent, and if such loans are not collateral dependent, the estimate of impairment is based on a cash flow analysis. If management’s assumptions are incorrect, the allowance for loan losses may be insufficient to cover probable incurred losses in the loan portfolio, resulting in additions to the allowance. The allowance for loan losses is also periodically reviewed by the Office of Thrift Supervision, who may require us to increase the amount. Additions to the allowance for loans losses would be made through increased provisions for loan losses and would negatively affect our results of operations.

We could record future losses on our holdings of private label securities. In addition, we may not receive full future interest payments on these securities.

     We own private label collateralized mortgage obligations with an amortized cost basis of $13.4 million and a fair value of $12.9 million at June 30, 2010. The original purchase price of these securities was $36.5 million. We recognized total other-than-temporary impairment of $81,000 and $4.5 million for these securities for the first six months of 2010 and the year ended December 31, 2009, respectively, of which $81,000 and $4.5 million was credit-related losses recorded through our income statement as a reduction of non-interest income, and $629,000 and $4,000 was recorded as an increase to other comprehensive income.

     A number of factors or combinations of factors could require us to conclude in one or more future reporting periods that an unrealized loss that exists with respect to our securities portfolio constitutes additional impairment that is other than temporary, which could result in material losses to us. These factors include, but are not limited to, a continued failure by an issuer to make scheduled interest payments, an increase in the severity of the unrealized loss on a particular security, an increase in the continuous duration of the unrealized loss without an improvement in value or changes in market conditions and/or industry or issuer specific factors that would render us unable to forecast a full recovery in value. In addition, the fair values of securities could decline if the overall economy and the financial condition of some of the issuers continues to deteriorate and there remains limited liquidity for these securities.

     See “Business of Atlantic Coast Federal Corporation and Atlantic Coast Bank—Investment Activities” for a further discussion of the impairment charges we recognized in the first six months of 2010 and in fiscal 2009, as well as a discussion of our securities portfolio and the unrealized losses related to the portfolio.

Future changes in interest rates could impact our financial condition and results of operations.

     Net income is the amount by which net interest income and non-interest income exceeds non-interest expense and the provision for loan losses. Net interest income makes up a majority of our income and is based on the difference between:

•

interest income earned on interest-earning assets, such as loans and securities; and

•

interest expense paid on interest-bearing liabilities, such as deposits and borrowings.

     A substantial percentage of our interest-earning assets, such as residential mortgage loans, have longer maturities than our interest-bearing liabilities, which consist primarily of savings and demand accounts, certificates of deposit and borrowings. As a result, our net interest income is adversely affected if the average cost of our interest-bearing liabilities increases more rapidly than the average yield on our interest-earning assets.

     The Federal Reserve Board maintained the federal funds rate at the historically low rate of 0.25% during the first six months of 2010 and during 2009. The federal funds rate has a direct correlation to general rates of interest, including our interest-bearing deposits. Our mix of asset and liabilities are considered to be sensitive to interest rate changes. In a low rate environment, we may be susceptible to the payoff or refinance of high rate mortgage loans that could reduce net interest income. On the other hand, if interest rates rise, net interest income could be reduced because interest paid on interest-bearing liabilities, including deposits and borrowings, increases more quickly than interest received on interest-earning assets, including loans and mortgage-backed and related securities. In addition, rising interest rates may negatively affect income because higher rates may reduce the demand for loans and the value of mortgage-related and investment securities.

Our operating expenses are high as a percentage of our net interest income and non-interest income, making it more difficult to maintain profitability.

     Our non-interest expense, which consists primarily of the costs associated with operating our business, represents a high percentage of the income we generate. The cost of generating our income is measured by our efficiency ratio, which represents non-interest expense divided by the sum of our net interest income and our non-interest income. Our 2009 efficiency ratio was negatively affected by other-than-temporary impairment losses, losses on sale of portfolio loans and losses on sale of foreclosed assets, as well as higher collection expenses. If we are able to lower our efficiency ratio, our ability to generate income from our operations will be more effective. For the six months ended June 30, 2010 and for the years ended December 31, 2009 and 2008, our efficiency ratio was 72.50%, 93.65% and 77.69%, respectively. Generally, this means we spent $0.73, $0.94 and $0.77 during the first six months of 2010, 2009 and 2008 to generate $1.00 of income. This reflects a trend where our efficiency ratio has deteriorated from 63.5% to 72.50% for the approximate eight-year period ended June 30, 2010.

If economic conditions continue to deteriorate or the economic recovery remains slow over an extended period of time in our primary market areas of Jacksonville, Florida and Ware County, Georgia, our results of operation and financial condition could be adversely impacted as borrowers’ ability to repay loans declines and the value of the collateral securing the loan decreases.

     Our financial results may be adversely affected by changes in prevailing economic conditions, including decreases in real estate values, changes in interest rates, which may cause a decrease in interest rate spreads, adverse employment conditions, the monetary and fiscal policies of the federal and the Georgia and Florida state governments and other significant external events. We hold approximately 27.5% of the deposits in Ware County, the county in which Waycross, Georgia is located as of June 30, 2009. We also have approximately 1.0% of the deposits in the Jacksonville, Florida, metropolitan area. Additionally, our market share of loans in Ware County is significantly greater than our share of the loan market in the Jacksonville metropolitan area. As a result of the concentration in Ware County, we may be more susceptible to adverse market conditions in that market. Due to the significant portion of real estate loans in the loan portfolio, decreases in real estate values could adversely affect the value of property used as collateral. At June 30, 2010, $232.9 million, or 39.4%, of our loan portfolio consisted of real estate

secured loans in Florida and $110.5 million, or 18.7%, of such loans consisted of real estate secured loans in Georgia. Adverse changes in the economy may also have a negative effect on the ability of borrowers to make timely repayments of their loans, which would have an adverse impact on earnings. The unemployment rate for the Jacksonville, Florida metropolitan area was an estimated 11.2% as of June 30, 2010 and the unemployment rate for Ware County, Georgia was an estimated 11.1% as of May 31, 2010. In addition, the Jacksonville metropolitan area had the 26th highest foreclosure rate of one- to four-family residences in the United States.

The United States economy remains weak and unemployment levels are high. A prolonged economic downturn, especially one affecting our geographic market area, will adversely affect our business and financial results.

     The United States experienced a severe economic recession in 2008 and 2009, the effects of which have continued into 2010. Recent growth has been slow and unemployment remains at high levels and as a result economic recovery is expected to be slow. Loan portfolio quality has deteriorated at many financial institutions reflecting, in part, the weak United States economy and high unemployment rates. In addition, the value of real estate collateral supporting many commercial loans and home mortgages has declined and may continue to decline. The continuing real estate downturn also has resulted in reduced demand for the construction of new housing and increased delinquencies in construction, residential and commercial mortgage loans. Bank and bank holding company stock prices have declined substantially, and it is significantly more difficult for banks and bank holding companies to raise capital or borrow funds.

     Continued negative developments in the financial services industry and the domestic and international credit markets may significantly affect the markets in which we do business, the market for and value of our loans and investments, and our ongoing operations, costs and profitability. We could experience reduced demand for our products and services, increases in loan delinquencies, problem assets or foreclosures, and the collateral for our loans may decline further in value. Moreover, continued declines in the stock market in general, or stock values of financial institutions and their holding companies specifically, could adversely affect our stock performance.

The slowing and uncertain economy in Florida has negatively impacted our ability to grow loans in our primary market area, and combined with strong competition, may further reduce our ability to obtain loans and also decrease our yield on loans.

     From 2000 to mid-2007, the Jacksonville metropolitan area had been one of the fastest growing economies in the United States. The area experienced substantial growth in population, new business formation and public works spending. Due to the considerable slowing of economic growth and migration into our market area since mid-2007 and the resulting downturn in the real estate market, management believes growth in our market area will be moderate in the near term. Growth in the first mortgage loan portfolio has been negatively impacted by a slowing in existing and new home sales activity in our markets. A decrease in existing and new home sales decreases lending opportunities, and may negatively affect our income.

     In addition, we are located in a competitive market that affects our ability to obtain loans through origination or purchase as well as originating them at rates that provide an attractive yield. Competition for loans comes principally from mortgage bankers, commercial banks, other thrift institutions, nationally based homebuilders and credit unions. Internet based lenders have also become a greater competitive factor in recent years. Such competition for the origination and purchase of loans may limit future growth and earnings prospects.

Strong competition in our primary market area may reduce our ability to attract and retain deposits and also increase our cost of funds.

     We operate in a very competitive market for the attraction of deposits, the primary source of our funding. Historically, our most direct competition for deposits has come from credit unions, community banks, large commercial banks and thrift institutions within our primary market areas. In recent years competition has also come from institutions that largely deliver their services over the internet. Such competitors have the competitive advantage of lower infrastructure costs and substantially greater resources and lending limits and may offer services we do not provide. Particularly during times of extremely low or extremely high interest rates, we have faced significant competition for investors’ funds from short-term money market securities and other corporate and government securities. During periods of regularly increasing interest rates, competition for interest-bearing deposits increases as customers, particularly time deposit customers, tend to move their accounts between competing businesses to obtain the highest rates in the market. As a result, Atlantic Coast Bank incurs a higher cost of funds in an effort to attract and retain customer deposits. We strive to grow our lower cost deposits, such as non-interest-bearing checking accounts, in order to reduce our cost of funds.

We may not be able to realize our deferred tax asset.

     We recognize deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax bases of assets and liabilities. However, at June 30, 2010, we had no net deferred tax asset. In 2009, we established a valuation allowance for our net federal and state deferred tax asset after evaluating the positive and negative evidence under Generally Accepted Accounting Principles (“GAAP”). GAAP requires more weight be given to objective evidence, and since realization is dependent on future operating results our three year cumulative operating loss carried more weight than forecasted earnings.

     It is possible as a result of the conversion offering, that we may experience an “ownership change” as defined under Section 382 of the Internal Revenue Code of 1986, as amended (which is generally a greater than 50% increase by certain “5% stockholders” over a rolling three-year period). Section 382 imposes an annual limitation on the utilization of deferred tax assets, such as net operating loss carryforwards and other tax attributes, once an ownership change has occurred. Depending on the size of the annual limitation (which is in part a function of our market capitalization at the time of the ownership change) and the remaining carryforward period of the tax assets (federal net operating losses generally may be carried forward for a period of 20 years), we could realize a permanent loss of a portion of our federal and state deferred tax assets and certain built-in losses that have not been recognized for tax purposes.

     We regularly review our deferred tax assets for recoverability based on our history of earnings, expectations for future earnings and expected timing of reversals of temporary differences. Realization of our deferred tax assets ultimately depends on the existence of sufficient taxable income, including taxable income in prior carryback years, as well as future taxable income. Our net deferred tax asset at June 30, 2010 will not become fully realizable until our expected future earnings will support realization of the asset. In addition, we will not know the impact of the ownership change from the conversion offering until after it is completed. If triggered, we believe that the impact on our deferred tax asset could be material. This is a preliminary and complex analysis and requires us to make certain judgments in determining the annual limitation. Although it is currently not shown as an asset, it is possible that we could ultimately lose a significant portion of our deferred tax asset. Realization of our deferred tax asset would significantly improve our earnings and capital.

Atlantic Coast Federal Corporation’s expenses will increase as a result of increases in Federal Deposit Insurance Corporation insurance premiums.

     Due to the costs of resolving the increasing numbers of bank failures in 2008 and 2009, on May 22, 2009, the Federal Deposit Insurance Corporation adopted a final rule levying a five basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009. We recorded an expense of $465,000 during the quarter ended June 30, 2009 to reflect the special assessment. Any further special assessments that the Federal Deposit Insurance Corporation levies will be recorded as an expense during the appropriate period. In addition, the Federal Deposit Insurance Corporation increased the general deposit insurance assessment rate and, therefore, our Federal Deposit Insurance Corporation general insurance premium expense will increase compared to prior periods.

     The Federal Deposit Insurance Corporation also adopted a rule pursuant to which all insured depository institutions were required to prepay their estimated assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. The prepayment amount was collected on December 30, 2009. The assessment rate for the fourth quarter of 2009 and for 2010 is based on each institution’s total base assessment rate for the third quarter of 2009, modified to assume that the assessment rate in effect on September 30, 2009 had been in effect for the entire third quarter, and the assessment rate for 2011 and 2012 will be equal to the modified third quarter assessment rate plus an additional three basis points. In addition, each institution’s base assessment rate for each period will be calculated using its third quarter assessment base, adjusted quarterly for an estimated 5% annual growth rate in the assessment base through the end of 2012. We recorded the pre-payment as a prepaid expense, which will be amortized to expense over three years. Based on our deposits and assessment rate as of September 30, 2009, our prepayment amount was $6.1 million.

     In the event that the special assessment and the prepayment do not provide sufficient funds for the Federal Deposit Insurance Corporation to resolve future bank failures, the Federal Deposit Insurance Corporation may require another special assessment or increase assessment rates for all Federal Deposit Insurance Corporation insured institutions. An increase in assessments will adversely affect our results of operations.

Our wholesale funding sources may prove insufficient to replace deposits at maturity and support our future growth.

     We must maintain sufficient funds to respond to the needs of depositors and borrowers. As a part of our liquidity management, we use a number of funding sources in addition to core deposit growth and repayments and maturities of loans and investments. As we continue to grow, we are likely to become more dependent on these sources, which include Federal Home Loan Bank advances, proceeds from the sale of loans and liquidity resources of the holding company. At June 30, 2010, we had $170.7 million of Federal Home Loan Bank advances outstanding.

     In the past we have solicited brokered deposits as a source of funds. However, under a memorandum of understanding with the Office of Thrift Supervision entered into in August 2009, Atlantic Coast Bank cannot increase its level of brokered deposits over $83.9 million without prior approval of the Office of Thrift Supervision and must reduce the level of its brokered deposits to $52.5 million by June 30, 2011. We had $69.9 million of brokered deposits at June 30, 2010, which was 12.2% of total deposits. As our brokered deposits mature, we may have to pay a higher rate of interest to replace them with other deposits or with funds from other sources. Not being able to replace those deposits as they mature could adversely affect our liquidity. Paying higher interest rates to replace those deposits could adversely affect our net interest margin and our operating results.

     Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. If we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In this case, our operating margins and profitability would be adversely affected.

Our memorandum of understanding with the Office of Thrift Supervision imposes certain limits on our operations and could affect our liquidity.

     In August 2009, Atlantic Coast Bank entered into a memorandum of understanding with the Office of Thrift Supervision addressing certain areas of our operations. Under the memorandum we are required to (1) utilize a four quarter roll forward budget to address, among other things, capital adequacy, appropriate allowances for loan and lease losses and a liquidity analysis, (2) ensure that the book value of our bank owned life insurance does not exceed 25% of our total capital, (3) review and enhance our liquidity policy, (4) develop a written plan to mitigate any risks to our capital and liquidity from our repurchase agreements, (5) reduce our brokered deposits to not more than $52.5 million by June 30, 2011, (6) obtain Office of Thrift Supervision approval for the payment of any dividends, (7) develop a plan to enhance our compliance management program (including Bank Secrecy Act and anti-money laundering programs) and (8) correct all deficiencies and weaknesses identified in our 2009 Report of Examination.

     The requirement to reduce the level of brokered deposits may affect our ability to have sufficient liquid assets for our operations. It may also cause us to pay higher rates on retail deposits to replace our use of brokered deposits. We may not increase our level of brokered deposits above the limit permitted by the Office of Thrift Supervision without the prior approval of the agency. We believe we will be able to reduce the level of our brokered deposits from $69.9 million as of June 30, 2010 to the level required by the memorandum of understanding within the required time period.

     The restriction on the payment of dividends without Office of Thrift Supervision approval will affect our ability to pay dividends in the future unless we have sufficient assets at Atlantic Coast Financial Corporation to pay dividends without reliance on dividends from Atlantic Coast Bank.

     We have addressed all the corrective actions mandated in the memorandum and we believe we are in compliance with the requirements of the memorandum. In the event that Atlantic Coast Bank should become in material non-compliance with the memorandum of understanding, the Office of Thrift Supervision has the authority to subject us to a more formal enforcement action, such as a cease and desist order.

Atlantic Coast Bank operates in a highly regulated environment and may be adversely affected by changes in laws and regulations.

     Atlantic Coast Bank is currently subject to extensive regulation, supervision and examination by the Office of Thrift Supervision, its chartering authority, and by the Federal Deposit Insurance Corporation, which insures Atlantic Coast Bank’s deposits. As a savings and loan holding company, Atlantic Coast Federal Corporation is currently subject to regulation and supervision by the Office of Thrift Supervision. Such regulation and supervision govern the activities in which financial institutions and their holding companies may engage and are intended primarily for the protection of the federal deposit insurance fund and depositors. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operations of financial institutions, the classification of assets by financial institutions and the adequacy of financial institutions’ allowance for loan losses. New financial reform legislation has been enacted by Congress that will change the bank regulatory framework, create an independent consumer

protection bureau that will assume the consumer protection responsibilities of the various federal banking agencies, and establish more stringent capital standards for banks and bank holding companies. The legislation will also result in new regulations affecting the lending, funding, trading and investment activities of banks and bank holding companies. Further changes in such regulation and oversight, whether in the form of regulatory policy, regulations, or legislation, could have a material impact on Atlantic Coast Bank and Atlantic Coast Federal Corporation.

     Atlantic Coast Bank’s operations are also subject to extensive regulation by other federal, state and local governmental authorities, and are subject to various laws and judicial and administrative decisions that impose requirements and restrictions on operations. These laws, rules and regulations are frequently changed by legislative and regulatory authorities. In the future, changes to existing laws, rules and regulations, or any other new laws, rules or regulations could make compliance more difficult or expensive or otherwise adversely affect our business, financial condition or prospects.

Financial reform legislation recently enacted by Congress will, among other things, eliminate the Office of Thrift Supervision, tighten capital standards, create a new Consumer Financial Protection Bureau and result in new laws and regulations that are expected to increase our costs of operations.

     Congress has recently enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which will significantly change the current bank regulatory structure and affect the lending, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act will eliminate our current primary federal regulator, the Office of Thrift Supervision, and require Atlantic Coast Bank to be regulated by the Office of the Comptroller of the Currency (the primary federal regulator for national banks). The Dodd-Frank Act also authorizes the Board of Governors of the Federal Reserve System to supervise and regulate all savings and loan holding companies like Atlantic Coast Financial Corporation, in addition to bank holding companies which it currently regulates. As a result, the Federal Reserve Board’s current regulations applicable to bank holding companies, including holding company capital requirements, will apply to savings and loan holding companies like Atlantic Coast Financial Corporation. These capital requirements are substantially similar to the capital requirements currently applicable to Atlantic Coast Bank, as described in “Supervision and Regulation—Federal Banking Regulation—Capital Requirements.” The Dodd-Frank Act also requires the Federal Reserve Board to set minimum capital levels for bank holding companies that are as stringent as those required for the insured depository subsidiaries, and the components of Tier 1 capital would be restricted to capital instruments that are currently considered to be Tier 1 capital for insured depository institutions. The legislation also establishes a floor for capital of insured depository institutions that cannot be lower than the standards in effect today, and directs the federal banking regulators to implement new leverage and capital requirements within 18 months that take into account off-balance sheet activities and other risks, including risks relating to securitized products and derivatives.

     The Dodd-Frank Act also creates a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions such as Atlantic Coast Bank, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets will be examined by their applicable bank regulators. The new legislation also weakens the federal preemption available for national banks and federal savings associations, and gives state attorney generals the ability to enforce applicable federal consumer protection laws.

     The legislation also broadens the base for Federal Deposit Insurance Corporation insurance assessments. Assessments will now be based on the average consolidated total assets less tangible equity capital of a financial institution. The Dodd-Frank Act also permanently increases the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor, retroactive to January 1, 2009, and non-interest bearing transaction accounts have unlimited deposit insurance through December 31, 2013. Lastly, the Dodd-Frank Act will increase stockholder influence over boards of directors by requiring companies to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments, and by authorizing the Securities and Exchange Commission to promulgate rules that would allow stockholders to nominate their own candidates using a company’s proxy materials. The legislation also directs the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded or not.

     It is difficult to predict at this time what effect the new legislation and implementing regulations will have on community banks with regards to the lending and credit practices of such banks. Moreover, many of the provisions of the Dodd-Frank Act will not take effect for at least a year, and the legislation requires various federal agencies to promulgate numerous and extensive implementing regulations over the next several years. Although the substance and scope of these regulations cannot be determined at this time, it is expected that the legislation and implementing regulations, particularly those relating to the new Consumer Financial Protection Bureau, will increase our operating and compliance costs.

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and our income.

     In response to the financial crisis of 2008 and early 2009, Congress has taken actions that are intended to strengthen confidence and encourage liquidity in financial institutions, and the Federal Deposit Insurance Corporation has taken actions to increase insurance coverage on deposit accounts. The Dodd-Frank Act and implementing regulations are likely to have a significant effect on the financial services industry, which are likely to increase operating costs and reduce profitability. In addition, there have been proposals made by members of Congress and others that would reduce the amount delinquent borrowers are otherwise contractually obligated to pay on their mortgage loans and limit an institution’s ability to foreclose on mortgage collateral.

     The potential exists for additional federal or state laws and regulations, or changes in policy, affecting lending and funding practices and liquidity standards. Moreover, bank regulatory agencies have been active in responding to concerns and trends identified in examinations, and have issued many formal enforcement orders requiring capital ratios in excess of regulatory requirements. Bank regulatory agencies, such as the Office of Thrift Supervision and the Federal Deposit Insurance Corporation, govern the activities in which we may engage, primarily for the protection of depositors, and not for the protection or benefit of potential investors. In addition, new laws and regulations may increase our costs of regulatory compliance and of doing business, and otherwise affect our operations. New laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and investments, the fees we can charge, and our ongoing operations, costs and profitability. Legislative proposals limiting our rights as a creditor could result in credit losses or increased expense in pursuing our remedies as a creditor.

The Electronic Funds Transfer (EFT) act, also known as Regulation E, may negatively impact our non-interest income.

     On November 12, 2009, the Federal Reserve Board announced the final rules amending Regulation E (Reg E) that prohibit financial institutions from charging consumers fees for paying overdrafts on automated teller machine (ATM) and one-time debit card transactions, unless a consumer consents to opt-in to the overdraft service for those types of transactions. Compliance with this regulation is effective July 1, 2010 for new consumer accounts and August 15, 2010 for existing consumer accounts. The impact of Reg E is unknown at this time, but has the potential to reduce our non-interest income.

Our Executive Chairman of the Board also serves as the chairman and chief executive officer of another financial institution and such responsibilities could affect his ability to devote sufficient time to his position with Atlantic Coast Financial Corporation. In addition, director Bhanu Choudhrie serves as a director of the same financial institution as Mr. Sidhu and such responsibilities could affect his ability to devote sufficient time to his position with Atlantic Coast Financial Corporation.

     Our Executive Chairman of the Board, Jay S. Sidhu, also serves as the chairman of the board and chief executive officer of New Century Bank, located in Phoenixville, Pennsylvania. As chairman and chief executive officer of New Century Bank, Mr. Sidhu is a full-time employee. Mr. Sidhu intends to split his time on site evenly between both institutions over the course of a given year with fluctuations on a weekly and seasonal basis. Both institutions will share the commuting expenses of Mr. Sidhu. Mr. Sidhu’s duties at New Century Bank have the potential to cause him to devote less of his time to his responsibilities at Atlantic Coast Financial Corporation, thereby potentially reducing his effectiveness in overseeing our strategic plan. A reduction in the time that Mr. Sidhu may devote to our operations could adversely affect our ability to successfully implement our strategic plan and our results of operations. In addition, director Bhanu Choudhrie also serves as a director of New Century Bank. His duties as a director of New Century Bank may reduce the time he would otherwise devote to the affairs of Atlantic Coast Financial Corporation.

System failure or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities.

     The computer systems and network infrastructure we use could be vulnerable to unforeseen problems. Our operations are dependent upon our ability to protect our computer equipment against damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers. Any damage or failure that causes an interruption in our operations could have a material adverse effect on our financial condition and results of operations. Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us and may cause existing and potential customers to refrain from doing business with us. Although we, with the help of third-party service providers, intend to continue to implement security technology and establish operational procedures to prevent such damage, our security measures may be unsuccessful. In addition, advances in computer capabilities, new discoveries in the field of cryptography or other developments could result in a compromise or breach of the algorithms we and our third-party service providers use to encrypt and protect customer transaction data. A failure of such security measures could have a material adverse effect on our financial condition and results of operations.

Risks Related to the Offering

We intend to conduct a supplemental offering no sooner than six months following our conversion offering, which may dilute your stock ownership. There also may be additional future sales or other dilution of our equity, which may adversely affect the market price of our common stock.

     In order to further increase our capital levels, no sooner than six months following the completion of our conversion offering, we intend to initiate a public offering of shares of our common stock whereby shares of our common stock will be first marketed to purchasers in the conversion offering followed by stockholders of record, as of a date proximate to the supplemental offering, who did not purchase shares in the conversion offering, and then to the general public. The exact amount of shares and pricing of a supplemental offering will be determined based on market conditions at that date. Due to the estimated size of the future supplemental offering, there is the potential for our stock price to fluctuate and potentially trade at a lower market price. This additional offering of our common stock will dilute the ownership interest and book value per share of our current stockholders who do not purchase shares in the conversion offering or stockholders who do not purchase shares of common stock in the supplemental offering.

     We are not restricted from issuing additional common stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. The market price of our common stock could decline as a result of sales of shares of our common stock at a price below the current market value made after the completion of the supplemental offering. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock and diluting their stock holdings in our common stock.

The future price of the shares of common stock may be less than the $10.00 purchase price per share in the offering.

     If you purchase shares of common stock in the offering, you may not be able to sell them later at or above the $10.00 purchase price in the offering. In several cases, shares of common stock issued by newly converted savings institutions or mutual holding companies have traded below the initial offering price. The aggregate purchase price of the shares of common stock sold in the conversion offering will be based on an independent appraisal. The independent appraisal is not intended, and should not be construed, as a recommendation of any kind as to the advisability of purchasing shares of common stock. The independent appraisal is based on certain estimates, assumptions and projections, all of which are subject to change from time to time. After our shares begin trading, the trading price of our common stock will be determined by the marketplace, and may be influenced by many factors, including prevailing interest rates, the overall performance of the economy, investor perceptions of Atlantic Coast Financial Corporation and the outlook for the financial services industry in general. Price fluctuations may be unrelated to our operating performance.

Our failure to effectively deploy the net proceeds may have an adverse impact on our financial performance and the value of our common stock.

     We intend to invest between $7.5 million and $10.4 million of the net proceeds of the conversion offering (or $12.0 million at the adjusted maximum of the conversion offering range) in Atlantic Coast Bank. We also expect to use a portion of the net proceeds we retain to fund a loan for the purchase of shares of common stock in the conversion offering by the employee stock ownership plan and to repay a $5.0 million loan Atlantic Coast Federal Corporation obtained in June 2010. We may use the remaining

net proceeds to invest in short-term investments, repurchase shares of common stock, or for other general corporate purposes. Atlantic Coast Bank may use the net proceeds it receives to fund new loans, expand its retail banking franchise by acquiring new branches or by acquiring other financial institutions or other financial services companies, or for other general corporate purposes. However, with the exception of the loan to the employee stock ownership plan and repayment of the $5.0 million loan, we have not allocated specific amounts of the net proceeds for any of these purposes, and we will have significant flexibility in determining the amount of the net proceeds we apply to different uses and the timing of such applications. We have not established a timetable for reinvesting of the net proceeds, and we cannot predict how long we will require to reinvest the net proceeds.

Our stock-based benefit plans would increase our expenses and reduce our income.

     We intend to adopt one or more new stock-based benefit plans after the offering, subject to stockholder approval, which would increase our annual employee compensation and benefit expenses related to the stock options and shares granted to participants under our stock-based benefit plan. The actual amount of these new stock-related compensation and benefit expenses will depend on the number of options and stock awards actually granted under the plan, the fair market value of our stock or options on the date of grant, the vesting period and other factors which we cannot predict at this time. If the stock-based benefit plan is implemented within one year of the completion of the conversion offering, the number of shares of common stock reserved for issuance for awards of restricted stock or grants of options under such stock-based benefit plan may not exceed 4% and 10%, respectively, of the shares sold in the conversion offering, subject to adjustment as may be required by Office of Thrift Supervision regulations or policy to reflect stock options or restricted stock previously reserved for issuance by Atlantic Coast Federal Corporation or Atlantic Coast Bank. If we award restricted shares of common stock or grant options in excess of these amounts under stock-based benefit plans adopted more than one year after the completion of the conversion offering, our costs would increase further.

     In addition, we would recognize expense for our employee stock ownership plan when shares are committed to be released to participants’ accounts (i.e., as the loan used to acquire these shares is repaid), and we would recognize expense for restricted stock awards and stock options over the vesting period of awards made to recipients. The expense in the first year following the conversion offering has been estimated to be approximately $53,000 at the adjusted maximum of the conversion offering range as set forth in the pro forma financial information under “Pro Forma Data,” assuming the $10.00 per share purchase price as fair market value. Actual expenses, however, may be higher or lower, depending on the price of our common stock. For further discussion of our proposed stock-based plans, see “Management—Benefits to be Considered Following Completion of the Conversion.”

The implementation of stock-based benefit plans may dilute your ownership interest.

     We intend to adopt one or more new stock-based benefit plans following the conversion offering. These plans may be funded either through open market purchases or from the issuance of authorized but unissued shares of common stock. Our ability to repurchase shares of common stock to fund these plans will be subject to many factors, including, but not limited to, applicable regulatory restrictions on stock repurchases, the availability of stock in the market, the trading price of the stock, our capital levels, alternative uses for our capital and our financial performance. While our intention is to fund this plan through open market purchases, stockholders would experience a 8.35% reduction in ownership interest at the midpoint of the conversion offering range in the event newly issued shares of our common stock are used to fund stock options or shares of restricted common stock under the plan in an amount equal to up to 10% and 4%, respectively, of the shares sold in the conversion offering. In the event we adopt the plan within one year following the conversion, shares of common stock reserved for issuance pursuant to awards of restricted stock and grants of options under the stock-based benefit plan would be limited to 4%

and 10%, respectively, of the total shares sold in the conversion offering, subject to adjustment as may be required by Office of thrift Supervision regulations or policy to reflect stock options or restricted stock reserved for issuance by Atlantic Coast Federal Corporation or Atlantic Coast Bank. In the event we adopt the plan more than one year following the conversion, the plan would not be subject to these limitations.

Our current intention is to adopt stock-based benefit plans more than one year following the conversion offering. Stock-based benefit plans adopted more than one year following the conversion offering may exceed regulatory restrictions on the size of stock-based benefit plans adopted within one year, which would further increase our costs.

     If we adopt stock-based benefit plans more than one year following the completion of the conversion offering, then grants of shares of common stock or stock options under our stock-based benefit plans may exceed 4% and 10%, respectively, of our total outstanding shares. Stock-based benefit plans that provide for awards in excess of these amounts would increase our costs beyond the amounts estimated in “—Our stock-based benefit plans would increase our expenses, which would reduce our income.” Stock-based benefit plans that provide for awards in excess of these amounts could also result in dilution to stockholders in excess of that described in “—The implementation of stock-based benefit plans may dilute your ownership interest.” Although the implementation of the stock-based benefit plan would be subject to stockholder approval, the determination as to the timing of the implementation of such a plan will be at the discretion of our board of directors.

Various factors may make takeover attempts more difficult to achieve.

     Our board of directors has no current intention to sell control of Atlantic Coast Financial Corporation. Provisions of our articles of incorporation and bylaws, federal regulations, Maryland law and various other factors may make it more difficult for companies or persons to acquire control of Atlantic Coast Financial Corporation without the consent of our board of directors. You may want a takeover attempt to succeed because, for example, a potential acquiror could offer a premium over the then prevailing price of our common stock. The factors that may discourage takeover attempts or make them more difficult include:

	•		Office of Thrift Supervision regulations. Office of Thrift Supervision regulations prohibit, for three years following the completion of a conversion, the direct or indirect acquisition of more than 10% of any class of equity security of a savings institution regulated by the Office of Thrift Supervision without the prior approval of the Office of Thrift Supervision.
	•		Articles of Incorporation of Atlantic Coast Financial Corporation and statutory provisions. Provisions of the articles of incorporation and bylaws of Atlantic Coast Financial Corporation and Maryland law may make it more difficult and expensive to pursue a takeover attempt that management opposes, even if the takeover is favored by a majority of our stockholders. These provisions also would make it more difficult to remove our current board of directors or management, or to elect new directors. Specifically, under our articles of incorporation, directors will be divided into three classes, and directors may only be removed for cause by the holders of a majority of our outstanding common stock entitled to vote on the matter. In addition, under Maryland law, any person who acquires more than 10% of the common stock of Atlantic Coast Financial Corporation without the prior approval of its board of directors would be prohibited from engaging in any type of business combination with Atlantic Coast Financial Corporation for a five-year period. Any business combination after the five-

year prohibition would be subject to super-majority stockholder approval or minimum price requirements. Additional provisions include limitations on voting rights of beneficial owners of more than 10% of our common stock, the election of directors to staggered terms of three years and not permitting cumulative voting in the election of directors. Our articles of incorporation and bylaws provide that special meetings of stockholders can be called by our president, a majority of the whole board of directors, or by stockholders entitled to cast a majority of all votes entitled to vote at the meeting. Our articles of incorporation provide that at least 80% of the total votes eligible to be voted are required to approve certain amendments to the articles of incorporation, as described in “Comparison of Stockholders’ Rights For Existing Stockholders of Atlantic Coast Federal Corporation—Amendment of Governing Instruments.” Our articles of incorporation permit our board of directors to evaluate all relevant factors in exercising its business judgment with respect to transactions that could result in a change in control. Our bylaws also contain provisions regarding the timing and content of stockholder proposals and nominations and qualification for service on the board of directors.

	•		Charter of Atlantic Coast Bank. The charter of Atlantic Coast Bank will provide that for a period of five years from the closing of the conversion offering, no person other than Atlantic Coast Financial Corporation may offer directly or indirectly to acquire the beneficial ownership of more than 10% of any class of equity security of Atlantic Coast Bank. This provision does not apply to any tax-qualified employee benefit plan we establish, as well as other acquisitions specified in the charter. In addition, during this five-year period, all shares owned over the 10% limit may not be voted on any matter submitted to stockholders for a vote.
	•		Stock options and restricted stock. We have previously granted to key employees and directors stock options and shares of restricted stock that will require payments to these persons in the event of a change in control of Atlantic Coast Financial Corporation. We currently expect to issue additional stock options and shares of restricted stock following the conversion with similar terms. These payments may have the effect of increasing the costs of acquiring Atlantic Coast Financial Corporation, thereby discouraging future takeover attempts.
	•		Significant ownership by our directors, executive officers and stock benefit plans. Following the offering, our directors, executive officers and stock benefit plans are expected to beneficially own in the aggregate approximately 24.3% of our shares of common stock to be outstanding based upon sales of shares at the minimum of the conversion offering range. The significant ownership percentage could make it more difficult to obtain the required vote for a takeover or merger that management opposes.
	•		Significant ownership by certain stockholders. We may have one or more stockholders with at least a 5% ownership interest following completion of the offering. These stockholders could take a position adverse to management or other stockholder interests making it more difficult to obtain a vote that management recommends.
	•		Employment agreements. Atlantic Coast Federal Corporation has employment agreements with certain of its executive officers that will remain in effect following the conversion offering. These agreements may have the effect of increasing the costs of acquiring Atlantic Coast Financial Corporation, thereby discouraging future takeover attempts.

     See “Restrictions on Acquisition of Atlantic Coast Financial Corporation.”

There may be a decrease in stockholders’ rights for existing stockholders of Atlantic Coast Federal Corporation.

     As a result of the conversion, existing stockholders of Atlantic Coast Federal Corporation will become stockholders of Atlantic Coast Financial Corporation. In addition to the provisions discussed above that may discourage takeover attempts that are favored by stockholders, some rights of stockholders of Atlantic Coast Financial Corporation will be reduced compared to the rights stockholders currently have in Atlantic Coast Federal Corporation. The reduction in stockholder rights results from differences between the federal and Maryland charters and bylaws, and from distinctions between federal and Maryland law. Many of the differences in stockholder rights under the articles of incorporation and bylaws of Atlantic Coast Financial Corporation are not mandated by Maryland law but have been chosen by management as being in the best interests of Atlantic Coast Financial Corporation and its stockholders. The articles of incorporation and bylaws of Atlantic Coast Financial Corporation include the following provisions: (i) allowing the board of directors to change the authorized number of shares without stockholder approval; (ii) the restriction on the payment of dividends under Maryland corporate law; (iii) filling vacancies on the board of directors; (iv) limitations on liability for directors and officers; (v) indemnification of directors, officers, employees and agents; (vi) the calling of special meetings of stockholders; (vii) greater lead time required for stockholders to submit proposals for new business or to nominate directors; (viii) the right of a stockholder to examine the books and records of the company; (ix) limitations on the voting rights of stockholders owning more than 10% of our voting shares; (x) restrictions on certain types of business combinations with interested stockholders; (xi) consideration by the board of directors of certain factors when considering a change in control of the company; and (xii) generally requiring approval by at least 80% of the outstanding shares of capital stock entitled to vote generally to amend the bylaws and certain provisions of the articles of incorporation. See “Comparison of Stockholders’ Rights For Existing Stockholders of Atlantic Coast Federal Corporation” for a discussion of these differences.

You may not revoke your decision to purchase Atlantic Coast Financial Corporation common stock in the subscription or community offerings after you send us your order.

     Funds submitted or automatic withdrawals authorized in connection with a purchase of shares of common stock in the subscription and community offerings will be held by us until the completion or termination of the conversion and offering, including any extension of the expiration date. Because completion of the conversion offering will be subject to regulatory approvals and an update of the independent appraisal prepared by RP Financial, LC., among other factors, there may be one or more delays in the completion of the conversion offering. Orders submitted in the subscription and community offerings are irrevocable, and purchasers will have no access to their funds unless the conversion offering is terminated, or extended beyond February 4, 2011, or the number of shares to be sold in the conversion offering is increased to more than 2,645,000 shares or decreased to fewer than 1,700,000 shares.

An active trading market for our common stock may not develop.

     Atlantic Coast Federal Corporation’s common stock is currently quoted on the Nasdaq Global Market. Upon completion of the conversion, the common stock of Atlantic Coast Financial Corporation will replace the existing shares. An active public trading market for Atlantic Coast Financial Corporation’s common stock may not develop or be sustained after the stock offering. If an active trading market for our common stock does not develop, you may not be able to sell all of your shares of common stock on short notice, and the sale of a large number of shares at one time could depress the market price.

The distribution of subscription rights could have adverse income tax consequences.

     If the subscription rights granted to certain depositors of Atlantic Coast Bank are deemed to have an ascertainable value, receipt of such rights may be taxable in an amount equal to such value. Whether subscription rights are considered to have ascertainable value is an inherently factual determination. We have received an opinion of counsel, Luse Gorman Pomerenk & Schick, P.C., that such rights have no value; however, such opinion is not binding on the Internal Revenue Service.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
OF ATLANTIC COAST FEDERAL CORPORATION AND SUBSIDIARY

     The summary financial information presented below is derived in part from the consolidated financial statements of Atlantic Coast Federal Corporation. The following is only a summary and you should read it in conjunction with the consolidated financial statements and notes beginning on page F-1. The information at December 31, 2009 and 2008 and for the years ended December 31, 2009, 2008 and 2007 is derived in part from the audited consolidated financial statements of Atlantic Coast Federal Corporation that appear in this prospectus. The information at December 31, 2007, 2006 and 2005 and for the years ended December 31, 2006 and 2005 is derived in part from audited consolidated financial statements that do not appear in this prospectus. The operating data for the six months ended June 30, 2010 and 2009 and the financial condition data at June 30, 2010 were not audited. However, in the opinion of management of Atlantic Coast Federal Corporation, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of operations for the unaudited periods have been made. No adjustments were made other than normal recurring entries. The results of operations for the six months ended June 30, 2010 are not necessarily indicative of the results of operations that may be expected for the entire year.

		At
		June 30,				At December 31,
		2010				2009				2008				2007				2006				2005
		(unaudited)				(In Thousands)
Selected Consolidated Financial Condition Data:
Total assets		$	901,374			$	905,561			$	996,089			$	931,026			$	843,079			$	744,116
Cash and cash equivalents			29,892				37,144				34,058				29,310				41,057				37,959
Securities available for sale, at fair value			200,040				177,938				147,474				134,216				99,231				71,965
Loans receivable, net			586,676				614,371				741,879				703,513				639,517				580,441
Loans held for sale			17,086				8,990				736				640				4,365				100
Federal Home Loan Bank of Atlanta stock, at cost			10,023				10,023				9,996				9,293				7,948				7,074
Deposits			575,011				555,444				624,606				582,730				573,052				516,321
Total borrowings			268,541				287,694				277,650				251,500				173,000				129,000
Total stockholders’ equity			53,216				56,541				83,960				89,806				91,087				92,917

		Six Months Ended
		June 30,								Years Ended December 31,
		2010				2009				2009				2008				2007				2006				2005
		(unaudited)								(Dollars in Thousands, except per share amounts)
Selected Consolidated Operating Data:
Total interest income		$	22,894			$	24,952			$	48,718			$	55,259			$	55,509			$	46,407			$	37,254
Total interest expense			10,994				14,167				26,935				32,009				33,123				24,747				17,139
Net interest income			11,900				10,785				21,783				23,250				22,386				21,660				20,115
Provision for loan losses			11,217				12,007				24,873				13,948				2,616				475				2,121
Net interest income (loss) after provision for loan losses			683				(1,222	)			(3,090	)			9,302				19,770				21,185				17,994
Non-interest income			4,025				2,312				4,165				10,949				7,173				8,006				7,896
Non-interest expense			11,545				12,974				24,300				26,329				25,698				21,680				19,575
(Loss) income before income tax expense			(6,837	)			(11,884	)			(23,225	)			(6,078	)			1,245				7,511				6,315
Income tax expense (benefit)(1)			—				(4,190	)			6,110				(3,233	)			130				2,382				1,290
Net (loss) income		$	(6,837	)		$	(7,694	)		$	(29,335	)		$	(2,845	)		$	1,115			$	5,129			$	5,025
(Loss) earnings per share:
Basic		$	(0.52	)		$	(0.59	)		$	(2.24	)		$	(0.22	)		$	0.08			$	0.38			$	0.36
(Loss) earnings per share:
Diluted		$	(0.52	)		$	(0.59	)		$	(2.24	)		$	(0.22	)		$	0.08			$	0.38			$	0.36

		At or For the Six
		Months Ended
		June 30,								At or For the Years Ended December 31,
		2010				2009				2009				2008				2007				2006				2005
		(Unaudited)
Selected Consolidated Financial Ratios and Other Data:
Performance Ratios:
Return (loss) on assets (ratio of net income (loss) to average total assets)(2)			(1.51	)%			(1.54	)%			(3.01	)%			(0.29	)%			0.12	%			0.66	%			0.71	%
Return (loss) on equity (ratio of net income (loss) to average equity)(2)			(23.81	)%			(18.96	)%			(38.40	)%			(3.22	)%			1.22	%			5.48	%			5.07	%
Average interest rate spread(2)(4)			2.63	%			2.04	%			2.14	%			2.21	%			2.23	%			2.55	%			2.62	%
Net interest margin(2)(5)			2.78	%			2.29	%			2.37	%			2.53	%			2.67	%			2.99	%			3.06	%
Efficiency ratio(6)			72.50	%			99.06	%			93.65	%			76.99	%			86.94	%			73.08	%			69.88	%
Non-interest expense to average total assets(2)			2.55	%			2.60	%			2.34	%			2.61	%			2.85	%			2.78	%			2.78	%
Average interest-earning assets to average interest-bearing liabilities			105.86	%			108.22	%			107.92	%			109.06	%			110.96	%			113.01	%			116.92	%
Dividend payout ratio(2)(3)			—	%			(3.39	)%			(0.89	)%			(213.64	)%			712.50	%			110.53	%			72.22	%
Asset Quality Ratios:
Non-performing assets to total assets			3.22	%			4.68	%			4.44	%			2.90	%			1.03	%			0.40	%			0.39	%
Non-performing loans to total loans			3.64	%			6.06	%			5.64	%			3.43	%			1.11	%			0.48	%			0.45	%
Allowance for loan losses to non-performing loans			47.12	%			28.28	%			39.29	%			41.50	%			82.69	%			154.21	%			175.36	%
Allowance for loan losses to total loans			1.71	%			1.71	%			2.22	%			1.43	%			0.92	%			0.73	%			0.78	%
Net charge-offs to average outstanding loans(2)			4.74	%			2.94	%			3.11	%			1.35	%			0.13	%			0.06	%			0.27	%
Capital Ratios:
Total capital to risk-weighted assets			11.1	%			11.4	%			11.4	%			11.6	%			12.1	%			13.8	%			15.9	%
Tier I capital to risk-weighted assets			9.9	%			10.3	%			10.2	%			10.8	%			11.2	%			13.1	%			15.0	%
Tier I capital to average assets			5.8	%			6.4	%			6.1	%			7.5	%			7.7	%			9.3	%			10.0	%
Average equity to average assets			6.33	%			8.12	%			7.83	%			9.03	%			10.23	%			12.00	%			14.07	%
Other Data:
Number of full service offices			11				12				11				12				13				13				12
Number of loans			10,781				11,670				11,094				14,126				14,101				14,679				15,151
Number of deposit accounts			40,951				42,036				39,282				46,148				48,334				49,896				51,738