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Atlantic Coast Financial Corporation Reports First Quarter 2011 Results

"Small business lending continues to be a bright spot for our growth," Frankland added. "During the quarter, we originated approximately $2.0 million in new small business and SBA loans and our pipeline includes almost $20.0 million in loans in process at March 31, 2011. Our Small Business Lending Fund application, which is still pending, adds to our enthusiasm for this product line.

"With respect to our mortgage initiatives, we have been disappointed with our sales production and operational execution thus far," Frankland continued. "However, we have quickly identified the issues that have restrained our progress and have dealt with them decisively. Our actions have included changes in leadership, the modification of compensation programs and improved operational efficiency. Accordingly, we expect to see continued improvement in production over the remainder of the year. In spite of a recent softening in the market for residential lending, we continue to believe mortgage banking represents an attractive fee income opportunity for the Bank."

Frankland also pointed out that as part of the Company's capital preservation initiatives, total assets declined versus the end of 2010 and the year-earlier quarter. With additional capital added in February associated with the second-step conversion and offering, the Company expects to see moderate asset growth for the remainder of the year.

Capital Position

The Bank's Tier 1 leverage ratio, Tier 1 risk-based capital ratio and Total risk-based capital ratio were 6.3%, 10.2%, and 11.4% at March 31, 2011, respectively, and as such, they continued to exceed the required minimums of 5%, 6%, and 10%, respectively, necessary to be deemed a well-capitalized institution. In addition, stockholders' equity represented 6.77% of total assets at that date.

On February 3, 2011, the Company, as successor to Atlantic Coast Federal Corporation, completed the conversion from a mutual holding company structure and the related public stock offering and is now a stock holding company that is 100% owned by public stockholders. The Company sold a total of 1,710,857 shares of common stock in the subscription and community offerings, resulting in gross proceeds of approximately $17.1 million before offering expenses of $2.7 million. After paying off a $5.0 million loan, the majority of the remaining proceeds were contributed to the Bank. Each outstanding share of Atlantic Coast Federal Corporation, other than those owned by Atlantic Coast Federal, MHC that were sold as part of the conversion, was converted into 0.1960 share of the Company's common stock.

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