ATLANTIC COAST FEDERAL CORP (Form: 10-K, Received: 03/31/2009 15:36:19)

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Exhibit 10.12

AMENDED AND RESTATED

SUPPLEMENTAL RETIREMENT AGREEMENT

THIS AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT AGREEMENT (the “Agreement”) is made as of January 1, 2006 by and between ATLANTIC COAST BANK (the “Bank”), its successors and assigns and CARL W. INSEL (the “Executive”). The original agreement, which was effective January 1, 2006, is being amended and restated in order to comply with the 2007 final Treasury Regulations under Section 409A of the Internal Revenue Code (the “Code”) and to make certain other clarifications to the original agreement.

1.	Definitions . In this Agreement, the following words and phrases shall have the following meanings:

(a)

Accrued Benefit Percentage shall mean, except as otherwise provided in this Agreement, 1.15% for each full calendar quarter of the Executive’s employment with the Bank since January 1, 2006, calculated through the last day of the calendar quarter in which the Executive (i) experiences a Separation from Service or (ii) attains the Normal Retirement Date, whichever shall first occur; provided , however , that in no event shall the Accrued Benefit Percentage exceed 60%.

(b)

Administrator shall mean the person or committee appointed by the Board of Directors of the Bank to administer this Agreement. If a committee is appointed by the Board of Directors, a majority of those persons shall constitute a quorum and the act of the majority of such of persons either at a meeting or by written consent, shall be the act of the Administrator. The Administrator may adopt such rules and procedures, not inconsistent with this Agreement, as it deems necessary or appropriate in order to administer this Agreement.

(c)

Average Compensation shall mean the amount determined by dividing by three (3) the total compensation reported in Box 1 of Form W-2 (excluding taxable income attributable to any restricted stock awards, stock options, stock appreciation rights or any other awards made under any equity plan maintained by the Bank or its affiliates) earned by the Executive from the Bank and its affiliates and subsidiaries (or any successors thereto by merger or purchase) during the three calendar years in the ten year period prior to his Separation from Service that results in the largest total.

(d)

Benefit Determination Date shall mean the first business day of the calendar month following the earliest of (i) the Executive’s Normal Retirement Date; (ii) the Executive’s Separation from Service; (iii) the Executive’s death; (iv) the Executive’s Disability; or (v) a Change in Control.

(e)

Cause shall mean a Separation from Service due to the Executive’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, and willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order.

(f)

Change in Control shall mean the following:

(1) “Change in Control” shall mean (i) a change in the ownership of the Bank or Atlantic Coast Federal Corporation (the “Company”), (ii) a change in the effective control of the Bank or Company, or (iii) a change in the ownership of a substantial portion of the assets of the Bank or Company, as described below. Notwithstanding anything herein to the contrary, the reorganization of Atlantic Coast Federal, MHC by way of a “second-step conversion” shall not be deemed a Change in Control.

(2) A change in ownership occurs on the date that any one person, or more than one person acting as a group (as defined in Treasury Regulations section 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Bank or Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation.

(3) A change in the effective control of the Bank or Company occurs on the date that either (i) any one person, or more than one person acting as a group (as defined in Treasury Regulations section 1.409A-3(i)(5)(vi)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Bank or Company possessing 30% or more of the total voting power of the stock of the Bank or Company, or (ii) a majority of the members of the Bank’s or Company’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Bank’s or Company’s board of directors prior to the date of the appointment or election, provided that this sub-section “(ii)” is inapplicable where a majority shareholder of the Bank or Company is another corporation.

(4) A change in a substantial portion of the Bank’s or Company’s assets occurs on the date that any one person or more than one person acting as a group (as defined in Treasury Regulations section 1.409A-3(i)(5)(vii)(C)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Bank or Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of (i) all of the assets of the Bank or Company, or (ii) the value of the assets being disposed of, either of which is determined without regard to any liabilities associated with such assets. For all purposes hereunder, the definition of Change in Control shall be construed to be consistent with the requirements of Treasury Regulations section 1.409A-3(i)(5), except to the extent that such regulations are superseded by subsequent guidance.

(g)

Disabled or Disability shall mean the Executive:

(1) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death, or last for a continuous period of not less than 12 months;

(2) by reason of any medically determinable physical or mental impairment which can be expected to result in death, or last for a continuous period of not less than 12 months, is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank; or

(3) is determined to be totally disabled by the Social Security Administration.

(h)

Involuntary Termination shall mean Separation from Service, other than for Cause, without the Executive’s express written consent and voluntary resignation due to a material diminution of or interference with the Executive’s duties, responsibilities and benefits as Executive Vice President of the Bank, including (without limitation) any of the following actions unless consented to in writing by the Executive: (i) a change in the principal workplace of the Executive to a location outside of a 30 mile radius from the Executive’s principal workplace as of the date hereof; (ii) a material demotion of the Executive; (iii) a material reduction in the number or seniority of other personnel reporting to the Executive or a material reduction in the frequency with which, or on the nature of the matters with respect to which, such personnel are to report to the Executive, other than as part of an institution-wide reduction in staff; (iv) a material adverse change in the Executive’s salary, perquisites, benefits, contingent benefits or vacation, other than as part of an overall program applied uniformly and with equitable effect to all members of the senior management of the Bank; and (v) a material permanent increase in the required hours of work or the workload of the Executive; provided that the Executive has notified the Bank of the existence of such a condition no later than 90 days after the initial existence of such condition and the Bank has at least 30 days to cure such condition. The term “Involuntary Termination” does not include termination for Cause or termination of employment due to retirement, death, Disability or suspension or temporary or permanent prohibition from participation in the conduct of the Bank’s affairs under Section 8 of the Federal Deposit Insurance Act.

(i)

Monthly Benefit shall mean the Average Compensation multiplied by the Accrued Benefit Percentage and then divided by twelve (12), calculated at the Benefit Determination Date.

(j)

Normal Retirement Date shall mean the date the Executive attains age 55.

(k)

Separation from Service shall mean the date of cessation of the employment relationship (other than an approved leave of absence) between the Executive and the Bank and its affiliates and subsidiaries (including any successor in interest, if applicable), and shall be construed to comply with Code Section 409A and Treasury Regulations Section 1.409A-1(h).

(l)

Specified Employee shall mean a key employee of the Bank within the meaning of Code Section 416(i) without regard to paragraph 5 thereof, determined in accordance with Code Section 409A and Treasury Regulations Section 1.409A-1(i).

2.	Payment of Benefits .

(a)

Normal Benefit . If Monthly Benefits have not already started due to Separation from Service, Disability or Change in Control, the Bank shall pay the Monthly Benefit to Executive starting on the first business day of the month following the Normal Retirement Date and on the first business day of each calendar month thereafter for a total of 180 months (i.e., monthly payments for 15 years), regardless of whether the Executive has experienced a Separation from Service; provided however, that, if the Executive has experienced a Separation from Service, then, to the extent necessary to avoid penalties under Code Section 409A and the regulations thereunder, such payments shall not commence until the first day of the seventh month following the date of the Executive’s Separation from Service if the Executive is a Specified Employee on his date of Separation from Service.

(b)

Death Benefit .

(i)

Death Before Benefit Period Begins . If the Executive dies prior to the Normal Retirement Date, Separation from Service, Disability or Change in Control, the Bank shall pay to the beneficiary designated on Exhibit A, using an Accrued Benefit Percentage of 60%, the Monthly Benefit commencing on the first business day of the month following the Executive’s Normal Retirement Date and on the first business day of each calendar month thereafter for a period of 180 months. The Average Compensation calculation shall assume that the Executive’s compensation increased by 3% for each full calendar year that occurs prior to what would have been his Normal Retirement Date.

(ii)

Death During Benefit Period . If the Executive dies after Normal Retirement Date, Separation from Service, Disability or Change in Control, the Bank shall make any remaining monthly payments due to the Executive to the beneficiary designated by the Executive on Exhibit A.

(c)

Disability Benefit . If the Executive becomes Disabled before the Normal Retirement Date, death, Separation from Service or Change in Control, the Bank shall pay the Monthly Benefit to him, using an Accrued Benefit Percentage of not less than 60%, starting on the first business day of the calendar month following the date on which the Executive became Disabled and on the first business day of each calendar month thereafter for a total of 180 months (i.e., monthly payments for 15 years). If the Executive dies after becoming entitled to Disability benefits, the Bank shall continue to make the remaining monthly payments due to the Executive to the beneficiary designated by the Executive on Exhibit A.

(d)

Separation from Service Benefit . In the event the Executive incurs a Separation from Service due to an Involuntary Termination before the Normal Retirement Date, Disability, death or Change in Control, the Bank shall pay the Monthly Benefit to the Executive, using an Accrued Benefit Percentage of not less than 60%, commencing on the first business day of the month following the Separation from Service and on the first business day of each calendar month thereafter for a total of 180 months; (i) provided, however, that in the event of Separation from Service due to Cause, except as may be prohibited by federal law, the Executive shall only be entitled to the Monthly Benefit calculated at the time of his Separation from Service with payment commencing on the first business day of the month following the Separation from Service and on the first business date of each calendar month thereafter for a total of 180 months; and (ii) provided, further, that, to the extent necessary to avoid penalties under Code Section 409A and the regulations thereunder, such payments shall not commence until the first day of the seventh month following the date of the Executive’s Separation from Service if the Executive is a Specified Employee on his date of Separation from Service.

(e)

Change in Control Benefit . If a Change in Control occurs before the Normal Retirement Date, Separation from Service, Disability or death, then, within 30 calendar days of a Change in Control, the Bank shall pay the Executive a lump sum equal to the present value of the Monthly Benefit that would otherwise be paid to the Executive hereunder, using an Accrued Benefit Percentage of not less than 60%, regardless of whether the Executive has experienced a Separation from Service; provided however, that, if the Executive has experienced a Separation from Service, then, to the extent necessary to avoid penalties under Code Section 409A and the regulations thereunder, such payments shall not be made until the first day of the seventh month following the date of the Executive’s Separation from Service if the Executive is a Specified Employee on his date of Separation from Service.

(f)

Funding of Monthly Benefit . The Bank reserves the right to purchase a contract from a life insurance company with a minimum rating of AA from Standard & Poors and Moody’s in order to provide all or any portion of the Monthly Benefit described herein. Upon the Bank’s purchase of such contract and distribution of the contract to Executive or his Beneficiary, the Bank’s liability to provide the Monthly Benefit hereunder shall cease and such contract shall be the sole source of funds for providing such Monthly Benefit.

3.	Required Provisions .

(a) The Bank may terminate Executive’s employment at any time, but any termination by the Bank other than Separation from Service for Cause as defined above shall not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive shall have no right to receive compensation or other benefits for any period after Separation from Service for Cause.

(b) If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) [12 USC §1818(e)(3)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit Insurance Act (the “FDI Act”), the Bank’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations which were suspended.

(c) If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) [12 USC §1818(e)(4)] or 8(g)(1) [12 USC §1818(g)(1)] of the FDI Act, all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

(d) If the Bank is in default as defined in Section 3(x)(1) [12 USC §1813(x)(1)] of the FDI Act, all obligations of the Bank under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

(e) All obligations under this Agreement shall be terminated, except to the extent determined that continuation of this Agreement is necessary for the continued operation of the Bank, (i) by the Director of the Office of Thrift Supervision (“OTS”) or his or her designee, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) [12 USC §1823(c)] of the FDI Act; or (ii) by the Director or his or her designee at the time the Director or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

(f) Notwithstanding anything herein contained to the contrary, any payments to Executive by the Company, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the FDI Act, 12 U.S.C. Section 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359.

Claims . In the event a claim for benefits is wholly or partially denied under this Agreement, the Executive or any other person claiming benefits under this Agreement (a “Claimant”) shall be given notice in writing within 30 calendar days after the Administrator’s receipt of the claim. For good cause shown, the Administrator may extend this period for an additional 30 calendar days. Any denial must specifically set forth the reasons for the denial and any additional information necessary to rescind such denial. The Claimant shall have the right to seek a review of the denial by filing a written request with the Administrator within 60 calendar days of receipt of the denial. Such request may be supported by such documentation and evidence deemed relevant by the Claimant. Following receipt of this information, the Administrator shall make a final determination and notify the Claimant in writing within 60 calendar days of the Administrator’s receipt of the request for review together with the specific reasons for the decision.

General Assets and Funding . The amounts payable under this Agreement are payable from the general assets of the Bank and no special fund or arrangement is intended to be established hereby nor shall the Bank be required to earmark, place in trust or otherwise segregate assets with respect to this Agreement or any benefits hereunder. The Administrator reserves the right to determine how the Bank will fund its obligation undertaken by this Agreement. Should the Administrator elect to purchase assets relating to this Agreement, in whole or in part, through the medium of life insurance or annuities, or both, the Bank shall be the owner and beneficiary of each such policy unless otherwise provided by this Agreement. Bank reserves the absolute right, in its sole discretion, to terminate such life insurance or annuities, as well as any other investment program, at any time, in whole or in part unless otherwise provided by this Agreement. Such termination shall in no way affect the Bank’s obligation to pay the Executive the benefits as provided in this Agreement. At no time shall the Executive be deemed to have any right, title, or interest in or to any specific asset or assets of the Bank, including but not by way of restriction, any insurance or annuity contract and contracts or the proceeds therefrom.

Certain Reductions . Notwithstanding any other provision of this Agreement, if the value and amounts of benefits under this Agreement, together with any other amounts and the value of benefits received or to be received by the Executive in connection with a Change in Control would cause any amount to be nondeductible for federal income tax purposes by the Bank or the consolidated group of which the Bank is a member pursuant to Section 280G of the Code, then amounts and benefits under this Agreement shall be reduced (not less than zero) to the extent necessary so as to maximize amounts and the value of benefits to the Employee without causing any amount to become nondeductible by Bank pursuant to or by reason of such Section 280G. The Employee shall determine the allocation of such reduction among payments and benefits to the Employee.

Beneficiary Designations . The Executive shall designate a beneficiary by filing with Bank a written designation of beneficiary on a form substantially similar to the form attached as Exhibit A. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Executive and accepted by the Bank during the Executive’s lifetime. The Executive’s beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executive’s surviving spouse, if any, and if none, to the Executive’s surviving children and the descendants of any deceased child by right of representation, and if no children or descendants survive, to the Executive’s estate.

If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person, or to a custodian selected by the Bank under the Georgia Uniform Transfers to Minors Act for the benefit of such minor. The Bank may require proof of incompetency, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Bank from all liability with respect to such benefit.

8.	Amendment and Termination.

(a)

Amendment . The Bank may at any time amend the Agreement in whole or in part, provided, however, that no amendment shall decrease or restrict the amount accrued to the date of amendment.

(b)

Termination . The Bank may at any time partially or completely terminate the Agreement, if, in its judgment, the tax, accounting, or other effects of the continuance of the Agreement, or potential payments thereunder, would not be in the best interests of the Bank.

(i) Partial Termination . In the event of a partial termination, the Agreement shall continue to operate and be effective with regard to benefits accrued prior to the effective date of such partial termination, but no further benefits shall accrue after the date of such partial termination.

(ii) Complete Termination . Subject to the requirements of Code Section 409A, in the event of complete termination, the Agreement shall cease to operate and the Bank shall pay the Executive his Account as if he had terminated service as of the effective date of the complete termination. Such complete termination of the Agreement shall occur only under the following circumstances and conditions.

(A) The Bank may terminate the Agreement within 12 months of a corporate dissolution taxed under Code section 331, or with approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts accrued under the Agreement are included in the Executive’s gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.

(B) The Bank may terminate the Agreement within the 30 days preceding a Change in Control (but not following a Change in Control), provided that the Agreement shall only be treated as terminated if all substantially similar arrangements sponsored by the Bank are terminated so that the Executive and all participants under substantially similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within 12 months of the date of the termination of the arrangements.

(C) The Bank may terminate the Agreement provided that (i) all arrangements sponsored by the Bank that would be aggregated with this Agreement under Treasury regulations section 1.409A-1(c) if any individual; covered by this Agreement was also covered by any of those other arrangements are also terminated; (ii) no payments other than payments that would be payable under the terms of the arrangement if the termination had not occurred are made within 12 months of the termination of the arrangement; (iii) all payments are made within 24 months of the termination of the arrangements; and (iv) the Bank does not adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury regulations section 1.409A-1(c) if the same individual participated in both arrangements, at any time within three years following the date of termination of the arrangement.

(D) The Bank may terminate the Agreement pursuant to such other terms and conditions as the Internal Revenue Service may permit from time to time.

9.	Miscellaneous .

(a)

Withholding . To the extent amounts payable under this Agreement are determined by the Administrator, in good faith, to be subject to federal, state or local income tax, the Bank may withhold from each such payment an amount necessary to meet the Bank’s obligation to withhold amounts under the applicable federal, state or local law.

(b)

Governing Law . This Agreement shall be construed under the laws of the State of Georgia, except to the extent that federal law applies.

(c)

Future Employment . This Agreement shall not be construed as providing the Executive the right to be continued in the employ of the Bank or its affiliates or subsidiaries.

(d)

No Pledge or Attachment . No benefit which is or may become payable under this Agreement shall be subject to any anticipation, alienation, sale, transfer, pledge, encumbrance or hypothecation or subject to any attachment, levy or similar process and any attempt to effect any such action shall be null and void.

(e)

Successors and Assigns . This Agreement and the obligations of the Bank herein shall be binding upon the successors and assigns of the Bank. This Agreement may not be assigned by the Bank without the prior written consent of the Executive or any other beneficiary receiving payments under this Agreement.

(f)

Participation in Plans. Nothing contained in this Agreement shall be construed to alter, abridge, or in any manner affect the rights and privileges of the Executive to participate in and be covered by any pension, profit sharing, group insurance, bonus, incentive, or other employee plans which the Bank or its affiliates or subsidiaries may now or hereafter have.

(g)

Notices . Any notices under this Agreement shall be provided to the Executive at his last address on file with the Administrator and shall be provided to the Administrator in care of President, Atlantic Coast Federal, 505 Haines Avenue, Waycross, Georgia 31501.

(h)

Headings . Headings of sections herein are inserted for convenience of reference. They are not to be considered in the construction of this Agreement.

(i)

Savings Clause . If any provision of this Agreement shall be for any reason invalid or unenforceable, the remaining provisions shall be carried into effect.

(j)

Entire Agreement . This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive be virtue of this Agreement other than as specifically set forth herein.

(k)

Suicide . No benefits shall be payable if the Executive commits suicide within two (2) years after the date of this Agreement, or if the Executive has made any material misstatement of fact on any application for life insurance purchased by the Bank

(l)

Top Hat Agreement. For purposes of the Internal Revenue Code, the Bank intends this Agreement to be an unfunded, unsecured promise to pay on the part of the Bank. For purposes of ERISA, the Bank intends this Agreement to be an unfunded obligation solely for the benefit of the Executive for the purpose of qualifying this Agreement for the “top hat” exception under sections 201(2), 301(a)(3) and 401(a) of ERISA.

The parties have caused this Agreement to be executed and delivered as of the date first above written.

	ATLANTIC COAST BANK


August 4, 2008	By:	/s/ Robert J. Larison, Jr.
Date	Name:	Robert J. Larison, Jr.
	Title:	President and Chief Executive Officer

	EXECUTIVE


August 4, 2008	/s/ Carl W. Insel
Date	Carl W. Insel

AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT AGREEMENT

EXHIBIT A

BENEFICIARY DESIGNATION

In accordance with the terms of the Amended and Restated Supplemental Retirement Agreement, I hereby designate the following Beneficiary(ies) to receive any death benefits under the Agreement:

PRIMARY BENEFICIARY:

SECONDARY BENEFICIARY (if all Primary Beneficiaries pre-decease the Executive):

This Beneficiary Designation hereby revokes any prior Beneficiary Designation which may have been in effect and this Beneficiary Designation is revocable.


Date		Carl W. Insel

Federal	59-3764686
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

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

Registrant's telephone number, including area code: (800) 342-2824

Title of class		Name of each exchange on which registered
Common Stock, $0.01 par value		The NASDAQ Stock Market, LLC

		Page
	PART I	Number

Item 1.	Business	1
	General	1
	Market	3
	Competition	4
	Lending Activities	4
	Investment Activities	22
	Sources of Funds	24
	How We Are Regulated	27
Item 1A.	Risk Factors	37
Item 1B.	Unresolved Staff Comments	44
Item 2.	Properties	44
Item 3.	Legal Proceedings	45
Item 4.	Submission of Matters to a Vote of Security Holders	45

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	45
Item 6.	Selected Financial Data	48
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	50
	General	50
	Critical Accounting Policies	50
	Business Strategy	52
	Financial Condition	54
	Results of Operations	58
	Average Balances, Net Interest Income, Yields Earned, and Rates Paid	59
	Rate/Volume Analysis	61
	Liquidity	70
	Contractual Obligations and Commitments	72
	Capital Resources	72
	Inflation	73
	Future Accounting Pronouncements	73
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	74
Item 8.	Financial Statements and Supplementary Data	77
	Report of Independent Registered Public Accountant	77
	Financial Statements	78
	Notes to Financial Statements	84
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	120
Item 9A.	Controls and Procedures	120
Item 9B.	Other Information	121

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	122
Item 11.	Executive Compensation	122
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	122
Item 13.	Certain Relationships and Related Transactions, and Director Independence	122
Item 14.	Principal Accountant Fees and Services	122

PART IV

Item 15.	Exhibits and Financial Statement Schedules	122
Form 10-K	Signature Page	124
Exhibit 21.	Subsidiaries of Registrant	125
Exhibit 23.1	Consent of Crowe Horwath LLP	126
Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	127
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	128
Exhibit 32.	Certification of Chief Executive Officer and Chief Financial Officer of Atlantic Coast Federal Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	129

	At December 31,
	2008						2007						2006						2005						2004
	Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in Thousands)
Real estate loans:
One- to four-family	$	370,783			49.86	%	$	377,956			53.51	%	$	334,000			52.14	%	$	324,681			55.88	%	$	303,544			58.44	%
Commercial		84,134			11.31	%		74,748			10.58	%		60,912			9.51	%		59,074			10.16	%		57,178			11.01	%
Other (land & multi-family)		43,901			5.91	%		40,698			5.76	%		34,446			5.38	%		20,302			3.49	%		20,120			3.87	%
Total real estate loans		498,818			67.08	%		493,402			69.85	%		429,358			67.03	%		404,057			69.53	%		380,842			73.32	%

Real estate construction loans:
Construction-one- to four-family		8,974			1.21	%		13,448			1.90	%		32,467			5.07	%		24,243			4.17	%		14,275			2.75	%
Construction-commercial		10,883			1.46	%		11,129			1.58	%		2,862			0.45	%		2,577			0.44	%		2,577			0.50	%
Acquisition & development		5,008			0.67	%		5,329			0.75	%		2,103			0.33	%		-			0.00	%		-			0.00	%
Total real estate construction loans		24,865			3.34	%		29,906			4.23	%		37,432			5.85	%		26,820			4.61	%		16,852			3.25	%

Other loans:
Home equity		107,525			14.46	%		98,410			13.93	%		91,062			14.22	%		79,016			13.60	%		60,077			11.57	%
Consumer		87,162			11.72	%		64,673			9.16	%		63,630			9.93	%		62,846			10.81	%		57,893			11.15	%
Commercial		25,273			3.40	%		20,009			2.83	%		19,044			2.97	%		8,430			1.45	%		3,711			0.71	%
Total other loans		219,960			29.58	%		183,092			25.92	%		173,736			27.12	%		150,292			25.86	%		121,681			23.43	%

Total loans	$	743,643			100.00	%	$	706,400			100.00	%	$	640,526			100.00	%	$	581,169			100.00	%	$	519,375			100.00	%

Less:
Net deferred loan origination costs		8,662						3,256						3,348						3,164						1,473
Premiums on purchased loans		172						339						348						695						819
Allowance for loan losses		(10,598	)					(6,482	)					(4,705	)					(4,587	)					(3,956	)
Total loans, net	$	741,879					$	703,513					$	639,517					$	580,441					$	517,711

	One- to Four-Family					Commercial Real Estate					Other Real Estate (1)					Construction-One- to four-family (2)					Construction- Commercial (2)					Acquisition & Development
	Amount		Weighted Average Rate (%)			Amount		Weighted Average Rate (%)			Amount		Weighted Average Rate (%)			Amount		Weighted Average Rate (%)			Amount		Weighted Average Rate (%)			Amount		Weighted Average Rate (%)
At December 31, 2008	(Dollars in Thousands)

1 year or less	$	114		7.00	%	$	15,172		6.11	%	$	12,414		3.98	%	$	2,661		4.21	%	$	10,298		4.34	%	$	405		3.75	%
Greater than 1 to 3 years		4,413		5.21			16,137		5.94			13,943		6.29			179		3.50			-		-			4,603		4.09
Greater than 3 to 5 years		2,210		6.21			15,813		7.27			5,070		8.81			-		-			-		-			-		-
Greater than 5 to 10 years		25,496		5.25			22,655		6.80			3,529		7.25			-		-			-		-			-		-
Greater than 10 to 20 years		40,973		6.05			13,548		6.71			5,921		7.49			-		-			585		3.42			-		-
More than 20 years		297,577		6.04			809		5.95			3,024		6.05			6,134		8.09			-		-			-		-
Total	$	370,783				$	84,134				$	43,901				$	8,974				$	10,883				$	5,008

	One- to Four-Family		Commercial Real Estate		Other –Real Estate (1)		Construction One- to four-family (2)		Construction Commercial (2)		Acquisition & Development		Home Equity		Consumer		Commercial		Total
	Amount		Amount		Amount		Amount		Amount		Amount		Amount		Amount		Amount		Amount
	(Dollars in Thousands)

1 year or less	$	78,393	$	30,266	$	24,963	$	2,513	$	10,298	$	5,008	$	57,321	$	12,034	$	16,948	$	237,744
Greater than 1 to 3 years		72,412		15,185		8,716		165		-		-		19,068		58,622		1,362		175,530
Greater than 3 to 5 years		21,988		19,066		5,682		2,002		-		-		4,408		14,635		3,026		70,807
Greater than 5 to 10 years		32,673		12,458		1,882		-		-		-		5,670		1,871		3,937		58,491
Greater than 10 to 20 years		32,618		7,159		2,639		-		585		-		19,291		-		-		62,292
More than 20 years		132,699		-		19		4,294		-		-		1,767		-		-		138,779

Total	$	370,783	$	84,134	$	43,901	$	8,974	$	10,883	$	5,008	$	107,525	$	87,162	$	25,273	$	743,643

	Due After December 31, 2009
	Fixed Rate		Adjustable Rate		Total
	(Dollars in Thousands)
Real estate loans :
One- to four-family	$	196,420	$	174,249	$	370,669
Commercial		37,788		31,174		68,962
Other (1)		16,724		14,763		31,487

Construction loans :
One- to four-family	$	2,002	$	4,311	$	6,313
Commercial		585		-		585
Acquisition & development		-		4,603		4,603

Other loans :
Home equity	$	32,902	$	74,356	$	107,258
Consumer		84,278		257		84,535
Commercial business		7,807		8,259		16,066

Total loans	$	378,506	$	311,968	$	690,474

	Loans Delinquent For:										Total
	60-89 Days					90 Days or More					Delinquent Loans
Loan Types	Number of Loans		Principal Balance of Loans			Number of Loans		Principal Balance of Loans			Number of Loans		Principal Balance of Loans
	(Dollars in Thousands)
Real estate
One- to four-family		10	$	1,848			36	$	8,599			46	$	10,447
Commercial		-		- -			4		7,185			4		7,185
Other (Land and multi-family)		1		35			13		1,188			14		1,223

Real Estate Construction
Construction - One- to four-family		-		-			2		258			2		258
Construction – Commercial		-		-			2		4,289			2		4,289
Construction - Acquisition & development		-		-			-		-			-		-

Other Loans – Consumer
Home equity		12		837			16		840			28		1,677
Consumer		34		249			41		387			75		636
Commercial		-		-			1		170			1		170
Total		57	$	2,969			115	$	22,916			172	$	25,885

Delinquent loans to total gross loans				0.39	%				3.05	%				3.44	%

	Year Ended December 31,
	2008			2007			2006			2005			2004
	(Dollars in Thousands)
Balance at beginning of period	$	6,482		$	4,705		$	4,587		$	3,956		$	6,593
Charge-offs:
Real Estate Loans
One-to four-family		3,514			133			107			192			78
Commercial		3,393			-			-			605			4,637
Other (Land & Multi-family)		777			41			-			-			-
Real Estate Construction Loans
Construction - One-to four- family		336			275			-			-			-
Construction - Commercial		-			-			-			-			-
Acquisition & Development		-			-			-			-			-
Other Loans
Home equity		1,392			550			14			160			63
Consumer		1,232			1,819			1,094			1,249			1,642
Commercial		345			135			-			120			-
Total charge-offs		10,989			2,953			1,215			2,326			6,420
Recoveries:
Real Estate Loans
One-to four-family		25			5			54			40			7
Commercial		550			893			83			51			-
Other (Land & Multi-family)		45			-			-			-			-
Real Estate Construction Loans
Construction - One-to four-family		-			-			-			-			-
Construction - Commercial		-			-			-			-			-
Acquisition & Development		-			-			-			-			-
Other Loans
Home equity		3			71			18			1			11
Consumer		533			1,145			703			732			790
Commercial		1			-			-			12			-
Total recoveries		1,157			2,114			858			836			808
Net charge-offs		9,832			839			357			1,490			5,612
Provision for loan losses		13,948			2,616			475			2,121			2,975

Balance at end of period	$	10,598		$	6,482		$	4,705		$	4,587		$	3,956
Net charge-offs to average loans during this period (1)		1.35	%		0.13	%		0.06	%		0.27	%		1.16	%
Net charge-offs to average non-performing loans during this period		131.80	%		24.71	%		11.36	%		43.41	%		122.10	%
Allowance for loan losses to non-performing loans		41.50	%		82.69	%		154.21	%		175.36	%		59.42	%
Allowance as % of total loans (end of period) (1)		1.43	%		0.92	%		0.73	%		0.78	%		0.75	%

	2005							2004
	Amount of Loan Loss Allowance		Loan Amounts by Category		Percent of Loans in Each Category to Total Loans			Amount of Loan Loss Allowance		Loan Amounts by Category		Percent of Loans in Each Category to Total Loans

Real Estate Loans
One-to four-family real estate	$	672	$	324,682		55.88	%	$	494	$	303,544		58.44	%
Commercial real estate		1,041		59,074		10.16	%		1,404		57,178		11.01	%
Other (land & multi-family)		117		20,302		3.49	%		32		20,120		3.87	%

Real Estate Constrcution
Construction-one-to four family		185		24,242		4.17	%		71		14,275		2.75	%
Construction -commercial		26		2,577		0.44	%		179		2,577		0.50	%
Acquistion & Development		-		-		-			-		-		-

Other Loans
Home equity		497		79,016		13.60	%		332		60,077		11.57	%
Consumer		1,581		62,846		10.81	%		1,227		57,893		11.15	%
Commercial		468		8,430		1.45	%		217		3,711		0.71	%
Total	$	4,587	$	581,169		100.00	%	$	3,956	$	519,375		100.00	%

							Greater Than			Greater
	Less Than 1 Year			1 to 5 Years			5 to 10 Years			Than 10 Years			Total Securities
	Amortized Cost			Amortized Cost			Amortized Cost			Amortized Cost			Amortized Cost			Fair Value
	(Dollars in Thousands)
U.S. government and agency	$	-		$	-		$	975		$	12,890		$	13,865		$	14,200
State and Municipal		-			-			434			2,231			2,665			2,513
Mortgage-backed		2,624			-			5,139			123,717			133,480			130,761
Total investment securities	$	2,624		$	-		$	6,548		$	138,838		$	148,010		$	147,474

Weighted average yield		4.00	%		-	%		5.60	%		5.23	%		5.11	%		5.11	%

Maturity Period	At December 31, 2008
	(Dollars in Thousands)

Three months or less	$	17,524
Over three months through six months		13,084
Over six months through one year		53,039
Over one year to three years		51,419
Over three years		10,646

Total	$	145,712

	Years Ended December 31,
	2008			2007			2006
	(Dollars In Thousands)
Average balance outstanding	$	191,055		$	148,184		$	128,260

Maximum month-end balance	$	207,592		$	173,000		$	144,000

Balance at end of period	$	184,850		$	173,000		$	144,000

Weighted average interest rate during the period		3.97	%		4.49	%		4.42	%

Weighted average interest rate at end of period		4.05	%		4.23	%		4.45	%

	Owned or	Lease Expiration		Net Book Value
Location	Leased	Date		December 31, 2008
				(Dollars in Thousands)
HOME AND EXECUTIVE OFFICE	Owned		--	$	1,550
AND MAIN BRANCH
505 Haines Avenue
Waycross, GA 31501

FLORIDA REGIONAL CENTER	Leased	June 2009			61
10151 Deerwood Park Blvd.
Building 100, Suite 501
Jacksonville, FL 32256

BRANCH OFFICES:	Owned		--		96
Drive-up Facility
400 Haines Avenue
Waycross, GA 31501

2110 Memorial Drive	Owned		--		298
Waycross, GA 31501

1390 South Gaskin Avenue	Owned		--		334
Douglas, GA 31533

213 Hwy 80 West	Owned		--		125
Garden City, GA 31408

10328 Deerwood Park Blvd.	Owned		--		822
Jacksonville, FL 32256

8048 Normandy Blvd.	Owned		--		913
Jacksonville, FL 32221

1567 Kingsley Avenue	Leased	October 2017			730
Orange Park, FL 32073

463 West Duval Street	Owned		--		91
Lake City, FL 32055

930 University Avenue, North	Owned		--		644
Jacksonville, FL 32211

1700 South Third Street	Owned		--		472
Jacksonville Beach, FL 32200

1425 Atlantic Blvd.	Owned		--		1,554
Neptune Beach, FL 32233

2766 Race Track Road	Owned		--		2,409
Jacksonville, FL 32259

	At December 31,
	2008					2007					2006					2005					2004
	Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent
FIXED-RATE LOANS	(Dollars in Thousands)
Real estate loans:
One- to four-family	$	194,778		26.19	%	$	172,730		24.45	%	$	115,453		18.02	%	$	113,590		19.55	%	$	118,515		22.82	%
Commercial		43,393		5.83	%		40,298		5.70	%		23,840		3.72	%		22,612		3.89	%		33,568		6.46	%
Other (land and multi-family)		17,899		2.41	%		20,078		2.85	%		15,780		2.46	%		8,474		1.46	%		5,436		1.05	%
Total real estate loans		256,070		34.43	%		233,106		33.00	%		155,073		24.20	%		144,676		24.90	%		157,519		30.33	%
Real estate construction loans:
Construction-one- to four-family		3,045		0.41	%		4,773		0.68	%		4,046		0.63	%		16,418		2.82	%		14,275		2.74	%
Construction-commercial		1,206		0.16	%		750		0.11	%		1,758		0.27	%		-		0.00	%		600		0.12	%
Acquisition & development		-		0.00	%		-		0.00	%		-		0.00	%		-		0.00	%		-		0.00	%
Total real estate construction loans		4,251		0.57	%		5,523		0.79	%		5,804		0.90	%		16,418		2.82	%		14,875		2.86	%
Other loans:
Home equity		32,872		4.42	%		23,355		3.31	%		20,176		3.15	%		13,184		2.27	%		7,994		1.54	%
Consumer		85,302		11.47	%		63,472		8.99	%		62,868		9.82	%		62,343		10.73	%		57,409		11.05	%
Commercial		9,742		1.31	%		6,947		0.98	%		2,349		0.37	%		535		0.09	%		2,370		0.46	%
Total other loans		127,916		17.20	%		93,774		13.28	%		85,393		13.34	%		76,062		13.09	%		67,773		13.05	%
Total fixed-rate loans		388,237		52.20	%		332,403		47.06	%		246,270		38.44	%		237,156		40.81	%		240,167		46.24	%

ADJUSTABLE-RATE LOANS
Real estate loans:
One-to-four-family		176,005		23.67	%		205,226		29.05	%		218,547		34.12	%		211,091		36.31	%		185,029		35.62	%
Commercial		40,741		5.48	%		34,450		4.88	%		37,072		5.79	%		36,462		6.27	%		23,610		4.55	%
Other (land and multi-family)		26,002		3.50	%		20,620		2.92	%		18,666		2.91	%		11,828		2.04	%		14,684		2.83	%
Total real estate loans		242,748		32.65	%		260,296		36.85	%		274,285		42.82	%		259,381		44.62	%		223,323		43.00	%
Real estate construction loans:
Construction-one- to four-family		5,929		0.80	%		8,675		1.23	%		28,421		4.44	%		7,825		1.35	%		-		0.00	%
Construction-commercial		9,677		1.30	%		10,379		1.47	%		1,104		0.17	%		2,577		0.44	%		1,977		0.38	%
Acquisition & development		5,008		0.67	%		5,329		0.75	%		2,103		0.33	%		-		0.00	%		-		0.00	%
Total real estate construction loans		20,614		2.77	%		24,383		3.45	%		31,628		4.94	%		10,402		1.79	%		1,977		0.38	%
Other loans:
Home equity		74,653		10.04	%		75,055		10.63	%		70,886		11.07	%		65,832		11.33	%		52,083		10.03	%
Consumer		1,860		0.25	%		1,201		0.17	%		762		0.12	%		503		0.09	%		484		0.09	%
Commercial		15,531		2.09	%		13,062		1.85	%		16,695		2.61	%		7,895		1.36	%		1,341		0.26	%
Total other loans		92,044		12.38	%		89,318		12.65	%		88,343		13.80	%		74,230		12.78	%		53,908		10.38	%
Total adjustable-rate loans		355,405		47.80	%		373,997		52.94	%		394,256		61.56	%		344,013		59.19	%		279,208		53.76	%

Total loans	$	743,643		100.00	%	$	706,400		100.00	%	$	640,526		100.00	%	$	581,169		100.00	%	$	519,375		100.00	%

	At December 31,
	2008		2007
	(Dollars in Thousands)
Loss	$	-	$	-
Doubtful		459		1,527
Substandard		33,248		5,519
Total	$	33,707	$	7,046

	At December 31,
	2008					2007					2006
	Carrying Value		% of Total			Carrying Value		% of Total			Carrying Value		% of Total
	(Dollars in Thousands)
Securities available for sale :
U.S. government and agency	$	14,200		9.63	%	$	11,510		8.58	%	$	16,280		16.41	%
State and municipal		2,513		1.70	%		8,684		6.47	%		1,729		1.74	%
Mortgage backed (1)		130,761		88.67	%		114,022		84.95	%		81,222		81.85	%
Total	$	147,474		100.00	%	$	134,216		100.00	%	$	99,231		100.00	%

Other earning assets :
Interest-earning deposits with banks	$	24,033		60.15	%	$	24,584		63.27	%	$	30,486		76.92	%
FHLB stock		9,996		25.02	%		9,293		23.92	%		7,948		20.05	%
Other investments		5,927		14.83	%		4,977		12.81	%		1,200		3.03	%
Total	$	39,956		100.00	%	$	38,854		100.00	%	$	39,634		100.00	%

	At December 31,
	2008								2007								2006
											(Dollars in Thousands)
						Weighted								Weighted								Weighted
						average								average								average
	Balance		Percent			rate			Balance		Percent			rate			Balance		Percent			rate
											(Dollars in thousands)
Deposit type:
Non interest bearing demand	$	33,192		5.31	%		-		$	35,284		6.05	%		-		$	38,301		6.68	%		-
Savings		32,465		5.20	%		0.38	%		35,633		6.11	%		0.37	%		41,915		7.31	%		0.42	%
Interest bearing demand		67,714		10.84	%		2.78	%		45,893		7.88	%		2.59	%		52,895		9.23	%		3.00	%
Money market demand		131,923		21.12	%		2.95	%		149,266		25.61	%		4.06	%		116,314		20.31	%		4.69	%

Total transaction accounts		265,294		42.47	%		2.22	%		266,076		45.66	%		2.77	%		249,425		43.53	%		2.89	%

Certificates of deposit		359,312		57.53	%		4.12	%		316,654		54.34	%		4.98	%		323,627		56.47	%		4.83	%

Total deposits	$	624,606		100.00	%		3.31	%	$	582,730		100.00	%		3.97	%	$	573,052		100.00	%		3.99	%

	High		Low		Dividends

Fiscal 2008
January 1-March 31	$	12.19	$	8.10	$	0.15
April 1- June 30		9.93		7.30		0.12
July 1- September 30		8.47		4.69		0.11
October 1- December 31		7.89		3.40		0.09

Fiscal 2007
January 1-March 31	$	19.10	$	17.18	$	0.13
April 1- June 30		20.06		15.55		0.14
July 1- September 30		15.80		12.42		0.15
October 1- December 31		15.38		10.61		0.15

Month ended	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 31, 2008		12,800	$	6.77		12,800		207,117
November 30, 2008		7,300		6.17		7,300		199,817
December 31, 2008		20,083		4.11		20,083		179,734
Total		40,183	$	5.33		40,183		179,734

October 31, 2007		-		-		-		182,646
November 30, 2007		-		-		-		182,646
December 31, 2007		-		-		-		182,646
Total		-		-		-		182,646

Plan	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1)		Weighted Average Exercise Price (2) of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (3)

Equity compensation plans approved by stockholders		559,101	$	13.94		141,964
Equity compensation plans not approved by stockholders		—		—		—
Total		559,001	$	13.94		141,964

	At December 31,
Selected Consolidated Balance	2008		2007		2006		2005		2004
Sheet Data:	(Dollars in Thousands)

Total assets	$	996,089	$	931,026	$	843,079	$	744,116	$	637,678
Cash and cash equivalents		34,058		29,310		41,057		37,959		25,708
Securities available-for-sale		147,474		134,216		99,231		71,965		53,363
Loans receivable, net		741,879		703,513		639,517		580,441		517,711
FHLB stock		9,996		9,293		7,948		7,074		5,511
Deposits		624,606		582,730		573,052		516,321		435,682
Total borrowings		184,850		173,000		144,000		129,000		100,314
Total stockholders’ equity		83,960		89,806		91,087		92,917		98,700

	Years Ended December 31,
Selected Consolidated Statement of	2008			2007		2006		2005		2004
Income Data:	(Dollars in Thousands)

Total interest income	$	55,259		$	55,509	$	46,407	$	37,254	$	31,772
Total interest expense		32,009			33,123		24,747		17,139		11,643
Net interest income		23,250			22,386		21,660		20,115		20,129
Provision for loan losses		13,948			2,616		475		2,121		2,975

Net interest income after provision for loan losses		9,302			19,770		21,185		17,994		17,154
Non-interest income		10,134			6,926		8,005		7,937		5,207
Non-interest expense		25,514			25,451		21,679		19,616		17,256

(Loss) income before income taxes		(6,078	)		1,245		7,511		6,315		5,105

Income tax (benefit) expense (1)		(3,233	)		130		2,382		1,290		1,815

Net (loss) income	$	(2,845	)	$	1,115	$	5,129	$	5,025	$	3,290
(Loss) earnings per share: Basic	$	(0.22	)	$	0.08	$	0.38	$	0.36	$	0.33
(Loss) earnings per share: Diluted	$	(0.22	)	$	0.08	$	0.38	$	0.36	$	0.33


Selected Consolidated Financial Ratios and Other Data:	At or For the Year Ended December 31,
	2008			2007			2006			2005			2004
Performance Ratios :
Return on assets (ratio of net income to average total assets)		(0.29	)%		0.12	%		0.66	%		0.71	%		0.56	%
Return on equity (ratio of net income to average equity)		(3.22	)%		1.22	%		5.48	%		5.07	%		6.05	%
Dividend Payout ratio		(218.4	)%		712.5	%		110.53	%		72.22	%		-	%
Interest rate spread information:
Average during period		2.21	%		2.23	%		2.55	%		2.62	%		3.29	%
Net interest margin (1)		2.53	%		2.67	%		2.99	%		3.06	%		3.64	%
Ratio of operating expense to average total assets		2.61	%		2.85	%		2.78	%		2.78	%		2.95	%
Efficiency ratio (2)		76.43	%		86.83	%		73.08	%		69.93	%		68.11	%
Ratio of average interest-earning assets to average interest-bearing liabilities		109.06	%		110.96	%		113.01	%		116.92	%		116.63	%

Asset Quality Ratios:
Non-performing assets to total assets at end of period		2.90	%		1.03	%		0.40	%		0.39	%		1.09	%
Allowance for loan losses to non performing loans		41.50	%		82.69	%		154.21	%		175.36	%		59.42	%
Allowance for loan losses to total Loans		1.43	%		0.92	%		0.73	%		0.78	%		0.75	%
Net charge-offs to average outstanding loans		1.35	%		0.13	%		0.06	%		0.27	%		1.16	%
Non-performing loans to total Loans		3.43	%		1.11	%		0.48	%		0.45	%		1.28	%

Capital Ratios:
Equity to total assets at end of period		8.43	%		9.65	%		10.80	%		12.49	%		15.48	%
Average equity to average assets		9.03	%		10.23	%		12.00	%		14.07	%		9.29	%

Other Data:
Number of full-service offices		12			13			13			12			12
Number of loans		14,126			14,101			14,679			15,151			15,840
Number of deposit accounts		46,148			48,334			49,896			51,738			56,962

	2008		2007
	(In Millions)
First quarter	$	1.6	$	0.3
Second quarter		3.8		0.5
Third quarter		3.8		0.4
Fourth quarter		4.7		1.4
Total	$	13.9	$	2.6

							Increase(decrease)
	2008			2007			Dollars			Percentage
Assets	(Dollars in thousands)
Cash and cash equivalents	$	34,058		$	29,310		$	4,748			16.2	%
Securities available for sale		147,474			134,216			13,258			9.9	%
Loans		752,477			709,995			42,482			6.0	%
Allowance for loan losses		(10,598	)		(6,482	)		(4,116	)		63.5	%
Loans, net		741,879			703,513			38,366			5.5	%
Loans held for sale		736			640			96			15.0	%
Other assets		71,942			63,347			8,595			13.6	%
Total assets	$	996,089		$	931,026		$	65,063			7.0	%

Liabilities and stockholders' equity
Deposits
Non-interest bearing	$	33,192		$	35,284		$	(2,092	)		-5.9	%
Interest bearing transaction accounts		67,714			45,893			21,821			47.5	%
Savings and money-market		164,388			184,899			(20,511	)		-11.1	%
Time		359,312			316,654			42,658			13.5	%
Total deposits		624,606			582,730			41,876			7.2	%
Federal Home Loan Bank advances		184,850			173,000			11,850			6.8	%
Securities sold under agreement to repurchase		92,800			78,500			14,300			18.2	%
Accrued expenses and other liabilities		9,873			6,990			2,883			41.2	%
Total liabilities		912,129			841,220			70,909			8.4	%
Stockholders' equity		83,960			89,806			(5,846	)		-6.5	%
Total liabilities and stockholders' equity	$	996,089		$	931,026		$	65,063			7.0	%

	As of December 31,												Increase (decrease)
	2008			% of total loans			2007			% of total loans			Dollars			Percentage
Real estate loans:	(Dollars In Thousands)
One-to-four family	$	370,783			49.9	%	$	377,956			53.5	%	$	(7,173	)		-1.9	%
Commercial		84,134			11.3	%		74,748			10.6	%		9,386			12.6	%
Other ( Land & Multi-family)		43,901			5.9	%		40,698			5.8	%		3,203			7.9	%
Total real estate loans		498,818			67.1	%		493,402			69.8	%		5,416			1.1	%

Real estate construction loans:
Construction-one-to-four family		8,974			1.2	%		13,448			1.9	%		(4,474	)		-33.3	%
Construction-commercial		10,883			1.5	%		11,129			1.6	%		(246	)		-2.2	%
Acquisition & development		5,008			0.7	%		5,329			0.8	%		(321	)		-6.0	%
Total real estate construction loans		24,865			3.3	%		29,906			4.2	%		(5,041	)		-16.9	%

Other loans:
Home equity		107,525			14.5	%		98,410			13.9	%		9,115			9.3	%
Consumer		87,162			11.7	%		64,673			9.2	%		22,489			34.8	%
Commercial		25,273			3.4	%		20,009			2.8	%		5,264			26.3	%
Total other loans		219,960			29.6	%		183,092			25.9	%		36,868			20.1	%

Total loans		743,643			100	%		706,400			100	%		37,243			5.3	%

Allowance for loan losses		(10,598	)					(6,482	)					(4,116	)		63.5	%
Net deferred loan costs		8,662						3,256						5,406			166.0	%
Premiums on purchased loans		172						339						(167	)		-49.3	%

Loans, net	$	41,879					$	703,513					$	38,366			5.5	%

	Georgia		Florida		Other States		Total
	(Dollars in Thousands)
1-4 Family First Mortgages	$	84,258	$	229,973	$	56,552	$	370,783
1-4 Family Second Mortgages		49,648		55,544		2,333		107,525
1-4 Family Construction Loans		1,135		7,504		336		8,974
	$	135,041	$	293,021	$	59,222	$	487,282

	For the year ended December 31,
	(Dollars in Thousands)
	2008								2007
	Average Balance		Interest			Average Yield /Cost			Average Balance		Interest			Average Yield /Cost
INTEREST-EARNING ASSETS
Loans receivable(1)	$	730,245	$	46,385			6.35	%	$	668,150	$	46,331			6.93	%
Securites(2)		147,855		7,866			5.32	%		126,809		6,822			5.38	%
Other interest-earning assets(3)		42,323		1,008			2.38	%		44,607		2,356			5.28	%

Total interest-earning assets		920,423		55,259			6.00	%		839,566		55,509			6.61	%
Non-interest-earning assets		57,578								54,085
Total assets	$	978,001							$	893,651

INTEREST-BEARING LIABILITIES
Savings deposits	$	35,132		132			0.38	%	$	40,333		157			0.39	%
Interest on interest-bearing demand		58,709		1,438			2.45	%		50,092		1,481			2.96	%
Money market accounts		132,313		4,036			3.05	%		155,863		7,012			4.50	%
Time deposits		336,982		15,048			4.47	%		303,102		15,145			5.00	%
Federal Home Loan Bank advances		191,055		7,575			3.96	%		148,184		6,653			4.49	%
Securities sold under agreement to repurchase		89,793		3,780			4.21	%		59,063		2,675			4.53	%

Total interest-bearing liabilities		843,984		32,009			3.79	%		756,637		33,123			4.38	%
Non-interest-bearing liabilities		45,704								45,563
Total liabilities		889,688								802,200
Stockholders' equity		88,313								91,451
Total liabilities and stockholders' equity	$	978,001							$	893,651

Net interest income			$	23,250							$	22,386
Net interest spread							2.21	%							2.23	%
Net earning assets	$	76,439							$	82,929
Net interest margin(4)							2.53	%							2.67	%
Average interest-earning assets to average interest-bearing liabilities				109.06	%							110.96	%

	2008 vs. 2007
	Increase/(Decrease)						Total
	Due to						Increase
	Volume			Rate			(Decrease)
INTEREST-EARNING ASSETS	(Dollars in Thousands)
Loans receivable	$	4,116		$	(4,062	)	$	54
Securites		1,120			(76	)		1,044
Other interest-earning assets		(115	)		(1,233	)		(1,348	)
Total interest-earning assets		5,121			(5,371	)		(250	)

INTEREST-BEARING LIABILITIES
Savings deposits		(20	)		(6	)		(26	)
Interest bearing demand accounts		233			(277	)		(44	)
Money market accounts		(951	)		(2,025	)		(2,976	)
Time deposits		1,601			(1,696	)		(95	)
Federal Home Loan Bank advances		1,765			(842	)		923
Securities sold under agreements to repurchase		1,305			(201	)		1,104
Total interest-bearing liabilities		3,933			(5,047	)		(1,114	)

Net interest income	$	1,188		$	(324	)	$	864

	2007 vs. 2006
	Increase/(Decrease)						Total
	Due to						Increase
	Volume			Rate			(Decrease)
INTEREST-EARNING ASSETS				(Dollars in Thousands)
Loans receivable	$	3,412		$	1,890		$	5,302
Securites		2,685			534			3,219
Other interest-earning assets		549			32			581
Total interest-earning assets		6,646			2,456			9,102

INTEREST-BEARING LIABILITIES
Savings deposits		(34	)		(4	)		(38	)
Interest bearing demand accounts		(238	)		147			(91	)
Money market accounts		3,455			459			3,914
Time deposits		(421	)		1,983			1,562
Federal Home Loan Bank advances		893			96			989
Securities sold under agreements to repurchase		2,043			(2	)		2,041
Total interest-bearing liabilities		5,698			2,679			8,377

Net interest income	$	948		$	(223	)	$	725

	December 31, 2008
	Less Than 1 Year		1 Through 3 Years		4 Through 5 Years		More Than 5 Years		Total
	(Dollars in Thousands)
FHLB advances	$	12,250	$	38,000	$	-	$	134,600	$	184,850
Operating leases (premises)		287		301		316		695		1,599
Borrowings and operating leases		12,537		38,301		316		135,295		186,449

Undisbursed portion of loans closed		-		-		-		-		8,669
Unused lines of credit		-		-		-		-		76,907
Total loan commitments		-		-		-		-		85,576
Loan purchase commitment		-		-		-		-		-
Security repurchase commitment		92,800		-		-		-		92,800
Total purchase commitments		-		-		-		-		-
Total contractual obligations And loan commitments	$	105,337	$	38,301	$	316	$	135,295	$	364,825

											To Be Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in Millions)
As of December 31, 2008
Total capital (to risk-weighted assets)	$	74.5		10.9	%	$	54.6		8.0	%	$	68.3		10.0	%
Tier 1 (core) capital (to risk-weighted assets)	$	68.5		10.0	%	$	27.3		4.0	%	$	41.0		6.0	%
Tier 1 (core) capital (to adjusted total assets)	$	68.5		7.0	%	$	39.4		4.0	%	$	49.2		5.0	%

	Economic Value of Equity and Duration of Assets and Liabilities at December 31, 2008
	Change in Interest Rate
	Decrease			Decrease			Decrease			Increase			Increase			Increase
	3%			2%			1%			1%			2%			3%

Duration of assets(1)		1.54			1.62			2.26			2.77			2.89			3.03
Duration of liabilities(1)		2.48			2.61			3.29			3.06			2.97			2.99
Differential in duration		-0.94			-0.99			-1.03			-0.29			-0.08			0.04

Amount of change in Economic Value of Equity(2)	$	(28,240,492	)	$	(19,817,889	)	$	(10,290,360	)	$	2,823,339		$	1,717,281		$	(1,071,596	)
Percentage change in Economic Value of Equity(2)		-29.89	%		-20.98	%		-10.89	%		2.99	%		1.82	%		-1.13	%

												ACCUMULATED
	COMMON STOCK		ADDITIONAL PAID IN CAPITAL			UNEARNED ESOP SHARES			RETAINED EARNINGS			OTHER COMPREHENSIVE INCOME (LOSS)			TREASURY STOCK			TOTAL STOCKHOLDERS’ EQUITY
Balance at January 1, 2006	$	148	$	56,876		$	(3,724	)	$	49,629		$	(408	)	$	(9,603	)	$	92,918
ESOP shares earned, 46,552 shares		-		290			465			-			-			-			755
Stock options exercised		-		(13	)		-			-			-			115			102
Management restricted stock granted		-		(348	)		-			-			-			348			-
Management restricted stock expense, 78,256 shares		-		595			-			-			-			-			595
Stock options expense		-		308			-			-			-			-			308
Dividends declared ($0.42 per share)		-		-			-			(2,048	)		-			-			(2,048	)
Treasury stock purchased at cost		-		-			-			-			-			(6,877	)		(6,877	)
Comprehensive income:
Net income		-		-			-			5,129			-			-			5,129
Other comprehensive income (loss)		-		-			-			-			204			-			204
Total comprehensive income		-		-			-			5,129			204			-			5,333
Balance at December 31, 2006		148		57,708			(3,259	)		52,711			(204	)		(16,017	)		91,087
ESOP shares earned, 46,552 shares		-		276			466			-			-			-			742
Stock options exercised		-		(8	)		-			-			-			65			57
Management restricted stock granted		-		(98	)		-			-			-			207			109
Management restricted stock expense, 78,256 shares		-		684			-			-			-			-			684
Stock options expense		-		332			-			-			-			-			332
Directors deferred compensation		-		49			-			-			-			(49	)		-
Shares relinquished		-		139			-			-			-			(155	)		(16	)
Cash dividends declared ($0.57 per share)		-		-			-			(2,644	)		-			-			(2,644	)
Treasury stock purchased at cost		-		-			-			-			-			(1,968	)		(1,968	)
Comprehensive income:
Net income		-		-			-			1,115			-			-			1,115
Other comprehensive income		-		-			-			-			308			-			308
Total comprehensive income		-		-			-			1,115			308			-			1,423
Balance at December 31, 2007	$	148	$	59,082		$	(2,793	)	$	51,182		$	104		$	(17,917	)	$	89,806

	Fair Value		Gross Unrealized Gains		Gross Unrealized Losses
December 31, 2008	(Dollars in Thousands)
U.S. Government-sponsored enterprises	$	14,200	$	371	$	(35	)
State and municipal		2,513		7		(158	)
Mortgage-backed		130,761		1,063		(1,781	)

	$	147,474	$	1,441	$	(1,974	)


December 31, 2007
U.S. Government-sponsored enterprises	$	11,510	$	87	$	(45	)
State and municipal		8,684		13		(175	)
Mortgage-backed		114,022		703		(429	)

	$	134,216	$	803	$	(649	)

	2008
	(Dollars in Thousands)

Due in one year or less	$	-
Due from one to five years		-
Due from five to ten years		1,365
Due after ten years		15,348
Mortgage-backed		130,761

Total	$	147,474

	(Dollars in Thousands)
	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Description of Securities	Value		Loss			Value		Loss			Value		Loss
2008
Government-sponsored enterprises	$	940	$	(35	)	$	-	$	-		$	940	$	(35	)
State and municipal		1,015		(33	)		823		(125	)		1,838		(158	)
Mortgage-backed		30,149		(724	)		14,796		(1,057	)		44,945		(1,781	)

Total temporarily impaired	$	32,104	$	(792	)	$	15,619	$	(1,182	)	$	47,723	$	(1,974	)

2007
Government-sponsored enterprises	$	1,968	$	(6	)	$	933	$	(39	)	$	2,901	$	(45	)
State and municipal		7,575		(175	)		-		-			7,575		(175	)
Mortgage-backed		26,297		(193	)		24,464		(236	)		50,761		(429	)

Total temporarily impaired	$	35,840	$	(374	)	$	25,397	$	(275	)	$	61,237	$	(649	)