Atlantic Coast Financial Corporation Reports Fourth Quarter and Year-End 2012 Results

  Atlantic Coast Financial Corporation Reports Fourth Quarter and Year-End
  2012 Results

  Following Recent Merger Announcement, Company Poised to Fulfill Regulatory
                               Capital Mandate

Business Wire

JACKSONVILLE, Fla. -- March 4, 2013

Atlantic Coast Financial Corporation (the "Company,") (NASDAQ: ACFC), the
holding company for Atlantic Coast Bank (the "Bank"), today reported financial
results for the fourth quarter and year ended December 31, 2012.

This release follows the announcement last week that the Company had entered
into a definitive merger agreement with Bond Street Holdings, Inc. ("Bond
Street") under which the Company will merge into Bond Street, a
community-oriented bank holding company with $3.2 billion in total assets. The
transaction is expected to achieve the Company's goal of maximizing
stockholder value and fulfill the capital mandate established by the Company's
regulators.

For the fourth quarter of 2012, the Company reported net loss of $0.3 million
or $0.12 per diluted share compared with a net loss of $4.0 million or $1.61
per diluted share in the year-earlier quarter and a net loss of $1.7 million
or $0.66 per diluted share in the third quarter of 2012. For full year 2012,
the net loss totaled $6.7 million or $2.67 per diluted share compared with a
net loss for 2011 of $10.3 million or $4.13 per diluted share.

Notable highlights of the Company's fourth quarter and year-end report
included:

  *The Company's net loss for the fourth quarter of 2012 compared with the
    net loss in the year-earlier quarter reflected primarily a lower provision
    for loan losses, while reduced non-interest expense and higher gains on
    investment security sales helped offset a decrease in net interest income.
    The Company's net loss for the fourth quarter compared with the
    linked-quarter net loss reflected primarily a lower provision for loan
    losses and higher gains on sales of investment securities and loans, which
    helped offset a decline in net interest income and higher non-interest
    expense.
  *The net loss for the full year 2012 declined compared with the full year
    2011 primarily due to lower provision for loan losses and non-interest
    expense, which helped offset a decrease in net interest income.
  *Non-performing assets decreased 37% to $33.0 million or 4.26% of total
    assets at December31, 2012, from $52.5 million or 6.65% of total assets
    at December 31, 2011, and decreased 4% from $34.2 million or 4.35% of
    total assets at September 30, 2012.
  *Annualized net charge-offs to average loans decreased to 2.83% for the
    fourth quarter of 2012 from 3.34% for the year-earlier fourth quarter, but
    increased from 2.43% in the third quarter of 2012.
  *Total assets were $772.6 million at December 31, 2012, compared with
    $789.0 million at December31, 2011, as the Company has continued to
    manage asset size consistent with its overall capital management strategy.

Commenting on the fourth quarter and full year results, G. Thomas Frankland,
President and Chief Executive Officer, said, "We are pleased to report that
our company continued to make progress in narrowing its net loss in the just
completed fourth quarter. While our results indicate that the Company is
moving in the right direction, we know that we have a pressing need for
capital and continue to face ongoing economic and market challenges. This is
one of the reasons why we are enthusiastic about the agreement we entered into
last week to merge with Bond Street and become part of its attractive banking
platform, Florida Community Bank. We believe this transaction represents the
best overall solution for us by providing attractive and immediate value for
our stockholders, positioning us to better serve our customers, and making our
franchise more competitive in the marketplace."

For well more than a year, the Company's Board of Directors, with the
assistance of its financial advisor, has considered various alternatives to
meet its capital needs, Frankland noted. These strategic alternatives included
a recapitalization in the form of a rights offering as well as an outright
merger transaction. In its evaluation, the Board considered all associated
risks, including continued exposure to credit, economic, and interest rate
risks, as well as the ongoing earnings pressure arising from the Company's
asset quality and the cost of its wholesale debt. Additionally, there are
timing, market and execution risks associated with each of the strategic
alternatives considered. On balance, taking into consideration these risks as
well as the desire to provide an attractive return for all stockholders, the
Board believes the completion of the merger with Bond Street represents the
best alternative and offers the lowest execution risks of all the alternatives
it considered to fulfill the capital mandate from regulators.

The Bond Street Merger

On February 26, 2013, the Company entered into a definitive merger agreement
with Bond Street under which the Company will merge into Bond Street. Upon
completion of that transaction, Atlantic Coast Bank will merge into Florida
Community Bank, N.A., Bond Street's banking subsidiary, which operates 41
Florida Community Bank branches along both Florida coasts and in the Orlando
area.

As a result of this agreement, stockholders will receive $5.00 per share in
cash for each common share owned. The $5.00 per share merger consideration to
be realized by stockholders represents a premium of approximately 49% to the
Company's average stock price of $3.36 over the 10-day period ended February
25, 2013. Of the total transaction price of $5.00, $2.00 will be held in an
escrow account to cover potential stockholder claims for one year or until the
final resolution of such claims, if later. The transaction is expected to be
completed by the end of the second quarter of 2013, subject to customary
conditions, including regulatory approvals and the approval of Company
stockholders.

                                                               
                         Dec. 31,   Sept.30,   June 30,   March 30,   Dec. 31,
Capital Update
                         2012       2012       2012       2012        2011
                                    ($ in millions)
Tier 1(core) capital
ratio
                         5.13   %   5.11   %   5.36   %   5.71   %    5.83   %
(to adjusted total
assets)
Total risk-based
capital ratio
                         10.58  %   10.50  %   10.83  %   11.18  %    10.91  %
(to risk-weighted
assets)
Tier 1 (core)
risk-based capital       9.31   %   9.23   %   9.57   %   9.91   %    9.65   %
ratio
                                                                      

  *As previously reported, effective August 10, 2012, the Bank's Board of
    Directors consented to the issuance of a Consent Order (the "Order") by
    the Office of the Comptroller of the Currency.
  *Among other things, the Order calls for the Bank to achieve and maintain
    Tier 1 capital of 9% of adjusted total assets and Total risk-based capital
    of 13% of risk-weighted assets by December 31, 2012.
  *The Bank was not in compliance with the Order at December 31, 2012, with
    respect to the required capital levels.

                   
Asset Quality         At
                      Dec. 31,   Sept. 30,   June 30,   March 30,   Dec. 31,
                                                               
                      2012       2012        2012       2012        2011
                      ($ in millions)
Non-performing        $ 24.9     $  26.3     $ 33.1     $  41.8     $ 46.6
loans
Non-performing
loans to total          5.76 %      5.81 %     7.07 %      8.38 %     8.94 %
loans
Other real estate     $ 8.1      $  7.9      $ 7.7      $  4.3      $ 5.8
owned
Non-performing        $ 33.0     $  34.2     $ 40.8     $  46.1     $ 52.4
assets
Non-performing
assets to total         4.26 %      4.35 %     5.24 %      5.94 %     6.65 %
assets
Troubled debt
restructurings
performing for
less than 12          $ 20.0     $  18.5     $ 20.0     $  19.9     $ 19.3
months under
terms of
modification
Total
non-performing
assets and
troubled debt
restructurings        $ 53.0    $  52.7    $ 60.8    $  66.0    $ 71.7 
performing for
less than 12
months under
terms of
modification
Troubled debt
restructurings
performing for
more than 12          $ 12.5    $  12.5    $ 12.0    $  11.6    $ 12.7 
months under
terms of
modification
                                                                             

  *Non-performing loans and non-performing assets remained relatively stable
    in the fourth quarter of 2012 compared with the linked quarter, decreasing
    primarily due to a $1.7 million charge-off of a reserve established in
    2010 for a commercial loan associated with an owner-occupied commercial
    real estate loan relationship.
  *The Company continues to see a slowing pace of loans that are being
    reclassified as non-performing, particularly categories such as
    one-to-four family residential loans and home equity loans.

                                                   
Provision /        At and for the                      At and for the
Allowance for
Loan Losses        Three Months Ended                  Year Ended
                   Dec. 31,    Sept. 30,   Dec. 31,    Dec. 31,    Dec. 31,
                                                               
                   2012        2012        2011        2012        2011
                   ($ in millions)
Provision for      $ 1.7      $ 3.5      $ 5.2      $ 12.5     $ 15.4  
loan losses
Allowance for      $ 10.9     $ 12.7     $ 15.5     $ 10.9     $ 15.5  
loan losses
Allowance for
loan losses to      2.52  %    2.82  %    2.98  %    2.52  %    2.98  %
total loans
Allowance for
loan losses to      43.76 %    48.45 %    33.31 %    43.76 %    33.31 %
non-performing
loans
Net                $ 3.6      $ 3.1      $ 4.9      $ 17.1     $ 13.2  
charge-offs
Net
charge-offs to
average             2.83  %    2.43  %    3.34  %    3.23  %    2.25  %
outstanding
loans
                                                                             

  *The decline in the provision for loan losses in the fourth quarter of 2012
    compared with both the linked quarter and year-earlier quarter reflected
    the continuation of improving asset quality in the loan portfolio, with
    non-performing assets declining approximately 37% year over year.
  *The increase in net charge-offs in the fourth quarter of 2012 compared
    with the linked quarter was primarily due to the $1.7 million commercial
    loan charge-off described earlier.
  *The increase in net charge-offs in 2012 versus 2011 primarily reflected
    2012 charge-offs associated with the strategic resolution of several
    larger non-performing loan relationships such as (1) a $1.7 million
    charge-off in the first quarter 2012 related to the short sale of a retail
    strip center; (2) a $1.2 million charge-off in the second quarter of 2012
    for the bulk sale of $4.0million of non-performing residential loans; and
    (3) the $1.7 million commercial loan charge-off in the fourth quarter
    described earlier. A significant portion of the amounts charged off was
    reserved in previous years.

                                                     
Net Interest           Three Months Ended                Year Ended
Income
                       Dec. 31,   Sept. 30,   Dec. 31,   Dec. 31,   Dec. 31,
                                                                
                       2012       2012        2011       2012       2011
                       ($ in millions)
Net interest           $ 4.4     $  4.7     $ 5.3     $ 19.2    $ 21.5 
income
Net interest            2.37 %     2.55 %    2.80 %    2.58 %    2.83 %
margin
Yield on
investment              1.55 %     1.89 %    2.68 %    2.04 %    3.09 %
securities
Yield on loans          5.70 %     5.73 %    5.71 %    5.71 %    5.75 %
Total cost of           1.88 %     1.92 %    2.12 %    1.95 %    2.24 %
funds
Average cost of         0.74 %     0.76 %    1.10 %    0.82 %    1.21 %
deposits
Rates paid on           4.48 %     4.48 %    4.48 %    4.45 %    4.40 %
borrowed funds
                                                                             

  *The decline in net interest income for the fourth quarter of 2012 compared
    with the linked quarter and year-earlier quarter reflected primarily a
    reduction in portfolio loans outstanding and the impact of lower interest
    rates on funds reinvested in investment securities and other
    interest-earning assets. The reduction in portfolio loans is consistent
    with the Company's capital management strategy and its efforts to increase
    levels of primary liquidity due to reductions in sources of secondary
    liquidity.
  *Net interest margin for the fourth quarter was negatively affected by
    higher premium amortization related to increased pre-payments of
    mortgage-backed securities prompted by declines in long-term interest
    rates. Year-over-year net interest margin has declined due to the change
    in mix of interest earning assets, with higher liquidity partially offset
    by decreases in the cost of deposits.

                                                    
Non-Interest
Income /
                   Three Months Ended                  Year Ended
Non-Interest
Expense
                   Dec. 31,    Sept. 30,   Dec. 31,    Dec. 31,    Dec. 31,
                                                               
                   2012        2012        2011        2012        2011
                   ($ in millions)
Non-interest       $ 3.4      $ 2.7      $ 2.1      $ 10.1     $ 11.2  
income
Non-interest       $ 6.4      $ 5.6      $ 6.6      $ 23.4     $ 28.1  
expense
Efficiency ratio    81.47 %    75.03 %    89.38 %    79.63 %    85.74 %
                                                                             

  *The increase in non-interest income for the fourth quarter of 2012
    compared with the linked quarter primarily reflected increased gains on
    the sales of investment securities as well as increased gains on the sales
    of Small Business Administration loans originated for sale.
  *The increase in non-interest income for the fourth quarter of 2012
    compared with the year-earlier quarter primarily reflected an increase in
    gains on the sales of investment securities.
  *The increase in non-interest expense in the fourth quarter of 2012
    compared with the linked quarter primarily reflected higher FDIC insurance
    expense in the fourth quarter, along with higher credit and collection
    costs.
  *The decline in non-interest expense in the fourth quarter of 2012 compared
    with the year-earlier quarter primarily reflected reduced compensation and
    benefit expenses along with professional and outside services expense,
    both due to expense-reduction initiatives. The benefit of these reduced
    expenses was partially offset by higher collection costs in the fourth
    quarter of 2012 compared with the same quarter in 2011.

About the Company

Atlantic Coast Financial Corporation is the holding company for Atlantic Coast
Bank, a federally chartered and insured stock savings bank. It is a
community-oriented financial institution serving northeastern Florida and
southeastern Georgia markets through 12 locations, with a focus on the
Jacksonville metropolitan area. Investors may obtain additional information
about Atlantic Coast Financial Corporation on the Internet at
www.AtlanticCoastBank.net, under Investor Information.

                                                                        
ATLANTIC COAST FINANCIAL CORPORATION

Unaudited Financial Highlights

(In thousands, except per share amounts)
                                                                                           
                       Dec. 31,      Sept. 30,     June 30,      March 31,     Dec. 31,

                       2012          2012          2012          2012          2011
Total assets           $ 772,619     $ 784,810     $ 778,534     $ 776,831     $ 788,967
Cash and cash            67,828        63,840        64,772        47,117        41,017
equivalents
Securities               159,746       155,368       146,383       131,910       126,821
available-for-sale
                                                                                           
Loans                    72,568        74,313        57,806        59,399        61,619
held-for-sale
Loans receivable,        432,090       452,120       467,819       498,921       521,233
gross
Allowance for loan      10,889      12,729      12,339      13,516      15,526  
losses
Loans receivable,       421,201     439,391     455,480     485,405     505,707 
net
                                                                                           
Total deposits           499,760       507,906       500,481       498,010       508,411
Federal Home Loan        135,000       135,000       135,000       135,000       135,000
Bank advances
Securities sold
under agreements         92,800        92,800        92,800        92,800        92,800
to purchase
Stockholders'            40,260        43,080        43,990        45,315        46,294
equity
                                                                                           
                       For the Three Months Ended
                       Dec. 31,      Sept. 30,     June 30,      March 31,     Dec. 31,

                       2012          2012          2012          2012          2011
Interest income        $ 7,919       $ 8,213       $ 8,623       $ 8,749       $ 9,246
Interest expense        3,487       3,497       3,519       3,766       3,963   
Net interest             4,432         4,716         5,104         4,983         5,283
income
Provision for loan      1,746       3,529       3,741       3,475       5,201   
losses
Net interest
income after
provision                2,686         1,187         1,363         1,508         82

for loan losses
Non-interest             3,408         2,734         1,799         2,155         2,134
income
Non-interest            6,387       5,590       6,008       5,372       6,629   
expense
Loss before income       (293    )     (1,669  )     (2,846  )     (1,709  )     (4,413  )
taxes
Income tax              --          --          (150    )    --          424     
(expense) benefit
Net loss               $ (293    )   $ (1,669  )   $ (2,996  )   $ (1,709  )   $ (3,989  )
                                                                                           
Net loss per basic     $ (0.12   )   $ (0.66   )   $ (1.20   )   $ (0.69   )   $ (1.61   )
and diluted share
                                                                                           
Basic and diluted
weighted average        2,499       2,498       2,497       2,494       2,483   
shares outstanding
                                                                                           
                                                                 For the Year Ended
                                                                 Dec. 31,      Dec. 31,

                                                                 2012          2011
Interest income                                                  $ 33,505      $ 38,281
Interest expense                                                  14,270      16,756  
Net interest income                                                19,235        21,525
Provision for loan losses                                         12,491      15,383  
Net interest income after provision for loan losses                6,744         6,142
Non-interest income                                                10,096        11,232
Non-interest expense                                              23,357      28,085  
Loss before income taxes                                           (6,517  )     (10,711 )
Income tax (expense) benefit                                      (150    )    424     
Net loss                                                         $ (6,667  )   $ (10,287 )
                                                                                           
Net loss per basic and diluted share                             $ (2.67   )   $ (4.13   )
                                                                                           
Basic and diluted weighted average shares outstanding             2,497       2,490   

                                               
ATLANTIC COAST FINANCIAL CORPORATION

Selected Consolidated Financial Ratios and Other Data (Unaudited)

(Dollars in thousands)
                                                                             
                       At and for the              At and for the

                       Three Months Ended          Year Ended

                       Dec. 31,                    Dec. 31,
                       2012         2011          2012         2011
Interest rate
Net interest             2.24    %     2.64    %     2.42    %     2.67    %
spread
Net interest             2.37    %     2.80    %     2.58    %     2.83    %
margin
                                                                             
Average balances
Loans receivable       $ 506,635     $ 582,913     $ 529,518     $ 585,918
Total
interest-earning         748,735       755,140       745,563       760,790
assets
Total assets             785,778       797,412       781,755       807,785
Deposits                 508,879       513,464       502,330       508,520
Total
interest-bearing         692,122       703,378       689,664       710,543
liabilities
Total liabilities        742,026       747,035       735,811       754,322
Stockholders'            43,752        50,377        45,944        53,463
equity
                                                                             
Performance ratios
(annualized)
Return on average        -0.15   %     -2.00   %     -0.85   %     -1.27   %
total assets
Return on average
stockholders'            -2.68   %     -31.67  %     -14.51  %     -19.24  %
equity
Ratio of operating
expenses to              3.25    %     3.33    %     2.99    %     3.48    %
average total
assets
Efficiency ratio         81.47   %     89.38   %     79.63   %     85.74   %
Ratio of average
interest-earning
assets to average        108.18  %     107.36  %     108.11  %     107.07  %
interest-bearing
liabilities
                                                                             
Asset quality
ratios
Non-performing         $ 24,884      $ 46,615      $ 24,884      $ 46,615
loans
Foreclosed assets        8,065         5,839         8,065         5,839
Impaired loans           37,676        51,325        37,676        51,325
Non-performing
assets to total          4.26    %     6.65    %     4.26    %     6.65    %
assets
Non-performing
loans to total           5.76    %     8.94    %     5.76    %     8.94    %
loans
Allowance for loan
losses to                43.76   %     33.31   %     43.76   %     33.31   %
non-performing
loans
Allowance for loan
losses to total          2.52    %     2.98    %     2.52    %     2.98    %
loans
Net charge-offs to
average                  2.83    %     3.34    %     3.23    %     2.25    %
outstanding loans
(annualized)
                                                                             
Capital ratios
Tangible
stockholders'            5.21    %     5.87    %     5.21    %     5.87    %
equity to tangible
assets
Average
stockholders'            5.57    %     6.32    %     5.88    %     6.62    %
equity to average
total assets

Forward-looking Statements

This news release contains forward-looking statements within the meaning of
the federal securities laws. Statements in this release that are not strictly
historical are forward-looking and are based upon current expectations that
may differ materially from actual results. These forward-looking statements,
identified by words such as "will," "expected," "believe," and "prospects,"
involve risks and uncertainties that could cause actual results to differ
materially from those anticipated by the statements made herein. These risks
and uncertainties involve general economic trends and changes in interest
rates, increased competition, changes in consumer demand for financial
services, the possibility of unforeseen events affecting the industry
generally, the uncertainties associated with newly developed or acquired
operations, market disruptions and other effects of terrorist activities, and
the possibility that the aforementioned merger with Bond Street does not close
when expected or at all because required regulatory, stockholder or other
approvals and other conditions to closing are not received or satisfied on a
timely basis or at all. The Company undertakes no obligation to release
revisions to these forward-looking statements publicly to reflect events or
circumstances after the date hereof or to reflect the occurrence of unforeseen
events, except as required to be reported under the rules and regulations of
the Securities and Exchange Commission.

Additional Information

This communication does not constitute an offer to sell or the solicitation of
an offer to buy any securities or a solicitation of any vote or approval. This
communication is being made in respect of a proposed business combination
transaction involving Atlantic Coast Financial Corporation and Bond Street
Holdings, Inc. In connection with the proposed transaction, Atlantic Coast
Financial Corporation will file with the Securities and Exchange Commission
(the "SEC") a proxy statement to be distributed to the stockholders of the
Company in connection with their vote on the proposed transaction. BEFORE
MAKING ANY VOTING OR INVESTMENT DECISION REGARDING THE PROPOSED TRANSACTION,
STOCKHOLDERS OF ATLANTIC COAST FINANCIAL CORPORATION ARE URGED TO READ ALL
FILINGS MADE BY THE COMPANY IN CONNECTION WITH THE TRANSACTION, INCLUDING THE
PROXY STATEMENT, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. The final proxy statement will be mailed to
stockholders of Atlantic Coast Financial Corporation. Stockholders may obtain
copies of all documents filed with the SEC regarding this transaction, free of
charge, at the SEC's website (www.sec.gov) and by accessing Atlantic Coast
Financial Corporation's website (www.atlanticcoastbank.net) under the heading
"Investor Relations" and then under the link "SEC Filings." These documents
may also be obtained free of charge from Atlantic Coast Financial Corporation
by requesting them in writing to Atlantic Coast Financial Corporation, 10151
Deerwood Park Blvd., Building 200, Suite 100, Jacksonville, Florida 32256;
Attention: Thomas B. Wagers, Sr., Chief Financial Officer, or by telephone at
(904) 565-8570.

Atlantic Coast Financial Corporation and its directors and executive officers
may be deemed participants in the solicitation of proxies from Atlantic Coast
Financial Corporation's stockholders in connection with this transaction.
Information about the directors and executive officers of Atlantic Coast
Financial Corporation and information about other persons who may be deemed
participants in this transaction will be included in the proxy statement. You
can find information about Atlantic Coast Financial Corporation's executive
officers and directors in Atlantic Coast Financial Corporation's definitive
proxy statement filed with the SEC on April 11, 2012, a copy of which is
available at the SEC's website or from Atlantic Coast Financial Corporation as
described above.

Contact:

Atlantic Coast Financial Corporation
Thomas B. Wagers, Sr., 904-565-8570
Chief Financial Officer
 
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