Expected next dividend:
Dividend Announcement Date: 9/26/2008
Dividend Record Date: 10/10/2008
Dividend Pay Date: 10/27/2008
Dividend Amount: 0.11

Non-performing loans were $22,349,000 or 2.99% of total loans at September 30, 2008, up from $18,323,000 or 2.50% at June30, 2008, and $7,099,000 or 1.05% at September30, 2007. Net charge-offs to average outstanding loans, on an annualized basis, rose to 1.79% in the third quarter of 2008 versus 1.21% in the second quarter of 2008 and -0.17% in the third quarter of 2007 primarily due to net charge-offs of $1,700,000 related to the disposal of $4,400,000 of non-performing residential mortgage loans. Considering the general economy, current real estate market conditions and overall credit quality concerns, management believes non-performing loans and net charge-offs will, at least in the near term, remain at historical elevated levels.

Atlantic Coast Federal Corporation's capital position remained strong at September 30, 2008, with a stockholders' equity to total assets ratio of 8.69%. Additionally, the Company's liquidity levels were at or above both regulatory and internal policy guidelines.

Commenting on the Company's financial results, Robert J. Larison, Jr., President and Chief Executive Officer, said, "during this period of unprecedented economic turmoil, Atlantic Coast Federal Corporation remains proactive in assessing the credit quality of its borrowers, associated collateral values and the effects the changing real estate market has had in order to prudently manage and mitigate ongoing risk within the loan portfolio. Even though we incurred a net loss for the period due to higher credit losses, we were pleased to see continued expansion in our core business during the third quarter, an accomplishment made even more significant considering the weakening economy over the past several months. The progress we have witnessed stems from ongoing growth in our loan portfolio and the focus we have placed on our commercial lending, along with a steady rise in our organic deposit base. We believe both of these areas reflect the inherent strength of our business as we face the near-term challenges of a depressed real estate market."

Based on management's assessment of risk in its portfolio, taking into consideration the disposal of certain non-performing residential mortgage loans and reflecting current known conditions, the Company recorded a provision for loan losses of $3,749,000 for the third quarter of 2008, a slight decrease from $3,930,000 in the second quarter of 2008, but well above the $438,000 recorded in the third quarter last year. For the year-to-date period, the Company's provision for loan losses totaled $9,240,000 versus $1,243,000 for the first nine months of 2007. At September 30, 2008, the Company's allowance for loan losses was 1.15% of total loans, up from 1.11% at June 30, 2008, and 0.86% at September 30, 2007.

For the third quarter of 2008, net interest income increased 4% to $5,930,000 from $5,730,000 in the third quarter last year. This reflected primarily an increase in the average balance of interest-earning assets, largely due to loan growth. The Company's net interest margin for the third quarter of 2008 declined 13 basis points to 2.57% compared with 2.70% for both the second quarter of 2008 and the year-earlier quarter, reflecting the impact on interest income of higher non-performing loan balances, which has more than offset the Company's continued reduction in its funding costs. For the nine months ended September30, 2008, net interest income increased 7% to $17,859,000 from $16,621,000 in the same period last year as net interest margin declined five basis points to 2.62% versus 2.67% for the first nine months of 2007. Due to recent and possible further rate reductions by the Federal Reserve, as well as ongoing intense competition for retail deposits and continuing issues in the credit markets, the Company anticipates further pressure on net interest margin going forward. The Company does not have any equity investments in government sponsored entities FNMA or FHLMC, or any trust preferred securities.

Non-interest income for the third quarter of 2008 rose 100% to $3,032,000 versus $1,514,000 in the prior-year period, primarily reflecting gains on the previously announced sale of the Bank's Fernandina Beach branch, available-for-sale securities, and the extinguishment of FHLB debt. Non-interest income for the first nine months of 2008 increased 71% to $9,220,000 from $5,402,000 in the same period last year, as a result of approximately $2,680,000 in proceeds from bank-owned life insurance as well as the aforementioned third quarter gains.

Non-interest expense for the third quarter of 2008 increased 4% to $5,871,000 from $5,670,000 in the same period last year. Non-interest expense for the first nine months of 2008 increased 8% to $18,953,000 from $17,589,000 in the year-earlier period, reflecting approximately $1,432,000 in unusual compensation expenses related to certain benefit plans.

Total assets increased 4% to $999,983,000 at September 30, 2008, from $963,927,000 at June 30, 2008, and were 9% higher than total assets of $915,748,000 at September 30, 2007. Loans receivable, net totaled $740,175,000 at September 30, 2008, up 2% from $725,917,000 at June 30, 2008, and up 11% from $669,225,000 a year ago. Deposits rose 4% to $605,301,000 at the end of the third quarter of 2008 from $583,743,000 at June 30, 2008, and up 1% from $598,013,000 at September 30, 2007. Total stockholders' equity was $86,936,000 at September 30, 2008, up slightly from stockholders' equity of $86,870,000 at June 30, 2008, and down 4% from $90,793,000 a year ago, with the year-over-year decline reflecting stock repurchases and dividends, as well as the change in other comprehensive income.

During the third quarter, the Company continued to repurchase shares under its existing stock repurchase plan. Repurchases are made from time to time in open-market or negotiated transactions as deemed appropriate by the Company and depending on market conditions.

Atlantic Coast Federal Corporation is the holding company for Atlantic Coast Bank, a federally chartered and insured stock savings association that was organized in 1939 as a credit union to serve the employees of the Atlantic Coast Line Railroad. Today, Atlantic Coast Bank is a community-oriented financial institution serving southeastern Georgia and northeastern Florida through 13 offices, including a focus on the Jacksonville metropolitan area.

Atlantic Coast Federal Corporation completed its initial public stock offering in October 2004. Investors may obtain additional information about Atlantic Coast Federal Corporation on the Internet at www.AtlanticCoastBank.net, under the Investor Information section.

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, and market disruptions and other effects of terrorist activities. 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.

ATLANTIC COAST FEDERAL CORPORATION
Unaudited Financial Highlights
(In thousands, except per share amounts)
                                                            Third Quarter Ended                   Nine Months Ended
                                                            September 30,                         September 30,
                                                                 2008               2007                2008                2007
Interest income                                             $    13,840       $     14,263        $     41,644        $     41,285
Interest expense                                                 7,910              8,533               23,785              24,664
Net interest income                                              5,930              5,730               17,859              16,621
Provision for loan losses                                        3,749              438                 9,240               1,243
Net interest income
after provision for
loan losses                                                      2,181              5,292               8,619               15,378
Non-interest income                                              3,032              1,514               9,220               5,402
Non-interest expense                                             5,871              5,670               18,953              17,589
Income (loss) before
income taxes                                                     (658)              1,136               (1,114)             3,191
Income tax expense (benefit)                                     (329)              347                 (1,519)             982
Net income (loss)                                           $    (329)        $     789           $     405           $     2,209
Net income (loss) per share:                                                                                          $
Basic                                                       $    (0.03)       $     0.06          $     0.03                0.17
Diluted                                                     $    (0.03)       $     0.06          $     0.03          $     0.17
Weighted average shares
outstanding:
Basic                                                            13,124             13,168              13,156              13,164
Diluted                                                          13,203             13,255              13,228              13,286
                                                                              Sept. 30,           Dec. 31,            Sept. 30,
                                                                              2008                2007                2007
Total assets                                                                  $     999,983       $     931,026       $     915,748
Cash and cash equivalents                                                           44,626              29,310              49,903
Securities available for sale                                                       143,043             134,216             133,681
Loans receivable, net (including loans held for sale)                               740,175             704,153             669,225
Total deposits                                                                      605,301             582,730             598,013
Federal Home Loan Bank Advances                                                     207,576             173,000             156,000
Securities sold under agreements to purchase                                        92,800              78,500              63,500
Stockholders' equity                                                                86,936              89,806              90,793

Selected Consolidated Financial Ratios and Other Data (unaudited) for the third quarter and nine months ended September30,2008 and 2007, may be found at the following link: http://www.irinfo.com/acfc/ACFC3Q08tlc.pdf. Investors should refer to the Company's Form 10-Q for the quarter ended September 30, 2008, for additional information and disclosures; the Form 10-Q will be available at the Investor Information section of the Company's website immediately upon filing with the Securities and Exchange Commission.

SOURCE: Atlantic Coast Federal Corporation

Corporate Communications, Inc. 
Patrick J. Watson, 615-254-3376

Expected next dividend:
Dividend Announcement Date: 6/27/2008
Dividend Record Date: 7/11/2008
Dividend Pay Date: 7/28/2008
Dividend Amount: 0.15

Expected next dividend:
Dividend Announcement Date: 7/24/2008
Dividend Record Date: 8/7/2008
Dividend Pay Date: 8/21/2008
Dividend Amount: 0.06