Atlantic Coast Financial Corporation to Merge with Bond Street Holdings

Atlantic Coast Financial Corporation

, the holding company for Atlantic Coast Bank (the "Bank"), today announced a strategic transaction that will achieve immediate enhanced value for all stockholders with respect to the present value of their investment, as well as a financially strong banking platform, and a competitive community banking organization that is well positioned to meet the needs of its customers and communities for the long term. Specifically, the Company has 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 that operates 41 community banking branches along both Florida coasts and in the Orlando area. Upon completion of that transaction, Atlantic Coast Bank will merge into Florida Community Bank, N.A., Bond Street's banking subsidiary. As a result of this strategic merger agreement, the Company's 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 the Company's 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 and will be available to cover losses from 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. G. Thomas Frankland, President and Chief Executive Officer of the Company, said, "This transaction is a win for our stockholders, a win for our customers and a win for our banking franchise. This strategic business combination significantly enhances our combined abilities to be one of the financially strongest and most competitive community banking organizations in the northeast Florida and southeast Georgia markets. This transaction is an important and meaningful opportunity for our stockholders, our customers and our communities. The keys to community banking going forward are the resources that an organization can dedicate to build its customer market potential, the soundness of the capital and operating capabilities of its platform, and its expertise about its markets and products to meet the financial services needs of its customers. We are confident that this merger is a highly attractive strategic alignment. Its completion will fulfill as well the capital mandate we have received from our regulators." The Company stated that its Board of Directors and the Strategic Alternatives Committee of the Board, with the assistance of the Committee's independent financial advisor, Stifel, Nicolaus & Company, Incorporated, an affiliate of Keefe, Bruyette & Woods, Inc., (a Stifel Financial Corp Company), have considered various strategic alternatives for more than a year, including a recapitalization in the form of a rights offering as well as an outright merger transaction. In evaluating its options, the Committee and the Board considered the relative risks involved with the alternatives, along with the Company's goal of maximizing the return to stockholders. These risks include the prospects of approval by regulators for successful completion of other alternatives, the effectiveness of each option in gaining full compliance with the Consent Order issued by the Office of the Comptroller of the Currency under which the Bank currently operates, the Bank's continued exposure to credit, market, economic, and interest rate risks, as well as ongoing earnings pressure from the Company's asset quality and wholesale debt. Considering all these factors, the Board of Directors voted to proceed with the merger alternative, determining that it will provide stockholders with an enhanced return given market and business conditions, remove the prospects of future dilution to stockholders, and eliminate the operational and regulatory risks associated with a recapitalization. "We are excited by the prospects of growing our bank platform with the addition of Atlantic Coast Bank and the opportunities we foresee as we move together to expand in the Jacksonville area as well as the Southeast Georgia markets," added Kent Ellert, President and Chief Executive Officer of Florida Community Bank. "This acquisition will enhance our Florida footprint significantly by giving us attractive visibility in the state's fourth largest metro area and will provide a substantial foundation for us to build a commercial lending team to spur future growth – precisely as we have done with the eight successful acquisitions we have previously completed. We look forward to having Atlantic Coast Bank on our team, building on its tradition and many great qualities, and together creating an even stronger community bank for customers." When the transaction is completed, Florida Community Bank will become the fourth largest bank headquartered in Florida, with almost $4 billion in assets and 53 locations along both Florida coasts and in Southeast Georgia.