UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 1, 2007
ATLANTIC COAST FEDERAL CORPORATION
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(Exact name of Registrant as specified in its charter)
Federal 000-50962 59-3764686
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(State or Other (Commission (I.R.S. Employer
Jurisdiction File Number) Identification No.)
of Incorporation)
505 Haines Avenue, Waycross, Georgia 31501
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(Address of principal executive offices)
(800) 342-2824
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Registrant's telephone number, including area code
Not Applicable
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(Former Name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
Attached as Exhibit 99.1 and made a part of this item is a press
release dated June 7, 2007 that announces information relating to the
restatement of certain financial statements due to a change in accounting for
certain interest rate swaps accounted for as cash flow hedges.
ITEM 4.02 NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED
AUDIT REPORT OR COMPLETED INTERIM REVIEW.
(a) On June 1, 2007, management and the Audit Committee of the Board of
Directors of Atlantic Coast Federal Corporation (the "Company") determined that
the financial statements for the years ended December 31, 2006, 2005 and 2004
included in the Company's Annual Reports on Form 10-K, as well as the interim
financial statements for the first quarter of 2007, and the first, second and
third quarters of 2006, 2005 and 2004, included in Quarterly Reports on Form
10-Q, should no longer be relied upon as a result of a change in the accounting
treatment applied retroactively by the Company in connection with certain
interest rate swaps that were accounted for as cash flow hedges.
During 2004, the Company entered into two interest rate swap
agreements with notional amounts totaling $15 million, of which $10 million
remained in effect as of December 31, 2006, to hedge the variability in expected
future cash flows on certain floating-rate Federal Home Loan Bank ("FHLB")
advances. At inception, the critical terms of these swaps were viewed as
matching the critical terms of the hedged FHLB advances and, as a result, it was
determined that changes in cash flows were expected to completely offset at
inception and on an ongoing basis as provided under Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS 133"). Therefore, the interest rate swap agreements were
deemed to be effective cash flow hedges during the first quarter of 2007, and
the years 2006, 2005 and 2004, consistent with SFAS 133. During the reporting
periods between 2004 and 2007, the Company's independent registered public
accounting firm, Crowe Chizek and Company LLC, did not disagree with the
accounting treatment of the interest rate swaps as part of their year-end audit
or review of the Company's interim financial statements.
In conjunction with the preparation of the Company's prospectus
associated with the conversion and stock offering announced on May 7, 2007, and
based on discussions with Crowe Chizek and Company LLC, the Company has now
determined that although these swaps were economically effective, the initial
assessment of matching critical terms for the interest rate swaps and the
corresponding hedged FHLB advances was incorrect. In each circumstance, the
interest rate swap contained an embedded written option that allowed the
counterparty to terminate the interest rate swap under certain conditions, while
the FHLB advance did not contain such matching terms. The Company did have the
option to prepay the FHLB advances, however, it was not a contractual
requirement. Since the interest rate swaps and the FHLB advances did not have
absolute parity and the critical terms of the instruments did not completely
match, the Company and its Audit Committee have concluded that the swap
transactions did not qualify as cash flow hedges and, therefore, any
fluctuations in the market value of the interest rate swaps, including any
accrued interest, should have been included in other non-interest income
resulting in quarterly and annual mark-to-market adjustments. As originally
recorded, fluctuations in the fair value of the interest rate swaps were
recorded in other comprehensive income, with accrued interest recorded as a
reduction of interest expense on FHLB advances. There is no effect on cash flows
or stockholders' equity from these revisions.
The restated financial statements, when filed, for all affected
periods through March 31, 2007, will reflect a cumulative increase in net income
over the three-year period of approximately $422,000 (net of income taxes) to
account for the swap transactions associated with FHLB advances as if cash flow
hedge accounting under SFAS 133 was never applied. The Company intends to file
an amended Annual Report on Form 10-K/A for the year ended December 31, 2006, an
amended Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2007, to
reflect the accounting adjustments described herein.
Management and the Audit Committee have discussed with Crowe Chizek and
Company LLC, the Company's independent registered public accounting firm, the
matters disclosed in this Form 8-K pursuant to this Item 4.02(a).
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
99.1 Press Release dated June 7, 2007
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ATLANTIC COAST FEDERAL CORPORATION
Date: June 7, 2007 By: /s/ Robert J. Larison, Jr.
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Robert J. Larison, Jr.
President and Chief
Executive Officer
(Duly Authorized
Representative)
EXHIBIT INDEX
Exhibit
Number Description of Exhibit(s)
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99.1 Copy of press release issued by the Company on June 7, 2007.