UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20529
--------------------------------------------------------------------------------


                                   FORM 10-QSB


MARK ONE
--------

   [X]          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

   [ ]             TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                               OF THE EXCHANGE ACT

                            FOR THE TRANSITION PERIOD
                       FROM _____________ TO _____________

                        COMMISSION FILE NUMBER 000-50771

                            BG FINANCIAL GROUP, INC.
            --------------------------------------------------------
               (Exact Name of Registrant as Specified in Charter)


            Tennessee                                         20-0307691
--------------------------------------------------------------------------------
   (State or Other Jurisdiction of                         (I.R.S. Employer
   Incorporation or Organization)                        Identification Number)

3095 East Andrew Johnson Highway, Greeneville, Tennessee          37745
--------------------------------------------------------------------------------
       (Address of Principal Executive Offices)                 (Zip Code)

Registrant's telephone number, including area code:      (423) 636-1555
                                                    ----------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
                                 YES [X] NO [ ]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

     Common Stock, $1.00 par value, outstanding: 2,306,775 at November 1, 2004

Traditional Small Business Disclosure Format (check one):
                                 YES [ ] NO [X]


                                        1

<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements.

           The unaudited consolidated financial statements of the Registrant are
           as follows:

           Consolidated  Balance  Sheets - September  30, 2004 and  December 31,
           2003.

           Consolidated  Statements  of  Income  - For  the  nine  months  ended
           September 30, 2004 and 2003.

           Consolidated  Statements  of  Income -  For  the  three  months ended
           September 30, 2004 and 2003.

           Consolidated  Statements  of Cash Flows - For the nine  months  ended
           September 30, 2004 and 2003.

Item 2.    Management's Discussion and Analysis or Plan of Operation.

Item 3.    Controls and Procedures.



                           PART II - OTHER INFORMATION

Item 1.    Legal Proceedings.

Item 2.    Changes in Securities  and Small Business Issuer  Purchases of Equity
           Securities.

Item 3.    Defaults Upon Senior Securities.

Item 4.    Submission of Matters to a Vote of Security Holders.

Item 5.    Other Information.

Item 6.    Exhibits and Reports on Form 8-K.


                                       2

<PAGE>


                          Part I. FINANCIAL INFORMATION

Item 1.  Financial Statements

                     BG FINANCIAL GROUP, INC. AND SUBSIDIARY
                             Greeneville, Tennessee
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<S>                                                 <C>                           <C>

                                                               As of                        As of
                                                        September 30, 2004            December 31, 2003
                                                    --------------------------    ------------------------
                  ASSETS

Cash and due from banks                                       $ 5,439,752                $ 5,054,515
Investment securities:
  Available for sale                                              224,200                    171,700
Federal funds sold                                              5,734,275                  7,244,455
Loans, net of allowance for loan losses                        74,651,524                 68,539,235
Bank premises and equipment, net                                3,847,142                  2,763,153
Accrued income receivable                                         368,985                    387,258
Deferred tax benefit                                              589,701                    603,177
Foreclosed assets                                                 428,469                    184,127
Other assets                                                       48,757                    127,530
                                                              -----------                -----------
                                                              $91,332,805                $85,075,150
                                                              ===========                ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
  Deposits:
      Demand                                                  $17,387,175                $14,547,268
      Savings                                                   4,693,350                  3,486,770
      Time, $100,000 and over                                   9,180,607                 11,637,050
      Other time                                               47,640,814                 43,790,678
                                                               ----------                 ----------
                                                               78,901,946                 73,461,766
  Short-term note payable                                          49,000                          -
  Accrued interest and other liabilities                          451,582                    151,991
  Federal Home Loan Bank - advances                             4,403,568                  4,254,106
                                                               ----------                 ----------
                                                               83,806,096                 77,867,863
                                                               ----------                 ----------

COMMITMENTS AND CONTINGENCIES                                           -                          -

STOCKHOLDERS' EQUITY
  Stock:
    Preferred stock, no par value; authorized 1,000,000
      shares; none issued                                               -                          -
    Common stock, $.333 par value; authorized
       6,000,000 shares; issued and outstanding
       2,305,975 shares at September 30, 2004 and
       2,295,775 shares at December 31, 2003                      768,658                    765,258
  Surplus                                                       6,556,432                  6,887,325
  Retained earnings                                               201,619                   (445,296)
                                                               ----------                 ----------
                                                                7,526,709                  7,207,287
                                                               ----------                 ----------
                                                              $91,332,805                $85,075,150
                                                               ==========                 ==========

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       3

<PAGE>


                     BG FINANCIAL GROUP, INC. AND SUBSIDIARY
                             Greeneville, Tennessee
                        CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<S>                                                 <C>                           <C>
                                                                   Nine Months Ended
                                                                   -----------------
                                                    September 30, 2004            September 30, 2003
                                                    ------------------            ------------------

Interest income:
  Interest and fees on loans                               $3,689,565                    $2,955,867
  Interest on investment securities:
     Interest on federal funds sold                            54,661                        55,797
     Other                                                     21,489                        18,902
                                                            ---------                     ---------
                                                            3,765,715                     3,030,566

Interest expense:
  Interest on deposits                                        942,155                       778,759
  Interest on borrowed funds                                  109,606                        92,432
                                                            ---------                     ---------

                Net interest income                         2,713,954                     2,159,378

Provision for possible loan losses                            529,001                       322,918
                                                            ---------                     ---------
                Net interest income after provision
                for possible loan losses                    2,184,953                     1,836,460
                                                            ---------                     ---------

Other income:
  Fees and service charges                                    194,588                       201,238
  Secondary market mortgage loan fees                         101,905                       121,232
  Other                                                        12,447                        45,060
  Commissions                                                  74,806                        53,088
                                                            ---------                     ---------
                                                              383,746                       420,618
                                                            ---------                     ---------

Other expenses:
  Salaries and wages                                          964,165                       763,220
  Employee benefits                                           122,615                       120,562
  Occupancy expenses                                           93,415                        65,266
  Equipment rentals, depreciation and maintenance             182,084                       157,979
  Other operating expenses                                    837,792                       559,584
                                                            ---------                     ---------
                                                            2,200,071                     1,666,611
                                                            ---------                     ---------
                Income before income taxes                    368,628                       590,467
                                                            ---------                     ---------

Federal and state income taxes                                142,026                       195,156
Deferred tax expense (benefit)                                 19,985                        23,298
                                                            ---------                     ---------

                Net income (loss)                          $  206,617                    $  372,013
                                                            =========                     =========

Earnings per share                                         $      .09                    $      .16
                                                            =========                     =========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                       4

<PAGE>


                     BG FINANCIAL GROUP, INC. AND SUBSIDIARY
                             Greeneville, Tennessee
                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<S>                                                 <C>                           <C>

                                                                   Three Months Ended
                                                                   ------------------
                                                    September 30, 2004            September 30, 2003
                                                    ------------------            ------------------

Interest income:
  Interest and fees on loans                                $1,366,899              $ 1,115,705
  Interest on investment securities:
     Interest on federal funds sold                             43,722                   13,013
     Other                                                      (9,838)                  11,896
                                                             ---------                ---------
                                                             1,400,783                1,140,614

Interest expense:
  Interest on deposits                                         362,903                  272,734
  Interest on borrowed funds                                    36,837                   34,482
                                                             ---------                ---------

                Net interest income                          1,001,043                  833,398

Provision for possible loan losses                             483,513                  105,075
                                                             ---------                ---------
                Net interest income after provision
                for possible loan losses                       517,530                  728,323
                                                             ---------                ---------

Other income:
  Fees and service charges                                      66,961                   71,891
  Secondary market mortgage loan fees                           30,951                   39,917
  Other                                                          1,707                    8,335
  Commissions                                                   23,235                   18,588
                                                             ---------                ---------
                                                               122,854                  138,731
                                                             ---------                ---------

Other expenses:
  Salaries and wages                                           423,333                  261,078
  Employee benefits                                             58,612                   48,798
  Occupancy expenses                                            40,363                   25,248
  Equipment rentals, depreciation and maintenance               70,303                   56,679
  Other operating expenses                                     377,120                  174,279
                                                             ---------                ---------
                                                               969,731                  566,082
                                                             ---------                ---------
         Income (loss) before income taxes                    (329,347)                 300,972

Federal and state income taxes                                (130,453)                  99,720
Deferred tax expense (benefit)                                  24,513                   18,000
                                                             ---------                ---------

                Net income (loss)                           $ (223,407)               $ 183,252
                                                             ==========                ========

Earnings per share                                          $     (.10)               $     .08
                                                             =========                 ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       5

<PAGE>


                     BG FINANCIAL GROUP, INC. AND SUBSIDIARY
                             Greeneville, Tennessee
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<S>                                                 <C>                           <C>

                                                                    Nine Months Ended
                                                                    -----------------
                                                    September 30, 2004            September 30, 2003
                                                    ------------------            ------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss)                                    $     206,617                 $     372,013
    Adjustments to reconcile net income (loss) to
      net cash provided by operating activities:
       Depreciation                                            160,263                       147,078
       Provision for possible loan losses                      529,001                       322,918
       Gain on sale of automobile                                    -                        (8,470)
    Change in operating assets and liabilities:
       Accrued income receivable                                81,559                      (103,707)
       Other assets                                            (27,832)                      (11,054)
       Deferred tax benefit                                     14,400                        41,875
       Accrued interest and other liabilities                  289,455                      (124,076)
                                                           -----------                   -----------
           Net cash provided by operating activities         1,253,463                       636,577
                                                           -----------                   -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Net change in federal funds sold                           (28,415)                     (148,333)
    Loan originations and principal collections, net        (4,643,320)                  (20,066,003)
    Net change in foreclosed assets                           (316,775)                     (130,603)
    Purchases of premises and equipment                     (1,147,394)                      (32,500)
    Purchase of investment securities available for sale       (52,500)                       14,000
                                                           -----------                   -----------
           Net cash used by investing activities            (6,188,404)                  (20,363,439)
                                                           -----------                   -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net increase (decrease) in non-interest bearing deposits   162,191                     1,992,699
    Net increase (decrease) in interest bearing deposits     4,499,472                    20,710,778
    Issuance of stock                                           34,000                        35,800
    Proceeds from short-term borrowing                          41,000                             -
    Net Federal Home Loan Bank advances                        162,616                     1,499,207
                                                           -----------                   -----------
           Net cash provided by financing activities         4,899,279                    24,238,484
                                                           -----------                   -----------

           Increase (decrease) in cash and due from
           banks                                               (35,662)                    4,511,622

Cash and due from banks:
  Beginning                                                  5,475,414                     1,713,248
                                                           -----------                   -----------
  Ending                                                   $ 5,439,752                  $  6,224,870
                                                            ==========                    ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for:
    Interest paid on deposits and borrowed funds           $ 1,018,072                  $   962,785
                                                            ==========                   ==========
    Income taxes paid                                      $    41,821                  $   200,020
                                                            ==========                   ==========

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       6

<PAGE>


                     BG FINANCIAL GROUP, INC. AND SUBSIDIARY
                             Greeneville, Tennessee
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 1.  Summary of Significant Accounting Policies

         Nature of Business:

         BG Financial  Group,  Inc. (the  "Company")  is a bank holding  company
         whose  business is conducted by its  wholly-owned  subsidiary,  Bank of
         Greeneville.  Bank of Greeneville is primarily  engaged in the business
         of obtaining  deposits and originating loans within its primary lending
         area, Greeneville and Greene County in Tennessee. This became effective
         on January 23, 2004 due to the result of a Plan of Share  Exchange (the
         "Share Exchange")  between the Company and Bank of Greeneville  whereby
         the  common  shares  of  Bank  of  Greeneville  were  exchanged,  on  a
         one-for-one  basis,  for common shares of the Company.  The shares were
         exchanged with no additional  consideration  being  exchanged with this
         transaction. This transaction has been accounted for under the purchase
         method for business  combinations,  Statement  of Financial  Accounting
         Standards  No.  141.  The fair  value  for the  acquisition  of Bank of
         Greeneville  by the Company was  determined to be the stated value with
         no goodwill  acquired in the one-for-one  stock  exchange.  The Company
         currently has no  operations  and conducts no business on its own other
         than owning Bank of Greeneville.  Based on the foregoing, the unaudited
         financial  statements  included  herein that are for  periods  prior to
         January 23, 2004 are those of Bank of Greeneville only.

         Due to the effective date of the Share Exchange,  the first  twenty-two
         (22)  days of Bank of  Greeneville's  year  was  consolidated  into the
         Company's  equity.  Thus,  the results of operations for these days are
         not included in the nine months ended  September  30, 2004  financials.
         Therefore,  for  comparability  purposes,  Note 2 includes  comparative
         financials for the wholly-owned subsidiary Bank of Greeneville.

         The following is a description of the significant  accounting  policies
         used in the  preparation  of the  accompanying  consolidated  financial
         statements.

         Basis of Presentation:

         These consolidated  financial statements include the accounts of the BG
         Financial  Group,  Inc.  Significant   intercompany   transactions  and
         accounts are eliminated in consolidation.

         The accompanying unaudited consolidated financial  statements have been
         prepared in accordance  with  accounting  principles generally accepted
         in the United States for interim  financial  information  and with  the
         instructions to Form 10-QSB. Accordingly,  they do  not include all the
         information and footnotes required by accounting  principles  generally
         accepted in the United States for complete financial statements. In the
         opinion of management,  all adjustments (none of which were  other than
         normal recurring accruals) considered necessary for a fair presentation
         of the financial  position and  results of  operations for the  periods
         presented  have been included.  Operating  results for the  nine months
         ended September 30, 2004 are not necessarily  indicative of the results
         that  may  be  expected  for the year  ending  December 31,  2004.  For
         further   information,  refer  to   Bank  of  Greeneville's   financial
         statements and footnotes thereto included in Bank of Greenville's  Form

                                       7
<PAGE>


Note 1.  Summary of Significant Accounting Policies (Continued)

         10-KSB for the  year ended December 31, 2003 as filed  with the Federal
         Deposit Insurance Corporation.

         Use of Estimates:

         The preparation  of financial statements in conformity with  accounting
         principles generally accepted  in the United States requires management
         to make estimates and assumptions that  affect the reported  amounts of
         assets  and  liabilities  and  disclosures  of  contingent  assets  and
         liabilities  as of the balance sheet  date and the reported  amounts of
         revenues and expenses during the reporting period. Actual results could
         differ from those estimates.  The Company's most significant management
         accounting estimate is the appropriate level for the allowance for loan
         losses. The allowance for loan losses is evaluated on a  regular  basis
         by management  and is based  upon management's  periodic  review of the
         collectibility of  the loans in  light of  historical  experience,  the
         nature and volume of the  loan portfolio,  adverse  situations that may
         affect  the  borrower's  ability  to  repay,  estimated  value  of  any
         underlying   collateral  and   prevailing  economic   conditions.  This
         evaluation is inherently subjective as it requires  estimates  that are
         susceptible  to  significant  revision  as  more  information   becomes
         available.

Note 2.  Subsidiary Bank Only Financial Information

         For  purposes of providing  subsidiary  only  comparability,  financial
         information of Bank of  Greeneville for the full nine months, including
         the first twenty-two (22) days of operations before the Share Exchange,
         are as follows:

         Balance Sheets
<TABLE>
<S>                                                 <C>                           <C>

                                                              As of                        As of
                                                        September 30, 2004           December 31, 2003
                                                    --------------------------    ------------------------
                      ASSETS

         Cash and due from banks                            $ 5,439,752                $ 5,054,515
         Investment securities:
            Available for sale                                  224,200                    171,700
         Federal funds sold                                   5,734,275                  7,244,455
         Loans, net of allowance for loan losses             74,651,524                 68,539,235
         Bank premises and equipment, net                     3,846,727                  2,763,153
         Accrued income receivable                              368,985                    387,258
         Deferred tax benefit                                   583,477                    603,177
         Foreclosed assets                                      428,469                    184,127
         Other assets                                            48,757                    127,530
                                                             ----------                 ----------
                                                            $91,326,166                $85,075,150
                                                             ==========                 ==========

</TABLE>
                                       8

<PAGE>


Note 2.  Subsidiary Bank Only Financial Information (Continued)
<TABLE>
<S>                                                                  <C>                           <C>


         LIABILITIES AND STOCKHOLDERS' EQUITY

         LIABILITIES
            Deposits:
                Demand                                                      $17,419,483                $14,547,268
                Savings                                                       4,693,350                  3,486,770
                Time, $100,000 and over                                       9,180,607                 11,637,050
                Other time                                                   47,640,814                 43,790,678
                                                                             ----------                 ----------
                                                                             78,934,254                 73,461,766
            Accrued interest and other liabilities                              513,298                    151,991
            Federal Home Loan Bank - advances                                 4,403,568                  4,254,106
                                                                             ----------                -----------
                                                                             83,851,120                 77,867,863
                                                                             ----------                -----------

         COMMITMENTS AND CONTINGENCIES                                                -                          -

         STOCKHOLDERS' EQUITY
            Stock:
                Preferred stock, no par value; authorized
                    1,000,000 shares; none issued                                     -                          -
                Common stock, $.333 par value; authorized
                    6,000,000 shares; issued and outstanding
                    2,295,775 shares at September 30, 2004
                    and 2,295,775 shares at December 31, 2003                   765,258                    765,258
            Surplus                                                           6,838,325                  6,887,325
            Retained earnings                                                  (128,537)                  (445,296)
                                                                             ----------                -----------
                                                                              7,475,046                  7,207,287
                                                                             ----------                -----------
                                                                            $91,326,166                $85,075,150
                                                                             ==========                 ==========

         Statements of Income
                                                                                     Nine Months Ended
                                                                                     -----------------
                                                                     September 30, 2004            September 30, 2003
                                                                     ------------------            ------------------

         Interest income:
            Interest and fees on loans                                       $4,009,382                  $2,955,867
            Interest on investment securities:
               Interest on federal funds sold                                    58,063                      55,797
               Other                                                             25,738                      18,902
                                                                              ---------                   ---------
                                                                              4,093,183                   3,030,566

         Interest expense:
            Interest on deposits                                              1,029,821                     778,756
            Interest on borrowed funds                                          108,725                      92,432
                                                                              ---------                   ---------

                          Net interest income                                 2,954,637                   2,159,378
</TABLE>

                                       9

<PAGE>

<TABLE>
<S>                                                                  <C>                           <C>

Note 2.  Subsidiary Bank Only Financial Information (Continued)

          Provision for possible loan losses                                    554,112                     322,918
                                                                              ---------                   ---------
                          Net interest income after provision
                          for possible loan losses                            2,400,525                   1,836,460
                                                                              ---------                   ---------

          Other income:
            Fees and service charges                                            213,498                     201,238
            Secondary market mortgage loan fees                                 104,798                     121,232
            Other                                                                19,203                      45,060
            Commissions                                                          81,378                      53,088
                                                                              ---------                   ---------
                                                                                418,877                     420,618
                                                                              ---------                   ---------

          Other expenses:
            Salaries and wages                                                1,034,606                     763,220
            Employee benefits                                                   136,022                     120,562
            Occupancy expenses                                                   98,452                      65,266
            Equipment rentals, depreciation and maintenance                     195,253                     157,979
            Other operating expenses                                            829,228                     559,584
                                                                              ---------                   ---------
                                                                              2,293,561                   1,666,611
                                                                              ---------                   ---------
                          Income before income taxes                            525,841                     590,467

            Federal and state income taxes                                      189,382                     195,156
            Deferred tax expense (benefit)                                       19,700                      23,298
                                                                              ---------                   ---------

                          Net income (loss)                                  $  316,759                  $  372,013
                                                                              =========                   =========

            Earnings per share                                               $      .14                  $      .16
                                                                              =========                   =========

          Statements of Cash Flows
                                                                                     Nine Months Ended
                                                                                     -----------------
                                                                     September 30, 2004            September 30, 2003
                                                                     ------------------            ------------------

            CASH FLOWS FROM OPERATING ACTIVITIES:
                Net income (loss)                                      $    316,759                 $   372,013
                Adjustments to reconcile net income (loss)
                   to net cash provided by operating activities:
                     Depreciation                                           177,768                     147,078
                     Provision for possible loan losses                     554,112                     322,918
                     Gain on sale of automobile                                   -                      (8,470)
                Change in operating assets and liabilities:
                     Accrued income receivable                               18,273                    (103,707)
                     Other assets                                            78,773                     (11,054)
                     Deferred tax benefit                                    19,700                      41,875
                     Accrued interest and other liabilities                 312,306                    (124,076)
                                                                          ---------                  ----------
                                Net cash provided by
                                operating activities                      1,477,691                     636,577
                                                                          ---------                  ----------
</TABLE>

                                       10

<PAGE>


Note 2.  Subsidiary Bank Only Financial Information (Continued)
<TABLE>
<S>                                                                  <C>                           <C>
            CASH FLOWS FROM INVESTING ACTIVITIES:
                Net change in federal funds sold                          1,510,180                    (148,333)
                Loan originations and principal collections, net         (6,666,401)                (20,066,003)
                Net change in foreclosed assets                            (244,342)                   (130,603)
                Purchases of premises and equipment                      (1,261,342)                    (32,500)
                Purchase of investment securities available for sale        (52,500)                     14,000
                                                                        -----------                  -----------
                                Net cash used by investing
                                activities                               (6,714,405)                (20,363,439)
                                                                        -----------                  ----------

            CASH FLOWS FROM FINANCING ACTIVITIES:
                Net increase (decrease) in non-interest
                  bearing deposits                                          484,572                   1,992,699


                Net increase (decrease) in interest bearing deposits      4,987,917                  20,710,778
                Issuance of stock                                                 -                      35,800
                Net Federal Home Loan Bank advances                         149,462                   1,499,207
                                                                         ----------                 -----------
                                Net cash provided by financing
                                activities                                5,621,951                  24,238,484
                                                                         ----------                  ----------

                                Increase (decrease) in cash and
                                due from banks                              385,237                    4,511,622

            Cash and due from banks:
              Beginning                                                   5,054,515                    1,713,248
                                                                          ---------                    ---------
              Ending                                                    $ 5,439,752                  $ 6,224,870
                                                                         ==========                   ==========

            SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
            Cash payments for:
              Interest paid on deposits and borrowed funds              $ 1,009,899                  $   962,785
                                                                         ==========                   ==========
              Income taxes paid                                         $    49,781                  $   200,020
                                                                         ==========                   ==========
</TABLE>

Note 3.  Stock Options and Awards

         In  December  2002,  the FASB  issued  SFAS No.  148,  "Accounting  for
         Stock-Based  Compensation - Transition and Disclosure,  an amendment of
         FASB  Statement  No. 123." This  Statement  amends  Statement  No. 123,
         Accounting for Stock-Based Compensation, to provide alternative methods
         of  transition  for a  voluntary  change  to the fair  value  method of
         accounting for stock-based  employee  compensation.  In addition,  this
         Statement  amends the disclosure  requirements  of Statement No. 123 to
         require  prominent  disclosures  in both annual and  interim  financial
         statements.  Certain of the disclosure  modifications  are required for
         fiscal years ending after December 15, 2003 and are included below.


                                       11

<PAGE>


         The  Company  applies APB  Opinion 25 and  related  interpretations  in
         accounting  for the stock option plan. All option grants carry exercise
         prices equal to or above the fair value of the common stock on the date
         of the grant.  Accordingly,  no compensation  cost has been recognized.
         The following  table  illustrates the effect on net income and earnings
         per  share  if the  Company  had  applied  the fair  value  recognition
         provisions of SFAS No. 123 to stock-based employee compensation.

<TABLE>
<S>                                                     <C>                              <C>


                                                             Three-Month Period               Nine-Month Period
                                                             Ended September 30              Ended September 30
                                                        -----------------------------    ---------------------------
                                                            2004            2003            2004            2003
                                                            ----            ----            ----            ----

         Net income (loss), as reported                 $(223,407)        $183,252        $206,617        $372,013

         Deduct:  Total stock-based employee
          compensation expense determined
          under fair value based method for all
          awards, net of related tax effects               15,300           15,100          45,900          45,300
                                                         --------         --------        --------        --------

         Pro forma net income (loss)                    $(238,707)        $168,152        $160,717        $326,713
                                                         ========          =======         =======         =======

         Earnings per share
         Basic - as reported                            $    (.10)        $    .08        $    .09        $    .16
                                                         ========          =======         =======         =======

         Basic - pro forma                              $    (.10)        $    .07        $    .07        $    .14
                                                         ========          =======         =======         =======

         Diluted - as reported                          $    (.09)        $    .08        $    .09        $    .16
                                                         ========          =======         =======         =======

         Diluted - pro forma                            $    (.10)        $    .07        $    .07        $    .14
                                                         ========          =======         =======         =======
</TABLE>


Note 4.  Cash Dividends

         On September 14, 2004, Bank  of Greeneville declared a $49,000 dividend
         to the bank's holding company,  BG Financial Group, Inc., to be paid on
         October 1, 2004.  The purpose  of the  dividend is to allow the holding
         company to pay for expenses it  incurred during its  organization.  The
         dividend was  approved by  the Federal  Deposit  Insurance  Corporation
         ("FDIC") and the Tennessee Department of Financial Institutions.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results

Forward-Looking Statements

     Management's  discussion  of the Company and  management's  analysis of the
Company's   operations   and   prospects,   and  other   matters,   may  include
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform  Act of 1995  and  other  provisions  of  federal  and  state
securities laws.  Although the Company believes that the assumptions  underlying
such forward-looking  statements contained in this Report are reasonable, any of
the assumptions could be inaccurate and, accordingly,  there can be no assurance
that the  forward-looking  statements included herein will prove to be accurate.
The use of such words as  "expect,"  "anticipate,"  "forecast,"  and  comparable
terms  should be  understood  by the reader to indicate  that the  statement  is
"forward-looking"   and  thus  subject  to  change  in  a  manner  that  can  be
unpredictable.  Factors  that  could  cause  actual  results to differ  from the

                                       12

<PAGE>


results  anticipated,  but not  guaranteed,  in this  Report,  include  (without
limitation)  economic and social conditions,  competition for loans,  mortgages,
and other financial services and products, changes in interest rates, unforeseen
changes in liquidity,  results of operations, and financial conditions affecting
the Company's customers, and other risks that cannot be accurately quantified or
completely identified.  Many factors affecting the Company's financial condition
and profitability,  including changes in economic conditions,  the volatility of
interest  rates,  political  events  and  competition  from other  providers  of
financial  services  simply  cannot be  predicted.  Because  these  factors  are
unpredictable  and beyond the Company's  control,  earnings may  fluctuate  from
period to period.  The purpose of this type of information is to provide readers
with information relevant to understanding and assessing the financial condition
and results of  operations  of the Company,  and not to predict the future or to
guarantee results.  The Company is unable to predict the types of circumstances,
conditions and factors that can cause anticipated results to change. The Company
undertakes  no  obligation  to publish  revised  forward-looking  statements  to
reflect the  occurrence of changed or  unanticipated  events,  circumstances  or
results.

General

     On January 23, 2004, BG Financial Group, Inc.  ("Company"),  a bank holding
company,  acquired all of the outstanding shares of Bank of Greeneville ("Bank")
in a one for one stock  exchange.  The Bank is a  Tennessee-chartered,  insured,
non-Member commercial bank offering a wide range of banking services,  including
checking,  savings,  and money market deposit accounts,  certificates of deposit
and  loans  for  consumers,  commercial  and real  estate  purposes,  and is the
principal business of the Company.  The Company and the Bank are located at 3095
East Andrew Johnson Highway, Greeneville, Tennessee 37745.

     Management's  discussion and analysis of financial condition and results of
operations are based on Bank only statements for the three and nine months ended
September 30, 2003, whereas, the three and nine months ended September 30, 2004,
are based on the consolidated statements of the Company and the Bank.

Liquidity

     At September 30, 2004,  Company of  Greeneville  had liquid assets of $11.4
million in the form of cash and federal  funds sold compared to $12.0 million on
September,  2003.  Management  believes  that the liquid  assets are adequate at
September  30,  2004.  Additional  liquidity  will be  provided by the growth in
deposit  accounts  and loan  repayments.  The  Company  also has the  ability to
purchase  federal  funds  and is a  member  of the  Federal  Home  Loan  Bank of
Cincinnati that will provide a credit line if necessary. Management is not aware
of any trends,  events or  uncertainties  that are  reasonably  likely to have a
material impact on the Company's short term or long term liquidity.

Results of Operations

     The  Company  had a net loss of  $223,407 or $.10 per share for the quarter
ended  September  30, 2004  compared to net income of $183,252 or $.08 per share
for the same period in 2003. Net income for the nine months ended  September 30,
2004 was $206,617 as compared to a net income of $372,013 for the same period in
2003.

                                       13

<PAGE>


Net Interest Income/Margin

     Net  interest  income  represents  the amount by which  interest  earned on
various  assets  exceeds  interest  paid on deposits and other  interest-bearing
liabilities and is the most significant component of the Company's earnings. Net
interest income for the quarter ended September 30, 2004 was $1,001,043 compared
to $833,398 for the same period in 2003

     Net  interest  income for the nine  months  ended  September  30,  2004 was
$2,713,954,  compared to $2,159,378  for the same period in 2003. All categories
of interest income and expense  increased  dramatically from 2003 to 2004 due to
the rapid growth of the Company in both loans and deposits.

Provision for Possible Loan Losses

     The provision for loan losses  represents a charge to operations  necessary
to establish  an allowance  for  possible  loan  losses,  which in  management's
evaluation,  is adequate to provide coverage for estimated losses on outstanding
loans and to provide for  uncertainties  in the economy.  The provision for loan
losses  during the three  months and nine months  ended  September  30, 2004 was
$483,513 and $529,001  respectively as compared to $105,075 and $322,918 for the
same periods in 2003. During the three and nine months ended September 30, 2004,
loan charge-offs were $750,748 and $776,070 respectively. The recoveries for the
three and nine month periods ended September 30, 2004 were $396,877 and $450,874
respectively.  The  provision  for loan losses  raised the total  allowance  for
possible  loan losses to  $1,554,071 at September 30, 2004 from the December 31,
2003  total of  $1,350,266,  an  increase  of  15.1%.  Management  believes  the
allowance for possible loan losses at September 30, 2004 to be adequate and will
increase during the year to match normal loan growth.

Provisions for Income Taxes

     In 2002, the Company posted pre-tax income of $130,109  causing  management
to believe that it is more likely than not that it will generate  future taxable
income to  utilize  its net  deferred  tax  asset.  As a result,  the  valuation
allowance  was  eliminated  and a net  deferred  tax asset was  recorded for the
deductible  temporary  differences  and  carryforwards  that are  expected to be
available to reduce future taxable  income.  The Company's  provision for income
tax expense for the three months and nine months ended  September 30, 2004,  was
$(105,940) and $162,011  respectively when compared to $117,720 and $218,454 for
the same periods in 2003.  Management believes the provision for income taxes at
September 30, 2004 to be adequate.

Noninterest Income

     The Company's  noninterest  income  consists of service  charges on deposit
accounts  and other fees and  commissions.  Total  noninterest  income for three
months and nine months  ended  September  30, 2004 was  $122,854  and  $383,746,
respectively  when  compared to $138,731 and  $420,618,  for the same periods in
2003.  Management  projects that other fees and  commissions and service charges
will increase in 2004 due to the growth of the Company.

Noninterest Expense

     Noninterest  expenses for the three months and nine months ended  September
30, 2004, was $969,731 and $2,200,071,  respectively as compared to $566,082 and
$1,666,611 for the same periods in 2003.  These  expenses  consisted of employee
costs,  occupancy  expense and other operating  expenses.  Salaries and employee
benefits for the three and nine months ended  September 30, 2004,  were $423,333
and $964,165 respectively compared to $261,078 and $763,220 for the same periods

                                       14

<PAGE>


in  2003,  or  an  increase  of 62.15%  and 26.33%  respectively.  Salaries  and
employee benefits, along with all other noninterest expense categories increased
due to the Company's growth.

Financial Condition

     Total  assets at  September  30,  2004,  were  $91,332,805,  an increase of
$6,257,655 or 7.4% over 2003 year-end assets of $85,075,150.  Deposits increased
to  $78,901,946  at September 30, 2004,  and increase of $5,440,180 or 7.4% from
$73,461,766 at December 31, 2003.  The increased  deposits were used for funding
growth in the loan portfolio for the most part. Loans increased by $7,666,359 or
11.2% to $76,205,594 at September 30, 2004, from $68,539,235 from year-end 2003.
Securities  were $224,200 at September 30, 2004 compared to $171,000 at December
31, 2003.

     The Company  places an emphasis  on an  integrated  approach to its balance
sheet management. Significant balance sheet components of investment securities,
loans  and  sources  of funds  are  managed  in an  integrated  manner  with the
management of interest rate risk, liquidity,  and capital.  These components are
discussed below.

Loans

     Net loans outstanding totaled $74,651,524 at September 30, 2004 compared to
$68,539,235  at  December  31,  2003.  Commercial  and real  estate  loan growth
accounted  for almost all of the total  $6.1  million  growth for the first nine
months of 2004.

     Management  feels the overall  quality of loans remains solid. In the event
that a loan is 90 days or more  past due the  accrual  of  income  is  generally
discontinued  when the full  collection  of  principal  or  interest is in doubt
unless the  obligations  are both well secured and in the process of collection.
At September 30, 2004,  total loans 90 days or more past due and still  accruing
interest  were  $162,171  while  total  loans  90 days or more  past  due and in
non-accrual status equaled $546,173.

Securities

     Investments  at September 30, 2004 had an amortized  cost of $224,200 and a
market  value of $224,200 as compared  to an  amortized  cost of $171,700  and a
market  value of $171,700 at December  31.  2003.  The Bank's  total  investment
portfolio  is in Federal  Home Loan Bank.  As a member of the Federal  Home Loan
Bank,  the Bank is required to  maintain  stock in an amount  equal to .0015% of
total  assets.  Federal  Home  Loan  Bank  stock is  carried  at cost  under the
available-for-sale  category.  Federal Home Loan Bank stock is maintained by the
Bank at par value of one hundred dollars per share.

Deposits

     Total  deposits,  which are the principal  source of funds for the Company,
were  $78,901,946  at September 30, 2004 compared to $73,461,766 at December 31,
2003 representing an increase of 7.4%. The Company has targeted local consumers,
professional  and  commercial  businesses as its central  clientele,  therefore,
deposit  instruments in the form of demand  deposits,  savings  accounts,  money
market demand  accounts,  NOW accounts,  certificates  of deposit and individual
retirement accounts are offered to customers.  The Company established a line of
credit with the Federal Home Loan Bank secured by a blanket-pledge of 1-4 family
residential  mortgage  loans.  At September 30, 2004 the Company had outstanding
advances of $4,403,568 at the Federal Home Loan Bank.

                                       15

<PAGE>


Capital

     Equity  capital at  September  30,  2004 was  $7,526,709,  an  increase  of
$319,422  from  $7,207,287  at December  31,  2003,  due to a net profit for the
Company of  $206,617  for the first nine months of 2004 and $83,803 of Bank only
earnings before the consolidation of the two companies,  stock options exercised
during the current quarter of $34,000 and beginning equity of the parent company
only of $(4,999).  The $83,803 was taken directly to surplus and not included in
earnings of the Company due to the  effective  date of the  consolidation  being
January 23, 2004.

     At September 30, 2004, both the Company's and Bank's capital ratios were in
excess of the regulatory minimums. Those ratios are shown in the table below:

<TABLE>
<S>                            <C>                 <C>                 <C>


                               CAPITAL RATIOS AT SEPTEMBER 30, 2004
                               ------------------------------------

                               Required
                               Minimum
                                Ratio              Bank                Company
                                -----              ----                -------

Tier 1 risk-based capital       4.00%              9.48%                 9.54%
Total risk-based capital        8.00%             10.73%                10.80%
Tier 1 leverage ratio           4.00%              8.11%                 8.16%

</TABLE>


Liability and Asset Management

     The Company's  Asset/Liability  Committee  ("ALCO")  actively  measures and
manages  interest rate risk using a process  developed by the Bank.  The ALCO is
also  responsible  for  implementing  the Company's  asset/liability  management
policies, overseeing the formulation and implementation of strategies to improve
balance sheet  positioning  and earnings,  and reviewing the Company's  interest
rate sensitivity position.

     The primary tool that management uses to measure  short-term  interest rate
risk is a net  interest  income  simulation  model  prepared  by an  independent
correspondent  institution.  These simulations  estimate the impact that various
changes in the  overall  level of  interest  rates over one- and  two-year  time
horizons would have on net interest income. The results help the Company develop
strategies for managing exposures to interest rate risk.

     Like any forecasting technique,  interest rate simulation modeling is based
on a large number of assumptions. In this case, the assumptions relate primarily
to loan and deposit growth, asset and liability prepayments,  interest rates and
balance sheet management strategies.  Management believes that both individually
and  in  the  aggregate  the  assumptions  are  reasonable.   Nevertheless,  the
simulation  modeling  process  produces  only a  sophisticated  estimate,  not a
precise calculation of exposure.

     At September 30, 2004,  approximately 494 of the institution's  gross loans
had adjustable rates. Based on the asset/liability  modeling management believes
that  these  loans  reprice  at a  faster  pace  than  liabilities  held  at the
institution. Because the majority of the institution's liabilities are 12 months
and under and the gap in repricing is asset sensitive,  management believes that
a rising rate  environment  would have a positive  impact on the  company's  net
interest  margin.  Floors in the majority of the  institution's  adjustable rate
assets also mitigate interest rate sensitivity in a decreasing rate environment.

                                       16


<PAGE>


Off-Balance Sheet Arrangements

     The Bank, at September 30, 2004, had outstanding unused lines of credit and
standby  letters  of  credit  that  totaled  approximately   $7,947,300.   These
commitments  have fixed  maturity dates and many will mature without being drawn
upon,  meaning that the total  commitment  does not  necessarily  represent  the
future cash  requirements.  The Bank has the ability to liquidate  Federal funds
sold or, on a short-term  basis, to purchase  Federal funds from other banks and
to borrow from the Federal Home Loan Bank. At September  30, 2004,  the Bank had
established  with  correspondent  banks the ability to purchase Federal funds if
needed.

Item 3.  Controls and Procedures

         a)       Evaluation of Disclosure Controls and Procedures
                  ------------------------------------------------

                  As of the end of the period covered by this report, we carried
out an  evaluation,  under the  supervision  and with the  participation  of the
Company's Chief Executive Officer and the Chief Financial Officer, of the design
and operation of our  disclosure  controls and  procedures  (as defined in Rules
13a-15(e)  and  15d-15(e)  under  the  Exchange  Act of 1934,  as  amended  (the
"Exchange  Act")).  Based on this  evaluation,  our Chief Executive  Officer and
Chief Financial  Officer  concluded that our disclosure  controls and procedures
are effective for gathering,  analyzing and disclosing the  information  that we
are  required to  disclose  in the reports we file with the SEC  pursuant to the
Exchange  Act,  within the time periods  specified in the SEC's rules and forms.
Our Chief Executive  Officer and Chief Financial Officer also concluded that our
disclosure  controls and  procedures  are  effective in timely  alerting them to
material  information  relating  to our  Company  required to be included in our
periodic SEC filings.

         b)       Changes in Internal Controls and Procedures
                  -------------------------------------------

                  There were no changes in our internal  controls over financial
reporting  during the quarter  ended  September  30,  2004 that have  materially
affected,  or are reasonably likely to materially  affect,  our internal control
over financial reporting.

                                       17


<PAGE>


                           PART II - OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS
         None.

Item 2.  CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
         SECURITIES

         (a)  Not applicable.

         (b)  Not applicable.

         (c)  10,200 shares of the Company's common stock were issued during the
              quarter ended September 30, 2004  as a result of the  exercise  of
              the following stock options:

<TABLE>
<S>               <C>                      <C>                        <C>
                    Date Exercised         Number of Shares           Exercise Price
                    --------------         ----------------           --------------

                  July 20, 2004                  2,000                     $3.33
                  July 23, 2004                  2,000                     $3.33
                  July 30, 2004                    200                     $3.33
                  September 9, 2004              6,000                     $3.33

</TABLE>
         The aggregate proceeds of the shares sold were $34,000.

         There  were  no  underwriters   and  no   underwriting   discounts  or
         commissions. All sales were for cash.

         The Company  believes  that an exemption  from  registration  of  these
         shares was  available to the Company in that  the issuance  thereof did
         not constitute  a public  offering of securities  within the meaning of
         the  Securities  Act of 1933, as amended,  pursuant to  Section 4(2) of
         the Securities Act.

         The securities sold are not convertible or exchangeable into any other
         equity security.

         The  proceeds  of the sales are being used by the  Company for general
         corporate purposes.

         (d)  Not applicable.

         (e)  No  repurchase of Company  securities were made during the quarter
              ended September 30, 2004.

Item 3.  DEFAULTS UPON SENIOR SECURITIES
         None.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         None.

Item 5.  OTHER INFORMATION
         None.

                                       18


<PAGE>


Item 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a) Index to Exhibits.

Exhibit No.      Description
-----------      -----------
3.1*             Charter of BG Financial Group, Inc.
3.2*             Bylaws of BG Financial Group, Inc.
10.1*            Stock Option Agreement between  BG Financial Group, Inc. and J.
                 Robert Grubbs
10.2*            Stock Option Agreement  between BG Financial Group,  Inc and T.
                 Don Waddell
31.1             Certification pursuant to Rule 13a-14a/15d-14(a)
31.2             Certification pursuant to Rule 13a-14a/15d-14(a)
32.1             Certification  pursuant to  Rule 18 USC Section  1350-Sarbanes-
                 Oxley Act of 2002
32.2             Certification  pursuant  to Rule 18 USC Section  1350-Sarbanes-
                 Oxley Act of 2002

*  Previously  filed as an exhibit to BG  Financial  Group,  Inc.'s Form 8-K, as
filed with the Securities Exchange Commission on May 21, 2004.

         (b) Reports on Form 8-K.

             None.

                                       19


<PAGE>



                                   SIGNATURES

     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                            BG FINANCIAL GROUP, INC.
                            ------------------------
                                  (Registrant)

DATE:  November 12, 2004                  /s/ J. Robert Grubbs
       ---------------------              --------------------------------------
                                          J. Robert Grubbs
                                          President & Chief Executive Officer


                                       20