UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM 10-Q




(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, 2010




OR




 ̈
            TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the transition period from _____________________ to
________________




Commission
file number   000-50771




AMERICAN PATRIOT FINANCIAL
GROUP, INC.




(Exact
name of registrant as specified in its charter)




Tennessee
              
              20-0307691(State
      or other jurisdiction of
              
              (I.R.S.
      Employer Identification No.)incorporation
      or organization)3095
      East Andrew Johnson HighwayGreeneville,
      Tennessee
              
              37745(Address
      of principal executive offices)
              
              (Zip
      Code)





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





Not
Applicable


(Former
name, former address and former fiscal year, if changed since last
report)




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 o NO x




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).  YES  ̈ NO  ̈




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.   See the definitions of “large accelerated filer,"
"accelerated filer” and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.




Large
      accelerated filer  ̈
              
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈ (Do
      not check if a small reporting company)
              
              Smaller
      reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.) YES  ̈NOx




As of
November 1, 2010, there were 2,389,391 shares of common stock, $0.333 par value,
issued and outstanding.







PART
      I - FINANCIAL INFORMATIONItem
      1.
                          Financial
      Statements.
                          3The
      consolidated financial statements of the Registrant and its wholly owned
      subsidiary are as follows:Consolidated
      Balance Sheets - September 30, 2010 (unaudited) and December 31,
      2009.
                          3Consolidated
      Statements of Operations - For the nine months ended September 30, 2010
      and 2009 (unaudited).
                          4Consolidated
      Statements of Operations - For the three months ended September 30, 2010
      and 2009 (unaudited).
                          5Consolidated
      Statements of Changes in Stockholders' Equity - For the nine months ended
      September 30, 2010 (unaudited).
                          6Consolidated
      Statements of Cash Flows - For the nine months ended September 30, 2010
      and 2009 (unaudited).
                          7Notes
      to Consolidated Financial Statements.
                          9Item
      2.
                          Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                          17Item
      3.
                          Quantitative
      and Qualitative Disclosures about Market Risk.
                          26Item
      4.
                          Controls
      and Procedures.
                          26PART
      II - OTHER INFORMATIONItem
      1.
                          Legal
      Proceedings.
                          27Item 1A.
                          Risk
      Factors.
                          27Item
      2.
                          Unregistered
      Sales of Equity Securities and Use of Proceeds.
                          27Item
      3.
                          Defaults
      Upon Senior Securities.
                          27Item
      4.
                          (Removed
      and Reserved).
                          27Item
      5.
                          Other
      Information.
                          27Item
      6.
                          Exhibits.
                          28


2


AMERICAN
PATRIOT FINANCIAL GROUP, INC. AND SUBSIDIARY


Greeneville,
Tennessee


CONSOLIDATED
BALANCE SHEETS





Part
I. FINANCIAL INFORMATION


Item
1.  Financial Statements


As
      of
                
                
                As
      ofSeptember
      30, 2010
                
                
                December
      31, 2009(Unaudited)ASSETSCash
      and due from banks
                
                $
                5,134,536
                
                
                $
                4,606,244Federal
      funds sold
                
                
                2,794,028
                
                
                
                3,137,654Interest-bearing
      deposits in banks
                
                
                2,012,173
                
                
                
                2,470,118Cash
      and cash equivalents
                
                
                9,940,737
                
                
                
                10,214,016Securities
      available for sale
                
                
                2,504,385
                
                
                
                2,984,945Federal
      Home Loan Bank stock, at cost
                
                
                296,500
                
                
                
                296,500Loans,
      net of allowance for loan losses of $2,752,845 in 2010 and $3,082,659 in
      2009
                
                
                78,237,012
                
                
                
                92,562,338Premises
      and equipment, net
                
                
                4,860,288
                
                
                
                5,047,047Accrued
      interest receivable
                
                
                531,566
                
                
                
                390,165Deferred
      tax assets, net
                
                
                223,455
                
                
                
                228,303Foreclosed
      assets
                
                
                4,283,118
                
                
                
                3,409,635Cash
      surrender value of bank owned life insurance
                
                
                2,544,005
                
                
                
                2,464,771Other
      assets
                
                
                201,278
                
                
                
                616,518Total
      Assets
                
                $
                103,622,344
                
                
                $
                118,214,238LIABILITIES
      AND STOCKHOLDERS’ EQUITYLIABILITIESDeposits:Noninterest-bearingDemand
                
                $
                5,007,095
                
                
                $
                6,669,598Interest-bearingMoney
      market, interest checking and savings
                
                
                22,756,258
                
                
                
                25,512,212Time
      deposits
                
                
                67,596,311
                
                
                
                74,327,770Total
      Deposits
                
                
                95,359,664
                
                
                
                106,509,580Accrued
      interest payable
                
                
                306,300
                
                
                
                621,045Other
      liabilities
                
                
                489,677
                
                
                
                428,826Federal
      Home Loan Bank and other borrowings
                
                
                4,371,254
                
                
                
                6,338,497Total
      Liabilities
                
                
                100,526,895
                
                
                
                113,897,948Commitments
      and Contingencies
                
                
                -
                
                
                
                -STOCKHOLDERS’
      EQUITYStock:Preferred
      stock, no par value; authorized 1,000,000 shares; issued and outstanding
      192 shares at September 30, 2010
                
                
                155,579
                
                
                
                -Common
      stock, $0.333 par value; authorized 6,000,000 shares; issued and
      outstanding 2,389,391 shares at September 30, 2010 and  December
      31, 2009
                
                
                796,337
                
                
                
                796,337Additional
      paid-in capital
                
                
                7,167,260
                
                
                
                7,167,260Retained
      deficit
                
                
                (5,026,432
                )
                
                
                (3,638,017
                )Accumulated
      other comprehensive income
                
                
                2,705
                
                
                
                (9,290
                )Total
      Stockholders’ Equity
                
                
                3,095,449
                
                
                
                4,316,290Total
      Liabilities and Stockholders’ Equity
                
                $
                103,622,344
                
                
                $
                118,214,238





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


3


AMERICAN
PATRIOT FINANCIAL GROUP, INC. AND SUBSIDIARY


Greeneville,
Tennessee


CONSOLIDATED
STATEMENTS OF OPERATIONS


(Unaudited)





Nine Months EndedSeptember30, 2010
                
                
                September 30, 2009Interest
      and dividend income:Loans,
      including fees
                
                $
                3,969,548
                
                
                $
                4,674,930Investment
      securities
                
                
                37,938
                
                
                
                4,173Dividends
      on Federal Home Loan Bank stock
                
                
                9,979
                
                
                
                10,224Federal
      funds sold and other
                
                
                21,769
                
                
                
                17,959Total
      interest and dividend income
                
                
                4,039,234
                
                
                
                4,707,286Interest
      expense:Deposits
                
                
                1,346,834
                
                
                
                2,145,701Borrowed
      funds
                
                
                156,209
                
                
                
                195,572Total
      interest expense
                
                
                1,503,043
                
                
                
                2,341,273Net
      interest income before provision for loan losses
                
                
                2,536,191
                
                
                
                2,366,013Provision
      for loan losses
                
                
                1,141,080
                
                
                
                2,796,581Net
      interest income (loss) after provision for loan losses
                
                
                1,395,111
                
                
                
                (430,568
                )Noninterest
      income:Service
      charges on deposit accounts
                
                
                281,641
                
                
                
                321,189Fees
      from origination of mortgage loans sold
                
                
                14,472
                
                
                
                15,620Other
                
                
                560,057
                
                
                
                110,446Total
      noninterest income
                
                
                856,170
                
                
                
                447,255Noninterest
      expense:Salaries
      and employee benefits
                
                
                1,110,743
                
                
                
                1,311,442Occupancy
                
                
                431,674
                
                
                
                441,995Advertising
                
                
                14,806
                
                
                
                33,626Data
      processing
                
                
                232,294
                
                
                
                247,535Legal
      and professional
                
                
                423,454
                
                
                
                505,051Other
      operating
                
                
                1,419,440
                
                
                
                800,678Total
      noninterest expense
                
                
                3,632,411
                
                
                
                3,340,327Net
      loss before income taxes
                
                
                (1,381,130
                )
                
                
                (3,323,640
                )Income
      tax benefit
                
                
                -
                
                
                
                (941,253
                )Net
      loss
                
                $
                (1,381,130
                )
                
                $
                (2,382,387
                )Preferred
      stock dividend requirement
                
                
                6,073
                
                
                
                -Accretion
      on preferred stock discount
                
                
                7,285
                
                
                
                -Net
      Loss to Common Shareholders
                
                $
                (1,394,488
                )
                
                $
                (2,382,387
                )Basic
      net loss per common share
                
                $
                (.58
                )
                
                $
                (1.00
                )Diluted
      net loss per common share
                
                $
                (.58
                )
                
                $
                (1.00
                )





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


4


AMERICAN
PATRIOT FINANCIAL GROUP, INC. AND SUBSIDIARY


Greeneville,
Tennessee


CONSOLIDATED
STATEMENTS OF OPERATIONS


(Unaudited)





Three Months EndedSeptember 30, 2010
                
                
                September 30, 2009Interest
      and dividend income:Loans,
      including fees
                
                $
                1,235,537
                
                
                $
                1,515,661Investment
      securities
                
                
                13,193
                
                
                
                4,173Dividends
      on Federal Home Loan Bank stock
                
                
                3,326
                
                
                
                3,696Federal
      funds sold and other
                
                
                8,080
                
                
                
                6,454Total
      interest and dividend income
                
                
                1,260,136
                
                
                
                1,529,984Interest
      expense:Deposits
                
                
                396,490
                
                
                
                652,234Borrowed
      funds
                
                
                60,014
                
                
                
                65,155Total
      interest expense
                
                
                456,504
                
                
                
                717,389Net
      interest income before provision for loan losses
                
                
                803,632
                
                
                
                812,595Provision
      for loan losses
                
                
                293,179
                
                
                
                771,586Net
      interest income after provision for loan losses
                
                
                510,453
                
                
                
                41,009Noninterest
      income:Service
      charges on deposit accounts
                
                
                87,709
                
                
                
                111,031Fees
      from origination of mortgage loans sold
                
                
                5,224
                
                
                
                -Other
                
                
                499,755
                
                
                
                39,428Total
      noninterest income
                
                
                592,688
                
                
                
                150,459Noninterest
      expense:Salaries
      and employee benefits
                
                
                356,073
                
                
                
                422,310Occupancy
                
                
                143,502
                
                
                
                138,085Advertising
                
                
                4,233
                
                
                
                7,631Data
      processing
                
                
                71,802
                
                
                
                82,246Legal
      and professional
                
                
                170,380
                
                
                
                116,982Other
      operating
                
                
                416,229
                
                
                
                318,321Total
      noninterest expense
                
                
                1,162,219
                
                
                
                1,085,575Net
      loss before income taxes
                
                
                (59,078
                )
                
                
                (894,107
                )Income
      tax benefit
                
                
                -
                
                
                
                (10,912
                )Net
      loss
                
                $
                (59,078
                )
                
                $
                (883,195
                )Preferred
      stock dividend requirement
                
                
                2,889
                
                
                
                -Accretion
      on preferred stock discount
                
                
                3,642
                
                
                
                -Net
      Loss to Common Shareholders
                
                $
                (65,609
                )
                
                $
                (883,195
                )Basic
      net loss per common share
                
                $
                (.03
                )
                
                $
                (.37
                )Diluted
      net loss per common share
                
                $
                (.03
                )
                
                $
                (.37
                )





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


5


AMERICAN
PATRIOT FINANCIAL GROUP, INC. AND SUBSIDIARY


Greeneville,
Tennessee


CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED


Nine
Months Ended September 30, 2010





AccumulatedAdditional
                  
                  
                  
                  
                  
                  OtherComprehensive
                  
                  
                  Preferred
                  
                  
                  Common
                  
                  
                  Paid-In
                  
                  
                  Retained
                  
                  
                  ComprehensiveLoss
                  
                  
                  Stock
                  
                  
                  Stock
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  Income
                  
                  
                  TotalBalance,
      December 31, 2009
                  
                  
                  
                  
                  $
                  -
                  
                  
                  $
                  796,337
                  
                  
                  $
                  7,167,260
                  
                  
                  $
                  (3,638,017
                  )
                  
                  $
                  (9,290
                  )
                  
                  $
                  4,316,290Comprehensive
      loss:Net
      loss
                  
                  $
                  (1,381,130
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,381,130
                  )
                  
                  
                  -
                  
                  
                  
                  (1,381,130
                  )Other
      comprehensive income:Unrealized
      holding gains on securities available for sale, net of tax effect of
      $7,445
                  
                  
                  11,995
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  11,995
                  
                  
                  
                  11,995Total
      comprehensive loss
                  
                  $
                  (1,369,135
                  )Issuance
      of preferred stock
                  
                  
                  
                  
                  
                  
                  148,294
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  148,294Accretion
      of discount on preferred stock - Series A
                  
                  
                  
                  
                  
                  
                  7,285
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (7,285
                  )
                  
                  
                  -
                  
                  
                  
                  -Balance,
      September 30, 2010
                  
                  
                  
                  
                  
                  $
                  155,579
                  
                  
                  $
                  796,337
                  
                  
                  $
                  7,167,260
                  
                  
                  $
                  (5,026,432
                  )
                  
                  $
                  2,705
                  
                  
                  $
                  3,095,449





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


6


AMERICAN
PATRIOT FINANCIAL GROUP, INC. AND SUBSIDIARY


Greeneville,
Tennessee


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)





NineMonths EndedSeptember30, 2010
                
                
                September 30, 2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                
                $
                (1,381,130
                )
                
                $
                (2,382,387
                )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Provision
      for loan losses
                
                
                1,141,080
                
                
                
                2,796,581Depreciation
                
                
                201,605
                
                
                
                228,528Gain
      on sale of premises and equipment
                
                
                -
                
                
                
                (1,817
                )Write-down
      of foreclosed assets
                
                
                187,824
                
                
                
                -Realized
      loss on sales of foreclosed assets
                
                
                112,513
                
                
                
                1,566Deferred
      income tax benefit
                
                
                -
                
                
                
                (941,253
                )Increase
      in cash surrender value of bank owned life insurance
                
                
                (79,234
                )
                
                
                (84,897
                )Net
      change in:Accrued
      interest receivable
                
                
                (141,401
                )
                
                
                131,922Other
      assets
                
                
                412,643
                
                
                
                21,114Other
      liabilities
                
                
                60,851
                
                
                
                (15,487
                )Accrued
      interest payable
                
                
                (314,745
                )
                
                
                3,203Net
      cash provided by (used in) operating activities
                
                
                200,006
                
                
                
                (242,927
                )CASH
      FLOWS FROM INVESTING ACTIVITIES:Securities
      available for sale:Purchases
                
                
                (500,000
                )
                
                
                (2,000,000
                )Maturities,
      prepayments and calls
                
                
                1,000,000
                
                
                
                -Proceeds
      from sale of foreclosed assets
                
                
                881,875
                
                
                
                19,052Federal
      Home Loan Bank stock purchase
                
                
                -
                
                
                
                (5,300
                )Loan
      originations and principal collections, net
                
                
                11,128,551
                
                
                
                776,190Additions
      to premises and equipment
                
                
                (14,846
                )
                
                
                (13,153
                )Proceeds
      from sale of premises and equipment
                
                
                -
                
                
                
                2,299Net
      cash provided by (used in) investing activities
                
                
                12,495,580
                
                
                
                (1,220,912
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      change in deposits (non-time deposits)
                
                
                (4,418,457
                )
                
                
                1,338,670Net
      change in time deposits
                
                
                (6,731,459
                )
                
                
                4,663,086Issuance
      of stock
                
                
                148,294
                
                
                
                -Repayments
      of other borrowings
                
                
                (107,000
                )
                
                
                -Proceeds
      from other borrowings
                
                
                -
                
                
                
                28,000Federal
      Home Loan Bank repayments
                
                
                (1,860,243
                )
                
                
                (138,885
                )Net
      cash (used in) provided by financing activities
                
                
                (12,968,865
                )
                
                
                5,890,871





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


7


AMERICAN
PATRIOT FINANCIAL GROUP, INC. AND SUBSIDIARY


Greeneville,
Tennessee


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)


(Unaudited)





Nine Months EndedSeptember 30, 2010
                
                
                September 30, 2009Net
      change in cash and cash equivalents
                
                $
                (273,279
                )
                
                $
                4,427,032Cash
      and cash equivalents at beginning of period
                
                
                10,214,016
                
                
                
                6,396,406Cash
      and cash equivalents at end of period
                
                $
                9,940,737
                
                
                $
                10,823,438SUPPLEMENTARY
      CASH FLOW INFORMATION:Interest
      paid on deposits and borrowed funds
                
                $
                1,817,788
                
                
                $
                2,338,070Income
      taxes paid
                
                $
                -
                
                
                $
                152,004SUPPLEMENTAL
      SCHEDULE OF NON-CASH ACTIVITIES:Loans
      moved to foreclosed/repossessed assets
                
                $
                2,055,695
                
                
                $
                3,107,645





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


8


AMERICAN
PATRIOT FINANCIAL GROUP, INC. AND SUBSIDIARY


Greeneville,
Tennessee


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Note 1.
            Summary
      of Significant Accounting Policies





Nature of
Business:





American
Patriot Financial Group, Inc. (the “Company”) is a bank holding company which
owns all of the outstanding common stock of American Patriot Bank (the
“Bank”).  The Bank provides a variety of financial services through
its locations in Greeneville and Maryville, Tennessee and surrounding
areas.  The Bank’s primary deposit products are demand deposits,
savings accounts, and certificates of deposit.  Its primary lending
products are commercial loans, real estate loans, and installment
loans.





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





Basis
of Presentation:





These
consolidated financial statements include the accounts of American Patriot
Financial Group, Inc. and its wholly owned subsidiary, American Patriot
Bank.  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
("GAAP") for interim financial information and in accordance with the
instructions to Form 10-Q and Article 10 of Regulation  S-X as
promulgated by the Securities and Exchange Commission
(“SEC”).  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 (consisting of 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 three and nine months ended September 30, 2010, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2010.  For further information, refer to the consolidated
financial statements and notes thereto included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2009.  Certain amounts
from prior period financial statements have been reclassified to conform to
current period’s presentation.





Preferred
Stock Issuance:





In
accordance with its charter, the Company has authorized and began offering and
issuing up to 5,000 shares of series A Preferred Stock (preferred stock) at a
price of $1,000 per share.  The preferred stock will accrue cumulative
dividends at a rate of 6% per annum.  Dividends will be payable
quarterly in arrears.  However, the Bank and Company are currently
prohibited from paying dividends.  The shares have a liquidation
preference of $1,000 per share.  The shares may be converted to common
stock after three years at a $5.00 per share conversion rate.  The
preferred stock is redeemable only at the option of the Company, subject to
regulatory approval, after the third anniversary date of the investment at 100%
of the issuance price of $1,000 per share plus any accrued and unpaid
dividends.  The preferred stock ranks senior to the Company's common
stock, and no dividends on common stock may be declared or paid until all
accrued and unpaid dividends for all past dividend periods have been paid on the
preferred stock.  The preferred stock is non-voting, other than
certain class voting rights. For the nine months ended September 30, 2010, the
Company issued 192 shares of preferred stock.  The Company incurred
$43,706 in issuance costs.


9


Going
Concern:





The
Company continues to prepare its consolidated financial statements on a going
concern basis. For further information regarding this issue, refer to note 2
“Regulatory Actions & Going Concern Considerations” of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2009, as filed with the
Securities and Exchange Commission on April 15, 2010. The consolidated financial
statements and notes thereto are presented in accordance with the instructions
for Form 10-K.





Use
of Estimates:





The
preparation of consolidated financial statements in conformity with GAAP
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 most significant management accounting
estimate is 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 collectability 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.
            Stock
      Options and Awards





No
      options were granted during the nine months ended September 30, 2010, and
      no compensation cost related to options is recognized in the consolidated
      statements of income for the nine months ended September 30, 2010 or
      2009.  No intrinsic value exists at September 30, 2010, as the
      market price of the Company's common stock of $2.75 per common share is
      below the exercise price of the outstanding
  options.





Note 3.
            Earnings
      (Loss) Per Share of Common Stock





Basic
      earnings (loss) per share (EPS) of common stock is computed by dividing
      net income (loss) available to common shareholders by the weighted average
      number of common shares outstanding during the period.  Diluted
      earnings (loss) per share of common stock is computed by dividing net
      income (loss) available to common shareholders by the weighted average
      number of common shares and potential dilutive common shares outstanding
      during the period.  Stock options are regarded as potential
      common shares.  Potential common shares are computed using the
      treasury stock method.  For the nine months ended September 30,
      2010, 31,550 options are excluded from the effect of dilutive securities
      because they are anti-dilutive; 71,150 options are similarly excluded from
      the effect of dilutive securities for the nine months ended September 30,
      2009.


10


The
      following is a reconciliation of the numerators and denominators used in
      the basic and diluted earnings (loss) per share computations for the three
      and nine months ended September 30, 2010 and
  2009.





Three Months Ended September
      30,2010
                
                
                2009Income (Loss)
                
                
                Shares
                
                
                Income
      (Loss)
                
                
                Shares(Numerator)
                
                
                (Denominator)
                
                
                (Numerator)
                
                
                (Denominator)Basic
      EPSIncome
      (loss) available to common stockholders
                
                $
                (59,078
                )
                
                
                2,389,391
                
                
                $
                (883,195
                )
                
                
                2,389,391Effect
      of dilutive securities Stock options outstanding
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Diluted
      EPSIncome
      (loss) available to common shareholders plus assumed
      conversions
                
                $
                (59,078
                )
                
                
                2,389,391
                
                
                $
                (883,195
                )
                
                
                2,389,391





Nine Months Ended September
      30,2010
                
                
                2009Income
      (Loss)
                
                
                Shares
                
                
                Income
      (Loss)
                
                
                Shares(Numerator)
                
                
                (Denominator)
                
                
                (Numerator)
                
                
                (Denominator)Basic
      EPSIncome
      (loss) available to common stockholders
                
                $
                (1,381,130
                )
                
                
                2,389,391
                
                
                $
                (2,382,387
                )
                
                
                2,389,391Effect
      of dilutive securities Stock options outstanding
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Diluted
      EPSIncome
      (loss) available to common shareholders plus assumed
      conversions
                
                $
                (1,381,130
                )
                
                
                2,389,391
                
                
                $
                (2,382,387
                )
                
                
                2,389,391


11


Note
      4.
            Fair
      Value Disclosures





The
      Company uses fair value measurements to record fair value adjustments to
      certain assets and liabilities and to determine fair value
      disclosures.  In accordance with the Fair Value Measurements and
      Disclosures ASC Topic 820, the fair value of a financial instrument
      is the price that would be received to sell an asset or paid to transfer a
      liability in an orderly transaction between market participants at the
      measurement date.  Fair value is best determined based upon
      quoted market prices.  In cases where quoted market prices are
      not available, fair values are based on estimates using present value or
      other valuation techniques.  Those techniques are significantly
      affected by the assumptions used, including the discount rate and
      estimates of future cash flows.  Accordingly, the fair value
      estimates may not be realized in an immediate settlement of the
      instrument.





ASC
      Topic 820 provides a consistent definition of fair value, which focuses on
      exit price in an orderly transaction between market participants at the
      measurement date under current market conditions.  If there has
      been a significant decrease in the volume and level of activity for the
      asset or liability, a change in valuation technique or the use of multiple
      valuation techniques may be appropriate.  In such instances,
      determining the price at which willing market participants would transact
      at the measurement date under current market conditions depends on the
      facts and circumstances and requires the use of significant
      judgment.  The fair value is a reasonable point within the range
      that is most representative of fair value under current market
      conditions.





ASC
      Topic 820 also establishes a three-tier fair value hierarchy which
      requires an entity to maximize the use of observable inputs and minimize
      the use of unobservable inputs when measuring fair value, as
      follows:





Level
      1 - Quoted prices (unadjusted) in active markets for identical assets or
      liabilities that the Company has the ability to
  access.





Level
      2 - Significant other observable inputs other than Level 1 prices, such as
      quoted prices for similar assets or liabilities in active markets, quoted
      prices in markets that are not active and other inputs that are observable
      or can be corroborated by observable market
  data.





Level
      3 - Significant unobservable inputs that reflect the Company’s own
      assumptions about the assumptions that market participants would use in
      pricing an asset or liability.





A
      financial instrument’s categorization within the valuation hierarchy is
      based upon the lowest level of input that is significant to the fair value
      measurement.





The
      following methods and assumptions were used by the Company in estimating
      fair value disclosures for financial instruments.  There have
      been no changes in the methodologies used at September 30, 2010 and
      December 31, 2009.





Cash
      and cash equivalents:





The
      carrying amounts of cash and due from banks, interest-bearing deposits in
      banks, and federal funds sold approximate fair values based on the
      short-term nature of the assets.





Securities:





Fair
values are estimated using pricing models and discounted cash flows that
consider standard input factors such as observable market data, benchmark
yields, interest rate volatilities, broker/dealer quotes, and credit
spreads.  Securities classified as available for sale are reported at
fair value utilizing Level 2 inputs.


12


The
carrying value of Federal Home Loan Bank stock approximates fair value based on
the redemption provisions of the Federal Home Loan Bank.





Loans:





For
      variable-rate loans that reprice frequently and with no significant change
      in credit risk, fair values are based on carrying values.  Fair
      values for fixed-rate loans are estimated using discounted cash flow
      analyses, using market interest rates for comparable
      loans.  Loans for which it is probable that payment of interest
      and principal will not be made in accordance with the contractual terms of
      the loan agreement are considered impaired.  Once a loan is
      identified as individually impaired, management measures impairment in
      accordance with ASC Topic 310, Accounting by Creditorsfor Impairment of
      a Loan.  The fair value of impaired loans is estimated
      using several methods including collateral value, liquidation value and
      discounted cash flows.  Those impaired loans not requiring an
      allowance represent loans for which the fair value of the expected
      repayments or collateral exceed the recorded investments in such
      loans.  At September 30, 2010, substantially all of the total
      impaired loans were evaluated based on the fair value of
      collateral.  In accordance with ASC Topic 820, impaired loans
      where an allowance is established based on the fair value of collateral
      require classification in the fair value hierarchy.  When the
      fair value of the collateral is based on an observable market price or a
      current appraised value, the Company records the impaired loan as
      nonrecurring Level 2.  When an appraised value is not
      available or management determines the fair value of the collateral is
      further impaired below the appraised value and there is no observable
      market price, the Company records the impaired loan as nonrecurring Level
      3.





Accrued
      interest:





The
      carrying amounts of accrued interest approximate fair
    value.





Foreclosed
      assets:





Foreclosed
      assets, consisting of properties obtained through foreclosure or in
      satisfaction of loans, is initially recorded at fair value, determined on
      the basis of current appraisals, comparable sales, and other estimates of
      value obtained principally from independent sources, adjusted for
      estimated selling costs.  At the time of foreclosure, any excess
      of the loan balance over the fair value of the real estate held as
      collateral is treated as a charge against the allowance for loan
      losses.  Gains or losses on sale and any subsequent adjustment
      to the fair value are recorded as a component of foreclosed real estate
      expense.  Foreclosed assets are included in Level 2 of the
      valuation hierarchy when the fair value is based on an observable market
      price or a current appraised value.  When an appraised value is
      not available or management determines the foreclosed asset is impaired
      below the appraised value and there is no observable market price, the
      Company records the foreclosed asset as nonrecurring Level
    3.





Cash
      surrender value of bank owned life
insurance:





The
      carrying amounts of cash surrender value of bank owned life insurance
      approximate their fair value.  The carrying amount is based on
      information received from the insurance carriers indicating the financial
      performance of the policies and the amount the Company would receive
      should the policies be surrendered.  The Company reflects these
      assets within Level 2 of the valuation
  hierarchy.


13


Deposits:





The
      fair value of deposits with no stated maturity, such as
      noninterest-bearing demand deposits and NOW, money market, and savings
      accounts, is equal to the amount payable on demand at the reporting
      date.  The carrying amounts of variable-rate, fixed-term money
      market accounts and certificates of deposit approximate their fair values
      at the reporting date.  Fair values for fixed-rate certificates
      of deposit are estimated using a discounted cash flow calculation that
      applies market interest rates on comparable instruments to a schedule of
      aggregated expected monthly maturities on time
  deposits.





Federal
      Home Loan Bank and other
borrowings:





Fair
      values of Federal Home Loan Bank and other borrowings are estimated using
      discounted cash flow analyses based on the Company’s current incremental
      borrowing rates for similar types of borrowing
    arrangements.





The
      tables below present the recorded amount of assets and liabilities
      measured at fair value on a recurring
basis.





Quoted
      Prices in
                            
                            
                            Significant
                            
                            
                            SignificantBalance
      as
                            
                            
                            Active
      Markets
                            
                            
                            Other
                            
                            
                            Otherof
                            
                            
                            for
      Identical
                            
                            
                            Observable
                            
                            
                            UnobservableSeptember30,
                            
                            
                            Assets
                            
                            
                            Inputs
                            
                            
                            Inputs2010
                            
                            
                            (Level
    1)
                            
                            
                            (Level
    2)
                            
                            
                            (Level
      3)Securities
      available for sale:U.S.
      Government-sponsored Enterprises (GSEs)
                            
                            $
                            2,504,385
                            
                            
                            $
                            -
                            
                            
                            $
                            2,504,385
                            
                            
                            $
                            -Cash
      surrender value of life insurance
                            
                            $
                            2,544,005
                            
                            
                            $
                            -
                            
                            
                            $
                            2,544,005
                            
                            
                            $
                            -Quoted
      Prices in
                            
                            
                            Significant
                            
                            
                            SignificantBalance
      as
                            
                            
                            Active
      Markets
                            
                            
                            Other
                            
                            
                            Otherof
                            
                            
                            for
      Identical
                            
                            
                            Observable
                            
                            
                            UnobservableDecember
      31,
                            
                            
                            Assets
                            
                            
                            Inputs
                            
                            
                            Inputs2009
                            
                            
                            (Level
    1)
                            
                            
                            (Level
    2)
                            
                            
                            (Level
      3)Securities
      available for sale:U.S.
      Government-sponsored Enterprises (GSEs)
                            
                            $
                            2,984,945
                            
                            
                            $
                            -
                            
                            
                            $
                            2,984,945
                            
                            
                            $
                            -Cash
      surrender value of life insurance
                            
                            $
                            2,464,771
                            
                            
                            $
                            -
                            
                            
                            $
                            2,464,771
                            
                            
                            $
                            -





The
      Company has no assets or liabilities whose fair values are measured on a
      recurring basis using Level 3
inputs.


14


Certain
      assets and liabilities are measured at fair value on a nonrecurring basis,
      which means the assets and liabilities are not measured at fair value on
      an ongoing basis but are subject to fair value adjustments in certain
      circumstances (for example, when there is evidence of
      impairment).  The tables below present information about assets
      and liabilities for which a nonrecurring change in fair value was
      recorded.





Quoted
      Prices in
                            
                            
                            Significant
                            
                            
                            SignificantBalance
      as
                            
                            
                            Active
      Markets
                            
                            
                            Other
                            
                            
                            Otherof
                            
                            
                            for
      Identical
                            
                            
                            Observable
                            
                            
                            UnobservableSeptember30,
                            
                            
                            Assets
                            
                            
                            Inputs
                            
                            
                            Inputs2010
                            
                            
                            (Level 1)
                            
                            
                            (Level 2)
                            
                            
                            (Level 3)Impaired
      loans
                            
                            $
                            3,627,260
                            
                            
                            $
                            -
                            
                            
                            $
                            3,627,260
                            
                            
                            $
                            -Foreclosed
      real estate
                            
                            
                            4,283,118
                            
                            
                            
                            -
                            
                            
                            
                            3,596,260
                            
                            
                            
                            686,858Quoted
      Prices in
                            
                            
                            Significant
                            
                            
                            SignificantBalance
      as
                            
                            
                            Active
      Markets
                            
                            
                            Other
                            
                            
                            Otherof
                            
                            
                            for
      Identical
                            
                            
                            Observable
                            
                            
                            UnobservableDecember
      31,
                            
                            
                            Assets
                            
                            
                            Inputs
                            
                            
                            Inputs2009
                            
                            
                            (Level 1)
                            
                            
                            (Level 2)
                            
                            
                            (Level 3)Impaired
      loans
                            
                            $
                            4,573,057
                            
                            
                            $
                            -
                            
                            
                            $
                            4,573,057
                            
                            
                            $
                            -Foreclosed
      real estate
                            
                            
                            3,409,635
                            
                            
                            
                            -
                            
                            
                            
                            2,487,125
                            
                            
                            
                            922,510





Impaired
      loans include impaired loans held for investment for which an allowance
      for loan losses has been calculated based upon the fair value of the loans
      at September 30, 2010.





The
      carrying amount and estimated fair value of the Company's financial
      instruments are as follows:





September
      30, 2010
                    
                    
                    December
      31, 2009Carrying
                    
                    
                    Fair
                    
                    
                    Carrying
                    
                    
                    FairAmount
                    
                    
                    Value
                    
                    
                    Amount
                    
                    
                    ValueFinancial
      Assets:Cash
      and cash equivalents
                    
                    $
                    9,940,737
                    
                    
                    $
                    9,940,737
                    
                    
                    $
                    10,214,016
                    
                    
                    $
                    10,214,016Securities
      available for sale
                    
                    
                    2,504,385
                    
                    
                    
                    2,504,385
                    
                    
                    
                    2,984,945
                    
                    
                    
                    2,984,945Federal
      Home Loan Bank stock
                    
                    
                    296,500
                    
                    
                    
                    296,500
                    
                    
                    
                    296,500
                    
                    
                    
                    296,500Loans,
      net
                    
                    
                    78,237,012
                    
                    
                    
                    78,405,576
                    
                    
                    
                    92,562,338
                    
                    
                    
                    92,675,811Accrued
      interest receivable
                    
                    
                    531,566
                    
                    
                    
                    531,566
                    
                    
                    
                    390,165
                    
                    
                    
                    390,165Cash
      surrender value of life insurance
                    
                    
                    2,544,005
                    
                    
                    
                    2,544,005
                    
                    
                    
                    2,464,771
                    
                    
                    
                    2,464,771Financial
      Liabilities:Deposits
                    
                    
                    95,359,664
                    
                    
                    
                    95,640,487
                    
                    
                    
                    106,509,580
                    
                    
                    
                    107,009,991Accrued
      interest payable
                    
                    
                    306,300
                    
                    
                    
                    306,300
                    
                    
                    
                    621,045
                    
                    
                    
                    621,045Federal
      Home Loan Bank and other borrowings
                    
                    
                    4,371,254
                    
                    
                    
                    4,441,402
                    
                    
                    
                    6,338,497
                    
                    
                    
                    6,495,938





Note
      5.
            Securities
      Available for Sale





Securities
      have been classified in the balance sheet according to management’s intent
      as securities available for sale.  The amortized cost and
      approximate fair value of securities are as
  follows:


15





September 30,
      2010Gross
                          
                          
                          GrossAmortized
                          
                          
                          Unrealized
                          
                          
                          Unrealized
                          
                          
                          FairCost
                          
                          
                          Gains
                          
                          
                          Losses
                          
                          
                          ValueDebt
      securities available for sale:U.S.
      Government- sponsored Enterprises (GSEs)
                          
                          $
                          2,500,000
                          
                          
                          $
                          4,385
                          
                          
                          $
                          -
                          
                          
                          $
                          2,504,385December 31,
      2009Gross
                          
                          
                          GrossAmortized
                          
                          
                          Unrealized
                          
                          
                          Unrealized
                          
                          
                          FairCost
                          
                          
                          Gains
                          
                          
                          Losses
                          
                          
                          ValueDebt
      securities available for sale:U.S.
      Government- sponsored Enterprises (GSEs)
                          
                          $
                          3,000,000
                          
                          
                          $
                          2,490
                          
                          
                          $
                          (17,545
                          )
                          
                          $
                          2,984,945





U.S.
      Government sponsored enterprises include entities such as Federal National
      Mortgage Association, Federal Home Loan Mortgage Corporation, and Federal
      Home Loan Banks.





The
      securities have maturity dates of one to five
  years.





Securities
      with a carrying value of approximately $2,504,000 at September 30, 2010
      were pledged to secure a federal funds line of credit with First National
      Bankers Bank, Alabama.





Upon
      acquisition of a security, the Company determines the appropriate
      impairment model that is applicable.  If the security is a
      beneficial interest in securitized financial assets, the Company uses the
      beneficial interests in securitized financial assets impairment
      model.  If the security is not a beneficial interest in
      securitized financial assets, the Company uses the debt and equity
      securities impairment model.  The Company conducts periodic
      reviews to evaluate each security to determine whether an
      other-than-temporary impairment has occurred.  The Company does
      not have any securities that have been classified as
      other-than-temporarily-impaired at September 30,
  2010.





Note
      6.
            Subsequent
      Events





Management
      evaluated subsequent events through the date the financial statements were
      issued.  Material events or transactions occurring after
      September 30, 2010, that provided additional evidence about conditions
      that existed at September 30, 2010, have been recognized in the financial
      statements for the period ended September 30, 2010.  Events or
      transactions that provided evidence about conditions that did not exist at
      September 30, 2010, have not been recognized in the financial statements
      for the period ended September 30,
2010.


16





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




Impact
of Inflation


The
consolidated financial statements and related financial data presented herein
have been prepared in accordance with accounting principles generally accepted
in the United States and practices within the banking industry that require the
measurement of financial position and operating results in terms of historical
dollars without considering the changes in the relative purchasing power of
money over time due to inflation.  Unlike most industrial companies,
virtually all the assets and liabilities of a financial institution are monetary
in nature.  As a result, interest rates have a more significant impact on a
financial institution’s performance than the effects of general levels of
inflation.




Critical
Accounting Estimates




The
Company follows generally accepted accounting principles that are recognized in
the United States, along with general practices within the banking
industry.  In connection with the application of those principles and
practices, we have made judgments and estimates which, in the case of our
allowance for loan and lease losses (“ALLL”), are material to the determination
of our financial position and results of operation.  Other estimates relate
to the valuation of assets acquired in connection with foreclosures or in
satisfaction of loans, and realization of deferred tax assets.




Recent
Accounting Pronouncements




In July
2010, the FASB issued Accounting Standards Update No. 2010-20 ("ASU
2010-20"),Disclosures about the
Credit Quality of Financing Receivables and the Allowance for Credit
Losses (ASC Topic 310, Receivables).   ASU
2010-20 will improve transparency by requiring expanded disclosures about the
credit quality of our loans and the related reserves against
them.  ASU 2010-20 is effective for interim and annual reporting
periods ending on or after December 15, 2010.  The adoption of this
standard is not expected to materially impact the Company's consolidated
financial statements.




The
Company has determined that all other recently issued accounting pronouncements
will not have a material impact on its consolidated financial statements or do
not apply to its operations.




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 “may”, “will”,
“anticipate”, “assume”, “should”, “indicate”, “attempt”, “would”, “believe”,
“contemplate”, “expect”, “seek”, “estimate”, “continue”, “plan”, “point to”,
“project”, “predict”, “could”, “intend”, “target”, “potential”, “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
materially from the results anticipated, but not guaranteed, in this Report,
include those factors included in Part I Item 1A of the Company’s Annual Report
on Form 10-K for the year ended December 31, 2009 and include (without
limitation) deterioration in the financial condition of borrowers resulting in
significant increases in loan losses, and provisions for those losses, economic
and social conditions, competition for loans, mortgages, and other financial
services and products, results of regulatory examinations and/or efforts to
comply with the requirements of regulatory proceedings, including the obligation
to raise additional capital, 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.


17


General





On
January 23, 2004, American Patriot Financial Group, Inc. (the “Company”), a bank
holding company, acquired all of the outstanding shares of American Patriot Bank
(the “Bank”) in a one for one stock exchange.  The Bank is a
Tennessee-chartered, FDIC-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 main office
of the Company is located at 3095 East Andrew Johnson Highway, Greeneville,
Greene County, Tennessee, which is also the main office of the
Bank.  This location is a 2.66 acre lot, on which there is a fully
operational modular bank unit.  Other full service branch banking
offices of the Bank are located at 506 Asheville Highway and 208 West Summer
Street, Greeneville, Greene County, Tennessee.  During 2007 the Bank
purchased property in Maryville, Tennessee at 710 South Foothills Plaza
Drive.  This location is a 1.17 acre lot, on which there is a 3,272
square foot fully operational brick bank building with drive through facilities
that was opened for business on July 9, 2007.  These locations are
centrally located and in high traffic/exposure areas.  Automatic
teller machines and overnight "deposit drops" are positioned to serve the Bank's
clients.  Additional branches may be established as market
opportunities surface or existing branch locations may be sold or closed if in
the opinion of the Company such closure or sale is appropriate.





Liquidity





At September 30, 2010, the Company had
liquid assets of approximately $12.4 million in the form of cash, federal funds
sold and securities available for sale compared to approximately $13.2 million
on December 31, 2009.  Management believes that the liquid assets are
adequate at September 30, 2010. Additional liquidity should be provided by loan
repayments.  The Company also has the ability to purchase federal funds.
Management has taken a pro-active approach to develop a larger local deposit
base to help reduce any risk of over reliance on non-core funding including
brokered deposits.





Results
of Operations





The Company had a net loss to common
shareholders of $(65,609) or $(.03) per share for the quarter ended September
30, 2010 compared to a net loss of $(883,195)or $(.37) per share for the quarter
ended September 30, 2009.  The Company had a net loss to common
shareholders for the nine months ended September 30, 2010 of $(1,394,488)
or $(.58) per share as compared to a net loss of $(2,382,387) or ($1.00) per
share for the same period in 2009.  A significant provision for loan
losses was the primary cause of the net loss in the three and nine month periods
ended September 30, 2010 coupled with substantial FDIC assessments and increased
collection, OREO and workout expenses.  During the quarter ended
September 30, 2010, the Company recorded a provision for loan losses of
$293,179, while recording a provision for loan losses of $771,586 for the same
period in 2009. For the nine months ended September 30, 2010, the provision for
loan losses was $1,141,080 compared to $2,796,581 for the comparable period in
2009.


18


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.  Interest income for the quarter
ended September 30, 2010 was $1,260,136 compared to $1,529,984 for the same
period in 2009, and total interest expense was $456,504 in the third quarter of
2010 compared to $717,389 in 2009 for the same period.  Interest
income for the nine months ended September 30, 2010 was $4,039,234, compared to
$4,707,286 for the same period in 2009, and total interest expense was
$1,503,043 in the first nine months of 2010 compared to $2,341,273 in 2009 for
the same period.  Net interest margin, calculated as the ratio of net
interest income to average earning assets, for the three months ended September
30, 2010 was 3.53% compared to 2.92% for the same period in 2009.  The
net interest margin for the nine months ended September 30, 2010 was 3.47%,
compared to 2.81% for the same period in 2009.  Our net interest
margin has begun to stabilize in 2010 and improve as compared to 2009 comparable
periods and should continue to do so for the remainder of the year as deposits,
primarily time deposits, continue to reprice to lower interest
rates.  If interest rates remain stable,  net interest
margin should continue to increase.  However, rate floors in many of
our variable rate loans would initially slow or eliminate any increase in net
interest margin if rates were to increase.  Continued elevated levels
of nonaccrual loans will continue to negatively impact our net interest margin.
Net interest income before provision for loan losses decreased by $(8,963) for
the three months ended September 30, 2010, while increasing $170,178 for the
nine months ended September 30, 2010, compared to the comparable periods in
2009.





Provision
for 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 for the three month
and nine month periods ended September 30, 2010 was $293,179 and $1,141,080,
respectively, as compared to $771,586 and $2,796,581 for the same three month
and nine month periods ended September 30, 2009.  During the three and
nine months ended September 30, 2010, loan charge-offs were $127,345 and
$1,515,661, respectively.  The recoveries for the three and nine month
periods ended September 30, 2010 were $8,945 and $44,767,
respectively.  The allowance for loan losses was $2,752,845 at
September 30, 2010 as compared to $3,082,659 at December 31, 2009, a decrease of
10.7%.  The allowance was 3.4% of gross loans at September 30, 2010 as
compared to 3.6% at September 30, 2009 and 3.3% at December 31,
2009.  These continued elevated levels of allowance for loan losses
were primarily caused by provision expense in 2009 and 2010 reflecting the
continued deterioration in the Company’s construction and development loan
portfolio, particularly loans to residential builders and developers for
projects in the Company’s Blount County market as well as continued elevated
unemployment in the Bank’s primary market areas of Greene and Blount Counties,
Tennessee.  The Company’s construction and development loan portfolio
continues to experience weakness due to continuing decreased real estate sales
in the Company’s markets, particularly the Blount County market, which has led
to falling appraisal values of the collateral which secures the Company’s
construction and development loan portfolio.  The Company’s
collateral, for substantially all construction and development loans, is its
primary source of repayment and as the value of the collateral deteriorates,
ultimate repayment by the borrower becomes increasingly unlikely and the Bank is
required to charge off the loan down to the new collateral value. Management
feels that the allowance for loan losses is adequate at September 30, 2010.
However, there can be no assurance that additional provisions for loan losses
will not be required in the future, including as a result of possible changes in
the economic assumptions underlying management’s estimates and judgments,
adverse developments in the economy, and the residential real estate market in
particular, or changes in the circumstances of particular borrowers. 
Management intends to pursue more aggressive strategies for problem loan
resolution, and is committed to bolster loan loss reserves to levels sufficient
to absorb losses recognized in the pursuit of this
strategy.


19


Provision
(Benefit) for/from Income Taxes





The Company had no expense or benefit
from income taxes for the three and nine months ended September 30, 2010, as
compared to a benefit of $(10,912) and $(941,253) for the three and nine months
ended September 30, 2009. The significant decline from 2009 was the result of a
valuation allowance on a substantial portion of our deferred tax assets during
2010. The tax benefit created by the net loss during the quarter was offset by
additional deferred tax asset valuation.





Noninterest
Income





The Company's noninterest income
consists of service charges on deposit accounts and other fees and
commissions.  Total noninterest income for the three and nine months
ended September 30, 2010 was $592,688 and $856,170, respectively compared to
$150,459 and $447,255 for the same periods in 2009.  Service charges
on deposit accounts decreased $23,322 and $39,548 for the three and nine months
ended September 30, 2010 respectively, compared to the same periods in 2009. The
primary cause of the decline in service charges between 2009 and 2010 was
related to declines in NSF and overdraft fees. In addition, a reduction in NSF
charges is being noted nationwide as a result of the current economy and reduced
consumer spending. These fees are primarily activity driven and relate to
transaction based checking accounts.  The Bank noted a significant decline
in checking account customers when comparing the first nine months of 2010 to
the first nine months of 2009, and a corresponding decrease in NSF and overdraft
transactions during the first nine months of 2010, as compared to the first nine
months of 2009. The sharp increase in other noninterest income for the three and
nine months ended September 30, 2010, compared to the same periods in 2009 is
due mostly from an insurance recovery of $467,196 received in September
2010.





Noninterest
Expense





Noninterest expenses totaled $1,162,219
and $3,632,411 for the three and nine months ended September 30, 2010, as
compared to $1,085,575 and $3,340,327 for the same periods in 2009.  
Salaries and benefits decreased $66,237 and $200,699 for the three and nine
months ended September 30, 2010, respectively, when compared to the same periods
in 2009.  The decrease in salaries and benefits is due to reductions in
senior level management positions and a general overall reduction in staff
levels. Legal and professional fees increased $53,398 for the three months ended
September 30, 2010, while decreasing $81,597 for nine months ended September 30,
2010, as compared to the same periods in 2009.  Management continues to
incur additional expenses to meet the demands of regulatory requirements,
including compliance with Section 404 of the Sarbanes-Oxley Act of 2002, in
addition to strategic plan development. The Company has also incurred
significant noninterest expense increases in other operating expenses primarily
as a result of increased collection, workout and OREO expenses, ATM expenses,
and FDIC insurance and state banking assessments.  Combined, operating
expenses relating to all other expenses increased $89,483 and $574,380 for the
three and nine months ended September 30, 2010, respectively, compared to the
same periods in 2009.


20


Financial
Condition





Total
assets at September 30, 2010, were $103,622,344, a decrease of $14,591,894 or
12.3% compared to 2009 year-end assets of $118,214,238.  Deposits decreased
to $95,359,664 at September 30, 2010, a decrease of $11,149,916 or 10.5%
from $106,509,580 at December 31, 2009. Premises and equipment decreased to
$4,860,288 at September 30, 2010 a decrease of $186,759, or 3.7%, from
$5,047,047 at December 31, 2009, primarily as a result of minimal fixed
asset purchases coupled with normal depreciation charges.  Other
significant changes noted as of September 30, 2010 when compared to December 31,
2009 relate to foreclosed assets which increased by $873,483 or 25.6% to $4.3
million at September 30, 2010 compared to $3.4 million at December 31,
2009.  The Company anticipates that foreclosed real estate assets and
related charges will remain at elevated levels throughout 2010 and into
2011.





The Company places an emphasis on an
integrated approach to its balance sheet management. Significant balance sheet
components of 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 $78,237,012 at September 30, 2010 compared to $92,562,338 at
December 31, 2009, a decrease of $14,325,326 or 15.5%. The decrease in loan
volume is largely attributable to management’s strategy to decrease
concentrations in certain loan types, particularly residential real estate
construction and development loans, and the movement during the second quarter
of 2010 of one large real estate loan totaling $1,086,704 to foreclosed real
estate following completion of foreclosure.  Management is monitoring
the portfolio closely and believes it has identified and properly reserved for
all major problem credits in the portfolio.  In the event that a loan
is ninety days or more past due, the accrual of income is generally discontinued
when the full collection of principal and interest is in doubt unless the
obligations are both well secured and in the process of
collection.  At September 30, 2010 there was $5,098,190 in loans not
accruing interest as compared to $7,790,863 at December 31, 2009. Although
reduced from December 31, 2009 levels as a result of some of these loans being
foreclosed on and transferred to foreclosed real estate, the level of nonaccrual
loans remains elevated over historical levels as a result of the continued
weakened real estate market in the Company’s market areas, particularly its
Blount County market.  Within this segment of the loan portfolio, the
Company makes loans to home builders and developers and sub-dividers of
land.  These borrowers have experienced stress due to a combination of
declining residential real estate demand and resulting price and collateral
value declines.  Further, housing starts in the Company’s market areas
continue to lag at historical levels.





The
following is a summary of information pertaining to impaired
loans:





September
      30,
                      
                      
                      December
      31,2010
                      
                      
                      2009Impaired
      loans without a specific valuation allowance
                      
                      $
                      8,069,976
                      
                      
                      $
                      5,324,899Impaired
      loans with a specific valuation allowance
                      
                      $
                      4,615,935
                      
                      
                      $
                      6,622,969Total
      specifically evaluated impaired loans
                      
                      $
                      12,685,911
                      
                      
                      $
                      11,947,868Specific
      valuation allowance related to impaired loans
                      
                      $
                      988,675
                      
                      
                      $
                      2,049,912


21


In
addition to the specifically evaluated impaired loans above, the Bank
collectively evaluates large groups of smaller balance homogeneous loans for
impairment.  Loans collectively evaluated for impairment, with a
classification of, substandard and doubtful, as of September 30, 2010 and
December 31, 2009 were $346,653 and $2,972,100 respectively.  The Bank
has reserved $36,525 and $101,994 related to these loans as of September 30,
2010 and December 31, 2009, respectively.




There are
no commitments to lend additional funds to any of the impaired
borrowers.




As of
September 30, 2010, the Company has identified loans aggregating $12,685,911 as
being impaired, of which $5,098,190 are non-performing as it relates to payment
of interest.  The aforementioned total is approximately $740,000 more
than reported at December 31, 2009.  The increase is primarily related
to identified problem assets centered in the Blount County
Market.  Improved collections, obtaining additional collateral, and
foreclosures transferred to OREO have all contributed to slowing the growth of
impaired loans. Continuation of the current challenging economic environment
will likely cause the Company’s real estate construction and land development
loans to continue to underperform and such underperformance, along with
continued stress on individual borrowers, particularly those impacted by the
elevated unemployment rates in the Greene and Blount County markets, have
resulted in increased levels of impaired loans which may negatively impact the
Company’s results of operations.




Nonperforming
Assets







At
September 30, 2010 the Company had $ 9.4 million in nonperforming assets
compared to $11.2 million at December 31, 2009. Included in nonperforming assets
at September 30, 2010 were $ 5.1   million in nonperforming loans
and $4.3 million in other real estate owned. The continued elevated levels of
nonperforming asset balances that the Company continues to experience is
primarily related to a weakened residential real estate market in the Company’s
primary markets. Home builders and developers and sub-dividers of land have
continued to experience stress due to a combination of declining residential
demand for new housing and resulting price and collateral value declines in the
Company’s market areas. The Company believes that its nonperforming asset levels
will remain elevated throughout the remainder of 2010 and into 2011 as it works
diligently to remediate these assets.




Restricted
Equity Investments




Federal
Home Loan Bank (“FHLB”) stock at September 30, 2010 had an amortized cost and
market value of $296,500 and remained unchanged from December 31,
2009.   As a member of the FHLB, the Company is required to
maintain stock in an amount equal to .15% of total assets.  Federal
Home Loan Bank stock is carried at cost.  FHLB stock is maintained by
the Company at par value of one hundred dollars per
share.


22


Securities
Available for Sale





Securities have been classified in the
balance sheet according to management’s intent as securities available for
sale.  The amortized cost and approximate fair value of securities at
September 30, 2010 are as follows:





Amortized
                  Cost
                
                
                Gross
                  Unrealized
                  Gains
                
                
                Gross
                  Unrealized
                  Losses
                
                
                Fair
                  ValueDebt
      securities available for sale:U.S.
      Government-sponsored Enterprises (GSE’s)
                
                $
                2,500,000
                
                
                $
                4,385
                
                
                $
                -
                
                
                $
                2,504,385




At September 30, 2010, securities with
a carrying value of $ 2,502,648 were pledged to secure a federal funds line of
credit with the First National Bankers Bank, Alabama.




Deposits




Total deposits, which are the principal
source of funds for the Company, were $95,359,664 at September 30, 2010,
compared to $106,509,580 at December 31, 2009, representing a decrease of
10.5%.  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.   At September 30, 2010 the Company had
outstanding advances of $3,450,254 at the FHLB compared with $5,310,497 at
December 31, 2009.  At September 30, 2010 and December 31, 2009, the
Company also had $900,000 and $1,000,000, respectively, in short-term borrowings
from Jefferson Federal Bank which matures on November 29, 2010 and is secured by
100% of the Bank’s common stock.  Management is currently negotiating
to extend this short-term borrowing but can give no assurance that it will be
able to extend the maturity date. If the Company is unable to extend the
maturity date, Jefferson Federal Bank could choose to foreclose on the loan and
take ownership of the Bank. Further, there are $21,000 in loans due to directors
at September 30, 2010.





Because the Bank is “significantly
undercapitalized” under the prompt corrective action provisions of the FDICIA
and subject to minimum capital requirements in the Order (as defined below), it
may not accept, renew or rollover brokered deposits.  It is also
prohibited from paying interest on deposits at rates higher than certain
nationally prescribed rates.  These limitations could place pressure
on the Bank’s liquidity as it may be unable to retain deposits as they
mature.




Capital
and Regulatory Matters





Pursuant to the terms of the Cease and
Desist Order (the “Order”) that the Bank entered into with the FDIC during the
second quarter of 2009, as more fully described below, the Bank is required to
develop and implement a capital plan that increases the Bank’s Tier 1 capital
ratio, Tier 1 risk-based capital ratio and Total risk-based capital ratio to 8%,
10% and 11%, respectively.  The capital plan has been submitted to the
FDIC and the Tennessee Department of Financial Institutions (the “TDFI”) for
approval. The capital plan has not yet been approved by the FDIC or the TDFI,
but, once approved, the Company must immediately initiate measures to effect
compliance with the capital plan within 30 days after the FDIC and the TDFI
respond to the capital plan.


23


As a result of the Bank’s total
risk-based capital ratio falling below 8% at June 30, 2009 and remaining in this
category at September 30, 2010, the Bank was considered undercapitalized since
that date (and as described below is now significantly undercapitalized) and it
is subject to the provisions of Section 38 of the Federal Deposit Insurance Act,
which among other things: (i) restricts payment of capital distributions and
management fees; (ii) requires that the FDIC monitor the condition of the Bank;
(iii) required submission of a capital restoration plan within 45 days; (iv)
restricts the growth of the Bank's assets; and (v) requires prior approval of
certain expansion proposals, many of which restrictions or obligations,
including the requirement to submit a capital restoration plan, the Bank was
already subject to as a result of the Order. The Bank has submitted its capital
restoration plan to the FDIC for approval, but the plan has not yet been
approved by the FDIC.





In order to secure the approval of the
FDIC of the Bank’s capital plan, the Company executed on August 31, 2010, a
Capital Maintenance Commitment and Guaranty (the “Commitment”) with the FDIC,
which remains subject to the FDIC’s approval and execution.  Pursuant
to the Commitment, the Company will be required to provide the FDIC assurance in
the form of a financial commitment and guaranty that the Bank will comply with
the Bank’s capital restoration plan until the Bank has been adequately
capitalized on average during each of four consecutive quarters and, in the
event the Bank fails to so comply, to pay to the Bank the lesser of five percent
of the Bank's total assets at the time the Bank was undercapitalized, or the
amount which is necessary to bring the Bank into compliance with all capital
standards applicable to the Bank at the time it failed to comply.





In August
2010, the FDIC notified the Bank that, due to the Bank’s “significantly
undercapitalized” status, it intended to issue the Bank a prompt corrective
action directive requiring the Bank to submit an acceptable capital restoration
plan on or before August 31, 2010 providing that, among other things, at a
minimum the Bank shall restore and maintain its capital to the level of
“adequately capitalized.”  This directive was issued on August 17,
2010.  In the event that the Bank does not increase its Tier 1 capital
in accordance with the requirements of this directive, the Bank will be required
under the directive to take any necessary action to result in the Bank’s
acquisition by another depository institution holding company or merge with
another insured depository institution.  A capital restoration plan
has been submitted, however it was subsequently rejected. A revised plan will be
submitted and the Company will be required to guarantee this capital restoration
plan submitted pursuant to the directive to the same extent described in the
immediately preceding paragraph. If the Bank is unable to raise capital to the
levels required by the directive or, thereafter, to take action necessary to be
acquired or merge with another insured depository institution, the FDIC could
place the Bank into receivership.  The directive also imposes certain
limitations on the Bank’s operations, many of which the Bank is already subject
to under the terms of the Order or as a result of the Bank falling below
“adequately capitalized” at June 30, 2009, including limitations on the Bank’s
ability to pay dividends, to pay management fees to the Company, to grow the
Bank’s asset base, to make acquisitions, establish new branches or engage in new
lines of business, to pay board and committee fees, to accept, renew or rollover
brokered deposits and to pay interest rates on deposits above prescribed
national rates.  The terms of the directive require that the directive
shall remain effective until the Bank has been “adequately capitalized” on
average for four consecutive quarters.





The Bank
and the Company are currently evaluating their respective capital options and
the Company believes that it will need to issue additional shares of common or
preferred stock to achieve compliance with the minimum capital ratios set forth
in the Order.  Alternatively, the Company may be required to seek
another company with which to merge or by which to be acquired.


24


Equity capital at September 30, 2010
was $3,095,449, a decrease of $1,220,841 from $4,316,290 at December 31, 2009,
due to a net loss of $1,381,130 offset in part by an unrealized holding gain on
available for sale securities of $11,995 and the sale of $192,000 of preferred
stock minus the issuance cost of $43,706.





At September 30, 2010, the Bank’s Tier
1 risk-based capital ratio was in excess of the regulatory
minimums.  The Bank’s Tier 1 leverage ratio and Total risk-based
capital ratio, however, were less than the required minimum ratios and the Bank,
accordingly, now falls within the category of “significantly undercapitalized”
within the FDIC’s prompt corrective action provisions. In addition to the
limitations on the Bank’s activities mandated by the Order and the prompt
corrective action directive, the Bank, because it is significantly
undercapitalized, is also now subject to determinations by the FDIC to require
the Bank to be recapitalized, to restrict transactions with affiliates, restrict
interest paid on deposits and to require changes in the directorate and/or
senior management.  The Bank’s respective ratios at September 30, 2010
were as follows:





Required
                    Minimum
                    Ratio
                  
                  
                  To be
                    Well
                    Capitalized
                  
                  
                  Requirements
                    Under the
                    Order
                  
                  
                  BankTier
      1 Leverage ratio
                  
                  
                  4.00
                  %
                  
                  
                  5.00
                  %
                  
                  
                  8.00
                  %
                  
                  
                  3.63
                  %Tier
      1 risk-based capital ratio
                  
                  
                  4.00
                  %
                  
                  
                  6.00
                  %
                  
                  
                  10.00
                  %
                  
                  
                  4.69
                  %Total
      risk-based capital ratio
                  
                  
                  8.00
                  %
                  
                  
                  10.00
                  %
                  
                  
                  11.00
                  %
                  
                  
                  5.97
                  %





Liability
and Asset Management





The
Company’s Asset/Liability Committee (“ALCO”) actively measures and manages
interest rate risk using a process developed by the Company.  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, 2010, approximately 67.1 % of the Company’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 by the
Company.  Because the majority of the Company’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
Company’s adjustable rate assets also mitigate interest rate sensitivity in a
decreasing rate environment.  However, there is increasing pressure to
adjust the floor rates downward in the adjustable rate portfolio as customers
become more cost conscious and competition becomes more
aggressive.


25


Off-Balance
Sheet Arrangements




At September 30, 2010, the Company had
outstanding unused lines of credit and standby letters of credit that totaled
approximately $5.6 million.  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 Company has the ability to liquidate federal funds
sold or, on a short-term basis, to purchase federal funds from another bank and
to borrow from the Federal Home Loan Bank.  At September 30, 2010, the
Company had established with a correspondent bank the ability to purchase
federal funds if needed.




Item
3.  Quantitative and Qualitative Disclosures about Market Risk




The
information set forth on pages 17 through 26 of Item 2, “MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS”, is incorporated
herein by reference.




Item
4.  Controls and Procedures




a)
            Evaluation of
      Disclosure Controls and
Procedures




The
Company maintains disclosure controls and procedures, as defined in
Rule 13a-15(e) and 15d-15(e) promulgated under the Securities
Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that
information required to be disclosed by it in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time period specified in the SEC’s rules and forms and that such
information is accumulated and communicated to the Company’s management,
including its Chief Executive Officer and Chief Financial Officer.  The
Company carried out an evaluation, under the supervision and with the
participation of its management, including its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of its
disclosure controls and procedures as of the end of the period covered by this
report.  Based on the evaluation of these disclosure controls and
procedures, the Chief Executive Officer and Chief Financial Officer concluded
that the Company’s disclosure control and procedures were
effective.





b)
            Changes in Internal
      Controls and Procedures




There
were no changes in our internal controls over financial reporting during the
quarter ended September 30, 2010, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.


26


PART
II - OTHER INFORMATION





Item
1.  LEGAL PROCEEDINGS





None.




Item
1A.   RISK FACTORS





There were no material changes to
the Company’s risk factors as previously disclosed in Part I, Item 1A, of the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009
as updated in the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2010.





Item
2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





(a)
            On
      June 29, 2010, the Company sold an aggregate of 15 shares of preferred
      stock for gross proceeds of $192,000. The  preferred stock was sold
      directly to the residents of the State of Tennessee pursuant to the
      exemption from registration requirements under Section 3(a)(11) of the
      Securities Act of 1933 for offers or sales of securities made to
      registrants of a single
state.




(b)
            Not
      applicable.




(c)
            No
      repurchases of Company securities were made during the quarter ended
      September 30, 2010.




The
Company's ability to pay dividends is derived from the income of the
Bank.  The Bank's ability to declare and pay dividends is limited by
its obligations to maintain sufficient capital by the terms of the Order and the
prompt corrective action directive issued by the FDIC and by other general
restrictions on its dividends that are applicable to banks that are regulated by
the FDIC and the TDFI.  In addition, the Federal Reserve Board may
impose restrictions on the Company's ability to pay dividends on its common
stock.  As a result, the Company cannot assure its shareholders that
it will declare or pay dividends on shares of its common stock in the future and
the Company has never paid dividends in the past.




Item
3.   DEFAULTS UPON SENIOR SECURITIES





(a)
            None.




(b)
            None.




Item
4.   (REMOVED AND RESERVED).





Item
5.   OTHER INFORMATION





(a)  
None.




(b)  None.


27


Item
6. EXHIBITS.





Index to Exhibits.





Exhibit No.
              
              Description3.1*
              
              Charter
      of American Patriot Financial Group, Inc.3.2*
              
              Bylaws
      of American Patriot Financial Group, Inc.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 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 200232.2
              
              Certification
      pursuant to Rule 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002





*
            Previously
      filed as an exhibit to a Current Report on Form 8-K filed by American
      Patriot Financial Group, Inc. (f/k/a BG Financial Group, Inc.) with the
      Commission on May 21, 2004.


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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 thereunto
duly authorized.





AMERICAN PATRIOT FINANCIAL
GROUP, INC.


(Registrant)


DATE:
              November 15, 2010
              
              /s/ John D. BelewJohn
      D. BelewChief
      Executive OfficerDATE:
              November 15, 2010
              
              /s/ T. Don WaddellT.
      Don WaddellChief
      Financial Officer


29