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**UNITED STATESSECURITIES 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 March 31, 2009**                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                    |
| **OR**                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                    |   |
| o                                                                                                                                                                                                                                                       | **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 asspecified in its charter)

 

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

 

Registrant’s telephonenumber, including area code:  **(423)636-1555**

 

**NotApplicable**

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

 

Indicate by check mark whether the registrant: (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90days.  YES x  NO o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T (§ 232.405 of this chapter) during the preceding 12months (or for such shorter period that the registrant was required to submitand post such files).  Yes   ̈  No   ̈

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company.   Seedefinition of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 

| Large accelerated filer  o | Accelerated filer o          |
|----------------------------|-----------------------------------|
|                       |                              |
| Non-accelerated filer o    | Smaller reporting  company x |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act.) YES  o NO x

 

As of May 1,2009, there were 2,389,391 shares of common stock, $0.333 par value, issued andoutstanding.

 

 

 

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# ***PART I - FINANCIAL INFORMATION***

# *** ***

| **Item 1.**                           | **Financial  Statements.**                                                                                    |
|---------------------------------------|---------------------------------------------------------------------------------------------------------------|
|                                  |                                                                                                          |
|                                  | The consolidated financial statements of the Registrant and its  wholly owned subsidiary are as follows:      |
|                                  |                                                                                                          |
|                                  | Consolidated Balance Sheets – March 31, 2009  (unaudited) and December 31, 2008.               |
|                                  |                                                                                                          |
|                                  | Consolidated Statements of Income - For the three  months ended March 31, 2009 and 2008 (unaudited).     |
|                                  |                                                                                                          |
|                                  | Consolidated Statements of Cash Flows - For the three  months ended March 31, 2009 and 2008 (unaudited). |
|                                  |                                                                                                          |
|                                  | Notes to Consolidated Financial Statements.                                                                   |
|                                  |                                                                                                          |
| **Item 2.**                           | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations.**              |
|                                  |                                                                                                          |
| **Item 3.**                           | **Quantitative  and Qualitative Disclosures about Market Risk.**                                              |
|                                  |                                                                                                          |
| **Item 4T.**                          | **Controls and  Procedures.**                                                                                 |
|                                  |
| **PART II  - OTHER INFORMATION** |
|                                  |
| **Item 1.**                           | **Legal Proceedings.**                                                                                        |
|                                  |                                                                                                          |
| **Item 1A.**                          | **Risk Factors.**                                                                                             |
|                                  |                                                                                                          |
| **Item 2.**                           | **Unregistered  Sales of Equity Securities and Use of Proceeds.**                                             |
|                                  |                                                                                                          |
| **Item 3.**                           | **Defaults  Upon Senior Securities.**                                                                         |
|                                  |                                                                                                          |
| **Item 4.**                           | **Submission  of Matters to a Vote of Security Holders.**                                                     |
|                                  |                                                                                                          |
| **Item 5.**                           | **Other Information.**                                                                                        |
|                                  |                                                                                                          |
| **Item 6.**                           | **Exhibits.**                                                                                                 |

 

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*** ***

**AMERICAN PATRIOT FINANCIAL GROUP,INC. AND SUBSIDIARY**

**Greeneville, Tennessee**

**CONSOLIDATED BALANCE SHEETS**

** **

**Part I. FINANCIAL INFORMATION**

** **

**Item 1. Financial Statements**

 
| ** **                                                                                                                                               | ** ** | **As of**               | ** **      | **As of**                  | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|-----------------|----------------------------|------------|
| ** **                                                                                                                                               | ** ** | **March 31, 2009** | ** **      | **December 31, 2008** | ** ** |
| ** **                                                                                                                                               | ** ** | **(Unaudited)**         | ** **      | ** **                 | ** ** |
| **ASSETS**                                                                                                                                               |       |                    |            |                       |       |
|                                                                                                                                                     |       |                    |            |                       |       |
| Cash and due  from banks                                                                                                                                 |       | $                       |  2,674,884 |                       | $          |  2,690,246 |   |
| Federal funds  sold                                                                                                                                      |       | 10,216,441              |            | 3,706,160                  |       |
| Cash and cash  equivalents                                                                                                                               |       | 12,891,325              |            | 6,396,406                  |       |
| Federal Home  Loan Bank stock, at cost                                                                                                                   |       | 296,500                 |            | 291,200                    |       |
| Loans, net of  estimated allowance for loan losses of $2,532,432 in 2009 and $2,373,648 in  2008                                                         |       | 104,066,392             |            | 103,327,562                |       |
| Premises and  equipment, net                                                                                                                             |       | 5,241,188               |            | 5,317,685                  |       |
| Accrued interest  receivable                                                                                                                             |       | 493,421                 |            | 505,460                    |       |
| Deferred tax  assets, net                                                                                                                                |       | 1,129,842               |            | 788,325                    |       |
| Foreclosed  assets                                                                                                                                       |       | 1,242,837               |            | 394,579                    |       |
| Cash surrender  value of bank owned life insurance                                                                                                       |       | 2,383,229               |            | 2,353,498                  |       |
| Other assets                                                                                                                                             |       | 224,818                 |            | 218,111                    |       |
| Total Assets                                                                                                                                             |       | $                       | 127,969,552     |                       | $          | 119,592,826 |   |
| ** **                                                                                                                                               | ** ** | ** **              | ** **      | ** **                 | ** ** |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                           | ** ** | ** **              | ** **      | ** **                 | ** ** |
|                                                                                                                                                     |       |                    |            |                       |       |
| **LIABILITIES**                                                                                                                                          |       |                    |            |                       |       |
| Deposits:                                                                                                                                                | ** ** | ** **              | ** **      | ** **                 | ** ** |
| Noninterest-bearing  demand                                                                                                                              |       | $                       |  7,792,120 |                       | $          |  7,937,765 |   |
| Interest-bearing                                                                                                                                         |       |                    |            |                       |       |
| Money market,  interest checking and savings                                                                                                             |       | 28,887,576              |            | 25,490,810                 |       |
| Time deposits                                                                                                                                            |       | 75,970,238              |            | 70,310,602                 |       |
| Total Deposits                                                                                                                                           |       | 112,649,934             |            | 103,739,177                |       |
| Accrued interest  payable                                                                                                                                |       | 676,748                 |            | 522,592                    |       |
| Other  liabilities                                                                                                                                       |       | 457,939                 |            | 476,003                    |       |
| Federal Home  Loan Bank and other borrowings                                                                                                             |       | 6,410,717               |            | 6,506,805                  |       |
| Total  Liabilities                                                                                                                                       |       | 120,195,338             |            | 111,244,577                |       |
| ** **                                                                                                                                               | ** ** | ** **              | ** **      | ** **                 | ** ** |
| **Commitments  and contingencies**                                                                                                                       | ** ** | ** **              | ** **      | ** **                 | ** ** |
| ** **                                                                                                                                               | ** ** | ** **              | ** **      | ** **                 | ** ** |
| **STOCKHOLDERS’  EQUITY**                                                                                                                           | ** ** | ** **              | ** **      | ** **                 | ** ** |
| Stock:                                                                                                                                                   | ** ** | ** **              | ** **      | ** **                 | ** ** |
| Preferred stock,  no par value; authorized 1,000,000 shares; none issued and outstanding                                                                 | ** ** | —                  | ** **      | —                     | ** ** |
| Common stock,  $0.333 par value; authorized 6,000,000 shares; issued and outstanding 2,389,391  shares at March 31, 2009 and December 31, 2008 |       | 796,337                 |            | 796,337                    |       |
| Additional  paid-in capital                                                                                                                              |       | 7,167,260               |            | 7,167,260                  |       |
| Retained  earnings (deficit)                                                                                                                             |       | (189,383                | )               | 384,652                    |       |
| Total  Stockholders’ Equity                                                                                                                         |       | 7,774,214               |            | 8,348,249                  |       |
| Total  Liabilities and Stockholders’ Equity                                                                                                         |       | $                       | 127,969,552     |                       | $          | 119,592,826 |   |

 

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

 

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**AMERICANPATRIOT****FINANCIAL GROUP, INC. AND SUBSIDIARY**

**Greeneville,Tennessee**

**CONSOLIDATED STATEMENTS OF INCOME**

**(Unaudited)**

** **
| ** **                                                            | ** ** | **Three****Months****Ended** | ** **     |
|-----------------------------------------------------------------------|------------|------------------------------|----------------|
| ** **                                                            | ** ** | **March 31,  2009**     | ** **     | **March 31,  2008** | ** ** |
| ** **                                                            |       |                         |           |   |   |
| **Interest  and dividend income:**                                    |       |                         |           |   |   |
| Loans, including  fees                                                |       | $                            | 1,666,590      |   | $ | 1,931,059 |   |
| Dividends on  Federal Home Loan Bank stock                            |       | 3,294                        |           | 78 |   |
| Federal funds  sold and other                                         |       | 3,314                        |           | 44,448 |   |
| Total interest  and dividend income                                   |       | 1,673,198                    |           | 1,975,585 |   |
|                                                                  |       |                         |           |   |   |
| **Interest  expense:**                                                | ** ** | ** **                   | ** **     | ** ** | ** ** |
| Deposits                                                              |       | 745,617                      |           | 966,427 |   |
| Borrowed funds                                                        |       | 65,506                       |           | 17,345 |   |
| Total interest  expense                                               |       | 811,123                      |           | 983,772 |   |
| Net interest  income before provision for  (benefit from) loan losses |       | 862,075                      |           | 991,813 |   |
| ** **                                                            | ** ** | ** **                   | ** **     | ** ** | ** ** |
| **Provision  for (benefit from) loan losses**                         |       | 856,656                      |           | (92,129 | ) |
| Net interest  income after provision for (benefit from) loan losses   | ** ** | 5,419                        | ** **     | 1,083,942 | ** ** |
|                                                                  |       |                         |           |   |   |
| **Noninterest  income:**                                              |       |                         |           |   |   |
| Service charges  on deposit accounts                                  |       | 103,081                      |           | 130,401 |   |
| Fees from  origination of mortgage loans sold                         |       | 10,499                       |           | 6,322 |   |
| Investment sales  commissions                                         |       | —                       |           | 5,478 |   |
| Other                                                                 |       | 35,493                       |           | 35,169 |   |
| Total  noninterest income                                             |       | 149,073                      |           | 177,370 |   |
|                                                                  |       |                         |           |   |   |
| **Noninterest  expense:**                                             |       |                         |           |   |   |
| Salaries and  employee benefits                                       |       | 485,467                      |           | 552,962 |   |
| Occupancy                                                             |       | 146,972                      |           | 154,378 |   |
| Advertising                                                           |       | 22,414                       |           | 18,093 |   |
| Data processing                                                       |       | 83,550                       |           | 81,815 |   |
| Legal and  professional                                               |       | 132,374                      |           | 102,725 |   |
| Other operating                                                       |       | 211,158                      |           | 144,127 |   |
| Total  noninterest expense                                            |       | 1,081,935                    |           | 1,054,100 |   |
| **Income  (loss) before income tax (benefit) expense**                |       | (927,443                     | )              | 207,212 |   |
|                                                                  |       |                         |           |   |   |
| Income tax  (benefit) expense                                         |       | (353,408                     | )              | 73,647 |   |
|                                                                  |       |                         |           |   |   |
| **Net  (loss) income**                                                |       | $                            |  (574,035 | ) | $ |  133,565 |   |
|                                                                  |       |                         |           |   |   |
| Basic net (loss)  income per common share                             |       | $                            |  (.24     | ) | $ |  .06 |   |
| Diluted net  (loss) income per common share                           |       | $                            |  (.24     | ) | $ |  .06 |   |

** **

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

 

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** **

**AMERICAN PATRIOT FINANCIAL GROUP, INC. AND SUBSIDIARY**

**Greeneville,Tennessee**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                                | ** ** | **Three ****Months ****Ended** | ** ** |
|-------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                                | ** ** | **March 31, 2009**             | ** ** | **March 31, 2008** | ** ** |
| ** **                                                                                | ** ** | ** **                               | ** ** | ** ** | ** ** |
| **CASH  FLOWS FROM OPERATING ACTIVITIES:**                                                | ** ** | ** **                               | ** ** | ** ** | ** ** |
| Net (loss)  income                                                                        |       | $                                        | (574,035   | ) | $ | 133,565 |   |
| Adjustments to  reconcile net (loss) income to net cash provided by operating activities: |       |                                     |       |   |   |
| Provision for  (benefit from) loan losses                                                 |       | 856,656                                  |       | (92,219 | ) |
| Depreciation                                                                              |       | 79,197                                   |       | 78,626 |   |
| Gain on sale of  premises and equipment                                                   |       | —                                   |       | (12,300 | ) |
| Write-down of  foreclosed assets                                                          |       | 184,520                                  |       | — |   |
| Realized loss  (gain) on sales of foreclosed assets                                       |       | 1,398                                    |       | (7,221 | ) |
| Deferred income  tax (benefit) expense                                                    |       | (341,517                                 | )          | 9,128 |   |
| Increase in cash  surrender value of bank owned life insurance                            |       | (29,731                                  | )          | (26,838 | ) |
| Net change in:                                                                            |       |                                     |       |   |   |
| Accrued interest  receivable                                                              |       | 12,039                                   |       | (63,137 | ) |
| Other assets                                                                              |       | (6,707                                   | )          | (2,263 | ) |
| Other  liabilities                                                                        |       | (18,064                                  | )          | 58,847 |   |
| Accrued interest  payable                                                                 |       | 154,156                                  |       | 21,174 |   |
| Net cash provided by  operating activities                                                |       | 317,912                                  |       | 97,362 |   |
|                                                                                      |       |                                     |       |   |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES:**                                                | ** ** | ** **                               | ** ** | ** ** | ** ** |
| Proceeds from  sale of foreclosed assets                                                  |       | 14,602                                   |       | 86,716 |   |
| Federal Home  Loan Bank stock purchase                                                    |       | (5,300                                   | )          | — |   |
| Loan  originations and principal collections, net                                         |       | (2,644,264                               | )          | (6,045,677 | ) |
| Additions to  premises and equipment                                                      |       | (2,700                                   | )          | (7,179 | ) |
| Proceeds from  sale of premises and equipment                                             |       | —                                   |       | 12,300 |   |
| Net cash used in  investing activities                                                    |       | (2,637,662                               | )          | (5,953,840 | ) |
|                                                                                      |       |                                     |       |   |   |
| **CASH  FLOWS FROM FINANCING ACTIVITIES:**                                                |       |                                     |       |   |   |
| Net change in  deposits (non-time deposits)                                               |       | 3,251,121                                |       | (4,565,293 | ) |
| Net change in  time deposits                                                              |       | 5,659,636                                |       | 659,145 |   |
| Federal Home  Loan Bank repayments                                                        |       | (96,088                                  | )          | (53,614 | ) |
| Net cash provided by  (used in) financing activities                                      |       | 8,814,669                                |       | (3,959,762 | ) |
|                                                                                      |       |                                     |       |   |   |
| Net change in  cash and cash equivalents                                                  |       | 6,494,919                                |       | (9,816,240 | ) |
|                                                                                      |       |                                     |       |   |   |
| Cash and cash  equivalents at beginning of period                                         |       | 6,396,406                                |       | 15,069,442 |   |
|                                                                                      |       |                                     |       |   |   |
| Cash and cash  equivalents at end of period                                               |       | $                                        | 12,891,325 |   | $ | 5,253,202 |   |

 

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

 

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**AMERICAN PATRIOT FINANCIAL GROUP, INC. AND SUBSIDIARY**

**Greeneville,Tennessee**

**CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)**

**(Unaudited)**

** **
| ** **                                         | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------|------------|----------------------------------|------------|
| ** **                                         | ** ** | **March 31, 2009**     | ** ** | **March 31, 2008** | ** ** |
| ** **                                         | ** ** | ** **                       | ** ** | ** ** | ** ** |
| **SUPPLEMENTARY  CASH FLOW INFORMATION:**          | ** ** | ** **                       | ** ** | ** ** | ** ** |
| Interest paid on  deposits and borrowed funds      |       | $                                | 656,967    |   | $ | 962,598 |   |
| Income taxes  paid                                 |       | $                                | 118,356    |   | $ | — |   |
| ** **                                         | ** ** | ** **                       | ** ** | ** ** | ** ** |
| **SUPPLEMENTAL  SCHEDULE OF NON-CASH ACTIVITIES:** | ** ** | ** **                       | ** ** | ** ** | ** ** |
| Loans moved to  foreclosed/repossessed assets      |       | $                                | 1,048,778  |   | $ | 32,430 |   |

 

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

 

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**AMERICANPATRIOT FINANCIAL GROUP, INC. AND SUBSIDIARY**

**Greeneville, Tennessee**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

**Note 1.**   **Summary of Significant AccountingPolicies**

 

*Nature of Business*:

 

American Patriot Financial Group, Inc.(the “Company”) is a bank holding company which owns all of the outstandingcommon stock of American Patriot Bank (the “Bank”).  The Bank provides a variety of financial servicesthrough their locations in Greeneville and Maryville, Tennessee and surroundingareas.  The Bank’s primary depositproducts are demand deposits, savings accounts, and certificates ofdeposit.  Its primary lending productsare commercial loans, real estate loans, and installment loans.

 

The following is a description of thesignificant policies used in the preparation of the accompanying consolidatedfinancial statements.

 

*Basisof Presentation:*

 

These consolidated financial statementsinclude the accounts of the American Patriot Financial Group, Inc. and itswholly owned subsidiary, American Patriot Bank. Significant intercompany transactions and accounts are eliminated inconsolidation.

 

The accompanying unaudited consolidatedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States for interim financialinformation and in accordance with the instructions to Form 10-Q and Article 8of Regulation  S-X as promulgated by theSecurities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and footnotesrequired by accounting principles generally accepted in the United States forcomplete financial statements.  In theopinion of management, all adjustments (consisting of normal recurringaccruals) considered necessary for a fair presentation of the financialposition and results of operations for the periods presented have beenincluded.  Operating results for thethree months ended March 31, 2009, are not necessarily indicative of theresults that may be expected for the year ending December 31, 2009.  For further information, refer to theconsolidated financial statements and notes thereto included in the Company’sAnnual Report on Form 10-K for the year ended December 31, 2008.  Certain amounts from prior period financialstatements have been reclassified to conform to current period’s presentation.

 

*Use ofEstimates:*

 

The preparation of consolidated financialstatements in conformity with accounting principles generally accepted in theUnited States requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosures of contingentassets and liabilities as of the balance sheet date and the reported amounts ofrevenues and expenses during the reporting period.  Actual results could differ from thoseestimates.  The most significantmanagement accounting estimate is the allowance for loan losses.  The allowance for loan losses is evaluated ona regular basis by management and is based upon management’s periodic review ofthe collectibility of the loans in light of historical experience, the natureand volume of the loan 

 

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portfolio, adverse situations that mayaffect the borrower’s ability to repay, estimated value of any underlyingcollateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates thatare susceptible to significant revision as more information becomes available.

 

**Note 2.**   **Stock Options and Awards**

 

No options weregranted during the period ended March 31, 2009; therefore, no compensationcost is recognized in the consolidated statement of income for the period endedMarch 31, 2009.  The aggregateintrinsic value of options was $21,280 at March 31, 2009.  The aggregate intrinsic value is calculatedas the difference between the exercise price of the underlying option and thequoted market price of the Company’s common stock of $3.89 per common share forthe 38,000 options that were in-the-money at March 31, 2009.

 

**Note 3.**   **Earnings Per Share of Common Stock**

 

Basic earnings per share (EPS) of common stock is computed by dividingnet income by the weighted average number of common shares outstanding duringthe period.  Diluted earnings per shareof common stock is computed by dividing net income by the weighted averagenumber of common shares and potential dilutive common shares outstanding duringthe period.  Stock options are regardedas potential common shares.  Potentialcommon shares are computed using the treasury stock method.  For the three months ended March 31,2009, 71,150 options are excluded from the effect of dilutive securitiesbecause they are anti-dilutive; 34,900 options are similarly excluded from theeffect of dilutive securities for the three months ended March 31, 2008.

 

The following is a reconciliation of the numerators and denominators usedin the basic and diluted earnings per share computations for the three monthsended March 31, 2009 and 2008.

 
| ** **                                                               | ** ** | **Three Months Ended March 31,** | ** ** |
|--------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                               | ** ** | **2009**                              | ** ** | **2008** |
| ** **                                                               | ** ** | **Income (Loss)**                     | ** ** | **Shares** | ** ** | **Income** | ** ** | **Shares** | ** ** |
| ** **                                                               | ** ** | **(Numerator)**                       | ** ** | **(Denominator)** | ** ** | **(Numerator)** | ** ** | **(Denominator)** | ** ** |
|                                                                     |       |                                  |       |   |   |   |   |   |   |
| Basic EPS                                                                |       |                                  |       |   |   |   |   |   |   |
| Income (loss)  available to common stockholders                          |       | $                                     | (574,035   | ) | 2,389,391 |   | $ | 133,565 |   | 2,314,391 |   |
|                                                                     |       |                                  |       |   |   |   |   |   |   |
| Effect of  dilutive securities                                           |       |                                  |       |   |   |   |   |   |   |
| Stock options  outstanding                                               |       | —                                |       | — |   | — |   | 68,810 |   |
|                                                                     |       |                                  |       |   |   |   |   |   |   |
| Diluted EPS                                                              |       |                                  |       |   |   |   |   |   |   |
| Income (loss)  available to common shareholders plus assumed conversions |       | $                                     | (574,035   | ) | 2,389,391 |   | $ | 133,565 |   | 2,383,201 |   |

 

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**Item2.  Management’s Discussion and Analysis of Financial Condition andResults of Operations**

 

**Impactof Inflation**

 

The consolidatedfinancial statements and related financial data presented herein have beenprepared in accordance with accounting principles generally accepted in theUnited States and practices within the banking industry that require themeasurement of financial position and operating results in terms of historicaldollars without considering the changes in the relative purchasing power ofmoney over time due to inflation.  Unlike most industrial companies,virtually all the assets and liabilities of a financial institution aremonetary in nature.  As a result, interest rates have a more significantimpact on a financial institution’s performance than the effects of generallevels of inflation.

 

**CriticalAccounting Estimates**

 

The Company followsgenerally accepted accounting principles that are recognized in the UnitedStates, along with general practices within the banking industry.  Inconnection with the application of those principles and practices, we have madejudgments and estimates which, in the case of our allowance for loan and leaselosses (ALLL), are material to the determination of our financial position andresults of operation.  Other estimates relate to the valuation of assetsacquired in connection with foreclosures or in satisfaction of loans, andrealization of deferred tax assets.

 

**RecentAccounting Pronouncements**

 

In September 2006,the FASB issued SFAS No. 157,*FairValue Measurements* (“SFAS 157”).  SFAS 157 defines fair value,establishes a framework for measuring fair value and expands disclosures aboutfair value measurements.  SFAS 157 will be applied prospectively and iseffective for fiscal years beginning after November 15, 2007, and interimperiods within those fiscal years.  SFAS 157 did not have a materialimpact on the Company’s consolidated financial statements.

 

In September 2006,the Financial Accounting Standards Board ratified a consensus opinion reachedby the Emerging Issues Task Force on Issue 06-04,*  Accounting for DeferredCompensation and Postretirement Benefit Aspects of Endorsement Split-DollarLife Insurance Arrangements* (“EITF 06-04”), which requires employersthat enter into endorsement split-dollar life insurance arrangements thatprovide an employee with a postretirement benefit to recognize a liability forthe future benefits promised based on the substantive agreement made with theemployer.  Whether the accrual is based on a death benefit or on thefuture cost of maintaining the insurance would depend on what the employer haseffectively agreed to provide during the employee’s retirement.  Thepurchase of an endorsement-type life insurance policy does not qualify as asettlement of the liability.  The consensus in EITF 06-04 is effective forfiscal years beginning after December 15, 2007.  The Company adoptedEITF 06-04 effective January 1, 2008, and its adoption did not have amaterial impact on the Company.

 

In February 2007, theFASB issued SFAS No. 159,*The FairValue Option for Financial Assets and Financial Liabilities*, (“SFAS159”).  This statement permits entities to choose to measure manyfinancial instruments and certain other items at fair value.  Theobjective of this standard is to improve financial reporting by providingentities with the opportunity to mitigate volatility in reported earningscaused by measuring related assets and liabilities differently without havingto apply complex hedge accounting provisions.  This statement is effectiveas of the beginning of fiscal years beginning after November 15, 2007,with early adoption permitted under certain circumstances.  The Companydid not choose to early adopt this standard and implementation of SFAS 159 didnot have a material impact on its financial position or results of operations.

 

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In March 2007, theEITF reached a final consensus on Issue No. 06-10,*Accounting for Deferred Compensation andPostretirement Benefit Aspects of Collateral Assignment Split-Dollar LifeInsurance Arrangements*, (“EITF 06-10”).  EITF 06-10 requiresemployers to recognize a liability for the post-retirement benefit related tocollateral assignment split-dollar life insurance arrangements in accordancewith SFAS No. 106 or APB Opinion No. 12.  EITF 06-10 alsorequires employers to recognize and measure an asset based on the nature andsubstance of the collateral assignment split-dollar life insurancearrangement.  The provisions of EITF 06-10 are effective for the Companyon January 1, 2008, with earlier application permitted, and are to beapplied as a change in accounting principle either through a cumulative-effectadjustment to retained earnings or other components of equity or net assets inthe statement of financial position as of the beginning of the year ofadoption; or as a change in accounting principle through retrospectiveapplication to all prior periods.  Adoption of EITF 06-10 did not have asignificant impact on its consolidated financial statements, results ofoperations or liquidity.

 

In October 2008, the FASB issued FSP No. FAS157-3 *Determining the Fair Value of a Financial Asset WhenThe Market for That Asset Is Not Active. *This FSP clarifies the application of SFAS 157 in amarket that is not active and provides an example to illustrate keyconsiderations in determining the fair value of a financial asset whenthe market for that financial asset is notactive.  This FSP was effective for theCompany upon issuance, including prior periods for which financial statementshave not been issued; and, therefore, was effective for the Company’s financialstatements as of and for the year ended December 31, 2008.  Adoption of FSP No. 157-3 had no impacton the Company’s consolidated financial statements.

 

In December 2008,the FASB issued FASB Staff Position No. FAS 140-4 and FIN 46(R)-8, *Disclosures about Transfers of Financial Assets and Interests inVariable Interest Entities* (“FSP 140-4 and 46(R)-8”).  This FSP requires additional disclosures bypublic entities with continuing involvement in transfers of financial assets tospecial purpose entities and with variable interests in VIEs, includingsponsors that have a variable interest in a VIE.  Additionally, this FSP requires certaindisclosures to be provided by a public entity that is (1) a sponsor of aqualifying special-purpose entity (SPE) that holds a variable interest in thequalifying SPE but was not the transferor (nontransferor) of financial assetsto the qualifying SPE, and (2) a servicer of a qualifying SPE that holds asignificant variable interest in the qualifying SPE but was not the transferor(nontransferor) of financial assets to the qualifying SPE.  This FSP is effective for the first reportingperiod (interim or annual) that ends after December 15, 2008.  The Company adopted FSP 140-4 and 46(R)-8 asof December 31, 2008, and its adoption did not have a significant impacton the Company’s consolidated financial statements.

 

The Company hasdetermined that all other recently issued accounting pronouncements will nothave a material impact on its consolidated financial statements or do not applyto its operations.

 

**Forward-LookingStatements**

 

Management’s discussionof the Company and management’s analysis of the Company’s operations andprospects, and other matters, may include forward-looking statements within themeaning of the Private Securities Litigation Reform Act of 1995 and otherprovisions of federal and state securities laws.  Although the Companybelieves that the assumptions underlying such forward-looking statementscontained in this Report are reasonable, any of the assumptions could beinaccurate and, accordingly, there can be no assurance that the forward-lookingstatements included herein will prove to be accurate.  The use of suchwords as “expect,” “anticipate,” “forecast,” and comparable terms should beunderstood by the reader to indicate that the statement is “forward-looking”and thus subject to change in a manner that can be unpredictable.  Factorsthat could cause actual results to differ from the results anticipated, but 

 

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not guaranteed, in thisReport, include (without limitation) economic and social conditions,competition for loans, mortgages, and other financial services and products,changes in interest rates, unforeseen changes in liquidity, results ofoperations, and financial conditions affecting the Company’s customers, andother risks that cannot be accurately quantified or completelyidentified.  Many factors affecting the Company’s financial condition andprofitability, including changes in economic conditions, the volatility ofinterest rates, political events and competition from other providers offinancial services simply cannot be predicted. Because these factors areunpredictable and beyond the Company’s control, earnings may fluctuate fromperiod to period.  The purpose of this type of information is to providereaders with information relevant to understanding and assessing the financialcondition and results of operations of the Company, and not to predict thefuture or to guarantee results.  The Company is unable to predict thetypes of circumstances, conditions and factors that can cause anticipatedresults to change.  The Company undertakes no obligation to publishrevised forward-looking statements to reflect the occurrence of changed orunanticipated events, circumstances or results.

 

**General**

 

On January 23, 2004,American Patriot Financial Group, Inc. (formerly known as BG FinancialGroup, Inc.) (the “Company”), a bank holding company, acquired all of theoutstanding shares of American Patriot Bank (formerly known as Bank ofGreeneville) (the “Bank”) in a one for one stock exchange.  The Bank is aTennessee-chartered, FDIC-insured, non-Member commercial bank offering a widerange of banking services, including checking, savings, and money marketdeposit accounts, certificates of deposit and loans for consumers, commercialand real estate purposes, and is the principal business of the Company. Themain office of the Corporation is located at 3095 East Andrew Johnson Highway,Greeneville, Greene County, Tennessee, which is also the main office of theBank.  This location is a 2.66 acre lot, on which there is a fullyoperational modular bank unit.  Other full service branch banking officesof the Bank are located at 506 Asheville Highway and 208 West Summer Street,Greeneville, Greene County, Tennessee.  During 2007 the Bank purchasedproperty in Maryville, Tennessee at 710 South Foothills Plaza Drive.  Thislocation is a 1.17 acre lot, on which there is a 3,272 square foot fullyoperational brick bank building with drive through facilities and was openedfor business on July 9, 2007.  These locations are centrally locatedand in high traffic/exposure areas.  Automatic teller machines andovernight “deposit drops” are positioned to serve the Bank’s clients. Additional branches may be established as market opportunities surface.

 

**Liquidity**

 

At March 31, 2009,the Company had liquid assets of approximately $12.9 million in the form ofcash and federal funds sold compared to approximately $6.4 million on December 31,2008.  Management believes that the liquid assets are adequate at March 31,2009. Additional liquidity should be provided by the growth in deposit accountsand loan repayments.  The Company also has the ability to purchase federalfunds and is a member of the Federal Home Loan Bank of Cincinnati that willprovide a credit line if necessary.  Management is not aware of anytrends, events or uncertainties that are reasonably likely to have a materialimpact on the Company’s short term or long term liquidity and has takena pro-active approach to develop a larger local deposit base to help minimizeany risk.

 

**Resultsof Operations**

 

The Company had a netloss of $(574,035) or $(.24) per share for the quarter ended March 31,2009 compared to net income of $133,565 or $.06 per share for the quarter endedMarch 31, 2008.  During the quarter ended March 31, 2009, theCompany recorded a provision for loan losses of $856,656, 

 

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while recording a benefitfrom loan losses of $(92,129) for the same period in 2008. (See additionaldiscussion at*Provision for / Benefit fromLoan Losses*).

 

*NetInterest Income/Margin*

 

Net interestincome represents the amount by which interest earned on various assets exceedsinterest paid on deposits and other interest-bearing liabilities and is themost significant component of the Company’s earnings.  Interest income forthe quarter ended March 31, 2009 was $1,673,198 compared to $1,975,585 forthe same period in 2008. Total interest expense was $811,123 for the quarterended March 31, 2009 compared to $983,772 in 2008 for the same period. TheCompany pursues local deposits aggressively with attractive interest rates,which has contributed to compression of net interest margin.  Also, theFederal Reserve Bank’s interest rate cuts over the past year have contributedto this compression as our loan yields have repriced faster than our deposityields. Based on the Company’s mix of interest earning assets and interestbearing liabilities, management believes that net interest margin should beginto stabilize for the remainder of the year.  Many economists now believewe are at or near the end of interest rate cuts. If interest rates remainstable or begin to increase, net interest margin could increase.

 

*Provisionfor / Benefit from Loan Losses*

 

The provision for(benefit from) loan losses represents a charge (or recovery) to operationsnecessary to establish an allowance for possible loan losses, which inmanagement’s evaluation, is adequate to provide coverage for estimated losseson outstanding loans and to provide for uncertainties in the economy. Theprovision for (benefit from) loan losses during the three-month period ended March 31,2009 was $856,656 as compared to $(92,129) for the same three-month periodended March 31, 2008.  During the three months ended March 31,2009, loan charge-offs were $713,997.  The recoveries for the three-monthperiod ended March 31, 2009 were $16,125.  The allowance for loanlosses was $2,532,432 at March 31, 2009 as compared to $2,373,648 at December 31,2008, an increase of 6.7%.  The allowance was approximately 2.38% of loansat March 31, 2009.  During the three months ended March 31, 2009a significant impaired loan relationship was identified which was latercharged-off.  This charge-off, inconjunction with other economic declines (primarily increased unemploymentrates in our primary lending areas) resulted in the significant provision forloan losses required during the quarter ended March 31, 2009.

 

Management believesthat the allowance for loan losses is adequate at March 31, 2009. However,there can be no assurance that additional provisions for loan losses will notbe required in the future, including as a result of possible changes in theeconomic assumptions underlying management’s estimates and judgments, adversedevelopments in the economy, and the residential real estate market inparticular, or changes in the circumstances of particular borrowers. Management intends to pursue more aggressive strategies for problem loanresolution, and is committed to bolster loan loss reserves to levels sufficientto absorb losses recognized in the pursuit of this strategy.

 

*Provisionfor / Benefit from Income Taxes*

 

The Company’s benefitfrom income tax expense for the three months ended March 31, 2009 was$(353,408), compared to a provision of $73,647, for the same period in2008.  Management believes the provision for income taxes for the periodended March 31, 2009 to be adequate.

 

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*Noninterest Income*

 

The Company’s noninterestincome consists of service charges on deposit accounts and other fees andcommissions.  Total noninterest income for the three months ended March 31,2009 was $149,073, compared to $177,370 for the same period in 2008. Service charges on deposit accounts decreased $27,320 to $103,081 for the threemonths ended March 31, 2009 from $130,401 for the same period in2008. Of the $27,320 decrease in service charges on deposit accounts,approximately $20,500 related to declines in NSF and overdraft fees. These fees are primarily activity driven and relate to transaction basedchecking accounts.  The bank noted a significant decline in checkingaccount balances when comparing the first quarter of 2009 to the first quarterof 2008, and a corresponding decrease in NSF and overdraft transactions duringthe first quarter of 2009, as compared to the first quarter of 2008. Investmentsale commissions decreased $5,478 due to the discontinuance of that service bythe bank due to the high overhead expense and lack of sufficient revenues.These decreases were partially offset by an increase of $4,177 in fees fromorigination of mortgage loans sold from $6,322 during the three months ended March 31,2008 when compared to $10,499 for the same period in 2009. Favorable interestrates spurred an increase in mortgage loan originations during the firstquarter of 2009. Management projects that noninterest income will improveduring the remainder of 2009 due to  more aggressive collection of feesand renewed marketing efforts.

 

*Noninterest Expense*

 

Noninterest expenses totaled $1,081,935 for the three months ended March 31,2009 as compared to $1,054,100 for the three months ended March 31, 2008and consisted of employee costs, occupancy expense and other operatingexpenses.  Salaries and wages decreased $67,495 from $552,962 for thethree months ended March 31, 2008 when compared to $485,467 for the threemonths ended March 31, 2009. Occupancy expenses decreased $7,406 from$154,378 for the three months ended March 31, 2008 when compared to$146,972 for the three months ended March 31, 2009.  Most of thedecrease in employee costs is attributable to a focused effort by managementand the Board to improve its personnel efficiency and reduce headcount andrelated costs in this tough economic period. Legal and professional expensesincreased $29,649 from $102,275 for the three months ended March 31, 2008when compared to $132,374 for the three months ended March 31, 2009.Management continues to strengthen all departments of the Company to meet thenew demands of regulatory requirements and strategic plan development, whichcarries with it additional legal and professional expenses.  Othernoninterest expense increased $67,031 from $144,127 for the three months ended March 31,2008 to $211,158 when compared to the three months ended March 31,2009.  Most of the increase in other noninterest expense can be attributedto increased ATM expenses, higher FDIC premiums, and education expenses.

 

**Financial Condition**

 

Total assets at March 31,2009, were $127,969,552, an increase of $8,376,726 or 7.0% compared to 2008year-end assets of $119,592,826.  Deposits increased to $112,649,934 at March 31,2009, an increase of $8,910,757 or 8.6% from $103,739,177 at December 31,2008. Most of the change in total assets and total deposits can be attributedto the Company taking measures to increase liquidity by offering attractiverates to customers. Premises and equipment decreased to $5,241,188 at March 31,2009 a decrease of $76,497 or 1.4% from $5,317,685 at December 31, 2008,primarily as a result of minimal fixed asset purchases coupled with normaldepreciation charges.  Other significantadditions noted as of March 31, 2009 when compared to December 31,2008 relate to foreclosed assets.  During the first quarter of 2009,management foreclosed on one significant loan relationship totalingapproximately $1,012,000, which accounted for all of the increase during thequarter.

 

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TheCompany places anemphasis on an integrated approach to its balance sheet management. Significant balance sheet components of loans and sources of funds are managedin an integrated manner with the management of interest rate risk, liquidity,and capital.  A discussion of these components follows.

 

*Loans*

 

Net loans outstandingtotaled $106,598,824 at March 31, 2009 compared to $105,701,210 at December 31,2008.  Commercial loan growth accounted for almost all of theapproximately $.9 million increase for the first quarter of 2009. Management believesthe overall quality of loans remains solid.  In the event that a loan is90 days or more past due, the accrual of income is generally discontinued whenthe full collection of principal or interest is in doubt unless the obligationsare both well secured and in the process of collection.  At March 31,2009, one loan for $444,181 was 90 days or more past due and still accruinginterest, while total loans 90 days or more past due and in non-accrual statuswere $757,265.  At December 31, 2008, there we no loans 90 days ormore past due and still accruing interest, while total loans 90 days or morepast due and in non-accrual status were $599,667.

 

The following is a summary of information pertainingto impaired loans:

 
| ** **                                              | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                              | ** ** | **2009**           | ** ** | **2008**              | ** ** |
|                                                    |       |               |       |                  |       |
| Impaired loans  with a specific valuation allowance     |       | $                  | 8,489,309  |                  | $          | 6,414,683 |   |
| Total  specifically evaluated impaired loans            |       | $                  | 8,489,309  |                  | $          | 6,414,683 |   |
| Specific  valuation allowance related to impaired loans |       | $                  | 1,408,580  |                  | $          | 1,512,511 |   |

 

In addition to thespecifically evaluated impaired loans above, the Bank collectively evaluateslarge groups of smaller balance homogeneous loans for impairment.  Loans collectively evaluated for impairment,risk rates special mention, substandard and doubtful, as of March 31, 2009and December 31, 2008 were $5,657,874 and $739,517, respectively.  The Bank has reserved $160,789 and $29,149related to these loans as of March 31, 2009 and December 31, 2008,respectively.

 

In connection withimpaired loans, additional funds are committed to one borrower in an amount notto exceed $78,825 subject to compliance with provisions of the applicable loanagreement which includes a lending base formula.

 

As of March 31,2009, the Company has identified loans aggregating $8,489,309 as beingimpaired, of which $3,854,251 are non-performing as it relates to payment ofinterest.  The aforementioned total isapproximately $3,255,000 more than reported at December 31, 2008.  The increase is primarily related toidentified problem assets centered in the Blount County Market.

 

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*RestrictedEquity Investments*

 

FederalHome Loan Bank (FHLB) stock at March 31, 2009 had an amortized cost andmarket value of $296,500 as compared to an amortized cost and a market value of$291,200 at December 31, 2008.  As amember of the FHLB, the Company is required to maintain stock in an amountequal to a minimum of 0.15% of total assets and 4% of outstanding FHLB advances.  Federal Home Loan Bank stock iscarried at cost.  Federal Home Loan Bankstock is maintained by the Company at par value of one hundred dollars pershare.

 

*Depositsand Other Funding*

 

Total deposits, which arethe principal source of funds for the Company, were $112,649,934 at March 31,2009, compared to $103,739,177 at December 31, 2008, representing anincrease of 8.6%.  The Company hastargeted local consumers, professional and commercial businesses as its centralclientele; therefore, deposit instruments in the form of demand deposits,savings accounts, money market demand accounts, NOW accounts, certificates ofdeposit and individual retirement accounts are offered to customers.   The Company established a line of creditwith the Federal Home Loan Bank secured by a blanket-pledge of 1-4 familyresidential mortgage loans. At March 31, 2009 the Company had outstandingadvances of $5,410,717 at the Federal Home Loan Bank and at December 31, 2008,the Company had outstanding advances of $5,506,805 at the Federal Home LoanBank. At March 31,2009 and December 31, 2008, the Company also had $1,000,000 in short-termborrowings from Jefferson Federal Bank that is due on demand.

 

*Capital*

 

Equity capital at March 31,2009 was $7,774,214, a decrease of $574,035 from $8,348,249 at December 31,2008, due to a net loss of $(574,035) for the first three months of 2009.

 

At March 31, 2009,the Bank’s capital ratios were in excess of the regulatory guidelines. Those ratios are as follows:

 
| ** **                       | ** ** | **Required  Minimum  Ratio** | ** ** | **To be  Well  Capitalized** | ** ** | **Bank** | ** ** |
|----------------------------------|------------|------------------------------|------------|-----------------------------------|------------|----------|------------|
| Tier 1 Leverage  ratio           |       | 4.00                         | %          | 5.00                              | %          | 7.09     | %          |
| Tier 1  risk-based capital ratio |       | 4.00                         | %          | 6.00                              | %          | 8.42     | %          |
| Total risk-based  capital ratio  |       | 8.00                         | %          | 10.00                             | %          | 9.68     | %          |

 

*Liabilityand Asset Management*

 

The Company’sAsset/Liability Committee (“ALCO”) actively measures and manages interest raterisk using a process developed by the Company.  The ALCO is alsoresponsible for implementing the Company’s asset/liability management policies,overseeing the formulation and implementation of strategies to improve balancesheet positioning and earnings, and reviewing the Company’s interest ratesensitivity position.

 

The primary tool thatmanagement uses to measure short-term interest rate risk is a net interestincome simulation model prepared by an independent correspondentinstitution.  These simulations estimate the impact that various changesin the overall level of interest rates over one- and two-year time horizonswould have on net interest income.  The results help the Company developstrategies for managing exposures to interest rate risk.

 

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Like any forecastingtechnique, interest rate simulation modeling is based on a large number ofassumptions.  In this case, the assumptions relate primarily to loan anddeposit growth, asset and liability prepayments, interest rates and balancesheet management strategies.  Management believes that both individuallyand in the aggregate the assumptions are reasonable.  Nevertheless, thesimulation modeling process produces only a sophisticated estimate, not aprecise calculation of exposure.

 

At March 31, 2009,approximately 69% of the institution’s gross loans had adjustable rates. Based on the asset/liability modeling, management believes that these loansreprice at a faster pace than liabilities held at the institution. Because the majority of the institution’s liabilities are 12 months and underand the gap in repricing is asset sensitive, management believes that a risingrate environment would have a positive impact on the Company’s net interestmargin.  Floors in the majority of the institution’s adjustable rateassets also mitigate interest rate sensitivity in a decreasing rateenvironment.

 

*Off-BalanceSheet Arrangements*

 

The Company, at March 31,2009, had outstanding unused lines of credit and standby letters of credit thattotaled approximately $10,162,000.  These commitments have fixed maturitydates and many will mature without being drawn upon, meaning that the totalcommitment does not necessarily represent the future cash requirements. The Company has the ability to liquidate Federal funds sold or, on a short-termbasis, to purchase Federal funds from other banks and to borrow from theFederal Home Loan Bank.  At March 31, 2009, the Company hadestablished with correspondent banks the ability to purchase Federal funds ifneeded.

 

**Item3.  Quantitative and Qualitative Disclosures about Market Risk**

 

As a smaller reporting company, the Company is not required to includethis information in our quarterly report on Form 10-Q.

 

**Item4T.  Controls and Procedures**

 

a)                                           Evaluation of Disclosure Controls andProcedures

 

The Company maintainsdisclosure controls and procedures, as defined in Rule 13a-15(e) and15d-15(e) promulgated under the Securities Exchange Act of 1934 (the “ExchangeAct”), that are designed to ensure that information required to be disclosed byit 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’srules and forms and that such information is accumulated and communicatedto the Company’s management, including its Interim Chief Executive Officer andChief Financial Officer.  The Company carried out an evaluation, under thesupervision and with the participation of its management, including its InterimChief Executive Officer and Chief Financial Officer, of the effectiveness ofthe design and operation of its disclosure controls and procedures as of theend of the period covered by this report.  Based on the evaluation ofthese disclosure controls and procedures, the Interim Chief Executive Officer andChief Financial Officer concluded that the Company’s disclosure control andprocedures were effective.

 

b)                                          Changes in Internal Controls andProcedures

 

There were no changes inour internal control over financial reporting during the quarter ended March 31,2009, that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

 

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**PART II - OTHER INFORMATION**

 

**Item1.****   ****LEGAL PROCEEDINGS**

 

None.

 

**Item 1A.****    ****RISK FACTORS**

 

As asmaller reporting company, the Company is not required to include this informationin our quarterly report on Form 10-Q.

 

**Item2.  UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS**

 

(a)   None.

 

(b)  Not applicable.

 

(c)   No repurchases of Company securities were made by oron behalf of the Company or any “affiliated purchaser,” as defined in ExchangeAct Rule 10b-18(a)(3), during the quarter ended March 31, 2009.

 

The Company’s ability to pay dividends is derived from the income ofthe Bank.  The Bank’s ability to declareand pay dividends is limited by its obligations to maintain sufficient capitaland by other general restrictions on its dividends that are applicable to banksthat are regulated by the FDIC and the Department of FinancialInstitutions.  In addition, the FederalReserve Board may impose restrictions on the Company’s ability to pay dividendson its common stock.  As a result, theCompany cannot assure its shareholders that it will declare or pay dividends onshares of its common stock in the future, the Company has never paid dividendsin the past and the Company does not foresee paying dividends in the future.

 

**Item3.****   ****DEFAULTS UPON SENIORSECURITIES**

 

(a)    None.

 

(b)   None.

 

**Item4.****   ****SUBMISSION OF MATTERS TOA VOTE OF SECURITY HOLDERS**

 

None.

 

**Item5.****   ****OTHER INFORMATION**

 

(a)    None.

 

(b)   None.

 

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**Item6.****   ****EXHIBITS.**

 

Index to Exhibits.

 
| **Exhibit No.** | ** ** | **Description**                                                                             |
|----------------------|------------|---------------------------------------------------------------------------------------------|
| 3.1*                 |       | 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-Sarbanes-Oxley Act of 2002 |
| 32.2                 |       | Certification pursuant  to Rule 18 U.S.C. Section 1350-Sarbanes-Oxley Act of 2002 |

 

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* Previously filed as anexhibit to a Form 10-Q filed by American Patriot Financial Group, Inc.(F/K/A BG Financial Group, Inc.) with the Commission on August 14,2007.

** Previously filed as anexhibit to a 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***

 

In accordance with the requirements of the ExchangeAct, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

 

 

AMERICAN PATRIOTFINANCIAL GROUP, INC.(Registrant)

 

 
| DATE:  | May 15,  2009 |   |                             | /s/William J. Smead |
|--------|--------------------|--------|----------------------------------|---------------------|
|   |               |   | William J. Smead                 |
|   |               |   | Interim Chief Executive  Officer |
|   |               |   |                             |
|   |               |   |                             |
| DATE:  | May 15,  2009 |   |                             | /s/T. Don Waddell   |
|   |               |   | T. Don Waddell                   |
|   |               |   | Chief Financial Officer          |

 

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