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



                                   FORM 10-QSB


MARK ONE
--------

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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004

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

                            FOR THE TRANSITION PERIOD
                       FROM _____________ TO _____________

                        COMMISSION FILE NUMBER 000-50771

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


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

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

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


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

As of August 1, 2004, the number of shares outstanding of the issuer's common
stock was:  2, 299,975


<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements

           The unaudited financial statements of the registrant are as follows:

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

           Consolidated Statements of Income - For the six months ended June 30,
           2004 and 2003.

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

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

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

Item 3.    Controls and Procedures



                           PART II - OTHER INFORMATION

Item 1.     Legal Proceedings.

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

Item 3.     Defaults Upon Senior Securities.

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

Item 5.     Other Information.

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



<PAGE>


                          Part I. FINANCIAL INFORMATION

Item 1.  Financial Statements

                     BG FINANCIAL GROUP, INC. AND SUBSIDIARY
                             Greeneville, Tennessee
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<S>                                                                 <C>                           <C>

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

Cash and due from banks                                                       $5,841,914                 $5,054,515
Investment securities:
  Available for sale                                                             221,900                    171,700
Federal funds sold                                                             6,249,649                  7,244,455
Loans, net of allowance for loan losses                                       74,246,107                 68,539,235
Bank premises and equipment, net                                               3,222,831                  2,763,153
Accrued income receivable                                                        417,584                    387,258
Deferred tax benefit                                                             614,213                    603,177
Foreclosed assets                                                                109,401                    184,127
Other assets                                                                      33,617                    127,530
                                                                                  ------                    -------
                                                                             $90,957,216                $85,075,150
                                                                              ==========                 ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
  Deposits:
      Demand                                                                 $15,900,919                $14,547,268
      Savings                                                                  4,452,559                  3,486,770
      Time, $100,000 and over                                                  9,474,643                 11,637,050
      Other time                                                              48,449,805                 43,790,678
                                                                              ----------                 ----------
                                                                              78,277,926                 73,461,766
  Short-term note payable                                                         49,000                          -
  Accrued interest and other liabilities                                         466,722                    151,991
  Federal Home Loan Bank - advances                                            4,447,453                  4,254,106
                                                                               ---------                  ---------
                                                                              83,241,101                 77,867,863
                                                                              ----------                 ----------

COMMITMENTS AND CONTINGENCIES                                                          -                          -

STOCKHOLDERS' EQUITY
  Stock:
      Preferred stock, no par value; authorized 1,000,000
          shares; none issued                                                          -                          -
      Common stock, $.333 par value; authorized
          6,000,000 shares; issued and outstanding
          2,295,775 shares at June 30, 2004 and 2,287,500
          shares at June 30, 2003                                                765,258                    765,258
  Surplus                                                                      6,525,832                  6,887,325
  Retained earnings                                                              425,025                   (445,296)
                                                                                 -------                   --------
                                                                               7,716,115                  7,207,287
                                                                               ---------                  ---------
                                                                             $90,957,216                $85,075,150
                                                                              ==========                 ==========
</TABLE>

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

<PAGE>


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

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

                                                                                       Six Months Ended
                                                                                       ----------------
                                                                          June 30, 2004                 June 30, 2003
                                                                          -------------                 -------------

Interest income:
  Interest and fees on loans                                                $2,322,666                    $1,840,162
  Interest on investment securities:
     Interest on federal funds sold                                             10,939                        42,784
     Other                                                                      31,327                         7,006
                                                                             ---------                     ---------
                                                                             2,364,932                     1,889,952

Interest expense:
  Interest on deposits                                                         652,021                       563,972
                                                                               -------                       -------

                Net interest income                                          1,712,911                     1,325,980

Provision for possible loan losses                                              45,488                       217,843
                                                                                ------                       -------
                Net interest income after provision
                for possible loan losses                                     1,667,423                     1,108,137
                                                                             ---------                     ---------

Other income:
  Fees and service charges                                                     127,627                       129,347
  Secondary market mortgage loan fees                                           70,954                        81,315
  Other                                                                         10,740                        36,725
  Commissions                                                                   51,571                        34,500
                                                                               -------                       -------
                                                                               260,892                       281,887
                                                                               -------                       -------

Other expenses:
  Salaries and wages                                                           540,832                       502,142
  Employee benefits                                                             64,003                        71,764
  Occupancy expenses                                                            53,052                        40,018
  Equipment rentals, depreciation and maintenance                              111,781                       101,300
  Other operating expenses                                                     460,672                       385,305
                                                                             ---------                     ---------
                                                                             1,230,340                     1,100,529
                                                                             ---------                     ---------
                Income before income taxes                                     697,975                       289,495

Federal and state income taxes                                                 272,479                        95,436
Deferred tax expense (benefit)                                                  (4,528)                        5,298
                                                                               -------                        ------

                Net income (loss)                                           $  430,024                   $   188,761
                                                                             =========                    ==========

Earnings per share                                                          $      .19                   $       .08
                                                                             =========                    ==========
</TABLE>

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

<PAGE>


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

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

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

Interest income:
  Interest and fees on loans                                                $1,326,739                $ 977,527
  Interest on investment securities:
     Interest on federal funds sold                                             21,249                   21,351
     Other                                                                       5,439                    7,006
                                                                             ---------                ---------
                                                                             1,353,427                1,005,884

Interest expense:
  Interest on deposits                                                         378,576                  297,828
                                                                              --------                 --------

                Net interest income                                            974,851                  708,056

Provision for possible loan losses                                               3,882                  133,294
                                                                              --------                 --------
                Net interest income after provision
                for possible loan losses                                       970,969                  574,762
                                                                              --------                 --------

Other income:
  Fees and service charges                                                      70,886                   68,630
  Secondary market mortgage loan fees                                           44,882                   32,260
  Other                                                                          1,013                   21,614
  Commissions                                                                   26,694                   13,544
                                                                              --------                 --------
                                                                               143,475                  136,048
                                                                              --------                 --------

Other expenses:
  Salaries and wages                                                           315,924                  250,995
  Employee benefits                                                             43,629                   32,164
  Occupancy expenses                                                            35,094                   20,593
  Equipment rentals, depreciation and maintenance                               65,856                   43,446
  Other operating expenses                                                     279,295                  216,183
                                                                              --------                 --------
                                                                               739,798                  563,381
                                                                              --------                 --------
         Income before income taxes                                            374,646                  147,429

Federal and state income taxes                                                 129,054                   40,536
Deferred tax expense(benefit)                                                   (1,429)                   5,298
                                                                              --------                 --------

                Net income (loss)                                          $   247,021              $   101,595
                                                                            ==========               ==========

Earnings per share                                                         $       .11              $       .04
                                                                            ==========               ==========
</TABLE>

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


<PAGE>


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

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

                                                                                    Six Months Ended
                                                                                    ----------------
                                                                       June 30, 2004                June 30, 2003
                                                                       -------------                -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss)                                                 $   430,024                  $    188,761
    Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
       Depreciation                                                        95,398                        96,018
       Provision for possible loan losses                                  45,488                       217,843
       Gain on sale of automobile                                               -                        (8,470)
    Change in operating assets and liabilities:
       Accrued income receivable                                           32,960                       (38,249)
       Other assets                                                       (12,692)                      (32,140)
       Deferred tax benefit                                                (3,075)                       23,874
       Accrued interest and other liabilities                             297,558                      (106,564)
                                                                         --------                    ----------
                  Net cash provided by operating activities               885,661                       341,073
                                                                         --------                    ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Net change in federal funds sold                                     (543,789)                      556,528
    Loan originations and principal collections, net                   (3,754,390)                  (11,600,657)
    Net change in foreclosed assets                                         2,293                      (129,520)
    Purchases of premises and equipment                                  (458,219)                      (32,500)
    Purchase of investment securities available for sale                  (50,200)                       14,000
                                                                      -----------                    ----------
                  Net cash used by investing activities                (4,804,305)                  (11,192,149)
                                                                      -----------                    ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net increase (decrease) in non-interest bearing deposits           (1,334,227)                    1,272,433
    Net increase (decrease) in interest bearing deposits                5,371,870                    10,418,593
    Issuance of stock                                                           -                        25,000
    Proceeds from short-term borrowing                                     41,000                             -
    Net Federal Home Loan Bank advances                                   206,501                     1,411,443
                                                                       ----------                    ----------
                  Net cash provided by financing activities             4,285,144                    13,127,469
                                                                       ----------                    ----------

                  Increase (decrease) in cash and due from
                  banks                                                   366,500                     2,276,393

Cash and due from banks:
  Beginning                                                             5,475,414                     1,713,248
                                                                       ----------                    ----------
  Ending                                                              $ 5,841,914                   $ 3,989,641
                                                                       ==========                    ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash payments for:
    Interest paid on deposits and borrowed funds                      $   735,676                   $   650,643
                                                                       ==========                    ==========
    Income taxes paid                                                 $    16,709                   $         -
                                                                       ==========                    ==========
</TABLE>

   The accompnaying notes are an integral part of these financial statements.
<PAGE>

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


Note 1.  Summary of Significant Accounting Policies

         Nature of Business:

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

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

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

         Basis of Presentation:

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

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

<PAGE>

Note 1.  Summary of Significant Accounting Policies (Continued)

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

         Use of Estimates:

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

Note 2.  Subsidiary Bank Only Financial Information

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

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

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

          Cash and due from banks                                            $5,841,914                 $5,054,515
          Investment securities:
            Available for sale                                                  221,900                    171,700
          Federal funds sold                                                  6,249,649                  7,244,455
          Loans, net of allowance for loan losses                            74,246,107                 68,539,235
          Bank premises and equipment, net                                    3,222,831                  2,763,153
          Accrued income receivable                                             417,584                    387,258
          Deferred tax benefit                                                  607,627                    603,177
          Foreclosed assets                                                     109,401                    184,127
          Other assets                                                           33,617                    127,530
                                                                             ----------                 ----------
                                                                            $90,950,630                $85,075,150
                                                                             ==========                 ==========
</TABLE>

<PAGE>

Note 2.  Subsidiary Bank Only Financial Information (Continued)

         LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S>                                                                         <C>                        <C>

         LIABILITIES
            Deposits:
                Demand                                                      $15,914,913                $14,547,268
                Savings                                                       4,452,559                  3,486,770
                Time, $100,000 and over                                       9,474,643                 11,637,050
                Other time                                                   48,449,805                 43,790,678
                                                                             ----------                 ----------
                                                                             78,291,920                 73,461,766
            Accrued interest and other liabilities                              472,801                    151,991
            Federal Home Loan Bank - advances                                 4,447,453                  4,254,106
                                                                             ----------                 ----------
                                                                             83,212,174                 77,867,863
                                                                             ----------                 ----------

          COMMITMENTS AND CONTINGENCIES                                               -                          -

          STOCKHOLDERS' EQUITY
            Stock:
                Preferred stock, no par value; authorized
                    1,000,000 shares; none issued                                     -                          -
                Common stock, $.333 par value; authorized
                    6,000,000 shares; issued and outstanding
                    2,295,775 shares at June 30, 2004 and
                    2,287,500 shares at June 30, 2003                           765,258                    765,258
            Surplus                                                           6,887,325                  6,887,325
            Retained earnings                                                    85,873                   (445,296)
                                                                             ----------                 ----------
                                                                              7,738,456                  7,207,287
                                                                             ----------                 ----------
                                                                            $90,950,630                $85,075,150
                                                                             ==========                 ==========

         Statements of Income
                                                                                    Six Months Ended
                                                                                    ----------------
                                                                       June 30, 2004                 June 30, 2003
                                                                       -------------                 -------------

          Interest income:
            Interest and fees on loans                                    $2,642,483                     $1,840,162
            Interest on investment securities:
               Interest on federal funds sold                                 15,188                         42,784
               Other                                                          34,729                          7,006
                                                                           ---------                      ----------
                                                                           2,692,400                      1,889,952

          Interest expense:
            Interest on deposits                                             739,368                        563,972
                                                                           ---------                      ---------

                          Net interest income                              1,953,032                      1,325,980

          Provision for possible loan losses                                  70,599                        217,843
                                                                           ---------                      ---------
                          Net interest income after provision
                          for possible loan losses                         1,882,433                      1,108,137
                                                                           ---------                      ---------
</TABLE>
<PAGE>

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

          Other income:
            Fees and service charges                                         146,537                        129,347
            Secondary market mortgage loan fees                               73,847                         81,315
            Other                                                             17,496                         36,725
            Commissions                                                       58,143                         34,500
                                                                           ---------                      ---------
                                                                             296,023                        281,887
                                                                           ---------                      ---------

          Other expenses:
            Salaries and wages                                               611,273                        502,142
            Employee benefits                                                 77,410                         71,764
            Occupancy expenses                                                58,089                         40,018
            Equipment rentals, depreciation and
               maintenance                                                   124,950                        101,300
            Other operating expenses                                         467,002                        385,305
                                                                           ---------                      ---------
                                                                           1,338,724                      1,100,529
                                                                           ---------                      ---------
                          Income before income taxes                         839,732                        289,495

          Federal and state income taxes                                     313,014                         95,436
          Deferred tax expense (benefit)                                      (4,451)                         5,298
                                                                           ---------                      ---------

                          Net income (loss)                               $  531,169                     $  188,761
                                                                           =========                      =========

          Earnings per share                                              $      .23                     $      .08
                                                                           =========                      =========


          Statements of Cash Flows
                                                                                      Six Months Ended
                                                                                      ----------------
                                                                           June 30, 2004             June 30, 2003
                                                                           -------------             -------------

            CASH FLOWS FROM OPERATING
            ACTIVITIES:
                Net income (loss)                                         $  531,169                     $  188,761
                Adjustments to reconcile net income (loss)
                   to net cash provided by operating activities:
                     Depreciation                                            112,928                         96,018
                     Provision for possible loan losses                       70,599                        217,843
                     Gain on sale of automobile                                    -                         (8,470)
                Change in operating assets and liabilities:
                     Accrued income receivable                               (30,326)                       (38,249)
                     Other assets                                             93,913                        (32,140)
                     Deferred tax benefit                                     (4,450)                        23,874
                     Accrued interest and other liabilities                  320,810                       (106,564)
                                                                           ---------                      ---------
                                Net cash provided by
                                operating activities                       1,094,643                        341,073
                                                                           ---------                      ---------

</TABLE>
<PAGE>

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

         CASH FLOWS FROM INVESTING
         ACTIVITIES:
                Net change in federal funds sold                            994,806                     556,528
                Loan originations and principal collections, net         (5,777,471)                (11,600,657)
                Net change in foreclosed assets                              74,726                    (129,520)
                Purchases of premises and equipment                        (572,606)                    (32,500)
                Purchase of investment securities available
                  for sale                                                  (50,200)                     14,000
                                                                         ----------                 -----------
                                Net cash used by investing
                                activities                               (5,330,745)                (11,192,149)
                                                                         ----------                 -----------

         CASH FLOWS FROM FINANCING
         ACTIVITIES:
                Net increase (decrease) in non-interest
                  bearing deposits                                       (1,030,161)                  1,272,433


                Net increase (decrease) in interest bearing
                  deposits                                                5,860,315                  10,418,593
                Issuance of stock                                                 -                      25,000
                Net Federal Home Loan Bank advances                         193,347                   1,411,443
                                                                         ----------                  ----------
                                Net cash provided by financing
                                activities                                5,023,501                  13,127,469
                                                                         ----------                  ----------

                                Increase (decrease) in cash and
                                due from banks                              787,399                   2,276,393

         Cash and due from banks:
              Beginning                                                   5,054,515                   1,713,248
                                                                         ----------                  ----------
              Ending                                                    $ 5,841,914                 $ 3,989,641
                                                                         ==========                  ==========

         SUPPLEMENTAL DISCLOSURES OF
         CASH FLOW INFORMATION:
         Cash payments for:
              Interest paid on deposits and borrowed funds             $    735,676                 $    650,643
                                                                        ===========                   ==========
              Income taxes paid                                        $     24,669                 $          -
                                                                        ===========                   ==========
</TABLE>

Note 3.   Stock Options and Awards

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

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


                                                             Three-Month Period               Six-Month Period
                                                                Ended June 30                   Ended June 30
                                                         ----------------------------    ----------------------------
                                                            2004            2003            2004            2003
                                                            ----            ----            ----            ----

        Net income, as reported                           247,021        $101,595        $430,024        $188,761

        Deduct:  Total stock-based employee
          compensation expense determined
          under fair value based method for all
          awards, net of related tax effects               15,300          15,100          30,600          30,201
                                                          -------         -------         -------         -------

        Pro forma net income                             $231,721       $  86,495        $399,424        $158,560
                                                          =======        ========         =======         =======

        Earnings per share
        Basic - as reported                              $    .11       $     .04        $    .19        $    .08
                                                          =======        ========         =======         =======

        Basic - pro forma                                $    .10       $     .04        $    .17        $    .07
                                                          =======        ========         =======         =======

        Diluted - as reported                            $    .11       $     .04        $    .18        $    .08
                                                          =======        ========         =======         =======

        Diluted - pro forma                              $    .10       $     .04        $    .17        $    .07
                                                          =======        ========         =======         =======
</TABLE>


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

Forward-Looking Statements

         Management's discussion of the Company and management's analysis of the
Company's   operations   and   prospects,   and  other   matters,   may  include
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform  Act of 1995  and  other  provisions  of  federal  and  state
securities laws.  Although the Company believes that the assumptions  underlying
such forward-looking  statements contained in this Report are reasonable, any of
the assumptions could be inaccurate and, accordingly,  there can be no assurance
that the  forward-looking  statements included herein will prove to be accurate.
The use of such words as  "expect,"  "anticipate,"  "forecast,"  and  comparable
terms  should be  understood  by the reader to indicate  that the  statement  is
"forward-looking"   and  thus  subject  to  change  in  a  manner  that  can  be
unpredictable.  Factors  that could  cause  actual  results  to differ  from the
results  anticipated,  but not  guaranteed,  in this  Report,  include  (without
limitation)  economic and social conditions,  competition for loans,  mortgages,
and other financial services and products, changes in interest rates, unforeseen
changes in liquidity,  results of operations, and financial conditions affecting
the Company's customers, and other risks that cannot be accurately quantified or
completely identified.  Many factors affecting the Company's financial condition
and profitability,  including changes in economic conditions,  the volatility of
interest  rates,  political  events  and  competition  from other  providers  of
financial  services  simply  cannot be  predicted.  Because  these  factors  are
unpredictable  and beyond the Company's  control,  earnings may  fluctuate  from
period to period.  The purpose of this type of information is to provide readers

<PAGE>

with information relevant to understanding and assessing the financial condition
and results of  operations  of the Company,  and not to predict the future or to
guarantee results.  The Company is unable to predict the types of circumstances,
conditions and factors that can cause anticipated results to change. The Company
undertakes  no  obligation  to publish  revised  forward-looking  statements  to
reflect the  occurrence of changed or  unanticipated  events,  circumstances  or
results.

General

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

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

Liquidity

         At June 30, 2004,  Company of  Greeneville  had liquid  assets of $12.1
million in the form of cash and federal  funds sold  compared to $9.0 million on
June, 2003.  Management believes that the liquid assets are adequate at June 30,
2004.  Additional  liquidity will be provided by the growth in deposit  accounts
and loan repayments.  The Company also has the ability to purchase federal funds
and is a member of the Federal Home Loan Bank of Cincinnati  that will provide a
credit  line if  necessary.  Management  is not aware of any  trends,  events or
uncertainties  that are  reasonably  likely  to have a  material  impact  on the
Company's short term or long term liquidity.

Results of Operations

         The  Company  had net  income  of  $247,021  or $.11 per  share for the
quarter  ended June 30, 2004  compared to $101,595 or .04 per share for the same
period in 2003.  Net income for the six months  ended June 30, 2004 was $430,024
as compared to a net income of $188,761 for the same period in 2003.

Net Interest Income/Margin

         Net interest  income  represents the amount by which interest earned on
various  assets  exceeds  interest  paid on deposits and other  interest-bearing
liabilities and is the most significant component of the Company's earnings. Net
interest  income for the quarter  ended June 30, 2004 was  $974,851  compared to
$708,056 for the same period in 2003

         Net  interest  income  for the six  months  ended  June  30,  2004  was
$1,712,911,  compared to $1,325,980  for the same period in 2003. All categories
of interest income and expense  increased  dramatically from 2003 to 2004 due to
the rapid growth of the Company in both loans and deposits.

<PAGE>

Provision for Possible Loan Losses

         The  provision  for  loan  losses  represents  a charge  to  operations
necessary  to  establish  an  allowance  for  possible  loan  losses,  which  in
management's evaluation, is adequate to provide coverage for estimated losses on
outstanding loans and to provide for uncertainties in the economy. The provision
for loan losses  during the three  months and six months ended June 30, 2004 was
$3,882 and $45,488  respectively  as compared to $133,294  and  $217,843 for the
same periods in 2003.  During the three and six months ended June 30, 2004, loan
charge-offs were $19,499 and $25,322 respectively.  The recoveries for the three
and six month periods ended June 30, 2004 were $23,192 and $27,982 respectively.
The  provision  for loan losses  raised the total  allowance  for possible  loan
losses to  $1,424,429  at June 30,  2004 from the  December  31,  2003  total of
$1,350,266, an increase of 5.49%. Management believes the allowance for possible
loan losses at June 30, 2004 to be adequate and will increase during the year to
match normal loan growth.

Provisions for Income Taxes

         In  2002,  the  Company  posted  pre-tax  income  of  $130,109  causing
management  to believe  that it is more  likely  than not that it will  generate
future  taxable income to utilize its net deferred tax asset.  As a result,  the
valuation allowance was eliminated and a net deferred tax asset was recorded for
the deductible  temporary  differences and carryforwards that are expected to be
available to reduce future taxable  income.  The Company's  provision for income
tax  expense  for the three  months and six  months  ended  June 30,  2004,  was
$127,625 and $267,951 respectively when compared to $45,834 and $100,734 for the
same periods in 2003. Management believes the provision for income taxes at June
30, 2004 to be adequate.

Noninterest Income

         The Company's noninterest income consists of service charges on deposit
accounts  and other fees and  commissions.  Total  noninterest  income for three
months  and  six  months  ended  June  30,  2004  was  $143,475  and   $260,892,
respectively  when  compared to $136,048 and  $281,887,  for the same periods in
2003.  Management  projects that other fees and  commissions and service charges
will increase in 2004 due to the growth of the Company.

Noninterest Expense

         Noninterest expenses for the three months and six months ended June 30,
2004,  was $739,798  and  $1,230,340,  respectively  as compared to $563,381 and
$1,100,529 for the same periods in 2003.  These  expenses  consisted of employee
costs,  occupancy  expense and other operating  expenses.  Salaries and employee
benefits  for the three and six months ended June 30,  2004,  were  $359,553 and
$604,835  respectively compared to $283,159 and $573,906 for the same periods in
2003,  or an increase of 27.0% and 5.39%  respectively.  Salaries  and  employee
benefits,  along with all other noninterest expense categories  increased due to
the Company's strong growth.

Financial Condition

         Total  assets  at June 30,  2004,  were  $90,957,216,  an  increase  of
$5,882,066 or 6.9% over 2003 year-end assets of $85,075,150.  Deposits increased
to  $78,277,926  at June 30,  2004,  and  increase  of  $4,816,160  or 6.6% from
$73,461,766 at December 31, 2003.  The increased  deposits were used for funding
growth in the loan portfolio for the most part. Loans increased by $5,706,872 or
8.3% to  $74,246,107  at June 30, 2004,  from  $68,539,235  from year-end  2003.
Securities  were  $221,900 at June 30, 2004 compared to $171,700 at December 31,
2003.

<PAGE>

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

Loans

         Net loans outstanding  totaled $74,246,107 at June 30, 2004 compared to
$68,539,235  at  December  31,  2003.  Commercial  and real  estate  loan growth
accounted  for  almost all of the total  $5.7  million  growth for the first six
months of 2004.

         Management  feels the overall  quality of loans remains  solid.  In the
event that a loan is 90 days or more past due the accrual of income is generally
discontinued  when the full  collection  of  principal  or  interest is in doubt
unless the  obligations  are both well secured and in the process of collection.
At June 30,  2004,  total  loans 90 days or more  past  due and  still  accruing
interest  were  $262,860  while  total  loans  90 days or more  past  due and in
non-accrual status equaled $1,351,501.

Securities

         Investments  at June 30, 2004 had an  amortized  cost of $221,900 and a
market  value of $221,900 as compared  to an  amortized  cost of $171,700  and a
market  value of $171,700 at December  31.  2003.  The Bank's  total  investment
portfolio  is in Federal  Home Loan Bank.  As a member of the Federal  Home Loan
Bank,  the Bank is required to  maintain  stock in an amount  equal to .0015% of
total  assets.  Federal  Home  Loan  Bank  stock is  carried  at cost  under the
available-for-sale  category.  Federal Home Loan Bank stock is maintained by the
Bank at par value of one hundred dollars per share.

Deposits

         Total  deposits,  which  are the  principal  source  of  funds  for the
Company,  were  $78,277,926 at June 30, 2004 compared to $73,461,766 at December
31,  2003  representing  an increase of 6.6%.  The  Company has  targeted  local
consumers,  professional  and  commercial  businesses as its central  clientele,
therefore, deposit instruments in the form of demand deposits, savings accounts,
money  market  demand  accounts,  NOW  accounts,  certificates  of  deposit  and
individual retirement accounts are offered to customers. The Company established
a line of credit with the Federal Home Loan Bank secured by a blanket-pledge  of
1-4  family  residential  mortgage  loans.  At June  30,  2004 the  Company  had
outstanding advances of $4,447,453 at the Federal Home Loan Bank.

Capital

         Equity capital at June 30, 2004 was $7,716,115, an increase of $508,828
from  $7,207,287  at December 31,  2003,  due to a net profit for the Company of
$430,024 for the first six months of 2004,  $83,803 of Bank only earnings before
the  consolidation  of the two  companies  and  beginning  equity of the  parent
company  only of  $(4,999).  The $83,803  was taken  directly to surplus and not
included  in  earnings  of  the  Company  due  to  the  effective  date  of  the
consolidation being January 23, 2004.

<PAGE>

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

                         CAPITAL RATIOS AT JUNE 30, 2004
                         -------------------------------
<TABLE>
<S>                                 <C>              <C>              <C>

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

Tier 1 risk-based capital           4.00%            10.14%           10.11%
Total risk-based capital            8.00%            11.38%           11.35%
Tier 1 leverage ratio               4.00%             8.49%            8.46%

</TABLE>

Liability and Asset Management

         The Company's  Asset/Liability Committee ("ALCO") actively measures and
manages interest rate risk using a process developed by the 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 June 30, 2004,  approximately 62 of the institutions gross loans had
adjustable rates. Based on the asset/liability modeling management believes that
these loans reprice at a faster pace than  liabilities  held at the institution.
Because the majority of the institutions 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.

Off-Balance Sheet Arrangements

The  Company,  at June 30,  2004,  had  outstanding  unused  lines of credit and
standby  letters  of  credit  that  totaled  approximately   $7,324,652.   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 other banks and
to borrow from the Federal  Home Loan Bank.  At June 30,  2004,  the Company had
established  with  correspondent  banks the ability to purchase Federal funds if
needed.

<PAGE>

Item 3.  Controls and Procedures

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

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

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

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





<PAGE>

                           PART II - OTHER INFORMATION

Item 1.   LEGAL PROCEEDINGS
          None

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


    (a)   Not applicable.

    (b)   Not applicable.

    (c)   No shares of the Company's common stock were issued during the quarter
          ended June 30, 2004.

    (d)   Not applicable.

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

Item 3.   DEFAULTS UPON SENIOR SECURITIES
          None.

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          (a)     The annual meeting of the Company's stockholders was held June
                  15, 2004.

          (b)     The  following  members  of the board of  directors  were each
                  reelected  as Class  III  directors  to serve  for  additional
                  three-year terms or until their respective successors are duly
                  elected and qualified:
                         William J. Smead
                         Wendy C. Warner
                         Roger A. Woolsey

                  The term of office for the following members of the board of
                  directors continued after the meeting:  Don E. Claiborne, J.
                  Robert Grubbs, and Leonard B. Lawson (Class I); and Rance P.
                  Merkel (Class II).

          (c)     (1) The following directors were elected by the following
                      tabulation:
<TABLE>
<S>    <C>                      <C>               <C>                <C>               <C>             <C>

                                   Number
                                     of                                                                   Broker
                                   Shares                                                                  Non-
             Name                  Voting              For              Against          Abstain           Votes
       -----------------       --------------    ---------------    --------------    ------------    -------------
       William J. Smead           1,312,806         1,301,556           11,250              0                0
       Wendy C. Warner            1,312,806         1,301,556           11,250              0                0
       Roger A. Woolsey           1,312,806         1,301,556           11,250              0                0
</TABLE>

                  (2) The ratification of the appointment of Dent K. Burk
                      Associates, P.C. as independent auditors for the Company
                      for fiscal year 2040 was as follows:

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


                                   Number
                                     of                                                                   Broker
                                   Shares                                                                  Non-
                                   Voting              For              Against          Abstain           Votes
                               --------------    ---------------    --------------    -------------   -------------
                                  1,312,806         1,299,911            1,405            11,490             0
</TABLE>

          (d)     None.


<PAGE>

Item 5.  OTHER INFORMATION
         None.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) Index to Exhibits.

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

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

         (b) Reports on Form 8-K.

             A current report on 8-K dated May 21, 2004, was filed with the
             Securities and Exchange Commission under Item 5, "Other Events and
             Regulation FD Disclosure."


<PAGE>

                                   SIGNATURES

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


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


DATE:  August 13, 2004
       ---------------                /s/ J. Robert Grubbs
                                      -----------------------------------
                                      J. Robert Grubbs
                                      President & Chief Executive Officer



<PAGE>