UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


WASHINGTON,
D.C. 20549




FORM 10-Q/A


(Amendment No.
1)




(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, 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 as specified in its charter)




Tennessee
                      
                      20-0307691(State
      or other jurisdiction of
                      
                      (I.R.S.
      Employer Identification No.)incorporation
      or organization)3095
      East Andrew Johnson Highway
                        Greeneville,
      Tennessee
                      
                      37745(Address
      of principal executive offices)
                      
                      (Zip
      Code)Registrant’s
      telephone number, including area code:  (423)
      636-1555Not Applicable(Former
      name, former address and former fiscal year, if changed since last
      report)


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




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





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





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




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




As of
August 1, 2009, there were 2,389,391 shares of common stock, $0.333 par value,
issued and outstanding.







EXPLANATORY
NOTE


American
Patriot Financial Group, Inc., a Tennessee corporation (the “Company”), is
filing this Amendment No. 1 (the “Amendment No. 1”) to its Quarterly Report on
Form 10-Q for the quarter ended June 30, 2009, as filed with the Securities and
Exchange Commission on August 14, 2009 (the “Original Form 10-Q”), to reflect
revised regulatory capital ratios as of the quarter ended June 30,
2009.  Subsequent to filing the Original Form 10-Q, the Federal
Deposit Insurance Corporation (the “FDIC”) advised American Patriot Bank, the
wholly-owned subsidiary of the Company, (the “Bank”), that it believed that the
Bank should restate its June 30, 2009 Consolidated Report of Condition and
Income (the “Call Report”) to reduce the Bank’s capital by the full amount of
the Company’s deferred tax asset at June 30, 2009.  On October 13,
2009, the Bank submitted a revised Call Report to the FDIC reflecting a
reduction in the Bank’s capital levels at June 30, 2009 as a result of the
FDIC’s request.  Except as identified above, no other amendments or
changes to the Original Form 10-Q are included in this Amendment No. 1 and the
remainder of the Original Form 10-Q shall remain in effect as of the date of the
filing of the Original Form 10-Q.  Additionally, this Amendment No. 1
does not purport to provide an update or discussion of any other developments
subsequent to the filing of the Original Form 10-Q.


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




Impact
of Inflation




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




Critical
Accounting Estimates




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




Recent
Accounting Pronouncements




In
September 2006, the FASB issued SFAS No. 157,Fair Value Measurements
(“SFAS” 157”).  SFAS 157 defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value
measurements.  SFAS 157 will be applied prospectively and is effective for
fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years.  SFAS 157 did not have a material impact on the
Company’s consolidated financial statements.




In
September 2006, the Financial Accounting Standards Board ratified a
consensus opinion reached by the Emerging Issues Task Force on Issue 06-04,Accounting for Deferred
Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life
Insurance Arrangements , (“EITF 06-04”) which requires employers that
enter into endorsement split-dollar life insurance arrangements that provide an
employee with a postretirement benefit to recognize a liability for the future
benefits promised based on the substantive agreement made with the
employer.  Whether the accrual is based on a death benefit or on the future
cost of maintaining the insurance would depend on what the employer has
effectively agreed to provide during the employee’s retirement.  The
purchase of an endorsement-type life insurance policy does not qualify as a
settlement of the liability.  The consensus in EITF 06-4 is effective for
fiscal years beginning after December 15, 2007.  The Company adopted
EITF 06-4 effective January 1, 2008 and its adoption did not have a
material impact on the Company.




In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial
Assets and Financial Liabilities, (“SFAS 159”).  This statement
permits entities to choose to measure many financial instruments and certain
other items at fair value.  The objective of this standard is to improve
financial reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions.  This statement is effective as of the beginning of fiscal
years beginning after November 15, 2007, with early adoption permitted
under certain circumstances.  The Company did not choose to early adopt
this standard and implementation of SFAS 159 did not have a material impact on
its financial position or results of operations.


2





In
March 2007, the EITF reached a final consensus on Issue
No. 06-10,Accounting for
Deferred Compensation and Postretirement Benefit Aspects of Collateral
Assignment Split-Dollar Life Insurance Arrangements, (“EITF
06-10”).  EITF 06-10 requires employers to recognize a liability for the
post-retirement benefit related to collateral assignment split-dollar life
insurance arrangements in accordance with SFAS No. 106 or APB Opinion
No. 12.  EITF 06-10 also requires employers to recognize and measure
an asset based on the nature and substance of the collateral assignment
split-dollar life insurance arrangement.  The provisions of EITF 06-10 are
effective for the Company on January 1, 2008, with earlier application
permitted, and are to be applied as a change in accounting principle either
through a cumulative-effect adjustment to retained earnings or other components
of equity or net assets in the statement of financial position as of the
beginning of the year of adoption; or as a change in accounting principle
through retrospective application to all prior periods.  Adoption of EITF
06-10 did not have a significant impact on its consolidated financial
statements, results of operations or liquidity.





In
October 2008, the FASB issued FSP No. FAS 157-3 Determining the Fair Value of a
Financial Asset When The Market for That Asset Is Not
Active.This FSP clarifies the application of SFAS No. 157 in
a market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that financial asset is not active.  This FSP was effective
for the Company upon issuance, including prior periods for which financial
statements have not been issued; and, therefore was effective for the Company's
financial statements as of and for the year ended December 31,
2008.  Adoption of FSP No. 157-3 had no impact on 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 in Variable Interest Entities
(“FSP 140-4 and 46(R)-8”).  This FSP requires additional disclosures
by public entities with continuing involvement in transfers of financial assets
to special purpose entities and with variable interests in VIEs, including
sponsors that have a variable interest in a VIE.  Additionally, this
FSP requires certain disclosures to be provided by a public entity that is (1) a
sponsor of a qualifying special-purpose entity (SPE) that holds a variable
interest in the qualifying SPE but was not the transferor (nontransferor) of
financial assets to the qualifying SPE, and (2) a servicer of a qualifying SPE
that holds a significant 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 reporting period (interim or
annual) that ends after December 15, 2008.  The Company adopted FSP
140-4 and 46(R)-8 as of December 31, 2008, and its adoption did not have a
significant impact on the Company's consolidated financial
statements.





Financial
Accounting Standards Board (“FASB”) Staff Position (“FSP”), Statement of
Financial Accounting Standards (“SFAS”) No. 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly was issued
April 9, 2009.  FSP SFAS 157-4 affirms that the objective of fair
value when the market for an asset is not active is the price that would be
received to sell the asset in an orderly transaction, and clarifies and includes
additional factors for determining whether there has been a significant decrease
in market activity for an asset when the market for that asset is not
active.  FSP SFAS 157-4 requires an entity to base its conclusion
about whether a transaction was not orderly on the weight of the
evidence.  FSP SFAS 157-4 also amended SFAS 157, “Fair Value
Measurements,” to expand certain disclosure requirements.  FSP SFAS
157-4 is effective for interim and annual periods ending after June 15, 2009,
with early adoption permitted for periods ending after March 15,
2009.  FSP SFAS 157-4 became effective for the Company on June 15,
2009 and did not have a significant impact on the Company’s financial
statements.


3


FSP SFAS
107-1 and Accounting Principles Board (“APB”) 28-1, Interim Disclosures about Fair Value
of Financial Instruments were issued April 9, 2009.  FSP SFAS
107-1 and APB 28-1 amends SFAS 107, Disclosures about Fair Value of
Financial Instruments, to require an entity to provide disclosures about
fair value of financial instruments in interim financial information and amends
APB Opinion No. 28, Interim
Financial Reporting, to require those disclosures in summarized financial
information at interim reporting periods.  Under FSP SFAS 107-1 and
APB 28-1, a publicly traded company shall include disclosures about the fair
value of its financial instruments whenever it issues summarized financial
information for interim reporting periods.  In addition, entities must
disclose, in the body or in the accompanying notes of its summarized financial
information for interim reporting periods and in its financial statements for
annual reporting periods, the fair value of all financial instruments for which
it is practicable to estimate that value, whether recognized or not recognized
in the statement of financial position, as required by SFAS 107.  The
new interim disclosures required by FSP SFAS 107-1 and APB 28-1 are included in
the Company’s interim financial statements for the second quarter, June 30,
2009.





On May
28, 2009, the FASB issued SFAS No. 165, Subsequent
Events.  Under SFAS 165, companies are required to evaluate
events and transactions that occur after the balance sheet date but before the
date the financial statements are issued, or available to be issued in the case
of non-public entities.  SFAS 165 requires entities to recognize in
the financial statements the effect of all events or transactions that provide
additional evidence of conditions that existed at the balance sheet date,
including the estimates inherent in the financial preparation
process.  Entities shall not recognize the impact of events or
transactions that provide evidence about conditions that did not exist at the
balance sheet date but arose after that date.  SFAS 165 also requires
entities to disclose the date through which subsequent events have been
evaluated.  SFAS 165 was effective for interim and annual reporting
periods ending after June 15, 2009.  The Company adopted the
provisions of SFAS 165 for the quarter ended June 30, 2009, as required, and
adoption did not have a material impact on the financial statements taken as a
whole.




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




Forward-Looking
Statements




Management’s
discussion of the Company and management’s analysis of the Company’s operations
and prospects, and other matters, may include forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 and other
provisions of federal and state securities laws.  Although the Company
believes that the assumptions underlying such forward-looking statements
contained in this Report are reasonable, any of the assumptions could be
inaccurate and, accordingly, there can be no assurance that the forward-looking
statements included herein will prove to be accurate.  The use of such
words as “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 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.


4





General





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




Liquidity





At June 30, 2009, the Company had
liquid assets of approximately $18.3 million in the form of cash and federal
funds sold compared to approximately $6.4 million on December 31,
2008.  Management believes that the liquid assets are adequate at June
30, 2009. Additional liquidity should 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 and has taken
a pro-active approach to develop a larger local deposit base to help minimize
any risk.





Results
of Operations





The Company had a net loss of
$(925,157) or $(.39) per share for the quarter ended June 30, 2009 compared to
net income of $82,502 or $.04 per share for the quarter ended June 30,
2008.  The Company had a net loss for the six months ended June 30,
2009 of $(1,499,192) as compared to net income of $216,067 for the same period
in 2008.  A significant increase to the provision for loan losses was
the primary cause of the net loss in 2009.  During the quarter ended
June 30, 2009, the Company recorded a provision for loan losses of $1,168,339,
while recording a benefit from loan losses of $(45,470) for the same period in
2008. For the six months ended June 30, 2009, the provision for loan losses was
$2,024,995 compared to a benefit of ($137,599) for the comparable period in
2008.


5


Net
Interest Income/Margin





Net interest income represents the
amount by which interest earned on various assets exceeds interest paid on
deposits and other interest-bearing liabilities and is the most significant
component of the Company's earnings.  Interest income for the quarter
ended June 30, 2009 was $1,504,104 compared to $1,771,168 for the same period in
2008, and total interest expense was $812,761 in 2009 compared to $813,958 in
2008 for the same period.  Interest income for the six months ended
June 30, 2009 was $3,177,302, compared to $3,746,753 for the same period in
2008, and total interest expense was $1,623,884 in 2009 compared to $1,797,730
in 2008 for the same period.  The Company pursues local deposits
aggressively with attractive interest rates, which has contributed to
compression of net interest margin.  Also, the Federal Reserve Bank’s
interest rate cuts beginning in latter 2007 and continuing through out all of
2008 have contributed to this compression as our loan yields have repriced
faster than our deposit yields. Based on the Company’s mix of interest earning
assets and interest bearing liabilities, management believes that net interest
margin should begin to stabilize for the remainder of the year.  Many
economists now believe we are at or near the end of interest rate cuts with
likely increases later in 2009. If interest rates remain stable or begin to
increase, net interest margin could increase.





Provision
for / Benefit from Loan Losses





The
provision for (benefit from) loan losses represents a charge (or recovery) to
operations necessary to establish an allowance for possible loan losses, which
in management's evaluation, is adequate to provide coverage for estimated losses
on outstanding loans and to provide for uncertainties in the economy. The
provision for loan losses for the three month and six month period ended June
30, 2009 was $1,168,339 and $2,024,995, respectively, as compared to a benefit
of $(45,470) and $(137,599) for the same three month and six month period ended
June 30, 2008.  During the three and six months ended June 30, 2009,
loan charge-offs were $713,997 and $1,444,654 respectively.  The
recoveries for the three and six month periods ended June 30, 2009 were $16,125
and $72,739, respectively.  The allowance for loan losses was
$3,026,728 at June 30, 2009 as compared to $2,373,648 at December 31, 2008, an
increase of 27.5%.  The allowance was 2.9% of loans at June 30,
2009.  Identification of additional impaired loans in conjunction with
other economic declines (primarily increased unemployment rates in our primary
lending areas) resulted in significant provision for loan losses during the
three and six month periods ended June 30, 2009.


Management believes that the
allowance for loan losses is adequate at June 30, 2009. However, there can be no
assurance that additional provisions for loan losses will not be required in the
future, including as a result of possible changes in the economic assumptions
underlying management’s estimates and judgments, adverse developments in the
economy, and the residential real estate market in particular, or changes in the
circumstances of particular borrowers.  Management intends to pursue more
aggressive strategies for problem loan resolution, and is committed to bolster
loan loss reserves to levels sufficient to absorb losses recognized in the
pursuit of this strategy.




Provision
(Benefit) for/from Income Taxes





The Company's benefit from income tax
expense for the three and six months ended June 30, 2009 was $(576,933) and
$(930,340), respectively when compared to a provision of $28,123 and $101,770
for the same periods in 2008.  Management believes the provision
(benefit) for income taxes for the period ended June 30, 2009 to be
adequate.


6


Noninterest
Income





The Company's noninterest income
consists of service charges on deposit accounts and other fees and
commissions.  Total noninterest income for three and six months ended
June 30, 2009 was $147,723 and $296,796, respectively when compared to $170,017
and $347,387 for the same periods in 2008.  Service charges on deposit
accounts decreased $29,367 and $56,687 for the three and six months ended June
30, 2009 respectively, when compared to the same periods in 2008.The primary cause of the
decline in service charges was related to declines in NSF and overdraft
fees.  These fees are primarily activity driven and relate to transaction
based checking accounts.  The bank noted a significant decline in checking
account balances when comparing the first six months of 2009 to the first six
months of 2008, and a corresponding decrease in NSF and overdraft transactions
during the first six months of 2009, as compared to the first six months of
2008. Fees from origination of mortgage loans sold increased for the three and
six months ended June 30, 2009 by $4,826 and $9,003 when compared to the same
period in 2008. Favorable interest rates spurred an increase in mortgage loan
originations during the first half of 2009. Investment sale commissions
decreased $4,256 and $9,734 for the three and six months ended June 30, 2009, as
compared to the same periods in 2008.  The reason for decreases in the
investment sale commissions is the discontinuance of that service by the bank
due to the high overhead expense and lack of sufficient revenues. Management
projects that other fees and commissions and service charges will improve during
the remainder of 2009.





Noninterest
Expense





Noninterest expenses totaled $1,172,817 and $2,254,751 for the three and six
months ended June 30, 2009, as compared to $1,062,072 and $2,116,172 for the
same periods in 2008.   Salaries and benefits decreased $84,055 and
$151,550 for the three and six months ended June 30, 2009, as compared to the
same periods in 2008.  The decrease in salaries and benefits for the three
and six months ended June 30, 2009 is due to reductions in senior level
management positions. Legal and professional fees increased $120,777 and
$150,426 for the three and six months ended June 30, 2009, as compared to the
same periods in 2008.  Management continues to incur additional expenses to
meet the demands of regulatory requirements, especially relating to SOX 404
compliance, in addition to strategic plan development.  The Company has
also incurred significant noninterest expense increases in other operating
expenses primarily as a result of increased collection expenses, ATM expenses
FDIC insurance and state banking assessments.   Combined, operating
expenses relating to all other expenses increased $90,990 and $158,020 for the
three and six months ended June 30, 2009, when compared to the same periods in
2008.





Financial
Condition





Total assets at June 30, 2009, were
$131,984,880, an increase of $12,392,054 or 10.4% compared to 2008 year-end
assets of $119,592,826.  Deposits increased to $117,588,567 at
June 30, 2009, an increase of $13,849,390 or 13.4% from $103,739,177 at
December 31, 2008. Most of the change in total assets and total deposits
can be attributed to the Company taking measures to increase liquidity by
offering attractive rates to customers.  The majority of our increased
liquidity at June 30, 2009 has been placed in Federal funds sold. Premises and
equipment decreased to $5,163,917 at June 30, 2009 a decrease of $153,768
or 2.9% from $5,317,685 at December 31, 2008, primarily as a result of
minimal fixed asset purchases coupled with normal depreciation
charges.  Other significant additions noted as of June 30, 2009 when
compared to December 31, 2008 relate to foreclosed assets.  During the
first two quarters of 2009, management foreclosed on one significant loan
relationship totaling approximately $1,012,000 in addition to several other
smaller loan foreclosures.





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


7


Loans





Net loans
outstanding totaled $100,628,824 at June 30, 2009 compared to $103,327,562 at
December 31, 2008.  $2.3 million of the $2.7 million shrinkage relates
to real estate loans and reflects management's strategy of reducing the
concentration in these loan types based on the current economic climate's impact
on the real estate industry. Management is monitoring this portfolio
closely.  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, 2009, there were no loans 90
days or more past due and still accruing interest, while total loans 90 days or
more past due and in non-accrual status were $6,197,002.  At
December 31, 2008, there we no loans 90 days or more past due and still
accruing interest, while total loans 90 days or more past due and in non-accrual
status were $599,667.





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





June 30,
                            
                            
                            December 31,2009
                            
                            
                            2008Impaired
      loans with a specificvaluation
      allowance
                            
                            $
                            11,098,399
                            
                            
                            $
                            6,414,683Total
      specifically evaluatedimpaired
      loans
                            
                            $
                            11,098,399
                            
                            
                            $
                            6,414,683Specific
      valuation allowancerelated
      to impaired loans
                            
                            $
                            2,051,930
                            
                            
                            $
                            1,512,511


In
addition to the specifically evaluated impaired loans above, the Bank
collectively evaluates large groups of smaller balance homogeneous loans for
impairment.  Loans collectively evaluated for impairment, risk rates
special mention, substandard and doubtful, as of June 30, 2009 and December 31,
2008 were $2,904,962 and $739,517, respectively.  The Bank has
reserved $86,926 and $29,149 related to these loans as of June 30, 2009 and
December 31, 2008, respectively.





In
connection with impaired loans, additional funds are committed to one borrower
in an amount not to exceed $78,825 subject to compliance with provisions of the
applicable loan agreement which includes a lending base formula.





As of
June 30, 2009, the Company has identified loans aggregating $11,098,399 as being
impaired, of which $6,197,002 are non-performing as it relates to payment of
interest.  The aforementioned total is approximately $5,598,000 more
than reported at December 31, 2008.  The increase is primarily related
to identified problem assets centered in the Blount County Market.





Restricted
Equity Investments




Federal
Home Loan Bank (FHLB) stock at June 30, 2009 had an amortized cost and market
value of $296,500 as compared to an amortized cost and a market value of
$291,200 at December 31, 2008.   As a member of the FHLB, the
Company is required to maintain stock in an amount equal to .15% of total
assets.  Federal Home Loan Bank stock is carried at
cost.  Federal Home Loan Bank stock is maintained by the Company at
par value of one hundred dollars per share.




Deposits





Total deposits, which are the principal
source of funds for the Company, were $117,588,567 at June 30, 2009, compared to
$103,739,177 at December 31, 2008, representing an increase of
13.4%.  The Company has targeted local consumers, professional and
commercial businesses as its central clientele; therefore, deposit instruments
in the form of demand deposits, savings accounts, money market demand accounts,
NOW accounts, certificates of deposit and individual retirement accounts are
offered to customers.   The Company established a line of credit
with the Federal Home Loan Bank secured by a blanket-pledge of 1-4 family
residential mortgage loans. At June 30, 2009 the Company had outstanding
advances of $5,389,423 at the Federal Home Loan Bank compared with $5,506,805 at
December 31, 2008. At June 30, 2009 and December 31, 2008, the Company also had
$1,000,000 in short-term borrowings from Jefferson Federal Bank which is due on
demand.


8





Capital





Equity capital at June 30, 2009 was
$6,849,057, a decrease of $1,499,192 from $8,348,249 at December 31, 2008, due
to a net loss of $1,499,192 for the first six months of 2009.





At June 30, 2009, the Bank’s capital
ratios were as follows:





Required
                    Minimum
                    Ratio
                  
                  
                  To be
                    Well
                    Capitalized
                  
                  
                  Requirements
                    Under the
                    Order
                  
                  
                  BankTier
      1 Leverage ratio
                  
                  
                  4.00
                  %
                  
                  
                  5.00
                  %
                  
                  
                  8.00
                  %
                  
                  
                  5.59
                  %Tier
      1 risk-based capital ratio
                  
                  
                  4.00
                  %
                  
                  
                  6.00
                  %
                  
                  
                  10.00
                  %
                  
                  
                  6.05
                  %Total
      risk-based capital ratio
                  
                  
                  8.00
                  %
                  
                  
                  10.00
                  %
                  
                  
                  11.00
                  %
                  
                  
                  7.30
                  %


In June 2009, the Bank’s Board of
Directors consented to the issuance of an Order to Cease and Desist (Order) by
the FDIC.  The Order requires the Bank to cease and desist from the
unsafe and unsound banking practices and violations of law and or regulations as
discussed in the Order.  The Order also includes minimum capital
ratios to maintain and prohibits payment of dividends without approval by the
FDIC, among other issues.




As a
result of the Bank’s total risk-based capital ratio falling below 8% at June 30,
2009, the Bank will be considered undercapitalized and will become subject to
the provisions of Section 38 of the Federal Deposit Insurance Act, which among
things: (i) restricts payment of capital distributions and management fees; (ii)
requires that the FDIC monitor the condition of the Bank; (iii) requires
submission of a capital restoration plan within 45 days; (iv) restricts the
growth of the Bank's assets; and (v) requires prior approval of certain
expansion proposals, many of which restrictions or obligations, including the
requirement to submit a capital restoration plan, the Bank was already subject
to as a result of the Order, which required the Bank to develop and implement a
capital plan that increases the Bank’s Tier 1 capital ratio, Tier 1 risk-based
capital ratio and Total risk-based capital ratio to 8%, 10% and 11%,
respectively,





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, 2009, approximately 69% of the Company’s gross loans had adjustable
rates.  Based on the asset/liability modeling, management believes
that these loans reprice at a faster pace than liabilities held by the
Company.  Because the majority of the Company’s liabilities are 12
months and under and the gap in repricing is asset sensitive, management
believes that a rising rate environment would have a positive impact on the
Company’s net interest margin.  Floors in the majority of the
Company’s adjustable rate assets also mitigate interest rate sensitivity in a
decreasing rate environment.  However, there is increasing pressure to
adjust the floor rates downward in the adjustable rate portfolio as customers
become more cost conscious and competition becomes more
aggressive.


9





Off-Balance
Sheet Arrangements





The Company, at June 30, 2009, had
outstanding unused lines of credit and standby letters of credit that totaled
approximately $11,451,000.  These commitments have fixed maturity
dates and many will mature without being drawn upon, meaning that the total
commitment does not necessarily represent the future cash
requirements.  The Company has the ability to liquidate Federal funds
sold or, on a short-term basis, to purchase Federal funds from another bank and
to borrow from the Federal Home Loan Bank.  At June 30, 2009, the
Company had established with a correspondent bank the ability to purchase
Federal funds if needed.




10





PART
II - OTHER INFORMATION




Item
6.   EXHIBITS.





Index to Exhibits.





Exhibit No.
              
              Description3.1*
              
              Charter
      of American Patriot Financial Group, Inc.3.2*
              
              Bylaws
      of American Patriot Financial Group, Inc.10.1**
              
              Stipulation
      and Consent to the Issuance of an Order to Cease and Desist dated May 29,
      200910.2**
              
              Order
      to Cease and Desist between American Patriot Bank and the Federal Deposit
      Insurance Corporation dated June 3, 200931.1***
              
              Certification
      pursuant to Rule 13a-14a/15d-14(a)31.2***
              
              Certification
      pursuant to Rule 13a-14a/15d-14(a)31.3
              
              Certification
      pursuant to Rule 13a-14a/15d-14(a)31.4
              
              Certification
      pursuant to Rule 13a-14a/15d-14(a)32.1***
              
              Certification
      pursuant to Rule 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 200232.2***
              
              Certification
      pursuant to Rule 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002





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





**
      Previously filed as an exhibit to a Current Report on Form 8-K filed by
      American Patriot Financial Group, Inc. with the Commission on June 9,
      2009.




***
      Previously filed as an exhibit to the Company’s Quarterly
      Report on Form 10-Q for the quarter ended June 30, 2009, as filed with
      Commission on August 14,
2009.





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SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this Amendment No. 1 to Quarterly Report on Form 10-Q to be signed
on its behalf by the undersigned thereunto duly authorized.





AMERICAN
      PATRIOT FINANCIAL GROUP, INC.(Registrant)
  DATE: October 16,
      2009
                                
                                /s/
      T. Don WaddellT.
      Don WaddellChief
      Financial
Officer





12