Five thousand shares of preferred stock are being offered for sale to Tennessee residents by American Patriot Financial Group, Inc., parent company of Greeneville-based American Patriot Bank.

The preferred stock offering totals $5 million.

The bank said in a written statement, "Preferred stock is a special equity security that carries no voting rights but may carry priority over common stock in the payment of dividends and upon liquidation."

The minimum investment would be $5,000, amounting to five shares at $1,000 per share, while the maximum investment would be $1 million, with 1,000 shares for $1,000 each.

The bank has not previously offered preferred stock.

Dividends are to be 6 percent per year, cumulative, paid quarterly.

American Patriot Bank's common stock most recently was selling at $2.75 a share, according to a bank spokesperson.

A Dec. 22 letter from the bank to its shareholders said, "The Board of Directors has determined that it is appropriate to increase capital to return the bank to a well capitalized position, support growth and enhance the bank's performance."

The bank's letter said, "As we are all aware, over the last several months the economic environment has encountered greater challenges than have been experienced in decades.

"All segments of the economy have been impacted in some fashion and the banking industry has shouldered the brunt of the fallout.

"American Patriot Financial Group, Inc. has not been exempted from these challenges. The Board of Directors and management have responded to these challenges and have identified and appropriately reserved for all major exposures.

"Additionally, we have strengthened our risk management processes and are confident that these enhancements will assist in improving asset quality in the future.

"This process has not occurred without considerable pressure on earnings and capital related to credit exposures, collection expenses and related administrative costs," the statement said.

The letter was signed by William J. Smead, chariman of the bank's board; Michael G. Burns, the bank's president, and John D. Belew, its chief executive officer.

The company this week also made this brief public announcement:

"American Patriot Financial Group, Inc. (the "Company") today announced that it is making an unregistered offering of preferred stock directed solely to residents of the State of Tennessee pursuant to the exemption from registration requirements under Section 3(a)(11) of the Securities Act of 1933 (the "Act") for offers and sales of securities made to residents of a single state.

"The Company is offering 5,000 shares of preferred stock without the engagement of underwriters. The offering is expected to be completed on or before January 31, 2010.

"The preferred stock offered will not be or have not been registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Act.

"Offers to purchase the preferred stock are only being solicited from and sales of preferred stock will be made only to bona fide residents of the State of Tennessee.

"The Company intends this notice to comply with Rule 135C of the Securities and Exchange Commission, and accordingly, this notice is not intended to and does not constitute an offer of any securities for sale."

Bank officials declined to say anything further. An American Patriot spokesperson said the bank's attorneys had insisted that they make no further comment.

On June 11, 2009, American Patriot Financial Group, Inc., announced that its subsidiary, American Patriot Bank, had entered into a cease-and-desist order with the Federal Deposit Insurance Corporation (FDIC), one of the federal agencies responsible for banking industry regulation.

Under the cease-and-desist order, the bank was required to take certain actions.

Among the purposes of those actions, according to the bank's announcement in June, were to strengthen the bank's management and its capital position and lending policies; reduce its concentration of construction and development loans; and reduce its level of "criticized assets."

The Internet Web site www.Investor http://Dictionary.com defines "criticized assets" as "loans with payments in arrears that are rated by government examiners as substandard, doubtful, loss or special mention."

According to the bank's June release, the cease-and-desist order also limited the ability of the bank to pay dividends to American Patriot Financial Group, the parent company of the bank, without the consent of the bank's regulators.

As a result of the order, the bank in June agreed to submit a capital plan to the FDIC and to maintain a "Tier 1 capital ratio" of at least 8 percent, a Tier 1 risk-based capital ratio of at least 10 percent, and a total risk-based capital ratio of at least 11 percent.

All of these percentages are above the regulatory minimums for a bank to be considered "well-capitalized," Dr. Smead said then.

He said in June that American Patriot Financial Group was considering a variety of alternatives to strengthen the bank's capital position.

The FDIC's June order further required the bank to improve its loan review policies and procedures, strengthen its allowance for loan losses, and take action to reduce delinquent loans and the concentration of loans made to borrowers involved in residential real estate construction and development.

American Patriot Financial Group reported that it had consolidated total assets of approximately $123 million as of Sept. 30, 2009.

That was about $5 million less than the $128 million the bank had reported on March 30, 2009.

American Patriot Bank has three offices in Greeneville and one in Maryville. Its headquarters office is at 3095 E. Andrew Johnson Hwy.

A 50-page Offering Circular issued by the bank says the preferred stock shares "rank senior to common stock and will rank senior to any future preferred shares which by their terms rank junior to any existing preferred shares ...

"Dividends will be payable quarterly ...

"These shares will be the only shares of Preferred Stock outstanding after the offering. In addition the common stock outstanding after the offering will be 2,389,391 shares ...

"As a group, the directors and executive officers (of the bank) own 11.9 percent of the common stock outstanding."