Item 2.06 Material Impairments.

On October 1, 2008, Atlantic Southern Financial Group, Inc. (the "Company"), the bank holding company for Atlantic Southern Bank (the "Bank"), determined that the value at September 30, 2008, with respect to the Company's investments in the preferred stock of the Federal Home Loan Mortgage Corporation ("Freddie Mac") and the Federal National Mortgage Association ("Fannie Mae"), was impaired.

On September 7, 2008, the United Stated Department of Treasury and the Federal Housing Finance Agency (the "FHFA") announced, among other things, that Freddie Mac and Fannie Mae were being placed under conservatorship, that control of their management was being given to their regulator, the FHFA, and that Fannie Mae and Freddie Mac were prohibited from paying dividends on their common and preferred stock. Following this announcement, the estimated fair market value of the Company's investment in Freddie Mac and Fannie Mae preferred stock has declined significantly and it remains unclear when and if the value of this investment will improve. The Company has 5,365 shares of Freddie Mac series F preferred stock and 40,000 shares of Fannie Mae series R preferred stock. At June 30, 2008, the Company had investments in Freddie Mac and Fannie Mae preferred stock having a cost basis of $1,250,009 and a carrying value of $1,151,115. As of the market close on September 30, 2008, however, the total market value of these securities declined to $84,725, resulting in an unrealized loss, on a pre-tax basis, to the Company on these securities of $1,165,284.

As a result of these events, the Company recorded a non-cash other than temporary impairment on these securities for the quarter ended September 30, 2008 in the amount of $722,477 (net of tax benefit). Management estimates that if the Company was required to write down the value of the securities to zero, the Bank would remain "well capitalized" under the federal prompt corrective action regulations.

---