<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the Quarter Ended June 30, 1996 Commission File Number 0-23470
FLAG Financial Corporation
(Exact name of registrant as specified in its charter)
Georgia 58-2094179
- - -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
101 North Greenwood St., P.O. Box 3007
LaGrange, Georgia 30240
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (706) 845-5000
- - -------------------------------------------------------------------------------
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 and Exchange Act of 1934 during the receding 12
months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such
filing requirement for the past 90 days. Yes X No
--- ---
Shares outstanding as of June 30, 1996: 2,035,740 shares of Common Stock,
$1.00 par value.
<PAGE> 2
FLAG FINANCIAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page
- - -------------------------------------------------------------------------------
<S> <C> <C>
Item I. Consolidated Statements of Condition as of June 30, 1996
(Unaudited) and December 31, 1995 1
Consolidated Statements of Income (Unaudited) for the
quarters and six months ended June 30, 1996 and June 30, 1995 2
Consolidated Statements of Cash Flows (Unaudited) for the
six months ended June 30, 1996 and June 30, 1995 3
Notes to the Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations for the quarter and six months ended
June 30, 1996 7
Part II. Other Information
- - -------------------------------------------------------------------------------
None 11
Signatures 12
</TABLE>
<PAGE> 3
FLAG FINANCIAL CORPORATION
LAGRANGE, GEORGIA
CONSOLIDATED STATEMENTS OF CONDITION
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---- ----
ASSETS (UNAUDITED)
<S> <C> <C>
Cash $ 5,132,312 $ 4,301,653
Interest bearing deposits 2,834,753 1,538,601
Fed funds sold 420,000 2,010,000
Investment securities 8,610,987 14,555,238
Mortgage-backed securities 39,421,241 44,105,262
Loans receivable - net 154,902,943 149,884,834
Loans held for sale 1,466,583 30,709
Mortgage servicing rights acquired 1,514,351 1,455,983
Accrued interest and
dividends receivable 2,036,118 1,750,434
Real estate acquired
through foreclosure 518,582 800,714
Federal Home Loan bank stock 1,895,900 1,895,900
Fixed assets 5,504,680 5,572,290
Deferred income taxes 858,066 779,055
Other assets 3,593,193 3,424,691
------------ ------------
Total assets $228,709,710 $232,105,364
============ ============
LIABILITIES
Savings accounts $176,201,051 $177,848,121
Advances from Federal Home Loan Bank 25,412,500 29,504,167
Advances from borrowers
for taxes & insurance 2,015,227 971,777
Advances payable to secondary market 1,830,232 1,788,205
Accrued interest on deposits 334,116 399,390
Dividends payable on common stock 173,038 143,603
Other liabilities 903,596 751,885
------------ ------------
Total liabilities 206,869,760 211,407,148
------------ ------------
STOCKHOLDERS' EQUITY
Common stock 2,035,740 1,916,000
Additional paid-in capital 8,040,228 7,519,001
Retained earnings 12,268,572 11,580,579
Unrealized loss - marketable securities (504,591) (317,364)
------------ ------------
Total stockholders' equity 21,839,949 20,698,216
------------ ------------
Total liabilities and
stockholders' equity $228,709,710 $232,105,364
============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE> 4
FLAG FINANCIAL CORPORATION
LAGRANGE, GEORGIA
CONSOLIDATED STATEMENTS OF INCOME
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1995 1996 1995
----------- ---------- ---------- ----------
Interest Income (UNAUDITED (UNAUDITED)
<S> <C> <C> <C> <C>
Interest and fees on loans $3,539,005 $3,144,597 $6,958,281 $6,136,656
Interest and dividends on securities 274,446 294,268 517,829 695,813
Interest on mortgage-backed securities 545,129 734,427 1,165,975 1,496,058
Interest on time deposits 27,715 52,324 83,815 91,234
---------- ---------- ---------- ----------
Total interest income 4,386,295 4,225,616 8,725,900 8,419,763
---------- ---------- ---------- ----------
Interest Expense
Interest on Savings 1,928,871 2,035,165 3,951,986 3,878,891
Interest on borrowings 326,122 481,676 650,185 1,061,453
---------- ---------- ---------- ----------
Total interest expense 2,254,993 2,516,841 4,602,171 4,940,344
---------- ---------- ---------- ----------
Net interest income before
provision for loan losses 2,131,303 1,708,776 4,123,730 3,479,419
Provision for Loan Losses 634,529 120,000 784,529 240,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 1,496,774 1,588,776 3,339,201 3,239,419
---------- ---------- ---------- ----------
Other Income
Fees and service charges 652,758 511,142 1,191,617 1,012,084
Gain on sale of investment securities 42,590 56,523 166,373 59,416
Gain on sale of loans 92,899 (48,757) 124,015 (91,243)
Gain on sale of mortgage-backed securities 1,024 36,299 7,614 40,667
Gain (loss) on sale of real estate-net (23,051) (9,965) (35,027) (846)
Sundry income 92,302 141,001 120,266 186,298
---------- ---------- ---------- ----------
Total other income 858,522 686,244 1,574,858 1,206,376
---------- ---------- ---------- ----------
Operating Expenses
Compensation and benefits 669,377 602,637 1,346,061 1,218,002
Office occupancy expense 65,945 54,201 128,284 105,211
Furniture, fixtures & equipment expenses 55,200 30,350 103,658 60,797
Federal deposit insurance premium 118,842 112,260 237,821 224,006
Legal and professional fees 67,012 50,745 141,740 96,065
Data processing expense 128,390 117,088 257,463 241,158
Advertising 51,262 46,183 91,108 80,927
General and payroll tax expense 89,638 73,870 170,950 147,995
Printing and postage 59,061 67,695 145,545 132,741
Depreciation 129,999 117,000 259,998 233,995
Other expenses 238,280 188,448 466,198 317,503
---------- ---------- ---------- ----------
Total operating expenses 1,673,006 1,460,477 3,348,827 2,858,400
---------- ---------- ---------- ----------
Net income prior to taxes 682,290 814,544 1,565,232 1,587,395
Less Provision for Taxes $ 254,156 $ 272,245 551,757 543,981
---------- ---------- ---------- ----------
Net Income $ 428,133 $ 542,300 $1,013,474 $1,043,415
========== ========== ========== ==========
Primary earnings per share $0.20 $0.26 $0.48 $0.49
Fully diluted earnings per share $0.20 $0.26 $0.48 $0.49
Book value per share $10.72 $9.77 $10.72 $9.77
Equity to total assets 9.55% 9.37% 9.55% 9.37%
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE> 5
FLAG FINANCIAL CORPORATION
LAGRANGE, GEORGIA
CONSOLIDATED STATEMENT OF CASH FLOWS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
------------------------
06-30-96 06-30-95
------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $1,013,474 $1,043,415
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Provision for loan losses 784,529 240,000
Provision for depreciation 259,998 233,995
Amortization of premiums/discounts on securities 109,546 (86,891)
(Gain)/loss on sale of investment securities (23,505) 23,329
(Gain)/loss on sale of loans and mortgage-backed securities 58,265 63,095
(Gain)/loss on sale of real estate acquired through foreclosure 35,027 846
(Gain) on sale of stock (135,252) (82,746)
(Increase)/decrease in accrued interest and dividends receivable (285,684) (70,789)
(Increase)/decrease in deferred taxes 35,741 (14,755)
Increase/(decrease) in accrued interest on savings (65,274) (52,782)
Increase/(decrease) in accrued interest and dividends receivable 0 0
Increase/(Decrease) in dividends payable on common stock 29,435 825
Increase/(decrease) in other - net (75,162) (440,465)
- - -------------------------------------------------------------------------------------------------------
Total adjustments 727,663 (186,338)
- - -------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,741,137 857,077
- - -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of interest-bearing deposits (1,296,152) (2,609,971)
Maturities of investment securities 4,250,382 400,960
Proceeds from sale of investment securities 4,380,796 7,465,000
Proceeds from sale of loans and mortgage-backed securities 11,726,761 7,722,237
Loans originated net of principal collected (11,394,775) (6,491,017)
Proceeds from sale of stock 2,721,836 3,438,841
(Increase)/decrease in real estate acquired through foreclosure 247,105 (213,111)
Purchase of investment securities (3,518,047) (500,000)
Purchase of loans and mortgage-backed securities (3,215,378) (4,765,579)
Deferred net origination fees/costs (25,665) (25,489)
Purchases of FHLB stock 0 0
Purchase of other stock (1,847,181) (1,546,344)
Purchase of fixed assets (192,388) (670,514)
(Increase)/decrease in Fed Funds Sold 1,590,000 0
- - -------------------------------------------------------------------------------------------------------
Net cash used by investing activities 3,427,295 2,205,013
- - -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITES:
Net increase in savings accounts (1,647,070) 13,640,247
Proceeds from FHLB advances 9,500,000 32,300,000
Repayment of FHLB advances (13,591,666) (51,041,667)
Decrease in advances to secondary market 42,027 (119,465)
Increase in advances for borrower taxes & insurance 1,043,450 743,782
Exercise of stock options 640,967 55,500
Cash dividends (325,481) (302,697)
- - -------------------------------------------------------------------------------------------------------
Net cash provided by financing activities (4,337,773) (4,724,300)
- - -------------------------------------------------------------------------------------------------------
Net increase/(decrease) in cash and cash equivalents 830,659 (1,662,210)
Cash and cash equivalents at beginning of year 4,301,653 4,265,250
- - -------------------------------------------------------------------------------------------------------
Cash and cash equivalents at June 30, $5,132,312 $2,603,040
=======================================================================================================
</TABLE>
<PAGE> 6
FLAG FINANCIAL CORPORATION
LAGRANGE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
(UNAUDITED)
NOTE 1: Principles of Consolidation
The consolidated financial statements include the operations of FLAG Financial
Corporation ("FLAG" or "the Company") and its wholly-owned subsidiary, First
Federal Savings Bank of LaGrange ("the Bank"). The interim consolidated
financial statements included herein are unaudited but reflect all adjustments
necessary to eliminate all significant intercompany balances and transactions
and such other adjustments and accruals which, in the opinion of management,
are necessary for a fair presentation of the consolidated financial position
and the results of operation for the interim periods presented. All such
adjustments are of a normal recurring nature. Certain prior period amounts
have been reclassified to conform with the current period's presentation. For
the purpose of comparison, information is included for prior periods.
Financial information for those periods including the financial statements,
footnotes and independent auditors' opinion contained in the Company's 1995
Annual Report should be read in conjunction with these financial statements.
The results of operations for the quarter and six months ended June 30, 1996
are not necessarily indicative of the results for a full year's operation.
NOTE 2: Investments
Investments are classified in three categories; held to maturity securities
(reported at amortized cost), trading securities (reported at fair value), and
available for sale securities (reported at fair value). Net unrealized gains
or losses on available for sale securities are excluded from income but
reported in a separate component of shareholder's equity. Net unrealized gains
or losses on trading Securities are included in current earnings.
The following summarizes FLAG's investments as of June 30, 1996:
<TABLE>
<CAPTION>
Net After-Tax
Unrealized Unrealized
Balance Gain/Loss Gain/Loss
----------- ---------- ----------
<S> <C> <C> <C>
Investment Securities
Held to Maturity (at amortized cost) $ 0 $ 0 $ 0
Available for Sale (at fair value) 8,772,039 (161,051) (99,852)
Trading Securities 0 0 0
Total Investment Securities 8,772,039 (161,051) (99,852)
----------- --------- ---------
Mortgage Backed Securities
Held to Maturity (at amortized cost) $ 3,718,159 0 0
Available for Sale (at fair value) 36,355,886 (652,804) (404,739)
Trading Securities 0 0 0
Total Mortgage Backed Securities 40,074,045 (652,804) (404,739)
----------- --------- ---------
FHLB Stock (available for sale) 1,895,900 0 0
----------- --------- ---------
Total $50,741,985 $(813,856) $(504,591)
=========== ========= =========
</TABLE>
<PAGE> 7
FLAG FINANCIAL CORPORATION
LAGRANGE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
(UNAUDITED)
NOTE 3: Net Loans Receivable (Excluding Loans Held for Sale)
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Permanent Mortgage Loans
Residential 1-4 family $ 91,945,372 $ 90,022,834
Multi-family 1,136,986 1,178,000
------------ ------------
Total permanent mortgages 93,082,358 91,200,834
Commercial real estate loans 24,151,053 25,593,000
Consumer and business loans 19,387,951 14,731,000
Commercial loans and leases 19,602,317 16,916,000
Residential construction loans 5,347,000 8,048,000
------------ ------------
Gross loans receivable 161,570,679 156,488,834
------------ ------------
Less:
Undisbursed proceeds on loans in process 4,463,241 4,978,000
Deferred loans fees and discounts 274,780 287,000
Allowance for loans losses 1,929,715 1,339,000
------------ ------------
Total net loans $154,902,943 $149,884,834
============ ============
</TABLE>
NOTE 4: Loans Held for Sale
Loans held for sale are carried at the lower of cost or market. The Bank had
$1,482,251 and $30,750 of conforming mortgage loans held for sale in the
secondary market at June 30, 1996 and December 31, 1995. The market values of
these loans at June 30, 1996 and December 31, 1995 were $1,466,583 and $30,709,
respectively.
NOTE 5: Supplemental Disclosure of Cash Flow Information
Cash paid during the six months ended:
<TABLE>
<CAPTION>
June 30,
1996 1995
---------- ----------
<S> <C> <C>
Interest $3,727,231 $3,617,430
Income Taxes 692,291 569,701
</TABLE>
NOTE 6: Stockholder's Equity
The following table sets forth changes in stockholders' equity for the six
months ended June 30, 1996:
<TABLE>
<S> <C>
Balance at December 31, 1995 $20,698,216
Net Income 1,013,474
Dividends Declared (325,481)
Increase in Unrealized Losses on
Marketable Securities (187,227)
Exercise of Options 640,967
-----------
Balance at June 30, 1996 $21,839,949
===========
</TABLE>
<PAGE> 8
FLAG FINANCIAL CORPORATION
LAGRANGE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
(UNAUDITED)
On May 20, 1996 the Board of Directors declared a $0.085 per share cash
dividend payable July 1, 1996 to shareholders of record June 21, 1996.
FLAG has 2,035,740 shares of common stock outstanding. FLAG has a stock option
plan which provides up to 201,250 shares of common stock and the granting of
stock appreciation rights. As of June 30, 196,750 stock options have been
granted, 145,750 have been exercised and included in the shares outstanding,
and 3,750 have expired, leaving 47,250 options granted but not exercised.
NOTE 7: Earnings Per Share
Earnings per share for the six months ended June 30, 1996 and 1995 were
computed based on the following:
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1996 1995
---------- ----------
<S> <C> <C>
Net Income $1,013,474 $1,043,415
Primary Number of Shares 2,109,050 2,109,050
Fully Diluted Number of Shares - Weighted Average 2,109,050 2,109,050
Earnings Per Share for the Period - Weighted Average
Primary $ 0.48 0.49
Fully Diluted 0.48 0.49
</TABLE>
In the last quarter of 1995, FLAG Financial Corporation purchased in the open
market 128,100 shares of its common stock at a purchase price of $12.75 per
share. These shares now have the status of authorized but unissued stock.
<PAGE> 9
FLAG FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - -------------------------------------------------------------------------------
Liquidity and Capital Resources
Applicable federal regulations required the Bank to maintain cash and eligible
short-term investment securities in an amount greater than or equal to 5% of
net withdrawable deposits and borrowings payable in one year or less. This
requirement is to help assure that funding is adequate to meet deposit
withdrawals, loan fundings and other short-term liquidity needs. The Bank's
liquidity position was 8.93% as of June 30, 1996.
The Bank's primary source of liquidity (funds) are deposits, loan repayments,
proceeds from the sale of loans and securities, Federal Home Loan Bank of
Atlanta advances, Fed Funds Purchased, and earnings from investments.
Non-interest checking accounts continue to be a growing source of funds for the
Bank. The Bank's principle uses of funds are the origination of loans, the
purchase of mortgage-backed and investment securities, and for the repayment of
borrowings and advances. Primarily, funds have been used this quarter to fund
newly originated loans and to pay off FHLB advances.
The Consolidated Cash Flow Statements for the periods ending June 30, 1996 and
1995 further outline the sources and uses of funds for this quarter.
An adequate level of capital is not only a regulated requirement, but is
necessary to provide the foundation for balance sheet expansion and protection
from future losses. The chart below reflects the Bank's capital as of June 30,
1996. As indicated in the following chart, FLAG and the Bank are significantly
above all capital levels which are considered necessary under current industry
standards and are required by regulatory agencies.
<TABLE>
<CAPTION>
REQUIRED ACTUAL EXCESS
CAPITAL CAPITAL CAPITAL
<S> <C> <C> <C>
Tangible Capital
($000) $ 3,444 $21,011 $17,567
% 1.50% 9.15% 7.65%
Core Capital
($000) $ 6,887 $21,011 $14,124
% 3.00% 9.15% 6.15%
Risk-based Capital
($000) $12,624 $22,616 $ 9,992
8.00% 14.33% 6.33%
</TABLE>
<PAGE> 10
FLAG FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - -------------------------------------------------------------------------------
CHANGES IN FINANCIAL CONDITION
December 31, 1995 and June 30, 1996
Total assets decreased approximately $3.40 million since December 31, 1995,
from $232,105,364 at December 31, 1995 to $228,709,710 at June 30, 1996. Total
liabilities decreased $4.54 million, from $211,407,148 at December 31, 1995 to
$228,709,710 at June 30, 1996. The decrease in assets resulted from the sales
and calls of investments and mortgage-backed securities, and these funds were
used to fund loans and pay down $4.09 million of Federal Home Loan Bank of
Atlanta advances.
Stockholder's Equity has increased $1,141,733 since December 31, 1995 as
follows:
<TABLE>
<S> <C>
Balance at December 31, 1995 $20,698,216
Net Income 1,013,474
Dividends Declared (325,481)
Increase in Unrealized Losses on
Marketable Securities (187,227)
Exercise of Options 640,967
-----------
Balance at June 30, 1996 $21,839,949
===========
</TABLE>
RESULTS OF OPERATIONS
Quarter ended June 30, 1996 and 1995
FLAG Financial reported net income in the second quarter of 1996 of $428,133 or
$0.20 per share which is compared to $542,300 or $0.26 per share for the same
period in 1995. The decrease in net income is the result of an increase in the
provision for loan losses. The larger than expected increase in the provision
for loan losses related to a $4.5 million portfolio of leases sold to the Bank
through Bennett Funding Group, Inc., an equipment leasing and financing company
based in Syracuse, New York. For several years, the Bank, along with many
other financial institutions and individuals, have invested in office
equipment leases sold through Bennett Funding throughout the United States.
Bennett Funding recently filed for Chapter 11 bankruptcy protection, and
certain officers of Bennett Funding are being investigated for possible
wrongdoing, including but not limited to criminal securities fraud. As a
result of the Chapter 11 filing, the collection of cash flows and the values
associated with these leases have become less certain. To reflect this
possible loss, the Bank classified these leases as substandard and set up a
specific loss reserve of $677,529 for possible losses. Disregarding the
increase in the provision for loan losses, FLAG had an excellent quarter.
Income from fees and service charges increased $141,616 or 27% from the year
ago period. Net interest income before provision for loan losses increased
$422,527 or 24% from the second quarter in 1995. The growth in net interest
income before provision for loan losses was primarily attributable to higher
net interest margins.
RESULTS OF OPERATIONS
Six months ended June 30, 1996 and 1995
Even with the increased loan loss provision, net income for the first six
months of 1996 was comparable to 1995. FLAG had growth in many positive areas.
Interest expense for the first six months of 1996 increased 6.85% due to a 39%
decrease in interest paid on FHLB advances. The growth of non-interest income
was primarily the result of gains on the sale of
<PAGE> 11
FLAG FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - -------------------------------------------------------------------------------
investment securities and loans. Specifically, non-interest income increased
30% from $1,206,376 in 1995 to $1,574,858 in 1996, with essentially all of the
increase due to gains. Pretax income before the provision for loan losses
increased 28% for the first six months of 1996. Interest and fees on loans
increased 13% from $6,136,656 in 1995 to $6,958,281 in 1996. This is the
result of higher interest rates than the year-ago period.
PROVISION FOR LOAN AND LEASE LOSSES
Management utilizes a systematic methodology to independently evaluate the
adequacy of the allowances for loan and lease losses. The adequacy of the
reserve for loan losses is determined through management's informed judgment
concerning the amount of risk inherent in the Bank's loan and lease portfolios.
This judgment is based on such factors as the levels of non-performing and
substandard loans and leases, portfolio mix, borrowers' financial condition,
estimated underlying collateral values, current and prospective loacal economic
conditions, and historical loss experience. Management expects the allowance
to increase as the Bank continues to expand the following loan portfolios:
consumer, commercial, and commercial real estate. Actual losses in the form of
loans charged-off during the six months ended June 30, 1996 and year ended
December 31, 1995 are presented as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Average net loans $151,880,718 $146,144,000
Allowance for possible loan and lease losses,
beginning of period 1,339,000 1,244,000
Charge-offs for the period:
Consumer 50,000 118,000
Commercial and business loans - -
Residential construction loans 22,000 23,000
Permanent mortgage loans 143,000 60,000
Commercial real estate loans - 364,000
Total charge-offs 215,000 565,000
------------ ------------
Recoveries for the period:
Consumer 21,000 30,000
Commercial and business loans - -
Residential construction loans - -
Permanent mortgage loans - -
Commercial real estate loans - -
Total recoveries 21,000 30,000
------------ ------------
Net charge-offs for the period 194,000 535,000
Provision for loan and lease losses 784,529 630,000
Allowance for possible loan and lease losses, $ $
end of period 1,929,529 1,339,000
============ ============
Ratio of allowance for loan and lease losses to
average net loans outstanding 1.27% 0.92%
Ratio of net charge-offs during the period to
average net loans and leases outstanding
during the period 0.13% 0.37%
</TABLE>
<PAGE> 12
FLAG FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - -------------------------------------------------------------------------------
The following table represents the allocation of the allowance:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
Percent of Percent of
Amount Total Loans Amount Total Loans
<S> <C> <C> <C> <C>
Permanent mortgage loans $ - - $ 16,000 0.01%
Commercial real estate loans 295,285 0.19% 257,000 0.17%
Consumer and business loans 30,395 0.02% 19,000 0.01%
Commercial loans & leases - - - -
Residential construction loans - - - -
Total Loans 325,680 0.21% 292,000 0.19%
--------- ---------
Unallocated allowance 1,604,035 1.06% 1,047,000 0.71%
Total allowance for possible
loan losses 1,929,715 1.27% 1,339,000 0.90%
========= =========
</TABLE>
The Bank continues to monitor the credit worthiness of its loan and lease
portfolios. The following table represents the non-accrual loans and other
non-performing assets. Interest income is recognized on a cash basis for these
loans.
<TABLE>
<Capton>
June 30, December 31,
1996 1995
<S> <C> <C>
Non-accruing loans:
Residential mortgage loans:
1-4 family $ 982,000 $1,064,000
Multi-family - -
Commercial real estate loans - 207,000
Consumer and business loans 86,000 123,000
Commercial loans/leases 4,517,000 -
Total non-accruing loans/leases 5,585,000 1,394,000
--------- ----------
Real estate acquired through foreclosure
other repossessed collateral 528,845 801,000
Total non-performing assets 6,113,845 2,195,000
========= ==========
Ratio of total non-performing assets to:
Total loans and real estate acquired
through foreclosure 3.90% 1.48%
Total assets 2.67% 0.95%
</TABLE>
<PAGE> 13
FLAG FINANCIAL CORPORATION
PART II. OTHER INFORMATION
No Other Information to Declare
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FLAG FINANCIAL CORPORATION
(Registrant)
Date: August 8, 1996 Ellison C. Rudd
---------------------------
Ellison C. Rudd
Chief Financial Officer
(Duly authorized officer)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,132,312
<INT-BEARING-DEPOSITS> 2,834,753
<FED-FUNDS-SOLD> 420,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 46,209,969
<INVESTMENTS-CARRYING> 3,718,159
<INVESTMENTS-MARKET> 3,584,863
<LOANS> 156,369,526
<ALLOWANCE> 1,929,529
<TOTAL-ASSETS> 228,709,710
<DEPOSITS> 176,201,051
<SHORT-TERM> 25,412,500
<LIABILITIES-OTHER> 903,596
<LONG-TERM> 0
0
0
<COMMON> 2,035,740
<OTHER-SE> 19,804,209
<TOTAL-LIABILITIES-AND-EQUITY> 228,709,710
<INTEREST-LOAN> 6,958,281
<INTEREST-INVEST> 517,829
<INTEREST-OTHER> 1,249,790
<INTEREST-TOTAL> 8,725,900
<INTEREST-DEPOSIT> 3,951,986
<INTEREST-EXPENSE> 650,185
<INTEREST-INCOME-NET> 4,123,730
<LOAN-LOSSES> 784,529
<SECURITIES-GAINS> 166,373
<EXPENSE-OTHER> 466,198
<INCOME-PRETAX> 1,565,232
<INCOME-PRE-EXTRAORDINARY> 1,013,474
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,013,474
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
<YIELD-ACTUAL> 1.94
<LOANS-NON> 5,585,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 2,035,000
<LOANS-PROBLEM> 8,902,674
<ALLOWANCE-OPEN> 1,339,000
<CHARGE-OFFS> 215,000
<RECOVERIES> 21,000
<ALLOWANCE-CLOSE> 1,929,529
<ALLOWANCE-DOMESTIC> 325,680
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,604,035
</TABLE>
