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 March 31, 1997 Commission File Number 0-24532
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 Exchange Act of 1934 during the preceding
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 May 14, 1997: 2,036,990 shares of Common Stock, $1.00
par value.
<PAGE>
FLAG FINANCIAL CORPORATION
INDEX
Part I. Financial Information Page
- -------------------------------------------------------------------------------
Item I. Financial Statements
Consolidated Statements of Condition as of March 31, 1997
(Unaudited) and December 31, 1996.............................. 1
Consolidated Statements of Income (Unaudited) for the
three months ended March 31, 1997 and March 31, 1996........... 2
Consolidated Statements of Cash Flows (Unaudited) for the
three months ended March 31, 1997 and March 31, 1996........... 3
Notes to Consolidated Financial Statements..................... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations for the
three months ended March 31, 1997 ............................. 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 10
Part II. Other Information
- -------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K ............................ 11
Signatures ................................................... 12
<PAGE>
PART I. FINANCIAL INFORMATION
FLAG FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
- --------------------------------------------------------------------------------
March 31, December 31,
1997 1996
---- ----
Assets
Cash ......................................... $ 6,538,562 $ 2,527,785
Interest-bearing deposits .................... 4,284,645 3,557,138
Federal funds sold ........................... 890,000 0
Proceeds receivable from secondary market .... 2,180,544 1,162,121
Investment securities ........................ 7,668,170 7,057,494
Mortgage-backed securities ................... 36,371,983 37,458,698
Loans receivable - net ....................... 147,585,486 152,644,436
Loans held for sale .......................... 100,259 343,677
Mortgage servicing rights .................... 950,215 1,703,710
Accrued interest and dividends receivable .... 1,745,069 1,763,345
Real estate acquired through foreclosure ..... 595,446 524,703
Federal Home Loan Bank stock ................. 1,478,200 1,895,900
Fixed assets ................................. 5,726,628 5,417,962
Deferred income taxes ........................ 1,775,342 2,012,987
Other assets ................................. 4,181,765 4,748,910
------------- -------------
Total assets ............................... $ 222,072,314 $ 222,818,866
============= =============
Liabilities
Savings accounts ............................. $ 182,511,446 $ 177,999,415
Federal funds purchased ...................... 0 2,210,000
Advances from Federal Home Loan Bank ......... 14,350,000 17,370,833
Advances from borrowers for taxes & insurance 927,746 709,672
Advances payable to secondary market ......... 1,858,635 1,982,676
Accrued interest on deposits ................. 79,966 323,783
Dividends payable on common stock ............ 173,144 173,144
Other liabilities ............................ 1,288,009 1,531,051
------------- -------------
Total liabilities .......................... 201,188,946 202,300,574
------------- -------------
Stockholders' Equity
Common stock ................................. 2,036,990 2,036,990
Additional paid-in capital ................... 8,037,630 8,044,728
Retained earnings ............................ 11,178,913 10,732,992
Unrealized loss - marketable securities
available-for-sale ......................... (370,165) (296,418)
------------- -------------
Total stockholders' equity ................. 20,883,368 20,518,292
------------- -------------
Total liabilities and stockholders' equity . $ 222,072,314 $ 222,818,866
============= =============
See Accompanying Notes to Consolidated Financial Statements
1
<PAGE>
FLAG FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
Three Months Ended
March 31,
---------------------------
1997 1996
------------- ------------
Interest Income
Interest and fees on loans ................ $ 3,430,208 $ 3,419,276
Interest and dividends on securities ...... 165,168 243,383
Interest on mortgage-backed securities .... 571,464 620,846
Interest on time deposits ................. 46,160 56,100
----------- -----------
Total interest ...................... 4,213,000 4,339,605
----------- -----------
Interest Expense
Interest on deposits ...................... 1,969,909 2,023,115
Interest on borrowings .................... 234,647 324,063
----------- -----------
Total interest expense .............. 2,204,556 2,347,178
----------- -----------
Net interest income before
provision for loan losses .......... 2,008,444 1,992,427
Provision for Loan Losses ...................... 150,000 150,000
----------- -----------
Net interest income after
provision for loan losses ........... 1,858,444 1,842,427
----------- -----------
Other Income
Fees and service charges .................. 628,303 538,859
Gain on sale of investment securities ..... 61,337 123,783
Gain on sale of loans ..................... 94,950 31,116
Gain (loss) on sale of mortgage-backed
securities .......................... (3,909) 6,590
Gain (loss) on sale of real
estate - net ........................ (9,486) (11,976)
Sundry income ............................. 75,534 27,964
----------- -----------
Total other income .................. 846,729 716,336
----------- -----------
Operating Expenses
Compensation and benefits ................. 817,871 676,684
Office occupancy expense .................. 73,348 62,339
Furniture, fixtures and equipment
expenses ............................. 77,877 48,458
Federal deposit insurance premium ......... 23,814 118,979
Legal and professional fees ............... 68,420 74,728
Data processing expense ................... 122,008 129,073
Advertising ............................... 45,990 39,846
General and payroll tax expense ........... 54,904 81,312
Printing and postage ...................... 82,991 86,484
Depreciation .............................. 145,500 129,999
Other expenses ............................ 257,836 227,919
----------- -----------
Total operating expenses ............ 1,770,559 1,675,821
----------- -----------
Net income prior to taxes ...................... 934,614 882,942
Less provision for taxes .................. 315,548 297,601
----------- -----------
Net Income ..................................... $ 619,066 $ 585,341
=========== ===========
Basic earnings per share ....................... $ 0.30 $ 0.29
Book value per share ........................... $ 10.25 $ 10.75
Equity to total assets ......................... 9.40% 9.56%
See Accompanying Notes to Consolidated Financial Statements
2
<PAGE>
FLAG FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
Three Months Ended
--------------------------------
03-31-97 03-31-96
--------------------------------
Cash Flows from Operating Activities (UNAUDITED)
Net Income ................................. $ 619,066 $ 585,341
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Provision for loan losses .............. 150,000 150,000
Provision for depreciation ............. 145,500 129,999
Amortization of premiums/discounts on
securities ......................... 46,035 49,107
(Gain)/loss on sale of investment
securities ......................... 0 (3,813)
(Gain)/loss on sale of loans and
mortgage-backed securities ......... (91,042) 7,300
(Gain)/loss on sale of real estate
acquired through foreclosure ....... 9,486 11,976
(Gain) on sale of stock ................ (62,036)
(Increase)/decrease in accrued
interest and dividends receivable .. 18,276 (20,808)
(Increase)/decrease in deferred
taxes .............................. 282,845 55,851
Increase/(decrease) in accrued
interest on savings ................ (243,817) (21,215)
Increase/(Decrease) in dividends
payable on common stock ............ 0 7,031
Increase/(Decrease) in other - net ..... 1,077,597 (213)
----------- -----------
Total adjustments ................ 1,332,844 245,245
Net cash provided by
operating activities .......... 1,951,910 830,586
----------- -----------
Cash Flows from Investing Activities
Maturities of interest-bearing
deposits ........................... (727,507) (1,653,602)
Maturities and calls of investment
securities ......................... 1,000,000 4,000,382
Proceeds from sale of investment
securities ......................... 0 3,353,686
Proceeds from sale of loans and
mortgage-backed securities ......... 1,587,408 5,647,007
Proceeds from sale of FHLB stock ....... 417,700 0
Loans originated net of principal
collected .......................... 4,681,214 (2,762,252)
Proceeds from sale of stock ............ 2,418,147 1,359,374
(Increase)/decrease in real estate
acquired through foreclosure ....... (80,229) (95,138)
Purchase of investment securities ...... (2,360,596) (2,010,625)
Purchase of loans and mortgage-backed
securities ......................... (961,848) (2,218,987)
Deferred net origination fees/costs .... (110,954) (13,049)
Purchase of FHLB stock ................. 0 0
Purchase of other stock ................ (1,655,291) (1,347,181)
Purchase of fixed assets ............... (454,166) (130,442)
(Increase)/decrease in federal
funds sold ......................... (890,000) 580,000
----------- -----------
Net cash provided by investing
activities .................... 2,863,878 4,899,449
----------- -----------
Cash Flows from Financing Activities
Net increase/(decrease) in
deposit accounts ................... 4,512,031 (1,041,304)
Increase/(decrease) in federal
funds purchased .................... (2,210,000) 0
Proceeds from FHLB advances ............ 1,500,000 0
Repayment of FHLB advances ............. (4,520,833) (7,020,833)
Decrease in advances to secondary
market ............................. (124,041) 664,501
Increase in advances for borrower
taxes & insurance .................. 218,074 326,877
Refund of overpayment on exercise
of stock options ................... (7,098) 0
Exercise of stock options .............. 0 477,678
Cash dividends ......................... (173,144) (150,634)
Net cash provided/(used) by
financing activities ........... (805,011) (6,743,715)
----------- -----------
Net increase/(decrease) in cash and cash
equivalents ............................. 4,010,777 (1,013,680)
Cash and cash equivalents at beginning of
year .................................... 2,527,785 4,301,653
----------- -----------
Cash and cash equivalents at March 31, ....... $ 6,538,562 $ 3,287,973
=========== ===========
3
<PAGE>
FLAG FINANCIAL CORPORATION
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 operations 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 1996 Annual Report should be read
in conjunction with these financial statements. The results of operations for
the three months ended March 31, 1997 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-salesecurities (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 stockholders' equity. Net unrealized gains or losses on
trading securities are included in current earnings.
The following summarizes FLAG's investments as of March 31, 1997:
Net After-Tax
Unrealized Unrealized
Balance Gain/(Loss) Gain/(Loss)
Investment Securities
Held to maturity (at
amortized cost) ................ $ 0 $ 0 $ 0
Available-for-sale (at
fair value) .................... 7,749,133 (80,964) (50,198)
Trading securities ............... 0 0 0
----------- ----------- -----------
Total investment securities .... 7,749,133 (80,964) (50,198)
Mortgage-Backed Securities
Held to maturity (at
amortized cost) ................ 3,073,595 0 0
Available-for-sale (at
fair value) .................... 33,814,465 (516,076) (319,967)
Trading securities ............... 0 0 0
----------- ----------- -----------
Total mortgage-backed
securities ................... 36,888,060 (516,076) (319,967)
----------- ----------- -----------
FHLB Stock (available-for-sale) .... 1,478,200 0 0
----------- ----------- -----------
Total ...................... $46,115,393 ($ 597,040) ($ 370,165)
=========== =========== ===========
4
<PAGE>
FLAG FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(UNAUDITED)
NOTE 3: Net Loans Receivable (Excluding Loans Held for Sale)
Loans receivable are summarized as follows:
March 31, December 31,
1997 1996
------------ -----------
Residential Mortgage Loans:
Residential 1-4 family ................... $ 73,906,486 $ 77,162,436
Multi-family ............................. 964,000 1,101,000
Total residential mortgages .............. 74,870,486 78,263,436
Commercial real estate ................... 32,811,000 33,844,000
Consumer loans ........................... 15,281,000 18,166,000
Commercial loans and loases .............. 21,833,000 17,780,000
Residential construction loans ........... 8,109,000 11,812,000
------------ ------------
Gross loans receivable ................... 152,904,486 159,865,436
------------ ------------
Less:
Undisbursed proceeds on
loans in process ....................... 785,000 2,663,000
Deferred loan fees and discounts ......... 107,000 219,000
Allowance for loan losses ................ 4,427,000 4,339,000
------------ ------------
Total net loans .............................. $147,585,486 $152,644,436
============ ============
NOTE 4: Loans Held for Sale
The Bank had $100,259 and $343,677 of mortgage loans held for sale in the
secondary market at March 31, 1997 and December 31, 1996 respectively, stated at
the lower of cost or market.
NOTE 5: Supplemental Disclosure of Cash Flow Information
>
Cash paid during the three months ended:
March 31,
---------
1997 1996
---- ----
Interest................... $1,977,397 $1,742,132
Income taxes .............. $0 $0
NOTE 6: Stockholders' Equity
The following table sets forth changes in stockholders' equity for the three
months ended March 31, 1997:
Balance at December 31, 1996 ......... $ 20,518,292
Net income (loss) .................... 619,066
Dividends declared ................... (173,144)
Increase in unrealized losses
on marketable securities .......... (73,748)
Refund of overpayment on
exercise of stock options ......... (7,098)
------------
Balance at March 31, 1997 ............ $ 20,883,368
============
5
<PAGE>
FLAG FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(UNAUDITED)
On February 20, 1997 the Board of Directors declared a $0.085 per share cash
dividend payable April 1, 1997 to shareholders of record March 21, 1997.
FLAG has 2,036,990 shares of common stock outstanding. FLAG has an Employee
Stock Incentive Plan which provides up to 201,250 shares of common stock which
may be issued upon the exercise of options granted under the plan and also
provides for the granting of stock appreciation rights. The options granted
shall be immediately vested as of the grant date and the maximum term is ten
years. As of December 31, 1996, 120,207 options had been exercised at a price of
$5.38. In the first quarter of 1997, 28,000 options were granted with an average
price of $11.37 and expire in the year 2007. None of such options have been
exercised in 1997.
FLAG also has a Directors Stock Incentive Plan. Under this Plan, up to 100,625
shares may be issued. The options granted shall be immediately vested as of the
date of grant, and the maximum term is ten years. There were 46,000 director
stock options outstanding as of March 31, 1997. Of these options, 40,000 can be
exercised at a price of $9.50 and expire in 2004, and 6,000 can be exercised at
a price of $13.50 and expire in 2006.
NOTE 7: Earnings Per Share
Net earnings per share is based on the weighted average number of shares
outstanding during each period. Stock options granted to key management
personnel are considered to be common stock equivalents. However, these
equivalents are not included in the calculation of net earnings per common share
as the effect of such is considered to be immaterial. Earnings per share for the
three months ended March 31, 1997 were computed based on the following:
Three Months Ended
March 31,
---------
1997 1996
---- ----
Net income ....................... $ 619,066 $ 585,341
Weighted average number of
shares ....................... 2,036,990 1,952,515
Basic earnings per share ......... $ 0.30 $ 0.29
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Forward-Looking Statements
Certain of the matters discussed in this document may constitute forward-looking
statements for purposes of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and as such may involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. The words "expect," "anticipate," "intend," "plan,"
"believe," "seek," "estimate," and similar expressions are intended to identify
such forward-looking statements. The Company's actual results may differ
materially from the results anticipated in these forward-looking statements due
to a variety of factors, including, without limitation, the effects of future
economic conditions; governmental monetary and fiscal policies, as well as
legislative and regulatory changes; the risks of changes in interest on the
level and composition of deposits, loan demand, and the values of loan
collateral, securities and interest rate protection agreements, as well as
interest rate risks; the effects of competition from other commercial banks,
thrifts, mortgage banking firms, consumer finance companies, credit unions,
securities brokerage firms, insurance companies, money market and other mutual
funds and other financial institutions operating in the Company's market area
and elsewhere, including institutions operating locally, regionally, nationally,
and internationally, together with such competitors offering banking products
and services by mail, telephone, computer, and the Internet; and the failure of
assumptions underlying the establishment of reserves for possible loan losses
and estimations of values of collateral and various financial assets and
liabilities. All written or oral forward-looking statements attributable to the
Company are expressly qualified in their entirety by these cautionary
statements.
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 11.48% as of March 31,1997, as compared to 7.75% at
December 31, 1996, and 10.31% as of March 31, 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 ("FHLBA") advances, federal funds purchased, and earnings from
interest-bearing assets. Non-interest checking accounts continue to be a growing
source of funds for the Bank. The Bank's principal uses of funds are the
origination of loans, the purchase of mortgage-backed and investment securities,
and for repayment of borrowings and advances. During the three months ended
March 31, 1997, funds were primarily used to fund newly originated loans and to
pay off FHLBA advances.
The Consolidated Statements of Cash Flow for the three months ended March 31,
1997 and 1996 provide additional information about the sources and uses of funds
for those two quarters.
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 March 31,
1997. 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.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Required Actual Excess
Capital Capital Capital
------- ------- -------
(Dollars in thousands)
Tangible Capital ........... $3,358 $20,136 $16,778
1.50% 8.99% 7.29%
Core Capital ............... $6,736 $20,136 $13,400
3.00% 8.99% 5.83%
Risk-based Capital ......... $11,842 $21,987 $10,145
8.00% 14.85% 6.85%
Changes in Financial Condition
December 31, 1996 and March 31, 1997
Total assets increased approximately $1.57 million from $222,818,866 at December
31, 1996, to $222,072,314 at March 31, 1997. Total liabilities decreased
approximately $1.11 million, from $202,300,574 at December 31, 1996, to
$201,188,946 at March 31, 1997. The changes resulted primarily from increases in
deposits and repayment of FHLBA advances and federal funds purchased.
Stockholders' Equity increased $365,076 from December 31, 1996 to March 31, 1997
as follows:
Balance at December 31, 1996 ......... $ 20,518,292
Net income (loss) .................... 619,066
Dividends declared ................... (173,144)
Increase in unrealized losses
on marketable securities .......... (73,748)
Refund of overpayment on
exercise of stock options ......... (7,098)
------------
Balance at March 31, 1997 ............ $ 20,883,368
============
Results of Operations
Three months ended March 31, 1997 and 1996
FLAG Financial reported net income in the first quarter of 1997 of $619,066 or
$0.30 per share, versus $585,341 or $0.29 per share for the comparable period in
1996. The increase in earnings resulted primarily from higher net interest
income and other income, combined with successful cost containment efforts. Net
interest income increased modestly (0.8%) due to higher loan volume rather than
any material increase in interest rates, while other income increased 18.2%.
Other expenses increased 5.7%. Annualized return on average assets totaled 1.11%
in the first quarter of 1997 versus 1.04% in the first quarter of 1996.
Annualized return on average equity was 12.3% in the first quarter of 1997
versus 11.1% in the first quarter of 1996.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Progress continued to be made in the resolution of the Bennett Funding matter.
The Bank is in the process of finalizing negotiations of a settlement with the
bankruptcy trustee. The settlement is contingent upon a satisfactory settlement
agreement and related documents as well as bankruptcy court approval. Although
the exact amount of the settlement has not yet been finalized, we believe that
these assets have been more than adequately reserved, which should position the
Bank conservatively going forward.
Provision for Loan and Lease Losses
Management utilizes a systematic methodology to independently evaluate the
adequacy of the allowance for loan and lease losses. The adequacy of the
allowance 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 nonperforming and
substandard loans and leases, portfolio mix, borrowers' financial condition,
estimated underlying collateral values, current and prospective local economic
conditions, and historical loss experience. Management expects the allowance to
increase as the Bank continues to expand the following loan portfolios:
consumer, commercial loans and leases, and commercial real estate. Actual losses
in the form of loans charged-off during the three months ended March 31, 1997
and the year ended December 31, 1996 are presented as follows:
March 31, December 31,
1997 1996
---- ----
Average net loans .............................. $150,691,320 $151,084,000
Allowance for possible loan and lease losses,
beginning of period .......................... 4,339,000 1,339,000
Charge-offs for the period:
Consumer loans ............................... 14,000 87,000
Commercial loans and leases .................. 1,000 --
Residential construction loans ............... -- 22,000
Residential mortgage loans ................... 58,000 410,000
Commercial real estate loans ................. -- --
------------ ------------
Total charge-offs ........................ 73,000 519,000
------------ ------------
Recoveries for the period:
Consumer loans ............................... 11,000 35,000
Commercial loans and leases .................. -- --
Residential construction loans ............... -- --
Residential mortgage loans ................... -- --
Commercial real estate loans ................. -- --
------------ ------------
Total recoveries ......................... 11,000 35,000
------------ ------------
Net charge-offs for the period ................. 62,000 484,000
Provision for loan and lease losses ............ 150,000 3,484,000
Allowance for possible loan and lease losses,
end of period ............................ $ 4,427,000 $4,339 000
============ ============
Ratio of allowance for loan and lease losses to
average net loans outstanding ............. 2.94% 2.84%
Ratio of net charge-offs during the period to
average net loans and leases outstanding
during the period ............................ 0.04% 0.32%
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
The following table represents the allocation of the allowance as of the dates
indicated:
March 31, December 31,
1997 1996
---- ----
Percent of Percent of
Amount Total Loans Amount Total Loans
------ ----------- ------ -----------
Residential mortgage loans ........ $ -- -% $ -%
Commercial real estate loans ...... 145,000 0.10% 261,000 0.17%
Consumer loans .................... 5,000 0.01% 7,000 0.01%
loans
Commercial loans and leases ....... 2,308,000 1.56% 2,978,000 1.93%
Residential construction loans .... -- -% -- -%
---------- ---- ---------- ----
Total loans allocated ......... 2,458,000 1.67% 3,246,000 2.11%
Unallocated allowance ............. 1,969,000 1.33% 1,093,000 0.71%
---------- ---- ---------- ----
Total allowance for possible
loan and lease losses ....... $4,427,000 3.00% $4,339,000 2.82%
========== ==== ========== ====
3
The Bank continues to monitor the credit worthiness of its loan and lease
portfolio. The following table represents the non-accrual loans and other
nonperforming assets as of the dates indicated. Interest income is recognized on
a cash basis for these loans.
March 31, December 31,
1997 1996
---- ----
Non-accruing loans:
Residential mortgage loans:
Residential 1-4 family ..................... $1,594,000 $1,327,000
Multi-family ............................... -- --
Commercial real estate loans ............... 711,000 662,000
Consumer loans ............................. 84,000 83,000
Commercial loans and leases ................ 4,616,000 4,616,000
---------- ----------
Total non-accruing loans and
leases .................................. 7,005,000 6,688,000
---------- ----------
Real estate acquired through
foreclosure and other
repossessed collateral ...................... 595,000 525,000
---------- ----------
Total nonperforming assets ............... $7,600,,000 $7,213,000
========== ==========
Ratio of total nonperforming assets to:
Total loans and real estate acquired
through foreclosure ........................ 5.05% 4.70%
Total assets ................................. 3.42% 3.25%
QUANTITATIVE AND QUALITATIVE MARKET DISCLOSURES ABOUT MARKET RISK
The Company is not required to respond to this Item 3 because it is a "small
business issuer" as defined in the rules and regulations of the Securities and
Exchange commission.
10
<PAGE>
FLAG FINANCIAL CORPORATION
PART II. OTHER INFORMATION
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
On February 22, 1997 the Company filed a Form 8-K disclosing the engagement of
Porter Keadle Moore, LLP as the independent accountants to audit the Company's
financial statements for the fiscal year ending December 31, 1997.
11
<PAGE>
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: May 13, 1997 Ellison C. Rudd
----------------------------
Ellison C. Rudd
Chief Financial Officer
(Duly authorized officer)
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<PERIOD-END> MAR-31-1997
<FISCAL-YEAR-END> DEC-31-1997
<CASH> 6,538,562
<INT-BEARING-DEPOSITS> 4,284,645
<FED-FUNDS-SOLD> 890,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 45,518,353
<INVESTMENTS-CARRYING> 3,073,595
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<ALLOWANCE> 4,427,000
<TOTAL-ASSETS> 222,072,314
<DEPOSITS> 182,511,446
<SHORT-TERM> 14,350,000
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0
0
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<INTEREST-DEPOSIT> 1,969,909
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<INCOME-PRETAX> 934,614
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