UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1998
OR
[ ] 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 0-24532
FLAG FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2094179
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(State of incorporation) (I.R.S. Employer Identification No.)
P.O. Box 3007
LaGrange, Georgia 30241
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(Address of principal executive (Zip Code)
offices)
(706) 845-5000
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(Telephone Number)
Indicate by check mark whether the registrant has (1) 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 XX NO
Common stock, par value $1 per share: 5,175,557, shares
Outstanding as of July 27, 1998
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Table of Contents
Page
PART I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998 and
December 31, 1997................................................... 1
Consolidated Statements of Earnings for the Six Months and
Quarter Ended June 30, 1998 and 1997................................ 2
Consolidated Statements of Comprehensive Income for the
Six Months and Quarter Ended June 30, 1998 and 1997................. 3
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1997........................................ 4
Notes to Consolidated Financial Statements............................ 5
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations..................................... 7
PART II Other Information
Item 1. Legal Proceedings.................................................. 11
Item 2. Changes in Securities.............................................. 11
Item 3. Defaults Upon Senior Securities.................................... 11
Item 4. Submission of Matters to a Vote of Security Holders................ 11
Item 5. Other Information.................................................. 11
Item 6. Exhibits and Reports on Form 8-K................................... 11
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
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<TABLE>
June 30, December 31,
1998 1997
--------------------------
ASSETS (UNAUDITED)
<S> <C> <C>
Cash and due from banks .................................. $ 11,724,475 $ 13,350,755
Federal funds sold ....................................... 10,070,000 5,900,000
---------- ---------
Total cash and cash equivalents ...................... 21,794,475 19,250,755
---------- ----------
Interest-bearing deposits ................................ 3,507,881 3,168,353
Investment securities held-to-maturity ................... 2,719,673 2,957,971
Investment securities available-for-sale ................. 66,712,172 71,063,805
Other investments ........................................ 5,755,363 5,358,063
Mortgage loans held for sale ............................. 6,306,170 3,481,678
Loans, net ............................................... 306,526,854 279,285,679
Premises and equipment, net .............................. 12,512,281 11,348,843
Mortgage servicing rights ................................ 1,443,083 1,174,292
Accrued interest receivable .............................. 5,079,802 4,713,021
Cash surrender value of life insurance ................... 4,000,533 3,864,612
Other assets ............................................. 6,520,653 5,618,002
--------- ---------
Total assets ................................... $ 442,878,940 $ 411,285,074
============= =============
LIABILITIES
Non interest-bearing deposits ............................ $ 26,508,839 $ 32,245,871
Interest-bearing deposits ................................ 312,736,404 292,606,172
Federal funds purchased .................................. -- 170,000
Other borrowed funds ..................................... 5,934,171 --
Advances from Federal Home Loan Bank ..................... 49,895,834 43,637,494
Accrued interest payable ................................. 1,649,688 1,312,319
Other liabilities ........................................ 7,571,911 4,542,310
--------- ---------
Total liabilities .............................. 404,296,847 374,514,166
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock (10,000,000 shares authorized none
issued and outstanding) ............................. -- --
Common stock ($1 par value, 20,000,000 shares authorized,
5,174,807 shares issued and outstanding ............ 5,174,807 5,171,432
Additional paid-in capital ............................... 8,817,080 8,794,541
Retained earnings ........................................ 24,380,729 22,813,421
Unrealized gain on investment securities
available-for-sale, net of tax ..................... 209,477 (8,486)
Total stockholders' equity ...................... 38,582,093 36,770,908
---------- ----------
Total liabilities and stockholders' equity ...... $ 442,878,940 $ 411,285,074
============= =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
1
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------------------------
1998 1997 1998 1997
Interest Income (UNAUDITED)
<S> <C> <C> <C> <C>
Interest and fees on loans..................... $7,716,882 $6,103,507 $15,037,255 $12,227,740
Interest on securities......................... 1,210,745 951,041 2,512,336 2,017,784
Interest interest-bearing deposits
and federal funds sold...................... 57,502 83,655 124,256 203,852
------------------------- --------------------------
Total interest income.................... 8,985,129 7,138,203 17,673,847 14,449,376
----------------------- -----------------------
Interest Expense
Interest on deposits........................... 3,658,644 3,193,758 7,197,151 6,287,004
Interest on borrowings......................... 777,719 237,430 1,480,862 478,300
------------------------- -------------------------
Total interest expense................... 4,436,363 3,431,188 8,678,013 6,765,304
----------------------- ----------------------
Net interest income before...............
provision for loan losses............ 4,548,766 3,707,015 8,995,834 7,684,072
Provision for Loan Losses........................... 222,000 163,000 444,000 407,000
------------------------- -----------------------
Net interest income after
provision for loan losses.............. 4,326,766 3,544,015 8,551,834 7,277,072
----------------------- ----------------------
Other Income
Fees and service charges........................ 834,225 927,580 1,825,835 1,801,538
Gain on sale of investment securities........... 84,043 24,631 148,042 104,899
Gain on sale of loans........................... 453,569 199,840 899,755 417,233
Gain (loss) on sale of real estate-net.......... (42,655) (26,531) (24,918) (36,017)
Other income.................................... 196,780 87,346 869,124 274,154
------------------------ -----------------------
Total other income........................ 1,525,962 1,212,866 3,717,838 2,561,807
----------------------- ----------------------
Other Expenses
Salaries and employee benefits................. 2,243,004 1,856,813 4,354,717 3,521,351
Occupancy ..................................... 690,168 657,563 1,547,904 1,232,906
Other operating................................ 1,602,600 1,081,468 3,322,879 2,186,976
----------------------- ----------------------
Total other expenses..................... 4,535,772 3,595,844 9,225,500 6,941,233
----------------------- ----------------------
Earnings before provision for income taxes 1,316,956 1,161,037 3,044,172 2,897,646
Provision for income taxes..................... 355,159 369,820 928,992 949,864
----------------------- -----------------------
Net earnings ........................... $961,797 $791,217 $2,115,180 $1,947,782
======================= =======================
Basic earnings per share....................... $0.19 $0.15 $0.41 $0.38
Diluted earnings per share..................... $0.18 $0.15 $0.41 $0.38
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
2
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
- --------------------------------------------------------------------------------
<TABLE>
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings........................................... $961,797 $791,217 $2,115,180 $1,947,782
Other comprehensive income, net of tax:
nrealized gains (losses) on investment
securities available-for-sale:...................
Unrealized gains (losses) arising during the period, net
of tax of $133,590, $45,657, $64,857,
and ($10,057), respectively........... 74,493 105,787 217,963 (16,409)
Less: Reclassification adjustment for gains included
in net earnings, net of tax of $31,936, $9,360
$56,256, and $39,862 respectively. (52,107) (15,271) (91,786) (65,037)
-----------------------------------------------
Other comprehensive income......................... 22,386 90,516 126,177 (81,446)
-----------------------------------------------
Comprehensive income............................... $ 984,183 $881,733 $2,241,357 $1,866,336
===============================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
3
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
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<TABLE>
June 30,
1998 1997
----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings ............................................... $ 2,115,180 $ 1,947,782
Adjustment to reconcile net earnings to net
cash provided by operating activities:
Depreciation, amortization and accretion ........... 1,043,243 752,301
Provision for loan losses .......................... 444,000 407,000
Gain on sale of investment securities
available-for-sale ............................. (148,042) (104,899)
Gain on sales of loans ............................. (899,755) (417,233)
Loss on other real estate - net .................... 24,918 36,017
Change in:
Mortgage loans held for sale ................ (1,924,737) 1,368,790
Other ....................................... 7,422,490 (197,517)
--------- --------
Net cash provided by operating activities 8,077,297 3,792,241
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest-bearing deposits .................... (339,528) (2,035,800)
Proceeds from sales and maturities of investment securities
available-for-sale ..................................... 36,456,520 47,577,205
Proceeds from maturities of investment securities
held-to-maturity ...................................... 231,555 521,387
Proceeds from sale of other investments .................... -- 643,100
Purchases of other investments ............................. (572,300) (777,595)
Purchases of investment securities available-for-sale ...... (31,492,377) (46,469,136)
Net change in loans ........................................ (27,685,175) (15,603,066)
Net increases of premises and equipment .................... (1,955,933) (1,823,685)
Purchases of cash surrender value life insurance ........... (135,921) (155,864)
-------- --------
Net cash used in investing activities .... (25,493,159) (18,123,454)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits ..................................... 14,393,200 18,040,153
Decrease in federal funds purchased ........................ (170,000) (2,210,000)
Proceeds from FHLB advances ................................ 38,500,000 7,500,000
Payments of FHLB advances .................................. (32,241,660) (7,991,669)
Proceeds from exercise of stock options .................... 26,438 --
Cash paid for fractional shares of acquired entity ......... (524) --
Cash dividends paid ........................................ (547,872) (410,231)
-------- --------
Net cash provided by financing activities . 19,959,582 14,928,253
---------- ----------
Net change in cash and cash equivalents ... 2,543,720 597,040
Cash and cash equivalents at beginning of period ......... 19,250,755 14,107,593
---------- ----------
Cash and cash equivalents at end of period ............... $21,794,475 $ 14,704,633
=========== ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
4
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The accompanying consolidated financial statements have not been audited. The
results of operations are not necessarily indicative of the results of
operations for the full year or any other interim periods.
The accounting principles followed by FLAG Financial Corporation ("FLAG") and
its bank subsidiaries and the methods of applying these principles conform with
generally accepted accounting principles and with general practices within the
banking industry. Certain principles, which significantly affect the
determination of financial position, results of operations, and cash flows are
summarized below and in FLAG's annual report on Form 10-K for the year ended
December 31, 1997.
Note 1. Basis of Presentation
The consolidated financial statements include the accounts of FLAG and its
wholly-owned subsidiaries, First Federal Savings Bank of LaGrange "LaGrange",
Citizens Bank "Vienna", and Bank of Milan "Milan". All significant intercompany
accounts and transactions have been eliminated in consolidation. Certain items
in prior period's financial statements have been reclassified to conform to the
current financial statement presentation.
The consolidated financial information furnished herein represents all
adjustments that are, in the opinion of management, necessary to present a fair
statement of the results of operations, and financial position for the periods
covered herein and are normal and recurring in nature. For further information,
refer to the consolidated financial statements and footnotes included in FLAG's
annual report on Form 10-K for the year ended December 31, 1997.
Note 2. Business Combinations
On March 30, 1998, FLAG completed its merger with Middle Georgia Bankshares,
Inc. ("MGB"), the parent company of Vienna. Effective May 8, 1998, FLAG
completed its merger with Three Rivers Bancshares, Inc. ("TRB"), parent company
of Milan,. The acquisitions have been accounted for as pooling of interests, and
all prior period financial statements of FLAG have been restated to reflect the
mergers as if they had occurred at the beginning of the earliest period
presented.
On May 14, 1998, FLAG announced the execution of a Letter of Intent with The
Brown Bank in Metter, Georgia. The operations will be combined by means of a
tax-free merger. The Brown Bank operates three full service banking offices in
Metter, Cobbtown, and Reidsville, Georgia. The Letter of Intent provides, among
other things, for the merger of The Brown Bank with and into FLAG and the
exchange of each share of The Brown Bank's common stock for 1.5 shares of FLAG
common stock.
5
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
On May 28, 1998, FLAG announced the execution of a Letter of Intent with Heart
of Georgia Bancshares, Inc. ("Heart of Georgia") to combine their two operations
by means of a tax free merger. The Letter of Intent provides, among other
things, for the merger of Heart of Georgia with and into FLAG and the exchange
of each share of Heart of Georgia common stock for 2.025 shares of FLAG common
stock.
On June 1, 1998, FLAG announced the execution of a Letter of Intent with Empire
Banking Company ("Empire") in Homerville, Georgia. The operations will be
combined by means of a tax free merger. The Letter of Intent provides, among
other things, for the merger of Empire for 42.975 shares of FLAG common stock.
These three pending acquisitions are expected to be accounted for as poolings of
interests and are projected to be consummated during the third quarter of 1998,
pending execution of a definitive agreement, final due diligence, regulatory
approval, and shareholder approval.
Note 4. Earnings per share
Net earnings per common share are based on the weighted average number of common
shares outstanding during each period. The calculation of basic and diluted
earnings per share is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
Basic earnings per share:
Net earnings....................... 961,797 791,217 2,115,180 1,947,782
Weighted Average Common shares
Outstanding....................5,173,258 5,163,716 5,172,389 5,172,995
Per share amount................... 0.19 0.15 0.41 0.38
Diluted earnings per share:
Net earnings....................... 961,797 791,217 2,115,180 1,947,782
Effect of dilutive securities -
Stock options................... 42,329 15,585 42,329 15,585
Diluted earnings per share......... 0.18 0.15 0.41 0.38
Note 5. Stock Split
On May 18, FLAG announced the declaration of a 3-for-2 stock split. The split
was payable on June 3, 1998 to shareholders of record on May 22, 1998. All per
share amounts have been restated to reflect this stock split as if it had
occurred at the beginning of the earliest period presented.
6
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Results of Operations
For the six months ended June 30, 1998 and 1997
Overview
Net earnings for the six months ended June 30, 1998, increased $167,000 or 9
percent compared to the first six months of 1997. Net earnings per common share,
both basic and fully diluted, increased 8 percent for the first six months of
1998. Net interest income increased 17% for the six months ended June 30, 1998,
over the same period of 1997 to approximately $9 million. Non-interest income
and expense rose 45 percent and 33 percent, respectively, for the first half of
1998 compared to the same period of 1997.
Net Interest Income
Net interest income for the six months ended June 30, 1998 increased $1,312,000
compared to the first half of 1997. This increase resulted from a $3,224,000, or
22 percent increase in interest income and a $1,913,000 or 28 percent increase
in interest expense. The increase in interest income resulted from an increase
in average earning assets of $61.6 million. The increase in interest expense was
primarily due to a $69.6 million increase in average interest bearing
liabilities.
Non-Interest Income and Expense
Non-interest income for the first six months of 1998 increased $1,156,000 or 45
percent compared to the first half of 1997. Other income includes a loan fee of
approximately $530,000 that FLAG received for its assistance in originating,
finding participants and selling an R&D loan in the first quarter of 1998.
Another contributing factor to the increase in 1998 non-interest income was
gains related to sales of currently originated residential mortgage loans. These
gains increased $483,000 in 1998, more than doubling first half 1997 gains, due
to an increased number of residential loan refinancings.
Non-interest expense increased almost $2.3 million or 33 percent in the first
six months of 1998 compared to the same period in 1997. Salaries and employee
benefits increased $833,000, a 24% increase over the first six months of 1997.
The increase was primarily due to additional staffing requirements. Many of the
additional positions were sales related, that management believes in the
long-term will increase revenues. Management also believes consolidation
efficiencies will be realized from its recent completed and pending mergers that
will reduce the need for some personnel. Other operating expenses increased
$1,136,000 or 52 percent during 1998 compared to the first six months in 1997.
Approximately $400,000 of this increase is due to additional legal and
professional fees related to FLAG's recent mergers. FLAG also experienced an
increase in data processing and communications expenses related to the
conversion of its data processing vendor.
7
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Income Taxes
Income tax expense for the first six months of 1998 was $929,000 in 1998
compared to $950,000 in 1997. The effective tax rates for the first six months
ended June 30, 1998 and 1997 were 31 percent and 33 percent, respectively.
FLAG's effective tax rate us lower than the statutory Federal tax rate of 34
percent primarily due to interest income on tax-exempt securities.
Provision and Allowance for Possible Loan Losses
The adequacy of the allowance for loan and losses is determined through
management's informed judgment concerning the amount of risk inherent in FLAG's
loan portfolios. This judgment is based on such factors as the change in levels
of non-performing and past due loans, historical loan loss experience,
borrowers' financial condition, concentration of loans to specific borrowers and
industries, estimated values of underlying collateral, and current and
prospective economic conditions. The allowance for loan losses at June 30, 1998,
was $3.9 million compared to $3.8 million at December 31, 1997. The allowance
for loan losses at June 30, 1998, was 1.23 percent of outstanding loans compared
to 1.35 percent at December 31, 1997. It is management's belief that the
allowance for loan losses is adequate to absorb possible loss in the loan
portfolio.
Non-Performing Assets and Past Due Loans
Non-performing assets, comprised of real estate owned, non-accrual loans and
loans for which payments are more than 90 days past due, totaled $5.9 million at
June 30, 1998, compared to $5.6 million at December 31, 1997. Non-performing
assets as a percentage of total loans and real estate owned at June 30, 1998,
and December 31, 1997, were 1.87 percent and 1.97 percent, respectively.
FLAG has a loan review function that continually monitors selected accruing
loans for which general economic conditions or changes within a particular
industry could cause the borrowers financial difficulties. The loan review
function also identifies loans with high degrees of credit or other risks. The
focus of loan review as well as FLAG management is to maintain a low level of
non-performing assets and return current non-performing assets to earning
status.
Management is unaware of any known trends, events or uncertainties that will
have or that are reasonably likely to have a material effect on FLAG's
liquidity, capital resources or operations.
8
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Financial Condition
Overview
Total assets were $443 million at June 30, 1998, an increase of $31.6 million or
7.7 percent from December 31, 1997.
Assets and Funding
At June 30, 1998, earning assets totaled $402 million, an increase of more than
$30.4 million from December 31, 1997. The mix of interest earning assets
remained relatively the same in the first 6 months of 1998. Loans increased from
77 percent of earning assets at December 31, 1997, to 78 percent of earning
assets at June 30, 1998. Investment securities decreased to 17 percent of
earning assets from 20 percent at December 31, 1997.
At June 30, 1998, interest-bearing deposits increased $20.1 million compared to
December 31, 1997. Noninterest-bearing deposits decreased $5.7 million in the
first six months of 1998 and totaled $26.5 million at June 30, 1998. Federal
Home Loan Bank advances increased $6.3 million in the first half of 1998 and
totaled $49.9 million at June 30, 1998. At June 30, 1998, deposits represented
85 percent of FLAG's interest-bearing liabilities and Federal Home Bank advances
represented 14 percent.
Liquidity and Capital Resources
Net cash provided by operating activities totaled $8,077,000 for the six months
ended June 30, 1998. Net cash used in investing activities totaling $25,493,000
consisted of $36,688,000 of proceeds from sale and maturities of investment
securities, offset by cash flows of $31,492,000 in investment securities
purchases, a $340,000 increase in interest-bearing deposits, a $27,685,000 net
increase in loans outstanding, net additions in bank premises and equipment of
$1,956,000, and a net $136,000 increase in cash surrender value of life
insurance. Net cash provided by financing activities consisted largely of
$14,393,000 increases in deposits and a net increase in Federal Home Loan Bank
advances of $6,258,000.
Total stockholders' equity at June 30, 1998, was 8.71 percent of total assets
compared to 8.94 percent at December 31, 1997. The slight decrease is attributed
to an $32 million increase in total assets since December 31, 1997.
9
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
At June 30, 1998, FLAG and its banks were in compliance with various regulatory
capital requirements administered by Federal and state banking agencies. The
following is a table representing FLAG's consolidated Tier-1, tangible capital,
and risk-based capital.
June 30, 1998
-------------
Actual Required Excess
Amount % Amount % Amount %
Tier 1 capital $ 36,285 8.03% $ 18,185 4.00% $ 18,100 4.03%
Tangible capital 36,285 8.03% 6,819 1.50% $ 29,466 6.53%
Risk-based capital 40,101 12.72% 25,212 8.00% $ 14,889 4.72%
Year 2000
FLAG Financial Corporation and each partner bank have appointed a Year
2000 committee comprised of outside directors and key senior executives of the
partner banks. The committees meet on a regular basis to provide direction and
monitor the progress being made relating to each partner bank's year 2000
efforts.
FLAG and the partner bank's managers and supervisors have identified:
(i) hardware and software used in their areas of responsibility impacted by the
Year 2000 issue; and (ii) vendors upon whom FLAG and the partner banks rely to
provide financial information or services which may be impacted by the Year 2000
issue. FLAG and the partner banks have conducted a risk assessment for each
product, and have categorized the risks associated with each product as
"catastrophic," "serious," or "minimal." FLAG and the partner banks' overall
risk is considered to be serious to minimal. A separate plan and action date
have been established for hardware/software considered to be critical to FLAG
and the partner banks' ongoing operations. FLAG and the partner banks have
developed a testing plan for the hardware/software and electronic components
affected by the year 2000. The next steps in the process will be to test the
hardware/software as it becomes Year 2000 compliant and to document these tests
accordingly.
Each partner bank will convert their core application system to the
Phoenix International Ltd., Inc. application system. The core applications
include general ledger, loans, deposits and receivables/payables. The
conversions will begin in August 1998. FLAG has performed appropriate testing to
determine the Phoenix system is Year 2000 compliant. The payroll for FLAG and
the partner banks is processed by an outside vendor who has been identified as
being Year 2000 compliant.
Each partner bank will monitor their larger loan customer compliance
issues in becoming Year 2000 compliant. For those customers unable and/or
unwilling to become Year 2000 compliant, the partner banks along with FLAG
Credit Administration will evaluate FLAG's
10
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
options to minimize the company's risks associated with continuing to do
business with these customers on a case by case basis.
PART II.
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1998 Annual Meeting of Shareholders was held on May 13, 1998.
(b) Election of directors
The shareholders voted 2,449,565.596 shares in the affirmative and
7004 shares were withheld from the authority to vote for the election
of Dr. A. Glenn Bailey, Kelly R. Linch and J. Daniel Speight, Jr. as a
class of directors, each to serve a three year term as a director of
the Company.
(c) The shareholders voted 2,320,011.640 shares in the affirmative and
89,570.843 shares in the negative, with 33,022.113 shares abstaining
for the amendment of the 1994 Employee Stock Incentive Plan.
(d) The shareholders voted 2,448,658.560 shares in the affirmative and 0
shares in the negative, with 7,911.036 shares abstaining for the
ratification and appointment of Porter, Keadle, Moore LLP as
independent accountants of the Company for the fiscal year ending
December 31, 1998.
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
On June 4, 1998, FLAG filed a Form 8-K announcing the signing of a
Letter of Intent with Heart of Georgia Bancshares, Inc. to merge with and into a
wholly-owned subsidiary of the Registrant.
11
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
On June 4, FLAG also filed a Form 8-k announcing the execution of a
Letter of Intent with Empire Bank Corporation to merge with and into a
wholly-owned subsidiary of the Registrant.
On May 22, 1998, FLAG filed a Form 8-K announcing the completion of a
merger agreement with Three Rivers Bancshares, Inc. with and into FLAG on May
12, 1998.
On May 22, 1998, FLAG filed a Form 8-K announcing the execution of a
Letter of Intent with the Brown Bank to merge with and into a wholly-owned
subsidiary of the Registrant.
On April 15, 1998, FLAG filed a Form 8-K announcing the completion of a
merger agreement with Middle Georgia Bankshares with and into FLAG on March 31,
1998.
Exhibit 27 - Financial Data Schedule (for SEC use only)
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
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
By:/s/ Patti S. Davis
---------------------
Patti S. Davis
(Chief Financial Officer)
Date: August 7, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
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0
0
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</TABLE>
