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 September 30, 1999
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
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(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 offices) (Zip Code)
(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: 8,264,576 shares
Outstanding as of November 10, 1999
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Table of Contents
Page
PART I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1999 and
December 31, 1998............................................. 3
Consolidated Statements of Operations for the Nine Months and
Quarter Ended September 30, 1999 and 1998..................... 4
Consolidated Statements of Comprehensive Income for the
Nine Months and Quarter Ended September 30, 1999 and 1998..... 5
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998............................. 6
Notes to Consolidated Financial Statements...................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations..................................... 9
PART II Other Information
Item 1. Legal Proceedings................................................. 13
Item 2. Changes in Securities............................................. 13
Item 3. Defaults Upon Senior Securities................................... 13
Item 4. Submission of Matters to a Vote of Security Holders............... 13
Item 5. Other Information................................................. 14
Item 6. Exhibits and Reports on Form 8-K.................................. 14
2
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
ASSETS (UNAUDITED)
<S> <C> <C>
Cash and due from banks ......................................... $ 18,530,953 $ 28,251,090
Federal funds sold .............................................. 610,000 25,030,000
------- ----------
Total cash and cash equivalents ............................. 19,140,953 53,281,090
---------- ----------
Interest-bearing deposits ....................................... 4,111,916 3,562,167
Investment securities held-to-maturity .......................... 16,421,048 16,898,998
Investment securities available-for-sale ........................ 76,894,183 80,907,309
Investment securities trading ................................... 213,596 -
Other investments ............................................... 5,461,345 6,382,443
Mortgage loans held for sale .................................... 4,071,614 10,219,739
Loans, net ...................................................... 446,104,203 424,672,122
Premises and equipment, net ..................................... 17,475,561 17,785,215
Mortgage servicing rights ....................................... 1,786,829 1,638,291
Accrued interest receivable ..................................... 7,181,617 6,928,916
Cash surrender value of life insurance .......................... 4,225,561 4,188,824
Other assets .................................................... 9,508,805 8,680,471
--------- ---------
Total assets..................................... $612,597,231 $635,145,585
============ ===========
LIABILITIES
Non interest-bearing deposits ................................... $ 60,591,794 $ 62,236,032
Interest-bearing deposits ....................................... 422,902,884 459,477,685
Federal funds purchased ......................................... 13,947,000 -
Other borrowed funds ............................................ 326,096 397,615
Advances from Federal Home Loan Bank ............................ 49,976,953 48,398,478
Other liabilities ............................................... 10,845,205 7,767,516
---------- ---------
Total liabilities ............................... 558,589,932 578,277,326
=========== ===========
STOCKHOLDERS' EQUITY
Preferred stock (10,000,000 shares authorized, none
issued and outstanding)..................................... - -
Common stock ($1 par value, 20,000,000 shares authorized
8,263,281 and 8,261,406 shares issued and outstanding
in 1999 and 1998, respectively.............................. 8,263,281 8,261,406
Additional paid-in capital....................................... 11,318,392 11,267,216
Retained earnings................................................ 35,110,957 35,402,801
Accumulated other comprehensive income........................... (685,331) 1,936,836
-------- ---------
Total stockholders' equity..................... 54,007,299 56,868,259
---------- ----------
Total liabilities and stockholders' equity..... $612,597,231 $635,145,585
============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
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<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
Interest Income (UNAUDITED)
<S> <C> <C> <C> <C>
Interest and fees on loans ........................ $10,668,146 $10,670,090 $32,141,840 $31,645,603
Interest on securities ............................ 1,315,947 1,693,013 4,216,270 5,534,304
Interest on federal funds sold and
interest-bearing deposits ....................... 228,556 338,951 543,036 534,207
------- ------- ------- -------
Total interest income ....................... 12,212,649 12,702,054 36,901,146 37,714,114
---------- ---------- ---------- ----------
Interest Expense
Interest on deposits .............................. 4,829,008 5,501,810 14,957,677 16,304,135
Interest on borrowings ............................ 828,380 920,622 2,233,065 2,572,484
------- ------- --------- ---------
Total interest expense ....................... 5,657,388 6,422,432 17,190,742 18,876,619
--------- --------- ---------- ----------
Net interest income before provision for loan
losses ................................... 6,555,261 6,279,622 19,710,404 18,837,495
Provision for Loan Losses ................................. 1,589,000 257,000 3,021,639 796,000
--------- ------- --------- -------
Net interest income after
provision for loan losses .................. 4,966,261 6,022,622 16,688,765 18,041,495
--------- --------- ---------- ----------
Other Income
Fees and service charges............................ 1,365,045 1,501,154 3,538,398 4,275,467
Gain on available-for-sale securities............... 27,054 72,736 1,132,496 211,146
Gain (Loss) on trading securities................... (314,029) - 486,483 -
Gain on sale of loans............................... 203,383 489,138 1,527,861 2,135,893
Other income........................................ 267,379 271,394 1,414,147 1,233,893
------- ------- --------- ---------
Total other income............................ 1,548,832 2,334,422 8,099,385 7,856,399
--------- --------- --------- ---------
Other Expenses
Salaries and employee benefits..................... 4,046,869 3,716,823 11,658,458 10,093,540
Occupancy.......................................... 1,261,724 1,278,226 3,527,364 3,564,130
Loss on sale of real estate, net................... 332,318 2,650 344,624 9,568
Other operating.................................... 3,185,052 2,785,660 7,829,562 7,124,285
--------- --------- --------- ---------
Total other expenses......................... 8,825,963 7,783,359 23,360,008 20,791,523
--------- --------- ---------- ----------
Earnings (loss) before provision for
income taxes................................ (2,310,870) 573,685 1,428,142 5,106,371
Provision for income taxes......................... (870,370) 61,085 364,752 1,446,077
-------- ------ ------- ---------
Net earnings................................ $(1,440,500) $ 512,600 $ 1,063,390 $ 3,660,294
=========== ========= =========== ===========
Basic earnings (loss) per share.................... $(0.17) $.06 $0.13 $0.44
Diluted earnings (loss) per share.................. $(0.17) $.06 $0.13 $0.44
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings (loss) ......................................... $(1,440,500) $ 512,600 $ 1,063,390 $ 3,660,294
Other comprehensive income, net of tax:
Unrealized gains (losses) on investment securities
available-for-sale:
Unrealized gains (losses) arising during the period,
net of tax of $(567,306), $858,569, $(991,923),
and $1,104,732 respectively ........................ (925,605) 1,400,823 (1,618,400) 1,702,931
Less: Reclassification adjustment for gains (losses)
included in net earnings, net of tax of $109,051,
$27,640, $615,212 and $80,235, respectively ....... (177,925) 45,096 1,003,767 130,911
-------- ------ --------- -------
Other comprehensive income .................................. (747,680) 1,355,727 (2,622,167) 1,572,020
-------- --------- ---------- ---------
Comprehensive income ........................................ $(2,188,180) $ 1,868,327 $(1,558,777) $ 5,232,314
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
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<TABLE>
<CAPTION>
(UNAUDITED)
September 30,
------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings .............................................. $ 1,063,390 $ 3,660,294
Adjustment to reconcile net earnings to net
cash provided by operating activities:
Depreciation, amortization and accretion .......... 2,079,278 1,522,487
Provision for loan losses ......................... 3,021,639 796,000
Gain on sale of investment securities
available-for-sale ............................ (1,132,496) (211,146)
Gain on trading securities ........................ (486,483) -
Proceeds from sale of trading securities .......... 292,487 -
Gain on sales of loans ............................ (1,527,861) (2,135,893)
Loss on sale of other real estate ................. 344,624 9,568
Change in:
Mortgage loans held for sale ............... 7,675,986 (2,565,125)
Other ...................................... 1,347,442 3,280,032
--------- ---------
Net cash provided by operating activities 12,678,006 4,356,217
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest-bearing deposits ................... (549,749) (8,755,644)
Proceeds from sales and maturities of investment
securities available-for-sale ......................... 37,723,289 64,356,716
Proceeds from maturities of investment securities
held-to-maturity ..................................... 4,689,608 6,842,053
Proceeds from sale of other investments ................... 5,247,498 -
Purchases of other investments ............................ (4,326,400) (784,500)
Purchases of investment securities available-for-sale ..... (36,755,048) (50,712,212)
Purchases of investment securities held-to-maturity ....... (4,154,716) (8,232,000)
Net change in loans ....................................... (24.453,720) (32,328,495)
Proceeds from sale of ORE ................................. 1,497,687 852,716
Purchases of premises and equipment ....................... (1,543,219) (2,332,642)
Purchases of cash surrender value life insurance .......... (197,626) (181,247)
-------- --------
Net cash used in investing activities ... (22,822,396) (31,275,255)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits .................................... (38,219,039) 21,913,429
Increase federal funds purchased .......................... 13,947,000 830,000
Proceeds from FHLB advances ............................... 32,496,148 52,100,000
Payments of FHLB advances ................................. 30,917,673) (44,229,059)
Proceeds from exercise of stock options ................... 53,070 72,938
Cash dividends paid ....................................... (1,355,253) (887,078)
---------- --------
Net cash provided by financing activities (23,995,747) 29,800,230
----------- ----------
Net change in cash and cash equivalents .. (34,140,137) 2,881,192
Cash and cash equivalents at beginning of period .......... 53,281,090 32,197,230
---------- ----------
Cash and cash equivalents at end of period ................ 19,140,953 35,078,422
========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
6
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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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, 1998.
Note 1. Basis of Presentation
The consolidated financial statements include the accounts of FLAG and its
wholly owned subsidiaries, First Flag Bank (LaGrange), Citizens Bank (Vienna),
Thomaston Federal Savings Bank (Thomaston) and The Citizens Bank (Hogansville).
All significant inter-company 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, 1998.
Note 2. Business Combinations
On August 27, 1999, Thomaston Federal Savings Bank, a $53 million asset thrift
based in Thomaston, Georgia, merged with and into a wholly owned subsidiary of
FLAG formed for the purposes of facilitating the merger; thereby, increasing
FLAG's total outstanding shares by approximately 1,126,000 additional shares at
closing.
On September 30, 1999, First Hogansville Bankshares, Inc., parent company of The
Citizens Bank, a $31 million asset bank holding company based in Hogansville,
Georgia, merged with and into FLAG; thereby, increasing FLAG's total outstanding
shares by approximately 575,000 additional shares at closing. These business
combinations have been accounted for as pooling of interests and, accordingly,
all prior period financial information has been restated as if the combinations
had occurred at the beginning of the earliest period presented.
On March 31, 1999, FLAG announced the execution of a definitive agreement to
merge with Abbeville Capital Corporation, a $58 million asset bank holding
company based in Abbeville, South Carolina. The merger agreement provided for,
among other things, the merger of Abbeville with and into FLAG and the exchange
of each share of Abbeville common stock for a minimum of 3.48 shares. On October
18, 1999, FLAG announced the execution of a Mutual Termination Agreement between
FLAG and Abbeville pursuant to which both parties agreed to cancel their plans
to merge.
7
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 3. 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:
Nine Months Ended
September 30,
-------------
1999 1998
---- ----
Basic earnings per share:
Net earnings............................... 1,063,390 3,660,294
Weighted average common shares
outstanding............................. 8,262,903 8,248,452
Per share amount............................ 0.13 0.44
Diluted earnings per share:
Net earnings................................ 1,063,390 3,660,294
Effect of dilutive securities -
stock options *....................... - 41,265
Diluted earnings per share.................. 0.13 0.44
* Stock options were anti-dilutive as of 9/30/99
Note 4. Recently Issued Accounting Standards
In 1998, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities". SFAS No. 133 establishes accounting and reporting
standards for hedging activities and for derivative instruments including
derivative instruments embedded in other contracts. SFAS No. 133 requires the
fair value recognition of derivatives as assets or liabilities in the financial
statements. SFAS No. 133 is effective for all fiscal quarters in fiscal years
beginning after June 15, 1999, but initial application of the statement must be
made as of the beginning of the quarter. At the date of initial application, an
entity may transfer any held-to-maturity security into the available-for-sale or
trading categories without calling into question the entity's intent to hold
other securities to maturity in the future. FLAG believes the adoption of SFAS
No. 133 will not have a material impact on its financial position, results of
operations or liquidity.
8
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Results of Operations
Quarters ended September 30, 1999 and 1998
Overview
Net earnings for the nine months ended September 30, 1999 decreased $2,597,000
or 71 percent compared to the first nine months of 1998. Net earnings per common
share decreased 70 percent for the first nine months of 1999 and are $0.13
compared to $0.44 in the first nine months of 1998. Net loss for the quarter
ended September 30, 1999 was $1,441,000 compared to net earnings of $513,000 for
the quarter ended September 30, 1998. Net loss per common share for the quarter
ended September 30, 1999 was $0.17 compared to a net gain of $0.06 for the same
quarter in 1998. Net interest income increased 5 percent for the nine months
ended September 30, 1999 over the same period of 1998 to $19.7 million.
Non-interest income increased 3 percent for the first nine months of 1999
compared to the same period of 1998 and non-interest expense increased 12
percent for the first nine months of 1999 compared to 1998. A major factor in
the decrease in net earnings was a higher provision for loan loss, writedowns
and other operating contingencies in 1999. The higher provision and writedowns
were deemed to be appropriate following an extensive review of FLAG's loan
portfolio, particularly given management's commitment to maintaining sound
levels of reserves.
Net Interest Income
Net interest income for the nine months ended September 30, 1999 increased
$873,000 compared to the first nine months of 1998. This increase resulted from
a $1,686,000 or 9 percent decrease in interest expense partially offset by a
$813,000 or 2 percent decrease in interest income.
Non-Interest Income and Expense
Non-interest income for the first nine months of 1999 increased $243,000 or 3
percent compared to the first nine months of 1998. This increase was due to an
increase in gain on sale of available-for- sale securities of $921,000, an
increase in gain on trading securities of $486,000 and an increase in other
income of $180,000 partially offset by a decrease in fees and service charges of
$737,000 and a decrease in gain on sale of loans of $608,000, Fees and service
charges in the first nine months of 1998 included a one time fee of $530,000
that FLAG received for its assistance in originating, finding participants and
selling an R&D loan.
Non-interest expense increased $2,568,000 or 12 percent in the first nine months
of 1999 compared to the same period in 1998. Salaries and employee benefits
increased $1,565,000, a 16 percent increase over the first nine months of 1998.
The increase was primarily due to additional staffing requirements, the use of
temporary employees for special projects and the improvement of our employee
benefit package. The benefits currently offered are, in the opinion of
management, necessary to effectively compete in hiring and maintaining a quality
staff. Management also believes consolidation efficiencies will be realized from
its mergers and reduce the need for some personnel. Other operating expense
increased $705,000 or 10 percent in the first nine months of 1999 compared to
1998. This increase was partially due to merger-related expenses totaling
approximately $400,000 for the closing of the mergers with Thomaston Federal
Savings Bank and First Hogansville Bankshares, Inc and the termination of the
Abbeville Capital Corporation transaction.
9
<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 nine months ended September 30 was $365,000 in 1999
compared to $1,446,000 in 1998. The effective tax rate for the nine months ended
September 30, 1999 was 26 percent and for the nine months ended September 30,
1998 was 28 percent.
Provision and Allowance for Possible Loan and Lease Losses
The adequacy of the allowance for loan and lease losses is determined through
management's informed judgment concerning the amount of risk inherent in FLAG's
loan and lease portfolios. This judgment is based on such factors as the change
in levels of non-performing and past due loans and leases, 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 and lease losses at
September 30, 1999 was $6.5 million compared to $6.2 million at December 31,
1998. However, the loan loss provision increased from $796,000 for the nine
months ended September 30, 1998 to $3,022,000 for the nine months ended
September 30, 1999. The ratio of the allowance for loan losses to outstanding
loans at September 30, 1999 and December 31, 1998 was 1.43 percent and 1.41
percent, respectively. The increase in the provision for loan losses is
primarily the result of management's increased focus on asset quality and loan
review.
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 $15.2 million
at September 30, 1999 compared to $10.8 million at December 31, 1998.
Non-performing assets as a percentage of total loans and real estate owned at
September 30, 1999 and December 31, 1998 were 3.30 percent and 2.44 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.
10
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Financial Condition
Overview
Total assets were $612.6 million at September 30, 1999, a decrease of $22.5
million or 3.6 percent from December 31, 1998.
Assets and Funding
At September 30, 1999 earning assets totaled $553.9 million, a decrease of $13.8
million from December 31, 1998. Loans were at 81 percent of earning assets and
investment securities were 18 percent of earning assets at September 30, 1999.
At September 30, 1999, interest-bearing deposits decreased $36.6 million
compared to December 31, 1998. Non-interest bearing deposits decreased $1.6
million in the first nine months of 1999 and totaled $60.6 million at September
30, 1999. Federal Home Loan Bank advances increased $1.6 million in the first
nine months of 1999 and totaled $50 million at September 30, 1999. At September
30, 1999, deposits represented 88 percent of FLAG's interest-bearing liabilities
and Federal Home Loan Bank advances represented 9 percent. These changes in the
mix reflect management's continued emphasis on balance sheet restructuring.
Liquidity and Capital Resources
Net cash provided by operating activities totaled $12.7 million for the nine
months ended September 30, 1999. Net cash used by investing activities totaling
$22.8 million consisted of $40.9 million in investment securities purchases, a
$24.5 million net increase in loans outstanding, and $1.5 million in purchases
of premises and equipment partially offset by cash flows of $42.4 million of
proceeds from sale and maturities of investment securities. Net cash used in
financing activities consisted largely of a $38.2 million decrease in deposits
offset by a $1.5 million increase in Federal Home Loan Bank advances and a $13.9
million increase in federal funds purchased.
Total stockholders' equity at September 30, 1999, was 8.82 percent of total
assets compared to 8.95 percent at December 31, 1998. The decrease in
stockholders' equity is largely attributable to a $2.6 million loss in
"Accumulated Other Comprehensive Income" from unrealized losses on
available-for-sale securities.
11
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
At September 30, 1999, 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
Capital, Tangible Capital, and Risk-Based Capital:
September 30, 1999
- -------------------------------------------------------------------------------
Actual Required Excess
Amount % Amount % Amount %
- --------------------------------------------------------------------------------
Tier 1 Capital $ 51,256 8.48% $ 24,347 4.00% $ 27,279 4.48%
Tangible Capital $ 51,626 8.48% $ 9,130 1.50% $ 42,496 6.98%
Risk-Based Capital $ 57,869 12.10% $ 38,267 8.00% $ 19,602 4.10%
Year 2000
FLAG and its partner banks have completed all testing and readiness planning for
Year 2000. During the final quarter of 1999 we will continue to concentrate on
preparation, and refining our business resumption plan to ensure systems operate
through the rollover period and beyond.
Appropriate due diligence procedures are in place to ensure relationships with
service providers and software vendors are in place as outlined by the Federal
Financial Institutions Examination Council. Updates to the core operating
software or other mission critical systems are not anticipated. Training and
advertising will continue to escalate as the Year 2000 date change approaches.
As the Year 2000 date change approaches, preparation activities are focusing on
liquidity and cash availability before, during, and after the year-end rollover.
Independent reviews by regulatory agencies and independent auditors, along with
regular updates to the board of directors continue to ensure guidance and
underscore the importance of reviewing customer data, security activities,
communication, training and general "clean management" of the activities leading
up to the event.
FLAG continues to remain optimistic and alert of the organizational
responsibility in being ready for the century date change as well as other dates
that may be considered critical to leap year and beyond.
12
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
PART II.
Item 1. Legal Proceedings
FLAG and the Banks are periodically involved as plaintiff or defendant
in various legal actions in the ordinary course of its business.
As previously reported, First Flag Bank is a named defendant in a suit
filed in December 1998 in Superior Court of the State of California
for the County of Los Angeles. The plaintiffs leased ATM machines from
First Flag Bank and other defendants. Another named defendant arranged
the leases and agreed to manage the ATMs and leases on behalf of the
plaintiffs. The plaintiffs allege that this defendant has breached his
contract with the plaintiffs. First Flag Bank leased the plaintiffs
ten ATMs having an original value of approximately $20,000 each. The
plaintiffs allege, among other things, that First Flag Bank and the
other lessor defendants are liable for fraud, restitution, recission
and negligent misrepresentation. The parties currently are exploring
settlement. If the parties do not reach a settlement, First Flag Bank
intends to vigorously defend the claims and pursue counterclaims
against the plaintiffs.
As previously reported, First Flag Bank purchased certain warehouse
loans of Gulf Properties Financial Services, Inc., a residential
mortgage broker. The loans that Gulf Properties sold to First Flag
Bank were fraudulent. Gulf Properties filed Chapter 11 bankruptcy on
December 30, 1998. First Flag Bank is serving on the creditors'
committee and is assisting in the liquidation of assets, which will be
distributed on a pro rata basis among the creditors. First Flag Bank
is also pursuing a claim under its fidelity bond regarding this
matter. The perpetrators of the fraud have pled guilty to criminal
charges. First Flag Bank is seeking a restitution order as part of the
criminal sentence. First Flag Bank's exposure as a result of the fraud
is approximately $3 million. Several other banks also purchased
fraudulent loans from Gulf Properties and the total amount of exposure
of all banks is approximately $32 million.
As previously reported, Tad Moore Golf, Inc. is a borrower of First
Flag Bank. An investor in Tad Moore Golf, Inc., who is also a lender
to Tad Moore Golf, Inc., has sued First Flag Bank in Southern District
Court in New York alleging that First Flag Bank fraudulently induced
the investor into allegedly subordinating his loan to the loan of
First Flag Bank. The investor is also a borrower of First Flag Bank.
The plaintiff is claiming $1.6 million in consequential damages and
$10 million in punitive damages. First Flag Bank has succeeded in
having the venue of this matter transferred from New York to United
States District Court in Newnan, Georgia. The Bank intends to
vigorously defend this claim and pursue counterclaims against the
investor.
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
13
<PAGE>
FLAG FINANCIAL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Item 5. Other Information
Pursuant to Rule 14a-14(c)(1) promulgated under the Securities
Exchange Act of 1934, as amended, shareholders desiring to present a
proposal for consideration at the Company's 2000 Annual Meeting of
Shareholders must notify the Company in writing at its principal
office at 101 N. Greenwood Street, LaGrange, Georgia 30241 of the
contents of such proposal no later than February 15, 2000. Failure to
timely submit such a proposal will enable the proxies appointed by
management to exercise their discretionary voting authority when the
proposal is raised at the Annual Meeting of Shareholders without any
discussion of the matter in the proxy statement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Separation Agreement between Robert G. Cochran and FLAG dated as
of August 27, 1999.
10.2 Separation Agreement between Joel A. Dudley and FLAG dated as of
August 27, 1999.
27.1 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
Reports on Form 8-K filed during Third Quarter 1999
A Current Report on Form 8-K filed September 3, 1999 regarding the
completion of the merger of Thomaston Federal Savings Bank, located in
Thomaston, Georgia, into a wholly owned subsidiary of FLAG Financial
Corporation pursuant to an Agreement and Plan of Merger, dated May 7,
1999, by and between FLAG Financial Corporation and Thomaston Federal
Savings Bank.
Reports on Form 8-K filed since Third Quarter End 1999 to Present
A Current Report on Form 8-K filed October 6, 1999 regarding
announcement of FLAG Financial Corporation on September 24, 1999 that
FLAG Financial Corporation and Abbeville Capital Corporation were
contemplating an amendment to the Agreement and Plan of Merger between
Abbeville Capital Corporation, parent company of The Bank of
Abbeville, located in Abbeville, South Carolina, and FLAG Financial
Corporation.
A Current Report on Form 8-K filed October 6, 1999 regarding the
completion of the merger of First Hogansville Bankshares, Inc., parent
company of The Citizens Bank, located in Hogansville, Georgia with and
into FLAG Financial Corporation pursuant to an Agreement and Plan of
Merger, dated June 1, 1999, by and between FLAG Financial Corporation
and First Hogansville Bankshares, Inc.
A Current Report on Form 8-K filed October 19, 1999 regarding the
execution of a Mutual Termination Agreement between FLAG Financial
Corporation and Abbeville Capital Corporation, parent company of The
Bank of Abbeville, located in Abbeville, South Carolina, pursuant to
which both parties agreed to cancel their plans to merge.
14
<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)
15
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
10.1 Separation Agreement between Robert G. Cochran and FLAG dated
as of August 27, 1999.
10.2 Separation Agreement between Joel A. Dudley and FLAG dated as
of August 27, 1999.
27.1 Financial Data Schedule (for SEC use only)
EXHIBIT 10.1
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT is made and effective this _27th_ day of
___August___, 1999 (the "Effective Date") by and between FLAG FINANCIAL
CORPORATION ("FLAG"), a Georgia corporation, and __Robert G. Cochran__, (the
"Executive").
STATEMENT OF BACKGROUND INFORMATION
A. The Executive currently serves as an officer of FLAG or of one of its
wholly owned subsidiaries (the "Employer").
B. The Employer and the Executive desire to enter into this agreement to
document certain terms and conditions of the Executive's employment relationship
with the Employer.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
promises herein contained, and other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I. TERM OF AGREEMENT
This Agreement shall remain in effect for an initial term expiring March
31, 2002; provided that, at the end of the initial term, and at the end of each
twelve-month period thereafter during which this Agreement is in effect, this
Agreement shall automatically be extended for an additional twelve-month period
commencing at the end of the initial term or any subsequent extension thereof,
unless either party gives written notice to the other of its intent not to
extend this Agreement. Such written notice shall be given not less than ninety
(90) days prior to March 31, 2002 or any subsequent twelve-month period to which
this Agreement has been extended. In the event that notice of non-extension is
properly given, this Agreement shall terminate at the end of the remaining term
then in effect.
ARTICLE II. SEVERANCE BENEFIT
In the event of the Executive's Involuntary Termination of employment with
the Employer during the term of this Agreement for the reasons specified in
Article III below, the Employer shall pay to the Executive an amount equal to
the Executive's base salary and bonus paid over the last three full fiscal years
(or the compensation paid to the Executive for such shorter period as Executive
has been employed) of the Employer or its subsidiary bank immediately preceding
such involuntary termination (the "Severance Benefit"). For the period prior to
the Executive's employment by the Employer, the Executive's base compensation
shall be calculated as set forth on Exhibit "A'. The Severance Benefit shall be
paid in cash in a lump sum within thirty (30) days following the Involuntary
Termination.
The Employer shall be entitled to withhold appropriate employment and
income taxes, if required by applicable law, should the Severance Benefit become
payable.
<PAGE>
ARTICLE III. PAYMENT EVENTS
The Severance Benefit described in Article II above shall become payable if
the Executive's employment is Involuntarily Terminated and either (i) such
Involuntary Termination occurred within six (6) months prior to or one (1) year
following a Change in Control as defined in Section 5.1(2) below, or (ii) such
Involuntary Termination occurred within three (3) years following the date of
this Agreement.
ARTICLE IV. PROTECTIVE COVENANTS
4.1 Confidential Information. As a senior management employee of the
Employer, the Executive has access to Confidential Information (as defined
herein). The Executive agrees to maintain the confidentiality of all
Confidential Information throughout the Term and for a period of one (1) year
after the termination of this Agreement. For purposes of this Section, the term
"Confidential Information" means data and information relating to the business
of the Employer which is or has been disclosed to the Executive or of which the
Executive has become aware as a consequence of or through his employment
relationship with the Employer and which has value to the Executive and is not
generally known to its competitors. Confidential Information shall not include
any data or information that has been voluntarily disclosed to the public by the
Employer (except where such public disclosure was effected by the Executive
without authorization) or that has been independently developed and disclosed by
others or that otherwise enters the public domain through lawful means.
4.2 Covenant Not to Compete. The Executive agrees, acknowledges and
understands that the nature, kind and character of the business conducted by the
Employer is highly competitive. Incident to the Executive engagement hereunder
and for the considerations contained herein, the Executive agrees that:
(1) during the term of this Agreement and for a period of twelve (12)
months following the later of the termination of this Agreement or the
resignation or Involuntary Termination of Executive, the Executive
will not, in the Georgia counties of Upson, Bibb and Muscogee or the
Alabama counties of Lee and Russell:
(a) enter into any employment relationship with any bank, thrift
institution, other entity providing financial services or an
affiliate of any of the foregoing in a capacity identical with or
substantially similar to the capacity in which he was employed by
the Employer at the time of his termination of employment;
(b) directly or indirectly, on his own behalf or in the service or on
behalf of others, solicit, divert, appropriate or attempt to
solicit, divert or appropriate, any business from any of the
Employer's customers with whom the Executive has had material
contact during the past two (2) years of the Executive's
employment, for purposes of providing products or services that
are competitive with those provided by the Employer; or
(c) on his own behalf or in the service or on behalf of others,
solicit, recruit or hire away, or attempt to solicit, recruit or
hire away, directly or by assisting others, any employee of the
Employer, whether or not such employee is a full-time employee,
part-time or temporary employee of the Employer, and whether or
not such employment is pursuant to a written agreement or is for
a determined period or at will.
<PAGE>
(2) by virtue of the duties and special knowledge of the affairs and
operations of the Employer that the Executive has and will obtain as a
result of his employment relationship with the Employer, a breach or
threatened breach by him of the provisions of this covenant not to
compete shall cause irreparable injury to the Employer and shall
entitle the Employer, in addition to any other remedy, to injunctive
relief against such breach or threatened breach.
The Executive acknowledges that the foregoing covenants are reasonable and
necessary to protect the interests of the Employer.
ARTICLE V. MISCELLANEOUS
5.1 Definitions. For purposes of this Agreement the terms set forth below
shall have the following meanings ascribed to them:
(1) "Cause" means conduct (a) constituting fraud or dishonesty resulting
in financial harm to the Employer or any of its affiliates; (b)
constituting a gross dereliction of the Executive's duties in the
capacity in which he is employed by the Employer; or (c) which results
in the successful criminal prosecution by federal, state or local
authorities for anything other than a misdemeanor relating to public
safety laws.
(2) "Change in Control" means any one of the following events which occurs
during the term of this Agreement or any extension:
(a) the acquisition by any person or persons acting in concert of the
then-outstanding voting shares of FLAG Financial Corporation,
after the transaction, the acquiring person or persons own,
control or hold with power to vote twenty-five percent (25%) or
more of any class of voting securities of FLAG Financial
Corporation or such other transactions as may be described under
12 C.F.R. @ 225.41(b)(1) or any successor thereto; or,
(b) the approval by the stockholders of FLAG Financial Corporation of
a reorganization, merger, share exchange or consolidation, with
respect to which persons who were the shareholders of FLAG
Financial Corporation immediately prior to such reorganization,
merger, share exchange or consolidation, do not, immediately
thereafter, own more than fifty percent (50%) of the combined
voting power entitled to vote at the election of directors of the
reorganized, merged, exchanged or consolidated company's then
outstanding voting securities; or
(c) the sale, transfer or assignment of all or substantially all of
the assets of FLAG Financial Corporation to any third party.
(3) "Involuntary Termination" means termination of Executive by the
Employer for any reason other than for Cause, and shall include for
purposes of this Agreement a 20% or greater reduction in base salary
or a material diminution in the duties and responsibilities of
Executive or a transfer of the Executive to another location more than
thirty (30) miles from the location of the office where Executive
employed at the time of the Change in Control.
<PAGE>
5.2 Amendment. This Agreement may not be amended (in whole or in part)
orally or by course of performance, but only by a written instrument signed by
both parties.
5.3 Notice. Except as otherwise required under this Agreement, any notice
required or permitted to be given pursuant to this Agreement shall be
sufficiently given:
(1) to the Executive if in writing and personally delivered, or mailed
(and if mailed shall be deemed given three (3) business days after mailing)
registered or certified mail addressed to the Executive at the Executive's
residence as shown in the records of the Employer or at such address as the
Executive shall designate in a written notice to the Employer; and
(2) to the Employer if in writing and personally delivered to the
Chairman or President and CEO of the Employer or mailed (and if mailed,
shall be deemed given three (3) business days after mailing) registered or
certified mail addressed to FLAG Financial Corp., P. O. Box 3007, LaGrange,
Georgia, 30241, Attn: Chairman or President.
5.4 Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the Executive and upon the Employer and its successors and assigns.
The Executive may not assign his rights and obligations hereunder without the
written consent of the Employer.
5.5 Applicable Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Georgia.
5.6 No Defense. The existence of any claim or cause of action of the
Executive against the Employer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Employer of
any covenant contained in this Agreement.
5.7 Survival. The provisions of Article IV shall survive any termination of
this Agreement.
5.8 Thomaston Federal Savings Bank. Thomaston Federal Savings Bank,
Thomaston, Georgia is not a party to this Agreement and is not bound by any
provision of this Agreement.
IN WITNESS WHEREOF, the Employer has executed and delivered by its duly
authorized officer, and the Executive has signed, this Agreement all as of the
day and year first above written.
FLAG FINANCIAL CORPORATION:
By:___/s/ Lee W. Washam________________________
Title:__Asst. Secretary_________________________
EXECUTIVE:
_____/s/ Robert G. Cochran________________(SEAL)
Print Name:____Robert G. Cochran________________
EXHIBIT 10.2
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT is made and effective this _27th_ day of
___August___, 1999 (the "Effective Date") by and between FLAG FINANCIAL
CORPORATION ("FLAG"), a Georgia corporation, and __Joel A. Dudley__, (the
"Executive").
STATEMENT OF BACKGROUND INFORMATION
A. The Executive currently serves as an officer of FLAG or of one of its
wholly owned subsidiaries (the "Employer").
B. The Employer and the Executive desire to enter into this agreement to
document certain terms and conditions of the Executive's employment relationship
with the Employer.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
promises herein contained, and other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I. TERM OF AGREEMENT
This Agreement shall remain in effect for an initial term expiring March
31, 2002; provided that, at the end of the initial term, and at the end of each
twelve-month period thereafter during which this Agreement is in effect, this
Agreement shall automatically be extended for an additional twelve-month period
commencing at the end of the initial term or any subsequent extension thereof,
unless either party gives written notice to the other of its intent not to
extend this Agreement. Such written notice shall be given not less than ninety
(90) days prior to March 31, 2002 or any subsequent twelve-month period to which
this Agreement has been extended. In the event that notice of non-extension is
properly given, this Agreement shall terminate at the end of the remaining term
then in effect.
ARTICLE II. SEVERANCE BENEFIT
In the event of the Executive's Involuntary Termination of employment with
the Employer during the term of this Agreement for the reasons specified in
Article III below, the Employer shall pay to the Executive an amount equal to
the Executive's base salary and bonus paid over the last three full fiscal years
(or the compensation paid to the Executive for such shorter period as Executive
has been employed) of the Employer or its subsidiary bank immediately preceding
such involuntary termination (the "Severance Benefit"). For the period prior to
the Executive's employment by the Employer, the Executive's base compensation
shall be calculated as set forth on Exhibit "A'. The Severance Benefit shall be
paid in cash in a lump sum within thirty (30) days following the Involuntary
Termination.
The Employer shall be entitled to withhold appropriate employment and
income taxes, if required by applicable law, should the Severance Benefit become
payable.
<PAGE>
ARTICLE III. PAYMENT EVENTS
The Severance Benefit described in Article II above shall become payable if
the Executive's employment is Involuntarily Terminated and either (i) such
Involuntary Termination occurred within six (6) months prior to or one (1) year
following a Change in Control as defined in Section 5.1(2) below, or (ii) such
Involuntary Termination occurred within three (3) years following the date of
this Agreement.
ARTICLE IV. PROTECTIVE COVENANTS
4.1 Confidential Information. As a senior management employee of the
Employer, the Executive has access to Confidential Information (as defined
herein). The Executive agrees to maintain the confidentiality of all
Confidential Information throughout the Term and for a period of one (1) year
after the termination of this Agreement. For purposes of this Section, the term
"Confidential Information" means data and information relating to the business
of the Employer which is or has been disclosed to the Executive or of which the
Executive has become aware as a consequence of or through his employment
relationship with the Employer and which has value to the Executive and is not
generally known to its competitors. Confidential Information shall not include
any data or information that has been voluntarily disclosed to the public by the
Employer (except where such public disclosure was effected by the Executive
without authorization) or that has been independently developed and disclosed by
others or that otherwise enters the public domain through lawful means.
4.2 Covenant Not to Compete. The Executive agrees, acknowledges and
understands that the nature, kind and character of the business conducted by the
Employer is highly competitive. Incident to the Executive engagement hereunder
and for the considerations contained herein, the Executive agrees that:
(1) during the term of this Agreement and for a period of twelve (12)
months following the later of the termination of this Agreement or the
resignation or Involuntary Termination of Executive, the Executive
will not, in the Georgia counties of Upson, Bibb and Muscogee or the
Alabama counties of Lee and Russell:
(a) enter into any employment relationship with any bank, thrift
institution, other entity providing financial services or an
affiliate of any of the foregoing in a capacity identical with or
substantially similar to the capacity in which he was employed by
the Employer at the time of his termination of employment;
(b) directly or indirectly, on his own behalf or in the service or on
behalf of others, solicit, divert, appropriate or attempt to
solicit, divert or appropriate, any business from any of the
Employer's customers with whom the Executive has had material
contact during the past two (2) years of the Executive's
employment, for purposes of providing products or services that
are competitive with those provided by the Employer; or
(c) on his own behalf or in the service or on behalf of others,
solicit, recruit or hire away, or attempt to solicit, recruit or
hire away, directly or by assisting others, any employee of the
Employer, whether or not such employee is a full-time employee,
part-time or temporary employee of the Employer, and whether or
not such employment is pursuant to a written agreement or is for
a determined period or at will.
<PAGE>
(2) by virtue of the duties and special knowledge of the affairs and
operations of the Employer that the Executive has and will obtain as a
result of his employment relationship with the Employer, a breach or
threatened breach by him of the provisions of this covenant not to
compete shall cause irreparable injury to the Employer and shall
entitle the Employer, in addition to any other remedy, to injunctive
relief against such breach or threatened breach.
The Executive acknowledges that the foregoing covenants are reasonable and
necessary to protect the interests of the Employer.
ARTICLE V. MISCELLANEOUS
5.1 Definitions. For purposes of this Agreement the terms set forth below
shall have the following meanings ascribed to them:
(1) "Cause" means conduct (a) constituting fraud or dishonesty resulting
in financial harm to the Employer or any of its affiliates; (b)
constituting a gross dereliction of the Executive's duties in the
capacity in which he is employed by the Employer; or (c) which results
in the successful criminal prosecution by federal, state or local
authorities for anything other than a misdemeanor relating to public
safety laws.
(2) "Change in Control" means any one of the following events which occurs
during the term of this Agreement or any extension:
(a) the acquisition by any person or persons acting in concert of the
then-outstanding voting shares of FLAG Financial Corporation,
after the transaction, the acquiring person or persons own,
control or hold with power to vote twenty-five percent (25%) or
more of any class of voting securities of FLAG Financial
Corporation or such other transactions as may be described under
12 C.F.R. @ 225.41(b)(1) or any successor thereto; or,
(b) the approval by the stockholders of FLAG Financial Corporation of
a reorganization, merger, share exchange or consolidation, with
respect to which persons who were the shareholders of FLAG
Financial Corporation immediately prior to such reorganization,
merger, share exchange or consolidation, do not, immediately
thereafter, own more than fifty percent (50%) of the combined
voting power entitled to vote at the election of directors of the
reorganized, merged, exchanged or consolidated company's then
outstanding voting securities; or
(c) the sale, transfer or assignment of all or substantially all of
the assets of FLAG Financial Corporation to any third party.
(3) "Involuntary Termination" means termination of Executive by the
Employer for any reason other than for Cause, and shall include for
purposes of this Agreement a 20% or greater reduction in base salary
or a material diminution in the duties and responsibilities of
Executive or a transfer of the Executive to another location more than
thirty (30) miles from the location of the office where Executive
employed at the time of the Change in Control.
<PAGE>
5.2 Amendment. This Agreement may not be amended (in whole or in part)
orally or by course of performance, but only by a written instrument signed by
both parties.
5.3 Notice. Except as otherwise required under this Agreement, any notice
required or permitted to be given pursuant to this Agreement shall be
sufficiently given:
(1) to the Executive if in writing and personally delivered, or mailed
(and if mailed shall be deemed given three (3) business days after mailing)
registered or certified mail addressed to the Executive at the Executive's
residence as shown in the records of the Employer or at such address as the
Executive shall designate in a written notice to the Employer; and
(2) to the Employer if in writing and personally delivered to the
Chairman or President and CEO of the Employer or mailed (and if mailed,
shall be deemed given three (3) business days after mailing) registered or
certified mail addressed to FLAG Financial Corp., P. O. Box 3007, LaGrange,
Georgia, 30241, Attn: Chairman or President.
5.4 Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the Executive and upon the Employer and its successors and assigns.
The Executive may not assign his rights and obligations hereunder without the
written consent of the Employer.
5.5 Applicable Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Georgia.
5.6 No Defense. The existence of any claim or cause of action of the
Executive against the Employer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Employer of
any covenant contained in this Agreement.
5.7 Survival. The provisions of Article IV shall survive any termination of
this Agreement.
5.8 Thomaston Federal Savings Bank. Thomaston Federal Savings Bank,
Thomaston, Georgia is not a party to this Agreement and is not bound by any
provision of this Agreement.
IN WITNESS WHEREOF, the Employer has executed and delivered by its duly
authorized officer, and the Executive has signed, this Agreement all as of the
day and year first above written.
FLAG FINANCIAL CORPORATION:
By:___/s/ Lee W. Washam________________________
Title:__Asst. Secretary_________________________
EXECUTIVE:
_____/s/ Joel A. Dudley___________________(SEAL)
Print Name:____Joel A. Dudley___________________
<TABLE> <S> <C>
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 22,767
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<INVESTMENTS-HELD-FOR-SALE> 76,894
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<LOANS> 447,798
<ALLOWANCE> 6,548
<TOTAL-ASSETS> 612,597
<DEPOSITS> 422,903
<SHORT-TERM> 60,592
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0
0
<COMMON> 8,263
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<EXPENSE-OTHER> 23,015
<INCOME-PRETAX> 1,428
<INCOME-PRE-EXTRAORDINARY> 1,063
<EXTRAORDINARY> 0
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<LOANS-PAST> 2,084
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