FLAG Financial Corporation


                       2 0 0 0  A N N U A L  R E P O R T












<PAGE>
                                Corporate Profile
                           FLAG Financial Corporation

                MISSION STATEMENT
           Our mission is to be a
diversified provider of financial
   services, creating the respect
     that maximizes value for our
     customers, our shareholders,
            our employees and our
                     communities.

                 VISION STATEMENT
       We will make FLAG the most
      respected financial service
        provider in our industry.

     FLAG  Financial  Corporation  is  a bank holding company whose wholly owned
subsidiary  is  FLAG  Bank.

     FLAG's  franchise consists of 25 offices, including 18 full-service banking
offices  and  6  mortgage/loan production offices, in 15 counties in Georgia and
east  Alabama.

     FLAG  also  provides  a  broad  range  of  financial  products and services
designed  to  meet all the financial needs of its customers. Primarily operating
as  a  community  bank,  FLAG  also  provides  mortgage,  investment,  trust and
insurance  services  through FLAG Mortgage, FLAG Investment Services, FLAG Trust
Services  and  FLAG  Insurance  Services,  respectively.

     As  of  December  31, 2000, total assets of FLAG Financial Corporation were
approximately  $559  million.  Net  loans totaled approximately $385 million and
deposits  were  approximately  $461  million. Shareholders' equity at the end of
2000  was  approximately  $55  million. The Company's common stock is traded and
quoted  on  The  Nasdaq  Stock  Market  under  the  symbol  "FLAG."

     To  accomplish  our mission and attain our vision, FLAG is committed to the
following  core  competencies:

-    Proficient  Employee  Base

-    Impeccable  Credit  Quality

-    Impeccable  Low  Cost/High
     Quality  Operations,
     Technology  and  Control

-    Proficient  Sales  and  Quality
     Service  Culture

-    Diversified  Revenue  Sources

-    Value  Added
     Growth/Acquisition  Strategy

-    High  Performance
     Organization

-    Impeccable  Regulatory  and
      Audit  Reviews

                                                               Table of Contents

To  Letter  Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . .  2

Financial  Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . .  5

Management's  Discussion  and  Analysis of
Financial  Condition  and  Results  of  Operations . . . . . . . . . . . . .  6

Report  of  Independent  Certified  Public  Accountants. . . . . . . . . . .  16

Consolidated  Balance  Sheets. . . . . . . . . . . . . . . . . . . . . . . .  17

Consolidated  Statments  of  Earnings. . . . . . . . . . . . . . . . . . . .  18

Consolidated  Statements  of  Comprehensive  Income. . . . . . . . . . . . .  19

Consolidated Statements of Changes in Stockholders' Equity . . . . . . . . .  20


Consolidated  Statements  of  Cash  Flow . . . . . . . . . . . . . . . . . .  21

Notes  to  Consolidated  Financial  Statements . . . . . . . . . . . . . . .  23

Corporate  Information . . . . . . . . . . . . . . . . . . . . . . . . . . .  43

Board  of  Directors  and  FLAG  Management. . . . . . . . . . . . . . . . .  44


<PAGE>
LETTER  TO  SHAREHOLDERS

       It is a pleasure to have this
opportunity to discuss the operating
    results, financial condition and
  business success FLAG accomplished
    this past year, all of which are
 directly related to a dedicated and
          determined team of banking
   professionals. We are also deeply
       grateful to each customer and
    stockholder who has supported us
         with their new and existing
   business and tangible investment.

     The  Year  2000 was extraordinary for our company. We entered the year as a
multi-bank  holding  company  comprised  of three independent bank charters that
operated  under  the  "super community bank" philosophy. This business strategy,
which  was  adopted in 1998, provides community bank operating independence with
centralized  back  office  support including, but not limited to, all aspects of
accounting,  internal  audit,  deposit  and  loan accounting, and credit related
functions.  The  creation  of our FLAG Eagle's Landing Operations Center in 1999
allowed  our organization to fully implement the advantages associated with this
operating  approach.  During  the  year  and  by strategic design, your Board of
Directors  and  Executive  Management  determined  the  best  complement  to the
existing  "super community bank" strategy would be a transition to a single bank
charter.  This  alleviated the remaining duplication in our operating structure.
This decision, although not completed until year-end, was implemented internally
during  the first quarter of the year. We believe this was a sound strategy that
allowed  the  Company  the  necessary  time to transition fully to a single bank
charter  and  conclude  the  year  as  FLAG  Bank  with FLAG as our recognizable
operating  name.  We  are  also  convinced the single bank strategy will enhance
long-term  franchise  value due to opportunities related to operating efficiency
and  allow  us  to  more  effectively  market FLAG in the various communities we
represent.  We  remain  confident in our internal and external growth objectives
using  this  strategy.

     When  we  began  2000,  we  were  also focused on continuing our efforts to
improve  the  consistency  of  our earnings and strengthen asset quality. We are
pleased to report we have made tremendous strides in both of these areas, as you
can  see  in  the following paragraph and in the attached financial analysis. We
remain  committed  to  fully  achieving  our  own  high expectations in 2001 and
beyond.  Our  lending  and credit function has received significant attention in
the  form  of training, management structure, and accountability in the areas of
loan  origination,  loan  approval, and credit administration. We have committed
significant  resources  to  creating and maintaining superior asset quality. Our
core  competency  of  "Impeccable Credit Quality" is a serious matter within our
organization  that  is  constantly  communicated to each of our lenders and loan
support  staff.  We  firmly believe the steps we are taking today are consistent
with  our commitment in providing value to the customer and will prove rewarding
to  FLAG  in  the  years  ahead.


                                        2
<PAGE>
     From  an operating standpoint, FLAG's net income for 2000 was $4,284,000 or
$.52  per  share,  as compared to $1,213,000 or $.15 per share for 1999. Our net
interest margin remained strong at 4.99% for.3 2000, compared to 4.90% for 1999.
These  earnings results relate to a ROA and ROE of .77% and 7.95%, respectively,
for  2000  compared  to .20% and 2.19%, respectively, for 1999. FLAG's allowance
for loan losses as a percentage of net outstanding loans was 1.71% and 1.67% for
2000  and  1999,  respectively.  FLAG  closed  the  year  with  total  assets of
$559,037,000.

     FLAG's consolidated capital position of $55,498,000 remains strong with all
ratios  well  in  excess  of regulatory requirements. At December 31, 2000, FLAG
reported a total risk-based capital ratio of 12.50%, a tier 1 risk-based capital
ratio  of  11.30%,  and  a leverage capital ratio of 10.10%. This strong capital
position  allowed  FLAG  to  reward  shareholders  with  annual  dividends  of
$1,969,000.  For  complete information regarding financial results, please refer
to  the  section  of this report titled "Management's Discussion and Analysis of
Financial  Condition  and  Results  of  Operations".

     During  this  year, your Board of Directors and Senior Management continued
to  evaluate  the  operations  of  the  company  to  improve revenues, operating
efficiencies  and  the  business  strategy.  We  took  the  following  steps:

     -  Divested  of  several  branches  that  were not strategically located to
complement  the  FLAG  organization  as  currently  designed.

     -  Reached  agreements  to  sell  portions  of  the  mortgage  and
mortgage-servicing  portfolio  to  allow  for  continued  improvement  in  the
efficiency  ratio.

     -  Reduced  non-interest  expense  by  $2,982,000,  primarily  due  to  the
reduction  of  100  full-time  equivalent  positions.

     -  Secured  branch approval authority for our Eagle's Landing, Stockbridge,
Georgia  and  John's Creek, Suwanee, Georgia locations. In addition, we opened a
loan  production  office  on St. Simons Island, Georgia to position FLAG to take
advantage  of  each  of  these  rapidly  growing  communities.

     -  Established  a  Trust  and  Wealth Management division located in Perry,
Georgia  while  experiencing  accelerated  growth  in  FLAG  Insurance  and FLAG
Investment  Services.

     -  Scheduled  and  initiated  implementation to convert data systems of the
former  Thomaston  Federal  Savings Bank subsidiary and the former CB&T branches
and  merge  the  databases  of  the  remainder  of  FLAG.

     -  Acquired  branch  offices  in  Montezuma,  Oglethorpe,  Buena  Vista and
Cusseta,  Georgia,  all  of which are located in the FLAG Middle Georgia Region.

     -  Expanded  the technology capabilities of FLAG to maximize the investment
made  over  the  last number of years and to provide instant account information
access  and  flexibility  to  customers.

     Each  of these achievements were a result of careful planning and execution
based  on the strategic objectives outlined in the 2001-2003 FLAG Business Plan.
This  Plan  contained  both  a  Mission  Statement and Vision Statement centered
around  the  creation  of  "Respect"  as  a  financial  service  provider to our
customers,  shareholders,  employees  and  communities.  Furthermore,  these
achievements  were a result of the leadership provided by the Board of Directors
and  the  commitment  exemplified  by  each FLAG employee during this past year.

     We  are  very  optimistic  about  2001, and we remain committed to the high
ideals  associated  with  community  banking  and  the  dedication  of providing
unparalleled  customer  service.

     Thank  you  for  your  confidence  and  continued  support.

/s/ JOHN  S.  HOLLE
    JOHN  S.  HOLLE
Chairman  of  the  Board
FLAG  Financial  Corporation


/s/ J.  DANIEL  SPEIGHT
    J.  DANIEL  SPEIGHT
Chief  Executive  Officer
FLAG  Financial  Corporation


                                        3
<PAGE>
                                      FLAG
                              FINANCIAL INFORMATION


                                        4
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL  HIGHLIGHTS

      (In thousands except per share data)    2000       1999      1998      1997      1996
<S>                                         <C>        <C>       <C>       <C>       <C>
FOR THE YEAR
Net interest income                         $ 24,961    26,490    25,952    23,272    21,189
Provision for loan losses                      3,597     4,656     3,475     1,702     4,566
Non-interest income                           11,962    10,072     9,952     8,578     7,636
Non-interest expense                          27,633    30,615    28,882    22,567    21,053
Income taxes                                   1,409        78       708     2,305       798
Net earnings                                $  4,284     1,213     2,839     5,276     2,409

PER COMMON SHARE
Basic earnings per share                    $    .52       .15       .35       .64       .29
Diluted earnings per share                       .52       .15       .34       .64       .29
Cash dividends declared                          .24       .24       .20       .13       .11
Book value                                  $   6.83      6.43      6.92      6.51      5.93

AT YEAR END
Loans, net                                  $384,661   419,079   424,660   399,725   348,417
Earning assets                               501,046   521,452   568,133   538,008   470,664
Assets                                       559,037   587,870   635,192   595,468   520,472
Deposits                                     461,438   483,987   521,671   485,174   438,292
Stockholders' equity                        $ 55,498    53,197    56,869    53,276    48,489
Common shares outstanding                      8,123     8,273     8,223     8,187     8,182

AVERAGE BALANCES
Loans                                       $405,101   449,689   435,422   374,065   331,095
Earning assets                               510,898   556,577   576,245   496,195   451,072
Assets                                       566,355   617,764   624,487   549,025   494,173
Deposits                                     455,338   496,998   505,337   456,713   412,585
Stockholders' equity                        $ 53,853    55,365    55,337    50,991    47,543
Weighted average shares outstanding            8,210     8,258     8,218     8,182     8,148

KEY PERFORMANCE RATIOS
Return on average assets                         .77%      .20%      .45%      .96%      .49%
Return on average stockholders' equity          7.95%     2.19%     5.13%    10.35%     5.07%
Net interest margin, tax equivalent basis       4.99%     4.90%     4.56%     4.74%     4.68%
Dividend payout ratio                          45.98%   153.50%    49.49%    17.66%    38.83%
Average equity to average assets                9.51%     8.96%     8.86%     9.29%     9.62%
</TABLE>


                                        5
<PAGE>
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION AND RESULTS OF

OPERATIONS

GENERAL

     FLAG Financial Corporation ("FLAG") is a bank holding company that owns 100
percent of the common stock of FLAG Bank (the "Bank"). During 2000, The Citizens
Bank  and  Thomaston  Federal  Savings  Bank  were  merged into First Flag Bank.
Effective  December  31, 2000, First Flag Bank merged into Citizens Bank and the
name  of  the  surviving  institution  was  changed  to FLAG Bank. The Bank is a
full-service,  retail  oriented  bank primarily engaged in retail banking, small
business,  residential and commercial real estate lending, and mortgage banking.

     The  following  discussion  focuses on significant changes in the financial
condition  and  results  of  operations  of  FLAG  during  the three years ended
December  31,  2000.  This  discussion  and  the financial information contained
herein  are  presented  to assist the reader in understanding and evaluating the
financial  condition,  results  of  operations, and future prospects of FLAG and
should  be  read  as  a  supplement  to and in conjunction with the Consolidated
Financial  Statements  and  Related  Notes.

CAPITAL  ISSUES

     Effective June 3, 1998, FLAG declared a 3-for-2 stock split.  All per share
amounts  and  prices have been restated to reflect this stock split as if it had
occurred  at  the  beginning  of  the  earliest  period  presented.

     During  the  fourth  quarter  of  1999, FLAG implemented a stock repurchase
program.  FLAG  repurchased 145,244 shares of its common stock in 2000 and 7,500
shares  of  its  common  stock  in  1999.

MERGER,  EXPANSION  AND  DISPOSITION  ACTIVITY

     Effective  March 30, 1998, FLAG completed the acquisition of Middle Georgia
Bankshares,  Inc.,  the  parent  company  of  the  $129 million Citizens Bank in
Vienna,  Georgia.  FLAG  issued  approximately  1.5 million shares of its common
stock  in  connection  with  this  acquisition.

     Effective  May  8,  1998,  FLAG  completed  the acquisition of Three Rivers
Bancshares,  Inc., the parent company of the $35 million Bank of Milan in Milan,
Georgia.  FLAG  issued  approximately  597,000  shares  of  its  common stock in
connection  with  this  acquisition.

     Effective  December  11,  1998,  FLAG  completed  the acquisition of Empire
Banking  Corp.,  the parent company of the $70 million Empire Banking Company of
Homerville,  Georgia. FLAG issued approximately 1.1 million shares of its common
stock  in  connection  with  this  acquisition.

     Effective  December  31,  1998,  FLAG  completed the acquisition of the $31
million  Brown Bank in Metter, Georgia. FLAG issued approximately 255,000 shares
of  its  common  stock  in  connection  with  this  acquisition.

     Effective  August  31,  1999,  FLAG acquired, for approximately 1.2 million
shares  of  its  common  stock, all of the outstanding stock of Thomaston, a $55
million  thrift  located  in  Thomaston,  Georgia.

     Effective  September  30,  1999,  FLAG  acquired, for approximately 575,000
shares  of  its  common stock, all of the outstanding stock of First Hogansville
Bankshares,  Inc., the holding company of the $31 million Citizens Bank, located
in  Hogansville,  Georgia.

     Effective September 30, 2000, FLAG sold the loans, deposits and property of
its  bank  branches  in  Cobbtown,  Metter  and  Statesboro,  Georgia.

     Effective September 30, 2000, FLAG sold the loans, deposits and property of
its  bank  branches  in  Blackshear,  Homerville  and  Waycross,  Georgia.

     On December 29, 2000, FLAG acquired certain loans, deposits and property of
bank  branches  in  Montezuma,  Oglethorpe,  Cusseta  and  Buena Vista, Georgia.


                                        6
<PAGE>
NET  INCOME

     Net  income  was  $4,284,000  in 2000, $1,213,000 in 1999 and $2,839,000 in
1998.  The  significant  increase in net income in 2000 compared to 1999 was due
to  the  gain  recognized  on  the  sale of branch locations in 2000 and certain
nonrecurring  provisions  for  possible loan losses in 1999, partially offset by
losses  on  the sale of investment securities due to balance sheet restructuring
in  2000.  In  2000,  FLAG  recognized  a  gain  on  the  sale of certain branch
locations  of approximately $5,080,000.  FLAG also recognized a loss on the sale
of  investment  securities  in 2000 of $263,000 compared to a gain on investment
securities  of  $1,689,000  in  1999.  The  net  effect  of  these  nonrecurring
transactions  was  to  increase  net income by approximately $1,939,000 in 2000.
The  decrease in net income in 1999 compared to 1998 was due to the nonrecurring
provisions  for  possible  loan  losses  recognized  in  1999.

NET  INTEREST  INCOME

     Net  interest  income (the difference between the interest earned on assets
and the interest paid on deposits and other interest-bearing liabilities) is the
single  largest  component  of  FLAG's  operating  income. The management of net
interest income is of most importance in the banking industry. FLAG manages this
income  source while it controls credit, liquidity, and interest rate risks. Net
interest  income  decreased  5.77%  in 2000, from $26.5 million in 1999 to $25.0
million  in 2000.  Net interest income increased 2.07% in 1999 compared to 1998.
Net  interest  income  decreased  in  2000  due  to  the  sale of certain branch
locations.

     Total  interest income decreased 5.62% in 2000 and decreased 3.95% in 1999.
Interest  expense  decreased approximately 5.44% in 2000 and decreased 10.14% in
1999.  The  interest  expense  variances  from  year to year have been primarily
influenced by the average balances of interest bearing liabilities (see TABLES 1
&  2).


<TABLE>
<CAPTION>
TABLE  1  -  CONSOLIDATED  AVERAGE  BALANCES,  INTEREST,  AND  RATES  -  TAXABLE EQUIVALENT  BASIS
(DOLLARS  IN  THOUSANDS)

                                                                          YEARS  ENDED  DECEMBER  31,
                                      --------------------------------------------------------------------------------------------
                                                    2000                            1999                         1998
                                      --------------------------------------------------------------------------------------------
                                                   INTEREST   WEIGHTED             INTEREST   WEIGHTED          INTEREST  WEIGHTED
                                       AVERAGE     INCOME/    AVERAGE    AVERAGE   INCOME/    AVERAGE   AVERAGE  INCOME/  AVERAGE
                                       BALANCE     EXPENSE     RATE      BALANCE   EXPENSE     RATE     BALANCE  EXPENSE    RATE
                                      --------------------------------------------------------------------------------------------
<S>                                   <C>         <C>        <C>        <C>        <C>       <C>        <C>      <C>      <C>
ASSETS
Interest-earning assets:
  Loans. . . . . . . . . . . . . . .  $ 405,101     40,014       9.88%  $ 449,689    43,131      9.59%  435,422   43,156     9.91%
  Taxable investment
   securities. . . . . . . . . . . .     84,833      5,471       6.45%     83,485     5,170      6.19%   97,159    5,886     6.06%
  Tax-free investment
   securities. . . . . . . . . . . .     11,180        861       7.70%     11,324       990      8.74%   12,448      947     7.61%
  Interest-bearing deposits
    in other banks . . . . . . . . .      2,718        163       6.00%      6,576       361      5.49%    9,603      459     4.78%
  Federal funds sold                      7,066        409       5.79%      5,503       277      5.03%   21,613    1,046     4.84%
                                      ----------  ---------  ---------  ---------  --------  ---------  -------  -------  --------
Total interest-
     earning assets. . . . . . . . .    510,898     46,918       9.18%    556,577    49,929      8.97%  576,245   51,494     8.94%
Other assets . . . . . . . . . . . .     55,457                            61,187                        48,242
                                      ----------                        ---------                     ---------
    Total assets . . . . . . . . . .  $ 566,355                           617,764                       624,487
                                      ==========                        =========                     =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Interest-bearing demand
     Deposits. . . . . . . . . . . .  $  55,803        973       1.74%     59,000       996      1.69%   60,950    1,254     2.06%
  Savings deposits . . . . . . . . .     61,843      1,790       2.89%     70,332     2,069      2.94%   69,440    2,225     3.20%
  Other time deposits. . . . . . . .    284,307     16,237       5.71%    309,484    16,527      5.34%  319,475   18,460     5.78%
  Federal funds purchased. . . . . .      7,990        506       6.33%      4,697       240      5.11%    1,238       60     4.85%
  FHLB advances and
     other borrowings. . . . . . . .     30,349      1,925       6.34%     52,122     2,831      5.43%   56,854    3,221     5.66%
                                      ----------  ---------  ---------  ---------  --------  ---------  -------  -------  --------
     Total interest-
      bearing liabilities. . . . . .    440,292     21,431       4.87%    495,635    22,663      4.57%  507,957   25,220     4.96%
Non-interest bearing
     demand deposits . . . . . . . .     53,385                            58,182                        55,472
Other liabilities. . . . . . . . . .     18,825                             8,582                         6,721
Stockholders' equity . . . . . . . .     53,853                            55,365                        55,337
                                      ----------                        ---------                       -------
     Total liabilities and . . . . .
      stockholders' equity . . . . .  $ 566,355                           617,764                       625,487
                                      ==========                        =========                     =========
Tax-equivalent adjustment. . . . . .                    526                             776                          322
                                                  ---------                        --------                      -------
Net interest income. . . . . . . . .                 24,961                          26,490                       25,952
                                                  =========                        ========                      =======
Interest rate spread . . . . . . . .                             4.31%                           4.40%                       3.97%
Net interest margin  . . . . . . . .                             4.99%                           4.90%                       4.56%
Interest-earning assets/
 interest-bearing liabilities. . . .                              116%                            112%                        113%
</TABLE>


                                        7
<PAGE>
CONSOLIDATED  AVERAGE  BALANCES,  INTEREST,  AND  RATES

     Net  interest income is determined by the amount of interest-earning assets
compared  to  interest-bearing  liabilities  and their related yields and costs.
The  difference  between  the  weighted  average  interest  rates  earned  on
interest-earning assets (i.e., loans and investment securities) and the weighted
average  interest rates paid on interest-bearing liabilities (i.e., deposits and
borrowings)  is  called  the  net  interest  spread.  Another  measure  of  the
difference  in  interest  income  earned  versus  interest  expense  paid is net
interest  margin.  Net  interest  margin  is calculated by dividing net interest
income  (on  a  tax-equivalent  basis)  by  average  earning  assets.

     TABLE  1  presents  for  the  three  years ended December 31, 2000, average
balances  of  interest-earning  assets  and interest-bearing liabilities and the
weighted  average interest rates earned and paid on those balances. In addition,
interest  rate  spreads,  net interest margins and the ratio of interest-earning
assets  versus  interest-bearing  liabilities  for  those  years  are presented.
Average  interest-earning  assets  were  $510.9  million  in  2000 versus $556.6
million  in  1999,  and  $576.2  million  in  1998.  Average  interest-bearing
liabilities were $440.3 million in 2000 versus $495.6 million in 1999 and $508.0
million in 1998. The interest rate spread was 4.31% in 2000 versus 4.40% in 1999
and  3.97%  in  1998,  while the net interest margin was 4.99% in 2000, 4.90% in
1999  and  4.56%  in  1998.

     TABLE  2 shows the change in net interest income from 2000 to 1999 and from
1999  to  1998  due  to  changes  in  volumes  and  rates.

TABLE  2  -  RATE/VOLUME  VARIANCE  ANALYSIS  -  TAXABLE  EQUIVALENT  BASIS
(DOLLARS  IN  THOUSANDS)

<TABLE>
<CAPTION>
                                                     YEARS  ENDED  DECEMBER  31,
                                       ----------------------------------------------------
                                         2000 COMPARED TO 1999     1999 COMPARED  TO  1998
                                       -------------------------  -------------------------
                                                 RATE/     NET              RATE/     NET
                                        VOLUME   YIELD   CHANGE   VOLUME    YIELD   CHANGE
                                       --------  ------  -------  -------  -------  -------
<S>                                    <C>       <C>     <C>      <C>      <C>      <C>
INTEREST INCOME:
  LOANS . . . . . . . . . . . . . . .  $(4,375)  1,258   (3,117)   1,388   (1,413)     (25)
  TAXABLE INVESTMENT SECURITIES . . .       87     214      301     (847)     131     (716)
  TAX-FREE INVESTMENT SECURITIES. . .      (11)   (118)    (129)     (98)     141       43
  INTEREST-BEARING DEPOSITS IN
    OTHER BANKS . . . . . . . . . . .     (231)     33     (198)    (166)      68      (98)
  FEDERAL FUNDS SOLD. . . . . . . . .       90      42      132     (811)      42     (769)
                                       --------  ------  -------  -------  -------  -------
     TOTAL INTEREST INCOME. . . . . .   (4,440)  1,429   (3,011)    (534)  (1,031)  (1,565)
INTEREST EXPENSE:
  INTEREST BEARING DEMAND DEPOSITS. .      (54)     31      (23)     (40)    (218)    (258)
  SAVINGS DEPOSITS. . . . . . . . . .     (250)    (29)    (279)      29     (185)    (156)
  OTHER TIME DEPOSITS . . . . . . . .   (1,344)  1,054     (290)    (577)  (1,356)  (1,933)
  FEDERAL FUNDS PURCHASED . . . . . .      168      98      266      168       12      180
  FHLB ADVANCES AND OTHER BORROWINGS.   (1,183)    277     (906)    (268)    (121)    (389)
                                       --------  ------  -------  -------  -------  -------
     TOTAL INTEREST EXPENSE. . . . .    (2,663)  1,431   (1,232)    (688)  (1,868)  (2,556)
                                       --------  ------  -------  -------  -------  -------
NET INTEREST INCOME . . . . . . . . .  $(1,777)     (2)  (1,779)     154      837      991
                                       ========  ======  =======  =======  =======  =======
</TABLE>

NON-INTEREST  INCOME

     Other  income increased to $12.0 million in 2000 from $10.1 million in 1999
and  $10.0  million in 1998. The increases in other income in 2000 resulted from
gain  on  the  sale  of  branches,  offset  by decreases in gains on the sale of
investment securities and loans.  The increases in other income in 1999 resulted
from  the  increase  in  gain  on  the  sales  of  investment  securities.

     During  2000,  FLAG  sold  the  loans,  deposits  and  property of its bank
branches  in  Cobbtown,  Metter and Statesboro, Georgia and recognized a gain on
sale  of  approximately  $2,011,000.  FLAG  also  sold  the  loans, deposits and
property  of  its  bank branches in Blackshear, Homerville and Waycross, Georgia
and  recognized  a gain on sale of approximately $3,069,000. Gains on investment
securities decreased $1,689,000 in 2000 from 1999 due to losses in the amount of
$263,000  on the sale of investment securities which were incurred as a strategy
to  restructure  the investment portfolio to take advantage of a higher interest
rate  environment.  Gain  on  sale of loans decreased to $895,000 in 2000 versus
$2,086,000  in  1999  and $2,429,000 in 1998. This decrease was due in part to a
one  time gain on the sale of the guaranteed portion of a commercial loan during
1999  in  the  amount  of  $382,000,  as well as decreased volume in the sale of
mortgage  loans,  servicing  released.


                                        8
<PAGE>
     Gain  on  sales  of  investment  securities increased to $1,148,000 in 1999
versus  $273,000 in 1998. The increase in gain on sales of investment securities
in  1999  primarily resulted from gains on the sale of the Company's holdings in
Towne  Services,  Inc.

     Fees  and service charges on deposits remained stable at approximately $4.5
million  in  2000  compared  to  1999.  Fees  and  service  charges  on deposits
decreased  approximately  $800,000 from 1998 to 1999 due to certain nonrecurring
fees  collected  in  1998.

NON-INTEREST  EXPENSES

     Salary  and employee benefits decreased to $14.4 million in 2000 from $15.1
million  in 1999 and increased from $13.4 million in 1998. This decrease in 2000
was primarily due to reduced salary and employee benefits attributed to the sale
of  the  branch offices during the third quarter of 2000 as well as management's
continued  emphasis  on  consolidation  and  cost  containment  in  an effort to
increase  the  efficiency  of  our  operations.  Management  also  believes
consolidation  efficiencies  will  continue  to  be  realized  as operations are
combined  in the current single charter environment.  The increases from 1998 to
1999  were  primarily  due  to  additional  staffing requirements and the use of
temporary  employees  for  special  projects.

     Occupancy  expenses  increased to $4.3 million in 2000 from $4.1 million in
1999  and  decreased  from  $4.4 million in 1998. The increase in 2000 occupancy
expenses  was  the result of an increase in depreciation on certain fixtures and
equipment.  The  decrease in 1999 occupancy expense was the result of a decrease
in  depreciation  on  certain  fixtures  and  equipment,  partially offset by an
increase  in  expenses  related  to  the  operations  center at Eagle's Landing.

     Other  expenses  were $9.0 million in 2000 versus $11.4 million in 1999 and
$11.0  million  in 1998. The decrease in 2000 other expenses was the result of a
decrease  in  operating expenses attributed to the sale of branch offices during
the  third  quarter  of  2000,  as  well  as a decrease in data processing, item
processing  and  imaging  expenses  as  a  result  of  bringing these operations
in-house.  The increase in other operating expenses from 1998 to 1999 was due to
certain  merger-related  expenses.

INVESTMENT  SECURITIES

     The  composition  of  the  investment  securities  portfolio  reflects
management's  strategy  of  maintaining an appropriate level of liquidity, while
providing  a  relatively  stable source of income. The portfolio also provides a
balance  to  interest  rate  risk  and credit risk in other categories of FLAG's
balance  sheet  while providing a vehicle for the investment of available funds,
furnishing  liquidity, and providing securities to pledge as required collateral
for  certain  deposits.

     Investment securities increased $11.4 million to $100.7 million at December
31,  2000  from  $89.3  million  at December 31, 1999. At December 31, 2000, all
investment  securities  outstanding  were classified as available-for-sale.  The
overall  increase  in investments was due to the investment of proceeds received
from  the  sale of the branch locations during 2000. At December 31, 2000, gross
unrealized  gains  in  the  total  portfolio  amounted  to  $477,000  and  gross
unrealized  losses  amounted  to  $1,555,000.

     TABLE 3 reflects the carrying amount of the investment securities portfolio
for  the  past  three  years.

<TABLE>
<CAPTION>
TABLE  3  -  CARRYING  VALUE  OF  INVESTMENTS
(DOLLARS IN THOUSANDS)
                                                DECEMBER  31,
                                          2000     1999    1998
                                        --------  ------  ------
<S>                                     <C>       <C>     <C>
SECURITIES HELD-TO-MATURITY:
   U.S. TREASURIES AND AGENCIES. . . .  $      -  10,178  11,624
   STATE, COUNTY AND MUNICIPAL . . . .         -   2,997   3,111
   MORTGAGE-BACKED SECURITIES. . . . .         -   2,318   1,127
   COLLATERALIZED MORTGAGE OBLIGATIONS         -     751   1,037

SECURITIES AVAILABLE-FOR-SALE:
  U.S. TREASURIES AND AGENCIES . . . .    22,554  18,877  22,002
  CORPORATE DEBT SECURITIES. . . . . .     2,014       -     999
  STATE, COUNTY AND MUNICIPAL. . . . .    10,652   8,732   9,767
  MORTGAGE-BACKED SECURITIES . . . . .    56,202  22,376  32,541
  TRUST PREFERRED SECURITIES . . . . .     8,811   7,431       -
  COLLATERALIZED MORTGAGE OBLIGATIONS.         -  14,264  11,520
  EQUITY SECURITIES. . . . . . . . . .       489   1,378   3,895
                                        --------  ------  ------
        TOTAL. . . . . . . . . . . . .  $100,722  89,302  97,623
                                        ========  ======  ======
</TABLE>


                                        9
<PAGE>
CARRYING  VALUE  OF  INVESTMENTS

     As of December 31, 2000, all of FLAG's investment securities are classified
as available-for-sale.  FLAG adopted Statement of Financial Accounting Standards
No.  133  ("SFAS  No. 133"), in 2000 and transferred all of its held-to-maturity
investment  securities  into  available-for-sale.

     The  December  31,  1999  market value of securities held-to-maturity, as a
percentage  of amortized cost, was 98%, down from 104% at December 31, 1998. The
market  value  of  the securities held-to-maturity will change as interest rates
change  and  such unrealized gains and losses will not flow through the earnings
statement  unless the related securities become permanently impaired or they are
called  at  prices which differ from the carrying value at the time of the call.

LOANS

     Gross  loans receivable decreased by approximately $35.0 million in 2000 to
$391.2  million  from $426.1 million at December 31, 1999. This decrease was the
result  of declines in commercial, financial and agricultural loans, installment
loans,  lease  financing  loans  and  real  estate construction loans, partially
offset by an increase in real estate mortgages. The decrease in loans in 2000 is
largely  attributable  to  the  sale  of the branches. As shown in TABLE 4, real
estate  mortgage  loans  increased  approximately  $10.0  million,  commercial,
financial  and  agricultural  loans  decreased  approximately  $25.0  million,
installment  loans  decreased  approximately  $12.0  million,  lease  financing
receivables  decreased  approximately $2.0 million, and real estate construction
loans  decreased  approximately  $6.0  million.

<TABLE>
<CAPTION>
TABLE  4  -  LOAN  PORTFOLIO
(DOLLARS  IN  THOUSANDS)
                                                                       DECEMBER  31,
                           -----------------------------------------------------------------------------------------------------
                                  2000                1999                  1998               1997               1996
                           -----------------------------------------------------------------------------------------------------
                                     PERCENT              PERCENT              PERCENT             PERCENT              PERCENT
                            AMOUNT   OF TOTAL    AMOUNT   OF TOTAL    AMOUNT   OF TOTAL   AMOUNT   OF TOTAL   AMOUNT   OF TOTAL
                           -----------------------------------------------------------------------------------------------------
<S>                        <C>       <C>        <C>       <C>        <C>       <C>        <C>      <C>        <C>      <C>
COMMERCIAL/FINANCIAL
/AGRICULTURAL . . . . . .  $ 92,757      23.7%  $117,728      27.6%  $121,744      28.3%   76,673      18.9%   60,778      20.0%
REAL ESTATE CONSTRUCTION.    37,501       9.6%    43,602      10.2%    31,814       7.4%   13,864       3.4%   10,784       3.5%
REAL ESTATE MORTGAGE. . .   228,508      58.4%   218,920      51.4%   205,753      47.8%  266,837      65.8%  191,478      62.9%
INSTALLMENT LOANS TO
 INDIVIDUALS. . . . . . .    28,767       7.4%    40,620       9.5%    63,869      14.8%   38,679       9.5%   33,744      11.1%
LEASE FINANCINGS. . . . .     3,711       0.9%     5,226       1.2%     7,674       1.8%    9,308       2.3%    7,723       2.5%
                           -----------------------------------------------------------------------------------------------------
     TOTAL LOANS. . . . .   391,244       100%   426,096       100%   430,854       100%  405,361       100%  304,507       100%
LESS:
ALLOWANCE FOR LOAN LOSSES     6,583                7,017                6,194               6,636               6,384
                           ------------------------------------------------------------------------------------------------------
     TOTAL NET LOANS. . .  $384,661              419,079              424,660             399,725             298,123
                           ======================================================================================================
</TABLE>

     TABLE  5  represents the expected maturities for commercial, financial, and
agricultural loans and real estate construction loans at December 31, 2000.  The
table  also  presents  the  rate structure for these loans that mature after one
year.

<TABLE>
<CAPTION>
TABLE  5  -  LOAN  PORTFOLIO  MATURITY
(DOLLARS  IN  THOUSANDS)

                                                                              RATE STRUCTURE FOR LOANS
                                                    MATURITY                   MATURITY OVER ONE YEAR
                            ---------------------------------------------------------------------------------
                                                 OVER ONE YEAR
                            ONE YEAR    THROUGH    OVER FIVE            FLOATING OR ADJUSTABLE  PREDETERMINED
                             OR LESS   FIVE YEARS    YEARS     TOTAL         INTEREST RATE          RATE
                            ---------------------------------------------------------------------------------
<S>                         <C>        <C>         <C>        <C>       <C>                     <C>
COMMERCIAL, FINANCIAL, AND
   AGRICULTURAL. . . . . .  $  49,755      28,860     14,142    92,757                  16,512         26,490
REAL ESTATE - CONSTRUCTION     36,911           0        590    37,501                     590              0
                            ---------------------------------------------------------------------------------
                            $  86,666      28,860     14,732   130,258                  17,102         26,490
                            =================================================================================
</TABLE>

PROVISION  AND  ALLOWANCE  FOR  LOAN  LOSSES

     TABLE  6  presents  an  analysis  of  activities in the allowance for loan
losses  for  the  past  five years. An allowance for possible losses is provided
through  charges  to FLAG's earnings in the form of a provision for loan losses.
The  provision  for  loan  losses was $3,597,000 in 2000, $4,656,000 in 1999 and
$3,475,000  in  1998.


                                       10
<PAGE>
     The  provision  for  2000  included  additional provisions in the amount of
$1,000,000  made  for  certain loans retained as a result of the Homerville, Ga.
branch  sale,  as well as an additional provision in the amount of $750,000 made
for  a  large  agricultural  credit  located  in  southeast  Georgia.

     The  increase  in  the  provision  in  1999  compared  to  1998  was due to
provisions made for certain lease financing receivables booked prior to 1999, as
well  as  various  commercial  and  agricultural  credits.  These commercial and
agricultural  credits  included  provisions for a large residential construction
company  as well as for certain timber and agricultural loans. The provision for
1998  was  primarily related to a provision in the amount of $2,000,000 directly
attributed  to  Gulf  Properties  Financial,  Inc.  (Gulf  Properties). FLAG had
provided  a  warehouse  line to Gulf Properties with which Gulf Properties would
originate  loans  and  sell  them  to  FLAG. During 1998, it was discovered that
certain  loans  would  not be collectible. During 1999 and 2000, we continued to
pursue collection of Gulf Properties through legal proceedings as well as claims
made  through  our  insurance  carrier. As a result of these continuing efforts,
FLAG  collected  approximately  $2,490,000  during  2000,  of which $949,000 had
previously  been  written  off.

      Management determines the level of the provision for loan losses based on
outstanding  loan  balances, the levels of non-performing assets, and reviews of
assets classified as substandard, doubtful, or loss and larger credits, together
with an analysis of historical loss experience, and current economic conditions.

     Historically,  the  loan portfolio has consisted primarily of loans secured
by  one-to-four  family  residential properties, and actual losses have not been
significant.  The  Bank  also  provides other services and loan products to meet
the  growing  financial  needs  of FLAG's communities, including consumer loans,
commercial loans, and commercial real estate loans.  Because these loans present
a  somewhat  higher  credit  risk  than loans secured by residential properties,
management has significantly increased the allowance for loan losses compared to
historic  levels  to  reflect  the  increased  potential  for  future  losses.

     As  shown  in  TABLE 6, the year-end allowance for loan losses decreased to
$6.6  million  at December 31, 2000, from $7.0 million at December 31, 1999. The
allowance for loan losses was $6.2 million at December 31, 1998. The decrease in
the allowance at December 31, 2000 was due primarily to the decreased provisions
associated  with  decreased  loan  balances  outstanding  and  a  decrease  in
non-performing  assets.  The  decrease  in  net-charge-offs  was  a  result  of
recoveries  attributed  to  Gulf  Properties during 2000. Total charge-offs were
$4.5  million  in  2000,  $4.1  million  in  1999, and $3.3 million in 1998. The
allowance  for  loan  losses  was 1.71% of net outstanding loans at December 31,
2000,  versus  1.67% of net outstanding loans at December 31, 1999, and 1.46% of
net  outstanding  loans  at  December  31,  1998.

     Management believes that the allowance for loan losses is both adequate and
appropriate.  However,  the  future  level  of  the allowance for loan losses is
highly  dependent  upon  loan  growth,  loan loss experience, and other factors,
which  cannot  be  anticipated  with  a  high  degree  of  certainty.

<TABLE>
<CAPTION>
TABLE  6  -  ANALYSIS  OF  THE  ALLOWANCE  FOR  LOAN  LOSSES
(DOLLARS  IN  THOUSANDS)


                                                                  Years  Ended  December  31,
                                                         -------------------------------------------------
                                                           2000       1999      1998      1997      1996
                                                         ---------  --------  --------  --------  --------
<S>                                                      <C>        <C>       <C>       <C>       <C>
Average net loans . . . . . . . . . . . . . . . . . . .  $405,101   449,689   435,422   374,065   331,589
                                                         ---------  --------  --------  --------  --------
Allowance for loan losses, beginning
  of the period   . . . . . . . . . . . . . . . . . . .     7,017     6,194     5,637     7,051     3,960
Charge-offs for the period:
  Commercial/financial/agricultural . . . . . . . . . .     1,246       722     1,834       328       828
  Real estate construction loans. . . . . . . . . . . .         -         -         -         -        24
  Real estate mortgage loans. . . . . . . . . . . . . .     2,308     1,305       296       242       433
  Installment loans to individuals. . . . . . . . . . .       894     1,007       818       349       309
  Lease financings. . . . . . . . . . . . . . . . . . .         6     1,056       314     2,465         -
                                                         ---------  --------  --------  --------  --------
Total charge-offs . . . . . . . . . . . . . . . . . . .     4,454     4,090     3,262     3,384     1,594
                                                         ---------  --------  --------  --------  --------
Recoveries for the period:
  Commercial/financial/agricultural . . . . . . . . . .        86        46        77         7         -
  Real estate construction loans. . . . . . . . . . . .         -         -         -         -         -
  Real estate mortgage loans. . . . . . . . . . . . . .       964        60        52       106         -
  Installment loans to individuals. . . . . . . . . . .        93       149       165       155       119
  Lease financings. . . . . . . . . . . . . . . . . . .       109         2        50         -         -
                                                         ---------  --------  --------  --------  --------
     Total recoveries . . . . . . . . . . . . . . . . .     1,252       257       344       268       119
                                                         ---------  --------  --------  --------  --------

       Net charge-offs for the period . . . . . . . . .     3,202     3,833     2,918     3,116     1,475
Provision for loan losses . . . . . . . . . . . . . . .     3,597     4,656     3,475     1,702     4,566
Allowance related to assets purchased and sold. . . . .      (829)        -         -         -         -
                                                         ---------  --------  --------  --------  --------
Allowance for loan losses, end of period. . . . . . . .  $  6,583     7,017     6,194     5,637     7,051
                                                         =========  ========  ========  ========  ========
Ratio of allowance for loan losses to total
  net loans outstanding . . . . . . . . . . . . . . . .      1.71%     1.67%     1.46%     1.41%     2.37%
Ratio of net charge-offs during the period to
  average net loans outstanding during the period . . .      0.79%     0.85%     0.67%     0.83%     0.44%
</TABLE>


                                       11
<PAGE>
ASSET  QUALITY

     At  December 31, 2000, non-performing assets totaled $12.8 million compared
to  $15.8 million at year-end 1999. The decrease in 2000 is primarily attributed
to  a decrease in loans on non-accrual, partially offset by an increase in loans
past  due  90  days  and still accruing. As part of the Company's renewed credit
culture,  a  special  assets  division  has  been established for the purpose of
managing all nonperforming assets. The primary concentration of nonaccrual loans
reside  with  several  commercial  and  agri-business  loans.  There  were  no
commitments  to  lend  additional funds to customers with loans on nonaccrual at
December  31, 2000. TABLE 7 summarizes the non-performing assets for each of the
last  five  years.

<TABLE>
<CAPTION>
TABLE 7 - RISK ELEMENTS
(DOLLARS  IN  THOUSANDS)

                                                            DECEMBER  31,
                                           -------------------------------------------
                                             2000     1999     1998     1997    1996
                                           -------------------------------------------
<S>                                        <C>       <C>      <C>      <C>     <C>

LOANS ON NONACCRUAL. . . . . . . . . . . . $ 7,144   12,118    7,729   6,501    9,132
LOANS PAST DUE 90 DAYS AND STILL ACCRUING    4,701    2,775      813     701    1,762
OTHER REAL ESTATE OWNED. . . . . . . . . .     992      939    2,251   1,040    1,085
                                           --------  -------  -------  ------  -------
TOTAL NON-PERFORMING ASSETS. . . . . . . . $12,837   15,832   10,793   8,242   11,979
                                           ========  =======  =======  ======  =======
TOTAL NON-PERFORMING LOANS AS A
PERCENTAGE OF NET LOANS. . . . . . . . . .    3.34%    3.78%    2.54%   2.06%    4.02%
                                           ========  =======  =======  ======  =======
</TABLE>

RISK  ELEMENTS

     There  may be additional loans within FLAG's loan portfolio that may become
classified  as  conditions may dictate; however, management was not aware of any
such  loans  that  are  material in amount at December 31, 2000. At December 31,
2000,  management was unaware of any known trends, events, or uncertainties that
will have, or that are reasonably likely to have a material effect on the Bank's
or  FLAG's  liquidity,  capital  resources,  or  operations.

DEPOSITS  AND  BORROWINGS

     Total  deposits decreased approximately $22.2 million during 2000, totaling
$461.4  million at December 31, 2000 versus $483.6 million at December 31, 1999.
Total  deposits  decreased during 2000 from levels of 1999 due primarily to sale
of  certain branches during 2000. The maturities of time deposits of $100,000 or
more  issued  by  the  Bank  at  December 31, 2000, are summarized in TABLE 8.


TABLE  8  -  MATURITIES  OF  TIME  DEPOSITS  OVER  $100,000
(DOLLARS  IN  THOUSANDS)

     THREE  MONTHS  OR  LESS . . . . . . . . . . . .  $  21,484
     OVER  THREE  MONTHS  THROUGH  SIX  MONTHS . . .     12,564
     OVER  SIX  MONTHS  THROUGH  TWELVE  MONTHS. . .     22,988
     OVER  TWELVE  MONTHS. . . . . . . . . . . . . .     14,090
                                                      ---------
                                                      $  71,126
                                                      =========

     At  December  31, 2000, the Bank was a shareholder in the Federal Home Loan
Bank  of  Atlanta  ("FHLBA").  Through this affiliation, advances totaling $32.0
million  were  outstanding  at  rates  competitive  with  time  deposits of like
maturities.  Management  anticipates  continued  utilization  of this short- and
long-term source of funds to minimize interest rate risk and to fund competitive
fixed  rate  loans  to  customers.

ASSET-LIABILITY  MANAGEMENT

     A  primary objective of FLAG's asset and liability management program is to
control  exposure to interest rate risk (the exposure to changes in net interest
income  due  to  changes in market interest rates) so as to enhance its earnings
and  protect  its  net worth against potential loss resulting from interest rate
fluctuations.


                                       12
<PAGE>
     Historically,  the  average term to maturity or repricing (rate changes) of
assets  (primarily  loans  and  investment  securities) has exceeded the average
repricing  period  of  liabilities (primarily deposits and borrowings).  TABLE 9
provides  information  about  the  amounts  of  interest-earning  assets  and
interest-bearing  liabilities  outstanding  as  of  December  31, 2000, that are
expected  to mature, prepay, or reprice in each of the future time periods shown
(i.e.,  the interest rate sensitivity).  As presented in this table, at December
31,  2000,  the liabilities subject to rate changes within one year exceeded its
assets  subject  to  rate  changes  within  one  year. This mismatched condition
subjects  FLAG  to  interest  rate  risk  within the one year period because the
assets,  due  to their generally shorter term to maturity or repricing, are more
sensitive  to  short-term  interest  rate  changes  than  the liabilities. It is
management's  belief that the result of this position would be a decrease in net
interest  income  if  market interest rates rise and an increase in net interest
income  if  market  interest  rates  decline.

     Management  carefully  measures  and monitors interest rate sensitivity and
believes  that  its  operating strategies offer protection against interest rate
risk.  As  required by various regulatory authorities, FLAG's Board of Directors
has  established  an  interest  rate  risk policy, which sets specific limits on
interest  rate risk exposure.  Adherence to this policy is reviewed quarterly by
the  Board  of  Directors'  Asset  Liability  Committee.

     Management  has  maintained  positive  ratios  of  average interest-earning
assets  to  average interest-bearing liabilities. As represented in TABLE 1 this
ratio,  based  on  average  balances for the respective years, was 116% in 2000,
112%  in  1999  and  113%  in  1998.

<TABLE>
<CAPTION>
TABLE  9  -  INTEREST  RATE  SENSITIVITY  ANALYSIS
(DOLLARS  IN  THOUSANDS)                               DECEMBER  31,  2000
                                                   MATURING  OR  REPRICING  IN
                                          ------------------------------------------------
                                                      OVER      OVER
                                                     1 YEAR    3 YEARS
                                          ONE YEAR   THROUGH   THROUGH     OVER
                                           OR LESS   3 YEARS   5 YEARS   5 YEARS    TOTAL
                                          ------------------------------------------------
<S>                                       <C>        <C>       <C>       <C>       <C>
INTEREST-EARNING ASSETS:
 ADJUSTABLE RATE MORTGAGES . . . . . . .  $111,478     7,810       996         -   120,284
 FIXED RATE MORTGAGES. . . . . . . . . .    43,780    34,574    22,858    38,254   139,466
 OTHER LOANS . . . . . . . . . . . . . .   100,080    24,950     7,248     3,337   135,615
 INVESTMENT SECURITIES . . . . . . . . .    23,048     2,593    10,172    70,270   106,083
 INTEREST-BEARING DEPOSITS
   IN OTHER BANKS AND FEDERAL FUNDS SOLD     6,181         -         -         -     6,181
                                          ------------------------------------------------
     TOTAL INTEREST-EARNING ASSETS . . .   284,567    69,927    41,274   111,861   507,629
                                          ------------------------------------------------
INTEREST-BEARING LIABILITIES:
 FIXED MATURITY DEPOSITS . . . . . . . .   214,881    48,114     7,656       238   270,889
 NOW AND MONEY MARKET DEMAND
    ACCOUNTS . . . . . . . . . . . . . .    96,698         -         -         -    96,698
 FED FUNDS PURCHASED . . . . . . . . . .       661         -         -         -       661
 PASSBOOK ACCOUNTS . . . . . . . . . . .    38,816         -         -         -    38,816
OTHER BORROWED FUNDS . . . . . . . . . .         -         -         -     1,500     1,500
FHLB ADVANCES. . . . . . . . . . . . . .     6,525    10,821     5,672     8,955    31,973
                                          ------------------------------------------------
TOTAL INTEREST-BEARING LIABILITIES . . .   357,581    58,935    13,328    10,693   440,537
                                          ------------------------------------------------
INTEREST RATE SENSITIVITY GAP. . . . . .   (73,014)   10,992    27,946   101,168    67,092
CUMULATIVE INTEREST RATE SENSITIVITY GAP  $(73,014)  (62,022)  (34,076)   67,092
CUMULATIVE INTEREST RATE SENSITIVITY GAP
      TO TOTAL ASSETS. . . . . . . . . .   (13.06)%  (11.09)%   (6.10)%    12.00%
</TABLE>

     TABLE  10  represents  the  expected  maturity  of investment securities by
maturity  date  and average yields based on amortized cost at December 31, 2000.
It  should  be noted that the composition and maturity/repricing distribution of
the  investment  portfolio  is  subject to change depending on rate sensitivity,
capital  needs,  and  liquidity  needs.

<TABLE>
<CAPTION>
TABLE  10  -  EXPECTED  MATURITY  OF  INVESTMENT  SECURITIES AVAILABLE-FOR-SALE
(DOLLARS  IN  THOUSANDS)
                                                          AFTER  ONE  BUT     AFTER FIVE  BUT
                                       WITHIN ONE YEAR   WITHIN FIVE YEARS    WITHIN TEN YEARS   AFTER TEN  YEARS    TOTALS
                                     ---------------------------------------------------------------------------------------
                                      AMOUNT     YIELD    AMOUNT     YIELD    AMOUNT    YIELD     AMOUNT     YIELD
                                     ------------------------------------------------------------------------------
<S>                                  <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>

U.S. TREASURY AND AGENCIES. . . . .  $  1,700     5.55%  $ 16,421     6.56%  $  4,446     6.96%  $      -        -   $ 22,567
STATE, COUNTY AND MUNICIPALS. . . .       741     6.54%     2,370     6.41%     3,000     7.49%     4,430     7.70%    10,541
CORPORATE DEBT SECURITIES . . . . .         -        -      2,039     7.00%         -        -          -        -      2,039
EQUITY SECURITIES . . . . . . . . .       253        -        129        -          -        -        511     6.61%       893
MORTGAGE-BACKED SECURITIES. . . . .        21     6.51%     1,427     6.18%    10,083     5.99%    44,886     6.61%    56,417
         TRUST PREFERRED SECURITIES         -        -          -        -          -        -      9,343     9.25%     9,343

                                     ----------------------------------------------------------------------------------------
                                     $  2,715     5.31%  $ 22,386     5.88%  $ 17,529     6.49%  $ 59,170     5.59%  $101,800
                                     ========================================================================================
</TABLE>


                                       13
<PAGE>
LIQUIDITY

     The  objective of liquidity management is to ensure that sufficient funding
is  available, at reasonable cost, to meet the ongoing operational cash needs of
FLAG  and  to  take  advantage  of income producing opportunities as they arise.
While  the  desired  level  of  liquidity  will vary depending upon a variety of
factors,  it  is  the  primary  goal  of  FLAG to maintain a sufficient level of
liquidity  in  all  expected economic environments.  Liquidity is defined as the
ability  of  a  bank  to  convert  assets  into cash or cash equivalents without
significant  loss  and  to  raise  additional  funds  by increasing liabilities.
Liquidity  management involves maintaining FLAG's ability to meet the daily cash
flow  requirements  of  the  Bank's  customers,  both  depositors and borrowers.

     The  primary  objectives  of  asset/liability management are to provide for
adequate  liquidity  in  order to meet the needs of customers and to maintain an
optimal  balance  between  interest-sensitive  assets  and  interest-sensitive
liabilities,  so  that  FLAG  can  also  meet the investment requirements of its
shareholders  as  market  interest rates change. Daily monitoring of the sources
and  use  of  funds  is  necessary  to  maintain  a  position  that  meets  both
requirements.

     The asset portion of the balance sheet provides liquidity primarily through
loan  principal  repayments and the maturities and sales of securities. Mortgage
loans  held  for  sale  totaled $4.1 million at December 31, 2000, and typically
turn  over  every  45  days  as  the  closed  loans are sold to investors in the
secondary  market.  Real estate-construction and commercial loans that mature in
one  year or less amounted to $86.7 million, or 22%, of the total loan portfolio
at  December  31,  2000. Other short-term investments such as federal funds sold
are  additional  sources  of  liquidity.

     The  liability  section  of  the  balance  sheet provides liquidity through
depositors'  interest bearing and non-interest bearing deposit accounts. Federal
funds  purchased,  FHLBA  advances,  other  borrowings and securities sold under
agreements  to  repurchase  are  additional  sources  of liquidity and represent
FLAG's incremental borrowing capacity. These sources of liquidity are short-term
in  nature  and  are  used  as  necessary  to  fund  asset growth and meet other
short-term  liquidity  needs.

     As  disclosed  in  FLAG's consolidated statements of cash flows included in
the consolidated financial statements, net cash provided by operating activities
was  $6.5  million  during 2000. The major sources of cash provided by operating
activities  are  net  income and the changes in other assets and liabilites. Net
cash  provided  by  investing  activities of $24.7 million was funded largely by
proceeds  from  sales  and maturities of investments and cash acquired in branch
acquisitions,  net  of  the  premium paid. Net cash used by financing activities
consisted  primarily  of  a  $24.9  million  net  decrease in deposits and a net
decrease  in  federal  funds  purchased  of  $15.0  million.

     In  the  opinion  of  management, FLAG's liquidity position at December 31,
2000,  is  sufficient  to  meet  its  expected cash flow requirements. Reference
should  be  made  to  the consolidated statements of cash flows appearing in the
consolidated  financial statements for the three-year analysis of the changes in
cash  and  cash  equivalents  resulting  from operating, investing and financing
activities.

CAPITAL  RESOURCES  AND  DIVIDENDS

     Stockholders' equity at December 31, 2000, increased 4.3% from December 31,
1999.  This  increase  resulted  from  net income and the decrease in unrealized
losses  on securities available-for-sale, partially offset by dividends paid and
the  purchase  of  treasury stock.  Dividends of  $2.0 million or $.24 per share
were  declared  in  2000,  compared  to  $1.9 million or $.24 per share in 1999.

     Average  stockholders'  equity  as a percent of total average assets is one
measure  used  to determine capital strength. The ratio of average stockholders'
equity  to  average total assets was 9.51% for 2000 and 8.96% for 1999. TABLE 11
summarizes these and other key ratios for FLAG for each of the last three years.

     The  Federal  Deposit  Insurance  Corporation  Improvement  Act  ("FDICIA")
required  federal banking agencies to take "prompt corrective action"with regard
to  institutions  that  do not meet minimum capital requirements. As a result of
FDICIA,  the  federal  banking agencies introduced an additional capital measure
called  the  "Tier 1 risk-based capital ratio." The Tier 1 ratio is the ratio of
core  capital  to  risk  adjusted  total  assets.  Note  11  to the Consolidated
Financial  Statements  presents  a summary of FDICIA's capital tiers compared to
FLAG's and the Banks' actual capital levels. The Banks exceeded all requirements
of  a  "well-capitalized"  institution  at  December  31,  2000.

<TABLE>
<CAPTION>
TABLE  11  -  EQUITY  RATIOS
                                  YEARS ENDED DECEMBER 31,
                                  ------------------------
                                   2000    1999     1998
                                  ------  -------  ------
<S>                               <C>     <C>      <C>
RETURN ON AVERAGE ASSETS. . . . .   .77%     .20%    .45%
RETURN ON AVERAGE EQUITY. . . . .  7.95%    2.19%   5.13%
DIVIDEND PAYOUT RATIO . . . . . . 45.98%  153.50%  49.49%
AVERAGE EQUITY TO AVERAGE ASSETS.  9.51%    8.96%   8.86%
</TABLE>


                                       14
<PAGE>
PROVISION  FOR  INCOME  TAXES

     The  provision  for  income taxes was $1,409,000 in 2000, versus $78,000 in
1999,  and  $708,000 in 1998. The effective actual tax rates for 2000, 1999, and
1998  (tax  provision  as a percentage of income before taxes) were 25%, 6%, and
20%,  respectively.  These  tax  rates  are lower than the statutory Federal tax
rate  of  34%  primarily  due  to  interest  income on tax exempt securities and
general  business  credits.  See FLAG's consolidated financial statements for an
analysis  of  income  taxes.

IMPACT  OF  INFLATION  AND  CHANGING  PRICES

     The  consolidated financial statements and related financial data presented
herein  have  been  prepared  in  accordance  with generally accepted accounting
principles  which  require  the  measurement of financial position and operating
results  in  terms of historical dollars without considering changes in relative
purchasing  power  over  time  due  to  inflation.

     Unlike  most  industrial  companies,  virtually  all  of  the  assets  and
liabilities  of  a  financial  institution are monetary in nature.  As a result,
interest  rates  generally  have  a  more  significant  impact  on  a  financial
institution's  performance than does the effect of inflation.  The liquidity and
maturity  structures  of  FLAG's  assets  and  liabilities  are  critical to the
maintenance  of  acceptable  performance  levels.

RECENT  ACCOUNTING  PRONOUNCEMENTS

     Effective  April  1,  2000,  FLAG adopted Statement of Financial Accounting
Standards  No.  133 ("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. It requires the fair value recognition
of derivatives as assets or liabilities in the financial statements. 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. Upon
adoption  of  SFAS  No.  133,  FLAG  transferred all held-to maturity investment
securities  to  available-for-sale  under  this  provision  of SFAS No. 133. The
held-for-maturity  investment  securities  had amortized cost of $16,111,000 and
net  unrealized  gains  of  $440,000. The result of the transfer was to increase
stockholders' equity by $273,000, which represented the net of tax effect of the
unrealized  gains  associated  with  the  held-to-maturity investment securities
transferred.


QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

     The  Company's  net  interest  income  and  the fair value of its financial
instruments  (interest-earning  assets  and  interest-bearing  liabilities)  are
influenced by changes in market interest rates. The Company actively manages its
exposure  to  interest  rate  fluctuations  through  policies established by its
Asset/Liability  Management Committee (the "ALCO"). The ALCO meets regularly and
is responsible for approving asset/liability management policies, developing and
implementing  strategies  to  improve balance sheet positioning and net interest
income  and  assessing  the  interest  rate  sensitivity  of  the  Banks.

     The  Company  utilizes  an  interest  rate  simulation model to monitor and
evaluate  the  impact  of changing interest rates on net interest income and the
market  value  of  its investment portfolio.  The ALCO policy limits the maximum
percentage  changes  in  net  interest  income  and investment portfolio equity,
assuming  a  simultaneous,  instantaneous  change  in  interest  rate.  These
percentage  changes  are  as  follows:

        Changes in         Percentage     Percent Change in
      Interest Rates     Change in Net     Market Value of
     (In Basis Points)  Interest Income   Portfolio Equity
     -----------------  ----------------  -----------------
               300                20%               20%
               200                20%               20%
               100                20%               20%

As  of  December  31, 2000, the Company was in compliance with its ALCO policy.


                                       15
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To  the  Board  of  Directors
FLAG  Financial  Corporation
Stockbridge,  Georgia


We  have  audited the accompanying consolidated balance sheets of FLAG Financial
Corporation  and  subsidiaries as of December 31, 2000 and 1999, and the related
statements  of  earnings,  comprehensive income, changes in stockholders' equity
and  cash  flows  for  each  of the three years in the period ended December 31,
2000.  These  financial  statements are the responsibility of FLAG's management.
Our  responsibility is to express an opinion on these financial statements based
on  our  audits.  We  did  not  audit the 1998 financial statements of Thomaston
Federal  Savings  Bank, which was pooled with FLAG Financial Corporation in 1999
as  explained  in  note  2  to  the  consolidated  financial  statements.  Those
statements  are  included  in the accompanying consolidated financial statements
and reflect net earnings of $611,000 for the year ended December 31, 1998. Those
statements  were audited by other auditors whose report has been furnished to us
and  our opinion, insofar as it relates to these amounts, is based solely on the
report  of  the  other  auditors.

We  conducted  our  audits  in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts and disclosures in the financial statements. An audit also includes
assessing  the  accounting  principles  used  and  significant estimates made by
management,  as well as evaluating the overall financial statement presentation.
We  believe  that  our  audits  provide  a  reasonable  basis  for  our opinion.

In  our  opinion,  based  on  our  audits  and the report of other auditors, the
consolidated  financial  statements  referred  to  above  present fairly, in all
material  respects,  the  financial  position  of FLAG Financial Corporation and
subsidiaries  as  of  December  31,  2000  and  1999,  and  the results of their
operations  and their cash flows for each of the three years in the period ended
December  31, 2000, in conformity with generally accepted accounting principles.

                                                  /s/ Porter Keadle Moore, LLP

Atlanta,  Georgia
January  26,  2001


                                       16
<PAGE>
<TABLE>
<CAPTION>
                                      FLAG FINANCIAL CORPORATION
                                     CONSOLIDATED  BALANCE  SHEETS
                                      DECEMBER 31, 2000 AND 1999

                                                ASSETS
                                                ------
                                                                                    2000       1999
                                                                                  ---------  --------
                                                                                     (In Thousands)
<S>                                                                               <C>        <C>
Cash and due from banks, including reserve requirements
  of $2,144,000 and $3,487,000                                                    $ 19,143    26,634
Federal funds sold                                                                   2,730       450
                                                                                  ---------  --------
     Cash and cash equivalents                                                      21,873    27,084
Interest-bearing deposits                                                            3,451     2,792
Investment securities available-for-sale                                           100,722    73,058
Investment securities held-to-maturity (fair value of
  $15,814,000 in 1999)                                                                   -    16,244
Other investments                                                                    5,361     6,345
Mortgage loans held for sale                                                         4,121     3,484
Loans, net                                                                         384,661   419,079
Premises and equipment, net                                                         14,934    18,392
Other assets                                                                        23,914    21,392
                                                                                  ---------  --------
                                                                                  $559,037   587,870
                                                                                  =========  ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Deposits:
  Demand                                                                          $ 55,035    58,513
  Interest-bearing demand                                                           96,698    96,002
  Savings                                                                           38,816    28,378
  Time                                                                             199,763   227,075
  Time, over $100,000                                                               71,126    73,667
                                                                                  ---------  --------
     Total deposits                                                                461,438   483,635

Federal funds purchased and repurchase agreements                                      661    15,672
Advances from Federal Home Loan Bank                                                31,973    27,173
Other borrowings                                                                     1,500         -
Other liabilities                                                                    7,967     8,193
                                                                                  ---------  --------
     Total liabilities                                                             503,539   534,673
                                                                                  ---------  --------

Stockholders' equity:
  Preferred stock (10,000,000 shares authorized; none issued and outstanding)            -         -
  Common stock ($1 par value, 20,000,000 shares authorized, 8,275,405 and
    8,272,815 shares issued in 2000 and 1999, respectively)                          8,275     8,273
  Additional paid-in capital                                                        11,348    11,342
  Retained earnings                                                                 37,069    34,754
  Accumulated other comprehensive income (loss)                                       (266)   (1,120)
                                                                                  ---------  --------
                                                                                    56,426    53,249
  Less: treasury stock, at cost; 152,744 shares in 2000 and 7,500 shares in 1999      (928)      (52)
                                                                                  ---------  --------
     Total stockholders' equity                                                     55,498    53,197
                                                                                  ---------  --------
                                                                                  $559,037   587,870
                                                                                  =========  ========
</TABLE>

See  accompanying  notes  to  consolidated  financial  statements.


                                       17
<PAGE>
<TABLE>
<CAPTION>
                           FLAG FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF EARNINGS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

                                                               2000        1999      1998
                                                            -----------  --------  --------
                                                          (In Thousands Except Per Share Data)
<S>                                                         <C>          <C>       <C>
Interest income:
  Interest and fees on loans                                $   39,815     42,749    43,217
  Interest on investment securities                              6,005      5,765     6,450
  Interest -bearing deposits                                       163        361       459
  Federal funds sold                                               409        278     1,046
                                                            -----------  --------  --------

     Total interest income                                      46,392     49,153    51,172
                                                            -----------  --------  --------

Interest expense:
  Deposits                                                      19,000     19,592    21,939
  Borrowings                                                     2,431      3,071     3,281
                                                            -----------  --------  --------

     Total interest expense                                     21,431     22,663    25,220
                                                            -----------  --------  --------

     Net interest income before provision for loan losses       24,961     26,490    25,952

Provision for loan losses                                        3,597      4,656     3,475
                                                            -----------  --------  --------

     Net interest income after provision for loan losses        21,364     21,834    22,477
                                                            -----------  --------  --------

Other income:
  Fees and service charges                                       4,490      4,633     5,424
  Gain (loss) on sales of investment securities                   (263)     1,148       273
  Gain on sale of trading securities                                 -        286         -
  Unrealized gain on trading securities                              -        255         -
  Gain on sales of loans                                           895      2,086     2,429
  Gain on sale of branch offices                                 5,080          -         -
  Other                                                          1,760      1,664     1,826
                                                            -----------  --------  --------

     Total other income                                         11,962     10,072     9,952
                                                            -----------  --------  --------

Other expenses:
  Salaries and employee benefits                                14,374     15,097    13,437
  Occupancy                                                      4,273      4,134     4,401
  Other operating                                                8,986     11,384    11,044
                                                            -----------  --------  --------

     Total other expenses                                       27,633     30,615    28,882
                                                            -----------  --------  --------

     Earnings before provision for income taxes                  5,693      1,291     3,547

Provision for income taxes                                       1,409         78       708
                                                            -----------  --------  --------

Net earnings                                                $    4,284      1,213     2,839
                                                            ===========  ========  ========

Basic earnings per share                                    $      .52        .15       .35
                                                            ===========  ========  ========

Diluted earnings per share                                  $      .52        .15       .34
                                                            ===========  ========  ========
</TABLE>

See  accompanying  notes  to  consolidated  financial  statements.


                                       18
<PAGE>
<TABLE>
<CAPTION>
                           FLAG FINANCIAL CORPORATION
                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

                                                                     2000    1999   1998
                                                                    ------  ------  -----
                                                                       (In Thousands)
<S>                                                                 <C>     <C>     <C>

Net earnings                                                        $4,284   1,213   2,839
                                                                    ------  -------  ------

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 $177, $1,232 and $1,302, respectively             288  (2,101)  2,125
     Less:  reclassification adjustment for (gains) loss included
       in net earnings, net of tax of $100, $(436) and $(104),
       Respectively                                                    163    (712)   (170)
 Gains on trading securities included in net earnings, net
   of tax of $206                                                        -    (335)      -

 Unrealized gain on cash flow hedges, net of tax of $247               403       -       -
                                                                    ------  -------  ------

Other comprehensive income (loss)                                      854  (3,057)  1,955
                                                                    ------  -------  ------

Comprehensive income (loss)                                         $5,138  (1,844)  4,794
                                                                    ======  =======  ======
</TABLE>

See  accompanying  notes  to  consolidated  financial  statements.


                                       19
<PAGE>
<TABLE>
<CAPTION>
                                         FLAG  FINANCIAL  CORPORATION
                          CONSOLIDATED  STATEMENTS  OF  CHANGES  IN  STOCKHOLDERS'  EQUITY
                               FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

                                                                              Accumulated
                                        Common Stock    Additional               Other
                                     ------------------  Paid-in   Retained  Comprehensive Treasury
                                      Shares    Amount   Capital  Earnings   Income (Loss)  Stock    Total
                                     ---------  -------  -------  ---------  -------------  ------  -------
<S>                                  <C>        <C>      <C>      <C>        <C>            <C>     <C>
                                                          (In Thousands Except Share Data)

Balance, December 31, 1997           8,187,293  $ 8,187   11,138    33,969            (18)      -    53,276
Treasury stock activity of pooled
 entity                                 26,265       26      104         -              -       -       130
Proceeds from issuance of stock            173        -        1         -              -       -         1
Exercise of  stock options               9,500       10       63         -              -       -        73
Change in unrealized gain
   (loss) on securities available-
   for-sale                                  -        -        -         -          1,955       -     1,955
Net earnings                                 -        -        -     2,839              -       -     2,839
Dividends declared                           -        -        -    (1,405)             -       -    (1,405)
                                     ---------  -------  -------  ---------  -------------  ------  --------

Balance, December 31, 1998           8,223,231    8,223   11,306    35,403          1,937       -    56,869

Purchase of treasury stock                   -        -        -         -              -     (52)      (52)

Exercise of stock options of
   pooled subsidiary                    38,175       38        -         -              -       -        38

Exercise of stock options               11,409       12       36         -              -       -        48

Change in unrealized gain
   (loss) on securities available-
   for-sale                                  -        -        -         -         (3,057)      -    (3,057)

Net earnings                                 -        -        -     1,213              -       -     1,213

Dividends declared                           -        -        -    (1,862)             -       -    (1,862)
                                     ---------  -------  -------  ---------  -------------  ------  --------

Balance, December 31, 1999           8,272,815    8,273   11,342    34,754         (1,120)    (52)   53,197

Purchase of treasury stock                   -        -        -         -              -    (876)     (876)

Exercise of stock options                2,590        2        6         -              -       -         8

Change in unrealized gain
   (loss) on securities available-
   for-sale                                  -        -        -         -            854       -       854

Net earnings                                 -        -        -     4,284              -       -     4,284

Dividends paid                               -        -        -    (1,969)             -       -    (1,969)
                                     ---------  -------  -------  ---------  -------------  ------  --------

Balance, December 31, 2000           8,275,405  $ 8,275   11,348    37,069           (266)   (928)   55,498
                                     =========  =======  =======  =========  =============  ======  ========
</TABLE>

See  accompanying  notes  to  consolidated  financial  statements.


                                       20
<PAGE>
<TABLE>
<CAPTION>
                                         FLAG  FINANCIAL  CORPORATION
                                    CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
                          FOR  THE  YEARS  ENDED  DECEMBER  31,  2000,  1999  AND  1998

                                                                                           2000      1999     1998
                                                                                         ---------  -------  -------
                                                                                                (In Thousands)
<S>                                                                                      <C>        <C>      <C>
Cash flows from operating activities:
 Net earnings                                                                            $  4,284    1,213    2,839
 Adjustments to reconcile net earnings to net cash provided by operating activities:
 Depreciation, amortization and accretion                                                   2,615    2,674    2,678
 Provision for loan losses                                                                  3,597    4,656    3,475
 Deferred tax benefit                                                                        (219)    (868)    (350)
 Gain on sale of branches                                                                  (5,080)       -        -
 Loss (gain) on sales of securities                                                           263   (1,148)    (273)
 Unrealized gain on trading securities                                                          -     (255)       -
 Gain on sale of trading securities                                                             -     (286)       -
 Loss (gain) on other real estate                                                             146      382      (26)
 Proceeds from sale of trading securities                                                       -    1,701        -
 Change in:
   Mortgage loans held for sale                                                              (637)   6,736   (5,322)
   Other assets and liabilities                                                             1,554    1,991     (940)
                                                                                         ---------  -------  -------
       Net cash provided by operating activities                                            6,523   16,796    2,081
                                                                                         ---------  -------  -------
Cash flows from investing activities (net of effect of branch sales and acquisitions):
 Net change in  interest-bearing deposits                                                    (660)     786    2,309
 Proceeds from sales and maturities of securities available-for-sale                       23,552   30,643   67,423
 Proceeds from maturities of securities held-to-maturity                                        -    4,814    9,198
 Proceeds from sale of other investments                                                    1,081    6,245    5,764
 Purchases of other investments                                                               (28)  (5,213)  (6,079)
 Purchases of securities available-for-sale                                               (34,572) (28,364) (52,037)
 Purchases of investments held-to-maturity                                                      -   (4,155)  (9,327)
 Net change in loans                                                                       (8,061)      68  (30,648)
 Proceeds from sales of real estate                                                         1,903    1,542    1,377
 Purchases of premises and equipment                                                         (590)  (3,152)  (2,969)
 Purchase of cash surrender value life insurance                                                -        -     (377)
 Cash acquired in branch acquisition, net of premium paid                                  48,790    7,909        -
 Cash paid in branch sale                                                                  (6,676)       -        -
                                                                                         ---------  -------  -------
       Net cash provided by (used in) investing activities                                 24,739   11,123  (15,366)
                                                                                         ---------  -------  -------
Cash flows from financing activities:
 Net change in deposits                                                                   (24,920) (46,536)  36,120
 Change in federal funds purchased and repurchase agreements                              (15,011)  15,320     (170)
 Change in other borrowings                                                                 1,500        -        -
 Proceeds from FHLB advances                                                               21,000    6,500   25,000
 Payments of FHLB advances                                                                (16,200) (27,726) (25,900)
 Proceeds from exercise of stock options                                                        8       48       73
 Purchase of treasury stock                                                                  (876)     (52)       -
 Stock transactions of pooled entities                                                          -       38      130
 Cash dividends paid                                                                       (1,974)  (1,744)  (1,200)
 Other                                                                                          -        -      (19)
                                                                                         ---------  -------  -------
       Net cash (used in ) provided by financing activities                               (36,473) (54,152)  34,034
                                                                                         ---------  -------  -------
Net change in cash and cash equivalents                                                    (5,211) (26,233)  20,749
Cash and cash equivalents at beginning of year                                             27,084   53,317   32,568
                                                                                         ---------  -------  -------
Cash and cash equivalents at end of year                                                 $ 21,873   27,084   53,317
                                                                                         =========  =======  =======
</TABLE>


                                       21
<PAGE>
<TABLE>
<CAPTION>
                               FLAG  FINANCIAL  CORPORATION
                 CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS,  CONTINUED
               FOR  THE  YEARS  ENDED  DECEMBER  31,  2000,  1999  AND  1998

                                                                            2000     1999   1998
                                                                          --------  ------  -----
                                                                               (In Thousands)
<S>                                                                       <C>       <C>     <C>

Supplemental disclosures of cash flow information:
 Cash paid during the year for:
   Interest                                                               $20,382  22,959   23,131
   Income taxes                                                           $ 1,442   1,131    1,731

Supplemental schedule of noncash investing and financing activities:
 Real estate acquired through foreclosure                                 $ 2,928     857    2,416
 Change in unrealized loss on securities available-for-sale, net of tax   $   451  (3,057)   1,955
 Transfer of investment securities from available-for-sale to trading     $     -   1,428        -
 Transfer of investment securities from trading to available-for-sale     $     -     268        -
 Transfer of investment securities from held-to-maturity to
   available-for-sale                                                     $16,142       -        -
 Increase (decrease) in dividends payable                                 $    (5)    118      205
 Deposit liabilities assumed in branch acquisition                        $76,288   8,852        -
 Assets acquired in branch acquisition, other than cash
     and cash equivalents                                                 $22,191      60        -
 Assets disposed of in branch sale                                        $62,212       -        -
</TABLE>

See  accompanying  notes  to  consolidated  financial  statements.


                                       22
<PAGE>
                           FLAG FINANCIAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

     Basis  of  Presentation
     -----------------------
     The  consolidated  financial  statements  include  the  accounts  of  FLAG
     Financial  Corporation  ("FLAG") and its wholly- owned subsidiary FLAG Bank
     (the  "Bank").  All significant intercompany accounts and transactions have
     been  eliminated  in  consolidation.  During  2000,  The  Citizens  Bank
     ("Hogansville")  and  Thomaston  Federal  Savings  Bank  ("Thomaston") were
     merged  into  First  Flag Bank ("First Flag"). Effective December 29, 2000,
     First  Flag  merged  into  Citizens  Bank  ("Citizens") and the name of the
     surviving  institution  was changed to Flag Bank. All of these mergers were
     between  subsidiaries  of  FLAG;  therefore,  the  consolidated  financial
     statements  were  not  affected  by  these  mergers.

     FLAG  is  a bank holding company formed in 1994 whose business is conducted
     by  the  Bank. FLAG is subject to regulation under the Bank Holding Company
     Act  of  1956. The Bank is primarily regulated by the Georgia Department of
     Banking  and  Finance ("DBF") and the Federal Deposit Insurance Corporation
     ("FDIC").  The  Bank  provides  a  full  range  of commercial, mortgage and
     consumer  banking  services  in  West-Central,  Middle  and  South Georgia.

     The  accounting  principles  followed  by  FLAG and its subsidiary, and the
     methods  of  applying  these  principles,  conform  with generally accepted
     accounting  principles  ("GAAP")  and  with  general  practices  within the
     banking  industry.  In  preparing  financial  statements in conformity with
     GAAP,  management is required to make estimates and assumptions that affect
     the  reported  amounts  in  the  financial statements. Actual results could
     differ significantly from those estimates. Material estimates common to the
     banking industry that are particularly susceptible to significant change in
     the  near  term  include,  but are not limited to, the determination of the
     allowance  for  loan  losses,  the  valuation  of  real  estate acquired in
     connection with or in lieu of foreclosure on loans, the valuation allowance
     for  mortgage servicing rights and valuation allowances associated with the
     realization  of  deferred  tax  assets  which  are  based on future taxable
     income.

     Cash  and  Cash  Equivalents
     ----------------------------
     Cash  equivalents  include  amounts  due from banks and federal funds sold.
     Generally,  federal  funds  are  sold  for  one-day  periods.

     Investment  Securities
     ----------------------
     FLAG  classifies  its  securities  in  one  of  three  categories: trading,
     available-for-sale,  or held-to-maturity. Trading securities are securities
     held  for  the  purpose  of generating profits on short-term differences in
     price.  Securities held-to-maturity are those securities for which FLAG has
     the  ability  and  intent  to  hold  to  maturity. All other securities are
     classified  as  available-for-sale.  As of December 31, 2000, all of FLAG's
     investment  securities  were  classified  as  available-for-sale.

     Trading  and  available-for-sale  securities  are  recorded  at fair value.
     Held-to-maturity  securities  are  recorded  at  cost,  adjusted  for  the
     amortization  or  accretion  of  premiums  or discounts. Unrealized holding
     gains  and  losses  on  trading  securities are included in earnings in the
     period  in  which  the  gain  or  loss occurs. Unrealized holding gains and
     losses, net of the related tax effect, on securities available-for-sale are
     excluded  from  earnings  and  are  reported  as  a  separate  component of
     stockholders'  equity  until  realized.  Transfers  of  securities  between
     categories  are  recorded  at  fair  value  at  the  date  of  transfer.

     A decline in the market value of any available-for-sale or held-to-maturity
     investment  below  cost  that  is deemed other than temporary is charged to
     earnings  and  establishes  a  new  cost  basis  for  the  security.

     Premiums  and  discounts  are  amortized  or  accreted over the life of the
     related  security  as an adjustment to the yield. Realized gains and losses
     are  included in earnings and the cost of securities sold are derived using
     the  specific  identification  method.

     Other  Investments
     ------------------
     Other  investments  include  Federal  Home  Loan Bank ("FHLB") stock, other
     equity securities with no readily determinable fair value and an investment
     in  a  limited  partnership.  FLAG  owns  a  43%  interest  in  a  limited
     partnership,  which  invests  in  multi-family  real  estate and passes low
     income  housing credits to the investors. FLAG recognizes these tax credits
     in  the  year  received.  These  investments  are  carried  at cost , which
     approximates  fair  value.


                                       23
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(1)  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED
     Mortgage  Loans  Held  for  Sale
     --------------------------------
     Mortgage loans originated and intended for sale in the secondary market are
     carried at the lower of aggregate cost or market value. The amount by which
     cost  exceeds  market  value  is  accounted  for  as a valuation allowance.
     Changes,  if  any,  in  the  valuation  allowance  are  included  in  the
     determination  of  net  earnings  in the period in which the change occurs.
     FLAG has recorded no valuation allowance related to its mortgage loans held
     for sale as their cost approximates market value. Gains and losses from the
     sale  of  loans  are  determined  using the specific identification method.

     Loans,  Loan  Fees  and  Interest  Income
     -----------------------------------------
     Loans  that  management  has  the  intent  and  ability  to  hold  for  the
     foreseeable  future  or  until  maturity  are reported at their outstanding
     unpaid  principal  balances, net of the allowance for loan losses, deferred
     fees  or costs on originated loans and unamortized premiums or discounts on
     purchased  loans.

     Loan  fees  and certain direct loan origination costs are deferred, and the
     net  fee  or  cost  is  recognized in interest income using the level-yield
     method  over  the  contractual  lives  of the loans, adjusted for estimated
     prepayments  based  on  the  Banks'  historical  prepayment  experience.
     Commitment  fees  and  costs  relating  to  commitments whose likelihood of
     exercise  is  remote  are  recognized  over  the  commitment  period  on  a
     straight-line basis. If the commitment is subsequently exercised during the
     commitment  period, the remaining unamortized commitment fee at the time of
     exercise  is  recognized  over the life of the loan as an adjustment to the
     yield.  Premiums  and  discounts  on purchased loans are amortized over the
     remaining  lives  of  the  loans using the level-yield method. Fees arising
     from  servicing  loans  for  others  are  recognized  as  earned.

     FLAG  considers  a  loan  impaired  when,  based on current information and
     events,  it  is  probable that all amounts due according to the contractual
     terms  of  the  loan  agreement  will  not be collected. Impaired loans are
     measured  based  on  the  present  value  of  expected  future  cash flows,
     discounted  at  the  loan's  effective  interest  rate  or  at  the  loan's
     observable market price, or the fair value of the collateral of the loan if
     the  loan  is  collateral dependent. Interest income from impaired loans is
     recognized  using  a cash basis method of accounting during the time within
     that  period  in  which  the  loans  were  impaired.

     Allowance  for  Loan  Losses
     ----------------------------
     The  allowance  for  loan losses is established through provisions for loan
     losses charged to expense. Loans are charged against the allowance for loan
     losses  when  management  believes  that the collection of the principal is
     unlikely.  The allowance is an amount which, in management's judgment, will
     be  adequate  to  absorb  losses  on  existing  loans  that  may  become
     uncollectible.  The  allowance is established through consideration of such
     factors  as  changes in the nature and volume of the portfolio, adequacy of
     collateral,  delinquency  trends,  loan  concentrations,  specific  problem
     loans,  and  economic  conditions that may affect the borrower's ability to
     pay.

     Management  believes  that the allowance for loan losses is adequate. While
     management  uses available information to recognize losses on loans, future
     additions  to  the  allowance may be necessary based on changes in economic
     conditions.  In  addition, various regulatory agencies, as an integral part
     of their examination process, periodically review FLAG's allowance for loan
     losses.  Such  agencies  may  require  FLAG  to  recognize additions to the
     allowance  based  on their judgments about information available to them at
     the  time  of  their  examination.

     Other  Real  Estate  Owned
     --------------------------
     Real  estate  acquired  through foreclosure is carried at the lower of cost
     (defined  as  fair value at foreclosure) or fair value less estimated costs
     to  dispose.  Fair  value  is  defined as the amount that is expected to be
     received in a current sale between a willing buyer and seller other than in
     a  forced  or  liquidation  sale.  Fair  values at foreclosure are based on
     appraisals.  Losses  arising  from the acquisition of foreclosed properties
     are  charged  against  the allowance for loan losses. Subsequent writedowns
     are  provided by a charge to operations through the allowance for losses on
     other  real  estate  in  the  period  in  which  the  need  arises.


                                       24
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(1)  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED
     Premises  and  Equipment
     ------------------------
     Premises  and  equipment  are stated at cost less accumulated depreciation.
     Major  additions  and  improvements are charged to the asset accounts while
     maintenance  and  repairs that do not improve or extend the useful lives of
     the  assets  are  expensed  currently. When assets are retired or otherwise
     disposed of, the cost and related accumulated depreciation are removed from
     the accounts, and any gain or loss is reflected in earnings for the period.

     Depreciation  expense  is  computed using the straight-line method over the
     following  estimated  useful  lives:

          Buildings  and  improvements     15-40  years
          Furniture  and  equipment         3-10  years

     Mortgage  Servicing  Rights
     ---------------------------
     FLAG's  mortgage banking division accounts for mortgage servicing rights as
     a  separate  asset  regardless of whether the servicing rights are acquired
     through purchase or origination. FLAG's mortgage servicing rights represent
     the  unamortized  cost  of  purchased  and originated contractual rights to
     service  mortgages for others in exchange for a servicing fee and ancillary
     loan  administration  income.  Mortgage servicing rights are amortized over
     the  period of estimated net servicing income and are periodically adjusted
     for  actual  and  anticipated prepayments of the underlying mortgage loans.
     Impairment  analysis is performed quarterly after stratifying the rights by
     interest  rate.  Impairment,  defined as the excess of the asset's carrying
     value  over  its  current  fair  value,  is  recognized through a valuation
     allowance.  At  December  31,  2000  and 1999, no valuation allowances were
     required  for  FLAG's  mortgage  servicing  rights.

     FLAG  did  not  recognize  any  servicing  asset during 2000 and recognized
     approximately  $460,000  and  $966,000  in servicing assets during 1999 and
     1998,  respectively,  and  recognized  amortization  expense  relating  to
     servicing  assets  of  approximately  $71,000, $346,000 and $312,000 during
     2000,  1999 and 1998, respectively. The risk characteristics that FLAG uses
     to  stratify  recognized  servicing  assets  for  purposes  of  measuring
     impairment  include  the  interest  rate  and  term of the underlying loans
     serviced.

     Core  Deposit  Intangible
     -------------------------
     Purchased  core  deposit  intangibles and the associated expenses have been
     capitalized and are being amortized using the straight-line method over the
     15 year estimated average life of the deposit base acquired and is included
     as  a  component  of  other  assets.

     Income  Taxes
     -------------
     Deferred  tax  assets  and  liabilities  are  recorded  for  the future tax
     consequences  attributable  to  differences between the financial statement
     carrying  amounts  of  existing assets and liabilities and their respective
     tax  bases.  Future tax benefits, such as net operating loss carryforwards,
     are  recognized  to  the  extent  that realization of such benefits is more
     likely  than  not.  Deferred  tax assets and liabilities are measured using
     enacted tax rates expected to apply to taxable income in the years in which
     the  assets  and  liabilities  are expected to be recovered or settled. The
     effect  on  deferred tax assets and liabilities of a change in tax rates is
     recognized  in income tax expense in the period that includes the enactment
     date.

     In  the  event  the  future  tax  consequences  of  differences between the
     financial  reporting  bases  and  the  tax  bases  of  FLAG's  assets  and
     liabilities  results  in  deferred  tax  assets,  an  evaluation  of  the
     probability  of being able to realize the future benefits indicated by such
     assets  is  required.  A  valuation  allowance  is provided when it is more
     likely than not that some portion or all of the deferred tax asset will not
     be  realized.  In  assessing  the realizability of the deferred tax assets,
     management  considers  the scheduled reversals of deferred tax liabilities,
     projected  future  taxable  income,  and  tax  planning  strategies.

     A  deferred  tax  liability is not recognized for portions of the allowance
     for  loan  losses  for  income  tax  purposes  in  excess  of the financial
     statement  balance,  as  described in note 9. Such a deferred tax liability
     will  only  be  recognized  when  it  becomes apparent that those temporary
     differences  will  reverse  in  the  foreseeable  future.


                                       25
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(1)  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED
     Net  Earnings  Per  Common  Share
     ---------------------------------
     FLAG  is  required to report earnings per common share with and without the
     dilutive  effects of potential common stock issuances from instruments such
     as  options,  convertible  securities  and  warrants  on  the  face  of the
     statements  of  earnings.  Basic earnings per common share are based on the
     weighted  average  number  of  common  shares outstanding during the period
     while  the effects of potential common shares outstanding during the period
     are  included  in  diluted  earnings  per  share.  Additionally,  FLAG must
     reconcile  the  amounts used in the computation of both "basic earnings per
     share"  and  "diluted  earnings per share". Antidilutive stock options have
     not  been  included  in  the  diluted  earnings  per  share  calculations.
     Antidilutive  stock  options totaled 896,198 and 811,534 as of December 31,
     2000  and  1999.  Earnings  per  common  share  amounts for the years ended
     December 31, 2000, 1999 and 1998 are as follows (in thousands, except share
     and  per  share  amounts):

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 2000
                                                      Net Earnings   Common Share    Per Share
                                                      (Numerator)    (Denominator)    Amount
                                                     --------------  -------------  -----------
<S>                                                  <C>             <C>            <C>
     Basic earnings per share                        $        4,284      8,210,485  $      .52
     Effect of dilutive securities - stock options                -         15,521           -
                                                     --------------  -------------  -----------
     Diluted earnings per share                      $        4,284      8,226,006  $      .52
                                                     ==============  =============  ===========

FOR THE YEAR ENDED DECEMBER 31, 1999
                                                      Net Earnings   Common Share    Per Share
                                                      (Numerator)    (Denominator)    Amount
                                                     --------------  -------------  -----------
     Basic earnings per share                        $      1,213        8,257,607  $      .15
     Effect of dilutive securities - stock options                -              -           -
                                                     --------------  -------------  -----------
     Diluted earnings per share                      $      1,213        8,257,607  $      .15
                                                     ==============  =============  ===========

FOR THE YEAR ENDED DECEMBER 31, 1998
                                                      Net Earnings   Common Share    Per Share
                                                      (Numerator)    (Denominator)    Amount
                                                     --------------  -------------  -----------
     Basic earnings per share                        $      2,839        8,217,854  $      .35
     Effect of dilutive securities - stock options               -          91,633        (.01)
                                                     --------------  -------------  -----------
     Diluted earnings per share                      $      2,839        8,309,487  $      .34
                                                     ==============  =============  ===========
</TABLE>

     Derivative  Instruments  and  Hedging  Activities
     -------------------------------------------------
     Effective  April  1,  2000,  FLAG adopted Statement of Financial Accounting
     Standards  No.  133,  "Accounting  for  Derivative  Instruments and Hedging
     Activities"  ("SFAS  No.  133"), which 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. The accounting for the changes in the fair value of a
     derivative  depends  on  the  intended  use of the derivative instrument at
     inception.  The  change  in  fair  value  of instruments used as fair value
     hedges  is  accounted  for  in  the  income of the period simultaneous with
     accounting  for  the fair value change of the item being hedged. The change
     in fair value of the effective portion of cash flow hedges is accounted for
     in comprehensive income rather than income, and the change in fair value of
     foreign currency hedges is accounted for in comprehensive income as part of
     the  translation  adjustment.  The  change  in  fair  value  of  derivative
     instruments that are not intended as a hedge is accounted for in the income
     of  the period of the change. 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. In 2000, FLAG transferred
     all held-to-maturity investment securities to available-for-sale under this
     provision  of  SFAS No. 133. The held-to-maturity investment securities had
     amortized  cost  of  $16,111,000  and net unrealized gains of $440,000. The
     result  of  the  transfer was to increase stockholders' equity by $273,000,
     which  represented the net of tax effect of the unrealized gains associated
     with  the  held-to-maturity  investment  securities  transferred.

     Reclassifications
     -----------------
     Certain  reclassifications  have  been  made to the 1999 and 1998 financial
     statements  to  conform  with  classifications  for 2000.


                                       26
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(2)  BUSINESS  COMBINATIONS
     Effective  August  31,  1999,  FLAG acquired, for approximately 1.2 million
     shares  of  its  common stock, all of the outstanding stock of Thomaston, a
     $55  million  thrift located in Thomaston, Georgia. Effective September 30,
     1999,  FLAG acquired, for approximately 575,000 shares of its common stock,
     all  of  the  outstanding  stock of First Hogansville Bankshares, Inc., the
     holding  company  of  the  $31 million Hogansville, located in Hogansville,
     Georgia. These acquisitions were accounted for as poolings of interests and
     accordingly the consolidated financial statements for all periods presented
     have  been  restated  to  include  the  financial  position  and results of
     operations  as  if  the  combination  had  occurred on January 1, 1998, the
     earliest  period  presented.

     The following is a reconciliation of the amounts of net interest income and
     net  earnings previously reported with the restated amounts (in thousands):

                                                        1998
                                                        -----
                 Net interest income:
                   FLAG                               $ 22,823
                   Thomaston                             1,629
                   Hogansville                           1,500
                                                        ------
                    As restated                         25,952
                                                        ======

                 Net earnings:
                   FLAG                                  1,960
                   Thomaston                               611
                   Hogansville                             268
                                                        ------
                    As restated                        $ 2,839
                                                        ======

     During  2000,  FLAG  acquired  certain loans, deposits and property of bank
     branches  in  Montezuma, Oglethorpe, Cusseta and Buena Vista, Georgia for a
     net  purchase price of approximately $5,462,000. During 1999, FLAG acquired
     a bank branch in Blackshear, Georgia, including certain loans, deposits and
     property  for  a  net  purchase  price  of  approximately  $882,000.

     During  2000,  FLAG  sold  the  loans,  deposits,  and property of its bank
     branches  in Cobbtown, Metter and Statesboro, Georgia and recognized a gain
     on  sale  of  approximately $2,011,000. FLAG also sold the loans, deposits,
     and  property  of its bank branches in Blackshear, Homerville and Waycross,
     Georgia  and  recognized  a  gain  on  sale  of  approximately  $3,069,000.

(3)  INVESTMENT  SECURITIES
     Investment  securities  at  December  31,  2000  and 1999 are summarized as
     follows  (in  thousands):

<TABLE>
<CAPTION>
                                                              December 31, 2000
                                               -------------------------------------------
                                                 Gross       Gross     Estimated
                                               Amortized   Unrealized  Unrealized   Fair
     INVESTMENT SECURITIES AVAILABLE-FOR-SALE    Cost        Gains       Losses     Value
                                               ----------  ----------  ----------  -------
<S>                                            <C>         <C>         <C>         <C>
     U.S. Treasuries and agencies              $   22,567         106         119   22,554
     State, county and municipals                  10,541         167          56   10,652
     Equity securities                                893          41         445      489
     Mortgage-backed securities                    56,417         163         378   56,202
     Corporate debt securities                      2,039           -          25    2,014
     Trust preferred securities                     9,343           -         532    8,811
                                               ----------  ----------  ----------  -------

                                               $  101,800         477       1,555  100,722
                                               ==========  ==========  ==========  =======
</TABLE>


                                       27
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(3)     INVESTMENT  SECURITIES,  CONTINUED

<TABLE>
<CAPTION>
                                                                        December 31, 1999
                                              ---------------------------------------------------------------
                                                                    Gross           Gross         Estimated
                                                  Amortized       Unrealized      Unrealized         Fair
     INVESTMENT SECURITIES AVAILABLE-FOR-SALE       Cost            Gains           Losses          Value
                                               ---------------  --------------  --------------  --------------
<S>                                            <C>              <C>             <C>             <C>
     U.S. Treasuries and agencies              $        19,447               2             572          18,877
     State, county and municipals                        8,947              43             258           8,732
     Equity securities                                     893             658             173           1,378
     Mortgage-backed securities                         22,915              23             562          22,376
     Collateralized mortgage obligations                14,607              19             362          14,264
     Trust preferred securities                          8,050               -             619           7,431
                                               ---------------  --------------  --------------  --------------

                                               $        74,859             745           2,546          73,058
                                               ===============  ==============  ==============  ==============

                                                                        December 31, 1999
                                               ---------------------------------------------------------------
                                                                    Gross           Gross         Estimated
                                                  Amortized       Unrealized      Unrealized         Fair
     INVESTMENT SECURITIES HELD-TO-MATURITY          Cost            Gains           Losses          Value
                                               ---------------  --------------  --------------  --------------

     U.S. Treasuries and agencies              $        10,178               -             366           9,812
     State, county and municipals                        2,997              34              15           3,016
     Mortgage-backed securities                          2,318               1              66           2,253
     Collateralized mortgage obligations                   751               1              19             733
                                               ---------------  --------------  --------------  --------------

                                               $        16,244              36             466          15,814
                                               ===============  ==============  ==============  ==============
</TABLE>

     The  amortized  cost  and  estimated  fair  value  of investment securities
     available-for-sale at December 31, 2000, by contractual maturity, are shown
     below  (in  thousands).  Expected  maturities  may  differ from contractual
     maturities  because  borrowers  may  have  the  right  to  call  or  prepay
     obligations  with  or  without  call  or  prepayment  penalties.

<TABLE>
<CAPTION>
                                                  Amortized   Estimated
                                                     Cost     Fair Value
                                                  ----------  ----------
<S>                                               <C>         <C>
     U.S. Treasuries and agencies, state, county
      and municipals and corporate debt:
        Within 1 year                             $    2,441       2,436
        1 to 5 years                                  20,830      20,788
        5 to 10 years                                  7,446       7,557
        More than 10 years                             4,430       4,439
        Equity securities                                893         489
        Mortgage-backed securities                    56,417      56,202
        Trust preferred securities                     9,343       8,811
                                                  ----------  ----------

                                                  $  101,800     100,722
                                                  ==========  ==========
</TABLE>

     There  were  no  sales of securities held-to-maturity during 2000, 1999 and
     1998.  Proceeds  from  sales  of securities available-for-sale during 2000,
     1999  and  1998  totaled  approximately  $14,706,000,  $11,720,000  and
     $14,843,000,  respectively.  Gross  gains  of  approximately $1,213,000 and
     $326,000  were  realized on those sales during 1999 and 1998, respectively.
     Gross  losses  of approximately $263,000, $65,000 and $52,000 were realized
     on  those  sales  for  the  years  ended  December 31, 2000, 1999 and 1998,
     respectively.  During  1999, FLAG recognized gross gains of $255,000 and no
     losses in earnings from transfers of securities from the available-for-sale
     category  into  the  trading  category.


                                       28
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(3)  INVESTMENT  SECURITIES,  CONTINUED
     Securities  and  interest-bearing  deposits  with  a  carrying  value  of
     approximately  $40,791,000  and  $46,211,000 at December 31, 2000 and 1999,
     respectively,  were  pledged  to secure advances from FHLB, U.S. Government
     and  other  public  deposits.

(4)  LOANS
     Major classifications of loans at December 31, 2000 and 1999 are summarized
     as  follows  (in  thousands):

<TABLE>
<CAPTION>
                                               2000     1999
                                             --------  -------
<S>                                          <C>       <C>
     Commercial, financial and agricultural  $ 92,757  117,728
     Real estate - construction                37,501   43,602
     Real estate - mortgage                   228,508  218,920
     Installment loans to individuals          28,767   40,620
     Lease financings                           3,711    5,226
                                             --------  -------

        Gross loans                           391,244  426,096
     Less allowance for loan losses             6,583    7,017
                                             --------  -------

                                             $384,661  419,079
                                             ========  =======
</TABLE>

     FLAG  concentrates  its  lending activities in the origination of permanent
     residential  mortgage loans, commercial mortgage loans, commercial business
     loans,  and  consumer installment loans. The majority of FLAG's real estate
     loans  are  secured  by  real  property located in West-Central, Middle and
     South  Georgia.

     FLAG  has  recognized  impaired  loans  of  approximately  $8,954,000  and
     $2,883,261  at  December  31,  2000  and  1999,  respectively, with a total
     allowance  for  loan  losses  related  to  these  loans  of  approximately
     $1,343,000  and $1,090,000, respectively. Interest income on impaired loans
     of  approximately  $839,000  and  $111,201 was recognized for cash payments
     received  in  2000  and  1999,  respectively.

     Activity  in the allowance for loan losses is summarized as follows for the
     years  ended  December  31,  2000,  1999  and  1998  (in  thousands):

<TABLE>
<CAPTION>
                                                      2000     1999    1998
                                                    --------  ------  ------
<S>                                                 <C>       <C>     <C>
     Balance at beginning of year                   $ 7,017   6,194    5,637
     Provisions charged to operations                 3,597   4,656    3,475
     Loans charged off                               (4,454) (4,090)  (3,262)
     Recoveries on loans previously charged off       1,252     257      344
     Allowance related to loans sold and purchased     (829)      -        -
                                                    --------  ------  -------
     Balance at end of year                         $ 6,583   7,017    6,194
                                                    ========  ======  =======
</TABLE>

     Mortgage  loans  serviced  for  others are not included in the accompanying
     consolidated financial statements. Unpaid principal balances of these loans
     at  December  31,  2000  and 1999 approximate $40,820,000 and $202,914,000,
     respectively.  Custodial escrow balances maintained in connection with loan
     servicing,  and included in demand deposits, were approximately $98,000 and
     $390,000  at  December  31,  2000  and  1999,  respectively.

     Mortgage  loans  secured  by  1-4  family residences totaling approximately
     $43,994,000 and $46,541,000 were pledged as collateral for outstanding FHLB
     advances  as  of  December  31,  2000  and  1999,  respectively.


                                       29
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(5)  PREMISES  AND  EQUIPMENT
     Premises  and  equipment  at  December  31, 2000 and 1999 are summarized as
     follows  (in  thousands):

<TABLE>
<CAPTION>
                                                      2000    1999
                                                     -------  ------
<S>                                                  <C>      <C>
           Land and land improvements                $ 1,814   2,145
           Buildings and improvements                 10,993  13,429
           Furniture and equipment                    17,480  18,256
                                                     -------  ------

                                                      30,287  33,830
           Less accumulated depreciation              15,353  15,438
                                                     -------  ------

                                                     $14,934  18,392
                                                     =======  ======
</TABLE>

     Depreciation expense approximated $3,573,000, $2,589,000 and $2,342,000 for
     the  years  ended  December  31,  2000,  1999  and  1998,  respectively.

(6)  TIME  DEPOSITS
     At  December  31,  2000,  contractual  maturities  of  time  deposits  are
     summarized  as  follows  (in  thousands):

       YEAR ENDING DECEMBER 31,
      -------------------------

                2001                      $ 214,881
                2002                         32,699
                2003                         15,415
                2004                          4,852
                2005                          2,804
                Thereafter                      238
                                           --------

                                          $ 270,889
                                           ========

(7)  FHLB  ADVANCES
     FHLB  advances  are  collateralized  by  FHLB  stock,  certain  investment
     securities  and first mortgage loans. Advances from the FHLB outstanding at
     December  31,  2000  mature  and  bear  fixed interest rates as follows (in
     thousands):

         Year             Amount      Interest Rate
         ----         --------------  --------------
         2001         $       6,525    5.97% - 8.13%
         2002                 1,470    5.97% - 8.00%
         2003                 9,351    5.97% - 7.55%
         2004                 1,351    5.97% - 7.55%
         2005                 4,321    5.97% - 7.55%
         Thereafter           8,955    5.97% - 7.55%
                      --------------  --------------

                      $       31,973   5.97% - 8.13%
                      ==============  ==============

(8)  OTHER  BORROWINGS
     Other  borrowings  consist  of  a  line  of credit with a bank with a total
     commitment  amount of $15,000,000 of which $1,500,000 was outstanding as of
     December 31, 2000. The line of credit bears interest at .5% below the prime
     rate and is secured by common stock of the Bank. The line of credit expires
     on  October 1, 2008. At December 31, 2000, the interest rate on the line of
     credit  was  9.0%.  The  terms  of  the  line  of  credit  include  certain
     restrictive  covenants regarding the performance of FLAG and the payment of
     dividends.  Management  believes  that  they  are  in  compliance  with all
     required  covenants.


                                       30
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(9)  INCOME  TAXES
     The  following  is  an  analysis  of  the  components of income tax expense
     (benefit)  for  the  years  ended  December  31,  2000,  1999  and 1998 (in
     thousands):

                                                           2000    1999    1998
                                                          -------  -----  ------

     Current                                              $1,628    946   1,058
     Deferred                                               (219)  (817)   (218)
     Change in valuation allowance                             -    (51)   (132)
                                                          -------  -----  ------

                                                          $1,409     78     708
                                                          =======  =====  ======

     The  differences  between  income  tax  expense  and the amount computed by
     applying the statutory federal income tax rate to earnings before taxes for
     the  years  ended  December  31,  2000,  1999  and  1998 are as follows (in
     thousands):

                                                            2000   1999   1998
                                                          -------  -----  ------

     Pretax income at statutory rate                      $1,936    439   1,206
     Add (deduct):
        Tax-exempt interest income                          (366)  (352)   (347)
        State income taxes, net of federal effect            228     52     142
        Increase in cash surrender value of life insurance   (79)   (56)    (64)
        Nondeductible merger expenses                          -    252     109
        General business credits                            (120)  (121)   (113)
        Other                                               (190)   (85)    (93)
        Change in valuation allowance                          -    (51)   (132)
                                                          -------  -----  ------

                                                          $1,409     78     708
                                                          =======  =====  ======

     The following summarizes the net deferred tax asset. The deferred tax asset
     is  included  as  a component of other assets at December 31, 2000 and 1999
     (in  thousands).

                                                                   2000    1999
                                                                 -------  ------

     Deferred tax assets:
      Allowance for loan losses                                  $2,161   2,119
      Net operating loss carryforwards and credits                  172     358
      Nondeductible interest on non-accrual loans                   275      45
      Nondeductible expenses                                        256     232
      Unrealized losses on securities available-for-sale            410   1,048
      Other                                                          53     214
                                                                 -------  ------
          Total gross deferred tax assets                         3,327   4,016
                                                                 -------  ------
     Deferred tax liabilities:
      Premises and equipment                                        467     701
      Unrealized gain on cash flow hedges                           247       -
      Other                                                          26      62
                                                                 -------  ------
          Total gross deferred tax liabilities                      740     763
                                                                 -------  ------
          Net deferred tax asset                                 $2,587   3,253
                                                                ========  ======


                                       31
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(9)  INCOME  TAXES,  CONTINUED
     The  Internal  Revenue  Code  ("IRC")  was  amended during 1996 and the IRC
     section  593  reserve  method  for  loan losses for thrift institutions was
     repealed.  Effective  January 1, 1996, First Flag and Thomaston now compute
     their tax bad debt reserves under the rules of IRC section 585, which apply
     to  commercial  banks.  In  years  prior  to 1996, First Flag and Thomaston
     obtained  tax  bad  debt deductions approximating $2.9 million in excess of
     their  financial statement allowance for loan losses for which no provision
     for federal income tax was made. These amounts were then subject to federal
     income tax in future years pursuant to the prior IRC section 593 provisions
     if  used  for  purposes  other  than  to  absorb bad debt losses. Effective
     January  1,  1996,  approximately  $2.9  million  of  the excess reserve is
     subject to recapture only if First Flag and Thomaston cease to qualify as a
     bank  pursuant  to  the  provisions  of  IRC  section  585.

(10) EMPLOYEE  AND  DIRECTOR  BENEFIT  PLANS
     Defined  Contribution  Plans
     ----------------------------
     FLAG  sponsors  the  FLAG  Financial  Profit  Sharing  Thrift  Plan that is
     qualified  pursuant  to  IRC  section  401(k).  The  plan  allows  eligible
     employees  to  defer a portion of their income by making contributions into
     the plan on a pretax basis. The plan provides a matching contribution based
     on  a  percentage  of the amount contributed by the employee. The plan also
     provides  that the Board of Directors may make discretionary profit-sharing
     contributions  up  to  15%  of  eligible compensation to the plan. The plan
     allows  participants  to  direct  up to 75% of their account balance and/or
     contributions  to  be  invested in the common stock of FLAG. The trustee of
     the plan is required to purchase the FLAG stock at market value and may not
     acquire  more  than  25%  of  the issued and outstanding shares. During the
     years  ended  December  31,  2000,  1999  and 1998, the Company contributed
     approximately $391,000,  $323,000  and $105,000, respectively, to this plan
     under  its  matching  provisions.

     The  companies  acquired  in  1998  sponsored  certain defined contribution
     employee  benefit  plans  that have been terminated or merged into existing
     plans of FLAG. Under these plans, the acquired companies recognized expense
     of  approximately  $58,000  in  1998.  This  amount  is  included  in  the
     accompanying  statements  of  earnings.

     The  companies  acquired  in  1999  sponsored  certain defined contribution
     employee  benefit  plans  that have been terminated or merged into existing
     plans of FLAG. Under these plans, the acquired companies recognized expense
     of approximately $12,000 and $23,000 in 1999 and 1998, respectively. One of
     the  companies  acquired in 1999 sponsored a deferred compensation plan for
     its  directors.  The acquired company has recognized expense of $70,000 and
     $54,000  in  1999  and  1998  related  to  this  plan.

     Directors'  Retirement  Plan
     ----------------------------
     The  Bank  sponsors  a  defined contribution postretirement benefit plan to
     provide  retirement  benefits to certain of their Board of Directors and to
     provide death benefits for their designated beneficiaries. Under this plan,
     the Bank purchased split-dollar whole life insurance contracts on the lives
     of  each  Director.  The increase in cash surrender value of the contracts,
     less  the  Bank's cost of funds, constitutes their contribution to the plan
     each  year.  In  the event the insurance contracts fail to produce positive
     returns,  the Bank has no obligation to contribute to the plan. At December
     31,  2000 and 1999, the cash surrender value of the insurance contracts was
     approximately  $4,187,000  and  $4,134,000.  Expenses incurred for benefits
     were  approximately $19,000, $50,000 and $7,000 during 2000, 1999 and 1998,
     respectively.

     Defined  Benefit  Plans
     -----------------------
     Prior  to  2000,  Hogansville  sponsored  a noncontributory defined benefit
     pension plan covering substantially all of its employees who have completed
     one  year  of service. This pension plan was frozen effective September 30,
     1999  and  terminated  effective October 30, 1999 at which time all accrued
     benefits  became  fully  vested.  During  2000,  FLAG  fully  satisfied its
     liability  under  this  plan.

     The  following  table  sets  forth  this  plan's  funded status and amounts
     recognized  in  the  balance  sheets  at December 31, 1999. Plan assets are
     stated  at  fair value and consist of cash, certificates of deposit, equity
     and  government  securities.


                                       32
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(10) EMPLOYEE  AND  DIRECTOR  BENEFIT  PLANS,  CONTINUED
     Defined  Benefit  Plans,  continued
     -----------------------
     Actuarial  present  value  of  benefit  obligations:

<TABLE>
<CAPTION>
<S>                                                                           <C>
     Vested                                                                   $490,941
     Nonvested                                                                  11,705
                                                                              ---------

          Total accumulated benefit obligations                               $502,646
                                                                              =========

     Projected benefit obligations for services rendered to date              $584,905
     Plan assets at fair value                                                 773,833
                                                                              ---------

          Assets in excess of projected benefit obligation                     188,928

     Unamortized transition gain existing at date of adoption of SFAS No. 87   (35,584)
     Unamortized net gain from past experience different from that assumed
       and effects of changes in assumptions                                  (190,866)
                                                                              ---------

          Accrued pension cost                                                $(37,522)
                                                                              =========
</TABLE>

     The  components  of  net pension cost for the years ended December 31, 1999
     and  1998  are  as  follows:

<TABLE>
<CAPTION>
                                                       1999      1998
                                                     ---------  --------
<S>                                                  <C>        <C>
     Service cost for benefits earned                $ 27,389    22,920
     Interest cost on projected benefit obligations    37,153    33,197
     Actual return on plan assets                     (59,414)  (96,437)
     Net amortization and deferral                      1,073    45,215
                                                     ---------  --------
     Net pension cost                                $  6,201     4,895
                                                     =========  ========
</TABLE>

     The  following  assumptions  were used in determining the actuarial present
     value  of  the projected benefit obligations at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                     1999   1998
                                                     -----  -----
<S>                                                  <C>    <C>
     Discount rate                                   7.75%  7.00%
     Rate of increase in future compensation levels  5.00%  5.00%
     Expected long-term rate of return on assets     8.25%  8.25%
</TABLE>

     Stock  Option  Plan
     -------------------
     FLAG  sponsors  an  employee  stock  incentive  plan  and  a director stock
     incentive plan. The plans were adopted for the benefit of directors and key
     officers  and  employees  in  order  that they may purchase FLAG stock at a
     price  equal  to  the  fair  market  value on the date of grant. A total of
     914,000  shares were reserved for possible issuance under the employee plan
     and  166,938  shares  were  reserved  under  the director plan. The options
     generally  vest  over  a  four-year  period  and  expire  after  ten years.

     Thomaston  previously  sponsored  a stock option plan for its directors and
     key  officers.  Prior  to its merger with FLAG, Thomaston had approximately
     27,595  options  outstanding to purchase Thomaston common stock. This stock
     option  plan  was  terminated  upon  Thomaston's merger with FLAG, and each
     option holder was issued options to purchase FLAG common stock in an amount
     equal  to  their  options  previously outstanding under the Thomaston stock
     option  plan  multiplied  by  the  conversion  factor  of  1.7275.


                                       33
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(10) EMPLOYEE  AND  DIRECTOR  BENEFIT  PLANS,  CONTINUED
     Stock  Option  Plan,  continued
     -------------------
     SFAS  No.  123,  "Accounting for Stock-Based Compensation," encourages, but
     does not require, entities to compute the fair value of options at the date
     of grant and to recognize such costs as compensation expense immediately if
     there  is  no  vesting  period  or  ratably  over the vesting period of the
     options.  FLAG  has  chosen not to adopt the cost recognition principles of
     this  statement.  No compensation expense has been recognized in 2000, 1999
     or  1998  related  to  the  stock  option plans. Had compensation cost been
     determined  based  upon  the  fair  value of the options at the grant dates
     consistent  with  the  method of the statement, FLAG's net earnings and net
     earnings  per  share  would  have  been  reduced  to  the pro forma amounts
     indicated  below.

<TABLE>
<CAPTION>
                                                2000   1999   1998
                                               ------  -----  ----
<S>                               <C>          <C>     <C>    <C>
     Net earnings (in thousands)  As reported  $4,284  1,213  2,839
                                  Pro forma     3,411    545  2,395
     Basic earnings per share     As reported     .52    .15    .35
                                  Pro forma       .42    .07    .29
     Diluted earnings per share   As reported     .52    .15    .34
                                  Pro forma       .41    .07    .29
</TABLE>

     The  fair  value of each option is estimated on the date of grant using the
     Black-Scholes  options-pricing  model  with  the following weighted average
     assumptions:  dividend yield of 3%; volatility ranging from .9424 to .9803;
     risk free interest rate of 6% and an expected life of 5 years. The weighted
     average grant-date fair value of options granted in 2000, 1999 and 1998 was
     $5.21,  $5.38  and  $6.12,  respectively.

     A  summary  of  activity  in  these  stock option plans is presented below:

<TABLE>
<CAPTION>
                                             2000                         1999                  1998
                                 ----------------------------  -------------------------  -------------------
                                                   Weighted                    Weighted             Weighted
                                                    Average                    Average              Average
                                                 Option Price               Option Price          Option Price
                                    Shares        Per Share       Shares      Per Share   Shares   Per Share
                                 -------------  -------------  -------------  ----------  --------  ----------
<S>                              <C>            <C>            <C>            <C>         <C>       <C>
Outstanding , beginning of year       813,409   $       10.34       539,024   $    11.87  109,125   $     7.01
Granted during the year               257,751            6.62       274,749         8.53  445,399        12.99
Granted for merger with
     Thomaston                              -               -        47,670         3.47        -            -
Cancelled during the year            (118,621)           9.73       (36,625)       12.24   (6,000)       13.33
Exercised during the year              (2,590)           3.47       (11,409)        4.13   (9,500)        7.68
                                 -------------  -------------  -------------  ----------  --------  ----------

Outstanding, end of year              949,949   $        9.48       813,409   $    10.34  539,024   $    11.87
                                 =============  =============  =============  ==========  ========  ==========
</TABLE>

     A  summary  of  options  outstanding  as  of December 31, 2000 is presented
     below:

<TABLE>
<CAPTION>
                                                                  Weighted                          Weighted
                                            Range of         Average                  Options       Average
                               Options       Price per     Option Price     Years     Currently   Option Price
                            Outstanding       Share         Per Share    Remaining  Exercisable    Per Share
                            -----------  ---------------  -------------  ---------  -----------  -------------
<S>                         <C>          <C>              <C>            <C>        <C>          <C>
                                 53,751  $   3.47 - 5.25  $        3.98          8       34,251  $        3.47
                                504,938      6.00 - 9.19           7.40          8      121,453           7.30
                                391,260    10.00 - 14.00          12.91          7      196,130          12.98
                            -----------  ---------------  -------------  ---------  -----------  -------------

                                949,949  $  3.47 - 14.00  $        9.48          8      351,834  $       10.09
                            ===========  ===============  =============  =========  ===========  =============
</TABLE>


                                       34
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(11) STOCKHOLDERS'  EQUITY
     Shares  of  preferred  stock may be issued from time to time in one or more
     series  as  established by resolution of the Board of Directors of FLAG, up
     to a maximum of 10,000,000 shares. Each resolution shall include the number
     of shares issued, preferences, special rights and limitations as determined
     by  the  Board.


     On May 18, 1998, FLAG declared a three for two stock split, payable on June
     3,  1998 to shareholders of record on May 22, 1998. All share and per share
     amounts  have  been  restated  to  reflect  this  stock  split as if it had
     occurred  on  January  1,  1998.

(12) REGULATORY  MATTERS
     FLAG  and  the  Bank are subject to various regulatory capital requirements
     administered  by  the  Federal  banking  agencies.  Failure to meet minimum
     capital  requirements  can  initiate  certain  mandatory,  and  possibly
     additional  discretionary,  action by regulators that, if undertaken, could
     have  a  direct  material  effect on the Bank's financial statements. Under
     capital  adequacy  guidelines  and  the  regulatory  framework  for  prompt
     corrective  action,  the  Bank  must  meet specific capital guidelines that
     involve  quantitative  measures  of  the  Bank's  assets,  liabilities, and
     certain  off-balance  sheet items as calculated under regulatory accounting
     practices.  The  Bank's capital amounts and classification are also subject
     to  qualitative  judgements  by  the  regulators  about  components,  risk
     weightings,  and  other  factors.

     Quantitative  measures established by regulation to ensure capital adequacy
     require the Bank to maintain minimum amounts and ratios of total and Tier 1
     capital  (as  defined)  to risk-weighted assets (as defined), and of Tier 1
     capital  (as  defined) to average assets (as defined). Management believes,
     as  of  December  31, 2000 that FLAG and the Bank meet all capital adequacy
     requirements  to  which  they  are  subject.

     Minimum  ratios  required by the Bank to ensure capital adequacy are 8% for
     total  capital  to  risk  weighted assets and 4% each for Tier 1 capital to
     average  assets. Minimum ratios required by the Bank to be well capitalized
     under prompt corrective action provisions are 10% for total capital to risk
     weighted  assets,  6% for Tier 1 capital to risk weighted assets and 5% for
     Tier  1  capital  to  average  assets. Minimum amounts required for capital
     adequacy purposes and to be well capitalized under prompt corrective action
     provisions  are  presented  below  for FLAG and the Bank. Prompt corrective
     action  provisions  do  not  apply  to  bank  holding  companies.

<TABLE>
<CAPTION>
                                                                                  To Be Well
                                                                              Capitalized Under
                                                              For Capital     Prompt Corrective
                                               Actual      Adequacy Purposes  Action Provisions
                                           ---------------  ----------------  -----------------
                                             Amount   Ratio   Amount   Ratio   Amount    Ratio
                                           --------  ------  -------  -------  -------  --------
                                            (000's)          (000's)           (000's)
<S>                                        <C>       <C>     <C>      <C>      <C>      <C>
AS OF DECEMBER 31, 2000:
 Total Capital (to Risk Weighted Assets)
   FLAG consolidated                       $ 53,390  12.5%   $34,116     8.0%      N/A      N/A
   FLAG Bank                               $ 51,553  11.8%   $34,993     8.0%  $43,741    10.0%
 Tier 1 Capital (to Risk Weighted Assets)
   FLAG consolidated                       $ 48,044  11.3%   $17,058     4.0%      N/A      N/A
   FLAG Bank                               $ 46,072  10.5%   $17,496     4.0%  $26,245     6.0%
 Tier 1 Capital (to Average Assets)
   FLAG consolidated                       $ 48,044  10.1%   $19,046     4.0%      N/A      N/A
   FLAG Bank                               $ 46,072   9.8%   $18,813     4.0%  $23,516     5.0%
AS OF DECEMBER 31, 1999:
 Total Capital (to Risk Weighted Assets)
   FLAG consolidated                       $ 57,179  12.5%   $ 36,615     8.0%      N/A      N/A
   First Flag                              $ 20,487  11.3%   $ 14,491     8.0%  $18,114    10.0%
   Citizens                                $ 23,791  10.5%   $ 18,174     8.0%  $22,718    10.0%
 Tier 1 Capital (to Risk Weighted Assets)
   FLAG consolidated                       $ 51,442  11.2%   $ 18,307     4.0%      N/A      N/A
   First Flag                              $ 18,214  10.1%   $  7,246     4.0%  $10,868     6.0%
   Citizens                                $ 20,944   9.2%   $  9,087     4.0%  $13,631     6.0%
 Tier 1 Capital (to Average Assets)
   FLAG consolidated                       $ 51,442   8.6%   $ 23,964     4.0%      N/A      N/A
   First Flag                              $ 18,214   7.8%   $  9,349     4.0%  $11,686     5.0%
   Citizens                                $ 20,944   7.5%   $ 11,227     4.0%  $14,034     5.0%
</TABLE>


                                       35
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(12) REGULATORY  MATTERS,  CONTINUED
     Banking  regulations limit the amount of dividends the Bank can pay to FLAG
     without  prior  regulatory  approval.  These  limitations are a function of
     excess  regulatory  capital  and  net  earnings in the year the dividend is
     declared.  In  2001,  the  Bank  can  pay  dividends totaling approximately
     $2,973,000  without  prior  regulatory  approval.

(13) COMMITMENTS  AND  CONTINGENCIES
     FLAG  has  a  partially  self-insured  health  care plan for the benefit of
     eligible  employees  and their eligible dependents, administered by a third
     party  administrator.  Claims in excess of $15,000 per person annually, but
     less  than  $1,000,000,  are  covered by an insurance policy with Guarantee
     Mutual  Life  Company. FLAG is responsible for any claims less than $15,000
     per  person  annually.

     FLAG is a party to financial instruments with off-balance sheet risk in the
     normal  course of business to meet the financing needs of its customers and
     to  manage  its  cost  of  funds.  These  financial  instruments  include
     commitments  to  extend credit, standby letters of credit and interest rate
     floor  agreements.  These instruments involve, to varying degrees, elements
     of  credit  risk  in  excess  of the amounts recognized in the consolidated
     balance  sheets.  The  contract  amounts  of  these instruments reflect the
     extent  of  involvement  the  Bank  has  in particular classes of financial
     instruments.

     Commitments  to  originate  first  mortgage  loans and to extend credit are
     agreements  to  lend  to a customer as long as there is no violation of any
     condition  established  in  the  contract. Commitments generally have fixed
     expiration  dates or other termination clauses and may require payment of a
     fee.  Since  many  of  the commitments are expected to expire without being
     drawn  upon,  the  total  commitment  amounts  do not necessarily represent
     future  cash  requirements.  The  Bank  evaluates  each  customer's
     creditworthiness  on  a  case-by-case  basis.  The  amount  of  collateral
     obtained,  if  deemed  necessary  by  the Bank upon extension of credit, is
     based  on  management's  credit  evaluation of the counterparty. The Bank's
     loans  are  primarily  collateralized  by  residential  and  other  real
     properties,  automobiles,  savings deposits, accounts receivable, inventory
     and  equipment.

     Standby letters of credit are written conditional commitments issued by the
     Bank  to  guarantee  the  performance of a customer to a third party. Those
     guarantees  are  primarily  issued  to support public and private borrowing
     arrangements.  Most  letters  of  credit extend for less than one year. The
     credit  risk  involved in issuing letters of credit is essentially the same
     as  that  involved  in  extending  loan  facilities  to  customers.

     FLAG's  exposure to credit loss in the event of nonperformance by the other
     party  to  the  financial  instrument  for commitments to extend credit and
     standby letters of credit is represented by the contractual amount of those
     instruments.  The  Bank uses the same credit policies in making commitments
     and  conditional  obligations  as it does for on-balance sheet instruments.
     All  standby  letters  of credit are secured at December 31, 2000 and 1999.

                                                               2000        1999
                                                             --------    -------
     Financial  instruments  whose  contract  amounts
         represent  credit  risk  (in  thousands):
            Commitments to extend credit                     $ 56,108     56,872
            Standby letters of credit                        $  1,023        819

     FLAG  maintains  an  overall  interest  rate  risk-management strategy that
     incorporates  the  use  of  derivative  instruments to minimize significant
     unplanned  fluctuations  in  earnings  that  are  caused  by  interest rate
     volatility.  The  goal  is to manage interest rate sensitivity by modifying
     the repricing or maturity characteristics of certain assets and liabilities
     so  that  the  net  interest  margin is not, on a material basis, adversely
     affected  by  certain movements in interest rates. FLAG views this strategy
     as  a  prudent  management of interest rate sensitivity, such that earnings
     are  not  exposed  to  undue  risk  presented by changes in interest rates.

     Derivative  instruments  that  are  used  as  part  of FLAG's interest rate
     risk-management  strategy  include  interest  rate contracts (floors). As a
     matter of policy, FLAG does not use highly leveraged derivative instruments
     for  interest  rate risk management. Interest rate floor agreements provide
     for  a  variable cash flow if interest rates decline below the strike rate,
     based  on  a  notional  principal  amount  and  maturity  date.


                                       36
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(13) COMMITMENTS  AND  CONTINGENCIES,  CONTINUED
     By using derivative instruments, FLAG is exposed to credit and market risk.
     If the counterparty fails to perform, credit risk is equal to the extent of
     the  fair-value  gain  in a derivative. When the fair value of a derivative
     contract  is  positive, this generally indicates that the counterparty owes
     FLAG,  and,  therefore,  creates  a  repayment risk for FLAG. When the fair
     value of a derivative contract is negative, FLAG owes the counterparty and,
     therefore,  it  has  no  repayment  risk.  FLAG  minimizes  the  credit (or
     repayment)  risk  in  derivative  instruments by entering into transactions
     with  high-quality  counterparties  that  are  reviewed  periodically.

     FLAG's  derivative  activities  are  monitored  by  its  asset/liability
     management  committee  as  part  of  that  committee's  oversight of FLAG's
     asset/liability and treasury functions. FLAG's asset/liability committee is
     responsible  for implementing various hedging strategies that are developed
     through  its  analysis  of  data from financial simulation models and other
     internal  and  industry  sources. The resulting hedging strategies are then
     incorporated  into  the  overall  interest-rate  risk  management.

     As  described more fully in the summary of significant accounting policies,
     FLAG  adopted  SFAS No. 133 during 2000. All of FLAG's derivative financial
     instruments  are  classified  as  highly  effective  cash  flow  hedges.

     For  the  year  ended  December  31,  2000,  there were no material amounts
     recognized  which  represented the ineffective portion of cash flow hedges.
     All  components  of  each  derivative's  gain  or  loss are included in the
     assessment  of  hedge  effectiveness,  unless  otherwise  noted.

(14) RELATED  PARTY  TRANSACTIONS
     FLAG  conducts  transactions  with  its  directors  and executive officers,
     including  companies  in which they have beneficial interest, in the normal
     course  of  business.  It is the policy of FLAG that loan transactions with
     directors and executive officers be made on substantially the same terms as
     those  prevailing  at  the  time for comparable loans to other persons. The
     following  is  a  summary  of activity for related party loans for 2000 (in
     thousands).

     Balance  at  December  31,  1999          $  925
     New  loans                                   399
     Repayments                                  (364)
                                               -------

     Balance  at  December  31,  2000          $  960
                                               =======

     At December 31, 2000, deposits from directors, executive officers and their
     related  interests aggregated approximately $3,008,000. These deposits were
     taken  in  the  normal  course  of  business  at  market  interest  rates.

(15) MISCELLANEOUS  OPERATING  EXPENSES
     Components  of  other  operating  expenses  in excess of 1% of interest and
     other  income  for  the years ended December 31, 2000, 1999 and 1998 are as
     follows  (in  thousands):

                                      2000      1999      1998
                                     -----     -----     -----
     Data  processing                $ 724     1,587     1,486
     Telephone                       $ 707       884       655
     Office  supplies                $ 571     1,013       843


                                       37
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(16) FLAG  FINANCIAL  CORPORATION  (PARENT  COMPANY  ONLY) FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                        Balance Sheets

                                  December 31, 2000 and 1999

                                            Assets
                                            ------
                                                                                 2000    1999
                                                                                -------  ------
<S>                                                                             <C>      <C>
                                                                                (In Thousands)
Cash                                                                            $   374   1,056
Investment securities                                                               891   1,787
Investment in subsidiaries                                                       53,782  48,426
Equipment, net                                                                    2,630   2,804
Other assets                                                                      1,169   1,156
                                                                                -------  ------

                                                                                $58,846  55,229
                                                                                =======  ======
                          Liabilities and Stockholders' Equity
                          ------------------------------------
Accounts payable and accrued expenses                                           $ 1,848   2,032
Other borrowings                                                                  1,500       -
Stockholders' equity                                                             55,498  53,197
                                                                                -------  ------
                                                                                $58,846  55,229
                                                                                =======  ======
</TABLE>
<TABLE>
<CAPTION>
                                          Statements of Earnings

                          For the Years Ended December 31, 2000, 1999 and 1998
                                                                                  2000     1999   1998
                                                                                --------  -------  -----
<S>                                                                             <C>       <C>      <C>
                                                                                     (In Thousands)
Income:
 Dividend income from subsidiaries                                              $ 2,000    5,770   4,195
 Interest income                                                                      6       17      23
 Gain on investments                                                                  -    1,627       -
 Other                                                                            7,715    4,126   1,473
                                                                                --------  -------  -----
         Total income                                                             9,721   11,540   5,691
                                                                                --------  -------  -----
Operating expenses:
 Interest expense                                                                   110        3      33
 Other                                                                           10,278    7,857   4,562
                                                                                --------  -------  -----
         Total operating expenses                                                10,388    7,860   4,595
                                                                                --------  -------  -----
         Earnings (loss)before income tax benefit and dividends received in
           excess of earnings of subsidiaries and equity in undistributed
           earnings of subsidiaries                                                (667)   3,680   1,096
Income tax benefit                                                                1,004      617   1,077
                                                                                --------  -------  -----
         Earnings before dividends received in excess of earnings of
           subsidiaries and equity in undistributed earnings  of subsidiaries       337    4,297   2,173
Dividends received in excess of earnings of subsidiaries                              -   (3,084)      -
Equity in undistributed earnings of subsidiaries                                  3,947        -     666
                                                                                --------  -------  -----
         Net earnings                                                           $ 4,284    1,213   2,839
                                                                                ========  =======  =====
</TABLE>


                                       38
<PAGE>
<TABLE>
<CAPTION>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(16) FLAG  FINANCIAL  CORPORATION  (PARENT  COMPANY ONLY) FINANCIAL INFORMATION,
     CONTINUED

                            Statements of Cash Flows

              For the Years Ended December 31, 2000, 1999 and 1998

                                                                   2000     1999     1998
                                                                 --------  --------  ------
<S>                                                              <C>       <C>       <C>
                                                                      (In Thousands)
Cash flows from operating activities:
 Net earnings                                                    $ 4,284    1,213    2,839
 Adjustments to reconcile net earnings to net cash provided by
   operating activities:
     Depreciation and amortization                                   502      298      125
     Gain on investments                                               -   (1,627)       -
     Proceeds from sale of trading securities                          -    1,701        -
     Dividends received in excess of earnings of subsidiaries          -    3,084        -
     Equity in undistributed earnings of subsidiaries             (3,947)       -     (666)
     Change in other assets and liabilities                          148      740    1,005
                                                                 --------  -------  -------

           Net cash provided by operating activities                 987    5,409    3,303
                                                                 --------  -------  -------

Cash flows from investing activities:
 Purchase of investment securities                                     -     (908)    (274)
 Proceeds from sale of investment securities                           1      418      263
 Purchase of equipment                                              (328)  (2,164)    (526)
 Investment in subsidiaries                                            -     (390)  (2,554)
                                                                 --------  -------  -------

           Net cash used in investing activities                    (327)  (3,044)  (3,091)
                                                                 --------  -------  -------

Cash flows from financing activities:
 Stock transactions of pooled entities                                 -       38      130
 Change in other borrowings                                        1,500        -        -
 Exercise of stock options                                             8       48       73
 Purchase of treasury stock                                         (876)     (52)       -
 Dividends paid                                                   (1,974)  (1,744)  (1,200)
                                                                 --------  -------  -------

           Net cash used in financing activities                  (1,342)  (1,710)    (997)
                                                                 --------  -------  -------

Net change in cash                                                  (682)     655     (785)

Cash at beginning of year                                          1,056      401    1,186
                                                                 --------  -------  -------

Cash at end of year                                              $   374    1,056      401
                                                                 ========  =======  =======
</TABLE>


                                       39
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(17) QUARTERLY  OPERATING  RESULTS  (UNAUDITED)
     The  following  is  a  summary  of  the  unaudited  condensed  consolidated
     quarterly  operating  results of FLAG for the years ended December 31, 2000
     and  1999  (amounts  in  thousands,  except  per  share  amounts):
<TABLE>
<CAPTION>

                                                         2000
                                       -----------------------------------------
                                                     QUARTER ENDED
                                        DEC.  31   SEPT. 30   JUNE 30   MARCH 31
                                       ----------  ---------  --------  --------
<S>                                    <C>         <C>        <C>       <C>
Interest income                        $  10,604     11,879     12,030    11,879
Interest expense                           5,078      5,688      5,469     5,196
                                       ----------  ---------  --------  --------
Net interest income                        5,526      6,191      6,561     6,683
Provision for loan losses                     88      2,183        733       593
                                       ----------  ---------  --------  --------
Net interest income after provision
 for loan losses                           5,438      4,008      5,828     6,090
Noninterest income                         1,522      6,637      1,888     1,915
Noninterest expense                        5,873      7,643      6,936     7,181
                                       ----------  ---------  --------  --------
Earnings before income taxes               1,087      3,002        780       824
Provision for income taxes                   217        924        120       148
                                       ----------  ---------  --------  --------

Net earnings                           $     870      2,078        660       676
                                       ==========  =========  ========  ========

Net earnings per share                 $     .11        .25        .08       .08
                                       ==========  =========  ========  ========

Weighted average shares outstanding        8,167      8,217      8,218     8,240
                                       ==========  =========  ========  ========

                                                           1999
                                       -----------------------------------------
                                                     QUARTER ENDED
                                        DEC.  31   SEPT. 30   JUNE 30   MARCH 31
                                       ----------  ---------  --------  --------

Interest income                        $  12,252     12,213     12,209    12,479
Interest expense                           5,472      5,657      5,659     5,875
                                       ----------  ---------  --------  --------
Net interest income                        6,780      6,556      6,550     6,604
Provision for loan losses                  1,634      1,589      1,071       362
                                       ----------  ---------  --------  --------
Net interest income after provision
 for loan losses                           5,146      4,967      5,479     6,242
Noninterest income                         2,317      1,217      3,903     2,635
Noninterest expense                        7,600      8,494      7,388     7,133
                                       ----------  ---------  --------  --------
Earnings (loss) before income taxes         (137)    (2,310)     1,994     1,744
Provision (benefit) for income taxes        (287)      (870)       683       552
                                       ----------  ---------  --------  --------

Net earnings (loss)                    $     150     (1,440)     1,311     1,192
                                       ==========  =========  ========  ========

Net earnings (loss) per share          $     .02       (.17)       .16       .14
                                       ==========  =========  ========  ========

Weighted average shares outstanding        8,266      8,263      8,263     8,238
                                       ==========  =========  ========  ========
</TABLE>


                                       40
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(18) FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS
     FLAG  is  required  to  disclose  fair  value  information  about financial
     instruments,  whether  or  not recognized on the face of the balance sheet,
     for which it is practicable to estimate that value. The assumptions used in
     the  estimation  of  the  fair  value  of  FLAG's financial instruments are
     detailed  below.  Where  quoted  prices  are not available, fair values are
     based  on  estimates  using  discounted  cash  flows  and  other  valuation
     techniques.  The use of discounted cash flows can be significantly affected
     by  the  assumptions  used,  including  the  discount rate and estimates of
     future  cash  flows.  The  following disclosures should not be considered a
     surrogate  of  the  liquidation  value  of  FLAG  or the Bank, but rather a
     good-faith  estimate  of  the  increase  or  decrease in value of financial
     instruments  held  by  FLAG  since  purchase,  origination  or  issuance.

         Cash  and  Cash  Equivalents  and  Interest-Bearing  Deposits
         -------------------------------------------------------------
         For  cash,  due  from  banks,  federal  funds sold and interest-bearing
         deposits  with other banks the carrying amount is a reasonable estimate
         of  fair  value.

         Securities  Held-to-Maturity  and  Securities  Available-for-Sale
         -----------------------------------------------------------------
         Fair  values  for  securities  held-to-maturity  and  securities
         available-for-sale  are  based  on  quoted  market  prices.

         Other  investments
         ------------------
         The  carrying  value  of  other  investments  approximates  fair value.

         Loans  and  Mortgage  Loans  Held  for  Sale
         --------------------------------------------
         The  fair  value  of  fixed  rate loans is estimated by discounting the
         future  cash flows using the current rates at which similar loans would
         be  made  to  borrowers  with similar credit ratings. For variable rate
         loans,  the  carrying  amount  is  a reasonable estimate of fair value.

         Mortgage  Servicing  Rights
         ---------------------------
         The  carrying  value  of  mortgage  servicing  rights approximates fair
         value.

         Cash  Surrender  Value  of  Life  Insurance
         -------------------------------------------
         The  carrying  value  of  cash  surrender  value  of  life  insurance
         Approximates fair  value.

         Deposits
         --------
         The  fair  value  of  demand  deposits, savings accounts, NOW accounts,
         certain  money  market  deposits,  advances from borrowers and advances
         payable  to  secondary  market  is  the amount payable on demand at the
         reporting  date.  The  fair  value  of  fixed  maturity certificates of
         deposit  is  estimated  by  discounting the future cash flows using the
         rates  currently  offered for deposits of similar remaining maturities.

         Federal  Funds  Purchased,  Repurchase  Agreements and Other Borrowings
         ----------------------------------------------------------------------
         For  federal  funds  purchased  and repurchase agreements, the carrying
         amount  is  a  reasonable  estimate  of  fair  value.

         Advances  from  the  Federal  Home  Loan  Bank
         ----------------------------------------------
         The  fair  value  of the FHLB fixed rate borrowings are estimated using
         discounted cash flows, based on the current incremental borrowing rates
         for  similar  types  of  borrowing  arrangements.

         Commitments  to  Originate  First Mortgage Loans, Commitments to Extend
         ----------------------------------------------------------------------
         Credit  and  Standby  Letters  of  Credit
         ----------------------------------------
         Because  commitments  to originate first mortgage loans, commitments to
         extend  credit  and  standby  letters of credit are made using variable
         rates,  the  contract  value  is  a  reasonable estimate of fair value.

         Interest  Rate  Contracts
         -------------------------
         The  fair  value  of  interest  rate  contracts is obtained from dealer
         quotes.  These values represent the amount the Company would receive to
         terminate  the  contracts  or  agreements,  taking into account current
         interest  rates  and, when appropriate, the current creditworthiness of
         the  counterparties.


                                       41
<PAGE>
                           FLAG FINANCIAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(18) FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS,  CONTINUED
     Limitations
     -----------
     Fair  value  estimates  are  made  at  a  specific  point in time, based on
     relevant market information and information about the financial instrument.
     These  estimates  do  not reflect any premium or discount that could result
     from  offering  for sale at one time FLAG's entire holdings of a particular
     financial instrument. Because no market exists for a significant portion of
     FLAG's  financial  instruments,  fair  value  estimates  are  based on many
     judgments.  These  estimates  are  subjective  in  nature  and  involve
     uncertainties  and  matters of significant judgment and therefore cannot be
     determined  with  precision.  Changes  in  assumptions  could significantly
     affect  the  estimates.

     Fair  value  estimates  are  based  on  existing  on  and off-balance sheet
     financial  instruments  without  attempting  to  estimate  the  value  of
     anticipated  future  business  and the value of assets and liabilities that
     are  not  considered  financial  instruments.  Significant  assets  and
     liabilities  that  are  not  considered  financial  instruments include the
     mortgage  banking  operation, deferred income taxes, premises and equipment
     and  purchased  core deposit intangible. In addition, the tax ramifications
     related  to  the  realization of the unrealized gains and losses can have a
     significant  effect on fair value estimates and have not been considered in
     the  estimates.

     The  carrying  amount  and  estimated  fair  values  of  FLAG's  financial
     instruments  at  December  31, 2000 and 1999 are as follows (In Thousands):

<TABLE>
<CAPTION>
                                                           2000                  1999
                                                    --------------------  --------------------
                                                    CARRYING  ESTIMATED   CARRYING  ESTIMATED
                                                     AMOUNT   FAIR VALUE   AMOUNT   FAIR VALUE
                                                    --------  ----------  --------  ----------
<S>                                                 <C>       <C>         <C>       <C>
ASSETS:
 Cash and cash equivalents                            21,873      21,873    27,084      27,084
 Interest-bearing deposits                             3,451       3,451     2,792       2,792
 Investment securities                               100,722     100,722    89,302      88,872
 Other investments                                     5,361       5,361     6,345       6,345
 Mortgage loans held for sale                          4,121       4,121     3,484       3,484
 Loans, net                                          384,661     383,243   419,079     417,150
 Mortgage servicing rights                               319         319       390         390
 Cash surrender value of life insurance                4,484       4,484     4,134       4,134
 Interest rate contracts                                 650         650         -           -

LIABILITIES:
 Deposits                                            461,438     462,501   483,635     483,534
 Federal funds purchased and repurchase agreements       661         661    15,672      15,672
 FHLB advances                                        31,973      31,946    27,173      24,953
 Other borrowings                                      1,500       1,500         -           -

UNRECOGNIZED FINANCIAL INSTRUMENTS:
 Commitments to extend credit                         56,108      56,108    56,872      56,872
 Standby letters of credit                             1,023       1,023       819         819
</TABLE>


                                       42
<TABLE>
<CAPTION>
                                            CORPORATE INFORMATION
                                          FLAG FINANCIAL CORPORATION

<S>                                        <C>                                          <C>

CORPORATE HEADQUARTERS                     SHAREHOLDERS OF RECORD                       DIVIDEND PAYMENT DATES
FLAG Financial Corporation                 FLAG Financial Corporation had               Subject to approval of the Board of
Eagle's Landing Office                     8,122,661 shares of Common Stock             Directors, quarterly dividend payments
235 Corporate Center Drive                 outstanding and 903 shareholders of          are made on the first business day of
Stockbridge, Georgia 30281                 record as of December 31, 2000.              January, April, July and October.
(770) 515-2100
                                           INVESTOR RELATIONS                           DIVIDEND REINVESTMENT AND STOCK
CORPORATE MAILING ADDRESS                  Shareholders, analysts, investors, the news  PURCHASE PLAN
FLAG Financial Corporation                 media and others desiring a copy of the
P.O. Box 3007                              FLAG Financial Corporation 2000              FLAG Financial Corporation offers a
LaGrange, Georgia 30241                    Annual Report or 2000 Annual Report on       Dividend Reinvestment Plan for
(706) 845-5000                             Form 10-K as filed with the Securities       automatic reinvestment of dividends in
                                           and Exchange Commission, supplemental        the Common Stock of the Company.
NOTICE OF 2000 ANNUAL MEETING              quarterly information or general             FLAG Common Stock may also be
The Annual Meeting of Shareholders of      information about the Company may            purchased with optional cash payments.
FLAG Financial Corporation will be held    obtain such information without charge       In order to purchase stock by making
on Wednesday, April 18, 2001 at 2:00 p.m.  by contacting:                               optional cash payments, shareholders
at the Corporate Headquarters,                                                          must be participants in the FLAG
235 Corporate Center Drive,                FLAG Financial Corporation                   Dividend Reinvestment Plan.
Stockbridge, Georgia                       Investor Relations Department
                                           101 North Greenwood Street                   For more information concerning this
INDEPENDENT AUDITORS                       LaGrange, Georgia 30240                      convenient and economical way to
Porter Keadle Moore, LLP                   (706) 845-5009                               purchase additional Common Stock and
235 Peachtree Street                                                                    to receive a brochure describing the
Suite 1800                                 MARKET MAKERS                                plan and an authorization card, contact:
Atlanta, Georgia 30303                     Herzog, Heine, Geduld, Inc.
(404) 588-4200                             525 Washington Boulevard                     Registrar and Transfer Company
                                           Jersey City, New Jersey 07310-1690           Dividend Reinvestment Department
LEGAL COUNSEL                                                                           P.O. Box 1010
Powell, Goldstein, Frazer & Murphy LLP     Knight Securities, Inc.                      Cranford, New Jersey 07016-3572
Sixteenth Floor                            525 Washington Boulevard                     (800) 368-5948
191 Peachtree Street, N.E.                 Jersey City, New Jersey 07310                Fax (908) 497-2318
Atlanta, Georgia 30303                                                                  e-mail invrelations@rtco.com
(404) 572-6600                             Morgan, Keegan & Company, Inc.
                                           Morgan Keegan Tower
SHAREHOLDER SERVICES                       50 Front Street
Shareholders who desire to change the      Memphis, Tennessee 38103
name, address or ownership of
FLAG Common Stock, to report               The Robinson-Humphrey
lost certificates or to consolidate        Company, Inc.
accounts should contact the                3333 Peachtree Road, N.E.
Transfer Agent:                            The Atlanta Financial Center
                                           11th Floor, South Tower
Registrar and Transfer Company             Atlanta, Georgia 30326
Investor Relations Department
10 Commerce Drive                          Trident Securities, a division of
Cranford, New Jersey 07016-3572            McDonald Investments
(800) 368-5948                             3455 Peachtree Road, N.E., Suite 650
Fax (908) 497-2318                         Atlanta, Georgia 30326
e-mail invrelations@rtco.com
                                           Spear, Leeds & Kellogg
STOCK EXCHANGE LISTING                     Capital Markets
FLAG Financial Corporation Common          10 Exchange Place
Stock is traded and quoted on              Jersey City, New Jersey 07302
The Nasdaq Stock Market under the
symbol "FLAG."                             Sterne, Agee & Leach, Inc.
                                           950 East Paces Ferry Road
                                           Suite 1580
                                           Atlanta, Georgia 30326
</TABLE>

STOCK  PRICES  AND  DIVIDENDS
The  following table sets forth the high
and  low  closing  sales  prices  of the
Company's  Common  Stock, as reported by
Nasdaq,  for  each  quarter for the past
two  fiscal years and the cash dividends
per  share  of  the Common Stock paid by
the Company during such fiscal quarters.

<TABLE>
<CAPTION>
                                   CASH
                                   DIVIDENDS
QUARTER  ENDED      HIGH     LOW   PER  SHARE
<S>                 <C>     <C>    <C>
March 31, 1999      $11.81  $9.13  $0.06
June 30, 1999       $11.00  $9.00  $0.06
September 30, 1999  $10.38  $7.50  $0.06
December 31, 1999   $ 8.81  $6.25  $0.06
March 31, 2000      $ 7.25  $5.50  $0.06
June 30, 2000       $ 6.50  $4.25  $0.06
September 30, 2000  $ 5.88  $4.13  $0.06
December 31, 2000   $ 6.00  $5.00  $0.06
</TABLE>


                                       43
<PAGE>
                     BOARD OF DIRECTORS AND FLAG MANAGEMENT
                           FLAG FINANCIAL CORPORATION

<TABLE>
<CAPTION>
<S>                           <C>                            <C>                           <C>
FLAG  FINANCIAL  CORPORATION  2001  BOARD  OF  DIRECTORS
--------------------------------------------------------
DR.A.GLENN BAILEY             JOHN S. HOLLE                  FLAG BANK 2001                JOHN S. HOLLE
Retired Physician             Chairman of the Board          BOARD OF DIRECTORS            Chairman of the Board
Clark-Holder Clinic           FLAG Financial Corporation     ----------------------------  FLAG Financial Corporation
                              Chairman of the Board and      A. Glenn Bailey               Chairman of the
JAMES A. BRETT                Region President               James A. Brett                Board and Region President
President/Owner               FLAG Bank                      Samuel A. Brewton, Jr.        FLAG Bank
Macon County Veterinary                                      H. Speer Burdette, III
Hospital, P.C.                JAMES W. JOHNSON               Robert G. Cochran             LISA G. LANE
                              President                      Patti S. Davis                Senior Vice President
H. SPEER BURDETTE, III        McCranie Motor and Tractor     Fred A. Durand, III           and Assistant Secretary
Vice President, Treasurer     Company, Inc.                  David B. Dunaway              Correspondent Services
and Managing Officer          Retail Tractor and             Charles O. Hinely             FLAG Bank
J.K. Boatwright &             Equipment Dealer               John R. Hines, Jr.
Company, P.C.                                                George H. Hightower, Jr.      J. PRESTON MARTIN
Accounting Firm               KELLY R. LINCH                 John S. Holle                 President
                              Owner                          Calvin S. Hopkins, Jr.        FLAG Financial Corporation
ROBERT C. COCHRAN             Linch's Inc.                   James W. Johnson              Region President and
Vice Chairman of the Board    Retail Appliances and          Kelly R. Linch                Senior Lending Officer
FLAG Financial Corporation    Electronics                    John C. McKibben              FLAG Bank
Region President                                             J. Preston Martin
FLAG Bank                     J. PRESTON MARTIN              Norman S. Morris              THOMAS L. REDDING
                              President                      W. Wallace Rhodes             Senior Vice President
PATTI S. DAVIS                FLAG Financial Corporation     Charles Speight, Jr.          and Secretary
Senior Vice President         Region President and Senior    J. Daniel Speight             Chief Financial Officer
and Assistant Secretary       Lending Officer                Mike Speight                  FLAG Financial Corporation
Administration and Control    FLAG Bank                      John W. Stewart, Jr.          and FLAG Bank
FLAG Financial Corporation                                   Robert W. Walters
and FLAG Bank                 J. DANIEL SPEIGHT                                            RAYMOND C. SMITH,JR.
                              Chief Executive Officer        Directors Emeritus            Senior Vice President
DAVID B. DUNAWAY              FLAG Financial Corporation                                   and Assistant Secretary
Attorney/Partner              President and Chief Executive  Jere Greer                    Human Resources
Adams. Barfield, Dunaway &    Officer                        William F. Holle, Jr.         FLAG Bank
Hankinson, LLP                FLAG Bank                      Lynmore James
Law Firm                                                     Gordon Smith                  J. DANIEL SPEIGHT
                              JOHN W. STEWART,JR.            Charles Speight, Sr           Chief Executive Officer
FRED A. DURAND, III           President                      Steve Teaver                  FLAG Financial Corporation
President & Chief Executive   Stewart Wholesale              Napolean Williams             President and
Officer                       Hardware Company                                             Chief Executive Officer
Durand-Wayland, Inc.                                         FLAG EXECUTIVE OFFICERS       FLAG Bank
Manufacturer of Produce       ROBERT W. WALTERS              AND MANAGEMENT
Sorting                       Retired Vice President         ----------------------------  CHARLES E. SWEAT
and Spray Equipment           The Mill Store, Inc.           CAROL D. ARFLIN               Senior Vice President
                              Retail and Contract Floor      Senior Vice President and     and Assistant Secretary
CHARLES O.HINELY              Coverings                      Assisant Secretary            Branch Administration and
Executive Vice President and  Director Emeritus              Senior Credit Officer         BSA Officer
Chief Operating Officer                                      FLAG Bank                     FLAG Bank
FLAG Financial Corporation    CHARLES SPEIGHT,SR.
and FLAG Bank                 Retired President              ROBERT G. COCHRAN             ROBERT H. TAYLOR
                              Unadilla Wholesale Company     Vice Chairman of the Board    Senior Vice President
JOHN R. HINES,JR.             Wholesale Grocer               FLAG Financial Corporation    and Assistant Secretary
Retired President                                            Region President              Retail Operations
First FLAG Bank Hogansville                                  FLAG Bank                     FLAG Bank

                                                             PATTI S. DAVIS                MARY E. WINKS
                                                             Senior Vice President and     Senior Vice President
                                                             Assistant Secretary           Audit and Compliance
                                                             Administration and Control    FLAG Bank
                                                             FLAG Financial Corporation
                                                             and FLAG Bank

                                                             CHARLES O. HINELY
                                                             Executive Vice President and
                                                             Chief Operating Officer
                                                             FLAG Financial Corporation
                                                             and FLAG Bank
</TABLE>


                                       44
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                   <C>                                 <C>
HENRY COUNTY                          TROUP COUNTY                        HOUSTON COUNTY
- Eagle's Landing Office              - Hogansville Office                - Perry Office - Trust Services
  Retail and Corporate                  111 High St                         921 Carroll Street
  235 Corporate Center Drive            PO Box 669                          Perry, GA 31069
  PO Box 2010                           Hogansville, GA 30230               Phone: (478) 987-4824
  Stockbridge, GA 30281                 Phone: (706) 637-6621               Fax: (478) 987-4866
  Phone: (770) 515-2100                 Fax: (706) 637-5606
  Fax: (770) 515-2160                                                     GLYNN COUNTY
                                      - Hogansville - Ingles Office       - St. Simons - Loan Production Office
TELFAIR COUNTY                          1890 East Main St                   1607 Frederica Road, Suite 201
- Milan Office                          PO Box 669                          St. Simons Island, GA 31522
  Mount Zion Street                     Hogansville, GA 30230               Phone: (912) 634-4680
  PO Box 38                             Phone: (706) 637-9925               Fax: (912) 634-9109
  Milan, GA 31060                       Fax: (706) 637-9524
  Phone: (229) 362-4483                                                   MARION COUNTY
  Fax: (229) 362-4291                 - LaGrange - Parkway Office         - Buena Vista Office
                                        1417 LaFayette Pkwy                 103 Broad Street
- McRae Office                          PO Box 3007                         PO Box 58
  850 E. Oak Street                     LaGrange, Georgia 30240             Buena Vista, Georgia
  PO Box 400                            Phone: (706) 845-5026               Phone: (229) 649-2091
  McRae, GA 31055                       Fax: (706) 845-5029                 Fax: (229) 649-7522
  Phone: (229) 868-2657
  Fax: (229) 868-7957                 - LaGrange -Lee's Crossing Office  CHATTAHOOCHEE COUNTY
                                        1795 West Point Rd.              - Cusseta Office
DOOLY COUNTY                            PO Box 3007                         One Courthouse Square
- Byromville Office                     LaGrange, Georgia 30240             PO Box 156
  448 Main Street                       Phone: (706) 845-5105               Cusseta, Georgia 31805
  PO Box 68                             Fax: (706) 845-5168                 Phone: (706) 989-3707
  Byromville, Georgia 31007                                                 Fax: (706) 989-0084
  Phone: (478) 433-5401               - LaGrange - Main Office
  Fax: (478) 433-6801                   101 North Greenwood St.           MACON COUNTY
                                        PO Box 3007                       - Montezuma Office
- Unadilla Office                       LaGrange, Georgia 30240             115 North Dooly Street
  2233 Pine Street                      Phone: (706) 845-5000               PO Box 346
  PO Box 428                            Fax: (706) 845-5155                 Montezuma, Georgia 31063
  Unadilla, Georgia 31091                                                   Phone: (478) 472-2331
  Phone: (478) 627-3236               - FLAG Insurance/FLAG Investments     Fax: (478) 472-7395
  Fax: (478) 627-9009                   LaGrange - Drive Thru Office
                                        306 Vernon St.                    - Oglethorpe Office
- Vienna Office                         PO Box 3007                         201 Macon Street
  100 Union Street                      LaGrange, Georgia 30240             Oglethorpe, GA 31068
  PO Box 156                            Phone: (706) 845-5023               Phone: (478) 472-4275
  Vienna, Georgia 31092                 Fax: (706) 845-5163                 Fax: (478) 472-9657
  Phone: (229) 268-2056
  Fax: (229) 268-7383                 COWETA COUNTY                       MUSCOGEE COUNTY
  FLAG Insurance/FLAG Investments     - Newnan - Loan Production Office   - Columbus Office - FLAG MTG
                                        3150 East Highway 34                5617 Princeton Avenue
CRISP COUNTY                            Suite 305                           Columbus, Georgia 31904
- Cordele Office                        Newnan, Georgia 30265               Phone: (706) 596-1792
  602 East 16th Ave                     Phone: (770) 251-1717               Fax: (706) 596-1859
  Times Square Suite G                  Fax: (770) 251-1516
  PO Box 919                                                              RUSSELL COUNTY, ALABAMA
  Cordele, Georgia 31015              UPSON COUNTY                        - Phoenix City Office - FLAG MTG
  Phone: (229) 271-2265               - Thomaston Office                    712 13th Street
  Fax: (229) 271-3959                   206 N.Church St.                    Suite A
                                        PO Drawer 1186                      Phoenix City, Alabama 36867
FORSYTH COUNTY                          Thomaston, Georgia 30286            Phone: (334) 298-4300
- Johns Creek - Loan Production Office  Phone: (706) 647-6601               Fax: (334) 298-3809
  3855 Johns Creek Parkway Suite B      Fax: (706) 647-6019
  Suwanee, Georgia 30024                FLAG Investments
  Phone: (678) 417-0930
  Fax: (678) 417-0093
</TABLE>


                                      45
<PAGE>










                                 FLAG












                      FLAG Financial Corporation
            235 Corporate Center Drive - Stockbridge, Georgia 30281
               (770) 515-2100 - Fax (770) 515-2160 - www.flag.net


                                       46
<PAGE>