Georgia's Flag Financial Corp. is hunting for deals at bargain prices to continue its nine-month buying spree.

Flag, based in La Grange, announced the first merger deal in its 12-year history last October, when it agreed to combine with Middle Georgia Bankshares, Unadilla. Since then, the $425 million-asset company has announced plans to buy four other banks in central and southeastern Georgia.

Two of the transactions have closed. The others, expected to close this fall, would boost Flag-which had $248 million of assets at yearend 1997-to almost $600 million. And more mergers are in the pipeline.

J. Daniel Speight Jr., Flag's president and chief executive officer, said he has had discussions with four banks "with some level of interest" in the last two weeks.

"We are looking for banks to be partners," Mr. Speight said. "We want to team up with bankers who still want to serve their communities but without the administrative burdens of being on their own."

Flag has been a frugal dealmaker. It has agreed to pay an average premium of 2.03 times book value for the banks it has bought and plans to buy, and each bank is expected to contribute to Flag's earnings this year. By comparison, the average seller in Georgia this year has gotten 2.9 times book, according to Sheshunoff Information Services Inc.

The small premiums have kept analysts happy and Flag's stock soaring, said John A. Howard, president of Equity Research Services Inc., Raleigh, N.C. The company's stock price is up more than 60% since it announced its first deal, to $17.625 per share at midday Tuesday.

In return for a lower price, Flag promises autonomy to the banks it acquires. The targets keep their names, officers, and boards. And Flag does not mandate cost-saving measures such as layoffs from the banks it buys.

"You can't just cut people in small towns," Mr. Speight said. "That is the kind of thing the whole community will find out about, and they will kill you for it."

Georgia is a buyer's market because the state waited so long to allow statewide branching, Mr. Speight said.

The state still has a large number of small banks based in rural towns. There are 236 banks and thrifts with less than $100 million of assets in Georgia, compared with 117 such institutions in neighboring Alabama, according to the Federal Deposit Insurance Corp.

The state liberalized its branching laws in 1996, allowing bigger banks from metropolitan regions easier access to rural areas. As a result, small banks are finding alliances an attractive option, Mr. Speight said.

"Bankers are looking at consolidation and seeing larger institutions entering their markets and are wondering if they can compete," he said. "We are offering a chance to get bigger without giving up control."

Mr. Speight said his goal is to expand Flag beyond its rural base. To add value, he said, the company must enter growth markets. "There are a lot of healthy community banks in Atlanta we would love to talk to," he said.

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