Brown's "Signal Corps USA in the War of the Rebellion" (1896), p. 250 quotes a 4 Jan 1862 report from the signal officer assigned to HQ, 2nd Brigade, Gen. Stevens' Expeditionary Corps to S.C. (Beaufort, Hilton Head, Port Royal Ferry), Lieut. Henry S. Tafft:

"I had before the battle [of Port Royal Ferry, 1 Jan 62] caused to be made some two dozen flags, blue and white, to be carried by our troops, to prevent any mistake by firing upon each other, and also to assist the firing from the [landing support] gunboats... ."

He illustrates with a sketch of a simple rectangular flag comprised of two horizonal bars, white on top, blue beneath. No dimensions or other details given.