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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year ended December 31, 2002

Commission File Number: 0-50106

LEGENDS FINANCIAL HOLDINGS, INC.




(Name of Small Business Issuer in its charter)


|                                                                         |  |                                                
|------------------------------------------------------------------------ |  | -----------------------------------------------
|Tennessee
(State or other jurisdiction of
incorporation or organization) |  | 32-0008963
(I.R.S. Employer
Identification No.)

|                                                                                        |  |                 
|--------------------------------------------------------------------------------------- |  | ----------------
|310 North First Street, Clarksville, Tennessee
(Address of principal executive offices) |  | 37040
(Zip Code)

(931) 503-1234

(Issuers telephone number)


Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $1.00 par value per share

(Title of Class)


Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

YES  [ ]         NO   [X ]

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB [X]

The issuers revenues for the fiscal year ended December 31, 2002 were
$6,840,000

The aggregate market value of the issuers voting stock held by
non-affiliates, computed by reference to the price at which the stock was sold
as of December 31, 2002, is $21,541,434 for 1,175,201 shares, at an estimated
$18.33 per share.





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As of December 31, 2002, 1,379,083 shares of the issuers Common Stock
were outstanding.

Transitional Small Business Disclosure Format (check one):

YES   [ ]   NO   [X]

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrants definitive proxy statement, which were filed
with the Securities and Exchange Commission on March 21, 2003, are incorporated
by reference into Part III of this annual report on Form 10-KSB.





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TABLE OF CONTENTS



|           |                                                                                                                         |  |  |  |  |  |  | 
|---------- | ----------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I    
|           | ITEM 1. DESCRIPTION OF BUSINESS                                                                                        
|           | ITEM 2. DESCRIPTION OF PROPERTY                                                                                        
|           | ITEM 3. LEGAL PROCEEDINGS                                                                                              
|           | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS                                                                
|PART II   
|           | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS                                          
|           | ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS VALERIE                   
|           | ITEM 7. FINANCIAL STATEMENTS                                                                                           
|           | ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                           
|PART III  
|           | ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
|           | ITEM 10. EXECUTIVE COMPENSATION                                                                                        
|           | ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                
|           | ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                
|           | ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                                                                              
|           | ITEM 14. CONTROLS AND PROCEDURES                                                                                       
|SIGNATURES



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CROSS REFERENCE INDEX

TO


FORM 10-KSB


Certain information required by Form 10-KSB is incorporated by reference
from the annual report to shareholders as indicated below. Only that
information expressly incorporated by reference is deemed filed with the
Commission.

|         |  |                                                                                                                 |  |      |    |  |  | 
|-------- |  | --------------------------------------------------------------------------------------------------------------- |  | ---- | -- |  |  | 
|PART I  
|ITEM 1.  |  | DESCRIPTION OF BUSINESS                                                                                         |  |      | *  | 
|ITEM 2.  |  | DESCRIPTION OF PROPERTY                                                                                         |  |      | *  | 
|ITEM 3.  |  | LEGAL PROCEEDINGS                                                                                               |  |      | *  | 
|ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                             |  | None |   
|PART II 
|ITEM 5.  |  | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS                                                        |  |      | *  | 
|ITEM 6.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION                                                       |  |      | *  | 
|ITEM 7.  |  | FINANCIAL STATEMENTS                                                                                            |  |      | *  | 
|ITEM 8.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE                            |  | None |   
|PART III
|ITEM 9.  |  | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT |  |      | ** | 
|ITEM 10. |  | EXECUTIVE COMPENSATION                                                                                          |  |      | ** | 
|ITEM 11. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT                                                  |  |      | ** | 
|ITEM 12. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                  |  |      | ** | 
|ITEM 13. |  | EXHIBITS AND REPORTS ON FORM 8-K                                                                                |  |      | *  | 
|ITEM 14. |  | CONTROL AND PROCEDURES                                                                                          |  |      | *  | 

*       This information is included in this annual report on Form 10-KSB and is not
incorporated by reference from Legends Financials definitive proxy statement.

**     The material required by Items 9 through 12 is incorporated by reference
from Legends Financials definitive proxy statement pursuant to Instruction
E(3) of Form 10-KSB. Legends Financial filed a definitive proxy statement with
the Securities and Exchange Commission on March 21, 2003.

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CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-KSB of Legends Financial Holdings, Inc., a
Tennessee corporation (Legends Financial), contains or incorporates by
reference certain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the Securities Act), and
Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange
Act), which are intended to be covered by the safe harbors created thereby.
Those statements include, but may not be limited to, the discussions of Legends
Financials expectations concerning its future profitability, operating
performance, growth strategy and its assumptions regarding other matters. Also,
when any of the words believes, expects, anticipates, intends,
estimates, plans, or similar terms or expressions, are used in this Annual
Report on Form 10-KSB, forward-looking statements are being made.

You should be aware that, while Legends Financial believes the
expectations reflected in those forward-looking statements are reasonable, they
are inherently subject to risks and uncertainties which could cause Legends
Financials future results and stockholder values to differ materially from
Legends Financials expectations. These factors are disclosed in Managements
Discussion and Analysis of Financial Condition and Results of Operation set
forth herein. Because of these factors, there can be no assurance that the
forward-looking statements included or incorporated by reference herein will
prove to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included or incorporated by reference herein, you
should not regard the inclusion of such information as a representation by
Legends Financial or any other person that the objectives and plans of Legends
Financial will be achieved. In addition, Legends Financial does not intend to,
and is not obligated to, update these forward-looking statements after the date
of this Annual Report on Form 10-KSB, even if new information, future events or
other circumstances have made them incorrect or misleading as of any future
date.




PART I




ITEM 1. DESCRIPTION OF BUSINESS

General

Legends Financial is a corporation formed on February 27, 2002 under the
laws of the State of Tennessee for the purpose of acquiring Legends Bank, a
Tennessee banking corporation (Legends Bank), by means of a share exchange
and becoming a registered bank holding company under the Federal Reserve Act.
On April 16, 2002, the shareholders of Legends Bank approved a Plan of Share
Exchange (the Plan of Share Exchange) between Legends Financial and Legends
Bank whereby the common shares of Legends Bank were exchanged, on a one for one
basis, for common shares of Legends Financial. The exchange became effective on
July 1, 2002.

Legends Bank is a banking corporation incorporated under the laws of
Tennessee in 1998. Legends Banks deposit accounts are insured under the
Federal Deposit Insurance Act (FDIA), up to the maximum applicable limits
thereof. Legends Bank has its main office at 310 North First Street,
Clarksville, Tennessee, and branch locations at 2250-O Wilma Rudolph Boulevard
and 1950 Madison Street, also in Clarksville.

Legends Bank considers its primary market for loans and deposits to be
individuals, small-to-medium size businesses, and professionals within Legends
Banks primary trade area. Legends Bank offers a full range of depository
products, including checking accounts; savings accounts; money market deposit
accounts; various types of time deposits; individual retirement accounts;
mobile branch services;

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lockbox services and safe deposit services. Legends Bank also offers its
customers loans for consumer, commercial, and real estate purposes, and credit
services. Legends Banks principal source of income is from interest earned on
personal, commercial and real estate loans of various types. Legends Bank has
correspondent banking relationships with a variety of banks, including certain
regional banks.

Legends Bank is subject to the regulatory authority of the Tennessee
Department of Financial Institutions (TDFI) and the Federal Deposit Insurance
Corporation (FDIC). Legends Financial is regulated by the Board of Governors
of the Federal Reserve System (the Federal Reserve Board).

During 2002, Legends Bank formed a wholly owned subsidiary, Legends
Financial Services, Inc. The subsidiary is affiliated with Community Bank
Marketing and Royal Alliance and offers customers a wide array of financial
products. Through its subsidiary, Legends Bank is able to offer annuities,
stock, bonds, mutual funds as well as other investment products. These
investment products are not federally insured and there is possibility of
principal loss.

Market Area

Legends Banks primary service area encompasses Clarksville, Montgomery
County, Tennessee and the surrounding counties in Tennessee and Kentucky.
Clarksville is situated on the Tennessee-Kentucky border approximately 40 miles
northwest of Nashville, Tennessee. Clarksvilles population is over 100,000,
with the county totaling 135,000 people. Clarksville is home to Austin Peay
State University, which is part of the Tennessee Regents higher education
system with an enrollment of 7,000. A factor effecting Clarksvilles growth is
the proximity to Fort Campbell, Kentucky, home of the 101st Airborne Division
as well as other special forces outfits. There are over 23,000 soldiers and
40,000 family members that reside at Fort Campbell. Based on comparable data
available on a statewide and national level, the local economy appears to be in
better relative health than both Tennessee and the United States. The local
retail, real estate and construction sectors are all showing positive growth.
The data indicates the local economy is experiencing overall modest but stable
growth. Today, Clarksville is Tennessees fifth largest and third fastest
growth city.

Employees

As of December 31, 2002, Legends Bank had 38 full-time employees, of which
16 were Bank officers, and five people employed on a part-time basis. Legends
Banks employees are not represented by any union or other collective
bargaining agreement and Legends Bank believes its employee relations are
satisfactory.

Investment Policy

The objective of Legends Banks investment policy is to invest funds not
otherwise needed to meet the loan demand of its market area to earn the maximum
return for Legends Bank, yet still maintain sufficient liquidity to meet
fluctuations in Legends Banks loan demand and deposit structure. In doing so,
Legends Bank balances the market and credit risks against the potential
investment return, makes investments compatible with the pledge requirements of
Legends Banks deposits of public funds, maintains compliance with regulatory
investment requirements, and assists the various public entities with their
financing needs. Thomas Bates, Jr. and Jan Roberts are authorized to execute
security transactions for the investment portfolio based on the decisions of
the investment committee. All the investment transactions occurring since the
previous board of directors meeting are reviewed by the board at its next
monthly meeting, and the entire portfolio is reviewed on a semi-annual basis.
The investment policy allows portfolio holdings to include short-term
securities purchased to provide Legends Banks needed liquidity and longer term
securities purchased to generate level income for Legends Bank over periods of
interest rate fluctuations.

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Loan Portfolio

Legends Bank had a total of $79.5 million in loans at December 31, 2002.
As the loan portfolio is concentrated in Montgomery County, there is a risk
that the ability of borrowers to repay the loans could be affected by changes
in local economic conditions. The loan portfolio consists primarily of real
estate, commercial, farming and installment loans. Commercial loans consist of
real estate loans, term loans, or lines of credit. Maturity of term loans is
normally limited to three to five years. Conventional real estate loans may be
made up to 89% of the appraised value or purchase cost of the real estate, with
maturities generally 5 years or less and amortization not to exceed 30 years.
Installment loans are based on the earning capacity and vocational stability of
the borrower.

Loan Policy

All lending activities of Legends Bank are under the direct supervision
and control of Legends Banks credit approval committee and the credit review
committee. The credit approval and review committees enforce loan
authorizations for each officer, decide on loans exceeding such limits, service
all requests for officer credits to the extent allowable under current laws and
regulations, administer all problem credits, and determine the allocation of
funds for each lending division.

The Executive Loan Committee approves loans over $400,000 while the Board
of Directors approves loans of $1,000,000 or more and reviews all new loans
made the preceding month. Loans which are 30 days or more past due are
reviewed monthly.

Real Estate Loans. Commercial real estate loans are secured primarily by
office, industrial and retail properties located in Clarksville. Included in
this category are loans secured by farmland. These types of loans amounted to
$28.5 million or 36% of the total loan portfolio as of December 31, 2002.
Commercial real estate loans typically may be amortized up to 20 years, but
frequently have maturities at five years or less. Commercial real estate loans
are originated with a loan-to-value ratio generally not exceeding 75%.
Commercial real estate loans are generally larger and involve a greater degree
of risk than mortgage loans.

Construction/Land development loans total $14.7 million or 18% of the
total portfolio on December 31, 2002. These loans are primarily used to fund
residential construction. Loans typically are set up for one to two years with
adjustable rates and are repaid with the sale of collateral. Construction loans
for residential construction are originated with a loan-to-value ratio
originally not exceeding 80%, and construction loans for non-residential
construction and land development are originated with a loan-to-value ratio
generally not exceeding 75%. The Clarksville area continues to prosper in the
residential home market.

Residential real estate loans representing loans secured by 1-4 family
mortgages. These loans, as of December 31, 2002, including junior loans and
home equity lines, total $14.5 million or 18% of the total loan portfolio.
Single family residence loans are originated for terms up to 30-year
amortization. Advances are typically limited to the lessor of 80% of appraised
value or purchased price. While amortization schedules may be for 30 years,
interest rates on real estate loans are generally not set for a period longer
than three to five years. Residential real estate loans are originated with a
loan-to-value ratio generally not exceeding 89.9%.

Commercial Business Loans. Commercial business loans are business loans
that are not secured by real estate and are dependent on business cash flows
for repayment. At December 31, 2002, commercial loans amounted to $15.9 million
or 20% of the total loan portfolio. Half of the outstanding commercial loans
are term loans, and half are commercial lines of credit.

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Consumer Loans. Consumer loans are made to provide a wide range of
financial services to customers and to create stronger ties to customers.
Consumer loans are typically five years or shorter and tend to carry higher
yields, helping maintain a profitable spread between average loan yields and
our cost of funds. Underwriting standards for consumer loans include assessment
of the applicants repayment ability. Consumer loan repayment are dependent on
the borrowers continuing financial stability and are likely to be adversely
affected by job loss, divorce and illness. As of December 31, 2002, consumer
loans amounted to $4.1 million or 5% of the total loan portfolio.

Management of Legends Bank periodically reviews the loan portfolio,
particularly non-accrual and renegotiated loans. The review may result in a
determination that a loan should be placed on a non-accrual status for income
recognition. In addition, to the extent that management identifies potential
losses in the loan portfolio, it reduces the book value of such loans, through
charge-offs, to their estimated collectible value. Legends Banks policy is to
classify as non-accrual any loan on which payment of principal or interest is
90 days or more past due except where there is adequate collateral to cover
principal and accrued interest and the loan is in the process of collection.
Management defines in the process of collection as that point where the
customer has agreed to an accelerated repayment plan to bring the loan current,
which definition is in accordance with generally accepted accounting principles
(GAAP) but is not in accordance with definition as contained in Banking
Bulletin 91-19. No concessions are granted and late fees are collected. In
addition, a loan will be classified as non-accrual if, in the opinion of the
management, based upon a review of the borrowers or guarantors financial
condition, collateral value or other factors, payment is questionable, even
though payments are not 90 days or more past due.

When a loan is classified as non-accrual, any unpaid interest is reversed
against current income. Interest is included in income thereafter only to the
extent received in cash. The loan remains in a non-accrual classification
until such time as the loan is brought current, when it may be returned to
accrual classification. When principal or interest on a non-accrual loan is
brought current, if in managements opinion future payments are questionable,
the loan would remain classified as non-accrual. After a non-accrual or
renegotiated loan is charged off, any subsequent payments of either interest or
principal are applied first to any remaining balance outstanding, then to
recoveries and lastly to income.

The large number of consumer installment loans and the relatively small
dollar amount of each makes an individual review impracticable. It is Legends
Banks policy to charge off any consumer installment loan, which is past due
120 days or more.

In addition, mortgage loans secured by real estate are placed on
non-accrual status when the mortgagor is in bankruptcy, or foreclosure
proceedings are instituted. Any accrued interest receivable remains an
obligation of the borrower.

Legends Banks underwriting guidelines are applied to four major
categories of loans, commercial and industrial, consumer, agricultural and real
estate which includes residential, construction and development and certain
other real estate loans. Legends Bank requires its loan officers and loan
committee to consider the borrowers character, the borrowers industry and the
economic environment in which the loan will be repaid. Before approving a
loan, the loan officer or committee must determine that the borrower is
basically honest and creditworthy, determine that the borrower is a capable
manager, understand the specific purpose of the loans, understand the source
and plan of repayment, determine that the purpose, plan and source of repayment
as well as collateral are acceptable, reasonable and practical given the normal
framework within which the borrower operates.

The accrual of interest income is discontinued when it is determined that
the collection of interest is less probable or the collection of any amount of
principal is doubtful. The decision to place a loan on a non-accrual status is
based on an evaluation of the borrowers financial condition, collateral
liquidation

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value, economic and business conditions and other factors that affect the
borrowers ability to pay. At the time a loan is placed on a non-accrual
status, the accrued but unpaid interest is also evaluated as to collectability.
If collectability is doubtful, the unpaid interest is charged off.
Thereafter, interest on non-accrual loans is recognized only as received.
Legends Bank had $268,000 loans on non-accrual status at December 31, 2002.

At December 31, 2002, there were loans totaling $2,013,000, which were
included in Legends Banks internal classified loans list. Loans are listed as
classified when information obtained about possible credit problems of the
borrower has prompted management to question the ability of the borrower to
comply with the repayment terms of the loan agreement. The loan
classifications do not represent or result from trends or uncertainties which
management expects will be materially impacted by economic or other conditions.

At December 31, 2002, there were no loan concentrations that exceeded ten
percent of total loans. Loan concentrations are amounts loaned to a multiple
number of borrowers engaged in similar activities which would cause them to be
similarly impacted by economic or other conditions.

There were no material amounts of other interest-bearing assets
(interest-bearing deposits with other banks, municipal bonds, etc.) at December
31, 2002 which would be required to be disclosed as past due, non-accrual,
restructured or potential problem loans, if such interest-bearing assets were
loans.

Credit Risk Management and Reserve for Loan Losses

Credit risks and exposure to loss are inherent parts of Legends Banking
business. Management seeks to manage and minimize these risks through its loan
and investment policies and loan review procedures. Management establishes and
continually reviews lending and investment criteria and approval procedures
that it believes reflect the risk sensitive nature of Legends Bank. The loan
review procedures are set to monitor adherence to the established criteria and
to ensure that on a continuing basis such standards are endorsed and
maintained.

The allowance for possible loan losses is an amount that management
believes will be adequate to absorb possible losses on existing loans that may
become uncollectible. The provision for possible loan losses charged to
operating expense is based on past loan loss experience and other factors,
which, in managements judgment, deserve current recognition in estimating
possible loan losses. Such other factors considered by management include
growth and composition of the loan portfolio, review of specific loan problems,
the relationship of the allowance for possible loan losses to outstanding
loans, adverse situations that may affect the borrowers ability to repay, the
estimated value of any underlying collateral and current economic conditions
that may affect the borrowers ability to pay.

Management conducts a continuous review of all loans that are delinquent,
previously charged down or loans which are determined to be potentially
uncollectible. Loan classifications are reviewed periodically by a person
independent of the lending function. The Board of Directors periodically
reviews the adequacy of the allowance for possible loan loss.

The loan portfolio is regularly reviewed and management determines the
amount of loans to be charged off. In addition, such factors as Legends Banks
previous loan loss experience, prevailing and anticipated economic conditions,
industry concentrations and the overall quality of the loan portfolio are
considered. While management uses available information to recognize losses on
loans and real estate owned, 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
the allowances for losses on loans and real estate owned. Such agencies may
require Legends Bank to recognize additions to the allowances based on their
judgments about information available at the time of

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their examination. In addition, any loan or portion thereof which is
classified as a loss by regulatory examiners is charged off.

The reserve for loan losses is increased by provisions charged to
operating expense. The reserve is reduced by charging off loans or portions of
loans at the time that are deemed by management to be uncollectible and
increased when loans previously charged off are recovered. The resulting
reserve for loan losses is viewed by management as a single, unallocated
reserve available for all loans and, in managements opinion, is adequate to
provide for reasonably foreseeable potential loan losses. Rules and formulas
relative to the adequacy of the reserve, although useful as guidelines to
management, are not rigidly applied. The reserve for loan losses was $879,000
at year-end 2002 or 1.13% of loans outstanding, net of unearned income.

Competition

Legends Bank encounters strong competition in making loans, acquiring
deposits and offering other services. Competition among financial institutions
is based upon interest rates offered on deposit accounts, interest rates
charged on loans, other credit and service charges relating to loans, the
quality and scope of the services rendered, the convenience of banking
facilities and, in the case of loans to commercial borrowers, relative lending
limits. Legends Bank competes with other commercial banks, savings and loan
associations, credit unions and finance companies, mutual funds, insurance
companies, brokerage and investment banking companies, and other financial
intermediaries. Many of these competitors, some of which are affiliated with
large bank holding companies, have substantially greater resources and lending
limits, and may offer certain services that Legends Bank does not currently
provide. In addition, many of Legends Banks non-bank competitors are not
subject to the same extensive federal regulations that govern bank holding
companies and federally insured banks.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(Riegle-Neal) authorized bank holding companies to acquire banks and other
bank holding companies without geographic limitations beginning September 30,
1995. The arrival of interstate banking has further increased the
competitiveness of Legends Banking industry.

In addition, beginning June 1, 1997, Riegle-Neal authorized interstate
mergers and consolidations of existing banks, provided that neither banks home
state had opted out of interstate branching by May 31, 1997. Tennessee did not
opt out of interstate branching. Interstate branching provides that once a
bank has established branches in a state through an interstate merger, Legends
Bank may establish and acquire additional branches at any location in the state
where any bank involved in the interstate merger could have established or
acquired branches under applicable federal or state law.

The continued deregulation of the financial services industry may have a
detrimental effect on Legends Banks long-term growth and profitability.

Supervision and Regulation

Legends Bank is regulated primarily by the TDFI and FDIC. Legends Bank is
also subject to various requirements and restrictions under federal and state
law, including requirements to maintain reserves against deposits, restrictions
on the types and amounts of loans that may be granted and the interest that may
be charged thereon and limitations on the types of investment securities that
may be purchased. Various consumer laws and regulations also affect the
operations of Legends Bank. In addition to the impact of regulation, commercial
banks are also affected significantly by the actions of the Federal Open Market
Committee (FOMC) of the Federal Reserve as a differentiating factor. The
FOMCs actions on interest rates significantly impacts the net interest margin
and interest rate risk management activities of Legends Bank.

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Legends Financial is regulated by the Federal Reserve Board under the Bank
Holding Company Act of 1956, which requires every bank holding company to
obtain the prior approval of the Federal Reserve Board before:



| | - |  | acquiring more than 5% of the voting shares of any bank, or       
| | - |  | ------------------------------------------------------------------
| |   |  |                                                                   
| | - |  | acquiring all or substantially all
of the assets of a bank, and   
| |   |  |                                                                   
| | - |  | before merging or consolidating with another bank holding company.

The Federal Reserve Board has maintained that a bank holding company must
serve as a source of financial strength to its subsidiary banks. In adhering to
the Federal Reserve Board policy, Legends Financial may be required to provide
financial support for a subsidiary bank, such as Legends Bank, at a time when,
in the absence of such Federal Reserve Board policy, Legends Financial may not
deem it advisable to provide such assistance.

A bank holding company is generally prohibited from acquiring control of
any company which is not a bank and from engaging in any business other than
the business of banking or managing and controlling banks. However, there are
certain activities which have been identified by the Federal Reserve Board to
be so closely related to banking as to be a proper incident thereto and thus
permissible for bank holding companies.

As a bank holding company, Legends Financial is required to file with the
Federal Reserve Board an annual report of its operations at the end of each
fiscal year and such additional information as the Federal Reserve Board may
require pursuant to Bank Holding Company Act. The Federal Reserve Board may
also make examinations of Legends Financial and each of its subsidiaries.

From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial services providers. Proposals to change the laws and regulations
governing the operations and taxation of banks, bank holding companies and
other financial service providers are frequently made in Congress, before the
Tennessee legislature and the other various bank regulatory agencies. The
likelihood of these changes occurring and the effect they may have on Legends
Banks and Legends Financials operations are difficult to predict.

Financial Modernization Legislation

The Gramm-Leach-Bliley Act (GLBA) authorizes affiliations between
banking, securities and insurance firms and authorizes bank holding companies
and national banks to engage in a variety of new financial activities. Among
the new activities that are permitted to bank holding companies are securities
and insurance brokerage, securities underwriting, insurance underwriting and
merchant banking. The GLBA imposes new requirements on financial institutions
with respect to customer privacy. The GLBA generally prohibits disclosure of
customer information to non-affiliated third parties unless the customer has
been given the opportunity to object and has not objected to such disclosure.
Financial institutions are further required to disclose their privacy policies
to customers annually.

The GLBA contains significant revisions to the FHLB System. In addition to
other provisions, the GLBA expands the permissible uses of FHLB advances by
community financial institutions (under $500 million in assets) to include
funding loans to small businesses, small farms and small agri-businesses. The
GLBA contains a variety of other provisions including a prohibition against ATM
surcharges unless the customer has first been provided notice of the imposition
and amount of the fee. Legends Bank does not anticipate a material impact on
its operation from this legislation at this time.

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State Regulation of Legends Bank

Legends Bank, as a Tennessee state chartered bank, is subject to primary
supervision, periodic examination and regulation by the TDFI and the FDIC. If
as a result of an examination of a bank, the FDIC should determine the
financial condition, capital resources, asset quality, earnings prospects,
management, liquidity or other aspects of Legends Banks operations are
unsatisfactory or that Legends Bank or its management is violating or has
violated any law or regulation, various remedies are available to the FDIC.
Such remedies include the power to enjoin unsafe or unsound practices, to
require affirmative action to correct any conditions resulting from any
violation or practice, to issue an administrative order that can be judicially
enforced, to direct an increase in capital, to restrict the growth of Legends
Bank, to assess civil money penalties, to remove officers and directors and
ultimately to terminate a banks deposit insurance. The Commissioner of the
TDFI has many of the same remedial powers, including the power to take
possession of a bank whose capital becomes impaired. As of
December 31, 2002,
Legends Bank is not the subject of any such action by the FDIC or the TDFI.

The deposits of Legends Bank are insured by the FDIC in the manner and
extent provided by law. For this protection, Legends Bank pays a semi-annual
statutory assessment. Although Legends Bank is not currently a member of the
Federal Reserve System, it is subject to certain regulations of the Federal
Reserve Board.

Various requirements and restrictions under the laws of the State of
Tennessee and the United States affect the operations of Legends Bank. State
and federal statutes and regulations relate to many aspects of Legends Banks
operations, including reserves against deposits, interest rates payable on
deposits, loans, investments, mergers and acquisitions, borrowings, dividends,
locations of branch offices and capital requirements. Further, Legends Bank is
required to maintain certain levels of capital.

Capital Adequacy

Under the Federal Reserve Boards risk-based capital guidelines applicable
to Legends Bank, the minimum ratio of capital to risk-weighted assets
(including certain off-balance sheet items, such as standby letters of credit)
is 8%. To be considered a well-capitalized bank under the guidelines, a bank
must have a total risk-based capital ratio in excess of 10%. Under these
guidelines, at least half of the total capital is to be comprised of common
equity, retained earnings and a limited amount of perpetual preferred stock,
after subtracting certain intangibles, and certain other adjustments (Tier 1
capital). The remainder may consist of perpetual debt, mandatory convertible
debt securities, a limited amount of subordinated debt, other preferred stock,
after subtracting certain intangibles, and certain amount of loan loss reserve
(Tier 2 capital). Banks are subject to similar capital requirements adopted
by the FDIC. In addition, the Federal Reserve Board, the FDIC and the Office
of the Comptroller of the Currency have adopted a minimum leverage ratio (Tier
1 capital to adjusted quarter average assets) of 4%. Generally, banking
organizations are expected to operate well above the minimum required capital
level of 4% unless they meet certain specified criteria, including that they
have the highest regulatory ratings. Most banking organizations are required
to maintain leverage ratio of 4% plus an additional cushion of at least 1% to
2%. The guidelines also provide that banking organizations experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels without
significant reliance upon intangible assets. Failure to meet capital
guidelines could subject a banking institution to a variety of enforcement
remedies available to federal regulatory authorities, including the termination
of deposit insurance by the FDIC, issuance of a capital directive, prohibition
on brokered deposits and certain other restrictions.

On December 31, 2002, Legends Bank had a Tier 1 capital ratio of 15.6%, a
total risk-based capital ratio of 16.6% and a leverage ratio of 12.1%.

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Payment of Dividends

The payment of dividends by Legends Financial depends to a great extent on
the ability of Legends Bank to pay dividends to Legends Financial. Legends
Bank is subject to the Tennessee Banking Act, which provides that Legends Bank
may not declare dividends in any calendar year that exceeds the total of its
net income of that year combined with its retained net income of the preceding
two years without the approval of the TDFI. Thereafter, 10% of net profits
must be transferred to capital surplus prior to payment of dividends until
capital surplus equals capital stock. Legends Bank is also subject to the
minimum capital requirements of the FDIC which impact Legends Banks ability to
pay dividends. If Legends Bank fails to meet these standards, it may not be
able to pay dividends or to accept additional deposits because of regulatory
requirements.

If, in the opinion of the applicable federal bank regulatory authority, a
depository institution is engaged in or is about to engage in an unsafe or
unsound practice (which, depending on the financial condition of the depository
institution, could include the payment of dividends), such authority may
require that such institution cease and desist from such practice. The federal
banking agencies have indicated that paying dividends that deplete a depository
institutions capital base to an inadequate level would be such an unsafe and
unsound banking practice. Moreover, the Federal Reserve Board, the Comptroller
of the Currency and the FDIC have issued policy statements which provide that
bank holding companies and insured depository institutions generally should
only pay dividends out of current earnings.

The payment of dividends by Legends Financial may also be affected or
limited by other factors, such as the requirement of Legends Bank to maintain
adequate capital above regulatory guidelines. On September 17, 2002, Legends
Financials board of directors declared a stock-split effected in the form of a
dividend of one share of Legends Financials common stock for every five of its
shares issued and outstanding.

Loans in Bankruptcy

In June and September 2001, Legends Bank made two loans totaling
approximately a $575,000 to a customer. The loans were secured by medical
equipment owned by the borrower. In addition, the loans were guaranteed by a
group of physicians. The borrower dissolved and the guarantors subsequently
filed for bankruptcy protection. In Managements opinion, the loans were made
based on fraudulent representations and are therefore improperly included by
the guarantors in the petition for bankruptcy. Management also believes the
guarantors have the ability to repay the debt if it is excluded from
the Bankruptcy. Management is pursuing exclusion of these loans from
the Bankruptcy. At December 31, 2001, Legends Bank made a specific allocation of
$200,000 to the allowance for loan losses related to these loans. In addition,
approximately $45,000 has been recovered related to the sale of the medical
equipment securing these loans. An additional $330,000 was added to the
allowance for loan losses during the first nine months of 2002 related to these
loans. These loans were charged off in 2002. Total charge-offs for the year
ended December 31, 2002 were $628,000.

Management believes that the circumstances related to these loans is an
isolated occurrence and does not believe that this represents a trend or
pattern of poor lending performance or monitoring that would adversely affect
the consolidated financial statements.




ITEM 2. DESCRIPTION OF PROPERTY

Legends Banks main banking office was completed and opened for full
operations in January 2000. This facility also serves as the principal office
of Legends Financial and of Legends Bank. The

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14,000 square foot facility is located at 310 North First Street in the
central business district of Clarksville. Legends Bank owns the property on
which Legends Financials principal office is located.

Legends Bank currently operates three full service banking locations at
310 North First Street, 1950 Madison Street and 2250-O Wilma Rudolph Blvd.
Legends Bank leases the property for the offices located on Madison Street and
Wilma Rudolph Blvd. Legends Bank owns its mobile branch.




ITEM 3. LEGAL PROCEEDINGS

From time to time Legends Bank is named as a defendant in suits arising
from the ordinary conduct of its affairs. In the opinion of management, the
ultimate outcome of the litigation to which Legends Bank is a party as of the
date of this Form 10-KSB will not adversely affect its financial condition.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

No matter was submitted to a vote of security holders during the fourth
quarter of Legends Financials fiscal year ending December 31, 2002.

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PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The common stock of Legends Financial is not traded through an organized
exchange nor is there a known active trading market. The number of shareholders
of record at December 31, 2002 was 1,094. Holders of Legends Financials common
stock are entitled to receive dividends when declared by the Board of Directors
out of funds legally available. Dividends will be affected by other factors
including applicable government regulations and policies. In September of 2002,
the Board of Directors declared a stock split effective in the form of a
dividend of one for every five shares. The following table shows the quarterly
range of high and low sale prices for Legends Financials stock during the
fiscal years 2002, 2001, and 2000. All sale prices have been retroactively
adjusted to reflect the effects of the stock split. These sale prices represent
known transactions and do not necessarily represent all trading transactions
for the periods.

|     |       |  |  |                |  |              |       |              |  |   |       | 
|---- | ----- |  |  | -------------- |  | ------------ | ----- | ------------ |  | - | ----- | 
|Year |       |  |  | High           |  | Low         
|     |       |  |  |                |  |             
|     | 2000: |  |  | First Quarter  |  | No Trades(1) |       | No Trades(1)
|     |       |  |  | Second Quarter |  | $            | 14.58 |              |  | $ | 14.58 | 
|     |       |  |  | Third Quarter  |  | $            | 15.00 |              |  | $ | 14.58 | 
|     |       |  |  | Fourth Quarter |  | $            | 16.67 |              |  | $ | 15.00 | 
|     | 2001: |  |  | First Quarter  |  | $            | 18.75 |              |  | $ | 16.67 | 
|     |       |  |  | Second Quarter |  | $            | 18.75 |              |  | $ | 18.75 | 
|     |       |  |  | Third Quarter  |  | $            | 18.75 |              |  | $ | 16.67 | 
|     |       |  |  | Fourth Quarter |  | $            | 18.75 |              |  | $ | 16.67 | 
|     | 2002: |  |  | First Quarter  |  | $            | 18.75 |              |  | $ | 15.00 | 
|     |       |  |  | Second Quarter |  | $            | 18.75 |              |  | $ | 15.83 | 
|     |       |  |  | Third Quarter  |  | $            | 17.50 |              |  | $ | 15.83 | 
|     |       |  |  | Fourth Quarter |  | $            | 18.33 |              |  | $ | 17.00 | 



---

|(1) |  | Management is unaware of any trades in the shares of its common stock for
the period indicated.
|--- |  | -----------------------------------------------------------------------------------------------

The payment of cash dividends is subject to the discretion of Legends
Financials board of directors. Legends Financials ability to pay dividends is
dependent on cash dividends paid to it by Legends Bank. The ability of Legends
Bank to pay dividends to Legends Financial is restricted by applicable
regulatory requirements. For more information on these restrictions, please see
PART I, ITEM 1 DESCRIPTION OF BUSINESS - Payment of Dividends. No assurances
can be given that any dividend will be declared or, if declared, what the
amount of such dividend would be or whether such dividends would continue in
future periods.

On September 17, 2002, Legends Financials board of directors declared a
dividend of one share of Legends Financials common stock for each five shares
of its common stock issued and outstanding. The dividend stock was distributed
to Legends Financials stockholders on or about October 31, 2002.

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ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS VALERIE

General

On February 27, 2002, the stockholders of Legends Bank voted to exchange
their stock for stock in Legends Financial. Effective July 1, 2002, Legends
Financial became a bank holding company within the meaning of
Bank Holding Company Act of 1956, as amended. The transaction has been treated
as a reorganization for accounting purposes. For comparative purposes all
financial information of Legends Bank prior to the reorganization has been
presented or included in the financial information of Legends Financial.
Management believes that the holding company structure will permit greater
flexibility in the expansion of Legends Financials present business and will
allow Legends Financial to be more responsive to its customers broadening and
changing financial needs.

Legends Bank is a state chartered bank which began operations on November
12, 1998. Legends Financial offers a wide range of banking services, including
checking, savings, and money market deposit accounts, certificates of deposit,
individual retirement accounts and loans for consumer, commercial and real
estate purposes and investment products through its wholly-owned subsidiary,
Legends Financial Services, Inc. The area served by Legends Financial is
Montgomery County, Tennessee and surrounding counties of Middle Tennessee.
Services are provided at the main office and two branches in Clarksville,
Tennessee. Legends Financial serves as a financial intermediary whereby
its profitability is determined to a large degree by the interest spread it
achieves and the successful measurement of risks. Legends Financials
management believes that its market area offers an environment for continued
growth and Legends Financials target market is local consumers, professionals
and small businesses. In that regard Legends Financial will open another
branch in 2003 in Clarksville, Montgomery County, Tennessee and an additional
branch in Dover, Stewart County, Tennessee.

The following discussion and analysis is designed to assist readers in
their analysis of Legends Financials financial statements and should be read
in conjunction with such financial statements.

Financial Condition

Balance Sheet Summary:Legends Financials total assets were $114,534,000
and $90,026,000 at December 31, 2002 and 2001, respectively, an increase of
27.2%. Loans, net of allowance for possible loan losses, totaled $76,901,000
and $62,056,000 at December 31, 2002 and 2001, respectively, an increase of
23.9% and investment securities totaled $24,593,000 and $19,740,000,
respectively, an increase of 24.6%. The increase in loans and securities was
primarily funded by an increase in deposits. The increase in securities also
resulted from an increase in unrealized gains of $210,000. Federal funds sold
increased to $1,225,000 as of December 31, 2002.

Total liabilities were $100,687,000 and $76,956,000 at December 31, 2002
and 2001, respectively, an increase of 30.8%. Stockholders equity was
$13,847,000 and $13,070,000, respectively, an increase of 5.9%. The increase
was primarily funded by an increase in deposits of $21,533,000 or 29.3% from
December 31, 2001 to December 31, 2002 and an increase in securities sold under
repurchase agreements of $3,682,000 for the same period. These increases were
slightly offset by $1,000,000 in repayment of advances from the Federal Home
Loan Bank. A more detailed discussion of assets, liabilities and capital
follows.

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Loans



| |                                
| | -------------------------------
| | Loan categories are as follows:

|                                       |       |   |              |        |            |  |        |       |            |   |        |        |  |  |      |       |  
|-------------------------------------- | ----- | - | ------------ | ------ | ---------- |  | ------ | ----- | ---------- | - | ------ | ------ |  |  | ---- | ----- | -
|                                       |       |   | December 31,
|                                       |       |   |             
|                                       |       |   | 2002         |        | 2001      
|                                       |       |   |              |        |           
|                                       |       |   | Amount       |        | Percentage |  | Amount |       | Percentage
|(In Thousands)                         |       |   |              |        |            |  |        |      
|Commercial, financial and
agricultural |       | $ | 15,947       |        |            |  | 20.5   | %     |            | $ | 17,641 |        |  |  | 28.1 | %    
|Installment                            |       |   | 4,090        |        |            |  | 5.3    |       |            |   | 4,222  |        |  |  | 6.7  |      
|Real estate  mortgage                 |       |   | 43,022       |        |            |  | 55.3   |       |            |   | 28,202 |        |  |  | 44.9 |      
|Real estate  construction             |       |   | 14,721       |        |            |  | 18.9   |       |            |   | 12,746 |        |  |  | 20.3 |      
|                                       |       |   |              |        |            |  |        |       |            |   |        |        |  |  |      |      
|                                       | Total |   | $            | 77,780 |            |  |        | 100.0 | %          |   | $      | 62,811 |  |  |      | 100.0 | %
|                                       |       |   |              |        |            |  |        |       |            |   |        |        |  |  |      |      

Loans are a large component of Legends Financials assets and are a
primary source of income. The loan portfolio is composed of four primary loan
categories: commercial, financial and agricultural; installment; real estate -
mortgage; and real estate - construction. The table above sets forth the loan
categories and the percentage of such loans in the portfolio at December 31,
2002 and 2001.

As represented in the table, primary loan growth was in real estate
mortgage loans, construction loans and commercial loans. Management is
increasing loans in an orderly fashion to maintain quality.

Banking regulators define highly leveraged transactions to include
leveraged buy-outs, acquisition loans, and recapitalization loans of an
existing business. Under the regulatory definition, at December 31, 2002 and
2001, Legends Financial had no highly leveraged transactions, and there were no
foreign loans outstanding.

Legends Financial follows the provisions of Statement of Financial
Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment
of a Loan and SFAS No. 118, Accounting by Creditors for Impairment of a Loan
- Income Recognition and Disclosures. These pronouncements apply to impaired
loans except for large groups of smaller-balance homogeneous loans that are
collectively evaluated for impairment including credit card, residential
mortgage, and consumer installment loans.

A loan is impaired when it is probable that Legends Financial will be
unable to collect the scheduled payments of principal and interest due under
the contractual terms of the loan agreement. Impaired loans are measured at
the present value of expected future cash flows discounted at the loans
effective interest rate, at the loans observable market price, or the fair
value of the collateral if the loan is collateral dependent. If the measure of
the impaired loan is less than the recorded investment in the loan, Legends
Financial shall recognize an impairment by creating a valuation allowance with
a corresponding charge to the provision for loan losses or by adjusting an
existing valuation allowance for the impaired loan with a corresponding charge
or credit to the provision for loan losses.

Legends Financials first mortgage single family residential and
installment loans which total approximately $14,598,000 and $9,947,000 and
$4,090,000 and $4,222,000, respectively at December 31, 2002 and 2001, are
divided into various groups of smaller-balance homogeneous loans that are
collectively evaluated for impairment and thus are not subject to the
provisions of SFAS Nos. 114 and 118. Substantially all other loans of Legends
Financial are evaluated for impairment under the provisions of SFAS Nos. 114
and 118.

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Legends Financial considers all loans subject to the provisions of SFAS
Nos. 114 and 118 that are on nonaccrual status to be impaired. Loans are
placed on nonaccrual status when doubt as to timely collection of principal or
interest exists, or when principal or interest is past due 90 days or more
unless such loans are well-secured and in the process of collection. Delays or
shortfalls in loan payments are evaluated with various other factors to
determine if a loan is impaired. Generally, delinquencies under 90 days are
considered insignificant unless certain other factors are present which
indicate impairment is probable. The decision to place a loan on nonaccrual
status is also based on an evaluation of the borrowers financial condition,
collateral, liquidation value, and other factors that affect the borrowers
ability to pay.

Generally, at the time a loan is placed on nonaccrual status, all interest
accrued on the loan in the current fiscal year is reversed from income, and all
interest accrued and uncollected from the prior year is charged off against the
allowance for loan losses. Thereafter, interest on nonaccrual loans is
recognized as interest income only to the extent that cash is received and
future collection of principal is not in doubt. If the collectibility of
outstanding principal is doubtful, such interest received is applied as a
reduction of principal. A nonaccrual loan may be restored to accruing status
when principal and interest are no longer past due and unpaid and future
collection of principal and interest on a timely basis is not in doubt. At
December 31, 2002 and 2001 Legends Bank had $268,000 and $18,000, respectively,
of loans on nonaccrual status.

Loans not on nonaccrual status are classified as impaired in certain cases
where there is inadequate protection by the current net worth and financial
capacity of the borrower or of the collateral pledged, if any. In those cases,
such loans have a well-defined weakness or weaknesses that jeopardize the
liquidation of the debt, and if such deficiencies are not corrected, there is a
probability that Legends Financial will sustain some loss. In such cases,
interest income continues to accrue as long as the loan does not meet Legends
Financials criteria for nonaccrual status.

Generally Legends Financial also classifies as impaired any loans the
terms of which have been modified in a troubled debt restructuring. Interest
is accrued on such loans that continue to meet the modified terms of their loan
agreements. At December 31, 2002 and 2001, Legends Financial had no loans that
have had the terms modified in a troubled debt restructuring.

Legends Financials charge-off policy for impaired loans is similar to its
charge-off policy for all loans in that loans are charged-off in the month when
they are considered uncollectible.

As of December 31, 2002 Legends Financial had impaired loans totaling
$2,013,000. A specific reserve of $244,000 has been established by management
related to these loans. The total amount of interest recognized during 2002 on
impaired loans was $143,000 As of December 31, 2001 Legends Financial had
impaired loans totaling $2,055,000. A specific reserve of $146,000 has been
established by management related to these loans. The total amount of interest
recognized on impaired loans was $120,000 in 2001.

The allowance for possible loan losses is discussed under Provision for
Possible Loan Losses. Legends Financial maintains its allowance for possible
loan losses at an amount considered by management to be adequate to provide for
the possibility of loan losses in the loan portfolio. Management has in place
a system of quality controls to identify and monitor problem loans. Management
believes the allowance for possible loan losses at December 31, 2002 to be
adequate.

Essentially all of Legends Financials loans originate from Montgomery and
adjacent Tennessee counties. Legends Financial seeks to exercise prudent risk
management in lending, including diversification by loan category and industry
segment, as well as by identification of credit risks.

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Legends Financials management believes there is a significant opportunity
to continue to increase the loan portfolio in Legends Financials primary
market area. Legends Financial has targeted commercial business lending,
commercial and residential real estate lending and consumer lending. Legends
Financial seeks to build a loan portfolio which is capable of adjusting to
swings in the interest rate market, and it is Legends Financials policy to
maintain a diverse loan portfolio not dependent on any particular market or
industrial segment. Management has set a goal for loans to approximate 80% of
deposits.

Securities

Securities increased 24.6% from $19,740,000 at December 31, 2001 to
$24,593,000 at December 31, 2002 and was a primary component of Legends
Financials earning assets. At December 31, 2002, the market value of Legends
Financials securities portfolio was greater than its amortized cost by
$255,000 or 1.0%. At December 31, 2001, the market value of Legends
Financials securities was greater than its amortized cost by $45,000 or 0.2%.
The weighted average yield (stated on a tax-equivalent basis, assuming a
Federal income tax rate of 34%) of the securities at December 31, 2002 was
4.42% as compared to an average yield of 6.03 at December 31, 2001.

Legends Financial has adopted the provisions of Statement of Financial
Accounting Standards No. 115 (SFAS No. 115), Accounting for Certain
Investments in Debt and Equity Securities. Under the provisions of the
Statement, securities are to be classified in three categories and accounted
for as follows:



| |  | Debt securities that the enterprise has the positive intent
and ability to hold to maturity are classified as held-to-maturity
securities and reported at amortized costs.                                                                                                                             
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are
classified as trading securities and reported at fair value, with
unrealized gains and losses included in earnings.                                                               
| 
| |  | Debt and equity securities not classified as either
held-to-maturity securities or trading securities are classified as
available-for-sale securities and reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a
separate component of stockholders equity.

Legends Financials classification of securities as of December 31, 2002
and 2001 is as follows:

|                                                                  |  |                    |        |        |  |           |        |        |  |   |        |           |  |   |        | 
|----------------------------------------------------------------- |  | ------------------ | ------ | ------ |  | --------- | ------ | ------ |  | - | ------ | --------- |  | - | ------ | 
|                                                                  |  | Available-For-Sale
|                                                                  |  |                   
|                                                                  |  | 2002               |        | 2001  
|                                                                  |  |                    |        |       
|                                                                  |  |                    |        |        |  | Estimated |        |        |  |   |        | Estimated
|                                                                  |  | Amortized          |        | Market |  | Amortized |        | Market
|                                                                  |  | Cost               |        | Value  |  | Cost      |        | Value 
|                                                                  |  |                    |        |        |  |           |        |       
|(In Thousands)                                                    |  |                    |        |        |  |           |        |        |  |   |        |           |  |   |        | 
|U.S. Treasury and other U.S. Government
agencies and corporations |  | $                  | 3,757  |        |  | $         | 3,736  |        |  | $ | 4,363  |           |  | $ | 4,345  | 
|Obligations of states and political
subdivisions                  |  |                    | 974    |        |  |           | 967    |        |  |   |       |           |  |   |       | 
|Mortgage-backed securities                                        |  |                    | 19,212 |        |  |           | 19,495 |        |  |   | 14,969 |           |  |   | 15,032 | 
|Federal Home Loan Bank stock                                      |  |                    | 233    |        |  |           | 233    |        |  |   | 201    |           |  |   | 201    | 
|The Bankers Bank stock                                           |  |                    | 162    |        |  |           | 162    |        |  |   | 162    |           |  |   | 162    | 
|                                                                  |  |                    |        |        |  |           |        |        |  |   |        |           |  |   |        | 
|                                                                  |  | $                  | 24,338 |        |  | $         | 24,593 |        |  | $ | 19,695 |           |  | $ | 19,740 | 
|                                                                  |  |                    |        |        |  |           |        |        |  |   |        |           |  |   |        | 

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No securities have been classified as trading or held-to-maturity
securities.

Deposits

Total deposits, which in the future are expected to be the principal
source of funds for Legends Financial, totaled $94,971,000 and $73,438,000 at
December 31, 2002 and 2001, respectively, representing an increase of
$21,533,000 or 29.3%. Legends Financial has targeted local consumers,
professionals, local governments and commercial businesses as its central
clientele; therefore, deposit instruments in the form of demand deposits,
savings accounts, money market demand accounts, certificates of deposits and
individual retirement accounts are offered to customers.

Management believes the Montgomery County area is a growing economic
market offering growth opportunities for Legends Financial; however, Legends
Financial competes with several of the larger bank holding companies that have
branch offices in this area; and therefore, no assurances of market growth can
be given. Even though Legends Financial is in a very competitive market,
management currently believes that its market share will be expanded.
Management firmly believes that its position as a locally owned financial
institution that offers personalized service will contribute significantly to
quality loan and deposit growth and profitability. Management will open an
additional branch in Clarksville, Tennessee and a branch in Dover, Stewart
County, Tennessee in 2003.

Liquidity and Asset Management

Legends Financials management seeks to maximize net interest income by
managing Legends Financials assets and liabilities within appropriate
constraints on capital, liquidity and interest rate risk. Liquidity is the
ability to maintain sufficient cash levels necessary to fund operations, meet
the requirements of depositors and borrowers and fund attractive investment
opportunities. A company has liquidity potential when it has the ability to
obtain sufficient funds in a timely manner at a reasonable cost. Legends
Financials primary source of liquidity is expected to be a stable core deposit
base. In addition, short-term investments, loan payments, investment security
maturities and Federal Home Loan Bank advances provide a secondary source.
Legends Financials loan to deposit ratio was approximately 81.9% and 85.5% at
December 31, 2002 and December 31, 2001, respectively.

Legends Financials investment portfolio, as represented above, consists
of earning assets that provide interest income.

Funds management decisions must reflect managements intent to maintain
profitability in both the immediate and long-term earnings. Legends
Financials rate sensitivity position has an important impact on earnings.
Senior management of Legends Financial meets monthly to analyze the rate
sensitivity position of Legends Financial. These meetings focus on the spread
between the subsidiary banks cost of funds and interest yields generated
primarily through loans and investments.

Legends Financial presently maintains a liability sensitive position over
the 2003 year or a negative gap. Liability sensitivity means that more of
Legends Financial liabilities are capable of repricing over certain time
frames than assets. The interest rates associated with these liabilities may
not actually change over this period but are capable of changing.

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|                                                     |  |      |        |       |  |        |         |         |  |        |         |       |  |  |         |    |  |          |        |   |  |  |         | 
|---------------------------------------------------- |  | ---- | ------ | ----- |  | ------ | ------- | ------- |  | ------ | ------- | ----- |  |  | ------- | -- |  | -------- | ------ | - |  |  | ------- | 
|Interest-rate sensitivity                            |  |      |        |       |  |        |         |         |  |        |         |       |  |  |         |    |  | One Year |        |   |  | 
|gaps:                                                |  | 0-30 |        | 31-90 |  | 91-180 |         | 181-365 |  | and    |         |       |  | 
|(In Thousands)                                       |  | Days |        | Days  |  | Days   |         | Days    |  | Longer |         | Total
|                                                     |  |      |        |       |  |        |         |         |  |        |         |      
|Interest-earning assets                              |  | $    | 43,659 |       |  |        | 1,293   |         |  |        | 749     |       |  |  | 3,546   |    |  |          | 56,038 |   |  |  | 105,285 | 
|Interest-bearing liabilities                         |  |      | 53,344 |       |  |        | 4,537   |         |  |        | 9,323   |       |  |  | 7,891   |    |  |          | 8,534  |   |  |  | 83,629  | 
|                                                     |  |      |        |       |  |        |         |         |  |        |         |       |  |  |         |    |  |          |        |   |  |  |         | 
|Interest rate sensitivity                            |  | $    | (9,685 | )     |  |        | (3,244  | )       |  |        | (8,574  | )     |  |  | (4,345  | )  |  |          | 47,504 |   |  |  | 21,656  | 
|                                                     |  |      |        |       |  |        |         |         |  |        |         |       |  |  |         |    |  |          |        |   |  |  |         | 
|Cumulative gap                                       |  | $    | (9,685 | )     |  |        | (12,929 | )       |  |        | (21,503 | )     |  |  | (25,848 | )  |  |          | 21,656 |   |  |  |         | 
|                                                     |  |      |        |       |  |        |         |         |  |        |         |       |  |  |         |    |  |          |        |   |  |  |         | 
|Interest rate sensitivity
gap as a % of total
assets |  |      | (8.46  | )%    |  |        | (2.83   | )%      |  |        | (7.49   | )%    |  |  | (3.79   | )% |  |          | 41.48  | % |  |  |         | 
|                                                     |  |      |        |       |  |        |         |         |  |        |         |       |  |  |         |    |  |          |        |   |  |  |         | 
|Cumulative gap as a
% of total assets                |  |      | (8.46  | )%    |  |        | (11.29  | )%      |  |        | (18.78  | )%    |  |  | (22.57  | )% |  |          | 18.91  | % |  |  |         | 
|                                                     |  |      |        |       |  |        |         |         |  |        |         |       |  |  |         |    |  |          |        |   |  |  |         | 

Historically, there has been no significant reduction in immediately
withdrawable accounts such as negotiable order of withdrawal, money market
demand, demand deposit and regular savings accounts. Management does not
anticipate that there will be significant withdrawals from these accounts in
the future.

Legends Financial completed and opened its main office in January of 2000.
In addition to its existing branch, a second branch was opened in January,
2001. Management also plans to open two branches in 2003 at an approximate
total cost of $1,500,000. Capital investments can be detrimental to a banks
earnings thus management evaluates the potential growth and profitability at
making such expenditures before proceeding. Other than the branch openings,
there are no known trends or any known commitments, demands, events or
uncertainties that will result in or that are reasonably likely to result in
Legends Financials liquidity changing in any material way. It is anticipated
that with present maturities, the anticipated growth in deposit base, and the
efforts of management in its asset/liability management program, liquidity will
not pose a problem in the foreseeable future.

Capital Position and Dividends

At December 31, 2002 and 2001, total stockholders equity was $13,847,000
and $13,070,000 or 12.1% and 14.5% of total assets. The increase in
stockholders equity results from net earnings of $594,000, a net increase in
unrealized gains on available-for-sale securities of $113,000 and proceeds from
sales of common stock totaling $70,000 issued in connection with Legends
Financials stock option plan.

Legends Financials principal regulators have established minimum
risk-based capital requirements and leverage capital requirements for Legends
Financial. These guidelines classify capital into two categories of Tier I and
Total risk-based capital. Total risk-based capital consists of Tier I (or
core) capital (essentially common equity less intangible assets) and Tier II
capital (essentially qualifying long-term debt, of which Legends Financial has
none, and a part of the allowance for possible loan losses). In determining
risk-based capital requirements, assets are assigned risk-weights of 0% to
100%, depending on regulatory assigned levels of credit risk associated with
such assets. The risk-based capital

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guidelines require Legends Financial to have a total risk-based capital ratio of 8.0% and a Tier I risk-
based capital ratio of 4.0%. At December 31, 2002 and 2001, Legends
Financials total risk-based capital ratio was 16.6% and 19.1%, respectively,
and its Tier I risk-based capital ratio was 15.6% and 18.0%, respectively. At
December 31, 2002 and 2001, Legends Financial had a leverage ratio of 12.1% and
15.2% and, respectively.

The ratios are high when compared to industry averages and result from the
fact that Legends Financial raised additional capital of approximately
$4,400,000 to fund expansion. Legends Financials plan to open two additional
branches in 2003 is expected to help leverage the capital. It is managements
objective to leverage Legends Financial to approximately a 10% capital ratio.
The emphasis will be on asset quality and growth in core deposits both of which
should be aided by the large stockholder base and expansion into new markets.

Results of Operations

Net earnings for the year ended December 31, 2002 were $594,000 and
increase of $95,000 or 19.0% from net earnings of $499,000 for the year ended
December 31, 2001. Legends Financial had net earnings of $88,000 in 2000. The
earnings in 2002 and 2001 are a result of net interest income increasing as a
result of Legends Financials growth which offset the overhead costs required
to operate a newly established financial institution and a large charge off
loan discussed hereafter. Basic and diluted earnings per common shares were
$0.43 in 2002, $0.36 in 2001 and $0.06 in 2000.

Net Interest Income

Net interest income represents the amount by which interest earned on
various earning assets exceeds interest paid on deposits and other
interest-bearing liabilities and is the most significant component of Legends
Financials earnings. Total interest income was $6,083,000, $5,843,000 and
$4,693,000 for the years ended December 31, 2002, 2001 and 2000, respectively,
and total interest expense was $2,035,000, $2,784,000, and $2,443,000,
respectively. Net interest income for the same periods netted $4,048,000,
$3,059,000, and $2,250,000, respectively. Interest rates fell during 2002 but
are expected to remain relatively stable in 2003. The continued growth in
interest income and expense are a direct result of growth in earning assets and
deposits consistent with the growth of a new bank and the opening of additional
branches. The increases in interest income and interest expense related to
increases in volume in 2002 were offset significantly by falling interest
rates. Management believes that a satisfactory level of loans and deposits can
be recorded in 2003 to maintain a stable net interest margin.

Provision for Possible Loan Losses

The provision for loan losses represents a charge to earnings necessary to
establish an allowance for possible loan losses that, in managements
evaluation, is adequate to provide coverage for estimated losses on outstanding
loans and to provide for uncertainties in the economy. The provision for loan
losses for the years ended December 31, 2002, 2001 and 2000 were $703,000,
$307,000 and $246,000, respectively. The allowance for possible loan losses
were $879,000 and $755,000 at December 31, 2002 and 2001, respectively. The
level of the allowance and the amount of the provision involve evaluation of
uncertainties and matters of judgment. Management believes the allowance for
possible loan losses at December 31, 2002 and 2001 to be adequate. The
allowance for loan losses was 1.1% and 1.2% of loans at December 31, 2002 and
2001, respectively.

In June and September 2001, Legends Bank made two loans totaling
approximately $575,000 to a customer. The loans were secured by medical
equipment owned by the borrower. In addition, the loans were guaranteed by a
group of physicians. The borrower dissolved and the guarantors subsequently
filed for bankruptcy protection. In Managements opinion, the loans were made
based on fraudulent

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representations and are therefore improperly included by
the guarantors in the petition for bankruptcy.
Management also believes the guarantors have the ability to repay the debt
if it is excluded from the Bankruptcy. Management is pursuing exclusion of
these loans from the Bankruptcy. At December 31, 2001, Legends Bank made a
specific allocation of $200,000 to the allowance for loan losses related to
these loans. In addition, approximately $45,000 has been recovered related to
the sale of the medical equipment securing these loans. An additional $330,000
was added to the allowance for loan losses during 2002 related to these loans.
The loans were charged off in 2002. Total charge-offs for the year ended
December 31, 2002 totaled $628,000.

Management believes that the circumstances related to these loans is an
isolated occurrence and does not believe that this represents a trend or
pattern of poor lending performance or monitoring that would adversely affect
the consolidated financial statements.

Non-Interest Income

Legends Financials non-interest income consists of other fees and
commissions. Total non-interest income for the year ended 2002 was $757,000
and $593,000 and for the year ended December 31, 2001, an increase of $164,000
or 27.7%. Included in the years ended December 31, 2002 and 2001 non-interest
income are security gains of $140,000 and $115,000, respectively. Total
non-interest income for 2000 was $238,000 and included security gains of
$6,000. Management projects that other fees and commissions and service
charges on deposit accounts will increase in 2003 due to growth of Legends
Financial.

Non-Interest Expense

Non-interest expenses consist primarily of employee costs, occupancy
expenses, furniture and equipment expenses, and other operating expenses.
Total non-interest expense for the year ended December 31, 2002 was $3,557,000
and was $2,846,000 for the year ended December 31, 2001, an increase of
$711,000 or 25.0%. Total non-interest expense for 2000 was $2,154,000. The
increases in non-interest expense from 2000 to 2001 primarily resulted from
increased occupancy expenses resulting from the opening of a new branch early
in 2001, expenses related to implementation of a lock box service and increases
in employment costs resulting from company growth. The increases in 2002 were
primarily the result of increases in salaries and benefits due to the addition
of personnel to facilitate bank growth, increase in other expenses including
legal fees related to the pursuit of loans in bankruptcy and an increase in
other fees associated with opening new branches such as armored car expenses.

Monetary Policy

Legends Financial is affected by commercial bank credit policies of
regulatory authorities, including the Board. An important function of the
Board is to regulate the national supply of bank credit in order to attempt to
combat recessionary and curb inflationary pressures. Among the instruments of
monetary policy used by the Board to implement these objectives are: open
market operations in U.S. government securities, changes in discount rates on
member borrowings, changes in reserve requirements against bank deposits and
limitations on interest rates which member banks may pay on time and savings
deposits. These means are used in varying combinations to influence overall
growth of bank loans, investments and deposits, and may also affect interest
rates charged on loans or paid on deposits. The monetary policies of the Board
have had a significant effect on the operating results of commercial banks,
including nonmembers as well as members, in the past and are expected to
continue to do so in the future.

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Impact of Inflation

The primary impact which inflation has on the results of Legends
Financials operations is evidenced by its effects on interest rates. Interest
rates tend to reflect, in part, the financial markets
expectations of the level of inflation and, therefore, will generally rise
or fall as the level of expected inflation fluctuates. To the extent interest
rates paid on deposits and other sources of funds rise or fall at a faster rate
than the interest income earned on funds, loans or investments, net interest
income will vary. Inflation also impacts on non-interest expenses as goods and
services are purchased, although this has not had a significant effect on net
earnings. If the inflation rate stays flat or increases slightly, management
believes that the effect on earnings will not be significant.

Impact of New Accounting Standards

In June 2000, the FASB issued Statement of Financial Accounting Standards
No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an amendment of FASB Statement No. 133. SFAS No. 138 provides
several technical amendments to SFAS No. 133. Since Legends Financial does not hold any
derivative instruments or engagement in
hedging activities, SFAS No. 138 has not had a significant impact on Legends
Financials financial position and results of operations.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 141, Business Combinations and SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. SFAS No. 142 requires that goodwill and other intangible assets with
indefinite useful lives no longer be amortized, but instead be tested for
impairment annually. SFAS No. 142 is effective on January 1, 2002. These
statements are not expected to have any impact on Legends Financials financial
position or results of operations.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development and/or the normal operation of a long-lived asset, except for
certain obligations of lessees. SFAS No. 143 is effective for financial
statements issued for fiscal years beginning after June 15, 2002. Since
Legends Financial does not have any legal obligations as
described above, this statement is not expected to have any impact on Legends
Financials financial position or results of operations.

In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, SFAS 144. This statement supersedes SFAS No.
121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, and the accounting and reporting provisions of APB
Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the disposal of a segment
of a business (as previously defined in that Opinion). SFAS No. 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years. This
statement is not expected to have a significant impact on Legends
Financials financial position or results of operations.

In October 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 147, Acquisitions of Certain Financial
Institutions. SFAS No. 147 amends SFAS No. 72 and FASB Interpretation No. 9 to
eliminate all acquisitions of financial institutions other than transactions
between mutual enterprises from their scope. Accordingly, the excess of the
purchase price paid to acquire a financial institution over the fair value of
the identifiable tangible and intangible

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assets and liabilities acquired now
must be recorded as goodwill following SFAS No. 141 and assessed for impairment
following SFAS No. 142, Goodwill and Other Intangible Assets. Furthermore, any
previously recognized unidentifiable intangible assets resulting from prior
business combinations that do not meet SFAS No. 141s criteria for separate
recognition must be reclassified to goodwill. Legends
Financial will adopt SFAS 147 immediately, but it is not
expected to have any current impact on Legends Financials financial position
or results of operations.

In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS
133). SFAS 133 is effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. SFAS 133 requires all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value
of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether the derivative is designated as part
of a hedge transactions and, if it is, the type of hedge transaction. In June
of 1999 the FASB issued Statement of Financial Accounting Standards No. 137,
Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133 (SFAS 137). SFAS 137 delays the
effective date of SFAS 133 to all fiscal quarters of all fiscal years beginning
after June 15, 2000. Due to the present limited use of derivative instruments,
the adoption of SFAS 133 did not have a significant impact on Legends
Financials results of operations or its financial position.

Market Risk

Legends Financials primary component of market risk is interest rate
volatility. Fluctuations in interest rates will ultimately impact both the
level of income and expense recorded on a large portion of Legends Banks
assets and liabilities, and the market value of all interest-earning assets and
interest-bearing liabilities, other than those which possess a short term to
maturity. Based upon the nature of Legends Financials operations, Legends
Financial is not subject to foreign currency exchange or commodity price risk.

Interest rate risk (sensitivity) management focuses on the earnings risk
associated with changing interest rates. Management seeks to maintain
profitability in both immediate and long term earnings through funds
management/interest rate risk management. Legends Financials rate sensitivity
position has an important impact on earnings. Senior management of Legends
Financial meets monthly to analyze the rate sensitivity position. These
meetings focus on the spread between the cost of funds and interest yields
generated primarily through loans and investments.



|I. |  | Distribution of Assets, Liabilities and Stockholders Equity:
|-- |  | -------------------------------------------------------------



| |  |  | Interest Rate and Interest Differential                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Schedule which follows indicates the average balances for each major
balance sheet item, an analysis of net interest income and the change in
interest income and interest expense attributable to changes in volume
and changes in rates.                                                                                                                                                                                                                                                   
|
| |  |  | The difference between interest income on interest-earning assets and
interest expense on interest-bearing liabilities is net interest income,
which is Legends Financials gross margin. Analysis of net interest
income is more meaningful when income from tax-exempt earning assets is
adjusted to a tax equivalent basis. Accordingly, the following schedule
includes a tax equivalent adjustment of tax-exempt earning assets,
assuming a weighted average Federal income tax rate of 34%.
|
| |  |  | In the following Schedule change due to volume is the change in volume
multiplied by the interest rate for the prior year. Change due to rate
is the change in interest rate multiplied by                                                                                                                                                                                                                                                                                                   

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| |  |  | the volume for the current
year. Changes in interest income and expense not due solely to volume or
rate changes are included in the change due to rate category.                                                                
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Non-accrual loans have been included in the loan category. Loan fees of
$188,000, $241,000 and $152,000 for 2002, 2001 and 2000, respectively,
are included in loan income and represent an adjustment of the yield on
these loans.

|                                   |                                        |   |                                     |         |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |       |      |   |  |       |       |  |  |       |       |  |  |        |        |   |  |      |     | 
|---------------------------------- | -------------------------------------- | - | ----------------------------------- | ------- | -------- |  | ---------------- | ---- | ------- |  | -------- | ----- | ------- |  | ------ | ------ | ------ |  | ----- | ---- | - |  | ----- | ----- |  |  | ----- | ----- |  |  | ------ | ------ | - |  | ---- | --- | 
|                                   |                                        |   | In Thousands, Except Interest Rates
|                                   |                                        |   |                                    
|                                   |                                        |   | 2002                                |         | 2001     |  | 2002/2001 Change
|                                   |                                        |   |                                     |         |          |  |                 
|                                   |                                        |   | Average                             |         | Interest |  | Income/          |      | Average |  | Interest |       | Income/ |  | Due to |        | Due to |  |       |      |  
|                                   |                                        |   | Balance                             |         | Rate     |  | Expense          |      | Balance |  | Rate     |       | Expense |  | Volume |        | Rate   |  | Total
|                                   |                                        |   |                                     |         |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |      
|Loans, net of unearned interest    |                                        | $ | 70,171                              |         |          |  | 7.05             | %    |         |  | 4,925    |       |         |  | 51,983 |        |        |  | 8.59  | %    |   |  | 4,461 |       |  |  | 1,562 |       |  |  | (1,098 | )      |   |  | 464  |    
|Investment securities - taxable    |                                        |   | 22,358                              |         |          |  | 4.85             |      |         |  | 1,084    |       |         |  | 20,659 |        |        |  | 6.41  |      |   |  | 1,324 |       |  |  | 109   |       |  |  | (349   | )      |   |  | (240 | )  
|Investment securities -
tax-exempt |                                        |   | 632                                 |         |          |  | 2.69             |      |         |  | 17       |       |         |  |       |        |        |  |      |      |   |  |      |       |  |  | 17    |       |  |  |       |        |   |  | 17   |    
|Taxable equivalent adjustment      |                                        |   |                                    |         |          |  | 1.39             |      |         |  | 9        |       |         |  |       |        |        |  |      |      |   |  |      |       |  |  |      |       |  |  |       |        |   |  | 9    |    
|                                   |                                        |   |                                     |         |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |       |      |   |  |       |       |  |  |       |       |  |  |        |        |   |  |      |    
|                                   | Total tax-exempt
investment securities |   |                                     | 632     |          |  |                  | 4.08 |         |  |          | 26    |         |  |        |       |        |  |       |     |   |  |       |      |  |  |       | 26    |  |  |        |       |   |  |      | 26  | 
|                                   |                                        |   |                                     |         |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |       |      |   |  |       |       |  |  |       |       |  |  |        |        |   |  |      |    
|Loans held for sale                |                                        |   | 400                                 |         |          |  | 5.25             | %    |         |  | 21       |       |         |  | 91     |        |        |  | 6.59  |      |   |  | 6     |       |  |  | 20    |       |  |  | (5     | )      |   |  | 15   |    
|Federal funds sold                 |                                        |   | 2,290                               |         |          |  | 1.57             |      |         |  | 36       |       |         |  | 1,134  |        |        |  | 4.59  |      |   |  | 52    |       |  |  | 53    |       |  |  | (69    | )      |   |  | (16  | )  
|                                   |                                        |   |                                     |         |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |       |      |   |  |       |       |  |  |       |       |  |  |        |        |   |  |      |    
|                                   | Total earning assets                   |   |                                     | 95,851  |          |  |                  | 6.36 | %       |  |          | 6,092 |         |  |        | 73,867 |        |  |       | 7.92 | % |  |       | 5,843 |  |  |       | 1,717 |  |  |        | (1,468 | ) |  |      | 249 | 
|                                   |                                        |   |                                     |         |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |       |      |   |  |       |       |  |  |       |       |  |  |        |        |   |  |      |    
|Cash and due from banks            |                                        |   | 3,859                               |         |          |  |                  |      |         |  |          |       |         |  | 2,838  |        |        |  |       |      |   |  |       |       |  |  |       |       |  |  |        |        |   |  |      |    
|Allowance for possible loan
losses |                                        |   | (797                                | )       |          |  |                  |      |         |  |          |       |         |  | (657   | )      |        |  |       |      |   |  |       |       |  |  |       |       |  |  |        |        |   |  |      |    
|Bank premises and equipment        |                                        |   | 3,506                               |         |          |  |                  |      |         |  |          |       |         |  | 3,409  |        |        |  |       |      |   |  |       |       |  |  |       |       |  |  |        |        |   |  |      |    
|Other assets                       |                                        |   | 989                                 |         |          |  |                  |      |         |  |          |       |         |  | 721    |        |        |  |       |      |   |  |       |       |  |  |       |       |  |  |        |        |   |  |      |    
|                                   |                                        |   |                                     |         |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |       |      |   |  |       |       |  |  |       |       |  |  |        |        |   |  |      |    
|                                   | Total assets                           |   | $                                   | 103,408 |          |  |                  |      |         |  |          |       |         |  |        | 80,178 |        |  |       |      |   |  |       |       |  |  |       |       |  |  |        |        |   |  |      |     | 
|                                   |                                        |   |                                     |         |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |       |      |   |  |       |       |  |  |       |       |  |  |        |        |   |  |      |    

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|                                            |                                            |                                            |        |                                     |         |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |       |       |  |    |     |     |  |     |      |        |   |     |      |      |  
|------------------------------------------- | ------------------------------------------ | ------------------------------------------ | ------ | ----------------------------------- | ------- | -------- | ---- | ---------------- | ---- | ------- | ----- | -------- | ----- | ------- | ------ | ------ | ------ | ------ | ---- | ----- | ---- |  | ----- | ----- | ----- |  | -- | --- | --- |  | --- | ---- | ------ | - | --- | ---- | ---- | -
|                                            |                                            |                                            |        | In Thousands, Except Interest Rates
|                                            |                                            |                                            |        |                                    
|                                            |                                            |                                            |        | 2002                                |         | 2001     |      | 2002/2001 Change
|                                            |                                            |                                            |        |                                     |         |          |      |                 
|                                            |                                            |                                            |        | Average                             |         | Interest |      | Income/          |      | Average |       | Interest |       | Income/ |        | Due to |        | Due to |      |       |      | 
|                                            |                                            |                                            |        | Balance                             |         | Rate     |      | Expense          |      | Balance |       | Rate     |       | Expense |        | Volume |        | Rate   |      | Total
|                                            |                                            |                                            |        |                                     |         |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |      
|Deposits:                                   |                                            |                                            |        |                                     |         |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |       |       |  |    |     |     |  |     |      |        |   |     |     
|                                            | Negotiable order of
withdrawal accounts    |                                            | $      | 19,033                              |         |          |      | 1.43             | %    |         |       | 273      |       |         |        | 9,918  |        |        |      | 3.11  | %    |  |       | 308   |       |  |    | 283 |     |  |     | (318 | )      |   |     | (35  | )   
|                                            | Money market demand
accounts               |                                            |        | 15,938                              |         |          |      | 1.81             |      |         |       | 288      |       |         |        | 12,016 |        |        |      | 3.35  |      |  |       | 403   |       |  |    | 131 |     |  |     | (246 | )      |   |     | (115 | )   
|                                            | Individual retirement accounts             |                                            |        | 1,387                               |         |          |      | 4.18             |      |         |       | 58       |       |         |        | 1,192  |        |        |      | 5.87  |      |  |       | 70    |       |  |    | 11  |     |  |     | (23  | )      |   |     | (12  | )   
|                                            | Other savings deposits                     |                                            |        | 1,340                               |         |          |      | 1.49             |      |         |       | 20       |       |         |        | 785    |        |        |      | 2.04  |      |  |       | 16    |       |  |    | 11  |     |  |     | (7   | )      |   |     | 4    |     
|                                            | Certificates of deposit,
$100,000 and over |                                            |        | 21,823                              |         |          |      | 3.40             |      |         |       | 742      |       |         |        | 18,712 |        |        |      | 5.67  |      |  |       | 1,061 |       |  |    | 176 |     |  |     | (495 | )      |   |     | (319 | )   
|                                            | Certificates of deposit
under $100,000     |                                            |        | 14,215                              |         |          |      | 3.93             |      |         |       | 559      |       |         |        | 13,649 |        |        |      | 5.80  |      |  |       | 792   |       |  |    | 33  |     |  |     | (266 | )      |   |     | (233 | )   
|                                            |                                            |                                            |        |                                     |         |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |       |       |  |    |     |     |  |     |      |        |   |     |     
|                                            |                                            | Total interest-bearing
deposits            |        |                                     | 73,736  |          |      |                  | 2.63 |         |       |          | 1,940 |         |        |        | 56,272 |        |      |       | 4.71 |  |       |       | 2,650 |  |    |     | 822 |  |     |      | (1,532 | ) |     |      | (710 | )
|                                            | Demand                                     |                                            |        | 11,455                              |         |          |      |                 |      |         |       |         |       |         |        | 7,727  |        |        |      |      |      |  |       |      |       |  |    |    |     |  |     |     |        |   |     |     |     
|                                            |                                            |                                            |        |                                     |         |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |       |       |  |    |     |     |  |     |      |        |   |     |     
|                                            |                                            | Total deposits                             |        |                                     | 85,191  |          |      |                  | 2.28 |         |       |          | 1,940 |         |        |        | 63,999 |        |      |       | 4.14 |  |       |       | 2,650 |  |    |     | 878 |  |     |      | (1,588 | ) |     |      | (710 | )
|Federal funds purchased                     |                                            |                                            | 465    |                                     |         |          | 2.58 |                  |      |         | 12    |          |       |         | 357    |        |        |        | 3.36 |       |      |  | 12    |       |       |  | 4  |     |     |  | (4  | )    |        |   |    |     
|Securities sold under
repurchase agreements |                                            |                                            | 684    |                                     |         |          | 1.17 |                  |      |         | 8     |          |       |         |       |        |        |        |     |       |      |  |      |       |       |  | 8  |     |     |  |    |      |        |   | 8   |     
|Advances from Federal Home
Loan Bank        |                                            |                                            | 3,138  |                                     |         |          | 2.39 |                  |      |         | 75    |          |       |         | 2,451  |        |        |        | 4.98 |       |      |  | 122   |       |       |  | 34 |     |     |  | (81 | )    |        |   | (47 | )   
|                                            |                                            |                                            |        |                                     |         |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |       |       |  |    |     |     |  |     |      |        |   |     |     
|                                            |                                            | Total deposits and
borrowed funds          |        |                                     | 89,478  |          |      |                  | 2.27 |         |       |          | 2,035 |         |        |        | 66,807 |        |      |       | 4.17 |  |       |       | 2,784 |  |    |     | 918 |  |     |      | (1,667 | ) |     |      | (749 | )
|                                            |                                            |                                            |        |                                     |         |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |       |       |  |    |     |     |  |     |      |        |   |     |     
|Other liabilities                           |                                            |                                            | 605    |                                     |         |          |      |                  |      |         |      |          |       |         | 651    |        |        |        |      |       |      |  |      |       |       |  |    |     |     |  |     |      |        |   |     |     
|Stockholders equity                        |                                            |                                            | 13,325 |                                     |         |          |      |                  |      |         |      |          |       |         | 12,720 |        |        |        |      |       |      |  |      |       |       |  |    |     |     |  |     |      |        |   |     |     
|                                            |                                            |                                            |        |                                     |         |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |       |       |  |    |     |     |  |     |      |        |   |     |     
|                                            |                                            | Total liabilities and
stockholders equity |        | $                                   | 103,408 |          |      |                  |      |         |       |          | 2,035 |         |        |        | 80,178 |        |      |       |      |  |       |       | 2,784 |  |    |     |     |  |     |      |        |   |     |      |      |  
|                                            |                                            |                                            |        |                                     |         |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |       |       |  |    |     |     |  |     |      |        |   |     |     
|Net interest income                         |                                            |                                            |        |                                     |         |          |      |                  |      |         | 4,057 |          |       |         |        |        |        |        |      |       |      |  | 3,059 |       |       |  |    |     |     |  |     |      |        |   |     |     
|                                            |                                            |                                            |        |                                     |         |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |       |       |  |    |     |     |  |     |      |        |   |     |     
|Net yield on earning assets                 |                                            |                                            |        |                                     |         |          | 4.23 | %                |      |         |       |          |       |         |        |        |        |        | 4.15 | %     |      |  |       |       |       |  |    |     |     |  |     |      |        |   |     |     
|                                            |                                            |                                            |        |                                     |         |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |       |       |  |    |     |     |  |     |      |        |   |     |     
|Net interest spread                         |                                            |                                            |        |                                     |         |          | 4.09 | %                |      |         |       |          |       |         |        |        |        |        | 3.75 | %     |      |  |       |       |       |  |    |     |     |  |     |      |        |   |     |     
|                                            |                                            |                                            |        |                                     |         |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |       |       |  |    |     |     |  |     |      |        |   |     |     

24



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##### Table of Contents



|                                   |                      |   |                                     |        |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |       |      |  |  |       |       |  |  |       |       |  |  |      |      |   |  |       |       | 
|---------------------------------- | -------------------- | - | ----------------------------------- | ------ | -------- |  | ---------------- | ---- | ------- |  | -------- | ----- | ------- |  | ------ | ------ | ------ |  | ----- | ---- |  |  | ----- | ----- |  |  | ----- | ----- |  |  | ---- | ---- | - |  | ----- | ----- | 
|                                   |                      |   | In Thousands, Except Interest Rates
|                                   |                      |   |                                    
|                                   |                      |   | 2001                                |        | 2000     |  | 2001/2000 Change
|                                   |                      |   |                                     |        |          |  |                 
|                                   |                      |   | Average                             |        | Interest |  | Income/          |      | Average |  | Interest |       | Income/ |  | Due to |        | Due to |  |       |      | 
|                                   |                      |   | Balance                             |        | Rate     |  | Expense          |      | Balance |  | Rate     |       | Expense |  | Volume |        | Rate   |  | Total
|                                   |                      |   |                                     |        |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |      
|Loans, net of unearned interest    |                      | $ | 51,983                              |        |          |  | 8.59             | %    |         |  | 4,467    |       |         |  | 35,120 |        |        |  | 9.68  | %    |  |  | 3,400 |       |  |  | 1,632 |       |  |  | (565 | )    |   |  | 1,067 |      
|Investment securities - taxable    |                      |   | 20,659                              |        |          |  | 6.41             |      |         |  | 1,324    |       |         |  | 16,890 |        |        |  | 6.99  |      |  |  | 1,180 |       |  |  | 263   |       |  |  | (119 | )    |   |  | 144   |      
|Federal funds sold                 |                      |   | 1,134                               |        |          |  | 4.59             |      |         |  | 52       |       |         |  | 1,803  |        |        |  | 6.27  |      |  |  | 113   |       |  |  | (42   | )     |  |  | (19  | )    |   |  | (61   | )    
|                                   |                      |   |                                     |        |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |       |      |  |  |       |       |  |  |       |       |  |  |      |      |   |  |       |      
|                                   | Total earning assets |   |                                     | 73,776 |          |  |                  | 7.92 | %       |  |          | 5,843 |         |  |        | 53,813 |        |  |       | 8.72 |  |  |       | 4,693 |  |  |       | 1,741 |  |  |      | (591 | ) |  |       | 1,150 | 
|                                   |                      |   |                                     |        |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |       |      |  |  |       |       |  |  |       |       |  |  |      |      |   |  |       |      
|Cash and due from banks            |                      |   | 2,929                               |        |          |  |                  |      |         |  |          |       |         |  | 2,089  |        |        |  |       |      |  |  |       |       |  |  |       |       |  |  |      |      |   |  |       |      
|Allowance for possible loan
losses |                      |   | (657                                | )      |          |  |                  |      |         |  |          |       |         |  | (431   | )      |        |  |       |      |  |  |       |       |  |  |       |       |  |  |      |      |   |  |       |      
|Bank premises and equipment        |                      |   | 3,409                               |        |          |  |                  |      |         |  |          |       |         |  | 3,200  |        |        |  |       |      |  |  |       |       |  |  |       |       |  |  |      |      |   |  |       |      
|Other assets                       |                      |   | 721                                 |        |          |  |                  |      |         |  |          |       |         |  | 467    |        |        |  |       |      |  |  |       |       |  |  |       |       |  |  |      |      |   |  |       |      
|                                   |                      |   |                                     |        |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |       |      |  |  |       |       |  |  |       |       |  |  |      |      |   |  |       |      
|                                   | Total assets         |   | $                                   | 80,178 |          |  |                  |      |         |  |          |       |         |  |        | 59,138 |        |  |       |      |  |  |       |       |  |  |       |       |  |  |      |      |   |  |       |       | 
|                                   |                      |   |                                     |        |          |  |                  |      |         |  |          |       |         |  |        |        |        |  |       |      |  |  |       |       |  |  |       |       |  |  |      |      |   |  |       |      

|                                     |                                            |                                            |        |                                     |        |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |     |       |  |    |     |       |  |     |      |      |   |    |      |     | 
|------------------------------------ | ------------------------------------------ | ------------------------------------------ | ------ | ----------------------------------- | ------ | -------- | ---- | ---------------- | ---- | ------- | ----- | -------- | ----- | ------- | ------ | ------ | ------ | ------ | ---- | ----- | ---- |  | ----- | --- | ----- |  | -- | --- | ----- |  | --- | ---- | ---- | - | -- | ---- | --- | 
|                                     |                                            |                                            |        | In Thousands, Except Interest Rates
|                                     |                                            |                                            |        |                                    
|                                     |                                            |                                            |        | 2001                                |        | 2000     |      | 2001/2000 Change
|                                     |                                            |                                            |        |                                     |        |          |      |                 
|                                     |                                            |                                            |        | Average                             |        | Interest |      | Income/          |      | Average |       | Interest |       | Income/ |        | Due to |        | Due to |      |       |      | 
|                                     |                                            |                                            |        | Balance                             |        | Rate     |      | Expense          |      | Balance |       | Rate     |       | Expense |        | Volume |        | Rate   |      | Total
|                                     |                                            |                                            |        |                                     |        |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |      
|Deposits:                            |                                            |                                            |        |                                     |        |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |     |       |  |    |     |       |  |     |      |      |   |    |     
|                                     | Negotiable order of
withdrawal accounts    |                                            | $      | 9,918                               |        |          |      | 3.11             | %    |         |       | 308      |       |         |        | 3,606  |        |        |      | 5.35  | %    |  |       | 193 |       |  |    | 338 |       |  |     | (223 | )    |   |    | 115  |    
|                                     | Money market demand
accounts               |                                            |        | 12,016                              |        |          |      | 3.35             |      |         |       | 403      |       |         |        | 9,689  |        |        |      | 5.43  |      |  |       | 526 |       |  |    | 126 |       |  |     | (249 | )    |   |    | (123 | )  
|                                     | Individual retirement accounts             |                                            |        | 1,192                               |        |          |      | 5.87             |      |         |       | 70       |       |         |        | 898    |        |        |      | 6.12  |      |  |       | 55  |       |  |    | 18  |       |  |     | (3   | )    |   |    | 15   |    
|                                     | Other savings deposits                     |                                            |        | 785                                 |        |          |      | 2.04             |      |         |       | 16       |       |         |        | 449    |        |        |      | 2.67  |      |  |       | 12  |       |  |    | 9   |       |  |     | (5   | )    |   |    | 4    |    
|                                     | Certificates of deposit,
$100,000 and over |                                            |        | 18,712                              |        |          |      | 5.67             |      |         |       | 1,061    |       |         |        | 14,961 |        |        |      | 6.33  |      |  |       | 947 |       |  |    | 237 |       |  |     | (123 | )    |   |    | 114  |    
|                                     | Certificates of deposit
under $100,000     |                                            |        | 13,649                              |        |          |      | 5.80             |      |         |       | 792      |       |         |        | 10,728 |        |        |      | 6.18  |      |  |       | 663 |       |  |    | 181 |       |  |     | (52  | )    |   |    | 129  |    
|                                     |                                            |                                            |        |                                     |        |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |     |       |  |    |     |       |  |     |      |      |   |    |     
|                                     |                                            | Total interest-bearing
deposits            |        |                                     | 56,272 |          |      |                  | 4.71 |         |       |          | 2,650 |         |        |        | 40,331 |        |      |       | 5.94 |  |       |     | 2,396 |  |    |     | 947   |  |     |      | (693 | ) |    |      | 254 | 
|                                     | Demand                                     |                                            |        | 7,727                               |        |          |      |                 |      |         |       |         |       |         |        | 5,204  |        |        |      |      |      |  |       |    |       |  |    |    |       |  |     |     |      |   |    |     |    
|                                     |                                            |                                            |        |                                     |        |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |     |       |  |    |     |       |  |     |      |      |   |    |     
|                                     |                                            | Total deposits                             |        |                                     | 63,999 |          |      |                  | 4.14 |         |       |          | 2,650 |         |        |        | 45,535 |        |      |       | 5.26 |  |       |     | 2,396 |  |    |     | 971   |  |     |      | (717 | ) |    |      | 254 | 
|Federal funds purchased              |                                            |                                            | 357    |                                     |        |          | 3.36 |                  |      |         | 12    |          |       |         | 85     |        |        |        | 7.06 |       |      |  | 6     |     |       |  | 19 |     |       |  | (13 | )    |      |   | 6  |     
|Advances from Federal Home
Loan Bank |                                            |                                            | 2,451  |                                     |        |          | 4.98 |                  |      |         | 122   |          |       |         | 980    |        |        |        | 4.18 |       |      |  | 41    |     |       |  | 61 |     |       |  | 20  |      |      |   | 81 |     
|                                     |                                            |                                            |        |                                     |        |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |     |       |  |    |     |       |  |     |      |      |   |    |     
|                                     |                                            | Total deposits and
borrowed funds          |        |                                     | 66,807 |          |      |                  | 4.17 |         |       |          | 2,784 |         |        |        | 46,600 |        |      |       | 5.24 |  |       |     | 2,443 |  |    |     | 1,059 |  |     |      | (718 | ) |    |      | 341 | 
|                                     |                                            |                                            |        |                                     |        |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |     |       |  |    |     |       |  |     |      |      |   |    |     
|Other liabilities                    |                                            |                                            | 651    |                                     |        |          |      |                  |      |         |      |          |       |         | 456    |        |        |        |      |       |      |  |      |     |       |  |    |     |       |  |     |      |      |   |    |     
|Stockholders equity                 |                                            |                                            | 12,720 |                                     |        |          |      |                  |      |         |      |          |       |         | 12,082 |        |        |        |      |       |      |  |      |     |       |  |    |     |       |  |     |      |      |   |    |     
|                                     |                                            |                                            |        |                                     |        |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |     |       |  |    |     |       |  |     |      |      |   |    |     
|                                     |                                            | Total liabilities and
stockholders equity |        | $                                   | 80,178 |          |      |                  |      |         |       |          | 2,784 |         |        |        | 59,138 |        |      |       |      |  |       |     | 2,443 |  |    |     |       |  |     |      |      |   |    |      |     | 
|                                     |                                            |                                            |        |                                     |        |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |     |       |  |    |     |       |  |     |      |      |   |    |     
|Net interest income                  |                                            |                                            |        |                                     |        |          |      |                  |      |         | 3,059 |          |       |         |        |        |        |        |      |       |      |  | 2,250 |     |       |  |    |     |       |  |     |      |      |   |    |     
|                                     |                                            |                                            |        |                                     |        |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |     |       |  |    |     |       |  |     |      |      |   |    |     
|Net yield on earning assets          |                                            |                                            |        |                                     |        |          | 4.15 | %                |      |         |       |          |       |         |        |        |        |        | 4.18 | %     |      |  |       |     |       |  |    |     |       |  |     |      |      |   |    |     
|                                     |                                            |                                            |        |                                     |        |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |     |       |  |    |     |       |  |     |      |      |   |    |     
|Net interest spread                  |                                            |                                            |        |                                     |        |          | 3.75 | %                |      |         |       |          |       |         |        |        |        |        | 3.48 | %     |      |  |       |     |       |  |    |     |       |  |     |      |      |   |    |     
|                                     |                                            |                                            |        |                                     |        |          |      |                  |      |         |       |          |       |         |        |        |        |        |      |       |      |  |       |     |       |  |    |     |       |  |     |      |      |   |    |     

25



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##### Table of Contents





|II. |  | Investment Portfolio:
|--- |  | ---------------------



| | A. |  | Securities at December 31, 2002 consist of the following:
| | -- |  | ---------------------------------------------------------

|                                                                  |  |                               |        |            |  |                |     |        |  |           |    |  |  |  |        | 
|----------------------------------------------------------------- |  | ----------------------------- | ------ | ---------- |  | -------------- | --- | ------ |  | --------- | -- |  |  |  | ------ | 
|                                                                  |  | Securities Available-For-Sale
|                                                                  |  |                              
|                                                                  |  |                               |        |            |  | (In Thousands) |     |        |  |          
|                                                                  |  |                               |        |            |  | Gross          |     | Gross  |  | Estimated
|                                                                  |  | Amortized                     |        | Unrealized |  | Unrealized     |     | Market
|                                                                  |  | Cost                          |        | Gains      |  | Losses         |     | Value 
|                                                                  |  |                               |        |            |  |                |     |       
|U.S. Treasury and other U.S.
Government agencies and
corporations |  | $                             | 3,757  |            |  |                | 7   |        |  |           | 28 |  |  |  | 3,736  | 
|Obligations of states and
political subdivision                   |  |                               | 974    |            |  |                |    |        |  |           | 7  |  |  |  | 967    | 
|Mortgage-backed securities                                        |  |                               | 19,212 |            |  |                | 283 |        |  |           |   |  |  |  | 19,495 | 
|Federal Home Loan Bank stock                                      |  |                               | 233    |            |  |                |    |        |  |           |   |  |  |  | 233    | 
|The Bankers Bank stock                                            |  |                               | 162    |            |  |                |    |        |  |           |   |  |  |  | 162    | 
|                                                                  |  |                               |        |            |  |                |     |        |  |           |    |  |  |  |        | 
|                                                                  |  | $                             | 24,338 |            |  |                | 290 |        |  |           | 35 |  |  |  | 24,593 | 
|                                                                  |  |                               |        |            |  |                |     |        |  |           |    |  |  |  |        | 



| |  |  | Securities at December 31, 2001 consist of the following:
| |  |  | ---------------------------------------------------------

|                                                                  |  |                               |        |            |  |                |    |        |  |           |    |  |  |  |        | 
|----------------------------------------------------------------- |  | ----------------------------- | ------ | ---------- |  | -------------- | -- | ------ |  | --------- | -- |  |  |  | ------ | 
|                                                                  |  | Securities Available-For-Sale
|                                                                  |  |                              
|                                                                  |  |                               |        |            |  | (In Thousands) |    |        |  |          
|                                                                  |  |                               |        |            |  | Gross          |    | Gross  |  | Estimated
|                                                                  |  | Amortized                     |        | Unrealized |  | Unrealized     |    | Market
|                                                                  |  | Cost                          |        | Gains      |  | Losses         |    | Value 
|                                                                  |  |                               |        |            |  |                |    |       
|U.S. Treasury and other U.S.
Government agencies and
corporations |  | $                             | 4,363  |            |  |                | 12 |        |  |           | 30 |  |  |  | 4,345  | 
|Mortgage-backed securities                                        |  |                               | 14,969 |            |  |                | 63 |        |  |           |   |  |  |  | 15,032 | 
|Federal Home Loan Bank stock                                      |  |                               | 201    |            |  |                |   |        |  |           |   |  |  |  | 201    | 
|The Bankers Bank stock                                            |  |                               | 162    |            |  |                |   |        |  |           |   |  |  |  | 162    | 
|                                                                  |  |                               |        |            |  |                |    |        |  |           |    |  |  |  |        | 
|                                                                  |  | $                             | 19,695 |            |  |                | 75 |        |  |           | 30 |  |  |  | 19,740 | 
|                                                                  |  |                               |        |            |  |                |    |        |  |           |    |  |  |  |        | 

26



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| | B. |  | The following schedule details the estimated maturities and
weighted average yields of investment securities of Legends
Financial at December 31, 2002.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                  |                              |                     |                                                                                       |        |                |        |        |        |           |        |          |       |       |       |  
|--------------------------------------------------------------------------------- | ---------------------------- | ------------------- | ------------------------------------------------------------------------------------- | ------ | -------------- | ------ | ------ | ------ | --------- | ------ | -------- | ----- | ----- | ----- | -
|                                                                                  |                              |                     |                                                                                       |        |                |        |        |        | Estimated |        | Weighted
|                                                                                  |                              |                     |                                                                                       |        | Amortized      |        | Market |        | Average  
|Available-For-Sale Securities                                                     |                              | Cost                |                                                                                       | Value  |                | Yields
|                                                                                  |                              |                     |                                                                                       |        |                |       
|                                                                                  |                              |                     |                                                                                       |        | (In Thousands)
|Obligations of U.S. Treasury and other U.S.
Government agencies and corporations: |                              |                     |                                                                                       |        |                |        |        |        |           |        |          |      
|                                                                                  |                              | Less than one year  |                                                                                       | $      |               |        |        |        |          |        |          |       |      | %    
|                                                                                  |                              | One to five years   |                                                                                       |        | 250            |        |        |        | 260       |        |          |       | 5.001 |      
|                                                                                  |                              | Five to ten years   |                                                                                       |        | 257            |        |        |        | 261       |        |          |       | 4.000 |      
|                                                                                  |                              | More than ten years |                                                                                       |        | 3,250          |        |        |        | 3,215     |        |          |       | 4.627 |      
|                                                                                  |                              |                     |                                                                                       |        |                |        |        |        |           |        |          |      
|                                                                                  |                              |                     | Total securities of U.S. Treasury
and other U.S. Government
agencies and corporations |        |                | 3,757  |        |        |           | 3,736  |          |       |       | 4.609 |  
|                                                                                  |                              |                     |                                                                                       |        |                |        |        |        |           |        |          |      
|Obligations of states and political
subdivisions (tax-exempt)*:                   |                              |                     |                                                                                       |        |                |        |        |        |           |        |          |      
|                                                                                  |                              | Less than one year  |                                                                                       |        |               |        |        |        |          |        |          |       |      |      
|                                                                                  |                              | One to five years   |                                                                                       |        |               |        |        |        |          |        |          |       |      |      
|                                                                                  |                              | Five to ten years   |                                                                                       |        |               |        |        |        |          |        |          |       |      |      
|                                                                                  |                              | More than ten years |                                                                                       |        | 974            |        |        |        | 967       |        |          |       | 6.639 |      
|                                                                                  |                              |                     |                                                                                       |        |                |        |        |        |           |        |          |      
|                                                                                  |                              |                     | Total obligations of states and
political subdivisions                                |        |                | 974    |        |        |           | 967    |          |       |       | 6.639 |  
|                                                                                  |                              |                     |                                                                                       |        |                |        |        |        |           |        |          |      
|Other:                                                                            |                              |                     |                                                                                       |        |                |        |        |        |           |        |          |      
|                                                                                  | Mortgage backed securities   |                     |                                                                                       | 19,212 |                |        |        | 19,495 |           |        |          | 4.275 |      
|                                                                                  | The Bankers Bank stock       |                     |                                                                                       | 162    |                |        |        | 162    |           |        |          |      |      
|                                                                                  | Federal Home Loan Bank stock |                     |                                                                                       | 233    |                |        |        | 233    |           |        |          |      |      
|                                                                                  |                              |                     |                                                                                       |        |                |        |        |        |           |        |          |      
|                                                                                  |                              |                     | Total investment securities                                                           |        | $              | 24,338 |        |        |           | 24,593 |          |       |       | 4.424 | %
|                                                                                  |                              |                     |                                                                                       |        |                |        |        |        |           |        |          |      



|* | Weighted average yield is stated on a tax-equivalent basis assuming a weighted average Federal
income tax rate of 34%.
|- | ----------------------------------------------------------------------------------------------------------------------

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|III. |  | Loan Portfolio:
|---- |  | ---------------



| | A. |  | Loan Types                                                                                  
| | -- |  | --------------------------------------------------------------------------------------------
|
| |    |  | The following schedule details the loans of Legends Financial at
December 31, 2002 and 2001.

|                                        |             |  |              |  |  |   |        |        |      |  |        |        | 
|--------------------------------------- | ----------- |  | ------------ |  |  | - | ------ | ------ | ---- |  | ------ | ------ | 
|                                        |             |  | In Thousands
|                                        |             |  |             
|                                        |             |  |              |  |  |   | 2002   |        | 2001
|                                        |             |  |              |  |  |   |        |        |     
|Commercial, financial and agricultural  |             |  |              |  |  | $ | 15,947 |        |      |  | 17,641 |       
|Real estate - construction              |             |  |              |  |  |   | 14,721 |        |      |  | 12,746 |       
|Real estate - mortgage                  |             |  |              |  |  |   | 43,022 |        |      |  | 28,202 |       
|Installment                             |             |  |              |  |  |   | 4,090  |        |      |  | 4,222  |       
|                                        |             |  |              |  |  |   |        |        |      |  |        |       
|                                        | Total loans |  |              |  |  |   |        | 77,780 |      |  |        | 62,811 | 
|Less allowance for possible loan losses |             |  |              |  |  |   | (879   | )      |      |  | (755   | )     
|                                        |             |  |              |  |  |   |        |        |      |  |        |       
|                                        | Net loans   |  |              |  |  |   | $      | 76,901 |      |  |        | 62,056 | 
|                                        |             |  |              |  |  |   |        |        |      |  |        |       



| | B. |  | Maturities and Sensitivities of Loans to Changes in Interest Rates                                                                                                             
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The following schedule details maturities and sensitivity to
interest rate changes for commercial and real estate construction
loans of Legends Financial at December 31, 2002.

|                           |                                         |                                                                                          |        |                |        |           |       |           |       |       |     |     |     |  |        |        |        | 
|-------------------------- | --------------------------------------- | ---------------------------------------------------------------------------------------- | ------ | -------------- | ------ | --------- | ----- | --------- | ----- | ----- | --- | --- | --- |  | ------ | ------ | ------ | 
|                           |                                         |                                                                                          |        | (In Thousands)
|                           |                                         |                                                                                          |        |               
|                           |                                         |                                                                                          |        |                |        |           |       | 1 Year to |       |       |     |     |     |  |        |       
|                           |                                         |                                                                                          |        | Less Than      |        | Less Than |       | After 5   |       |       |     |    
|                           |                                         |                                                                                          |        | 1 Year         |        | 5 Years   |       | Years     |       | Total
|                           |                                         |                                                                                          |        |                |        |           |       |           |       |      
|Maturity Distribution:     |                                         |                                                                                          |        |                |        |           |       |           |       |       |     |     |     |  |        |       
|                           | Commercial, financial
and agricultural* |                                                                                          | $      | 8,653          |        |           |       | 6,483     |       |       |     | 811 |     |  |        | 15,947 |       
|                           | Real estate  construction              |                                                                                          |        | 14,573         |        |           |       | 148       |       |       |     |    |     |  |        | 14,721 |       
|                           |                                         |                                                                                          |        |                |        |           |       |           |       |       |     |     |     |  |        |       
|                           |                                         | $                                                                                        | 23,226 |                |        |           | 6,631 |           |       |       | 811 |     |     |  | 30,668 |       
|                           |                                         |                                                                                          |        |                |        |           |       |           |       |       |     |     |     |  |        |       
|Interest-Rate Sensitivity: |                                         |                                                                                          |        |                |        |           |       |           |       |       |     |     |     |  |        |       
|                           | Fixed interest rates                    |                                                                                          | $      | 10,758         |        |           |       | 6,631     |       |       |     | 811 |     |  |        | 18,200 |       
|                           | Floating or adjustable
interest rates   |                                                                                          |        | 12,468         |        |           |       |          |       |       |     |    |     |  |        | 12,468 |       
|                           |                                         |                                                                                          |        |                |        |           |       |           |       |       |     |     |     |  |        |       
|                           |                                         | Total commercial,
financial and
agricultural loans
plus real estate -
construction loans |        | $              | 23,226 |           |       |           | 6,631 |       |     |     | 811 |  |        |        | 30,668 | 
|                           |                                         |                                                                                          |        |                |        |           |       |           |       |       |     |     |     |  |        |       



|* | Includes demand loans, bankers acceptances, commercial paper and deposit
notes.
|- | -------------------------------------------------------------------------------

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| | C. |  | Risk Elements                                                                                                                     
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The following schedule details selected information as to
non-performing loans of Legends Financial at December 31, 2002 and
2001.

|                                         |                                        |                   |                                                              |     |                    |        |      |    |    |        |  
|---------------------------------------- | -------------------------------------- | ----------------- | ------------------------------------------------------------ | --- | ------------------ | ------ | ---- | -- | -- | ------ | -
|                                         |                                        |                   |                                                              |     | In Thousands      
|                                         |                                        |                   |                                                              |     | except percentages
|                                         |                                        |                   |                                                              |     |                   
|                                         |                                        |                   |                                                              |     | 2002               |        | 2001
|                                         |                                        |                   |                                                              |     |                    |        |     
|Non accrual loans:                       |                                        |                   |                                                              |     |                    |        |      |   
|                                         | Commercial, financial and agricultural |                   | $                                                            | 77  |                    |        |      |   |   
|                                         | Real estate  construction             |                   |                                                              | 61  |                    |        |      |   |   
|                                         | Real estate  mortgage                 |                   |                                                              |    |                    |        |      |   |   
|                                         | Installment                            |                   |                                                              | 130 |                    |        |      | 18 |   
|                                         | Lease financing receivable             |                   |                                                              |    |                    |        |      |   |   
|                                         |                                        |                   |                                                              |     |                    |        |      |   
|                                         |                                        | Total non-accrual |                                                              | $   | 268                |        |      |    | 18 |       
|                                         |                                        |                   |                                                              |     |                    |        |      |   
|Loans 90 days past due:                  |                                        |                   |                                                              |     |                    |        |      |   
|                                         | Commercial, financial and agricultural |                   | $                                                            | 178 |                    |        |      | 60 |   
|                                         | Real estate  construction             |                   |                                                              |    |                    |        |      |   |   
|                                         | Real estate  mortgage                 |                   |                                                              |    |                    |        |      |   |   
|                                         | Installment                            |                   |                                                              |    |                    |        |      |   |   
|                                         | Lease financing receivable             |                   |                                                              |    |                    |        |      |   |   
|                                         |                                        |                   |                                                              |     |                    |        |      |   
|                                         |                                        |                   | Total loans 90 days past due                                 |     | $                  | 178    |      |    |    | 60     |  
|                                         |                                        |                   |                                                              |     |                    |        |      |   
|Renegotiated loans:                      |                                        |                   |                                                              |     |                    |        |      |   
|                                         | Commercial, financial and agricultural |                   | $                                                            |    |                    |        |      |   |   
|                                         | Real estate  construction             |                   |                                                              |    |                    |        |      |   |   
|                                         | Real estate  mortgage                 |                   |                                                              |    |                    |        |      |   |   
|                                         | Installment                            |                   |                                                              |    |                    |        |      |   |   
|                                         | Lease financing receivable             |                   |                                                              |    |                    |        |      |   |   
|                                         |                                        |                   |                                                              |     |                    |        |      |   
|                                         |                                        |                   | Total renegotiated loans past due                            |     | $                  |       |      |    |    |       |  
|                                         |                                        |                   |                                                              |     |                    |        |      |   
|Loans current - considered uncollectible |                                        | $                 |                                                             |     |                    |        |     |   
|                                         |                                        |                   |                                                              |     |                    |        |      |   
|                                         |                                        |                   | Total non-performing loans                                   |     | $                  | 446    |      |    |    | 78     |  
|                                         |                                        |                   |                                                              |     |                    |        |      |   
|                                         |                                        |                   | Total loans, net of unearned interest                        |     | $                  | 77,780 |      |    |    | 62,811 |  
|                                         |                                        |                   |                                                              |     |                    |        |      |   
|                                         |                                        |                   | Percent of total loans outstanding,
net of unearned interest |     |                    | 0.57   | %    |    |    | .12    | %
|                                         |                                        |                   |                                                              |     |                    |        |      |   
|Other real estate                        |                                        | $                 |                                                             |     |                    |        | 174  |   
|                                         |                                        |                   |                                                              |     |                    |        |      |   

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| |  |  | The accrual of interest income is discontinued when it is
determined that collection of interest is less than probable or the
collection of any amount of principal is doubtful. The decision to
place a loan on non-accrual status is based on an evaluation of the
borrowers financial condition, collateral liquidation value,
economic and business conditions and other factors that affect the
borrowers ability to pay. At the time a loan is placed on a
non-accrual status, the accrued but unpaid interest is also
evaluated as to collectibility. If collectibility is doubtful, the
unpaid interest is charged off. Thereafter, interest on
non-accrual loans is recognized only as received. Legends
Financial had $268,000 and $18,000 of loans on non-accrual status
at December 31, 2002 and 2001, respectively.                                                                                                                                                                                                                                                                      
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | At December 31, 2002 loans totaling $2,013,000 were included in
Legends Financials internal classified loan list. Of these loans
$1,447,000 are commercial and $566,000 are installment. The
collateral value related to these loans approximated $2,114,000
($1,373,000 related to commercial and $741,000 related to
installment). At December 31, 2001 loans totaling $2,055,000 were
included in Legends Financials internal classified loan list. Of
these loans $1,939,000 are commercial and $116,000 are installment.
The collateral value related to these loans approximated
$2,430,000 ($2,320,000 related to commercial and $110,000 related
to installment). Loans are listed as classified when information
obtained about possible credit problems of the borrower has
prompted management to question the ability of the borrower to
comply with the repayment terms of the loan agreement. The loan
classifications do not represent or result from trends or
uncertainties which management expects will materially impact
future operating results, liquidity or capital resources.
|
| |  |  | At December 31, 2002 and 2001 there were no loan concentrations
that exceeded ten percent of total loans other than as included in
the preceding table of types of loans. Loan concentrations are
amounts loaned to a multiple number of borrowers engaged in similar
activities which would cause them to be similarly impacted by
economic or other conditions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | There were no material amounts of other interest-bearing assets
(interest-bearing deposits with other banks, municipal bonds, etc.)
at December 31, 2002 which would be required to be disclosed as
past due, non-accrual, restructured or potential problem loans, if
such interest-bearing assets were loans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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| |  |  | The following schedule details selected information related to the
allowance for possible loan loss account of Legends Financial at December
31, 2002 and 2001.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                           |              |                                        |                      |   |                    |     |        |   |    |     | 
|------------------------------------------------------------------------------------------ | ------------ | -------------------------------------- | -------------------- | - | ------------------ | --- | ------ | - | -- | --- | 
|                                                                                           |              |                                        |                      |   | In Thousands,     
|                                                                                           |              |                                        |                      |   | Except Percentages
|                                                                                           |              |                                        |                      |   |                   
|                                                                                           |              |                                        |                      |   | 2002               |     | 2001  
|                                                                                           |              |                                        |                      |   |                    |     |       
|Allowance for loan losses at beginning of year                                             |              | $                                      | 755                  |   |                    |     | 552    |  
|                                                                                           |              |                                        |                      |   |                    |     |        |  
|Less: net loan charge offs:                                                                |              |                                        |                      |   |                    |     |        |  
|                                                                                           | Charge-offs: |                                        |                      |   |                    |     |        |   |   
|                                                                                           |              | Commercial, financial and agricultural |                      |   | 555                |     |        |   | 72 |    
|                                                                                           |              | Real estate construction               |                      |   |                   |     |        |   |   |    
|                                                                                           |              | Real estate  mortgage                 |                      |   |                   |     |        |   |   |    
|                                                                                           |              | Installment                            |                      |   | 73                 |     |        |   | 37 |    
|                                                                                           |              | Lease financing                        |                      |   |                   |     |        |   |   |    
|                                                                                           |              |                                        |                      |   |                    |     |        |  
|                                                                                           |              |                                        | 628                  |   |                    |     | 109    |  
|                                                                                           |              |                                        |                      |   |                    |     |        |  
|                                                                                           | Recoveries:  |                                        |                      |   |                    |     |        |   |   
|                                                                                           |              | Commercial, financial and agricultural |                      |   | 45                 |     |        |   |   |    
|                                                                                           |              | Real estate construction               |                      |   |                   |     |        |   |   |    
|                                                                                           |              | Real estate  mortgage                 |                      |   |                   |     |        |   |   |    
|                                                                                           |              | Installment                            |                      |   | 4                  |     |        |   | 5  |    
|                                                                                           |              | Lease financing                        |                      |   |                   |     |        |   |   |    
|                                                                                           |              |                                        |                      |   |                    |     |        |  
|                                                                                           |              |                                        | 49                   |   |                    |     | 5      |  
|                                                                                           |              |                                        |                      |   |                    |     |        |  
|                                                                                           |              |                                        | Net loan charge offs |   |                    | 579 |        |   |    | 104 | 
|                                                                                           |              |                                        |                      |   |                    |     |        |  
|Provision for loan losses charged to expense                                               |              |                                        | 703                  |   |                    |     | 307    |  
|                                                                                           |              |                                        |                      |   |                    |     |        |  
|Allowance for loan losses at end of year                                                   |              | $                                      | 879                  |   |                    |     | 755    |  
|                                                                                           |              |                                        |                      |   |                    |     |        |  
|Total loans at end of year                                                                 |              | $                                      | 77,780               |   |                    |     | 62,811 |  
|                                                                                           |              |                                        |                      |   |                    |     |        |  
|Average total loans outstanding during year                                                |              | $                                      | 70,171               |   |                    |     | 51,983 |  
|                                                                                           |              |                                        |                      |   |                    |     |        |  
|Net charge-offs as a percentage of average total loans
outstanding during year             |              |                                        | .83                  | % |                    |     | .20    | %
|                                                                                           |              |                                        |                      |   |                    |     |        |  
|Ending allowance for loan losses as a percentage of
total loans outstanding at end of year |              |                                        | 1.13                 | % |                    |     | 1.20   | %
|                                                                                           |              |                                        |                      |   |                    |     |        |  

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| |  |  | The following detail provides a breakdown of the allocation of the
allowance for possible loan losses:
| |  |  | ------------------------------------------------------------------------------------------------------

|                                       |  |                   |     |                   |  |              |       |       |  |   |     |          |  |  |       |  
|-------------------------------------- |  | ----------------- | --- | ----------------- |  | ------------ | ----- | ----- |  | - | --- | -------- |  |  | ----- | -
|                                       |  | December 31, 2002 |     | December 31, 2001
|                                       |  |                   |     |                  
|                                       |  |                   |     |                   |  | Percent      |       |       |  |   |     | Percent 
|                                       |  |                   |     |                   |  | of Loans     |       |       |  |   |     | of Loans
|                                       |  |                   |     |                   |  | in Each      |       |       |  |   |     | in Each 
|                                       |  |                   |     |                   |  | Category     |       |       |  |   |     | Category
|                                       |  |                   |     |                   |  | to Total     |       |       |  |   |     | to Total
|                                       |  | In Thousands      |     | Loans             |  | In Thousands |       | Loans
|                                       |  |                   |     |                   |  |              |       |      
|Commercial, financial and
agricultural |  | $                 | 220 |                   |  |              | 20.5  | %     |  | $ | 319 |          |  |  | 28.1  | %
|Real estate  construction             |  |                   | 102 |                   |  |              | 18.9  |       |  |   | 113 |          |  |  | 20.3  |  
|Real estate  mortgage                 |  |                   | 516 |                   |  |              | 55.3  |       |  |   | 266 |          |  |  | 44.9  |  
|Installment                            |  |                   | 41  |                   |  |              | 5.3   |       |  |   | 57  |          |  |  | 6.7   |  
|                                       |  |                   |     |                   |  |              |       |       |  |   |     |          |  |  |       |  
|                                       |  | $                 | 879 |                   |  |              | 100.0 | %     |  | $ | 755 |          |  |  | 100.0 | %
|                                       |  |                   |     |                   |  |              |       |       |  |   |     |          |  |  |       |  



| |  |  | The allowance for possible loan losses is an amount that management
believes will be adequate to absorb possible losses on existing loans
that may become uncollectible. The provision for possible loan losses
charged to operating expense is based on past loan loss experience and
other factors which, in managements judgment, deserve current
recognition in estimating possible loan losses. Such other factors
considered by management include growth and composition of the loan
portfolio, review of specific loan problems, the relationship of the
allowance for possible loan losses to outstanding loans, adverse
situations that may affect the borrowers ability to repay, the estimated
value of any underlying collateral and current economic conditions that
may affect the borrowers ability to pay.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Management conducts a continuous review of all loans that are delinquent,
previously charged down or loans which are determined to be potentially
uncollectible. Loan classifications are reviewed periodically by a
person independent of the lending function. The Board of Directors
periodically reviews the adequacy of the allowance for possible loan
losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  |  | Legends Financial maintains its allowance for possible loan losses at an
amount considered by management to be adequate to provide for the
possibility of loan losses in the loan portfolio.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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|V. |  | Deposits:
|-- |  | ---------



| |  |  | The average amounts and average interest rates for deposits for 2002 and
2001 are detailed in the following schedule:
| |  |  | ---------------------------------------------------------------------------------------------------------------------

|                                          |  |              |        |         |  |              |      |         |  |   |        |  |  |  |      |  
|----------------------------------------- |  | ------------ | ------ | ------- |  | ------------ | ---- | ------- |  | - | ------ |  |  |  | ---- | -
|                                          |  | 2002         |        | 2001   
|                                          |  |              |        |        
|                                          |  | Average      |        |         |  |              |      | Average |  |   |        | 
|                                          |  | Balance      |        | Average |  | Balance      |      | Average
|                                          |  | In Thousands |        | Rate    |  | In Thousands |      | Rate   
|                                          |  |              |        |         |  |              |      |        
|Non-interest bearing deposits             |  | $            | 11,455 |         |  |              |     | %       |  | $ | 7,727  |  |  |  |     | %
|Negotiable order of withdrawal
accounts   |  |              | 19,033 |         |  |              | 1.43 | %       |  |   | 9,918  |  |  |  | 3.11 | %
|Money market demand accounts              |  |              | 15,938 |         |  |              | 1.81 | %       |  |   | 12,016 |  |  |  | 3.35 | %
|Individual retirement accounts            |  |              | 1,387  |         |  |              | 4.18 | %       |  |   | 1,192  |  |  |  | 5.87 | %
|Other savings                             |  |              | 1,340  |         |  |              | 1.49 | %       |  |   | 785    |  |  |  | 2.04 | %
|Certificates of deposit
$100,000
and over |  |              | 21,823 |         |  |              | 3.40 | %       |  |   | 18,712 |  |  |  | 5.67 | %
|Certificates of deposit under
$100,000    |  |              | 14,215 |         |  |              | 3.93 | %       |  |   | 13,649 |  |  |  | 5.80 | %
|                                          |  |              |        |         |  |              |      |         |  |   |        |  |  |  |      |  
|                                          |  | $            | 85,191 |         |  |              | 2.28 | %       |  | $ | 63,999 |  |  |  | 4.14 | %
|                                          |  |              |        |         |  |              |      |         |  |   |        |  |  |  |      |  



| |  |  | The following schedule details the maturities of certificates of deposit
and individual retirement accounts of $100,000 and over at December 31,
2002.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |              |        |            |  |       |     |  |  |  |        | 
|----------------------- |  | ------------ | ------ | ---------- |  | ----- | --- |  |  |  | ------ | 
|                        |  | In Thousands
|                        |  |             
|                        |  | Certificates |        | Individual |  |       |     | 
|                        |  | of           |        | Retirement |  |       |     | 
|                        |  | Deposit      |        | Accounts   |  | Total
|                        |  |              |        |            |  |      
|Less than three months  |  | $            | 9,335  |            |  |       | 220 |  |  |  | 9,555  | 
|Three to six months     |  |              | 4,792  |            |  |       |    |  |  |  | 4,792  | 
|Six to twelve months    |  |              | 3,983  |            |  |       |    |  |  |  | 3,983  | 
|More than twelve months |  |              | 4,946  |            |  |       | 128 |  |  |  | 5,074  | 
|                        |  |              |        |            |  |       |     |  |  |  |        | 
|                        |  | $            | 23,056 |            |  |       | 348 |  |  |  | 23,404 | 
|                        |  |              |        |            |  |       |     |  |  |  |        | 

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|VI. |  | Return on Equity and Assets:
|--- |  | ----------------------------



| |  |  | The following schedule details selected key ratios of Legends Bank at
December 31, 2002 and 2001.
| |  |  | -------------------------------------------------------------------------------------------------

|                       |                                                                                                                             |  |       |   |      |  |       |   | 
|---------------------- | --------------------------------------------------------------------------------------------------------------------------- |  | ----- | - | ---- |  | ----- | - | 
|                       |                                                                                                                             |  | 2002  |   | 2001
|                       |                                                                                                                             |  |       |   |     
|Return on assets       |                                                                                                                             |  | 0.57  | % |      |  | 0.62  | %
|                       | (Net income divided by average total assets)                                                                                |  |       |   |      |  |       |   | 
|Return on equity       |                                                                                                                             |  | 4.46  | % |      |  | 3.92  | %
|                       | (Net income divided by average equity)                                                                                      |  |       |   |      |  |       |   | 
|Dividend payout ratio  |                                                                                                                             |  | 0.00  | % |      |  | 0.00  | %
|                       | (Dividends declared per share divided by net
earnings per share)                                                            |  |       |   |      |  |       |   | 
|Equity to asset ratio  |                                                                                                                             |  | 12.88 | % |      |  | 15.86 | %
|                       | (Average equity divided by average total assets)                                                                            |  |       |   |      |  |       |   | 
|Leverage capital ratio |                                                                                                                             |  | 12.10 | % |      |  | 15.15 | %
|                       | (Equity divided by fourth quarter average total
assets, excluding the net unrealized gain on
available-for-sale securities) |  |       |   |      |  |       |   | 



| |  |  | The minimum leverage capital ratio required by the regulatory agencies is
4%.                                                                                                                                                                                           
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Beginning January 1, 1991, new risk-based capital guidelines were adopted
by regulatory agencies. Under these guidelines, a credit risk is
assigned to various categories of assets and commitments ranging from 0%
to 100% based on the risk associated with the asset.
|
| |  |  | The following schedule details Legends Financials risk-based capital at
December 31, 2002 and 2001 excluding the net unrealized gain on
available-for-sale securities which is shown as an increase in
stockholders equity in the consolidated financial statements:  

|                           |                                                                                                |               |        |                    |        |      |        |        |        | 
|-------------------------- | ---------------------------------------------------------------------------------------------- | ------------- | ------ | ------------------ | ------ | ---- | ------ | ------ | ------ | 
|                           |                                                                                                |               |        | In Thousands      
|                           |                                                                                                |               |        | except percentages
|                           |                                                                                                |               |        |                   
|                           |                                                                                                |               |        | 2002               |        | 2001
|                           |                                                                                                |               |        |                    |        |     
|Tier I capital:            |                                                                                                |               |        |                    |        |      |        |       
|                           | Stockholders equity, excluding the net unrealized gain/
loss on available-for-sale securities |               | $      | 13,689             |        |      |        | 13,025 |       
|Total capital:             |                                                                                                |               |        |                    |        |      |        |       
|                           | Allowable allowance for loan losses (limited to 1.25%
of risk-weighted assets)                 |               |        | 879                |        |      |        | 755    |       
|                           |                                                                                                |               |        |                    |        |      |        |       
|                           |                                                                                                | Total capital |        | $                  | 14,568 |      |        |        | 13,780 | 
|                           |                                                                                                |               |        |                    |        |      |        |       
|Risk-weighted assets       |                                                                                                | $             | 87,725 |                    |        |      | 72,291 |       
|                           |                                                                                                |               |        |                    |        |      |        |       
|Risk-based capital ratios: |                                                                                                |               |        |                    |        |      |        |       
|                           | Tier I capital ratio                                                                           |               |        | 15.60              | %      |      |        | 18.02  | %     
|                           |                                                                                                |               |        |                    |        |      |        |       
|                           | Total risk-based capital ratio                                                                 |               |        | 16.61              | %      |      |        | 19.06  | %     
|                           |                                                                                                |               |        |                    |        |      |        |       

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| |  |  | Legends Financial is required to maintain a Total capital to
risk-weighted asset ratio of 8% and a Tier I capital to risk-weighted
asset ratio of 4%. At December 31, 2002, Legends Financial was in
compliance with these requirements.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The following schedule details Legends Financials interest rate
sensitivity at December 31, 2002:                                                                                                                                      

|                                              |                                 |                                                                               |                                    |           |                  |            |        |             |        |              |         |             |       |       |         |     |       |       |         |       |       |       |        |        |       |        | 
|--------------------------------------------- | ------------------------------- | ----------------------------------------------------------------------------- | ---------------------------------- | --------- | ---------------- | ---------- | ------ | ----------- | ------ | ------------ | ------- | ----------- | ----- | ----- | ------- | --- | ----- | ----- | ------- | ----- | ----- | ----- | ------ | ------ | ----- | ------ | 
|                                              |                                 |                                                                               |                                    |           | Repricing Within
|                                              |                                 |                                                                               |                                    |           |                 
|(In Thousands)                                |                                 | Total                                                                         |                                    | 0-30 Days |                  | 31-90 Days |        | 91-180 Days |        | 181-365 Days |         | Over 1 Year
|                                              |                                 |                                                                               |                                    |           |                  |            |        |             |        |              |         |            
|Earning assets:                               |                                 |                                                                               |                                    |           |                  |            |        |             |        |              |         |             |       |       |         |     |       |       |         |       |       |       |        |       
|                                              | Loans, net of
unearned interest |                                                                               | $                                  | 77,780    |                  |            |        | 34,506      |        |              |         | 967         |       |       |         | 749 |       |       |         | 2,579 |       |       |        | 38,979 |      
|                                              | Securities                      |                                                                               |                                    | 24,593    |                  |            |        | 6,241       |        |              |         | 326         |       |       |         |    |       |       |         | 967   |       |       |        | 17,059 |      
|                                              | Loans held for sale             |                                                                               |                                    | 1,687     |                  |            |        | 1,687       |        |              |         |            |       |       |         |    |       |       |         |      |       |       |        |       |      
|                                              | Federal funds sold              |                                                                               |                                    | 1,225     |                  |            |        | 1,225       |        |              |         |            |       |       |         |    |       |       |         |      |       |       |        |       |      
|                                              |                                 |                                                                               |                                    |           |                  |            |        |             |        |              |         |             |       |       |         |     |       |       |         |       |       |       |        |        |      
|                                              |                                 |                                                                               | Total earning
assets               |           |                  | 105,285    |        |             |        | 43,659       |         |             |       | 1,293 |         |     |       | 749   |         |       |       | 3,546 |        |        |       | 56,038 | 
|                                              |                                 |                                                                               |                                    |           |                  |            |        |             |        |              |         |             |       |       |         |     |       |       |         |       |       |       |        |        |      
|Interest-bearing
liabilities:                 |                                 |                                                                               |                                    |           |                  |            |        |             |        |              |         |             |       |       |         |     |       |       |         |       |       |       |        |       
|                                              |                                 | Negotiable order
of withdrawal
accounts                                       |                                    |           | 20,355           |            |        |             | 20,355 |              |         |             |      |       |         |     |      |       |         |       |      |       |        |        |      |       
|                                              |                                 | Money market demand
accounts                                                  |                                    |           | 18,596           |            |        |             | 18,596 |              |         |             |      |       |         |     |      |       |         |       |      |       |        |        |      |       
|                                              |                                 | Savings deposits                                                              |                                    |           | 1,653            |            |        |             | 1,653  |              |         |             |      |       |         |     |      |       |         |       |      |       |        |        |      |       
|                                              |                                 | Certificates of deposit,
and individual
retirement accounts
$100,000 and over |                                    |           | 23,404           |            |        |             | 6,517  |              |         |             | 3,038 |       |         |     | 4,792 |       |         |       | 3,983 |       |        |        | 5,074 |       
|                                              |                                 | Certificates of deposit,
under $100,000                                       |                                    |           | 13,397           |            |        |             | 2,541  |              |         |             | 1,398 |       |         |     | 3,924 |       |         |       | 2,627 |       |        |        | 2,907 |       
|                                              |                                 | Individual retirement
accounts                                                |                                    |           | 1,042            |            |        |             |       |              |         |             | 101   |       |         |     | 107   |       |         |       | 281   |       |        |        | 553   |       
|                                              |                                 | Securities sold under
repurchase agreements                                   |                                    |           | 3,682            |            |        |             | 3,682  |              |         |             |      |       |         |     |      |       |         |       |      |       |        |        |      |       
|                                              |                                 | Advances from FHLB                                                            |                                    |           | 1,500            |            |        |             |       |              |         |             |      |       |         |     | 500   |       |         |       | 1,000 |       |        |        |      |       
|                                              |                                 |                                                                               |                                    |           |                  |            |        |             |        |              |         |             |       |       |         |     |       |       |         |       |       |       |        |        |      
|                                              |                                 |                                                                               | Total interest
bearing
liabilities |           |                  | 83,629     |        |             |        | 53,344       |         |             |       | 4,537 |         |     |       | 9,323 |         |       |       | 7,891 |        |        |       | 8,534  | 
|                                              |                                 |                                                                               |                                    |           |                  |            |        |             |        |              |         |             |       |       |         |     |       |       |         |       |       |       |        |        |      
|Interest-sensitivity gap                      |                                 | $                                                                             | 21,656                             |           |                  |            | (9,685 | )           |        |              | (3,244  | )           |       |       | (8,574  | )   |       |       | (4,345  | )     |       |       | 47,504 |       
|                                              |                                 |                                                                               |                                    |           |                  |            |        |             |        |              |         |             |       |       |         |     |       |       |         |       |       |       |        |       
|Cumulative gap                                |                                 |                                                                               |                                    |           |                  |            | (9,685 | )           |        |              | (12,929 | )           |       |       | (21,503 | )   |       |       | (25,848 | )     |       |       | 21,656 |       
|                                              |                                 |                                                                               |                                    |           |                  |            |        |             |        |              |         |             |       |       |         |     |       |       |         |       |       |       |        |       
|Interest-sensitivity gap
as % of total assets |                                 |                                                                               |                                    |           |                  |            | (8.46  | )%          |        |              | (2.83   | )           |       |       | (7.49   | )   |       |       | (3.79   | )     |       |       | 41.48  |       
|                                              |                                 |                                                                               |                                    |           |                  |            |        |             |        |              |         |             |       |       |         |     |       |       |         |       |       |       |        |       
|Cumulative gap as %
of total assets           |                                 |                                                                               |                                    |           |                  |            | (8.46  | )%          |        |              | (11.29  | )           |       |       | (18.78  | )   |       |       | (22.57  | )     |       |       | 18.91  |       
|                                              |                                 |                                                                               |                                    |           |                  |            |        |             |        |              |         |             |       |       |         |     |       |       |         |       |       |       |        |       



| |  |  | Legends Financial presently maintains a liability sensitive position over
the next twelve months. Management expects that liabilities of a demand
nature will renew and that it will not be necessary to replace them with
significantly higher cost funds.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | Legends Financials primary component of market risk is interest rate
volatility. Fluctuations in interest rates will ultimately impact both
the level of income and expense recorded on a large portion of Legends
Financials assets and liabilities, and the market value of all
interest-earning assets and interest-bearing liabilities, other than
those which possess a short term to maturity. Based upon the nature of
Legends Financials operations, Legends Financial is not subject to
foreign currency exchange or commodity price risk.                        
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Interest rate risk (sensitivity) management focuses on the earnings risk
associated with changing interest rates. Management seeks to maintain
profitability in both immediate and long term earnings through funds
management/interest rate risk management. Legends Financials rate
sensitivity position has an important impact on earnings. Senior
management of Legends Bank meets monthly to analyze the rate sensitivity
position. These meetings focus on the spread between the cost of funds
and interest yields generated primarily through loans and investments.

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ITEM 7. FINANCIAL STATEMENTS

INDEPENDENT AUDITORS REPORT

The Board of Directors
Legends Financial Holdings, Inc.

We have audited the accompanying consolidated balance sheets of Legends
Financial Holdings, Inc. and Subsidiaries as of December 31, 2002 and 2001 and
the related consolidated statements of earnings, comprehensive earnings,
changes in stockholders equity and cash flows for each of the three years
ended December 31, 2002. These financial statements are the responsibility of
Legends Financials management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Legends Financial Holdings,
Inc. and Subsidiaries as of December 31, 2002 and 2001, and the results of its
operations and its cash flows for each of the three years ended December 31,
2002, in conformity with accounting principles generally accepted in the United
States of America.

| |                                                          
| | ---------------------------------------------------------
| | /s/ Maggart & Associates, P.C.

Maggart & Associates, P.C

January 22, 2003

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Consolidated Balance Sheets

December 31, 2002 and 2001

|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   |              |        |        |   |        |  | 
|------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ------------------------------------------ | ------ | - | ------------ | ------ | ------ | - | ------ |  | 
|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   | In Thousands
|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   |             
|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   | 2002         |        | 2001  
|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   |              |        |       
|ASSETS                                                                                                 |                                                                                                                                        |                                      |                                            |        |   |              |        |       
|Loans, less allowance for possible loan losses of
$879,000 and $755,000, respectively                  |                                                                                                                                        | $                                    | 76,901                                     |        |   |              | 62,056 |       
|Securities available-for-sale, at market (amortized cost of
$24,338,000 and $19,695,000, respectively) |                                                                                                                                        |                                      | 24,593                                     |        |   |              | 19,740 |       
|Loans held for sale                                                                                    |                                                                                                                                        |                                      | 1,687                                      |        |   |              | 239    |       
|Federal funds sold                                                                                     |                                                                                                                                        |                                      | 1,225                                      |        |   |              |       |       
|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   |              |        |       
|                                                                                                       |                                                                                                                                        |                                      | Total earning assets                       |        |   | 104,406      |        |        |   | 82,035 | 
|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   |              |        |       
|Cash and due from banks                                                                                |                                                                                                                                        |                                      | 5,287                                      |        |   |              | 3,826  |       
|Bank premises and equipment, net                                                                       |                                                                                                                                        |                                      | 4,079                                      |        |   |              | 3,418  |       
|Accrued interest receivable                                                                            |                                                                                                                                        |                                      | 511                                        |        |   |              | 445    |       
|Other real estate owned                                                                                |                                                                                                                                        |                                      |                                           |        |   |              | 174    |       
|Deferred tax asset, net                                                                                |                                                                                                                                        |                                      | 133                                        |        |   |              | 61     |       
|Other assets                                                                                           |                                                                                                                                        |                                      | 118                                        |        |   |              | 67     |       
|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   |              |        |       
|                                                                                                       |                                                                                                                                        |                                      | Total assets                               |        | $ | 114,534      |        |        |   | 90,026 | 
|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   |              |        |       
|                                                                                                       |                                                                                                                                        | LIABILITIES AND STOCKHOLDERS EQUITY |                                            |        |   |              |        |        |   |       
|Deposits                                                                                               |                                                                                                                                        | $                                    | 94,971                                     |        |   |              | 73,438 |       
|Securities sold under repurchase agreement                                                             |                                                                                                                                        |                                      | 3,682                                      |        |   |              |       |       
|Accrued interest payable                                                                               |                                                                                                                                        |                                      | 366                                        |        |   |              | 453    |       
|Accounts payable and other liabilities                                                                 |                                                                                                                                        |                                      | 114                                        |        |   |              | 563    |       
|Income taxes payable                                                                                   |                                                                                                                                        |                                      | 54                                         |        |   |              | 2      |       
|Advances from Federal Home Loan Bank                                                                   |                                                                                                                                        |                                      | 1,500                                      |        |   |              | 2,500  |       
|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   |              |        |       
|                                                                                                       |                                                                                                                                        |                                      | Total liabilities                          |        |   | 100,687      |        |        |   | 76,956 | 
|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   |              |        |       
|Stockholders equity:                                                                                  |                                                                                                                                        |                                      |                                            |        |   |              |        |       
|                                                                                                       | Preferred stock, no par value, authorized 1,000,000 shares,
no shares issued                                                           |                                      |                                            |       |   |              |        |       |  
|                                                                                                       | Common stock, par value $1 per share, authorized 2,000,000 shares,
1,379,083 and 1,142,252 shares issued and outstanding,
respectively |                                      |                                            | 1,379  |   |              |        | 1,142  |  
|                                                                                                       | Additional paid-in capital                                                                                                             |                                      |                                            | 12,267 |   |              |        | 12,434 |  
|                                                                                                       | Retained earnings (deficit)                                                                                                            |                                      |                                            | 43     |   |              |        | (551   | )
|                                                                                                       | Net unrealized gains on available-for-sale securities, net of
income taxes of $97,000 in 2002                                          |                                      |                                            | 158    |   |              |        | 45     |  
|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   |              |        |       
|                                                                                                       |                                                                                                                                        |                                      | Total stockholders equity                 |        |   | 13,847       |        |        |   | 13,070 | 
|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   |              |        |       
|COMMITMENTS AND CONTINGENCIES                                                                          |                                                                                                                                        |                                      |                                            |        |   |              |        |       
|                                                                                                       |                                                                                                                                        |                                      | Total liabilities and stockholders equity |        | $ | 114,534      |        |        |   | 90,026 | 
|                                                                                                       |                                                                                                                                        |                                      |                                            |        |   |              |        |       

See accompanying notes to financial statements.

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Consolidated Statements of Earnings

For the Years Ended December 31, 2002, 2001 and 2000

|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |       |       | 
|------------------------------------------------------------- | --------------------------------------------------------------------------- | ---------------------------- | ----- | -------------------------- | ----- | ---- | ----- | ------------ | ----- |  | ----- | ----- | ----- | 
|                                                              |                                                                             |                              |       |                            |       |      |       | In Thousands |       |  |       |      
|                                                              |                                                                             |                              |       | (except per share amounts)
|                                                              |                                                                             |                              |       |                           
|                                                              |                                                                             |                              |       | 2002                       |       | 2001 |       | 2000        
|                                                              |                                                                             |                              |       |                            |       |      |       |             
|Interest income:                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|                                                              | Interest and fees on loans                                                  |                              | $     | 4,925                      |       |      |       | 4,461        |       |  |       | 3,397 |      
|                                                              | Interest and dividends on taxable securities                                |                              |       | 1,084                      |       |      |       | 1,324        |       |  |       | 1,180 |      
|                                                              | Interest and dividends on securities exempt from
Federal income taxes       |                              |       | 17                         |       |      |       |             |       |  |       |      |      
|                                                              | Interest on loans held for sale                                             |                              |       | 21                         |       |      |       | 6            |       |  |       | 3     |      
|                                                              | Interest on Federal funds sold                                              |                              |       | 36                         |       |      |       | 52           |       |  |       | 113   |      
|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|                                                              |                                                                             | Total interest income        |       |                            | 6,083 |      |       |              | 5,843 |  |       |       | 4,693 | 
|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|Interest expense:                                             |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|                                                              | Interest on negotiable order of withdrawal accounts                         |                              |       | 273                        |       |      |       | 308          |       |  |       | 193   |      
|                                                              | Interest on money market and savings accounts                               |                              |       | 308                        |       |      |       | 419          |       |  |       | 538   |      
|                                                              | Interest on certificates of deposits over $100,000                          |                              |       | 758                        |       |      |       | 1,088        |       |  |       | 965   |      
|                                                              | Interest on certificates of deposits - other                                |                              |       | 601                        |       |      |       | 835          |       |  |       | 700   |      
|                                                              | Interest on Federal funds purchased                                         |                              |       | 12                         |       |      |       | 12           |       |  |       | 6     |      
|                                                              | Interest on advances from Federal Home Loan Bank                            |                              |       | 75                         |       |      |       | 122          |       |  |       | 41    |      
|                                                              | Interest on securities sold under repurchase
agreements and short-term debt |                              |       | 8                          |       |      |       |             |       |  |       |      |      
|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|                                                              |                                                                             | Total interest expense       |       |                            | 2,035 |      |       |              | 2,784 |  |       |       | 2,443 | 
|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|Net interest income before provision for possible
loan losses |                                                                             |                              | 4,048 |                            |       |      | 3,059 |              |       |  | 2,250 |      
|Provision for possible loan losses                            |                                                                             |                              | 703   |                            |       |      | 307   |              |       |  | 246   |      
|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|Net interest income after provision for possible
loan losses  |                                                                             |                              | 3,345 |                            |       |      | 2,752 |              |       |  | 2,004 |      
|Non-interest income:                                          |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|                                                              | Other fees and commissions                                                  |                              |       | 617                        |       |      |       | 478          |       |  |       | 232   |      
|                                                              | Gain on sale of securities                                                  |                              |       | 140                        |       |      |       | 115          |       |  |       | 6     |      
|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|                                                              |                                                                             | Total non-interest income    |       |                            | 757   |      |       |              | 593   |  |       |       | 238   | 
|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|Non-interest expense:                                         |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|                                                              | Employee salaries and benefits                                              |                              |       | 1,732                      |       |      |       | 1,407        |       |  |       | 1,050 |      
|                                                              | Occupancy expenses                                                          |                              |       | 250                        |       |      |       | 242          |       |  |       | 135   |      
|                                                              | Furniture and equipment expense                                             |                              |       | 373                        |       |      |       | 337          |       |  |       | 308   |      
|                                                              | Other operating expenses                                                    |                              |       | 1,202                      |       |      |       | 860          |       |  |       | 661   |      
|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|                                                              |                                                                             | Total non-interest expense   |       |                            | 3,557 |      |       |              | 2,846 |  |       |       | 2,154 | 
|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|                                                              |                                                                             | Earnings before income taxes |       |                            | 545   |      |       |              | 499   |  |       |       | 88    | 
|Income tax benefit                                            |                                                                             |                              | 49    |                            |       |      |      |              |       |  |      |      
|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|                                                              |                                                                             | Net earnings                 |       | $                          | 594   |      |       |              | 499   |  |       |       | 88    | 
|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|Basic earnings per common share                               |                                                                             | $                            | .43   |                            |       |      | .36   |              |       |  | .06   |      
|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      
|Diluted earnings per common share                             |                                                                             | $                            | .43   |                            |       |      | .36   |              |       |  | .06   |      
|                                                              |                                                                             |                              |       |                            |       |      |       |              |       |  |       |      

See accompanying notes to financial statements.

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Consolidated Statements of Comprehensive Earnings

For the Years Ended December 31, 2002, 2001 and 2000

|                           |                                                                                                         |                              |  |              |  |   |     |      |     |      |     |      |     |  |    |     |     |  |  |  |  | 
|-------------------------- | ------------------------------------------------------------------------------------------------------- | ---------------------------- |  | ------------ |  | - | --- | ---- | --- | ---- | --- | ---- | --- |  | -- | --- | --- |  |  |  |  | 
|                           |                                                                                                         |                              |  | In Thousands
|                           |                                                                                                         |                              |  |             
|                           |                                                                                                         |                              |  |              |  |   |     | 2002 |     | 2001 |     | 2000 |     |  |    |    
|                           |                                                                                                         |                              |  |              |  |   |     |      |     |      |     |      |     |  |    |    
|Net earnings               |                                                                                                         |                              |  |              |  | $ | 594 |      |     |      | 499 |      |     |  | 88 |    
|                           |                                                                                                         |                              |  |              |  |   |     |      |     |      |     |      |     |  |    |    
|Other comprehensive gains: |                                                                                                         |                              |  |              |  |   |     |      |     |      |     |      |     |  |    |    
|                           | Unrealized gains on available-for-sale securities
arising during year, net of taxes of $123,000
in 2002 |                              |  |              |  |   |     | 199  |     |      |     | 204  |     |  |    | 163 |    
|                           | Reclassification adjustment for gains included in
net earnings, net of taxes of $54,000 in 2002         |                              |  |              |  |   |     | (86  | )   |      |     | (115 | )   |  |    | (6  | )  
|                           |                                                                                                         |                              |  |              |  |   |     |      |     |      |     |      |     |  |    |    
|                           |                                                                                                         | Other comprehensive earnings |  |              |  |   |     |      | 113 |      |     |      | 89  |  |    |     | 157 | 
|                           |                                                                                                         |                              |  |              |  |   |     |      |     |      |     |      |     |  |    |    
|                           |                                                                                                         | Comprehensive earnings       |  |              |  |   |     | $    | 707 |      |     |      | 588 |  |    |     | 245 | 
|                           |                                                                                                         |                              |  |              |  |   |     |      |     |      |     |      |     |  |    |    

See accompanying notes to financial statements.

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Statements of Changes in Stockholders Equity

For the Years Ended December 31, 2002, 2001 and 2000

|                                                                                                        |  |              |       |         |  |            |        |            |  |               |        |   |  |                |      |   |  |  |        | 
|------------------------------------------------------------------------------------------------------- |  | ------------ | ----- | ------- |  | ---------- | ------ | ---------- |  | ------------- | ------ | - |  | -------------- | ---- | - |  |  | ------ | 
|                                                                                                        |  | In Thousands
|                                                                                                        |  |             
|                                                                                                        |  |              |       |         |  |            |        |            |  |               |        |   |  | Net Unrealized |      |   |  | 
|                                                                                                        |  |              |       |         |  |            |        |            |  |               |        |   |  | Gain (Loss)    |      |   |  | 
|                                                                                                        |  |              |       |         |  | Additional |        | Retained   |  | On Available- |        |   |  |               
|                                                                                                        |  | Common       |       | Paid-In |  | Earnings   |        | For-Sale   |  |               |        |  
|                                                                                                        |  | Stock        |       | Capital |  | (Deficit)  |        | Securities |  | Total        
|                                                                                                        |  |              |       |         |  |            |        |            |  |              
|Balance December 31, 1999                                                                               |  | $            | 1,128 |         |  |            | 12,286 |            |  |               | (1,138 | ) |  |                | (201 | ) |  |  | 12,075 | 
|Issuance of 16,272 shares of
$1 par value common stock                                                  |  |              | 13    |         |  |            | 140    |            |  |               |       |   |  |                |     |   |  |  | 153    | 
|Net change in unrealized gain
(loss) on available-for-sale
securities during the year                   |  |              |      |         |  |            |       |            |  |               |       |   |  |                | 157  |   |  |  | 157    | 
|Net earnings for the year                                                                               |  |              |      |         |  |            |       |            |  |               | 88     |   |  |                |     |   |  |  | 88     | 
|                                                                                                        |  |              |       |         |  |            |        |            |  |               |        |   |  |                |      |   |  |  |        | 
|Balance December 31, 2000                                                                               |  |              | 1,141 |         |  |            | 12,426 |            |  |               | (1,050 | ) |  |                | (44  | ) |  |  | 12,473 | 
|Issuance of 1,020 shares of
$1 par value common stock                                                   |  |              | 1     |         |  |            | 8      |            |  |               |       |   |  |                |     |   |  |  | 9      | 
|Net change in unrealized gain
(loss) on available-for-sale
securities during the year                   |  |              |      |         |  |            |       |            |  |               |       |   |  |                | 89   |   |  |  | 89     | 
|Net earnings for the year                                                                               |  |              |      |         |  |            |       |            |  |               | 499    |   |  |                |     |   |  |  | 499    | 
|                                                                                                        |  |              |       |         |  |            |        |            |  |               |        |   |  |                |      |   |  |  |        | 
|Balance December 31, 2001                                                                               |  |              | 1,142 |         |  |            | 12,434 |            |  |               | (551   | ) |  |                | 45   |   |  |  | 13,070 | 
|Issuance of 8,400 shares of
$1 par value common stock                                                   |  |              | 8     |         |  |            | 62     |            |  |               |       |   |  |                |     |   |  |  | 70     | 
|Stock-split effected in the form
of a stock dividend declared
1 share for every 5 outstanding           |  |              | 229   |         |  |            | (229   | )          |  |               |       |   |  |                |     |   |  |  |       | 
|Net change in unrealized gain
on available-for-sale securities
during the year, net of taxes
of $97,000 |  |              |      |         |  |            |       |            |  |               |       |   |  |                | 113  |   |  |  | 113    | 
|Net earnings for the year                                                                               |  |              |      |         |  |            |       |            |  |               | 594    |   |  |                |     |   |  |  | 594    | 
|                                                                                                        |  |              |       |         |  |            |        |            |  |               |        |   |  |                |      |   |  |  |        | 
|Balance December 31, 2002                                                                               |  | $            | 1,379 |         |  |            | 12,267 |            |  |               | 43     |   |  |                | 158  |   |  |  | 13,847 | 
|                                                                                                        |  |              |       |         |  |            |        |            |  |               |        |   |  |                |      |   |  |  |        | 

See
accompanying notes to financial statements.

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Consolidated Statements of Cash Flows

For the Years Ended December 31, 2002, 2001 and 2000

Increase (Decrease) in Cash and Cash Equivalents

|                                                     |                                                                                         |                                                     |       |              |         |      |       |         |         |   |        |         |         |  
|---------------------------------------------------- | --------------------------------------------------------------------------------------- | --------------------------------------------------- | ----- | ------------ | ------- | ---- | ----- | ------- | ------- | - | ------ | ------- | ------- | -
|                                                     |                                                                                         |                                                     |       | In Thousands
|                                                     |                                                                                         |                                                     |       |             
|                                                     |                                                                                         |                                                     |       | 2002         |         | 2001 |       | 2000   
|                                                     |                                                                                         |                                                     |       |              |         |      |       |        
|Cash flows from operating activities:                |                                                                                         |                                                     |       |              |         |      |       |         |         |   |        |        
|                                                     | Interest received                                                                       |                                                     | $     | 6,005        |         |      |       | 5,874   |         |   |        | 4,493   |        
|                                                     | Fees received                                                                           |                                                     |       | 473          |         |      |       | 414     |         |   |        | 134     |        
|                                                     | Proceeds from sales of loans                                                            |                                                     |       | 9,375        |         |      |       | 6,778   |         |   |        | 2,178   |        
|                                                     | Origination of loans held for sale                                                      |                                                     |       | (10,676      | )       |      |       | (6,750  | )       |   |        | (2,291  | )      
|                                                     | Interest paid                                                                           |                                                     |       | (1,989       | )       |      |       | (2,821  | )       |   |        | (2,190  | )      
|                                                     | Cash paid to suppliers and employees                                                    |                                                     |       | (3,277       | )       |      |       | (2,574  | )       |   |        | (2,003  | )      
|                                                     | Income taxes paid                                                                       |                                                     |       | (69          | )       |      |       | (59     | )       |   |        |        |        
|                                                     |                                                                                         |                                                     |       |              |         |      |       |         |         |   |        |        
|                                                     |                                                                                         | Net cash provided by (used in) operating
activities |       |              | (158    | )    |       |         | 862     |   |        |         | 321     |  
|                                                     |                                                                                         |                                                     |       |              |         |      |       |         |         |   |        |         |        
|Cash flows from investing activities:                |                                                                                         |                                                     |       |              |         |      |       |         |         |   |        |        
|                                                     | Purchase of available-for-sale securities                                               |                                                     |       | (23,427      | )       |      |       | (11,304 | )       |   |        | (17,622 | )      
|                                                     | Proceeds from maturities, calls and principal
payments of available-for-sale securities |                                                     |       | 7,874        |         |      |       | 6,536   |         |   |        | 1,502   |        
|                                                     | Proceeds from sale of available-for-sale securities                                     |                                                     |       | 10,927       |         |      |       | 6,388   |         |   |        | 6,499   |        
|                                                     | Loans made to customers, net of repayments                                              |                                                     |       | (15,548      | )       |      |       | (20,353 | )       |   |        | (16,785 | )      
|                                                     | Purchase of bank premises and equipment, net                                            |                                                     |       | (958         | )       |      |       | (309    | )       |   |        | (736    | )      
|                                                     | Proceeds from sale of other real estate                                                 |                                                     |       | 174          |         |      |       | (174    | )       |   |        |        |        
|                                                     |                                                                                         |                                                     |       |              |         |      |       |         |         |   |        |         |        
|                                                     |                                                                                         | Net cash used in investing activities               |       |              | (20,958 | )    |       |         | (19,216 | ) |        |         | (27,142 | )
|                                                     |                                                                                         |                                                     |       |              |         |      |       |         |         |   |        |         |        
|Cash flows from financing activities:                |                                                                                         |                                                     |       |              |         |      |       |         |         |   |        |        
|                                                     | Net increase in non-interest bearing, savings and
NOW deposit accounts                  |                                                     |       | 4,094        |         |      |       | 3,035   |         |   |        | 16,795  |        
|                                                     | Net increase in time deposits                                                           |                                                     |       | 17,439       |         |      |       | 12,906  |         |   |        | 6,774   |        
|                                                     | Proceeds from sale of common stock                                                      |                                                     |       | 70           |         |      |       | 9       |         |   |        | 153     |        
|                                                     | Repayment of short-term borrowings                                                      |                                                     |       | (483         | )       |      |       | 483     |         |   |        |        |        
|                                                     | Repayment of advances from Federal Home Loan
Bank                                       |                                                     |       | (1,000       | )       |      |       | 1,000   |         |   |        | 1,500   |        
|                                                     | Repurchase agreements                                                                   |                                                     |       | 3,682        |         |      |       |        |         |   |        |        |        
|                                                     |                                                                                         |                                                     |       |              |         |      |       |         |         |   |        |         |        
|                                                     |                                                                                         | Net cash provided by financing activities           |       |              | 23,802  |      |       |         | 17,433  |   |        |         | 25,222  |  
|                                                     |                                                                                         |                                                     |       |              |         |      |       |         |         |   |        |        
|Net increase (decrease) in cash and cash equivalents |                                                                                         |                                                     | 2,686 |              |         |      | (921  | )       |         |   | (1,599 | )      
|Cash and cash equivalents at beginning of year       |                                                                                         |                                                     | 3,826 |              |         |      | 4,747 |         |         |   | 6,346  |        
|                                                     |                                                                                         |                                                     |       |              |         |      |       |         |         |   |        |        
|Cash and cash equivalents at end of year             |                                                                                         | $                                                   | 6,512 |              |         |      | 3,826 |         |         |   | 4,747  |        
|                                                     |                                                                                         |                                                     |       |              |         |      |       |         |         |   |        |         |        

See
accompanying notes to financial statements.

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Consolidated Statements of Cash Flows, Continued

For the Years Ended December 31, 2002, 2001 and 2000

Increase (Decrease) in Cash and Cash Equivalents

|                                                                                       |                                                                                                      |                                                                                               |                                          |                                                     |     |              |      |      |     |      |     |     |    |      |     | 
|-------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------- | --------------------------------------------------- | --- | ------------ | ---- | ---- | --- | ---- | --- | --- | -- | ---- | --- | 
|                                                                                       |                                                                                                      |                                                                                               |                                          |                                                     |     | In Thousands
|                                                                                       |                                                                                                      |                                                                                               |                                          |                                                     |     |             
|                                                                                       |                                                                                                      |                                                                                               |                                          |                                                     |     | 2002         |      | 2001 |     | 2000
|                                                                                       |                                                                                                      |                                                                                               |                                          |                                                     |     |              |      |      |     |     
|Reconciliation of net earnings to net cash provided by
(used in) operating activities: |                                                                                                      |                                                                                               |                                          |                                                     |     |              |      |      |     |      |     |    
|                                                                                       |                                                                                                      | Net earnings                                                                                  |                                          | $                                                   | 594 |              |      |      | 499 |      |     |     | 88 |     
|                                                                                       |                                                                                                      | Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities: |                                          |                                                     |     |              |      |      |     |      |     |     |    |     
|                                                                                       |                                                                                                      |                                                                                               | Depreciation                             |                                                     |     | 297          |      |      |     | 284  |     |     |    | 229  |    
|                                                                                       |                                                                                                      |                                                                                               | Amortization and accretion               |                                                     |     | 124          |      |      |     | 90   |     |     |    | (69  | )  
|                                                                                       |                                                                                                      |                                                                                               | Gain on sale of securities, net          |                                                     |     | (140         | )    |      |     | (115 | )   |     |    | (6   | )  
|                                                                                       |                                                                                                      |                                                                                               | Provision for possible loan losses       |                                                     |     | 703          |      |      |     | 307  |     |     |    | 246  |    
|                                                                                       |                                                                                                      |                                                                                               | Increase in loans held for sale          |                                                     |     | (1,448       | )    |      |     | (86  | )   |     |    | (153 | )  
|                                                                                       |                                                                                                      |                                                                                               | Increase in accrued interest receivable  |                                                     |     | (66          | )    |      |     | (9   | )   |     |    | (206 | )  
|                                                                                       |                                                                                                      |                                                                                               | Increase in other assets                 |                                                     |     | (51          | )    |      |     | (15  | )   |     |    | (17  | )  
|                                                                                       |                                                                                                      |                                                                                               | Increase (decrease) in interest payable  |                                                     |     | (87          | )    |      |     | (37  | )   |     |    | 253  |    
|                                                                                       |                                                                                                      |                                                                                               | Increase (decrease) in other liabilities |                                                     |     | 14           |      |      |     | 3    |     |     |    | (44  | )  
|                                                                                       |                                                                                                      |                                                                                               | Increase in income taxes payable         |                                                     |     | 52           |      |      |     | 2    |     |     |    |     |    
|                                                                                       |                                                                                                      |                                                                                               | Increase in deferred taxes               |                                                     |     | (150         | )    |      |     | (61  | )   |     |    |     |    
|                                                                                       |                                                                                                      |                                                                                               |                                          |                                                     |     |              |      |      |     |      |     |     |    |     
|                                                                                       |                                                                                                      |                                                                                               |                                          | Total adjustments                                   |     |              | (752 | )    |     |      | 363 |     |    |      | 233 | 
|                                                                                       |                                                                                                      |                                                                                               |                                          |                                                     |     |              |      |      |     |      |     |     |    |     
|                                                                                       |                                                                                                      |                                                                                               |                                          | Net cash provided by (used in)
operating activities |     | $            | (158 | )    |     |      | 862 |     |    |      | 321 | 
|                                                                                       |                                                                                                      |                                                                                               |                                          |                                                     |     |              |      |      |     |      |     |     |    |     
|Supplemental Schedule of Non-Cash Activities:                                          |                                                                                                      |                                                                                               |                                          |                                                     |     |              |      |      |     |      |     |    
|                                                                                       | Increase in unrealized gain on available-for-sale
securities, net of income taxes of $97,000 in 2002 |                                                                                               | $                                        | 113                                                 |     |              |      | 89   |     |      |     | 157 |   
|                                                                                       |                                                                                                      |                                                                                               |                                          |                                                     |     |              |      |      |     |      |     |     |    |     

See
accompanying notes to financial statements.

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Notes to Consolidated Financial Statements

December 31, 2002, 2001 and 2000



|(1) |  | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The unaudited consolidated financial statements include the accounts of
Legends Financial Holdings, Inc. (the Legends Financial), Legends Bank
(Legends Bank), its wholly-owned subsidiary, and Legends Financial
Services, Inc., a wholly-owned subsidiary of Legends Bank. On February
27, 2002, the stockholders of Legends Bank voted to exchange their stock
for stock in Legends Financial Holdings, Inc. Effective July 1, 2002,
Legends Financial Holdings, Inc. became a bank holding company within the
meaning of Bank Holding Company Act of 1956, as amended. The transaction
has been treated as a reorganization for accounting purposes. For
comparative purposes all financial information of Legends Bank prior to
the reorganization has been presented or included in the financial
information of Legends Financial.
|   
|    |  | The accounting and reporting policies of Legends Financial Holdings,
Inc., its wholly-owned subsidiary, Legends Bank and Legends Banks
wholly-owned subsidiary, Legends Financial Services, Inc. are in
accordance with accounting principles generally accepted in the United
States of America and conform to general practices within Legends Banking
industry. The following is a brief summary of the more significant
policies.                                                                                                                                                                                                                                                                                                                                                                                                       



| | (a) |  | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The consolidated financial statements include the accounts of
Legends Financial, its wholly-owned subsidiary, Legends Bank and
Legends Banks wholly-owned subsidiary, Legends Financial Services,
Inc. All significant intercompany accounts and transactions have
been eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | (b) |  | Nature of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |     |  | Legends Financial is registered as a one bank holding company under
Bank Holding Company Act of 1956. Legends Bank operates under a
state bank charter and provides full banking services. As a state
bank, Legends Bank is subject to regulations of the Tennessee
Department of Financial Institutions and the Federal Deposit
Insurance Corporation. The area served by Legends Bank is
Montgomery County, Tennessee and surrounding counties of Middle
Tennessee. Services are provided at the main office and two
branches in Clarksville, Tennessee. Legends Financial Services,
Inc. was formed in 2002 to offer a wide array of financial products
such as annuities, stocks, bonds, mutual funds and other investment
products.
|
| | (c) |  | Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |     |  | The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant
change in the near term relate to determination of the allowance
for possible loan losses and the valuation of debt and equity
securities and the related deferred taxes.                                         

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|(1) |  | Summary of Significant Accounting Policies, Continued
|--- |  | -----------------------------------------------------



| | (d) |  | Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Loans are stated at the principal amount outstanding. Unearned
discount, deferred loan fees net of loan acquisition costs, and the
allowance for possible loan losses are shown as reductions of
loans. Loan origination and commitment fees and certain
loan-related costs are being deferred and the net amount amortized
as an adjustment of the related loans yield over the contractual
life of the loan. Unearned discount represents the unamortized
amount of finance charges, principally related to certain
installment loans. Interest income on most loans is accrued based
on the principal amount outstanding.                                                                                                                                                                                                                                                     
|
| |     |  | Legends Financial follows the provisions of Statement of Financial
Accounting Standards (SFAS) No. 114, Accounting by Creditors for
Impairment of a Loan and SFAS No. 118, Accounting by Creditors
for Impairment of a Loan by Creditors for Impairment of a Loan 
 and SFAS No. 118, Accounting Income Recognition and Disclosures.
These pronouncements apply to impaired loans except for large
groups of smaller-balance homogeneous loans that are collectively
evaluated for impairment including residential mortgage and
installment loans.                                                                                                                                                                                                                                                                                                                        
|
| |     |  | A loan is impaired when it is probable that Legends Financial will
be unable to collect the scheduled payments of principal and
interest due under the contractual terms of the loan agreement.
Impaired loans are measured at the present value of expected future
cash flows discounted at the loans effective interest rate, at the
loans observable market price, or the fair value of the collateral
if the loan is collateral dependent. If the measure of the
impaired loan is less than the recorded investment in the loan,
Legends Financial shall recognize an impairment by creating a
valuation allowance with a corresponding charge to the provision
for possible loan losses or by adjusting an existing valuation
allowance for the impaired loan with a corresponding charge or
credit to the provision for possible loan losses.                             
|
| |     |  | Legends Financials residential mortgage and installment loans are
divided into various groups of smaller-balance, homogeneous loans
that are collectively evaluated for impairment and, thus, are not
subject to the provisions of SFAS Nos. 114 and 118. Substantially
all other loans of Legends Financial are evaluated for impairment
under the provisions of SFAS Nos. 114 and 118.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |     |  | Legends Financial considers all loans subject to the provisions of
SFAS Nos. 114 and 118 that are on a nonaccrual status to be
impaired. Loans are placed on nonaccrual status when doubt as to
timely collection of principal or interest exists, or when
principal or interest is past due 90 days or more unless such loans
are well-secured and in the process of collection. Delays or
shortfalls in loan payments are evaluated along with various other
factors to determine if a loan is impaired. Generally,
delinquencies under 90 days are considered insignificant unless
certain other factors are present which indicate impairment is
probable. The decision to place a loan on nonaccrual status is
also based on an evaluation of the borrowers financial condition,
collateral, liquidation value, and other factors that affect the
borrowers ability to pay.

45



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##### Table of Contents





|(1) |  | Summary of Significant Accounting Policies, Continued
|--- |  | -----------------------------------------------------



| | (d) |  | Loans, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Generally, at the time a loan is placed on nonaccrual status, all
interest accrued and uncollected on the loan in the current fiscal
year is reversed from income, and all interest accrued and
uncollected from the prior year is charged off against the
allowance for possible loan losses. Thereafter, interest on
nonaccrual loans is recognized as interest income only to the
extent that cash is received and future collection of principal is
not in doubt. If the collectibility of outstanding principal is
doubtful, such cash received is applied as a reduction of
principal. A nonaccrual loan may be restored to an accruing status
when principal and interest are no longer past due and unpaid and
future collection of principal and interest on a timely basis is
not in doubt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |     |  | Loans not on nonaccrual status are classified as impaired in
certain cases when there is inadequate protection by the current
net worth and financial capacity of the borrower or of the
collateral pledged, if any. In those cases, such loans have a
well-defined weakness or weaknesses that jeopardize the liquidation
of the debt, and if such deficiencies are not corrected, there is a
probability that Legends Financial will sustain some loss. In such
cases, interest income continues to accrue as long as the loan does
not meet Legends Financials criteria for nonaccrual status.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |     |  | Generally, Legends Financial also classifies as impaired any loans
the terms of which have been modified in a troubled debt
restructuring. Interest is generally accrued on such loans that
continue to meet the modified terms of their loan agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |     |  | Legends Financials charge-off policy for impaired loans is similar
to its charge-off policy for all loans in that loans are charged
off in the month when they are considered uncollectible.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (e) |  | Allowance for Possible Loan Losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |     |  | The provision for possible loan losses represents a charge to
earnings necessary, after loan charge-offs and recoveries, to
maintain the allowance for possible loan losses at an appropriate
level which is adequate to absorb estimated losses inherent in the
loan portfolio. Such estimated losses arise primarily from the
loan portfolio but may also be derived from other sources,
including commitments to extend credit and standby letters of
credit. The level of the allowance is determined on a quarterly
basis using procedures which include: (1) categorizing commercial
and commercial real estate loans into risk categories to estimate
loss probabilities based primarily on the historical loss
experience of those risk categories and current economic
conditions; (2) analyzing significant commercial and commercial
real estate credits and calculating specific reserves as necessary;
(3) assessing various homogeneous consumer loan categories to
estimate loss probabilities based primarily on historical loss
experience; (4) reviewing unfunded commitments (included in other
liabilities); and (5) considering various other factors, such as
changes in credit concentrations, loan mix, and economic conditions
which may not be specifically quantified in the loan analysis
process.

46



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##### Table of Contents





|(1) |  | Summary of Significant Accounting Policies, Continued
|--- |  | -----------------------------------------------------



| | (e) |  | Allowance for Possible Loan Losses, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The allowance for possible loan losses consists of an allocated
portion and an unallocated, or general portion. The allocated
portion is maintained to cover estimated losses applicable to
specific segments of the loan portfolio. The unallocated portion
is maintained to absorb losses which probably exist as of the
evaluation date but are not identified by the more objective
processes used for the allocated portion of the allowance due to
risk of errors or imprecision. While the total allowance consists
of an allocated portion and an unallocated portion, these terms are
primarily used to describe a process. Both portions of the
allowance are available to provide for inherent loss in the entire
portfolio.
|
| |     |  | The allowance for possible loan losses is increased by provisions
for possible loan losses charged to expense and is reduced by loans
charged off net of recoveries on loans previously charged off. The
provision is based on managements determination of the amount of
the allowance necessary to provide for estimated loan losses based
on its evaluation of the loan portfolio. Determining the
appropriate level of the allowance and the amount of the provision
involves uncertainties and matters of judgment and therefore cannot
be determined with precision.                                                                                                                                                            
|
| | (f) |  | Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |     |  | Legends Financial accounts for securities under the provisions of
Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
Under the provisions of the Statement, securities are to be
classified in three categories and accounted for as follows:                                                                                                                                                                                                                                                                                                                                                                                                             



| |  |  | Securities Held-to-Maturity                                                                                                                                                                                                                                                                            
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |   |  | Debt securities that the enterprise has the positive intent and
ability to hold to maturity are classified as held-to-maturity
securities and reported at amortized cost. No securities have been
classified as securities held-to-maturity.                                                           
|
| |  |  | Trading Securities                                                                                                                                                                                                                                                                                     
|
| |   |  | Debt and equity securities that are bought and held principally for
the purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and
losses included in earnings. No securities have been classified as
trading securities.     
|
| |  |  | Securities Available-for-Sale                                                                                                                                                                                                                                                                          
|
| |   |  | Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and
losses excluded from earnings and reported in a separate component of
stockholders equity.

47



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|(1) |  | Summary of Significant Accounting Policies, Continued
|--- |  | -----------------------------------------------------



| | (f) |  | Securities, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Legends Financial has classified all its securities as securities
available-for-sale.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |     |  | Realized gains or losses from the sale of securities are recognized
upon realization based upon the specific identification method.                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | (g) |  | Premises and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |     |  | Premises and equipment are stated at cost. Depreciation is
computed by the straight-line method over the estimated useful
lives of the related assets. Gain or loss on items retired and
otherwise disposed of is credited or charged to operations and cost
and related accumulated depreciation are removed from the asset and
accumulated depreciation accounts.                                                                                                                                                                                          
|
| |     |  | Expenditures for major renewals and improvements of premises and
equipment are capitalized and those for maintenance and repairs are
charged to earnings as incurred.                                                                                                                                                                                                                                                                                                                                                                                        
|
| | (h) |  | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |     |  | Legends Financial uses the fair value method to calculate the
compensation reported in the proforma earnings in note 15 to the
consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (i) |  | Other Real Estate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |     |  | Real estate acquired in settlement of loans is initially recorded
at the lower of cost (loan value of real estate acquired in
settlement of loans plus incidental expense) or estimated fair
value, less estimated cost of disposal. Based on periodic
evaluations by management, the carrying values are reduced by a
direct charge to earnings when they exceed net realizable value.
Costs relating to the development and improvement of the property
are capitalized, while holding costs of the property are charged to
expense in the period incurred.
|
| | (j) |  | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |     |  | For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks, and Federal funds
sold. Generally, Federal funds sold are purchased and sold for
one-day periods. Legends Bank maintains deposits in excess of the
Federal insurance amounts with other financial institutions.
Management makes deposits only with financial institutions it
considers to be financially sound.                                                                                                                               
|
| | (k) |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |     |  | Provisions for income taxes are based on taxes payable or
refundable for the current year (after exclusion of non-taxable
income such as interest on state and municipal securities) and
deferred taxes on temporary differences between the amount of
taxable and pretax financial income and between the tax bases of
assets and liabilities and their reported amounts in the financial
statements. Deferred tax assets and liabilities are included in                                                                                                   

48



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|(1) |  | Summary of Significant Accounting Policies, Continued
|--- |  | -----------------------------------------------------



| | (k) |  | Income Taxes, Continued                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | the financial statements at currently enacted income tax rates
applicable to the period in which the deferred tax asset and
liabilities are expected to be realized or settled as prescribed in
Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. As changes in tax laws or rates are
enacted, deferred tax assets and liabilities are adjusted through
the provision for income taxes.
|
| |     |  | Legends Financial and its subsidiary file a consolidated Federal
income tax return. Each corporation provides for income taxes on a
separate return basis.                                                                                                                                                                                                                                                                      
|
| | (l) |  | Advertising Costs                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |     |  | Advertising costs are expensed when incurred.                                                                                                                                                                                                                                                                                                                                                                                   
|
| | (m) |  | Off-Balance-Sheet Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                         
|
| |     |  | In the ordinary course of business Legends Financial has entered
into off balance sheet financial instruments consisting of
commitments to extend credit, commitments under credit card
arrangements, commercial letters of credit and standby letters of
credit. Such financial instruments are recorded in the financial
statements when they are funded or related fees are incurred or
received.                            
|
| | (n) |  | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |     |  | Certain reclassifications have been made to the 2001 and 2000
figures to conform to the presentation for 2002.                                                                                                                                                                                                                                                                                                                  



|(2) |  | Loans and Allowance for Possible Loan Losses                    
|--- |  | ----------------------------------------------------------------
|   
|    |  | The detail of loans at December 31, 2002 and 2001 is as follows:

|                                       |  |              |        |      |  |  |        |  
|-------------------------------------- |  | ------------ | ------ | ---- |  |  | ------ | -
|                                       |  | In Thousands
|                                       |  |             
|                                       |  | 2002         |        | 2001
|                                       |  |              |        |     
|Commercial, financial and agricultural |  | $            | 15,947 |      |  |  | 17,641 |  
|Installment                            |  |              | 4,090  |      |  |  | 4,222  |  
|Real estate - mortgage                 |  |              | 43,022 |      |  |  | 28,202 |  
|Real estate - construction             |  |              | 14,721 |      |  |  | 12,746 |  
|                                       |  |              |        |      |  |  |        |  
|                                       |  |              | 77,780 |      |  |  | 62,811 |  
|Allowance for possible loan losses     |  |              | (879   | )    |  |  | (755   | )
|                                       |  |              |        |      |  |  |        |  
|                                       |  | $            | 76,901 |      |  |  | 62,056 |  
|                                       |  |              |        |      |  |  |        |  



| |  | At December 31, 2002, variable rate and fixed rate loans totaled
$20,326,000 and $57,454,000, respectively. At December 31, 2001,
variable rate and fixed rate loans totaled $29,304,000 and $33,507,000,
respectively.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

49



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|(2) |  | Loans and Allowance for Possible Loan Losses, Continued               
|--- |  | ----------------------------------------------------------------------
|   
|    |  | The principal maturities on loans at December 31, 2002 are as follows:

|                 |  |              |        |             |  |          |       |               |  |               |        |  |  |  |        |  |  |  |        | 
|---------------- |  | ------------ | ------ | ----------- |  | -------- | ----- | ------------- |  | ------------- | ------ |  |  |  | ------ |  |  |  | ------ | 
|                 |  | In Thousands
|                 |  |             
|                 |  | Commercial,  |        |             |  |          |       |               |  |               |        |  |  |  |        |  |  | 
|                 |  | Financial    |        |             |  |          |       |               |  |               |        |  |  |  |        |  |  | 
|                 |  | and          |        |             |  |          |       | Real estate - |  | Real estate - |        |  |  | 
|                 |  | Agricultural |        | Installment |  | Mortgage |       | Construction  |  | Total        
|                 |  |              |        |             |  |          |       |               |  |              
|3 months or less |  | $            | 5,924  |             |  |          | 717   |               |  |               | 5,412  |  |  |  | 8,824  |  |  |  | 20,877 | 
|3 to 12 months   |  |              | 2,729  |             |  |          | 743   |               |  |               | 2,617  |  |  |  | 5,749  |  |  |  | 11,838 | 
|1 to 5 years     |  |              | 6,483  |             |  |          | 2,576 |               |  |               | 32,302 |  |  |  | 148    |  |  |  | 41,509 | 
|over 5 years     |  |              | 811    |             |  |          | 54    |               |  |               | 2,691  |  |  |  |       |  |  |  | 3,556  | 
|                 |  |              |        |             |  |          |       |               |  |               |        |  |  |  |        |  |  |  |        | 
|                 |  | $            | 15,947 |             |  |          | 4,090 |               |  |               | 43,022 |  |  |  | 14,721 |  |  |  | 77,780 | 
|                 |  |              |        |             |  |          |       |               |  |               |        |  |  |  |        |  |  |  |        | 



| |  | In the normal course of business, Legends Financial has made loans at
prevailing interest rates and terms to its executive officers, directors
and their affiliates aggregating $2,398,000 and $2,460,000 at December
31, 2002 and 2001, respectively. As of December 31, 2002 and 2001, none
of these loans were restructured, nor were any related party loans
charged off in 2002 or 2001.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | An analysis of the activity with respect to such loans to related parties
is as follows:                                                                                                                                                                                                                                                                                                     

|                           |  |  |  |  |  |              |        |      |  |  |        |  
|-------------------------- |  |  |  |  |  | ------------ | ------ | ---- |  |  | ------ | -
|                           |  |  |  |  |  | In Thousands
|                           |  |  |  |  |  |             
|                           |  |  |  |  |  | 2002         |        | 2001
|                           |  |  |  |  |  |              |        |     
|Balance, January 1         |  |  |  |  |  | $            | 2,460  |      |  |  | 2,431  |  
|New loans during the year  |  |  |  |  |  |              | 1,456  |      |  |  | 1,701  |  
|Repayments during the year |  |  |  |  |  |              | (1,518 | )    |  |  | (1,672 | )
|                           |  |  |  |  |  |              |        |      |  |  |        |  
|Balance, December 31       |  |  |  |  |  | $            | 2,398  |      |  |  | 2,460  |  
|                           |  |  |  |  |  |              |        |      |  |  |        |  



| |  | Transactions in the allowance for possible loan losses of Legends
Financial for the years ended December 31, 2002 and 2001 are summarized
as follows:
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

|                                       |  |              |      |      |  |  |      |  
|-------------------------------------- |  | ------------ | ---- | ---- |  |  | ---- | -
|                                       |  | In Thousands
|                                       |  |             
|                                       |  | 2002         |      | 2001
|                                       |  |              |      |     
|Balance - beginning of year            |  | $            | 755  |      |  |  | 552  |  
|Provision charged to operating expense |  |              | 703  |      |  |  | 307  |  
|Loans charged off                      |  |              | (628 | )    |  |  | (109 | )
|Recoveries                             |  |              | 49   |      |  |  | 5    |  
|                                       |  |              |      |      |  |  |      |  
|Net charge-offs                        |  |              | (579 | )    |  |  | (104 | )
|                                       |  |              |      |      |  |  |      |  
|Balance - end of year                  |  | $            | 879  |      |  |  | 755  |  
|                                       |  |              |      |      |  |  |      |  

50



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|(2) |  | Loans and Allowance for Possible Loan Losses, Continued                                                                                                                                                                                                                                                                                                                                                               
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Legends Financials principal customers are basically in the Middle
Tennessee area with a concentration in Montgomery County. Credit is
extended to businesses and individuals and is evidenced by promissory
notes. The terms and conditions of the loans including collateral varies
depending upon the purpose of the credit and the borrowers financial
condition.                                               
|   
|    |  | There were no restructured loans outstanding at December 31, 2002 and
2001. Legends Financial had $268,000 and $18,000, respectively, of
nonaccrual loans outstanding as of December 31, 2002 and 2001,
respectively. The impact on interest income in 2001 and 2000 was not
significant. Had interest income been recognized on non-accrual loans in
2002 net earnings would have increased by approximately $11,000.
|   
|    |  | Impaired loans and related loan loss reserve amounts at December 2002 and
2001 were as follows:                                                                                                                                                                                                                                                                                                                       

|                     |  |              |       |      |  |  |       | 
|-------------------- |  | ------------ | ----- | ---- |  |  | ----- | 
|                     |  | In Thousands
|                     |  |             
|                     |  | 2002         |       | 2001
|                     |  |              |       |     
|Recorded investment  |  | $            | 2,013 |      |  |  | 2,055 | 
|Loan loss allocation |  | $            | 244   |      |  |  | 146   | 



| |  | The average recorded investment in impaired loans for the years ended
December 31, 2002 and December 31, 2001 was $2,034,000 and $1,394,000,
respectively.                                                                                                                                                                                                                                                                                                                                                                                   
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The related total amount of interest income recognized on the accrual
basis for the period that such loans were impaired was $143,000 for 2002,
$120,000 in 2001 and $68,000 in 2000.                                                                                                                                                                                                                                                                                                                                                        
|
| |  | In 2002, 2001 and 2000, Legends Financial originated loans for sale in
the secondary market of $10,676,000, $6,750,000 and $2,291,000. At
December 31, 2002, the wholly-owned subsidiary Bank had not been required
to repurchase any of the loans originated by Legends Bank and sold in the
secondary market. The gain on sale of these loans totaled $147,000,
$114,000 and $40,000 in 2002, 2001 and 2000, respectively.                                                                                                                 
|
| |  | Of the loans sold in the secondary market, the recourse to the
wholly-owned subsidiary Bank is limited. Nearly all other loans sold in
the secondary market provide the purchase recourse to Legends Bank for a
period of 60 to 90 days from the date of purchase and only in the event
of a default by the borrower pursuant to the terms of the individual loan
agreement. At December 31, 2002, total loans sold with recourse to
Legends Bank aggregated $5,835,000. Management expects no loss to result
from these recourse provisions.

51



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|(3) |  | Debt and Equity Securities                                                                                                                                                                  
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Debt and equity securities have been classified in the balance sheet
according to managements intent. Legends Financials classification of
securities at December 31, 2002 was as follows:

|                                                                 |  |                               |        |            |  |            |     |        |  |           |    |  |  |  |        | 
|---------------------------------------------------------------- |  | ----------------------------- | ------ | ---------- |  | ---------- | --- | ------ |  | --------- | -- |  |  |  | ------ | 
|                                                                 |  | In Thousands                 
|                                                                 |  |                              
|                                                                 |  | Securities Available-For-Sale
|                                                                 |  |                              
|                                                                 |  | 2002                         
|                                                                 |  |                              
|                                                                 |  |                               |        |            |  | Gross      |     | Gross  |  | Estimated
|                                                                 |  | Amortized                     |        | Unrealized |  | Unrealized |     | Market
|                                                                 |  | Cost                          |        | Gains      |  | Losses     |     | Value 
|                                                                 |  |                               |        |            |  |            |     |       
|U.S. Treasury and other U.S
government agencies and
corporations |  | $                             | 3,757  |            |  |            | 7   |        |  |           | 28 |  |  |  | 3,736  | 
|Obligations of states and
political subdivisions                 |  |                               | 974    |            |  |            |    |        |  |           | 7  |  |  |  | 967    | 
|Mortgage-backed securities                                       |  |                               | 19,212 |            |  |            | 283 |        |  |           |   |  |  |  | 19,495 | 
|Federal Home Loan Bank stock                                     |  |                               | 233    |            |  |            |    |        |  |           |   |  |  |  | 233    | 
|The Bankers Bank stock                                           |  |                               | 162    |            |  |            |    |        |  |           |   |  |  |  | 162    | 
|                                                                 |  |                               |        |            |  |            |     |        |  |           |    |  |  |  |        | 
|                                                                 |  | $                             | 24,338 |            |  |            | 290 |        |  |           | 35 |  |  |  | 24,593 | 
|                                                                 |  |                               |        |            |  |            |     |        |  |           |    |  |  |  |        | 



| |  | Legends Financials classification of securities at December 31, 2001 was
as follows:
| |  | -------------------------------------------------------------------------------------

|                                                                 |  |                               |        |            |  |            |    |        |  |           |    |  |  |  |        | 
|---------------------------------------------------------------- |  | ----------------------------- | ------ | ---------- |  | ---------- | -- | ------ |  | --------- | -- |  |  |  | ------ | 
|                                                                 |  | In Thousands                 
|                                                                 |  |                              
|                                                                 |  | Securities Available-For-Sale
|                                                                 |  |                              
|                                                                 |  | 2001                         
|                                                                 |  |                              
|                                                                 |  |                               |        |            |  | Gross      |    | Gross  |  | Estimated
|                                                                 |  | Amortized                     |        | Unrealized |  | Unrealized |    | Market
|                                                                 |  | Cost                          |        | Gains      |  | Losses     |    | Value 
|                                                                 |  |                               |        |            |  |            |    |       
|U.S. Treasury and other U.S
government agencies and
corporations |  | $                             | 4,363  |            |  |            | 12 |        |  |           | 30 |  |  |  | 4,345  | 
|Mortgage-backed securities                                       |  |                               | 14,969 |            |  |            | 63 |        |  |           |   |  |  |  | 15,032 | 
|Federal Home Loan Bank stock                                     |  |                               | 201    |            |  |            |   |        |  |           |   |  |  |  | 201    | 
|The Bankers Bank stock                                           |  |                               | 162    |            |  |            |   |        |  |           |   |  |  |  | 162    | 
|                                                                 |  |                               |        |            |  |            |    |        |  |           |    |  |  |  |        | 
|                                                                 |  | $                             | 19,695 |            |  |            | 75 |        |  |           | 30 |  |  |  | 19,740 | 
|                                                                 |  |                               |        |            |  |            |    |        |  |           |    |  |  |  |        | 



| |  | Included in mortgage backed securities as of December 31, 2002 and 2001,
are collateralized mortgage obligations with a market value of $4,759,000
(amortized cost of $4,767,000) and $6,211,000 (amortized cost of
$6,195,000), respectively. The effective yield at December 31, 2002 and
2001, on collateralized mortgage obligations was 3.3% and 4.7%,
respectively.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|(3) |  | Debt and Equity Securities, Continued                                                                                                                                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The amortized cost and estimated market value of debt and equity
securities at December 31, 2002, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with
or without call or prepayment penalties.

|                                       |  |  |  |  |  |              |        |       |  |           |        | 
|-------------------------------------- |  |  |  |  |  | ------------ | ------ | ----- |  | --------- | ------ | 
|                                       |  |  |  |  |  | In Thousands
|                                       |  |  |  |  |  |             
|                                       |  |  |  |  |  |              |        |       |  | Estimated
|                                       |  |  |  |  |  |              |        |       |  | Market   
|Securities Available-For-Sale          |  |  |  |  |  | Cost         |        | Value
|                                       |  |  |  |  |  |              |        |      
|Due in one year or less                |  |  |  |  |  | $            |       |       |  |           |       | 
|Due after one year through five years  |  |  |  |  |  |              | 250    |       |  |           | 260    | 
|Due after five years through ten years |  |  |  |  |  |              | 257    |       |  |           | 261    | 
|Due after ten years                    |  |  |  |  |  |              | 4,224  |       |  |           | 4,182  | 
|                                       |  |  |  |  |  |              |        |       |  |           |        | 
|                                       |  |  |  |  |  |              | 4,731  |       |  |           | 4,703  | 
|Mortgage-backed securities             |  |  |  |  |  |              | 19,212 |       |  |           | 19,495 | 
|Federal Home Loan Bank stock           |  |  |  |  |  |              | 233    |       |  |           | 233    | 
|The Bankers Bank stock                 |  |  |  |  |  |              | 162    |       |  |           | 162    | 
|                                       |  |  |  |  |  |              |        |       |  |           |        | 
|                                       |  |  |  |  |  | $            | 24,338 |       |  |           | 24,593 | 
|                                       |  |  |  |  |  |              |        |       |  |           |        | 



| |  | Included within the securities portfolio is stock of The Bankers Bank and
the Federal Home Loan Bank amounting to $162,000 and $233,000,
respectively, at December 31, 2002 and 2001. The stock can be sold back
to The Bankers Bank and the Federal Home Loan Bank or to another member
institution.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Results from sales of debt and equity securities are as follows:                                                                                                                                                                                                                                     

|                      |                    |  |  |  |  |   |                |     |      |  |       |     |  |  |       |   | 
|--------------------- | ------------------ |  |  |  |  | - | -------------- | --- | ---- |  | ----- | --- |  |  | ----- | - | 
|                      |                    |  |  |  |  |   | (In Thousands)
|                      |                    |  |  |  |  |   |               
|                      |                    |  |  |  |  |   | 2002           |     | 2001 |  | 2000 
|                      |                    |  |  |  |  |   |                |     |      |  |      
|Gross proceeds        |                    |  |  |  |  | $ | 10,927         |     |      |  | 6,388 |     |  |  | 6,499 |  
|                      |                    |  |  |  |  |   |                |     |      |  |       |     |  |  |       |  
|Gross realized gains  |                    |  |  |  |  | $ | 140            |     |      |  | 115   |     |  |  | 6     |  
|Gross realized losses |                    |  |  |  |  |   |               |     |      |  |      |     |  |  |      |  
|                      |                    |  |  |  |  |   |                |     |      |  |       |     |  |  |       |  
|                      | Net realized gains |  |  |  |  |   | $              | 140 |      |  |       | 115 |  |  |       | 6 | 
|                      |                    |  |  |  |  |   |                |     |      |  |       |     |  |  |       |  



| |  | Investment securities carried in the balance sheet of $19,480,000
(amortized cost of $19,184,000) and $14,107,000 (amortized cost of
$14,012,000) as of December 31, 2002 and 2001, respectively, were pledged
to secure public and trust deposits and for other purposes as required or
permitted by law.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|(4) |  | Bank Premises and Equipment                                                      
|--- |  | ---------------------------------------------------------------------------------
|   
|    |  | The detail of premises and equipment at December 31, 2002 and 2001 is as
follows:

|                              |  |  |  |  |  |              |       |   |  |  |  |      |  |  |       |  
|----------------------------- |  |  |  |  |  | ------------ | ----- | - |  |  |  | ---- |  |  | ----- | -
|                              |  |  |  |  |  | In Thousands
|                              |  |  |  |  |  |             
|                              |  |  |  |  |  | 2002         |       |   |  |  |  | 2001
|                              |  |  |  |  |  |              |       |   |  |  |  |     
|Land                          |  |  |  |  |  | $            | 1,134 |   |  |  |  |      |  |  | 599   |  
|Buildings                     |  |  |  |  |  |              | 2,053 |   |  |  |  |      |  |  | 2,053 |  
|Leasehold improvements        |  |  |  |  |  |              | 310   |   |  |  |  |      |  |  | 299   |  
|Furniture and fixtures        |  |  |  |  |  |              | 183   |   |  |  |  |      |  |  | 178   |  
|Equipment and software        |  |  |  |  |  |              | 1,088 |   |  |  |  |      |  |  | 906   |  
|Construction in process       |  |  |  |  |  |              | 212   |   |  |  |  |      |  |  |      |  
|                              |  |  |  |  |  |              |       |   |  |  |  |      |  |  |       |  
|                              |  |  |  |  |  |              | 4,980 |   |  |  |  |      |  |  | 4,035 |  
|Less accumulated depreciation |  |  |  |  |  |              | (901  | ) |  |  |  |      |  |  | (617  | )
|                              |  |  |  |  |  |              |       |   |  |  |  |      |  |  |       |  
|                              |  |  |  |  |  | $            | 4,079 |   |  |  |  |      |  |  | 3,418 |  
|                              |  |  |  |  |  |              |       |   |  |  |  |      |  |  |       |  



|(5) |  | Deposits                                                         
|--- |  | -----------------------------------------------------------------
|   
|    |  | Deposits at December 31, 2002 and 2001 are summarized as follows:

|                                                   |  |  |  |  |  |              |        |      |  |  |        | 
|-------------------------------------------------- |  |  |  |  |  | ------------ | ------ | ---- |  |  | ------ | 
|                                                   |  |  |  |  |  | In Thousands
|                                                   |  |  |  |  |  |             
|                                                   |  |  |  |  |  | 2002         |        | 2001
|                                                   |  |  |  |  |  |              |        |     
|Demand deposits                                    |  |  |  |  |  | $            | 16,524 |      |  |  | 13,816 | 
|Savings deposits                                   |  |  |  |  |  |              | 1,653  |      |  |  | 956    | 
|Negotiable order of withdrawal                     |  |  |  |  |  |              | 20,355 |      |  |  | 6,145  | 
|Money market demand accounts                       |  |  |  |  |  |              | 18,596 |      |  |  | 12,832 | 
|Certificates of deposit $100,000 or greater        |  |  |  |  |  |              | 23,056 |      |  |  | 22,063 | 
|Other certificates of deposit                      |  |  |  |  |  |              | 13,397 |      |  |  | 16,225 | 
|Individual retirement accounts $100,000 or
greater |  |  |  |  |  |              | 348    |      |  |  | 625    | 
|Other individual retirement accounts               |  |  |  |  |  |              | 1,042  |      |  |  | 776    | 
|                                                   |  |  |  |  |  |              |        |      |  |  |        | 
|                                                   |  |  |  |  |  | $            | 94,971 |      |  |  | 73,438 | 
|                                                   |  |  |  |  |  |              |        |      |  |  |        | 



| |  | Principal maturities of certificates of deposit and individual retirement
accounts at December 31, 2002 are as follows:
| |  | -----------------------------------------------------------------------------------------------------------------------

|                 |  |                 |        |                 |  |       |        |  |  |  |        | 
|---------------- |  | --------------- | ------ | --------------- |  | ----- | ------ |  |  |  | ------ | 
|                 |  | In Thousands   
|                 |  |                
|                 |  | Single Deposits |        | Single Deposits |  |       |        | 
|Maturity         |  | Under $100,000  |        | Over $100,000   |  | Total
|                 |  |                 |        |                 |  |      
|3 months or less |  | $               | 4,041  |                 |  |       | 9,555  |  |  |  | 13,596 | 
|3 to 12 months   |  |                 | 6,938  |                 |  |       | 8,775  |  |  |  | 15,713 | 
|1 to 5 years     |  |                 | 2,799  |                 |  |       | 4,845  |  |  |  | 7,644  | 
|After 5 years    |  |                 | 661    |                 |  |       | 229    |  |  |  | 890    | 
|                 |  |                 |        |                 |  |       |        |  |  |  |        | 
|                 |  | $               | 14,439 |                 |  |       | 23,404 |  |  |  | 37,843 | 
|                 |  |                 |        |                 |  |       |        |  |  |  |        | 

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|(5) |  | Deposits, Continued                                                                                                                                                                                                                                                                                              
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | At December 31, 2002 and 2001 certificates of deposit and other deposits
in denominations of $100,000 or more amounted to $63,865,000 and
$40,949,000, respectively.                                                                                                                                             
|   
|    |  | Legends Financial is required to maintain cash balances or balances with
the Federal Reserve Bank or other correspondent banks based on certain
percentages of deposit types. The average required amounts for the years
ended December 31, 2002 and 2001 were approximately $425,000 and
$300,000, respectively.
|   
|(6) |  | Securities Sold Under Repurchase Agreements                                                                                                                                                                                                                                                                      
|   
|    |  | The maximum amounts of outstanding repurchase agreements during 2002 were
$3,682,000. The average daily balance outstanding during 2002 was
$684,000. The underlying securities are typically held by other
financial institutions and are designated as pledged.                                                
|   
|(7) |  | Advances from Federal Home Loan Bank                                                                                                                                                                                                                                                                             
|   
|    |  | Advances from Federal Home Loan Bank (FHLB) at December 31, 2002 and 2001
consist of the following:                                                                                                                                                                                                              

|                 |  |                   |  |          |      |         |  |      |       |                |       |  |       |  |       | 
|---------------- |  | ----------------- |  | -------- | ---- | ------- |  | ---- | ----- | -------------- | ----- |  | ----- |  | ----- | 
|                 |  |                   |  |          |      |         |  |      |       | (IN THOUSANDS)
|                 |  |                   |  |          |      |         |  |      |       |               
|                 |  |                   |  |          |      | RATE AT |  |      |       |                |       |  |       | 
|ORIGINAL         |  | MATURITY DATE     |  | DECEMBER |      |         |  |     
|NOTE DATE        |  |                   |  | 31, 2002 |      | 2002    |  | 2001
|                 |  |                   |  |          |      |         |  |     
|October 20, 2000 |  | October 26, 2002  |  |          | 2.25 | %       |  | $    |      |                |       |  | 500   | 
|May 17, 2001     |  | February 15, 2002 |  |          | 4.16 | %       |  |      |      |                |       |  | 1,000 | 
|July 18, 2001    |  | July 18, 2002     |  |          | 2.52 | %       |  |      |      |                |       |  | 1,000 | 
|May 3, 2002      |  | May 3, 2003       |  |          | 2.71 | %       |  |      | 500   |                |       |  |      | 
|July 15, 2002    |  | July 15, 2003     |  |          | 1.92 | %       |  |      | 1,000 |                |       |  |      | 
|                 |  |                   |  |          |      |         |  |      |       |                |       |  |       |  |       | 
|                 |  |                   |  |          |      |         |  |      |       | $              | 1,500 |  |       |  | 2,500 | 
|                 |  |                   |  |          |      |         |  |      |       |                |       |  |       |  |       | 



| |  | Interest on the $1,000,000 advance is based on the three months LIBOR
(LIBOR plus 10 basis points) and is adjusted quarterly. The 2.71% rate
on the $500,000 advance is fixed.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Loans totaling $2,025,000 were pledged to FHLB as collateral at December
31, 2002.                                                                                            

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|(8) |  | Income Taxes                                                                                     
|--- |  | -------------------------------------------------------------------------------------------------
|   
|    |  | The components of the net deferred income tax asset at December 31, 2002
and 2001 are as follows:

|                         |         |                           |      |              |     |      |      |     |     | 
|------------------------ | ------- | ------------------------- | ---- | ------------ | --- | ---- | ---- | --- | --- | 
|                         |         |                           |      | In Thousands
|                         |         |                           |      |             
|                         |         |                           |      | 2002         |     | 2001
|                         |         |                           |      |              |     |     
|Deferred tax asset:      |         |                           |      |              |     |      |      |    
|                         | Federal |                           | $    | 242          |     |      |      | 254 |    
|                         | State   |                           |      | 50           |     |      |      | 48  |    
|                         |         |                           |      |              |     |      |      |    
|                         |         |                           | 292  |              |     |      | 302  |    
|                         |         |                           |      |              |     |      |      |    
|Deferred tax liability:  |         |                           |      |              |     |      |      |    
|                         | Federal |                           |      | (132         | )   |      |      | (27 | )  
|                         | State   |                           |      | (27          | )   |      |      | (5  | )  
|                         |         |                           |      |              |     |      |      |    
|                         |         |                           | (159 | )            |     |      | (32  | )  
|                         |         |                           |      |              |     |      |      |    
|                         |         | Total net deferred assets |      |              | 133 |      |      |     | 270 | 
|Less valuation allowance |         |                           |     |              |     |      | (209 | )  
|                         |         |                           |      |              |     |      |      |    
|                         |         | Net deferred assets       |      | $            | 133 |      |      |     | 61  | 
|                         |         |                           |      |              |     |      |      |    



| |  | The tax effects of each type of significant item that gave rise to
deferred taxes at December 31, 2002 and 2001 are:
| |  | --------------------------------------------------------------------------------------------------------------------

|                                                                                                                        |  |  |  |  |  |              |     |      |  |  |      |  
|----------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  | ------------ | --- | ---- |  |  | ---- | -
|                                                                                                                        |  |  |  |  |  | In Thousands
|                                                                                                                        |  |  |  |  |  |             
|                                                                                                                        |  |  |  |  |  | 2002         |     | 2001
|                                                                                                                        |  |  |  |  |  |              |     |     
|Financial statement allowance for loan losses in
excess of the tax allowance                                            |  |  |  |  |  | $            | 263 |      |  |  | 253  |  
|Excess of depreciation deducted for tax purposes over
the amounts deducted in the financial statements                  |  |  |  |  |  |              | (48 | )    |  |  | (7   | )
|Pre-opening costs amortized over a five-year period for
tax purposes, expensed for financial statements in
initial year |  |  |  |  |  |              | 28  |      |  |  | 49   |  
|Excess of estimated market value over amortized cost
related to available-for-sale securities                           |  |  |  |  |  |              | (97 | )    |  |  | (17  | )
|Financial statement income on FHLB stock dividends
not recognized for tax purposes                                      |  |  |  |  |  |              | (13 | )    |  |  | (8   | )
|                                                                                                                        |  |  |  |  |  |              |     |      |  |  |      |  
|                                                                                                                        |  |  |  |  |  |              | 133 |      |  |  | 270  |  
|Valuation allowance                                                                                                     |  |  |  |  |  |              |    |      |  |  | (209 | )
|                                                                                                                        |  |  |  |  |  |              |     |      |  |  |      |  
|                                                                                                                        |  |  |  |  |  | $            | 133 |      |  |  | 61   |  
|                                                                                                                        |  |  |  |  |  |              |     |      |  |  |      |  

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|(8) |  | Income Taxes, Continued                                                  
|--- |  | -------------------------------------------------------------------------
|   
|    |  | The components of income tax expense (benefit) are summarized as follows:

|                                                                 |         |         |                    |    |              |     |      |     |      |     |     |     |     |     |  
|---------------------------------------------------------------- | ------- | ------- | ------------------ | -- | ------------ | --- | ---- | --- | ---- | --- | --- | --- | --- | --- | -
|                                                                 |         |         |                    |    | In Thousands
|                                                                 |         |         |                    |    |             
|                                                                 |         |         |                    |    | 2002         |     | 2001 |     | 2000
|                                                                 |         |         |                    |    |              |     |      |     |     
|Current:                                                         |         |         |                    |    |              |     |      |     |      |     |     |    
|                                                                 | Federal |         | $                  | 81 |              |     |      | 52  |      |     |     | 68  |    
|                                                                 | State   |         |                    | 20 |              |     |      | 9   |      |     |     | 12  |    
|                                                                 |         |         |                    |    |              |     |      |     |      |     |     |     |    
|                                                                 |         |         | 101                |    |              |     | 61   |     |      |     | 80  |    
|                                                                 |         |         |                    |    |              |     |      |     |      |     |     |     |    
|Deferred:                                                        |         |         |                    |    |              |     |      |     |      |     |     |    
|                                                                 | Federal |         |                    | 49 |              |     |      | (29 | )    |     |     | (37 | )  
|                                                                 | State   |         |                    | 10 |              |     |      | (5  | )    |     |     | (7  | )  
|                                                                 |         |         |                    |    |              |     |      |     |      |     |     |     |    
|                                                                 |         |         | 59                 |    |              |     | (34  | )   |      |     | (44 | )  
|                                                                 |         |         |                    |    |              |     |      |     |      |     |     |     |    
|Benefits from utilization of net operating
loss carryforwards:   |         |         |                    |    |              |     |      |     |      |     |     |    
|                                                                 |         | Federal |                    |    |             |     |      |     | (52  | )   |     |     | (68 | )  
|                                                                 |         | State   |                    |    |             |     |      |     | (9   | )   |     |     | (12 | )  
|                                                                 |         |         |                    |    |              |     |      |     |      |     |     |     |    
|                                                                 |         |         |                   |    |              |     | (61  | )   |      |     | (80 | )  
|                                                                 |         |         |                    |    |              |     |      |     |      |     |     |     |    
|                                                                 |         |         | Subtotal           |    |              | 160 |      |     |      | (34 | )   |     |     | (44 | )
|Adjustment of valuation allowance
related to deferred tax assets |         |         | (209               | )  |              |     | 34   |     |      |     | 44  |    
|                                                                 |         |         |                    |    |              |     |      |     |      |     |     |     |    
|                                                                 |         |         | Actual tax benefit |    | $            | (49 | )    |     |      |    |     |     |     |    |  
|                                                                 |         |         |                    |    |              |     |      |     |      |     |     |     |    



| |  | A reconciliation of actual income tax expense (benefit) in the financial
statements to the expected tax expense (benefit) (computed by applying
the statutory Federal income tax rate of 34% to earnings before income
taxes) is as follows:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                          |                              |   |              |     |      |  |      |   |  |  |     |   | 
|--------------------------------------------------------- | ---------------------------- | - | ------------ | --- | ---- |  | ---- | - |  |  | --- | - | 
|                                                          |                              |   | In Thousands
|                                                          |                              |   |             
|                                                          |                              |   | 2002         |     | 2001 |  | 2000
|                                                          |                              |   |              |     |      |  |     
|Computed expected tax expense                           |                              | $ | 185          |     |      |  | 170  |   |  |  | 30  |  
|State income taxes, net of effect of Federal
income taxes |                              |   | 18           |     |      |  | 2    |   |  |  | 6   |  
|Disallowed expenses                                       |                              |   | 5            |     |      |  | 1    |   |  |  |    |  
|Utilization of book net operating loss
carryovers         |                              |   |             |     |      |  | (100 | ) |  |  | (80 | )
|Benefit of graduated rates                                |                              |   | (1           | )   |      |  | (12  | ) |  |  |    |  
|Benefit related to nonqualified stock
options             |                              |   | (35          | )   |      |  |     |   |  |  |    |  
|Tax exempt interest, net of interest expense
exclusion    |                              |   | (12          | )   |      |  |     |   |  |  |    |  
|Deferred tax benefits not recognized                      |                              |   |             |     |      |  |     |   |  |  | 44  |  
|Recognition of deferred tax assets                        |                              |   | (209         | )   |      |  | (61  | ) |  |  |    |  
|                                                          |                              |   |              |     |      |  |      |   |  |  |     |  
|                                                          | Actual tax expense (benefit) |   | $            | (49 | )    |  |      |  |  |  |     |  | 
|                                                          |                              |   |              |     |      |  |      |   |  |  |     |  

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|(9) |  | Commitment and Contingencies                                                                                                                                                                                                                                                                                                                     
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Legends Financial plans to open two branches in 2003 at a cost of
approximately $1,500,000. One branch will be in Clarksville, Montgomery
County, Tennessee and one in Dover, Stewart County, Tennessee.                                                                                                                                         
|   
|    |  | Legends Financial currently has two leases related to the operation of
two branches. One lease entered into in 1998 is for a period of five
years and can be renewed for two consecutive five year terms. The other
lease was entered into during 2001 and is for a period of three years and
can be renewed for two consecutive three year terms
|   
|    |  | Minimum future rental payments required under the terms of the leases are
as follows:                                                                                                                                                                                                                                                            

|             |  |                |    | 
|------------ |  | -------------- | -- | 
|Year Ending  |  |                |    | 
|December 31, |  | (In Thousands)
|             |  |               
|2003         |  | $              | 52 | 
|             |  |                |    | 



|     |  | Total rent expense under the leases amounted to $58,008, $55,258 and
$35,552 during the years ended December 31, 2002, 2001 and 2000,
respectively.                                                                                                                                                                                                                                                                                                                                                                                                      
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(10) |  | Financial Instruments with Off-Balance-Sheet Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    
|     |  | Legends Financial is party to financial instruments with
off-balance-sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments consist
primarily of commitments to extend credit. These instruments involve, to
varying degrees, elements of credit risk in excess of the amount
recognized in the consolidated balance sheets. The contract or notional
amounts of those instruments reflect the extent of involvement Legends
Financial has in particular classes of financial instruments.
|    
|     |  | Legends Financials exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for
commitments to extend credit is represented by the contractual notional
amount of those instruments. Legends Financial uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.                                                                                                                                                                        

|                                                                    |                             |       |   |              |        | 
|------------------------------------------------------------------- | --------------------------- | ----- | - | ------------ | ------ | 
|                                                                    |                             |       |   | In Thousands
|                                                                    |                             |       |   |             
|Financial instruments whose contract
amounts represent credit risk: |                             |       |   |             
|                                                                    | Commercial loan commitments |       | $ | 12,322       |       
|                                                                    | Unfunded lines-of-credit    |       |   | 2,889        |       
|                                                                    | Letters of credit           |       |   | 751          |       
|                                                                    |                             |       |   |             
|                                                                    |                             | Total |   | $            | 15,962 | 
|                                                                    |                             |       |   |             

58



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|(10) |  | Financial Instruments with Off-Balance-Sheet Risk, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|     |  | Commitments 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 be drawn upon, the total commitment amounts generally
represent future cash requirements. Legends Financial evaluates each
customers credit-worthiness on a case-by-case basis. The amount of
collateral, if deemed necessary by Legends Financial upon extension of
credit, is based on managements credit evaluation of the counterparty.
Collateral normally consists of real property.
|    
|(11) |  | Legends Financial Holdings, Inc. -
    Parent Company Financial Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

LEGENDS FINANCIAL HOLDINGS, INC.

(Parent Company Only)


Balance Sheet

December 31, 2002

|                                         |                                                                                                            |              |                                            |                                      |        |              |  | 
|---------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ------------ | ------------------------------------------ | ------------------------------------ | ------ | ------------ |  | 
|                                         |                                                                                                            |              |                                            |                                      |        | In Thousands
|                                         |                                                                                                            |              |                                            |                                      |        |             
|ASSETS                                   |                                                                                                            |              |                                            |                                     
|Cash                                     |                                                                                                            | $            | 32                                         | *                                   
|Deferred tax asset                       |                                                                                                            |              | 6                                          |                                     
|Investment in commercial bank subsidiary |                                                                                                            |              | 13,802                                     | *                                   
|Due from commercial bank subsidiary      |                                                                                                            |              | 7                                          | *                                   
|                                         |                                                                                                            |              |                                            |                                     
|                                         |                                                                                                            | Total assets |                                            | $                                    | 13,847 |             
|                                         |                                                                                                            |              |                                            |                                     
|                                         |                                                                                                            |              |                                            | LIABILITIES AND STOCKHOLDERS EQUITY |        |              |  | 
|Stockholders equity:                    |                                                                                                            |              |                                            |                                     
|                                         | Preferred stock, no par value, authorized 1,000,000 shares,
no shares issued                               |              | $                                          |                                     |       
|                                         | Common stock, par value $1 per share, authorized 2,000,000
shares, 1,379,083 shares issued and outstanding |              |                                            | 1,379                                |       
|                                         | Additional paid-in capital                                                                                 |              |                                            | 12,267                               |       
|                                         | Retained earnings                                                                                          |              |                                            | 43                                   |       
|                                         | Net unrealized gains on available-for-sale securities, net of
income taxes of $97,000                      |              |                                            | 158                                  |       
|                                         |                                                                                                            |              |                                            |                                     
|                                         |                                                                                                            |              | Total stockholders equity                 |                                      |        | 13,847       | 
|                                         |                                                                                                            |              |                                            |                                     
|                                         |                                                                                                            |              | Total liabilities and stockholders equity |                                      | $      | 13,847       | 
|                                         |                                                                                                            |              |                                            |                                     



|* |  | Eliminated in consolidation.
|- |  | ----------------------------

59



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(11)  Legends Financial Holdings, Inc. -
             Parent Company Financial Information, Continued

LEGENDS FINANCIAL HOLDINGS, INC.

(Parent Company Only)


Statement of Earnings and Comprehensive Earnings

For the Period July 1, 2002 (Inception) through December 31, 2002

|                                                               |                                                                                                            |                                                                                                            |     |              |     |  
|-------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | --- | ------------ | --- | -
|                                                               |                                                                                                            |                                                                                                            |     | In Thousands
|                                                               |                                                                                                            |                                                                                                            |     |             
|Operating expenses                                             |                                                                                                            | $                                                                                                          | 18  |             
|                                                               |                                                                                                            |                                                                                                            |     |             
|                                                               |                                                                                                            | Loss before Federal income tax benefits and
equity in undistributed earnings of commercial
bank subsidiary |     |              | (18 | )
|Federal income tax benefits                                    |                                                                                                            |                                                                                                            | 7   |             
|                                                               |                                                                                                            |                                                                                                            |     |             
|                                                               |                                                                                                            |                                                                                                            | (11 | )           
|Equity in undistributed earnings of commercial bank
subsidiary |                                                                                                            |                                                                                                            | 395 | *           
|                                                               |                                                                                                            |                                                                                                            |     |             
|                                                               |                                                                                                            | Net earnings                                                                                               |     |              | 384 |  
|Other comprehensive earnings, net of tax:                      |                                                                                                            |                                                                                                            |     |             
|                                                               | Unrealized gains on available-for-sale securities arising
during the year, net of taxes of $24,000 in 2002 |                                                                                                            |     | 38           |    
|                                                               | Less: reclassification adjustment for losses included in
net earnings, net of taxes of $3,000              |                                                                                                            |     | 5            |    
|                                                               |                                                                                                            |                                                                                                            |     |             
|                                                               |                                                                                                            | Other comprehensive earnings                                                                               |     |              | 43  |  
|                                                               |                                                                                                            |                                                                                                            |     |             
|                                                               |                                                                                                            | Comprehensive earnings                                                                                     |     | $            | 427 |  
|                                                               |                                                                                                            |                                                                                                            |     |             



|* |  | Eliminated in consolidation.
|- |  | ----------------------------

60



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|(11) |  | Legends Financial Holdings, Inc. -
      Parent Company Financial Information, Continued
|---- |  | ----------------------------------------------------------------------------------------

LEGENDS FINANCIAL HOLDINGS, INC.

(Parent Company Only)


Statement of Stockholders Equity

For the Period July 1, 2002 (Inception) through December 31, 2002

|                                                                                                          |  |              |       |         |  |            |        |            |  |            |      |   |  |                |     |  |  |  |        | 
|--------------------------------------------------------------------------------------------------------- |  | ------------ | ----- | ------- |  | ---------- | ------ | ---------- |  | ---------- | ---- | - |  | -------------- | --- |  |  |  | ------ | 
|                                                                                                          |  | In Thousands
|                                                                                                          |  |             
|                                                                                                          |  |              |       |         |  |            |        |            |  |            |      |   |  | Net Unrealized |     |  |  | 
|                                                                                                          |  |              |       |         |  |            |        |            |  |            |      |   |  | Gains On       |     |  |  | 
|                                                                                                          |  |              |       |         |  | Additional |        | Retained   |  | Available- |      |   |  |               
|                                                                                                          |  | Common       |       | Paid-In |  | Earnings   |        | For-Sale   |  |            |      |  
|                                                                                                          |  | Stock        |       | Capital |  | (Deficit)  |        | Securities |  | Total     
|                                                                                                          |  |              |       |         |  |            |        |            |  |           
|Acquisition by share exchange with
Legends Bank, July 1, 2002                                             |  | $            | 1,143 |         |  |            | 12,446 |            |  |            | (341 | ) |  |                | 115 |  |  |  | 13,363 | 
|Issuance of 6,720 shares of $1 par value
common stock                                                     |  |              | 7     |         |  |            | 50     |            |  |            |     |   |  |                |    |  |  |  | 57     | 
|Stock-split effected in the form of a stock
dividend declared at 1 share for every 5
outstanding          |  |              | 229   |         |  |            | (229   | )          |  |            |     |   |  |                |    |  |  |  |       | 
|Net change in unrealized gains on available-
for-sale securities during the year, net of
taxes of $97,000 |  |              |      |         |  |            |       |            |  |            |     |   |  |                | 43  |  |  |  | 43     | 
|Net earnings for the period July 1, 2002
(inception) through December 31, 2002                            |  |              |      |         |  |            |       |            |  |            | 384  |   |  |                |    |  |  |  | 384    | 
|                                                                                                          |  |              |       |         |  |            |        |            |  |            |      |   |  |                |     |  |  |  |        | 
|Balance December 31, 2002                                                                                 |  | $            | 1,379 |         |  |            | 12,267 |            |  |            | 43   |   |  |                | 158 |  |  |  | 13,847 | 
|                                                                                                          |  |              |       |         |  |            |        |            |  |            |      |   |  |                |     |  |  |  |        | 

61



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|(11) |  | Legends Financial Holdings, Inc. -
     Parent Company Financial Information, Continued
|---- |  | ---------------------------------------------------------------------------------------

LEGENDS FINANCIAL HOLDINGS, INC.

(Parent Company Only)


Statement of Cash Flows

For the Period July 1, 2002 (Inception) through December 31, 2002

Increase (Decrease) in Cash and Cash Equivalents

|                                                 |                         |                                           |    |              |     |  
|------------------------------------------------ | ----------------------- | ----------------------------------------- | -- | ------------ | --- | -
|                                                 |                         |                                           |    | In Thousands
|                                                 |                         |                                           |    |             
|Cash flows from operating activities:            |                         |                                           |    |             
|                                                 | Cash paid to suppliers  |                                           | $  | (18          | )  
|                                                 |                         |                                           |    |              |    
|                                                 |                         | Net cash used in operating activities     |    |              | (18 | )
|                                                 |                         |                                           |    |              |    
|Cash flows from financing activities:            |                         |                                           |    |             
|                                                 | Advance from subsidiary |                                           |    | 50           |    
|                                                 |                         |                                           |    |             
|                                                 |                         | Net cash provided by financing activities |    |              | 50  |  
|                                                 |                         |                                           |    |             
|                                                 |                         | Net increase in cash and cash equivalents |    |              | 32  |  
|Cash and cash equivalents at beginning of period |                         |                                           |   |             
|                                                 |                         |                                           |    |              |    
|Cash and cash equivalents at end of year         |                         | $                                         | 32 |             
|                                                 |                         |                                           |    |              |    

62



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|(11) |  | Legends Financial Holdings, Inc. -
     Parent Company Financial Information, Continued
|---- |  | ---------------------------------------------------------------------------------------

LEGENDS FINANCIAL HOLDINGS, INC.

(Parent Company Only)


Statement of Cash Flows, Continued

For the Period July 1, 2002 (Inception) through December 31, 2002

Increase (Decrease) in Cash and Cash Equivalents

|                                                                                |                                                  |                                       |   |              |      |  
|------------------------------------------------------------------------------- | ------------------------------------------------ | ------------------------------------- | - | ------------ | ---- | -
|                                                                                |                                                  |                                       |   | In Thousands
|                                                                                |                                                  |                                       |   |             
|Reconciliation of net earnings to net cash used in operating
activities:        |                                                  |                                       |   |             
|                                                                                | Net earnings                                     |                                       | $ | 384          |     
|Adjustments to reconcile net earnings to net cash
used in operating activities: |                                                  |                                       |   |             
|                                                                                | Equity in earnings of commercial bank subsidiary |                                       |   | (395         | )   
|                                                                                | Increase in deferred taxes                       |                                       |   | (7           | )   
|                                                                                |                                                  |                                       |   |              |     
|                                                                                |                                                  | Total adjustments                     |   |              | (402 | )
|                                                                                |                                                  |                                       |   |              |     
|                                                                                |                                                  | Net cash used in operating activities |   | $            | (18  | )
|                                                                                |                                                  |                                       |   |              |     

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|(12) |  | Concentration of Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|     |  | Practically all of Legends Financials loans, commitments, and commercial
and standby letters of credit have been granted to customers in Legends
Financials market area. Practically all such customers are depositors
of Legends Financial. The concentrations of credit by type of loan are
set forth in note 2 to the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    
|(13) |  | Employee Benefit Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    
|     |  | Legends Financial maintains a 401(K) plan which covers eligible
employees. All full time employees are eligible to participate. The
plan provides for both employee and employer contributions. For the
years ended December 31, 2002, 2001, and 2000 Legends Financial
contributed $45,000, $26,000 and $9,000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|(14) |  | Regulatory Matters and Restrictions on Dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    
|     |  | Legends Financial is subject to regulatory capital requirements
administered by the Federal Deposit Insurance Corporation and the
Tennessee Department of Financial Institutions. Failure to meet capital
requirements can initiate certain mandatory  and possibly additional
discretionary  actions by regulators that could, in that event, have a
direct material effect on the institutions financial statements. The
relevant regulations require Legends Financial to meet specific capital
adequacy guidelines that involve quantitative measures of Legends
Financials assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting principles. Legends Financials
capital classifications are also subject to qualitative judgments by the
Regulators about components, risk weightings and other factors. Those
qualitative judgments could also affect Legends Financials capital
status and the amount of dividends Legends Financial may distribute.
|    
|     |  | Legends Financial is required to maintain minimum amounts of capital to
total risk weighted assets, as defined by Legends Banking regulators.
Legends Financial is required to have a minimum Tier I and Total Capital
ratios of 4.0% and 8.0%, respectively. The actual ratios were 15.6% and
16.6% at December 31, 2002 and 18.0% and 19.1% at December 31, 2001. The
leverage ratios at December 31, 2002 and 2001 were 12.1% and 15.2%,
respectively, and the minimum requirement was 4.0%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|     |  | As of December 31, 2002, Legends Financial is categorized as well
capitalized under the regulatory framework for prompt corrective action.
There are no conditions or events since the notification that management
believes have changed Legends Financials category.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    
|(15) |  | Stock Option Arrangement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    
|     |  | In December, 1998, the Board of Directors of Legends Bank approved the
Legends Bank 1998 Stock Option Arrangement (the 1998 Arrangement). The
Arrangement provides for the granting of stock options, and authorizes
the issuance of common stock upon the exercise of such options, for up to
74,400 shares of common stock, to officers of Legends Bank and up to
33,600 shares of common stock to the Directors of Legends Bank.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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|(15) |  | Stock Option Arrangement, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|     |  | Under the Stock Option Arrangement, stock option awards may be granted in
the form of incentive stock options or nonstatutory stock options, and
are generally exercisable for up to five years following the date such
option awards are granted. Exercise prices of incentive stock options
must be equal to or greater than 100% of the fair market value of the
common stock on the grant date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    
|     |  | In April of 2001 the Board of Directors of Legends Bank approved the 2001
Stock Option Plan (the 2001 Plan). The 2001 Plan provides for the
granting of 215,998 shares of stock available for options. Under the
2001 Plan, stock option awards may be granted in the form of incentive
stock options or nonstatutory stock options and are exercisable over
three to six years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    
|     |  | Legends Financials stockholders approved Legends Bank 1998 Stock Option
Arrangement and 2001 Stock Option Plan. Legends Financial agreed with
Legends Bank that it would exchange its options to the holders of stock
options under the 1998 Arrangement and the 2001 Plan on an
option-for-option basis. Thus options that were outstanding under the
1998 Arrangement and the 2001 Plan have been exchanged for options under
Legends Financials Stock Option Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    
|     |  | On September 17, 2002, the Board of Directors of Legends Financial
approved a stock-split effected in the form of a one-for-five stock
dividend. The stock dividend also applied to all option arrangements and
as such the number of options, exercise prices and related earnings per
share disclosures have been retroactively adjusted to reflect the
stock-split effected in the form of a dividend.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    
|     |  | Statement of Financial Accounting Standards (SFAS) No. 123, Accounting
for Stock Based Compensation as amended by SFAS No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure sets forth the
methods for recognition of cost of arrangements similar to those of
Legends Financial. As is permitted, management has elected to continue
accounting for the arrangement under APB Opinion 25 and related
Interpretations in accounting for its arrangement. However, under SFAS
No. 123, Legends Financial is required to make proforma disclosures as if
cost had been recognized in accordance with the pronouncement. Had
compensation cost for Legends Financials stock option arrangement been
determined based on the fair value at the grant dates for awards under
the arrangement consistent with the method of SFAS No. 123, Legends
Financials net earnings and basic earnings per common share and diluted
earnings per common share would have been reduced to the proforma amounts
indicated below.

|                 |                  |             |          |   |     |     |                                        |   |      |     |      |   |     |     |  |  | 
|---------------- | ---------------- | ----------- | -------- | - | --- | --- | -------------------------------------- | - | ---- | --- | ---- | - | --- | --- |  |  | 
|                 |                  |             |          |   |     |     | In Thousands, Except Per Share Amounts
|                 |                  |             |          |   |     |     |                                       
|                 |                  |             |          |   |     |     | 2002                                   |   | 2001 |     | 2000
|                 |                  |             |          |   |     |     |                                        |   |      |     |     
|Net earnings     |                  | As Reported |          | $ | 594 |     |                                        | $ | 499  |     |      | $ | 88  |    
|                 |                  | Proforma    |          | $ | 518 |     |                                        | $ | 310  |     |      | $ | 58  |    
|Basic earnings   |                  | As Reported |          | $ | .43 |     |                                        | $ | .36  |     |      | $ | .06 |    
|                 | per common share |             | Proforma |   | $   | .39 |                                        |   | $    | .23 |      |   | $   | .04 | 
|Diluted earnings |                  | As Reported |          | $ | .43 |     |                                        | $ | .36  |     |      | $ | .06 |    
|                 | per common share |             | Proforma |   | $   | .39 |                                        |   | $    | .23 |      |   | $   | .04 | 

65



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|(15) |  | Stock Option Arrangement, Continued                  
|---- |  | -----------------------------------------------------
|    
|     |  | A summary of the stock option activity is as follows:

|                                 |  |        |         |       |  |          |       |       |  |        |         |          |  |   |       |  |  |          |         |   |  |   |      | 
|-------------------------------- |  | ------ | ------- | ----- |  | -------- | ----- | ----- |  | ------ | ------- | -------- |  | - | ----- |  |  | -------- | ------- | - |  | - | ---- | 
|                                 |  | 2002   |         | 2001  |  | 2000    
|                                 |  |        |         |       |  |         
|                                 |  |        |         |       |  | Weighted |       |       |  |        |         | Weighted |  |   |       |  |  | Weighted
|                                 |  |        |         |       |  | Average  |       |       |  |        |         | Average  |  |   |       |  |  | Average 
|                                 |  |        |         |       |  | Exercise |       |       |  |        |         | Exercise |  |   |       |  |  | Exercise
|                                 |  | Shares |         | Price |  | Shares   |       | Price |  | Shares |         | Price   
|                                 |  |        |         |       |  |          |       |       |  |        |         |         
|Outstanding at
beginning of year |  |        | 265,740 |       |  | $        | 15.13 |       |  |        | 93,600  |          |  | $ | 8.33  |  |  |          | 107,760 |   |  | $ | 8.33 | 
|Granted                          |  |        | 4,200   |       |  |          | 18.75 |       |  |        | 173,160 |          |  |   | 18.75 |  |  |          |        |   |  |   |     | 
|Exercised                        |  |        | (8,400  | )     |  |          | 8.33  |       |  |        | (1,020  | )        |  |   | 8.33  |  |  |          | (13,920 | ) |  |   | 8.33 | 
|Forfeited                        |  |        | (1,680  | )     |  |          | 18.75 |       |  |        |        |          |  |   |      |  |  |          | (240    | ) |  |   | 8.33 | 
|                                 |  |        |         |       |  |          |       |       |  |        |         |          |  |   |       |  |  |          |         |   |  |   |      | 
|Outstanding at end
of year       |  |        | 259,860 |       |  | $        | 15.38 |       |  |        | 265,740 |          |  | $ | 15.13 |  |  |          | 93,600  |   |  | $ | 8.33 | 
|                                 |  |        |         |       |  |          |       |       |  |        |         |          |  |   |       |  |  |          |         |   |  |   |      | 
|Options exercisable
at year end  |  |        | 141,952 |       |  |          |       |       |  |        | 89,606  |          |  |   |       |  |  |          | 29,681  |   |  |   |      | 
|                                 |  |        |         |       |  |          |       |       |  |        |         |          |  |   |       |  |  |          |         |   |  |   |      | 



| |  | The following table summarizes information about fixed stock options
outstanding at December 31, 2002:
| |  | ------------------------------------------------------------------------------------------------------

|         |  |             |                     |          |                     |             |          |             |         |           |          |  |        |  |          |   |       |  |  |  | 
|-------- |  | ----------- | ------------------- | -------- | ------------------- | ----------- | -------- | ----------- | ------- | --------- | -------- |  | ------ |  | -------- | - | ----- |  |  |  | 
|         |  |             | Options Outstanding |          | Options Exercisable
|         |  |             |                     |          |                    
|         |  |             |                     |          |                     |             |          |             |         |           | Weighted |  |        |  |          |   |       |  | 
|         |  |             |                     |          |                     |             | Weighted |             | Average |           |          |  |        |  | Weighted
|Range of |  | Number      |                     | Average  |                     | Remaining   |          | Number      |         | Average  
|Exercise |  | Outstanding |                     | Exercise |                     | Contractual |          | Exercisable |         | Exercise 
|Prices   |  | at 12/31/02 |                     | Price    |                     | Life        |          | at 12/31/02 |         | Price    
|         |  |             |                     |          |                     |             |          |             |         |          
|$ 
8.33  |  |             | 84,180              |          |                     | $           | 8.33     |             |         | 6 years   |          |  | 63,060 |  |          | $ | 8.33  | 
|$18.75   |  |             | 175,680             |          |                     | $           | 18.75    |             |         | 8.3 years |          |  | 78,892 |  |          | $ | 18.75 | 
|         |  |             |                     |          |                     |             |          |             |         |           |          |  |        |  |          |   |       |  |  | 
|         |  |             | 259,860             |          |                     |             |          |             |         |           |          |  |        |  | 141,952  |   |       |  |  | 
|         |  |             |                     |          |                     |             |          |             |         |           |          |  |        |  |          |   |       |  |  | 



| |  | The fair value of options granted in 2002 and 2001 was $1.41 and $3.05,
respectively, for each option. The 2002 and 2001 respective weighted
average assumptions used to calculate the minimum value were as follows:
risk free rate at 4.70% and 5.22%; expected life of five and seven years;
volatility of .01%; and dividend yield of 2.88% and 2.67%. The dividend
yield was computed assuming an 18% return on equity with a 30% dividend
to earnings payout ratio. There were no options granted in 2000.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|(16) |  | Earnings Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|     |  | Statement of Financial Accounting Standards (SFAS) No. 128 Earnings Per
Share establishes uniform standards for computing and presenting
earnings per share. The computation of basic earnings per share is based
on the weighted average number of common shares outstanding during the
period. For Legends Financial, the computation of diluted earnings per
share begins with the basic earnings per share plus the effect of common
shares contingently issuable from stock options and warrants. The
weighted average number of shares used in the computation of earnings per
share have been retroactively adjusted to reflect the effects of a
stock-split effected in the form of a one for five stock dividend
declared on September 17, 2002.
|    
|     |  | The following is a summary of the components comprising basic and diluted
earnings per share (EPS):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|                         |                                                                    |                                                      |                                   |           |                                    |     |           |           |               |     |           |           |           |     | 
|------------------------ | ------------------------------------------------------------------ | ---------------------------------------------------- | --------------------------------- | --------- | ---------------------------------- | --- | --------- | --------- | ------------- | --- | --------- | --------- | --------- | --- | 
|                         |                                                                    |                                                      |                                   |           |                                    |     |           |           | In Thousands, |     |           |           |          
|                         |                                                                    |                                                      |                                   |           | Except Share and Per Share Amounts
|                         |                                                                    |                                                      |                                   |           |                                   
|                         |                                                                    |                                                      |                                   |           | 2002                               |     | 2001      |           | 2000         
|                         |                                                                    |                                                      |                                   |           |                                    |     |           |           |              
|Basic EPS Computation:   |                                                                    |                                                      |                                   |           |                                    |     |           |           |               |     |           |          
|                         | Numerator  Net earnings for the year                              |                                                      | $                                 | 594       |                                    |     | $         | 499       |               |     | $         | 88        |          
|                         |                                                                    |                                                      |                                   |           |                                    |     |           |           |               |     |           |           |          
|                         | Denominator
- Weighted average number
of common shares outstanding |                                                      |                                   | 1,374,200 |                                    |     |           | 1,369,968 |               |     |           | 1,355,899 |          
|                         |                                                                    |                                                      |                                   |           |                                    |     |           |           |               |     |           |          
|                         |                                                                    |                                                      | Basic earnings per common share   |           | $                                  | .43 |           |           | $             | .36 |           |           | $         | .06 | 
|                         |                                                                    |                                                      |                                   |           |                                    |     |           |           |               |     |           |           |          
|Diluted EPS Computation: |                                                                    |                                                      |                                   |           |                                    |     |           |           |               |     |           |          
|                         | Numerator  Net earnings for the year                              |                                                      | $                                 | 594       |                                    |     | $         | 499       |               |     | $         | 88        |          
|                         |                                                                    |                                                      |                                   |           |                                    |     |           |           |               |     |           |           |          
|                         | Denominator:                                                       |                                                      |                                   |           |                                    |     |           |           |               |     |           |           |          
|                         |                                                                    | Weighted average number of common
shares outstanding |                                   |           | 1,374,200                          |     |           |           | 1,369,968     |     |           |           | 1,355,899 |    
|                         |                                                                    | Effect of stock options                              |                                   |           | 15,376                             |     |           |           | 16,930        |     |           |           | 8,159     |    
|                         |                                                                    |                                                      |                                   |           |                                    |     |           |           |               |     |           |          
|                         |                                                                    |                                                      | 1,389,576                         |           |                                    |     | 1,386,898 |           |               |     | 1,364,058 |          
|                         |                                                                    |                                                      |                                   |           |                                    |     |           |           |               |     |           |          
|                         |                                                                    |                                                      | Diluted earnings per common share |           | $                                  | .43 |           |           | $             | .36 |           |           | $         | .06 | 
|                         |                                                                    |                                                      |                                   |           |                                    |     |           |           |               |     |           |           |          



|(17) |  | Disclosures About Fair Value of Financial Instruments                                                                                                                                                                                                                                                                              
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|     |  | Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures
about Fair Value of Financial Instruments requires that Legends
Financial disclose estimated fair values for its financial instruments.
Fair value estimates, methods, and assumptions are set forth below for
Legends Financials financial instruments.
|    
|     |  | Cash and short-term investments                                                                                                                                                                                                                                                                                                    



| |  |  | For those short-term instruments, the carrying amount is a
reasonable estimate of fair value.
| |  |  | ---------------------------------------------------------------------------------------------

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|(17) |  | Disclosures About Fair Value of Financial Instruments, Continued
|---- |  | ----------------------------------------------------------------
|    
|     |  | Investments and Mortgage-Backed Securities                      



| |  |  | The carrying amounts for short-term securities approximate fair value
because they mature in 90 days or less and do not present
unanticipated credit concerns. The fair value of longer-term
securities and mortgage-backed securities, except certain state and
municipal securities, is estimated based on bid prices published in
financial newspapers or bid quotations received from securities
dealers. The fair value of certain state and municipal securities is
not readily available through market sources other than dealer
quotations, so fair value estimates are based on quoted market prices
of similar instruments, adjusted for differences between the quoted
instruments and the instruments being valued.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | SFAS No. 107 specifies that fair values should be calculated based on
the value of one unit without regard to any premium or discount that
may result from concentrations of ownership of a financial instrument,
possible tax ramifications, or estimated transaction costs.
Accordingly, these considerations have not been incorporated into the
fair value estimates.                                                                                                                                                                                                                                                                                                                                                       



| |  | Loans
| |  | -----



| |  |  | Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type such as
commercial, mortgage, credit card and other consumer. Each loan
category is further segmented into fixed and adjustable rate interest
terms.                                                                                                                                                                                         
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The fair value of the various categories of 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
and for the same remaining average estimated maturities.                                                                                                                                                                                                  
|
| |  |  | The estimated maturity for mortgages is modified from the contractual
terms to give consideration to managements experience with
prepayments. Management has made estimates of fair value discount
rates that it believes to be reasonable. However, because there is no
market for many of these financial instruments, management has no
basis to determine whether the fair value presented below would be
indicative of the value negotiated in an actual sale.
|
| |  |  | The value of the loan portfolio is also discounted in consideration of
the credit quality of the loan portfolio as would be the case between
willing buyers and sellers. Particular emphasis has been given to
loans on the subsidiary banks internal watch list. Valuation of
these loans is based upon borrower performance, collateral values
(including external appraisals), etc.                                                                             



| |  | Deposit Liabilities
| |  | -------------------



| |  |  | The fair value of demand deposits, savings accounts and certain money
market deposits is the amount payable on demand at the reporting date.
The fair value of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposits of similar remaining
maturities. Under the provision of SFAS No. 107 the fair value
estimates for deposits does not include the benefit that results from
the low cost funding provided by the deposit liabilities compared to
the cost of borrowing funds in the market.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|(17) |  | Disclosures About Fair Value of Financial Instruments, Continued
|---- |  | ----------------------------------------------------------------
|    
|     |  | Securities Sold Under Repurchase Agreements                     



| |  |  | The securities sold under repurchase agreements are payable upon
demand. For this reason the carrying amount is a reasonable estimate
of fair value.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Commitments to Extend Credit, Standby Letters of Credit and Financial
Guarantees Written
| |  | ----------------------------------------------------------------------------------------



| |  |  | Loan commitments are made to customers generally for a period not to
exceed one year and at the prevailing interest rates in effect at the
time the loan is closed. Commitments to extend credit related to
construction loans are made for a period not to exceed six months with
interest rates at the current market rate at the date of closing. In
addition, standby letters of credit are issued for periods up to three
years with rates to be determined at the date the letter of credit is
funded. Fees are only charged for the construction loans and the
standby letters of credit and the amounts unearned at December 31,
2002 and 2001 are insignificant. Accordingly, these commitments have
no carrying value and management estimates the commitments to have no
significant fair value.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The carrying value and estimated
fair values of Legends Financials financial instruments at December 31, 2002:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                    |                                 |  |              |        |            |  |        |        |            |  |     |        |   |  |     |        | 
|----------------------------------- | ------------------------------- |  | ------------ | ------ | ---------- |  | ------ | ------ | ---------- |  | --- | ------ | - |  | --- | ------ | 
|                                    |                                 |  | In Thousands
|                                    |                                 |  |             
|                                    |                                 |  | 2002         |        | 2001      
|                                    |                                 |  |              |        |           
|                                    |                                 |  | Carrying     |        |            |  |        |        | Carrying   |  |     |        |  
|                                    |                                 |  | Amount       |        | Fair Value |  | Amount |        | Fair Value
|                                    |                                 |  |              |        |            |  |        |        |           
|Financial assets:                   |                                 |  |              |        |            |  |        |        |            |  |     |        |   |  |     |       
|                                    | Cash and short-term investments |  | $            | 6,512  |            |  |        | 6,512  |            |  |     | 3,826  |   |  |     | 3,826  | 
|                                    | Securities                      |  |              | 24,593 |            |  |        | 24,593 |            |  |     | 19,740 |   |  |     | 19,740 | 
|                                    | Loans                           |  |              | 77,780 |            |  |        |        |            |  |     | 62,811 |   |  |     |        | 
|                                    | Less: allowance for loan losses |  |              | (879   | )          |  |        |        |            |  |     | (755   | ) |  |     |        | 
|                                    |                                 |  |              |        |            |  |        |        |            |  |     |        |   |  |     |        | 
|                                    | Loans, net of allowance         |  |              | 76,901 |            |  |        | 77,045 |            |  |     | 62,056 |   |  |     | 62,596 | 
|                                    |                                 |  |              |        |            |  |        |        |            |  |     |        |   |  |     |       
|Loans held for sale                 |                                 |  | 1,687        |        |            |  | 1,687  |        |            |  | 239 |        |   |  | 239 |       
|Financial liabilities:              |                                 |  |              |        |            |  |        |        |            |  |     |        |   |  |     |       
|                                    | Deposits                        |  |              | 94,971 |            |  |        | 95,427 |            |  |     | 73,438 |   |  |     | 74,011 | 
|                                    | Advances from FHLB              |  |              | 1,500  |            |  |        | 1,500  |            |  |     | 2,500  |   |  |     | 2,500  | 
|Unrecognized financial instruments: |                                 |  |              |        |            |  |        |        |            |  |     |        |   |  |     |       
|                                    | Commitments to extend credit    |  |              |       |            |  |        |       |            |  |     |       |   |  |     |       | 
|                                    | Standby letters of credit       |  |              |       |            |  |        |       |            |  |     |       |   |  |     |       | 

69



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|(17) |  | Disclosures About 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
instruments. These estimates do not reflect any premium or discount
that could result from offering for sale at one time Legends
Financials entire holdings of a particular financial instrument.
Because no market exists for a significant portion of Legends
Financials financial instruments, fair value estimates are based on
judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and
other factors. 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 estimating 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. For example, Legends
Financial has a mortgage department that contributes net fee income
annually. The mortgage department is not considered a financial
instrument, and its value has not been incorporated into the fair
value estimates. Other significant assets and liabilities that are
not considered financial assets or liabilities include deferred tax
assets and liabilities and property, plant and equipment. 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.




ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There have been no disagreements with Legends Financials independent
auditors on any matters of accounting principles or practices or financial
statement disclosure.




PART III




ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Information with respect to the directors and executive officers is
incorporated herein by reference to the Proxy Statement relating to the Annual
Meeting of Shareholders to be held April 15, 2003.




ITEM 10. EXECUTIVE COMPENSATION

Information with respect to executive compensation is incorporated herein
by reference to the Proxy Statement relating to the Annual Meeting of
Shareholders to be held April 15, 2003.




ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Information with respect to the security ownership of certain beneficial
owners and management is incorporated herein by reference to the Proxy
Statement relating to the Annual Meeting of Shareholders to be held April 15,
2003.

70



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##### Table of Contents






ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information with respect to certain relationships and related transactions
is incorporated herein by reference to the Proxy Statement relating to the
Annual Meeting of Shareholders to be held April 15, 2003.




ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | List of Exhibits Filed. None.                                                                                    
| | --- |  | -----------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Reports on Form 8-K. No reports on Form 8-K filed during the fourth
quarter of the Registrants last fiscal year.




ITEM 14. CONTROLS AND PROCEDURES

a)     Evaluation of Disclosure Controls and Procedures. Legends Financials
Chief Executive Officer and Chief Financial Officer has conducted an evaluation
of Legends Financials disclosure controls and procedures as of a date (the
Evaluation Date) within 90 days before the filing of this annual report.
Based on this evaluation, Legends Financials Chief Executive Officer and Chief
Financial Officer concluded that Legends Financials disclosure controls and
procedures are effective to ensure that information required to be disclosed by
Legends Financial in reports that it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the applicable Securities and Exchange Commission
rules and forms.

b)     Changes in Internal Controls and Procedures. Subsequent to the
Evaluation Date, there were no significant changes in Legends Financials
internal controls or in other factors that could significantly affect these
controls, nor were any corrective actions required with regard to significant
deficiencies and material weaknesses.

INDEX OF EXHIBITS

DESCRIPTION OF EXHIBITS


|            |  |                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NO. |  |                                                                                                                                   
|3.1         |  | Charter of Legends Financial Holdings, Inc.*                                                                                      
|            |  |                                                                                                                                   
|3.2         |  | Bylaws for Legends Financial Holdings, Inc.*                                                                                      
|            |  |                                                                                                                                   
|4           |  | Specimen Stock Certificate for Legends Financial Holdings, Inc.*                                                                  
|            |  |                                                                                                                                   
|10.1        |  | 2001 Statutory and Non-Statutory Stock Option Plan for Legends
Financial Holdings, Inc., as successor-in-interest to Legends
Bank*
|            |  |                                                                                                                                   
|21          |  | Subsidiaries of Registrant*                                                                                                       



|* |  | Incorporated by reference to Form 10-SB filed by Legends Financial with the
Commission on November 22, 2002.
|- |  | ------------------------------------------------------------------------------------------------------------

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

| |  |                                               |                                                                 | 
| |  | --------------------------------------------- | --------------------------------------------------------------- | 
| |  | LEGENDS FINANCIAL HOLDINGS, INC.
(Registrant)
| |  |                                               |                                                                 | 
| |  | By:                                           | /s/ Billy P. Atkins                                             | 
| |  |                                               | Billy P. Atkins, President and Chief
         Executive Officer
| |  |                                               |                                                                 | 
| |  | Date:                                         | 25 March 2003                                                   | 
| |  |                                               |                                                                

72



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In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.

| |       |  |                                                                                    
| | ----- |  | -----------------------------------------------------------------------------------
| | By:   |  | /s/ Billy P. Atkins                                                                
| |       |  | Billy P. Atkins, President and Chief
         Executive Officer                    
| |       |  |                                                                                    
| | Date: |  | 25 March 2003                                                                      
| |       |  |                                                                                    
| |       |  |                                                                                    
| | By:   |  | /s/ Thomas E. Bates, Jr.                                                           
| |       |  | Thomas E. Bates, Jr., Executive Vice
         President and Chief Financial Officer
| |       |  |                                                                                    
| | Date: |  | 25 March 2003                                                                      
| |       |  |                                                                                    
| |       |  |                                                                                    
| | By:   |  | /s/ James D. Amos                                                                  
| |       |  | James D. Amos                                                                      
| |       |  |                                                                                    
| | Date: |  | 25 March 2003                                                                      
| |       |  |                                                                                    
| |       |  |                                                                                    
| | By:   |  | /s/ Billy P. Atkins                                                                
| |       |  | Billy P. Atkins                                                                    
| |       |  |                                                                                    
| | Date: |  | 25 March 2003                                                                      
| |       |  |                                                                                    
| |       |  |                                                                                    
| | By:   |  | /s/ Mark Ray Barnett                                                               
| |       |  | Mark Ray Barnett                                                                   
| |       |  |                                                                                    
| | Date: |  | 25 March 2003                                                                      
| |       |  |                                                                                    
| |       |  |                                                                                    
| | By:   |  | /s/ Thomas E. Bates, Jr.                                                           
| |       |  | Thomas E. Bates, Jr.                                                               
| |       |  |                                                                                    
| | Date: |  | 25 March 2003                                                                      
| |       |  |                                                                                    

73



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| |       |  |                            
| | ----- |  | ---------------------------
| | By:   |  | /s/ William D. Dickson, Sr.
| |       |  | William D. Dickson, Sr.    
| |       |  |                            
| | Date: |  | 25 March 2003              
| |       |  |                            
| |       |  |                            
| | By:   |  | /s/ Ronald Alan Goad       
| |       |  | Ronald Alan Goad           
| |       |  |                            
| | Date: |  | 25 March 2003              
| |       |  |                            
| |       |  |                            
| | By:   |  | /s/ Dick Wright Littleton  
| |       |  | Dick Wright Littleton      
| |       |  |                            
| | Date: |  | 25 March 2003              
| |       |  |                            
| |       |  |                            
| | By:   |  | /s/ David P. Nussbaumer    
| |       |  | David P. Nussbaumer        
| |       |  |                            
| | Date: |  | 25 March 2003              
| |       |  |                            
| |       |  |                            
| | By:   |  | /s/ Pravin Chhagan Patel   
| |       |  | Pravin Chhagan Patel       
| |       |  |                            
| | Date: |  | 25 March 2003              
| |       |  |                            
| |       |  |                            
| | By:   |  | /s/ Jimmy Terry, Sr.       
| |       |  | Jimmy Terry, Sr.           
| |       |  |                            
| | Date: |  | 25 March 2003              
| |       |  |                            
| |       |  |                            
| | By:   |  | /s/ Francis Gene Washer    
| |       |  | Francis Gene Washer        
| |       |  |                            
| | Date: |  | 25 March 2003              
| |       |  |                            

74



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| |       |  |                     
| | ----- |  | --------------------
| | By:   |  | /s/ Ralph D. Weiland
| |       |  | Ralph D. Weiland    
| |       |  |                     
| | Date: |  | 25 March 2003       
| |       |  |                     

75



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CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

I, Billy P. Atkins, Chief Executive Officer of Legends Financial Holdings,
Inc. certify that:

1.     I have reviewed this annual report on Form 10-KSB of Legends Financial
Holdings;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

|       |  |               |  |                                        
|------ |  | ------------- |  | ---------------------------------------
|       |  |               |  | /s/ Billy P. Atkins                    
|       |  |               |  | Billy P. Atkins
Chief Executive Officer
|       |  |               |  |                                        
|Dated: |  | 25 March 2003 |  |                                        
|       |  |               | 





---



##### Table of Contents



I, Thomas E. Bates, Jr., Chief Financial Officer of Legends Financial
Holdings, Inc., certify that:

1.     I have reviewed this annual report on Form 10-KSB of Legends Financial
Holdings;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

|      |  |               |  |                                             
|----- |  | ------------- |  | --------------------------------------------
|      |  |               |  | /s/ Thomas E. Bates, Jr.                    
|      |  |               |  | Thomas E. Bates, Jr.
Chief Financial Officer
|      |  |               |  |                                             
|Date: |  | 25 March 2003 |  |                                             
|      |  |