UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the Transition Period from _____________ to _____________
Commission File No. 0-50106
--------------------
LEGENDS FINANCIAL HOLDINGS, INC.
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(Exact name of small business issuer as specified in its charter)
TENNESSEE
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(State or other jurisdiction of incorporation or organization)
32-0008963
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(I.R.S. Employer Identification No.)
310 North First Street, Clarksville, TN 37050
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(Address of principal executive offices)
(931) 503-1234
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common stock, $1.00 par value, outstanding: 1,406,397 shares at August 6,
2004
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited consolidated financial statements of the Registrant are as
follows:
Consolidated Balance Sheets - June 30, 2004 and December 31,
2003.
Consolidated Statements of Earnings - For the three months and
six months ended June 30, 2004 and 2003.
Consolidated Statements of Comprehensive Earnings (Loss) - For
the three months and six months ended June 30, 2004 and 2003.
Consolidated Statement of Cash Flows - For the six months ended
June 30, 2004 and 2003.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Item 3. Controls and Procedures.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities and Small Business Issuer Purchases of
Equity Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
Signatures
LEGENDS FINANCIAL HOLDINGS, INC.
Consolidated Balance Sheets
June 30, 2004 and December 31, 2003
(Unaudited)
June 30, December 31,
2004 2003
---------------- --------------
(In Thousands)
Assets
--------
Loans, less allowance for possible loan losses of $1,427,000 and $1,225,000
respectively $ 114,777 $ 103,794
Securities available-for-sale, at market (amortized cost of $35,807,000 and
$32,259,000, respectively) 34,807 31,944
Restricted equity securities 591 480
Loans held for sale - 274
Federal funds sold - 3,195
--------------- --------------
Total earning assets 150,175 139,687
-------------- --------------
Cash and due from banks 16,078 3,401
Bank premises and equipment, net 5,489 5,488
Accrued interest receivable 665 632
Other real estate owned 92 92
Other assets 289 276
Deferred tax asset, net 569 306
Goodwill 153 153
-------------- --------------
Total assets $ 173,510 $ 150,035
============== ==============
Liabilities and Stockholders' Equity
------------------------------------
Deposits $ 143,807 $ 129,816
Securities sold under repurchase agreements 693 651
Federal funds purchased 4,138 -
Advances from Federal Home Loan Bank 9,978 4,991
Accrued interest payable 195 316
Income taxes payable 99 -
Accounts payable and other liabilities 260 121
-------------- --------------
Total liabilities 159,170 135,895
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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,
1,406,397 and 1,381,749 shares issued and outstanding, respectively 1,406 1,382
Additional paid-in capital 12,468 12,287
Retained earnings 1,082 666
Net unrealized losses on available-for-sale securities, net of income taxes
of $384,000 and $120,000, respectively (616) (195)
-------------- --------------
Total stockholders' equity 14,340 14,140
-------------- --------------
Total liabilities and stockholders' equity $ 173,510 $ 150,035
============== ==============
See accompanying notes to consolidated financial statements (unaudited).
LEGENDS FINANCIAL HOLDINGS, INC.
Consolidated Statements of Earnings
Three Months and Six Months Ended June 30, 2004 and 2003
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
2004 2003 2004 2003
---- ---- ---- ----
(In Thousands (In Thousands
Except Per Share Amounts) Except Per Share Amounts)
Interest income:
Interest and fees on loans $ 1,792 $ 1,414 $ 3,506 $ 2,742
Interest and dividends on taxable securities 229 303 468 578
Interest and dividends on non-taxable securities 76 - 154 -
Interest on Federal funds sold 5 13 7 18
------------ ------------ ------------ ------------
Total interest income 2,102 1,730 4,135 3,338
------------ ------------ ------------ ------------
Interest expense:
Interest on negotiable order of withdrawal accounts 86 81 179 161
Interest on money market and savings accounts 58 74 117 143
Interest on certificates of deposits 323 271 622 534
Interest on Federal funds purchased 5 - 7 4
Interest on advances from Federal Home Loan Bank 35 13 59 25
------------ ------------ ------------ ------------
Total interest expense 507 439 984 867
------------ ------------ ------------ ------------
Net interest income before provision for possible loan
losses 1,595 1,291 3,151 2,471
Provision for possible loan losses 90 49 210 135
------------ ------------ ------------ ------------
Net interest income after provision for possible loan
losses 1,505 1,242 2,941 2,336
------------ ------------ ------------ ------------
Non-interest income:
Service charges on deposit accounts 171 131 318 221
Other fees and commissions 255 99 434 256
Security gains 11 - 67 -
------------ ------------ ------------ ------------
Total non-interest income 437 230 819 477
------------ ------------ ------------ ------------
Non-interest expenses:
Employee salaries and benefits 703 528 1,370 1,054
Occupancy expenses, net 101 68 200 135
Furniture and equipment expense 119 115 232 213
Data processing expense 103 75 198 144
Advertising expense 41 25 87 47
Other operating expenses 347 297 657 553
------------ ------------ ------------ ------------
Total non-interest expense 1,414 1,108 2,744 2,146
------------ ------------ ------------ ------------
Earnings before income taxes 528 364 1,016 667
Income taxes 166 155 320 282
------------ ------------ ------------ ------------
Net earnings $ 362 $ 209 $ 696 $ 385
============ ============ ============ ============
Basic earnings per common share $ .26 $ .15 $ .50 $ .28
============ ============ ============ ============
Diluted earnings per common share $ .26 $ .15 $ .49 $ .27
============ ============ ============ ============
See accompanying notes to consolidated financial statements (unaudited).
LEGENDS FINANCIAL HOLDINGS, INC.
Consolidated Statements of Comprehensive Earnings (Loss)
Three Months and Six Months Ended June 30, 2004 and 2003
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
2004 2003 2004 2003
---- ---- ---- ----
(In Thousands) (In Thousands)
Net earnings $ 362 $ 209 $ 696 $ 385
------------ ------------ ------------ ------------
Other comprehensive earnings (loss):
Unrealized gains (losses) on available-for-sale
securities arising during period, net of taxes
of $380,000, $58,000, $236,000 and $43,000,
respectively (613) 92 (380) 68
Less: reclassification adjustment for losses
included in net earnings, net of taxes of
$5,000 and $26,000, respectively (6) - (41) -
------------ ------------ ------------ ------------
Other comprehensive earnings (loss) (619) 92 (421) 68
------------ ------------ ------------ ------------
Comprehensive earnings (loss) $ (257) $ 301 $ 275 $ 453
============ ============ ============ ============
See accompanying notes to consolidated financial statements (unaudited).
LEGENDS FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2004 and 2003
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
2004 2003
---- ----
(In Thousands)
Cash flows from operating activities:
Interest received $ 4,089 $ 3,220
Fees received 752 477
Interest paid (997) (863)
Cash paid to suppliers and employees (2,560) (2,031)
Proceeds from sale of loans 1,207 7,247
Originations of loans held for sale (933) (5,653)
Income taxes paid (99) (249)
--------------- ---------------
Net cash provided by operating activities 1,459 2,148
--------------- ---------------
Cash flows from investing activities:
Purchase of available-for-sale securities (10,526) (18,742)
Proceeds from maturities, calls and principal payments of
available-for-sale securities 2,786 7,961
Loans made to customers, net of repayments (11,199) (4,039)
Purchase of bank premises and equipment (203) (491)
Proceeds from sales of available-for-sale securities 4,157 -
Proceeds from sale of repossessed property 29 -
Purchase of restricted equity securities (104) -
Proceeds from acquisition of NBC, net - 1,334
----------------- ---------------
Net cash used in investing activities (15,060) (13,977)
--------------- ---------------
Cash flows from financing activities:
Net increase in non-interest bearing, savings and NOW deposit
accounts 9,988 8,871
Net increase in time deposits 4,003 2,278
Increase in Fed funds purchased 4,138 -
Proceeds from sale of common stock 205 -
Dividends paid (280) (207)
Increase in securities sold under repurchase agreements 42 2,334
Proceeds from (repayment of) Federal Home Loan Bank
borrowings 4,987 (500)
--------------- ---------------
Net cash provided by financing activities 23,083 12,776
--------------- ---------------
Net increase in cash and cash equivalents 9,482 947
Cash and cash equivalents at beginning of period 6,596 6,512
--------------- ---------------
Cash and cash equivalents at end of period $ 16,078 $ 7,459
=============== ===============
See accompanying notes to consolidated financila statements (unaudited).
LEGENDS FINANCIAL HOLDINGS, INC.
Consolidated Statements of Cash Flows, Continued
Six Months Ended June 30, 2004 and 2003
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
2004 2003
---- ----
(In Thousands)
Reconciliation of net earnings to net cash provided by operating activities:
Net earnings $ 696 $ 385
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation, amortization and accretion 304 306
Federal Home Loan Bank stock dividends (7) (2)
Security gains related to available-for-sale securities (67) -
Provision for possible loan losses 210 135
Increase in accrued interest receivable (33) (105)
Increase in other assets (157) (108)
Decrease in accrued interest payable (121) (147)
Increase in other liabilities 139 57
Decrease in loans held for sale 274 1,594
Decrease in deferred taxes 221 33
--------------- ---------------
Total adjustments 763 1,763
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Net cash provided by operating activities $ 1,459 $ 2,148
=============== ===============
Supplemental Schedule of Non-Cash Activities:
Unrealized loss in values of securities available-for-sale $ (421) $ (138)
=============== ===============
Non-cash transfers from loans to repossessed property $ 6 $ -
=============== ===============
See accompanying notes to consolidated financial statements (unaudited).
LEGENDS FINANCIAL HOLDINGS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Basis of Presentation
- ---------------------
The unaudited consolidated financial statements include the accounts of Legends
Financial Holdings, Inc. ("Legends Financial") or ("the Company"), Legends Bank
("Legends Bank") and its wholly-owned subsidiary, Legends Financial Services,
Inc. 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 the Bank Holding
Company Act of 1956, as amended. For quarters after June 30, 2002, Legends Bank
will be included in the consolidated financial statements of its parent, Legends
Financial, which is subject to the rules and regulations of the Securities and
Exchange Commission. 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 all
financial information of Legends Financial.
The accompanying consolidated financial statements have been prepared, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Certain prior period financial information has been reclassified to
conform with current period presentation.
In the opinion of management, the consolidated financial statements contain all
adjustments and disclosures necessary to summarize fairly the financial position
of the Legends Financial as of June 30, 2004 and December 31, 2003, the results
of operations for the three months and six months ended June 30, 2004 and 2003,
comprehensive earnings (loss) for the three months and six months ended June 30,
2004 and 2003 and changes in cash flows for the six months ended June 30, 2004
and 2003. All significant intercompany transactions have been eliminated. The
interim consolidated financial statements should be read in conjunction with the
notes to the December 31, 2003 financial statements presented in Legends
Financial's December 31, 2003 Annual Report to Stockholders. The results for
interim periods are not necessarily indicative of results to be expected for the
complete fiscal year.
Allowance for Loan Losses
- -------------------------
Transactions in the allowance for loan losses were as follows:
Six Months Ended
June 30,
-------------------------------------
2004 2003
---- ----
(In Thousands)
Balance, January 1, 2004 and 2003, respectively $ 1,225 $ 879
Add (deduct):
Losses charged to allowance (13) (11)
Recoveries credited to allowance 5 31
Provision for loan losses 210 135
--------------- ---------------
Balance, June 30, 2004 and 2003, respectively $ 1,427 $ 1,034
=============== ===============
LEGENDS FINANCIAL HOLDINGS, INC.
Notes to Consolidated Financial Statements, Continued
(Unaudited)
Allowance for Loan Losses, Continued
- ------------------------------------
The provision for loan losses was $210,000 and $135,000 for the first six months
of 2004 and 2003, respectively. The provision for loan losses is based on past
loan experience and other factors which, in management's judgment, deserve
current recognition in estimating possible loan losses. Such factors include
growth and composition of the loan portfolio, review of specific loan problems,
the relationship of the allowance for loan losses to outstanding loans, and
current economic conditions that may affect the borrower's ability to repay.
Management has in place a system designed to identify and monitor problems on a
timely basis.
The Company maintains an allowance for loan losses which management believes is
adequate to absorb losses inherent in the loan portfolio. A formal review is
prepared quarterly by the Loan Review Committee to assess the risk in the
portfolio and to determine the adequacy of the allowance for loan losses. The
review includes analysis of historical performance, the level of non-performing
and adversely rated loans, specific analysis of certain problem loans, loan
activity since the previous assessment, reports prepared by the Loan Review
Committee, consideration of current economic conditions, and other pertinent
information. The level of the allowance to net loans outstanding will vary
depending on the overall results of this quarterly assessment. The review is
presented to and subsequently approved by the Board of Directors.
Acquisition
- -----------
Effective March 24, 2003, the Company acquired certain assets and liabilities of
NBC Bank in the Clarksville, Tennessee area. The acquisition was accounted for
as a purchase summarized as follows:
(In Thousands)
Loans including overdrafts assumed $ 1,243
Deposits assumed (2,718)
Accrued interest payable (6)
Cash received from NBC 1,328
Goodwill 153
Goodwill arising from this transaction will be evaluated on an annual basis.
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 1998
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. At June 30, 2004, 108,000 shares
have been granted at $8.33 per share (720 shares have been forfeited and
reallocated to plan participants and 50,414 shares have been exercised). At June
30, 2004, 57,586 shares have been granted and not exercised. Of these shares
57,586 are exercisable as of June 30, 2004.
LEGENDS FINANCIAL HOLDINGS, INC.
Notes to Consolidated Financial Statements, Continued
(Unaudited)
Stock Option Arrangement, Continued
- -----------------------------------
Under the 1998 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 award 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. At June 30, 2004,
174,020 shares of the options had been granted at $18.75 per share and 2,500 at
$17.00 per share (6,840 shares have been forfeited and no shares have been
exercised). At June 30, 2004, 176,520 shares had been granted and not exercised
of which 136,631 were exercisable.
Legends Financial's stockholders approved Legends Bank 1998 Arrangement and 2001
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
---------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- -------------------------
2004 2003 2004 2003
---- ---- ---- ----
Net earnings As Reported $ 362 $ 209 $ 696 $ 385
Proforma $ 361 $ 185 $ 678 $ 337
Basic earnings As Reported $ .26 $ .15 $ .50 $ .28
per common share Proforma $ .25 $ .13 $ .48 $ .24
Diluted earnings As Reported $ .26 $ .15 $ .49 $ .27
per common share Proforma $ .26 $ .13 $ .48 $ .24
LEGENDS FINANCIAL HOLDINGS, INC.
Notes to Consolidated Financial Statements, Continued
(Unaudited)
Earnings Per Share
- ------------------
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share"
establishes uniform standards for computing and presenting earnings per share.
SFAS No. 128 replaces the presentation of primary earnings per share with the
presentation of basic earnings per share and diluted 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 the Company 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 following is a summary of components comprising basic and diluted earnings
per share (EPS) for the three and six months ended June 30, 2004 and 2003:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- ---------------------------------
(In Thousands, except share amounts) 2004 2003 2004 2003
---- ---- ---- ----
Basic EPS Computation:
Numerator - net earnings available to
common shareholders $ 362 209 $ 696 385
------------ ------------ ------------ ------------
Denominator - weighted average number
of common shares outstanding 1,400,370 1,379,083 1,392,107 1,379,083
------------ ------------ ------------ ------------
Basic earnings per common share $ .26 .15 $ .50 .28
============ ============ ============ ============
Diluted EPS Computation:
Numerator-net earnings available to
common shareholders $ 362 209 $ 696 385
------------ ------------ ------------ ------------
Denominator:
Weighted average number of common
shares outstanding 1,400,370 1,379,083 1,392,107 1,379,083
Dilutive effect of stock options 30,550 31,630 30,550 31,630
------------ ------------ ------------ ------------
1,430,920 1,410,713 1,422,657 1,410,713
------------ ------------ ------------ ------------
Diluted earnings per common share $ .26 .15 $ .49 .27
============ ============ ============ ============
LEGENDS FINANCIAL HOLDINGS, INC.
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation
---------------------------------------------------------
The purpose of this discussion is to provide insight into the financial
condition and results of operations of the Company. This discussion should be
read in conjunction with the financial statements. Reference should also be made
to the Company's December 31, 2003 financial statements for a more complete
discussion of factors that impact liquidity, capital and the results of
operations.
Forward-Looking Statements
- --------------------------
Management's discussion of the Company and management's analysis of the
Company's operations and prospects, and other matters, may include
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and other provisions of federal and state
securities laws. Although management believes that the assumptions underlying
such forward-looking statements contained in this Report are reasonable, any of
the assumptions could be inaccurate and, accordingly, there can be no assurance
that the forward-looking statements included herein will prove to be accurate.
The use of such words as expect, anticipate, forecast, and comparable terms
should be understood by the reader to indicate that the statement is
"forward-looking" and thus subject to change in a manner that can be
unpredictable. Factors that could cause actual results to differ from the
results anticipated, but not guaranteed, in this Report, include (without
limitation) economic and social conditions, competition for loans, mortgages,
and other financial services and products, changes in interest rates, unforeseen
changes in liquidity, results of operations, and financial conditions affecting
the Company's customers, as well as other risks that cannot be accurately
quantified or completely identified. Many factors affecting the Company's
financial condition and profitability, including changes in economic conditions,
the volatility of interest rates, political events and competition from other
providers of financial services simply cannot be predicted. Because these
factors are unpredictable and beyond the Company's control, earnings may
fluctuate from period to period. The purpose of this type of information (such
as in Item 2, as well as other portions of this Report) is to provide Form
10-QSB readers with information relevant to understanding and assessing the
financial condition and results of operations of the Company, and not to predict
the future or to guarantee results. Management is unable to predict the types of
circumstances, conditions, and factors that can cause anticipated results to
change. The Company undertakes no obligation to publish revised forward-looking
statements to reflect the occurrence of changes or unanticipated events,
circumstances, or results.
Results of Operations
- ---------------------
The Company had net earnings of $362,000 and $696,000 for the three and
six months ended June 30, 2004 as compared to $209,000 and $385,000 in earnings
for the same period in 2003. The increase in earnings is the result of continued
growth in the assets of the Company. On a per share basis, the net earnings for
the three months ended June 30, 2004, resulted in basic and diluted earnings per
share of $.26 and basic and diluted earnings per share of $.50 and $.49 for the
six months ended June 30, 2004, respectively. For the three months ended June
30, 2003 the basic and diluted earnings per share was $.15 and the basic and
diluted earnings per share was $.28 and $.27 for the six months ended June 30,
2003, respectively.
LEGENDS FINANCIAL HOLDINGS, INC.
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
----------------------------------------------------------
Continued
---------
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 the
Company's earnings. Total interest income for the six months ended June 30, 2004
and 2003 was $4,135,000 and $3,338,000, respectively. Total interest expense for
the six months ended June 30, 2004 and 2003 was $984,000 and $867,000,
respectively. This resulted in an increase in net interest income of $680,000 or
27.5% during the first six months of 2004 as compared to the comparable period
in the prior year. Total interest income for the three months ended June 30,
2004 and 2003 was $2,102,000 and $1,730,000, respectively. Total interest
expense for the three months ended June 30, 2004 and 2003 was $507,000 and
$439,000. The foregoing resulted in an increase in net interest income of
$304,000 or 23.5% during the three months ended June 30, 2004 as compared to the
same period in the prior year. The increase is due primarily to continued growth
of the Bank and a decrease in higher yielding time deposits which matured during
2003. Interest rates are expected to increase slightly in 2004. Management
believes that a satisfactory level of loans and deposits can be originated or
repriced during the remainder of 2004 to provide for greater 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 during the three and six month period ended June 30, 2004 was $90,000 and
$210,000, respectively, as compared to $49,000 and $135,000, respectively, for
the same periods in 2003. The provision for loan losses raised the allowance for
possible loan losses to $1,427,000 at June 30, 2004, an increase of 16.5% from
$1,225,000 at December 31, 2003. 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 June 30, 2004 to
be adequate. The allowance for loan losses was 1.23% and 1.17% of loans
outstanding at June 30, 2004 and December 31, 2003, respectively.
Non-Interest Income
- -------------------
The Company's non-interest income consists of service charges on
deposit accounts, other fees and commissions, fees on mortgage originations and
security gains. Non-interest income, excluding securities transactions,
increased $275,000 or 57.6% during the six months ended June 30, 2004 as
compared to the same period in 2003. The increase for the quarter ended June 30,
2004 was $196,000 or 85.2% as compared to the same period in 2003. The increase
in non-interest income exclusive of securities gains was due primarily to
increases in service charges on deposit accounts and other fees and commissions
resulting from the growth of the Company's loan portfolio and deposit base.
Management projects that other fees and commissions and service charges on
deposit accounts will continue to increase during the remainder of 2004 due to
growth of the Company.
LEGENDS FINANCIAL HOLDINGS, INC.
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
----------------------------------------------------------
Continued
---------
Non-Interest Expense
- --------------------
Non-interest expenses consist primarily of employee costs, occupancy
expenses, furniture and equipment expenses, data processing expense, advertising
expense and other operating expenses. Non-interest expense increased $598,000 or
27.9% during the six months ended June 30, 2004 as compared to the same period
in 2003. The increase for the quarter ended June 30, 2004 was $306,000 or 27.6%
as compared to the same period in 2003. The increases in non-interest expense
are attributable primarily to increases in salaries and benefits and occupancy
expenses due to continued growth of the Company. Other operating expenses for
the six months ended June 30, 2004 increased to $657,000 from $553,000 for the
first six months of 2003. These expenses include taxes, supplies, communications
and general operating costs which increased as a result of continued growth of
the Company.
Financial Condition
- -------------------
Balance Sheet Summary. The Company's total assets increased 15.6% to
---------------------
$173,510,000 at June 30, 2004 from $150,035,000 at December 31, 2003. Loans, net
of allowance for possible loan losses, totaled $114,777,000 at June 30, 2004, a
10.6% increase compared to $103,794,000 at December 31, 2003. Investment
securities increased $2,863,000 or 9.0% to $34,807,000 at June 30, 2004. There
were no Federal funds sold at June 30, 2004 as compared to $3,195,000 at
December 31, 2003. The Federal funds sold were used primarily to provide funding
for loan growth and security purchases.
Total liabilities increased by 17.1% to $159,170,000 for the six months
ended June 30, 2004 compared to $135,895,000 at December 31, 2003. This increase
was composed primarily of a $13,991,000 increase in total deposits, a $4,138,000
increase in Federal funds purchased and an increase of $4,987,000 in advances
from the Federal Home Loan Bank during the six months ended June 30, 2004.
A more detailed discussion of assets, liabilities and capital follows:
Loans
-----
Loan categories are as follows:
June 30, December 31,
2004 2003
--------------- --------------
(In Thousands)
Commercial, financial and agricultural $ 19,629 $ 20,256
Installment 6,864 4,870
Real estate - mortgage 76,471 66,500
Real estate - construction 13,240 13,393
--------------- ---------------
Total $ 116,204 $ 105,019
=============== ===============
LEGENDS FINANCIAL HOLDINGS, INC.
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
----------------------------------------------------------
Continued
---------
Financial Condition, Continued
- ------------------------------
Loans are a large component of the Bank'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 in the portfolio at June 30, 2004 and December 31, 2003.
As represented in the table, primary loan growth was in real estate
mortgage loans. Management is increasing loans in an orderly fashion to maintain
quality.
The Company 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 the Company 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, the Company 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.
The Company's first mortgage single family residential and consumer
loans which total approximately $25,299,000 and $5,205,000, respectively at June
30, 2004, 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 the
Company are evaluated for impairment under the provisions of SFAS Nos. 114 and
118.
The Company 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.
LEGENDS FINANCIAL HOLDINGS, INC.
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
----------------------------------------------------------
Continued
---------
Financial Condition, Continued
- ------------------------------
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 June
30, 2004 and December 31, 2003, the Company had $56,000 and $305,000,
respectively, of loans on nonaccrual status.
Other loans may be classified as impaired when the current net worth
and financial capacity of the borrower or of the collateral pledged, if any, is
viewed as inadequate. 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 the Company will sustain some
loss. In such cases, interest income continues to accrue as long as the loan
does not meet the Company's criteria for nonaccrual status.
Generally the Company 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 June 30, 2004 the Company had one loan totalling $253,000 that
has had the terms modified in a troubled debt restructuring and none as of June
30, 2003.
The Company'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 June 30, 2004, the Company had impaired loans totaling
$1,072,000. A specific allocation of $98,000 has been established by management
related to these loans. The total amount of interest recognized during the
period on impaired loans approximated $32,000 and the average recorded
investment for the six months ended June 30, 2004 was $1,409,000 At December 31,
2003, impaired loans totaled $1,832,000 and had specific allowance for possible
loan losses of $163,000 allocated. The impaired loans are generally commercial
loans and have been classified as substandard and special mention by
management's internal grading system. The total collateral of these loans
approximated $1,132,000 at June 30, 2004.
LEGENDS FINANCIAL HOLDINGS, INC.
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
----------------------------------------------------------
Continued
---------
Financial Condition, Continued
- ------------------------------
The following schedule details selected information as to
non-performing loans of the Bank at June 30, 2004 and December 31, 2003:
June 30, 2004 December 31, 2003
------------------------------------- -------------------------------------
Past Due Past Due
90 Days Non-Accrual 90 Days Non-Accrual
-------- ----------- -------- -----------
(In Thousands) (In Thousands)
Real estate loans $ 347 - $ - -
Installment loans - 11 - 39
Commercial - 45 - 266
----------------- ---------------- ----------------- ----------------
$ 347 56 $ - 305
=============== ================ ===================================
Renegotiated loans $ - $ -
=============== ================
Securities
- ----------
Securities totaled $34,807,000 and $31,944,000 at June 30, 2004 and
December 31, 2003, respectively, and was a primary component of the Bank's
earning assets. Restricted equity securities totaled $591,000 and $480,000 at
June 30, 2004 and December 31, 2003, respectively. The Bank 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:
o Debt securities for which the enterprise has the positive intent and
ability to hold to maturity are classified as held-to-maturity
securities and reported at amortized costs.
o 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.
o 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 HOLDINGS, INC.
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
----------------------------------------------------------
Continued
---------
Securities, Continued
- ---------------------
The Bank's classification of securities as of June 30, 2004 and
December 31, 2003 is as follows:
Available-for-Sale
-------------------------------------------------------------------------
June 30, 2004 December 31, 2003
---------------------------------- ----------------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
--------- --------- --------- ---------
U.S. Treasury and other U.S.
Government agencies and
corporations $ 3,675 3,547 $ 1,796 1,755
Mortgage-backed securities 19,804 19,392 18,976 18,923
Obligations of states and
political subdivisions 9,578 9,137 8,237 8,091
Domestic corporate bonds 2,750 2,731 3,250 3,175
------------- ------------- -------------- -------------
$ 35,807 34,807 $ 32,259 31,944
============= ============= ============== =============
No securities have been classified as trading or held-to-maturity
securities.
Deposits
- --------
Deposits, which in the future are expected to be the principal source
of funds for the Bank, totaled $143,807,000 and $129,816,000 at June 30, 2004
and December 31, 2003, respectively. The Bank 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 and Stewart County areas in
Tennessee are a growing economic market offering growth opportunities for the
Bank; however, the Bank competes with several large bank holding companies that
have banking offices in this area. Even though the Bank is in a very competitive
market, management currently believes that it is possible to increase the Bank's
deposit and asset size. Management believes that it's position as a locally
oriented financial institution that offers personalized service will contribute
significantly to loan and deposit growth and eventually to overall
profitability. However, no assurance of market growth can be given.
Liquidity and Asset Management
- ------------------------------
The Company's management seeks to maximize net interest income by
managing the Company'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. Higher
levels of liquidity bear corresponding costs, measured in terms of lower yields
on short-term more liquid earning assets and higher interest expense involved in
extending liability maturities.
LEGENDS FINANCIAL HOLDINGS, INC.
FORM 10-QSB CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
----------------------------------------------------------
Continued
---------
Liquidity and Asset Management, Continued
- -----------------------------------------
The Company maintains a formal asset and liability management process
to quantify, monitor and control interest rate risk and to assist management in
maintaining stability in the net interest margin under varying interest rate
environments. The Company accomplishes this process through the development and
implementation of lending, funding and pricing strategies designed to maximize
net interest income under varying interest rate environments subject to specific
liquidity and interest rate risk guidelines.
Analysis of rate sensitivity and rate gap analysis are the primary
tools used to assess the direction and magnitude of changes in net interest
income resulting from changes in interest rates. Included in the analysis are
cash flows and maturities of financial instruments held for purposes other than
trading, changes in market conditions, loan volumes and pricing and deposit
volume and mix. These assumptions are inherently uncertain, and, as a result,
net interest income cannot be precisely estimated nor can the impact of higher
or lower interest rates on net interest income be precisely predicted. Actual
results will differ due to timing, magnitude and frequency of interest rate
changes and changes in market conditions and managements strategies, among other
factors.
The Company's primary source of liquidity is expected to be a stable
core deposit base. In addition, short-term investments, loan payments and
investment security maturities provide a secondary source.
The Company's securities portfolio consists of earning assets that
provide interest income. Securities classified as available-for-sale include
securities intended to be used as part of the Company's asset/liability strategy
and/or securities that may be sold in response to changes in interest rate,
prepayment risk, the need or desire to increase capital and similar economic
factors. Securities totaling $6.0 million mature or will be subject to rate
adjustments within the next twelve months.
The Company has entered into an interest rate swap agreement. The swap
instrument totals $500,000 and has a fixed rate yield of 6.65% through January
28, 2009. The underlying security used in the swap transaction is a trust
preferred security which yields LIBOR plus three hundred fifty basis points. As
of June 30, 2004, the transaction has resulted in an unrealized loss of
approximately $21,000.
A secondary source of liquidity is the Company's loan portfolio. At
June 30, 2004, loans of approximately $41.0 million either will become due or
will be subject to rate adjustments within twelve months from the respective
date.
As for liabilities, certificates of deposit of $100,000 or greater of
approximately $23.3 million will become due during the next twelve months.
Management anticipates that there will be no significant reductions from
withdrawable accounts such as negotiable order of withdrawal accounts, money
market demand accounts, demand deposit and regular savings accounts in the
future.
The Company has committed to opening an additional branch in the
Clarksville, Tennessee area expected to be completed in the second quarter of
2005. The total estimated cost to open the branch is $690,000.
LEGENDS FINANCIAL HOLDINGS, INC.
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
----------------------------------------------------------
Continued
---------
Liquidity and Asset Management, Continued
- -----------------------------------------
At the present time, 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 the Company's liquidity changing in any material
way other than the branch opening previously discussed.
Capital Position and Dividends
- ------------------------------
At June 30, 2004, total stockholders' equity was $14,340,000 or 8.3% of
total assets, which compares with $14,140,000 or 9.4% of total assets at
December 31, 2003. The dollar increase in stockholders' equity during the six
months ended June 30, 2004 results from the Bank's income of $696,000 and
proceeds from issuance of stock pursuant to the Company's stock option plan
totaling $205,000 which was offset by an unrealized loss on available-for-sale
securities of $421,000 and a dividend paid of $280,000.
The Bank's principal regulators have established minimum risk-based
capital requirements and leverage capital requirements for the Bank. 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 the Bank 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 guidelines require the Bank to have a total risk-based
capital ratio of 8.0% and a Tier I risk-based capital ratio of 4.0%. At June 30,
2004, the Bank's total risk-based capital ratio was 12.5% and its Tier I
risk-based capital ratio was 11.4%. At December 31, 2003, the Bank's total
risk-based capital ratio was 15.6% and its Tier I risk-based capital ratio was
12.5%. The required Tier I leverage capital ratio (Tier I capital to average
assets for the most recent quarter) for the Bank is 4%. At June 30, 2004, the
Bank had a leverage ratio of 9.1% compared to 9.9% at December 31, 2003. The
ratios are high when compared to industry averages and result from the fact that
the Bank is a newly chartered institution. The emphasis will be on asset quality
and growth in core deposits both of which should be aided by the large
stockholder base.
There is no established trading market for the Company's stock. From
time to time the Company may acquire shares of its stock to provide some
liquidity in the shares. During the quarter ended June 30, 2004, the Company did
not issue or redeem any shares of its voting common stock. No shares of the
Company's voting common stock were redeemed for the year ending December 31,
2003. During the three months ended June 30, 2004, the Company issued 8,680
shares in connection with its stock option plan. Privately negotiated trades may
not be reliable indicators of value.
On February 17, 2004, the Board of Directors recommended a dividend be
declared at the Annual Shareholders meeting on April 20, 2004. The
recommendation was to set the dividend rate for 2004 at 33% of 2003 earnings. On
May 14, 2004, the dividends were paid in the amount of $280,000 or $.20 per
share of voting common stock.
LEGENDS FINANCIAL HOLDINGS, INC.
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
----------------------------------------------------------
Continued
---------
Capital Position and Dividends, Continued
- -----------------------------------------
The Financial Accounting Standards Board has proposed a pronouncement
that requires all companies to recognize compensation expense related to the
issuance of stock options. However, implementation of this pronouncement has
been delayed through Congressional action. The ultimate outcome remains unknown
until Congress reaches a consensus on how to account for stock options. If the
Company is required to expense stock options it will have a negative impact on
earnings, the effect of which is not yet determinable.
Impact of Inflation
- -------------------
Although interest rates are significantly affected by inflation, the
inflation rate is immaterial when reviewing the Bank's results of operations.
Item 3. Controls and Procedures
-----------------------
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of the Company's
Chief Executive Officer and the Chief Financial Officer, of the design and
operation of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the
"Exchange Act")). Based on this evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
are effective for gathering, analyzing and disclosing the information that we
are required to disclose in the reports we file under the Exchange Act, within
the time periods specified in the SEC's rules and forms. Our Chief Executive
Officer and Chief Financial Officer also concluded that our disclosure controls
and procedures are effective in timely alerting them to material information
relating to our Company required to be included in our periodic SEC filings.
There have been no changes in our internal controls or in other factors
that has materially affected or is reasonably likely to materially affect
internal controls over financial reporting during the three months ended June
30, 2004.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
(a) Not Applicable.
(b) Not Applicable.
(c) Shares of the Company's common stock were issued to Employees
pursuant to the Company's Stock Option Plan as follows:
Number of Shares of
Date of Sale Common Stock Sold Price Per Share
------------ ------------------- ---------------
5/25/04 3,020 $ 8.33
6/2/04 1,952 $ 8.33
6/7/04 700 $ 8.33
6/8/04 700 $ 8.33
6/9/04 308 $ 8.33
6/10/04 2,000 $ 8.33
The aggregate proceeds of the shares sold were $72,304.
There were no underwriters and no underwriting discounts or
commissions. All sales were for cash.
The Company believes that an exemption from registration of
these shares was available to the Company in that the issuance
thereof did not constitute a public offering of securities
within the meaning of the Securities Act of 1933, as amended.
The Company relied on the exemption provided by Section 4(2)
of the Securities Act of 1933.
The common stock is not convertible or exchangeable into other
equity securities.
The proceeds of the sales are being used by the Company for
general corporate purposes.
(d) Not Applicable.
(e) No repurchase of Company securities were made during the
quarter ended June 30, 2004. The only restrictions on working
capital and/or dividends are those reported in Part I of this
Quarterly Report on Form 10-QSB.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
PART II. OTHER INFORMATION, CONTINUED
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of the Company's stockholders was held
April 20, 2004.
(b) The following members of the board of directors were each
reelected as Class II directors to serve for additional three
year terms or until their respective successors are duly
elected and qualified.
Mark Barnett
Dwight Dickson
Ronald Goad
Jimmy Terry, Sr.
The term of office for the following members of the board of
directors continued after the meeting: Billy P. Atkins,
Thomas E. Bates, Jr., Dick Littleton and Pravin C. Patel (Class
III); and James D. Amos, David Nussbaumer, Gene Washer, Doug
Weiland (Class I).
(c) (1) The following directors were elected by the following
tabulation:
Number
of Broker
Shares Non-
Voting For Against Abstain Votes
------- ------- ------ ------- ------
Mark Barnett 787,748 776,516 10,272 960 0
Dwight Dickson 787,748 772,976 14,052 720 0
Ronald Goad 787,748 765,776 13,392 8,580 0
Jimmy Terry 787,748 771,788 15,240 720 0
(2) The ratification of the appointment of Maggart &
Associates, P.C. as independent auditors for the Company for
the fiscal year 2004 was as follows:
Number
of Broker
Shares Non-
Voting For Against Abstain Votes
------- ------- ------- ------- -------
787,748 782,096 0 5,652 0
(d) None.
PART II. OTHER INFORMATION, CONTINUED
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Rule 13a-14(a) Certifications. Section 1350 Certifications.
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Bank
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LEGENDS FINANCIAL HOLDINGS, INC.
-------------------------------------------------
(Registrant)
DATE: August 11, 2004 /s/ Billy Atkins
--------------------------------- ----------------------------------
Billy Atkins, President and
Chief Executive Officer
DATE: August 11, 2004 /s/ Thomas Bates
--------------------------------- -----------------------------------
Thomas Bates, Executive Vice
President and Chief Financial
Officer
LEGENDS FINANCIAL HOLDINGS, INC.
INDEX TO EXHIBITS FOR FORM 10-QSB
FOR QUARTER ENDED JUNE 30, 2004
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
Exhibits 31.1 and 31.2 Rule 13a-14(a) Certifications.
Exhibits 32.1 and 32.2 1350 Certifications.