Safe and Sound

Legacy National Bank

Springdale, AR
5
Star Rating
Legacy National Bank is a Springdale, AR-based, FDIC-insured bank founded in 2005. As of June 30, 2017, the bank held equity of $46.8 million on assets of $441.5 million.

U.S. bank customers have $370.4 million on deposit at 5 offices in AR run by 82 full-time employees. With that footprint, the bank has amassed loans and leases worth $344.5 million, including $310.8 million worth of real estate loans.

Overall, Bankrate believes that, as of June 30, 2017, Legacy National Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank faired on the three major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and as protection for depositors during times of economic trouble for the bank. Therefore, a bank's level of capital is an essential measurement of a bank's financial resilience. From a safety and soundness perspective, the more capital, the better.
Legacy National Bank finished below the national average of 13.38 on our test to measure the adequacy of a bank's capital, racking up 12 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Legacy National Bank's Tier 1 capital ratio was 13.42 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Legacy National Bank held equity amounting to 10.59 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization could be affected by troubled assets, such as unpaid mortgages.

A bank with a large number of these kinds of assets could eventually be required to use capital to absorb losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, diminishing earnings and elevating the chances of a future failure.

Legacy National Bank beat out the national average of 37.62 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of June 30, 2017, 0.84 percent of Legacy National Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Legacy National Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, likely making the bank better able to withstand financial shocks. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Legacy National Bank scored 18 out of a possible 30, beating the national average of 16.52.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Legacy National Bank was 8.25 percent, below the national average of 9.28 percent.

The bank earned net income of $1.9 million on total equity of $46.8 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.91 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 percent.








WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.