Safe and Sound

Legend Bank, N.A.

Bowie, TX
5
Star Rating
Bowie, TX-based Legend Bank, N.A. is an FDIC-insured bank founded in 1890. Regulatory filings show the bank having equity of $73.4 million on assets of $627.4 million, as of June 30, 2017.

U.S. bank customers have $547.1 million on deposit at 10 offices in TX run by 142 full-time employees. With that footprint, the bank currently holds loans and leases worth $401.4 million, including real estate loans of $251.3 million.

Overall, Bankrate believes that, as of June 30, 2017, Legend Bank, N.A. exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of an institution's financial strength. It acts as a bulwark against losses and affords protection for depositors when a bank is struggling financially. When looking at safety and soundness, the higher the capital, the better.
Legend Bank, N.A. received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, falling short of the national average of 13.38.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Legend Bank, N.A.'s Tier 1 capital ratio was 13.82 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. A higher capital ratio means the bank will be better able to weather financial downturns.

Overall, Legend Bank, N.A. held equity amounting to 11.70 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 capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

A bank with large numbers of these types of assets may eventually be required to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and elevating the risk of a failure in the future.

On Bankrate's test of asset quality, Legend Bank, N.A. scored 40 out of a possible 40 points, beating out the national average of 37.62 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, 0.50 percent of Legend Bank, N.A.'s loans were noncurrent, meaning 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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the the size of that reserve to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Legend Bank, N.A.'s loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand economic shocks. Banks that are losing money, however, are less able to do those things.

Legend Bank, N.A. received above-average marks on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Legend Bank, N.A.'s most recent annualized quarterly return on equity was 12.63 percent, above the national average of 9.28 percent.

The bank reported net income of $4.5 million on total equity of $73.4 million for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 1.46 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.