Safe and Sound

Legacy Bank

Hinton, OK
3
Star Rating
Legacy Bank is a Hinton, OK-based, FDIC-insured bank founded in 1902. The bank has equity of $39.1 million on $457.3 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $417.1 million on deposit at 11 offices in OK run by 178 full-time employees. With that footprint, the bank currently holds loans and leases worth $336.3 million, including real estate loans of $275.6 million.

Overall, Bankrate believes that, as of December 31, 2017, Legacy Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial strength. It works as a buffer against losses and provides protection for depositors during periods of financial instability for the bank. When looking at safety and soundness, the more capital, the better.

Legacy Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Legacy Bank's Tier 1 capital ratio was 11.19 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Legacy Bank held equity amounting to 8.55 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand 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 forced to use capital to cover losses, reducing its equity cushion. 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 increasing the risk of a failure in the future.

Legacy Bank came in below the national average of 37.49 on Bankrate's asset quality test, racking up 28 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.19 percent of Legacy Bank'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 1.01 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Legacy Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, likely making the bank better able to withstand financial shocks. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's test of earnings, Legacy Bank scored 16 out of a possible 30, better than the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for Legacy Bank was 7.72 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $3.0 million on total equity of $39.1 million. The bank had an annualized return on average assets, or ROA, of 0.69 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 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.