Safe and Sound

Legacy Bank

Altoona, IA
3
Star Rating
Legacy Bank is an Altoona, IA-based, FDIC-insured bank that opened its doors in 1904. As of December 31, 2017, the bank held equity of $7.8 million on assets of $103.0 million.

With 35 full-time employees in 4 offices in IA, the bank holds loans and leases worth $76.9 million, including real estate loans of $54.2 million. U.S. bank customers currently have $95.0 million in deposits with the bank.

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. Here's an analysis of how the bank did on the three major criteria Bankrate used to evaluate U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for depositors when a bank is struggling financially. Therefore, a bank's level of capital is a key measurement of an institution's financial fortitude. When looking at safety and soundness, more capital is better.

On our test to measure the adequacy of a bank's capital, Legacy Bank received a score of 6 out of a possible 30 points, failing to reach the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Legacy Bank's Tier 1 capital ratio was 10.12 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial headwinds.

Overall, Legacy Bank held equity amounting to 7.58 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 past-due loans.

A bank with extensive holdings of these types of assets may eventually be forced to use capital to cover losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

Legacy Bank fell short of the national average of 37.49 on Bankrate's test of asset quality, racking up 28 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 December 31, 2017, 0.69 percent of Legacy 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 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Legacy Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is 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 economic shocks. Losses, on the other hand, diminish a bank's ability to do those things.

Legacy Bank outperformed the average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one key measure of a bank's earnings. Legacy Bank's most recent annualized quarterly return on equity was 9.54 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $715,000 on total equity of $7.8 million. The bank had an annualized return on average assets, or ROA, of 0.70 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.