Safe and Sound

Legacy National Bank

Springdale, AR
4
Star Rating
Springdale, AR-based Legacy National Bank is an FDIC-insured bank started in 2005. Regulatory filings show the bank having equity of $48.3 million on assets of $458.1 million, as of December 31, 2017.

With 85 full-time employees in 5 offices in AR, the bank has amassed loans and leases worth $392.7 million, including real estate loans of $351.7 million. U.S. bank customers currently have $367.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Legacy National Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of a bank's financial strength. It works as a cushion against losses and provides protection for accountholders when a bank is experiencing financial instability. From a safety and soundness perspective, more capital is preferred.

Legacy National Bank received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

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 12.58 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, Legacy National Bank held equity amounting to 10.54 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these kinds of assets could eventually require a bank to use capital to cover losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

Legacy National Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating out the national average of 37.49.

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, 0.57 percent of Legacy National 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic 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 ability to earn money affects its long-term survivability. Earnings can be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

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

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for Legacy National Bank was 7.45 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $3.5 million on total equity of $48.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.81 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.