Texas Bank in Pact with Regulators

LegacyTexas Group Inc. in Plano must get more aggressive in dealing with its loan trouble in order to satisfy regulators.

The $1.8 billion-asset company must devise a plan for handling overdue loans exceeding $1 million and charge off any loan unlikely to be collected, under a written agreement with the Federal Reserve Bank of Dallas and the Texas Department of Banking. The agreement is dated Aug. 18, but the Fed disclosed it Thursday.

Second-quarter earnings at LegacyTexas' bank unit plunged 94% from the year earlier, to $302,000, as the provision for loan losses grew sixfold, to $5.9 million, according to data from the Federal Deposit Insurance Corp. Its noncurrent assets plus other real estate owned rose to 4.39% of total assets, from 0.59% the year earlier.

The regulatory agreement requires LegacyTexas to demonstrate how it plans to improve earnings, reduce credit concentrations, strengthen board oversight and maintain sufficient capital.

The company also must improve its lending practices, conduct more frequent loan reviews, create a policy for the appropriate use of interest reserves and revise its methodology for calculating loan-loss allowances, among other things.

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