Safe and Sound

Pinnacle Bank

Lincoln, NE
5
Star Rating
Pinnacle Bank is a Lincoln, NE-based, FDIC-insured bank that opened its doors in 1880. The bank has equity of $454.3 million on assets of $4.47 billion, according to June 30, 2017, regulatory filings.

Thanks to the work of 749 full-time employees in 73 offices in multiple states, the bank has amassed loans and leases worth $3.39 billion, $2.54 billion of which are for real estate. U.S. bank customers currently have $3.78 billion in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Pinnacle Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank faired 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

When it comes to measuring an an institution's financial strength, capital is important. It acts as a cushion against losses and provides protection for depositors during times of financial instability for the bank. When looking at safety and soundness, the more capital, the better.
Pinnacle Bank fell below the national average of 13.38 on our test to measure capital adequacy, receiving a score of 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Pinnacle Bank's Tier 1 capital ratio was 10.97 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Pinnacle Bank held equity amounting to 10.15 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these kinds of assets could eventually be forced to use capital to cover losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, reducing earnings and elevating the chances of a failure in the future.

Pinnacle Bank beat out the national average of 37.62 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of June 30, 2017, 0.61 percent of Pinnacle 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 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the how large that reserve is 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 Pinnacle Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or use them to address problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money have less ability to do those things.

Pinnacle Bank scored 26 out of a possible 30 on Bankrate's earnings test, above the national average of 16.52.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Pinnacle Bank's most recent annualized quarterly return on equity was 16.89 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $37.9 million on total equity of $454.3 million. The bank had an annualized return on average assets, or ROA, of 1.71 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.