Safe and Sound

Pinnacle Bank, Inc.

Vanceburg, KY
4
Star Rating
Vanceburg, KY-based Pinnacle Bank, Inc. is an FDIC-insured bank founded in 1976. Regulatory filings show the bank having equity of $7.7 million on assets of $51.6 million, as of December 31, 2017.

U.S. bank customers have $39.0 million on deposit at 3 offices in KY run by 21 full-time employees. With that footprint, the bank holds loans and leases worth $40.1 million, including real estate loans of $34.3 million.

Overall, Bankrate believes that, as of December 31, 2017, Pinnacle Bank, Inc. exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to evaluate American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for account holders when a bank is struggling financially. It follows then that a bank's level of capital is an essential measurement of an institution's financial resilience. From a safety and soundness perspective, the more capital, the better.

Pinnacle Bank, Inc. scored above the national average of 13.13 points on our test to measure capital adequacy, scoring 16 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Pinnacle Bank, Inc.'s Tier 1 capital ratio was 16.88 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, Pinnacle Bank, Inc. held equity amounting to 14.88 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

Having lots of these kinds of assets means a bank could eventually have to use capital to cover losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

Pinnacle Bank, Inc. scored 40 out of a possible 40 points on Bankrate's test of asset quality, above the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.49 percent of Pinnacle Bank, Inc.'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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Pinnacle Bank, Inc.'s loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. Earnings can be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

Pinnacle Bank, Inc. scored 10 out of a possible 30 on Bankrate's earnings test, below the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. Pinnacle Bank, Inc.'s most recent annualized quarterly return on equity was 4.83 percent, below the national average of 8.10 percent.

The bank earned net income of $368,000 on total equity of $7.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.73 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.