Safe and Sound

Pinnacle Bank

Marshalltown, IA
5
Star Rating
Pinnacle Bank is an FDIC-insured bank founded in 1927 and currently headquartered in Marshalltown, IA. As of December 31, 2017, the bank had equity of $28.1 million on assets of $191.7 million.

With 25 full-time employees, the bank has amassed loans and leases worth $94.4 million, including real estate loans of $56.9 million. U.S. bank customers currently have $155.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Pinnacle Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three important criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of an institution's financial resilience. It works as a buffer against losses and provides protection for accountholders when a bank is experiencing financial instability. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Pinnacle Bank racked up 16 out of a possible 30 points, exceeding the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. Pinnacle Bank's Tier 1 capital ratio was 23.58 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, Pinnacle Bank held equity amounting to 14.64 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these kinds of assets could eventually have to use capital to absorb losses, reducing its buffer of equity. 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 lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Pinnacle Bank scored 40 out of a possible 40 points, better than the national average of 37.49 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, 0.67 percent of Pinnacle 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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problematic 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's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital cushion, or use them to deal with problematic loans, potentially making the bank better prepared to withstand economic trouble. However, banks that are losing money are less able to do those things.

Pinnacle Bank scored 20 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. Pinnacle Bank's most recent annualized quarterly return on equity was 11.00 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.9 million on total equity of $28.1 million. The bank had an annualized return on average assets, or ROA, of 1.51 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.