Safe and Sound

Pinnacle Bank

Lincoln, NE
5
Star Rating
Lincoln, NE-based Pinnacle Bank is an FDIC-insured bank started in 1880. Regulatory filings show the bank having equity of $467.6 million on assets of $4.59 billion, as of December 31, 2017.

Thanks to the efforts of 790 full-time employees in 76 offices in multiple states, the bank currently holds loans and leases worth $3.57 billion, including $2.63 billion worth of real estate loans. The bank currently holds $3.94 billion in deposits from U.S. customers.

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 a look at how the bank fared on the three important 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 stability, capital is crucial. It works as a buffer against losses and affords protection for depositors during periods of financial instability for the bank. When looking at safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Pinnacle Bank received a score of 10 out of a possible 30 points, failing to reach the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Pinnacle Bank's Tier 1 capital ratio was 11.06 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Pinnacle Bank held equity amounting to 10.18 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 troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

Having a large number of these kinds of assets may eventually force a bank to use capital to absorb losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and elevating the chances of a failure in the future.

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

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.27 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 1.01 percent.

Banks keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. 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 affects its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or use them to deal with problematic loans, likely making the bank better able to withstand economic trouble. However, 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, better than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Pinnacle Bank was 17.64 percent, above the national average of 8.10 percent.

The bank earned net income of $80.5 million on total equity of $467.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.79 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.