KBRA Affirms Ratings for Pinnacle Bancorp, Inc.

KBRA affirms the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, and the short-term debt rating of K2 for Omaha, Nebraska-based Pinnacle Bancorp, Inc. (“Pinnacle” or “the company”). In addition, KBRA affirms the deposit and senior unsecured debt ratings of A-, the subordinated debt rating of BBB+, and the short-term deposit and debt ratings of K2 for Pinnacle’s largest subsidiary bank, Pinnacle Bank (NE). KBRA also affirms the deposit and senior unsecured debt ratings of A- and the short-term deposit and debt ratings of K2 for Pinnacle’s other subsidiary banks, Bank of Colorado, Pinnacle Bank (TX), and Pinnacle Bank - Wyoming. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

Pinnacle’s ratings are supported by a favorable, long-term performance track record that has benefited most from very low credit costs over time, as well as a robust core deposit base. Positively, Pinnacle’s recent returns – including a ~1.3% core ROA generated in each of the past two quarters – have tracked towards the company’s historic levels, following some material, but largely ‘industry consistent’, NIM-driven decline that was most pronounced during 2023/2024 (to the 0.7%-0.8% ROA range). The decline in Pinnacle’s NIM from ~3% in 2022 to ~2.3% in 2024 was principally driven both by deposit cost increases, as well as an earning asset mix that included >$6 billion of low yielding securities. For 1Q26, Pinnacle’s NIM was back up to ~3.4%. The company’s average cost of total deposits was also back down to ~1.7%, having previously peaked at ~2.3% during mid-2024.

Positively, throughout this earnings variability, Pinnacle’s creditor profile has continued to benefit from a strong core capital base, including a recent CET1 measure >13%. Admittedly, while Pinnacle’s TCE ratio was impacted during 2022 by negative AOCI impacts on the securities portfolio (Note: all bonds classified as ‘available-for-sale’), CET1 ratio remained solid, tracking above the mid-12% range.

Over a longer horizon, we consider it noteworthy that Pinnacle’s annual returns during the GFC never fell below 1% ROA; unsurprisingly benefiting from superior credit quality that saw a “peak” annual NCO ratio of 0.46% for 2010. Since then, asset quality metrics have been pristine, with NCO ratios <10 bps since 2013, including through the pandemic, as well as more recently, despite some periods of mixed economic conditions.

Rating Sensitivities

Further development of existing or diversification into other fee revenue sources would be viewed favorably. Continued conservative financial management would remain important as well. An unexpected deterioration in asset quality, a distinct reversal in favorable core earnings trends, or material change in capital management could affect ratings.

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