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Pinnacle Bankshares Corporation Announces Third Quarter 2019 Earnings  

ALTAVISTA, Va., Oct. 17, 2019 (GLOBE NEWSWIRE) — Net income for Pinnacle Bankshares Corporation (OTCQX:PPBN), the one-bank holding company (the “Company”) for First National Bank (the “Bank”), was $1,043,000 or $0.67 per basic and diluted share for the quarter ended September 30, 2019, and $3,712,000 or $2.40 per basic and $2.38 per diluted share for the nine months ended September 30, 2019.  Net income was $636,000 or $0.42 per basic and $0.41 per diluted share and $2,823,000 or $1.84 per basic share and $1.82 per diluted share, respectively, for the same periods of 2018.  Consolidated results for the quarter and nine month periods are unaudited.

Net income generated during the first nine months of 2019 represents an $889,000 or 31% increase as compared to the same time period of the previous year, which was driven by higher net interest income and noninterest income combined with lower provision for loan losses, all offsetting higher noninterest expense. 

The net interest income improvement was due to growth of loans from September 30, 2018 to September 30, 2019 and higher yields on loans and investments.  Noninterest income increased as a result of higher fee income from sales of mortgage loans and commissions derived from sales of investments.  Lower levels of net charge-offs and continued strong asset quality resulted in a lower provision for loan losses. These improvements more than offset the increase in noninterest expense due to the growth of our Company.

Profitability as measured by the Company’s return on average assets (“ROA”) improved to 1.04% for the nine months ended September 30, 2019, as compared to 0.82% generated during the first nine months of 2018.  Correspondingly, return on average equity (“ROE”) increased for the nine month time period of 2019 to 11.15%, compared to 9.45% for the same time period of the prior year. 

“We are pleased to continue our record performance this year by reporting the highest nine month net income in Pinnacle’s history,” stated Aubrey H. Hall, III, President and Chief Executive Officer for both the Company and the Bank.  Mr. Hall further commented, “Continued growth of our interest earning assets, higher net interest margin and strong credit quality have contributed to solid financial results thus far in 2019.” 

The Company produced $13,325,000 in net interest income for the first nine months of 2019, which represents an 11% increase as compared to the $11,990,000 generated for the same time period of 2018.  Interest income increased $1,792,000, or approximately 13%, due to higher volume of loans and increased yields on loans and investments, while interest expense increased $457,000, or approximately 33%, due to the continued growth of deposits and higher cost of funds.  As a result of a 40 basis points increase in yield on average earning assets, which was partially offset by a 13 basis points increase in the cost to fund earning assets, the Company’s net interest margin increased to 4.05% for the first nine months of 2019 as compared to 3.78% for the first nine months of 2018.

The provision for loan losses was $151,000 for the first nine months of 2019 as compared to $575,000 for the first nine months of 2018.  The allowance for loan losses was $3,489,000 as of September 30, 2019, which represented 0.89% of total loans outstanding.  In comparison, the allowance for loan losses was $3,372,000 or 0.90% of total loans outstanding as of December 31, 2018.  Non-performing loans to total loans increased slightly to 0.28% as of September 30, 2019 compared to 0.24% as of year-end 2018, and was also up slightly from 0.26% as of September 30, 2018. Allowance coverage of non-performing loans as of September 30, 2019 decreased to 316% from 367% as of year-end 2018.  Management continues to view the allowance balance as being sufficient to offset potential future losses associated with problem loans. 

Noninterest income for the first nine months of 2019 increased $417,000 or approximately 14% to $3,408,000 from $2,991,000 for the first nine months of 2018. This increase was mainly driven by an increase in fees on sales of mortgage loans and commissions on sales of investments as the Bank’s Mortgage Division and First National Advisors continue to grow business after being restructured during 2018.

Noninterest expense for the first nine months of 2019 increased $1,048,000 or approximately 10% to $11,995,000 from $10,947,000 for the first nine months of 2018.  The increase is primarily attributed to increases in salaries and employee benefits and expenses associated with the overall growth of the Company to include the establishment of the new Downtown Lynchburg Branch. 

Total assets as of September 30, 2019 were $481,627,000, up $11,016,000 or 2% from $470,611,000 as of December 31, 2018.  The principal components of the Company’s assets as of September 30, 2019 were $391,603,000 in total loans, $46,456,000 in securities and $14,772,000 in cash and cash equivalents. During the first nine months of 2019, total loans increased $15,537,000, or 4%, from $376,066,000 as of December 31, 2018, while securities decreased $3,370,000, or approximately 7%, from $49,826,000.  As compared to September 30, 2018, loans increased 5% and investments decreased 8%.

Total liabilities as of September 30, 2019 were $435,326,000, up $6,826,000 or 2% from $428,500,000 as of December 31, 2018.  The growth of liabilities was driven by an $18,487,000, or approximately 22%, increase in demand deposits since year-end partially offset by decreases in savings and time deposits.  The Company continues to focus on the expansion of core deposit relationships, which has helped the Company maintain a low cost of funds, decrease its dependency on time deposits and provide relationship expansion opportunities. 

Total stockholders’ equity as of September 30, 2019 was $46,301,000 and consisted primarily of $41,938,000 in retained earnings.  In comparison, as of December 31, 2018, total stockholders’ equity was $42,111,000.  The Company has continued to increase capital and improve its capital ratios while also paying a cash dividend to shareholders in each of the last twenty-seven quarters.  Both the Company and Bank remain “well capitalized” per all regulatory definitions.

In other news, Pinnacle previously announced on September 24, 2019 that First National Bank has successfully recruited Michael D. Lyster as Senior Vice President and Market Leader for Charlottesville, VA.  The successful recruitment of Mr. Lyster is the first step in the Bank establishing a presence in the Charlottesville market.  The Bank plans to open a Loan Production Office in the near future and move towards establishment of a full service presence over the next few years. First National’s move into Charlottesville is part of the Bank’s Strategic Plan and the next step in its growth plans to expand over a larger geographical area.

Pinnacle Bankshares Corporation is a locally managed community banking organization based in Central Virginia.  The one-bank holding company of First National Bank serves an area consisting primarily of all or portions of the Counties of Campbell, Pittsylvania, Bedford, Amherst and the City of Lynchburg.  The Company has a total of ten branches with two located in the Town of Altavista, where the Bank was founded.  Other branch locations include Village Highway in Rustburg, Wards Road near the Lynchburg Regional Airport, Timberlake Road in Campbell County, South Main Street in the Town of Amherst, Old Forest Road, Odd Fellows Road and the Downtown Main Street Branch in the City of Lynchburg and Forest Road in Bedford County.  First National Bank is in its 111th year of operation.

Various securities laws regulate the use of financial measures that are not prepared in accordance with GAAP. We believe these non-GAAP measures provide important supplemental information to investors. We use these measures, together with GAAP measures, for internal managerial purposes and as a means to evaluate period-to-period comparisons. However, we do not, and you should not, rely on non-GAAP financial measures alone as measures of our performance. We believe that non-GAAP financial measures reflect an additional way of viewing aspects of our operations that – when taken together with GAAP results as presented in this press release- provide a more complete understanding of factors and trends affecting our business. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures, even if they have similar names.

These forward-looking statements may include, but are not limited to, statements regarding the credit quality of our asset portfolio in future periods, the expected losses of nonperforming loans in future periods, returns and capital accretion during future periods, the lowering or increasing of our cost of funds, the maintenance of our net interest margin, the continuation of improved returns, and future operating results and business performance. Although we believe our plans, intentions and expectations reflected in these forward‑looking statements are reasonable, we can give no assurance that these plans, intentions, or expectations will be achieved. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain, and actual results, performance or achievements could differ materially from those contemplated in any forward-looking statements. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in: the effectiveness of management’s efforts to maintain asset quality and control operating expenses; the quality, composition and growth of the loan and investment portfolios; interest rates; decrease in net interest margin; real estate values in our market area; general economic and financial market conditions;  levels of unemployment in our market area; the legislative/regulatory climate, including regulatory initiatives with respect to financial institutions, products and services in accordance with the Dodd Frank Wall Street Reform Act (the “Dodd Frank Act”) and otherwise; the Consumer Financial Protection Bureau and its regulatory and enforcement activities; and the application of the Basel III capital standards to the Company and the Bank; monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System; the impact of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”); demand for loan products; deposit flows; competition and demand for financial services in our market area; regulatory compliance costs; accounting principles, policies and guidelines; technological risks and developments and cyber threats, attacks or events; and an increase in shareholders that would require the Company to be subject to the reporting obligations of the Securities Exchange Act of 1934, as amended. These risks and uncertainties should be considered in evaluating forward‑looking statements contained herein.  We base our forward-looking statements on management’s beliefs and assumptions based on information available as of the date of this report. You should not place undue reliance on such statements, because the assumptions, beliefs, expectations and projections about future events on which they are based may, and often do, differ materially from actual events and, in many cases, are outside of our control.  We undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

Selected financial highlights are shown below.

 
Pinnacle Bankshares Corporation
Selected Financial Highlights
(9/30/19, 6/30/2019 and 9/30/2018 results unaudited)
(In thousands, except ratios, share and per share data)
       
  3 Months Ended   3 Months Ended   3 Months Ended  
Income Statement Highlights 09/30/2019   06/30/2019   09/30/2018  
Interest Income $  5,085   $  5,133   $4,655  
Interest Expense 717   568   490  
Net Interest Income 4,368   4,565   4,165  
Provision for Loan Losses 150   7   503  
Noninterest Income 1,140   1,223   938  
Noninterest Expense 4,075   4,087   3,833  
Net Income 1,043   1,368   636  
Earnings Per Share (Basic) 0.67   0.89   0.42  
Earnings Per Share (Diluted) 0.67   0.87   0.41  
       
  9 Months Ended   Year Ended   9 Months Ended  
Income Statement Highlights 09/30/2019   12/31/2018   09/30/2018  
Interest Income $15,161   $18,270   $13,369  
Interest Expense 1,836   1,888   1,379  
Net Interest Income 13,325   16,382   11,990  
Provision for Loan Losses 151   607   575  
Noninterest Income 3,408   4,202   2,991  
Noninterest Expense 11,995   14,928   10,947  
Net Income 3,712   4,160   2,823  
Earnings Per Share (Basic) 2.40   2.71   1.84  
Earnings Per Share (Diluted) 2.38   2.68   1.82  
       
Balance Sheet Highlights 09/30/2019   12/31/2018   09/30/2018  
Cash and Cash Equivalents $14,772   $15,717   $19,949  
Total Loans 391,603   376,066   372,673  
Total Securities 46,456   49,826   50,668  
Total Assets 481,627   470,611   472,435  
Total Deposits 431,340   425,278   428,624  
Total Liabilities 435,326   428,500   431,772  
Stockholders’ Equity 46,301   42,111   40,662  
Shares Outstanding 1,551,349   1,540,054   1,540,054  
             
Ratios and Stock Price 09/30/2019   12/31/2018   09/30/2018  
Gross Loan-to-Deposit Ratio 90.74 % 88.38 % 86.89 %
Net Interest Margin (Year-to-date) 4.05 % 3.83 % 3.78 %
Liquidity 12.59 % 13.63 % 14.61 %
Efficiency Ratio 71.65 % 72.56 % 73.14 %
Return on Average Assets (ROA) 1.04 % 0.90 % 0.82 %
Return on Average Equity (ROE) 11.15 % 10.33 % 9.45 %
Leverage Ratio (Bank) 9.61 % 9.15 % 9.03 %
Tier 1 Capital Ratio (Bank) 11.58 % 11.14 % 10.94 %
Total Capital Ratio (Bank) 12.48 % 12.04 % 11.84 %
Stock Price $31.49   $27.45   $32.50  
Book Value $29.85   $27.34   $26.40  
             
Asset Quality Highlights 09/30/2019   12/31/2018   09/30/2018  
Nonaccruing Loans $1,052   $839   $980  
Loans 90 Days or More Past Due and Accruing 54   80   0  
Total Nonperforming Loans 1,106   919   980  
Troubled Debt Restructures Accruing 261   267   473  
Total Impaired Loans 1,367   1,186   1,453  
Other Real Estate Owned (OREO) (Foreclosed Assets) 645   627   350  
Total Nonperforming Assets 1,751   1,546   1,330  
Nonperforming Loans to Total Loans 0.28 % 0.24 % 0.26 %
Nonperforming Assets to Total Assets 0.36 % 0.33 % 0.28 %
Allowance for Loan Losses $3,489   $3,372   $3,336  
Allowance for Loan Losses to Total Loans 0.89 % 0.90 % 0.90 %
Allowance for Loan Losses to Nonperforming Loans 315.64 % 366.87 % 340.40 %
       

CONTACT:  Pinnacle Bankshares Corporation, Bryan M. Lemley, 434-477-5882 or [email protected]