Pinnacle Bankshares Corporation Announces Record Core Net Income for the First Half of 2018

ALTAVISTA, Va., July 19, 2018 (GLOBE NEWSWIRE) -- Net income for Pinnacle Bankshares Corporation (OTCQX:PPBN), the one-bank holding company (the “Company”) for First National Bank (the “Bank”), was $1,115,000 or $0.72 per basic and diluted share for the quarter ended June 30, 2018, and $2,187,000 or $1.42 per basic share and $1.41 per diluted share for the six months ended June 30, 2017.  Net income was $694,000 or $0.45 per basic and diluted share and $1,511,000 or $0.99 per basic share and $0.98 per diluted share, respectively, for the same periods of 2017.  Consolidated results for the quarter and six month periods are unaudited.

Net income generated during the first six months of 2018 represents a $676,000 or 45% increase as compared to the same time period of the previous year, which was driven by higher net interest income and noninterest income, lower provision for loan losses and lower income taxes.  The net interest income improvement was due to the growth of loans and investments from June 30, 2017 to June 30, 2018, which drove an increase in yield on earning assets.  Further improvements in asset quality over the past year led to a lower provision for loan losses as the Bank experienced a decline in nonperforming loans and nonperforming assets since June 30, 2017. Additionally, the Company benefitted from a lower corporate income tax rate as a result of the Tax Cuts and Jobs Act with its effective tax rate decreasing from 34% to 21%.  Net income improvement on a pre-tax basis was $529,000 or 24%.

Profitability as measured by the Company’s return on average assets (“ROA”) was 0.96% for the six months ended June 30, 2018, compared to 0.68% generated during the first six months of 2017.  Correspondingly, return on average equity (“ROE”) increased for the six month period of 2018 to 11.06%, compared to 8.10% for the same time period of the prior year. 

“We are pleased to report the highest six month core 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, “Our expanding net interest margin and strong credit quality have contributed to solid financial results thus far in 2018.”

The Company produced $7,825,000 in net interest income for the first half of 2018, which represents a 9% increase as compared to the $7,199,000 generated for the same time period of 2017.  Interest income increased $692,000, or approximately 9%, due to higher volume of loans and investments and increased yields, while interest expense increased only $66,000, or approximately 8%, due mainly to the continued growth of deposits.  As a result of a 24 basis points increase in yield on average assets, which was partially offset by a 2 basis points increase in the cost to fund earning assets, the Company’s net interest margin increased to 3.75% for the first half of 2018 as compared to 3.53% for the first half of 2017.

The provision for loan losses was $72,000 for the first half of 2018 as compared to $193,000 for the first half of 2017.  The allowance for loan losses was $2,984,000 as of June 30, 2018, which represented 0.83% of total loans outstanding.  In comparison, the allowance for loan losses was $2,963,000 or 0.83% of total loans outstanding as of December 31, 2017.  Non-performing loans to total loans increased slightly to 0.28% as of June 30, 2018 compared to 0.20% as of year-end 2017, but was down from 0.98% as of June 30, 2017 as referenced earlier. Allowance coverage of non-performing loans as of the end of the quarter decreased to 295% from 410% as of year-end 2017.  Management continues to view the allowance balance as being sufficient to offset potential future losses associated with problem loans. 

Noninterest income for the first half of 2018 increased $130,000 or approximately 7% to $2,053,000 from $1,923,000 for the first half of 2017. This increase was mainly driven by an increase in deposit service charges, loan fees and income derived from the Bank’s investment in Banker Insurance LLC.

Noninterest expense for the first half of 2018 increased $347,000 or approximately 5% to $7,114,000 from $6,767,000 for the first half 2017.  The increase is primarily attributed to increases in occupancy expense due to the new Odd Fellows Road facility and core processing expenses due to higher transaction volume. 

Total assets as of June 30, 2018 were $461,058,000, up $17,134,000 or 4% from $443,925,000 as of December 31, 2017.  The principal components of the Company’s assets as of June 30, 2018 were $360,276,000 in total loans, $45,238,000 in securities and $25,865,000 in cash and cash equivalents. During the first half of 2018, total loans increased $2,484,000, or less than 1%, from $357,792,000 as of December 31, 2017, while securities increased $1,021,000, or approximately 2%, from $44,217,000.  As compared to June 30, 2017, loans and investments increased 3% and 12%, respectively.

Total liabilities as of June 30, 2018 were $420,713,000, up $15,583,000 or 4% from $405,130,000 as of December 31, 2017.  The growth of liabilities was driven by a $14,012,000, or approximately 18%, increase in demand deposits since year-end.  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 June 30, 2018 was $40,346,000 and consisted primarily of $37,242,000 in retained earnings.  In comparison, as of December 31, 2017, total stockholders’ equity was $38,795,000.  The Company has continued to increase capital while also paying a cash dividend to shareholders in each of the last twenty-three quarters.  Both the Company and Bank remain “well capitalized” per all regulatory definitions. 

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 nine 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 and Odd Fellows Road in the City of Lynchburg and Forest Road in Bedford County.  First National Bank is in its 110th 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.

This press release may contain “forward-looking statements” within the meaning of federal securities laws that involve significant risks and uncertainties. Any statements contained herein that are not historical facts are forward-looking and are based on current assumptions and analysis by the Company.  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 of our cost of funds, the maintenance of our net interest margin, the continuation of improved returns, the cost savings related to the deregistration of our common stock, and future operating results and business performance.  Although we believe our plans and expectations reflected in these forward-looking statements are reasonable, our ability to predict results or the actual effect of future plans or strategies is inherently uncertain, and we can give no assurance that these plans or expectations will be achieved.   Factors that could cause actual results to differ materially from management's expectations include, but are not limited to, the effectiveness of management’s efforts to improve asset quality, returns, net interest margin and collections and control operating expenses, management’s efforts to minimize losses related to nonperforming loans, management’s efforts to lower our cost of funds, changes in: interest rates, general economic and business conditions, declining collateral values, especially real estate, the real estate market, the legislative/regulatory climate, including the effect that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and regulations adopted thereunder may have on us, 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 and any policies or programs implemented pursuant to the Emergency Economic Stabilization Act of 2008, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows and funding costs, competition, demand for financial services in our market area, actual savings related to the deregistration of our common stock and accounting principles, policies and guidelines.  These risks and uncertainties should be considered in evaluating the forward-looking statements contained herein, and you should not place undue reliance on such statements, which reflect our views as of the date of this release.

Selected financial highlights are shown below.

Pinnacle Bankshares Corporation
Selected Financial Highlights
(6/30/18, 3/31/2018 and 6/30/2017 results unaudited)
(In thousands, except ratios, share and per share data)
 3 Months Ended
 3 Months Ended
 3 Months Ended
Income Statement Highlights06/30/2018
Interest Income$4,434 $4,280 $4,077 
Interest Expense 445  444  416 
Net Interest Income 3,989  3,836  3,661 
Provision for Loan Losses 71  1  88 
Noninterest Income 1,070  983  938 
Noninterest Expense 3,620  3,494  3,526 
Net Income 1,115  1,072  694 
Earnings Per Share (Basic) 0.72  0.70  0.45 
Earnings Per Share (Diluted) 0.72  0.69  0.45 
 6 Months Ended
 Year Ended
 6 Months Ended
Income Statement Highlights06/30/2018
Interest Income$8,714 $16,511 $8,022 
Interest Expense 889  1,661  823 
Net Interest Income 7,825  14,850  7,199 
Provision for Loan Losses 72  260  193 
Noninterest Income 2,053  3,855  1,923 
Noninterest Expense 7,114  14,128  6,767 
Net Income 2,187  2,748  1,511 
Earnings Per Share (Basic) 1.42  1.80  0.99 
Earnings Per Share (Diluted) 1.41  1.78  0.98 
Balance Sheet Highlights06/30/2018
Cash and Cash Equivalents$25,865 $12,825 $30,911 
Total Loans 360,276  357,792  350,580 
Total Securities 45,238  44,217  40,385 
Total Assets 461,058  443,925  450,279 
Total Deposits 417,684  401,685  408,598 
Total Liabilities 420,713  405,130  412,236 
Stockholders' Equity 40,346  38,795  38,043 
Shares Outstanding 1,538,688  1,529,033  1,529,031 
Ratios and Stock Price 06/30/2018  12/31/2017  06/30/2017 
Gross Loan-to-Deposit Ratio 86.26% 89.07% 85.80%
Net Interest Margin (Year-to-date) 3.75% 3.63% 3.53%
Liquidity 15.42% 12.92% 16.41%
Efficiency Ratio 72.07% 75.51% 74.13%
Return on Average Assets (ROA) 0.96% 0.62% 0.68%
Return on Average Equity (ROE) 11.06% 7.25% 8.10%
Leverage Ratio (Bank) 9.13% 9.06% 8.67%
Tier 1 Capital Ratio (Bank) 11.15% 10.77% 10.69%
Total Capital Ratio (Bank) 11.97% 11.59% 11.54%
Stock Price$29.60 $29.50 $27.95 
Book Value$26.22 $25.37 $24.88 
Asset Quality Highlights 06/30/2018  12/31/2017  06/30/2017 
Nonaccruing Loans$1,013 $723 $3,451 
Loans 90 Days or More Past Due and Accruing 0  0  0 
Total Nonperforming Loans 1,013  723  3,451 
Troubled Debt Restructures Accruing 474  541  343 
Total Impaired Loans 1,487  1,264  3,794 
Other Real Estate Owned (OREO) (Foreclosed Assets) 98  224  246 
Total Nonperforming Assets 1,111  946  3,697 
Nonperforming Loans to Total Loans 0.28% 0.20% 0.98%
Nonperforming Assets to Total Assets 0.24% 0.21% 0.82%
Allowance for Loan Losses$2,984 $2,963 $3,001 
Allowance for Loan Losses to Total Loans 0.83% 0.83% 0.86%
Allowance for Loan Losses to Nonperforming Loans 294.53% 409.90% 86.97%

CONTACT:  Pinnacle Bankshares Corporation, Bryan M. Lemley, 434-477-5882 or