Pinnacle Bankshares Corporation Announces Third Quarter 2018 Earnings  

ALTAVISTA, Va., Oct. 24, 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 $636,000 or $0.42 per basic and $0.41 per diluted share for the quarter ended September 30, 2018, and $2,823,000 or $1.84 per basic share and $1.82 per diluted share for the nine months ended September 30, 2018.  Net income was $909,000 or $0.59 per basic and $0.58 per diluted share and $2,420,000 or $1.58 per basic share and $1.57 per diluted share, respectively, for the same periods of 2017.  Consolidated results for the quarter and nine month periods are unaudited.

Net income of $636,000 generated in the third quarter of 2018 was down from record quarterly net income of $1,115,000 generated in second quarter of 2018 due to a $432,000 increase in provision for loan losses primarily caused by downgrades of two commercial loan relationships to special mention or criticized status, the charge-off of one commercial loan totaling $104,000 and potential future losses associated with the Bank’s student loan portfolio.  Additionally, noninterest expense increased $213,000 in the third quarter due mainly to legal and consulting fees. 

Net income generated during the first nine months of 2018 represents a $403,000 or 17% increase as compared to the same time period of the previous year, which was primarily driven by higher net interest income and lower income taxes, which were offset by higher provision for loan losses and noninterest expense.  The net interest income improvement was due to the growth of loans and investments from September 30, 2017 to September 30, 2018, which drove an increase in yield on earning assets.  The Company has also 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% in 2018.  Increased occupancy and core processing expenses associated with growth have contributed to higher noninterest expense.  On a pre-provision, pre-tax basis, net income increased $340,000 or 9%.

Profitability as measured by the Company’s return on average assets (“ROA”) was 0.82% for the nine months ended September 30, 2018, compared to 0.73% generated during the first nine months of 2017.  Correspondingly, return on average equity (“ROE”) increased for the nine month period of 2018 to 9.45%, compared to 8.56% for the same time period of the prior year. 

“While our third quarter 2018 performance was down compared to the first two quarters of the year, we are pleased to report the highest nine 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 lower tax rate have contributed to improved financial results thus far in 2018.”

The Company produced $11,990,000 in net interest income for the first nine months of 2018, which represents a $965,000 or 9% increase as compared to the $11,025,000 generated for the same time period of 2017.  Interest income increased $1,104,000, or approximately 9%, due to higher volume of loans and investments along with increased yields, while interest expense increased $139,000, or approximately 11%, due mainly to the continued growth of deposits.  As a result of a 25 basis points increase in yield on average assets, which was partially offset by a 3 basis points increase in the cost to fund earning assets, the Company’s net interest margin increased to 3.78% for the first nine months of 2018 as compared to 3.56% for the first nine months of 2017.

The provision for loan losses was $575,000 for the first nine months of 2018 as compared to $226,000 for the first nine months of 2017.  The allowance for loan losses was $3,336,000 as of September 30, 2018, which represented 0.90% 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 0.26% as of September 30, 2018 compared to 0.20% as of year-end 2017.  Allowance coverage of non-performing loans as of the end of the quarter decreased to 340% 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.  The previously referenced downgrades of two commercial loan relationships were due to weakened financials.  Management does not anticipate any losses resulting from either relationship.  The insurer of the Bank’s student loan portfolio, which consisted of one hundred twenty loans totaling $1,177,000 as of September 30, 2018, recently announced its insolvency, contributing to the increased provision.  The Bank ceased originations of new student loans during the 3rd quarter of 2017.

Noninterest income for the first nine months of 2018 increased $51,000 or approximately 2% to $2,991,000 from $2,940,000 for the first nine months of 2017. The increase was mainly driven by higher interchange fees derived from check card usage and receipt of an enterprise zone grant associated with the Company’s new Odd Fellows Road facility, which have helped offset decreases in fees on sales of mortgage loans and investment sales commissions. 

Noninterest expense for the first nine months of 2018 increased $676,000 or approximately 7% to $10,947,000 from $10,271,000 for the first nine months of 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 September 30, 2018 were $472,435,000, up $28,510,000 or 6% from $443,925,000 as of December 31, 2017.  The principal components of the Company’s assets as of September 30, 2018 were $372,448,000 in total loans, $50,668,000 in securities and $19,949,000 in cash and cash equivalents. During the first nine months of 2018, total loans increased $14,656,000, or approximately 4%, from $357,792,000 as of December 31, 2017, while securities increased $6,451,000, or approximately 15%, from $44,217,000.  As compared to September 30, 2017, loans and investments increased 5% and 14%, respectively.

Total liabilities as of September 30, 2018 were $431,772,000, up $26,642,000 or 7% from $405,130,000 as of December 31, 2017.  The growth of liabilities was driven by a $14,724,000, or approximately 19%, increase in demand deposits and a $12,291,000, or approximately 5%, increase in savings and NOW accounts 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 September 30, 2018 was $40,662,000 and consisted primarily of $37,709,000 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. 

In other news, John Tucker has resigned from his role as a Financial Advisor for First National Securities and Infinex effective August 31, 2018.  The Company is restructuring its Investments Division and has announced the hiring of Benjamin D. Giese, CFP®, as an Infinex Financial Advisor.  Ben is from the Lynchburg area, obtained his B.S. from Liberty University, his MBA from the University of Lynchburg (formerly Lynchburg College) and has prior experience as a Financial Advisor with an independent firm based in Forest, VA.  Corey A. Snyder, has been promoted from Retail Business Development Officer to Investment Associate.  Corey is also from the Lynchburg area and obtained his B.S. from the University of Virginia.  He has prior experience in the insurance industry and recently obtained his securities licenses.  Additionally, Laura Holt remains with First National Securities and Infinex in an Investment Associate Support role. 

First National Securities will be moving from the Infinex investment platform to LPL Financial, the largest provider of third-party investment services to banks and credit unions.  LPL will bring to First National Securities and its clients state-of-the-art technology, investment research and delivery channels.  The transition from Infinex to LPL is anticipated to be completed during the fourth quarter of this year. 

Finally, the bridge over the railway next to First National’s Odd Fellows Road facility is now closed for approximately eight months as it is replaced in conjunction with phase two of the Odd Fellows Road corridor improvements.  The closure had been anticipated with the temporary inconvenience being necessary to complete all roadway enhancements to U.S. Route 29 Business (Lynchburg Expressway).  Our facility can still be accessed via Odd Fellows Road exits from U.S. Route 29 Business or U.S. Route 460 (Mayflower Drive detour).


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, 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 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
(9/30/18, 6/30/2018 and 9/30/2017 results unaudited)
(In thousands, except ratios, share and per share data)
 3 Months Ended
3 Months Ended
3 Months Ended
Income Statement Highlights09/30/2018
Interest Income$4,655$4,434$4,243
Interest Expense 490 445 417
Net Interest Income 4,165 3,989 3,826
Provision for Loan Losses  503  71  34
Noninterest Income 938 1,070 1,017
Noninterest Expense 3,833 3,620 3,504
Net Income 636 1,115 909
Earnings Per Share (Basic) 0.42 0.72 0.59
Earnings Per Share (Diluted) 0.41 0.72 0.58
 9 Months EndedYear Ended9 Months Ended
Income Statement Highlights09/30/201812/31/201709/30/2017
Interest Income$13,369$16,511$12,265
Interest Expense 1,379 1,661 1,240
Net Interest Income 11,990 14,850 11,025
Provision for Loan Losses 575 260 226
Noninterest Income 2,991 3,855 2,940
Noninterest Expense 10,947 14,128 10,271
Net Income 2,823 2,748 2,420
Earnings Per Share (Basic) 1.84 1.80 1.58
Earnings Per Share (Diluted) 1.82 1.78 1.57
Balance Sheet Highlights09/30/201812/31/201709/30/2017
Cash and Cash Equivalents$19,949$12,825$13,659
Total Loans 372,448 357,792 355,310
Total Securities 50,668 44,217 44,260
Total Assets 472,435 443,925 442,601
Total Deposits 428,624 401,685 400,192
Total Liabilities 431,772 405,130 403,851
Stockholders' Equity 40,662 38,795 38,750
Shares Outstanding 1,540,054 1,529,033 1,529,033
Ratios and Stock Price09/30/201812/31/201709/30/2017
Gross Loan-to-Deposit Ratio 86.89% 89.07% 88.78%
Net Interest Margin (Year-to-date) 3.78% 3.63% 3.56%
Liquidity 14.61% 12.92% 13.08%
Efficiency Ratio 73.14% 75.51% 73.52%
Return on Average Assets (ROA) 0.82% 0.62% 0.73%
Return on Average Equity (ROE) 9.45% 7.25% 8.56%
Leverage Ratio (Bank) 9.03% 9.06% 8.95%
Tier 1 Capital Ratio (Bank) 10.94% 10.77% 10.70%
Total Capital Ratio (Bank) 11.84% 11.59% 11.53%
Stock Price$32.50$29.50$27.55
Book Value$26.40$25.37$25.34
Asset Quality Highlights09/30/201812/31/201709/30/2017
Nonaccruing Loans$980$723$761
Loans 90 Days or More Past Due and Accruing 0 0 0
Total Nonperforming Loans 980 723 761
Troubled Debt Restructures Accruing 473 541 341
Total Impaired Loans 1,453 1,264 1,102
Other Real Estate Owned (OREO) (Foreclosed Assets) 350 224 246
Total Nonperforming Assets 1,330 946 1,007
Nonperforming Loans to Total Loans 0.26% 0.20% 0.21%
Nonperforming Assets to Total Assets 0.28% 0.21% 0.23%
Allowance for Loan Losses$3,336$2,963$2,998
Allowance for Loan Losses to Total Loans 0.90% 0.83% 0.84%
Allowance for Loan Losses to Nonperforming Loans 340.40% 409.90% 393.78%

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