Pinnacle Bankshares Corporation Announces Record High First Quarter 2023 Earnings

Altavista, Virginia, UNITED STATES

ALTAVISTA, Va., April 27, 2023 (GLOBE NEWSWIRE) -- Net income for Pinnacle Bankshares Corporation (OTCQX:PPBN), the one-bank holding company (“Pinnacle” or the “Company”) for First National Bank (the “Bank”), was $2,639,000 or $1.21 per basic and diluted share for the quarter ended March 31, 2023 compared to net income of $1,391,000 or $0.64 per basic and diluted share for the same period of 2022. Quarterly consolidated results are unaudited.

The record high net income generated during the first quarter of 2023 represents a $1,248,000, or 90%, improvement as compared to the same time period of the prior year, which was driven by higher net interest income resulting from increased volume of loans and securities along with higher yields.

Profitability as measured by the Company’s return on average assets (“ROA”) was 1.09% for the first quarter of 2023, which is a 54 basis points increase from the 0.55% produced in the first quarter of 2022. Correspondingly, return on average equity (“ROE”) also increased in the first quarter of 2023 to 18.38%, compared to 9.04% for the same time period of the prior year. Improved profitability has positively impacted the Company’s efficiency ratio, which decreased to 67.21% for the first quarter of 2023 compared to 77.94% for the same time period of the prior year.

“We are extremely pleased with our record high first quarter earnings,” stated Aubrey H. Hall, III, President and Chief Executive Officer for both the Company and the Bank. Mr. Hall further commented, “Pinnacle’s profitability is moving in the right direction as we benefit from our expanded scale and capacity along with greater operating efficiency.”

Net interest margin increased to 3.64% for the quarter ended March 31, 2023 from 2.60% for the quarter ended March 31, 2022 as the Company’s net interest income increased 36% to $8,333,000. Interest income increased $3,445,000, or approximately 54%, to $9,864,000 due to an increase in average loan and securities volume as well as increased yield on earning assets due to higher interest rates. Yield on earning assets increased 159 basis points to 4.31%. Interest expense increased $1,236,000, or 419%, to $1,531,000 as the cost to fund earning assets increased 55 basis points to 0.67%.

The provision for credit losses increased $38,000 to $61,000 in the first quarter of 2023 as compared to the same period of the prior year. The allowance for credit losses was $4,465,000 as of March 31, 2023, representing 0.71% of total loans outstanding. In comparison, the allowance for credit losses was $3,853,000 as of December 31, 2022, which was 0.61% of total loans outstanding. The allowance for credit losses as of March 31, 2023 included an initial current expected credit losses (CECL) adjustment of $560,000, which was a charge to capital. Non-performing loans to total loans were 0.27% as of March 31, 2023, which was unchanged as compared to year-end 2022. Allowance coverage of non-performing loans was 264% as of the end of the quarter compared to 227% as of year-end 2022. Management views the allowance balance as being sufficient to offset potential future losses associated with problem loans.

Noninterest income for the quarter ended March 31, 2023 decreased $251,000, or 13%, to $1,742,000 from $1,993,000 for the quarter ended March 31, 2022. The decrease was mainly due to a $156,000 decrease in fees on sales of mortgage loans, a $66,000 decrease in Bankers Insurance income, and a $32,000 decrease in loan fee income. These decreases were partially offset by a $20,000 increase in non-sufficient funds (NSF) fees.

Noninterest expense for the quarter ended March 31, 2023 increased $449,000, or approximately 7%, to $6,777,000 from $6,328,000 for the quarter ended March 31, 2022. The increase was mainly due to a $355,000 increase in salaries and benefits driven by an employee pay improvement plan and partially offset by lower costs associated with the Bank’s pension plan. The Bank also experienced a $60,000 increase in occupancy expense due mainly to repairs and a $28,000 increase in audit fees. These increases were partially offset by a $35,000 decrease in loan fees paid.

Total assets as of March 31, 2023 were $993,817,000, up $23,886,000, or 2% from $969,931,000 as of December 31, 2022. The principal components of the Company’s assets as of March 31, 2023 were $626,060,000 in total loans, $246,684,000 in securities and $74,154,000 in cash and cash equivalents. During the first quarter of 2023, total loans decreased $6,836,000, or approximately 1%, from $632,896,000 as of December 31, 2022, while securities decreased $4,430,000, or approximately 2%, from $251,114,000. The majority of the Company’s securities portfolio is relatively short-term in nature. Sixty percent (60%) of the Company’s securities portfolio is invested in U.S. Treasuries with an average maturity of 1.97 years and $66,000,000 maturing throughout 2023 and 2024. The majority of the Company’s securities were classified as available for sale on March 31, 2023, which provides transparency regarding unrealized losses. Unrealized losses associated with the available for sale securities portfolio were $16,921,000 as of March 31, 2023 or seven percent (7%) of book value, an improvement from $19,892,000 as of December 31, 2022.

Cash and cash equivalents increased $37,633,000, or approximately 103%, to $74,154,000 as of March 31, 2023 from $36,521,000 as of December 31, 2022 due to the decrease in loans and securities combined with an increase in deposits. The Company had a strong liquidity ratio of 37% as of March 31, 2023 and a loans plus securities to deposits ratio of 95%, providing the opportunity to sell excess funds at an attractive federal funds rate. The Company has access to multiple liquidity lines of credit through its correspondent banking relationships and the Federal Home Loan Bank, if needed. Additionally, the Company plans to apply for access to the Federal Reserve’s term funding program in the near future for contingency purposes.

Total liabilities as of March 31, 2023 were $932,658,000, up $19,735,000, or 2%, from $912,923,000 as of December 31, 2022 as deposits increased $19,384,000, or 2%, to $918,622,000 in the first quarter of 2023. The Company has a relatively low level of uninsured deposits as seventy-six percent (76%) of the Company’s deposits are currently insured or collateralized. Deposit volume increased as the Company emphasized growth of deposits and deposit accounts by executing a liquidity and deposits plan in the fourth quarter of 2022 to address rising interest rates, increased deposits competition, and recent banking industry liquidity events. With attractive interest rates and product offerings and an emphasis on personalized service, the Bank looks to grow customer relationships and capitalize on large national bank branch closures in markets served.

Total stockholders’ equity as of March 31, 2023 was $61,159,000 and consisted primarily of $56,256,000 in retained earnings. In comparison, as of December 31, 2022 total stockholders’ equity was $57,008,000. The increase in equity is due to higher retained earnings from improved profitability and a decrease in unrealized losses associated with the Bank’s securities portfolio. Both the Company and Bank remain “well capitalized” per all regulatory definitions.

As a reminder, Pinnacle Bankshares Corporation’s Annual Meeting of Shareholders will be held at 11:00 AM Eastern Time on Tuesday, May 9, 2023, at Virginia Technical Institute located at 201 Ogden Road, Altavista VA 24517.

Pinnacle Bankshares Corporation is a locally managed community banking organization serving Central and Southern Virginia. The one-bank holding company of First National Bank serves market areas consisting primarily of all or portions of the Counties of Amherst, Bedford, Campbell and Pittsylvania, and the Cities of Charlottesville, Danville and Lynchburg. The Company has a total of eighteen branches with one branch in Amherst County within the Town of Amherst, two branches in Bedford County; five branches in Campbell County, including two within the Town of Altavista, where the Bank was founded; one branch in the City of Charlottesville, three branches in the City of Danville; three branches in the City of Lynchburg; and three branches in Pittsylvania County, including one within the Town of Chatham. First National Bank is celebrating its 115th year of operation.

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, including statements made in Mr. Hall’s quotes 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, future operating results and business performance, our growth initiatives, results of the Company’s merger with Virginia Bank, and the potential effects of the COVID-19 Pandemic and related impacts on the Company’s financial condition and results of operations. 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, expected revenue synergies and cost savings from the merger with Virginia Bank may not be fully realized or realized within the expected time frame; the potential effects of the COVID-19 pandemic on Pinnacle and the U.S. and global financial markets and the responses of federal, state and local governments and private businesses in the United States to the pandemic; changes in consumer spending and saving habits that may occur, including as a result of the COVID-19 pandemic and increased inflation; changes in general business, economic and market conditions; attracting, hiring, training, motivating and retaining qualified employees; changes in fiscal and monetary policies, and laws and regulations; changes in interest rates, inflation rates, deposit flows, loan demand and real estate values; changes in the quality or composition of the Company’s loan portfolio and the value of the collateral securing loans; changes in macroeconomic trends and uncertainty, including the government closure of Silicon Valley Bank and liquidity concerns at other financial institutions, and the potential for local and/or global economic recession; changes in demand for financial services in Pinnacle’s market areas; increased competition from both banks and non-banks in Pinnacle’s market areas; a deterioration in credit quality and/or a reduced demand for, or supply of, credit; increased information security risk, including cyber security risk, which may lead to potential business disruptions or financial losses; volatility in the securities markets generally, including in the value of securities in the Company’s securities portfolio or in the market price of Pinnacle common stock specifically; and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. 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
(3/31/2023 and 3/31/2022 results unaudited, 12/31/2022 results audited)
(In thousands, except ratios, share and per share data)
 3 Months

  3 Months

  3 Months

Income Statement Highlights3/31/2023
Interest Income$9,864  $9,335  $6,419 
Interest Expense 1,531   519   295 
Net Interest Income 8,333   8,178   6,124 
Provision for Credit Losses 61   114   23 
Noninterest Income 1,742   1,639   1,993 
Noninterest Expense 6,777   7,495   6,328 
Net Income 2,639   2,562   1,391 
Earnings Per Share (Basic) 1.21   1.18   0.64 
Earnings Per Share (Diluted) 1.21   1.17   0.64 
Balance Sheet Highlights3/31/2023
Cash and Cash Equivalents$74,154  $36,521  $189,629 
Total Loans 626,060   632,896   570,321 
Total Securities 246,684   251,114   209,541 
Total Assets 993,817   969,931   1,015,124 
Total Deposits 918,622   899,238   941,316 
Total Liabilities 932,658   912,923   957,618 
Stockholders' Equity 61,159   57,008   57,506 
Shares Outstanding 2,184,033   2,178,486   2,170,835 
Ratios and Stock Price3/31/2023
Gross Loan-to-Deposit Ratio 68.15%  70.38%  60.59%
Net Interest Margin (Year-to-date) 3.64%  3.18%  2.60%
Liquidity (Liquid assets to liabilities) 37.17%  32.68%  44.73%
Efficiency Ratio 67.21%  72.71%  77.94%
Return on Average Assets (ROA) 1.09%  0.82%  0.55%
Return on Average Equity (ROE) 18.38%  14.62%  9.04%
Leverage Ratio (Bank) 8.37%  8.06%  7.26%
Tier 1 Risk-based Capital Ratio (Bank) 12.44%  12.03%  12.97%
Total Capital Ratio (Bank) 13.15%  12.63%  13.65%
Stock Price$19.92  $19.20  $23.80 
Book Value$28.00  $26.17  $26.49 
Asset Quality Highlights3/31/2023
Nonaccruing Loans$1,689  $1,474  $1,252 
Loans 90 Days or More Past Due and Accruing 0   221   39 
Total Nonperforming Loans 1,689   1,695   1,291 
Troubled Debt Restructures Accruing 1,047   1,056   1,085 
Total Impaired Loans 2,736   2,751   2,376 
Other Real Estate Owned (OREO) (Foreclosed Assets) 0   0   0 
Total Nonperforming Assets 1,689   1,695   1,291 
Nonperforming Loans to Total Loans 0.27%  0.27%  0.23%
Nonperforming Assets to Total Assets 0.17%  0.17%  0.13%
Allowance for Credit Losses$4,465  $3,853  $3,669 
Allowance for Credit Losses to Total Loans 0.71%  0.61%  0.64%
Allowance for Credit Losses to Nonperforming Loans 264%  227%  284%

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