Pinnacle Bankshares Corporation Announces Record High 2nd Quarter/Mid-Year 2022 Earnings

Pinnacle Bankshares Corporation

ALTAVISTA, Va., July 25, 2022 (GLOBE NEWSWIRE) -- Pinnacle Bankshares Corporation (OTCQX:PPBN), the one-bank holding company (the “Company” or “Pinnacle”) for First National Bank (the “Bank”), produced record net income for the second quarter and the first half of 2022. Net income for the second quarter of 2022 was $1,892,000, or $0.87 per basic and diluted share. Net income for the six months ended June 30, 2022 was $3,283,000, or $1.51 per basic and diluted share.   In comparison, net income was $1,056,000, or $0.49 per basic and $0.48 per diluted share, and $2,155,000, or $1.00 per basic and $0.99 per diluted share, respectively, for the same periods of 2021.   Consolidated results for the quarter and six-month periods are unaudited.

Net income generated during the first half of 2022 represents a $1,128,000, or 52%, increase as compared to the same time period of the prior year, which was mainly driven by higher net interest income and lower noninterest expense. These factors were partially offset by a decrease in noninterest income. Net interest income increased due to higher volume of loans and securities and higher yields on Fed funds sold. Noninterest expense decreased compared to the same time period of 2021, which included expenses from Pinnacle’s merger with Virginia Bank Bankshares, Inc. (“Virginia Bank”) that closed in the fourth quarter of 2020. Noninterest income decreased due to lower sales of mortgage loans resulting from higher interest rates and lower loan fee income resulting from elimination of Paycheck Protection Program (“PPP”) loan originations.

Net income generated during the second quarter of 2022 represents a $836,000, or 79%, increase as compared to the second quarter of 2021, due to the same factors impacting year-to-date performance through June 30, 2022.

Profitability as measured by the Company’s return on average assets (“ROA”) increased to 0.65% for the six months ended June 30, 2022, as compared to 0.48% generated during the first six months of 2021. Correspondingly, return on average equity (“ROE”) increased for the six-month period of 2022 to 11.32%, compared to 7.34% for the same time period of the prior year.

“We are pleased to announce Pinnacle’s record net income for the second quarter and first half of 2022,” stated Aubrey H. Hall, III, President and Chief Executive Officer for both the Company and the Bank. Mr. Hall further commented, “Our balance sheet is in a solid position as we begin to recognize the earnings potential of growth initiatives pursued over the past few years. Despite volatile economic conditions, we remain optimistic regarding further enhancement of Pinnacle’s performance.”

The Company produced $13,446,000 in net interest income for the first half of 2022, which represents an 11% increase as compared to the $12,148,000 generated for the same time period of 2021. Interest income increased $846,000, or approximately 6%, due to increased loan and investment volume, while interest expense decreased $452,000, or approximately 44%, despite higher deposit volume, as cost to fund earning assets decreased 12 basis points to 0.12%. Yield on earning assets decreased 19 basis points to 2.95% as net interest margin decreased from 2.90% for the first half of 2021 to 2.83% for the first half of 2022.   The higher yield on earning assets in the first half of 2021 compared to the first half of 2022 was due to higher PPP loan interest and deferred fees.   Yield on earning assets increased from 2.68% in the first quarter of 2022 to 3.17% in the second quarter of 2022 due to increases in loans and securities and higher yields on Fed funds sold.

The Company produced $7,322,000 in net interest income for the second quarter of 2022, which represents a $1,161,000, or 19%, increase as compared to the $6,161,000 generated in the second quarter of 2021. Interest income increased $952,000, or approximately 14%, due to increased loan and investment volume, while interest expense decreased $209,000, or approximately 43%, despite higher deposit volume, as cost of funds decreased.

The provision for loan losses was $36,000 for the first half of 2022 as compared to $85,000 for the first half of 2021. Provision for the second quarter of 2022 was $13,000 compared to $23,000 for the second quarter of 2021. The decline in provision expense has been the result of strong credit quality.

The allowance for loan losses was $3,723,000 as of June 30, 2022, which represented 0.63% of total loans outstanding. In comparison, the allowance for loan losses was $3,663,000 or 0.66% of total loans outstanding as of December 31, 2021. The net credit mark on loans purchased from Virginia Bank as of June 30, 2022 was $1,623,000. The allowance for loan losses plus the net credit mark was $5,346,000, or 0.90%, of the Company’s total loans as of June 30, 2022. Non-performing loans to total loans decreased to 0.20% as of June 30, 2022, compared to 0.26% as of year-end 2021. Allowance coverage of non-performing loans was 310% as of the end of the quarter compared to 255% as of year-end 2021. Management views the allowance balance as being sufficient to offset potential future losses associated with problem loans.

Noninterest income for the first half of 2022 decreased $89,000, or approximately 2%, to $3,658,000, from $3,747,000 for the first half of 2021. The decrease was mainly due to a $267,000 decrease in fees generated from sales of mortgage loans and a $203,000 decrease in loan fee income due mainly to the origination of PPP loans that occurred in 2021. These decreases were partially offset by a $283,000 increase in debit card interchange fees and a $129,000 increase in overdraft fees.

Noninterest income for the second quarter of 2022 decreased $144,000, or approximately 8%, to $1,665,000, from $1,809,000 for the second quarter of 2020 as fees generated from sales of mortgage loans fees decreased by $275,000. This decrease was partially offset by a $95,000 increase in overdraft fees.

Noninterest expense for the first half of 2022 decreased $231,000, or approximately 2%, to $12,922,000, from $13,153,000 for the first half 2021 as salaries and employee benefits decreased $203,000 and occupancy expenses decreased $185,000. The first half of 2021 also included $315,000 in merger related expenses. These decreases were partially offset by a $412,000 increase in core system expenses and a $103,000 increase in FDIC insurance resulting from an increase in number of deposit accounts outstanding and deposit balances.

Noninterest expense for the second quarter of 2022 decreased $36,000, or less than 1%, to $6,594,000 from $6,630,000 for the second quarter of 2020. The decrease is due to the same factors impacting year-to-date performance through June 30, 2022.

Total assets as of June 30, 2022 were $996,328,000, down 2% from $1,015,863,000 as of December 31, 2021. The principal components of the Company’s assets as of June 30, 2022 were $592,209,000 in total loans, $249,347,000 in securities and $106,637,000 in cash and cash equivalents. During the first half of 2022, total loans increased approximately 7%, or $39,973,000, from $552,236,000 as of December 31, 2022.   Securities increased $128,638,000, or 107%, during in the first half of 2022, while cash and cash equivalents decreased $191,958,000, or 64%. The security portfolio increase included $100,000,000 in two and three year U.S. Treasury notes purchased as the Company sought to capitalize on its liquidity position and higher interest rates, while mitigating credit and interest rate risks.

Total liabilities as of June 30, 2022 were $942,127,000, down $11,369,000, or 1%, from $953,496,000 as of December 31, 2021 as deposits decreased 1%, or $12,667,000, to $925,412,000 during the first half of 2022.

Total stockholders’ equity as of June 30, 2022 was $54,201,000 and consisted primarily of $50,374,000 in retained earnings. In comparison, as of December 31, 2021 total stockholders’ equity was $62,367,000. The decrease in equity is due to a $10,962,000 increase in the Company’s unrealized accumulated other comprehensive losses on our available for sale securities portfolio as market rates have increased.   Both the Company and Bank remain “well capitalized” per all regulatory definitions.

In other news, at the Annual Meeting of Shareholders held on May 10, 2022, Elton W. Blackstock, Jr., Robert L. Finch, Jr., Aubrey H. (Todd) Hall, III, and Dr. Robert L. Johnson, II, were re-elected to the Board of Directors as Class I Directors to serve until the 2025 Annual Meeting of Shareholders.

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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 Amherst, Bedford, Campbell and Pittsylvania, and the Cities of Charlottesville, Danville and Lynchburg. The Company has a total of eighteen branches with two located in the Town of Altavista in Campbell County, where the Bank was founded, one branch in the Town of Amherst in Amherst County, two branches in Bedford County, one branch in the Town of Chatham in Pittsylvania County, three additional branches in Campbell County, three branches in the City of Danville, three branches in the City of Lynchburg, two additional branches in Pittsylvania County and one branch in the City of Charlottesville. First National Bank is in its 114th 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 Company’s outlook on future economic and market conditions, the credit quality of our asset portfolio in future periods, our cost of funds, the maintenance of our net interest margin, future operating results, business performance and capital levels, our growth initiatives and their results, results of the Company’s merger with Virginia Bank, and the potential effects of the COVID-19 pandemic on the Company’s financial condition and results of operations. Such statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “opportunity,” “potential,” or words of similar meaning or other statements concerning opinions or judgment of the Company and its management about future events. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable and are based on reasonable assumptions within the bounds of the Company’s existing knowledge of its business and operations, the Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain, and the Company can give no assurance that these plans or expectations will be achieved. Factors that could cause actual results to differ materially from historical results or from management's expectations that are expressed in or implied by the Company’s forward-looking statements include, but are not limited to, the effects of or changes in:

• market interest rates and inflation rates and their impacts on economic conditions, customer behavior and the Company’s funding costs;

• general economic conditions in the markets in which the Company operates and in which its loans are concentrates, including employment levels, rates of economic growth, and real estate values;

• the impact, severity and duration of the COVID-19 pandemic and the effectiveness of the steps taken by the Company in response to the COVID_19 pandemic;

• the quality or composition of the Company’s loan and investment portfolios;

• demand for loan products and financial services in the Company’s market area;

• the Company’s ability to manage its growth or implement its growth strategy, the Company’s ability to improve asset quality and net interest margin, and the Company’s ability control operating expenses and losses on nonperforming assets;

• technological risks and developments, and cyber threats, attacks or events;

• competition for financial products and services within our markets;

• the potential adverse effects of unusual and infrequently occurring events, such as wealth-related disasters, terrorist acts, geopolitical conflicts (such as the ongoing war between Russia and Ukraine) or public health events (such as the COVID-19 pandemic), with such potential adverse effects including adverse effects on the ability of the Company’s borrowers to satisfy their obligations to the Company, on the value of collateral securing the Company’s loans, or on demand for the Company’s products and services;

• performance by the Company’s counterparties or vendors;

• the legislative and regulatory climate, including laws and regulations concerning taxes, banking, securities, insurance and healthcare with which the Company and its subsidiaries must comply;

• monetary and fiscal policies of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System;

• changes to applicable accounting principles or guidelines; and

• other factors, many of which may be beyond the Company’s control.

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. Forward-looking statements speak only as of the date they are made. The Company does not intend or assume any obligation to update, revise or clarify any forward-looking statement that may be made from time to time on behalf of the Company, whether as a result of new information, future events or otherwise.

Selected financial highlights are shown below.

Pinnacle Bankshares Corporation
Selected Financial Highlights (6/30/22, 3/31/2022 and 6/30/2021 results unaudited)
(In thousands, except ratios, share and per share data)
	3 Months Ended			3 Months Ended			3 Months Ended
Income Statement Highlights	06/30/2022			3/31/2022			06/30/2021
Interest Income	$	7,602		$	6,419		$	6,650
Interest Expense		280			295			489
Net Interest Income		7,322			6,124			6,161
Provision for Loan Losses		13			23			23
Noninterest Income		1,665			1,993			1,809
Noninterest Expense		6,594			6,328			6,630
Net Income		1,892			1,391			1,056
Earnings Per Share (Basic)		0.87			0.64			0.49
Earnings Per Share (Diluted)		0.87			0.64			0.48
	6 Months Ended			Year Ended			6 Months Ended
Income Statement Highlights	06/30/2022			12/31/2021			06/30/2021
Interest Income	$	14,021		$	26,817		$	13,175
Interest Expense		575			1,728			1,027
Net Interest Income		13,446			25,089			12,148
Provision for Loan Losses		36			233			85
Noninterest Income		3,658			7,187			3,747
Noninterest Expense		12,922			26,826			13,153
Net Income		3,283			4,375			2,155
Earnings Per Share (Basic)		1.51			2.02			1.00
Earnings Per Share (Diluted)		1.51			2.02			0.99
Balance Sheet Highlights	06/30/2022			12/31/2021			06/30/2021
Cash and Cash Equivalents	$	106,637		$	298,595		$	250,158
Total Loans		592,209			552,236			554,101
Total Securities		249,347			120,709			90,087
Total Assets		996,328			1,015,863			933,110
Total Deposits		925,412			938,079			856,035
Total Liabilities		942,127			953,496			873,685
Stockholders' Equity		54,201			62,367			59,425
Shares Outstanding		2,179,325			2,170,311			2,170,311
Ratios and Stock Price	06/30/2022			12/31/2021			06/30/2021
Gross Loan-to-Deposit Ratio		63.99	%		58.87	%		64.73	%
Net Interest Margin (Year-to-date)		2.83	%		2.86	%		2.90	%
Liquidity		40.80	%		47.46	%		41.21	%
Efficiency Ratio		75.61	%		83.14	%		82.74	%
Return on Average Assets (ROA)		0.65	%		0.47	%		0.48	%
Return on Average Equity (ROE)		11.32	%		7.31	%		7.34	%
Leverage Ratio (Bank)		7.41	%		7.37	%		7.66	%
Tier 1 Capital Ratio (Bank)		12.09	%		12.54	%		12.36	%
Total Capital Ratio (Bank)		12.71	%		13.20	%		13.02	%
Stock Price	$	21.99		$	24.70		$	24.90
Book Value	$	24.87		$	28.74		$	27.38
Asset Quality Highlights	6/30/2022			12/31/2021			6/30/2021
Nonaccruing Loans	$	1,200		$	1,434		$	936
Loans 90 Days or More Past Due and Accruing		0			0			43
Total Nonperforming Loans		1,200			1,434			979
Troubled Debt Restructures Accruing		1,074			1,096			1,598
Total Impaired Loans		2,274			2,530			2,577
Other Real Estate Owned (OREO) (Foreclosed Assets)		0			0			519
Total Nonperforming Assets		1,200			1,434			1,498
Nonperforming Loans to Total Loans		0.20	%		0.26	%		0.18	%
Nonperforming Assets to Total Assets		0.12	%		0.14	%		0.16	%
Allowance for Loan Losses	$	3,723		$	3,663		$	3,551
Allowance for Loan Losses to Total Loans		0.63	%		0.66	%		0.64	%
Allowance for Loan Losses Plus Net Credit Mark to Total Loans (1)		0.90	%		0.99	%		1.14	%
Allowance for Loan Losses to Nonperforming Loans		310.25	%		255.41	%		362.74	%

CONTACT: Pinnacle Bankshares Corporation, Bryan M. Lemley, 434-477-5882 or bryanlemley@1stnatbk.com

(1) This is a non-GAAP measure calculated by dividing the sum of the allowance for loan losses of $3,723 plus the net credit mark of $1,623 by total loans $592,209 which equals 0.90% for 6/30/2022. For December 31, 2021, the allowance for loan losses of $3,663 was added to the credit mark of $1,829 and divided by total loans of $552,236 which equals 0.99%. For June 30, 2021, the allowance for loan losses of $3,551 was added to the credit marker of $2,747 and divided by the totals loans of $554,101 which equals 1.14%