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Pinnacle Bankshares Corporation Announces Second Quarter 2017 Earnings

ALTAVISTA, Va., July 24, 2017 (GLOBE NEWSWIRE) -- Net income for Pinnacle Bankshares Corporation (OTCQX:PPBN), the one-bank holding company (the “Company”) for First National Bank (the “Bank”), was $694,000 or $0.45 per basic and diluted share for the quarter ended June 30, 2017, and $1,511,000 or $0.99 per basic share and $0.98 per diluted share for the six months ended June 30, 2017. Net income was $711,000 or $0.47 per basic and $0.46 per diluted share and $1,357,000 or $0.89 per basic share and $0.88 per diluted share, respectively, for the same periods of 2016. Consolidated results for the quarter and six month periods are unaudited.

Net income generated during the first six months of 2017 represents an 11% increase as compared to the same time period of the previous year. For the second quarter of 2017, net income decreased 2% as compared to the second quarter of 2016. The increase in net income for the six months was driven by higher net interest income and noninterest income. The slight decrease in second quarter net income was driven by higher noninterest expense and an increase in the loan loss provision.

Profitability as measured by the Company’s return on average assets (“ROA”) was 0.68% for the six months ended June 30, 2017, compared to 0.72% generated during the first six months of 2016. Return on average equity (“ROE”) increased for the six month period of 2017 to 8.10%, compared to 7.67% for the same time period of the prior year. The Company experienced asset growth of 16% from June 30, 2016 to June 30, 2017, which contributed to the lower ROA for the six months ended June 30, 2017 as compared to the same time period of the prior year. Increased earnings for the six month time period resulted in a higher ROE.

“We are pleased to report an increase in net income for the first half of 2017 as compared to the same time period of 2016”, stated Aubrey H. Hall, III, President and Chief Executive Officer for both the Company and the Bank. He further commented, “Pinnacle has benefited from higher interest income driven by loan volume and increased noninterest income as a result of strong mortgage loan sales and investment commissions thus far in 2017.”

The Company produced $7,199,000 in net interest income for the first half of 2017, which represents an 8% increase as compared to the $6,642,000 generated for the same time period of 2016. Interest income increased $664,000 or approximately 9% due to higher loan volume, while interest expense increased $107,000 or approximately 15%, due to the continued growth of deposits.

The Company’s net interest margin declined to 3.53% for the first half of 2017 as compared to 3.82% for the first half of 2016 with yield on earning assets decreasing by 30 basis points and the cost to fund earning assets decreasing by 1 basis point. The decline in net interest margin was caused by a decrease in loan yields and an increase in excess deposit funds invested at lower yields with the Federal Reserve.

The provision for loan losses increased to $193,000 in the first half of 2017 as compared to $25,000 in the first half of 2016. The allowance for loan losses was $3,001,000 as of June 30, 2017, which represented 0.86% of total loans outstanding. In comparison, the allowance for loan losses was $2,898,000 or 0.85% of total loans outstanding as of December 31, 2016. As mentioned in the first quarter 2017 earnings release, the higher provision and resulting increase in the Company’s allowance balance were primarily the result of risk rating downgrades associated with two commercial loan relationships. One relationship was downgraded to a special mention classification and the other relationship was downgraded to a substandard non-performing classification. As a result, non-performing loans to total loans increased to 0.98% as of June 30, 2017 compared to 0.23% as of year-end 2016. Allowance coverage of non-performing loans as of the end of the quarter decreased to 87% from 377% as of year-end 2016. Despite the decline in this ratio, Management still views the allowance balance as being sufficient to offset potential future losses associated with problem loans. The Bank has sufficient collateral securing both referenced relationships and has initiated exit strategies that are expected to be completed during the third quarter without any losses being incurred.

Noninterest income for the first half of 2017 increased $190,000 or approximately 11% to $1,923,000 from $1,733,000 for the first half of 2016. This increase was mainly driven by an $83,000 increase in fees generated from the sale of mortgage loans, a $64,000 increase in investment commissions and a $52,000 increase in fee income associated with check card and ATM usage.

Noninterest expense for the first half of 2017 increased $392,000 or approximately 6% to $6,767,000 from $6,375,000 for the first half 2016. The increase is primarily attributed to a $229,000 increase in salaries and benefits, which includes a $125,000 increase in retirement plan expenses. Small increases in occupancy expense, deposit insurance and core system expenses were also contributing factors to the increase.

Total assets as of June 30, 2017 were $450,279,000, up $10,175,000 or 2% from $440,104,000 as of December 31, 2016. The principal components of the Company’s assets as of June 30, 2017 were $350,580,000 in total loans, $40,385,000 in securities and $30,911,000 in cash and cash equivalents. During the first half of 2017, total loans increased approximately 3% or $9,339,000 from $341,241,000 as of December 31, 2016, while securities increased approximately 46% or $12,816,000 from $27,569,000 as the Company has proactively sought opportunities to deploy excess funds.

Total liabilities as of June 30, 2017 were $412,236,000, up $8,681,000 or 2% from $403,555,000 as of December 31, 2016. The growth of liabilities was driven by a $9,885,000 or approximately 5% increase in savings and interest checking balances. 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, 2017 was $38,043,000 and consisted primarily of $34,070,000 in retained earnings. In comparison, as of December 31, 2016, total stockholders’ equity was $36,549,000. The Company has continued to increase capital while also paying a cash dividend to shareholders in each of the last nineteen quarters. Both the Company and Bank remain “well capitalized” per all regulatory definitions.

In other news, construction of First National Bank’s new Odd Fellows Road Branch/Lynchburg Headquarters facility is scheduled to be completed in September of 2017. The new facility is intended to increase the Bank’s presence and visibility in the Lynchburg market in an effort to further grow assets and enhance shareholder returns.

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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 Campbell, Pittsylvania, Bedford, Amherst and the City of Lynchburg. The Company has a total of eight 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 in the City of Lynchburg and Forest Road in Bedford County. The new Odd Fellows Road Branch and Lynchburg Headquarters facility is on schedule to be completed in September of 2017 and will increase the number of branches to nine. First National Bank is in its 109th 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.

Cautionary Statement Regarding Forward-Looking Statements

In addition to the historical information contained herein, this Earnings Press Release contains statements that may constitute “forward‑looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, predictions, expectations, or beliefs about future events or results or otherwise are not statements of historical fact, are based on certain assumptions as of the time they are made, and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Forward‑looking statements are generally identifiable by use of words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “may,” “will” or similar expressions. These forward-looking statements may include, but are not limited to, anticipated future financial performance, impairment of goodwill, funding sources including cash generated by banking operations, loan portfolio composition, trends in asset quality and strategies to address nonperforming assets and nonaccrual loans, adequacy of the allowance for loan losses and future provisions for loan losses, securities portfolio composition and future performance, interest rate environments, deposit insurance assessments, and strategic business initiatives.

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 actually 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, the effects of or changes in:

  • management’s efforts to maintain asset quality and control operating expenses;
  • the quality, composition and growth of the loan and investment portfolios;
  • interest rates;
  • general economic and financial market conditions;
  • net interest margin;
  • real estate values in our market area;
  • 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;
  • 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;
  • our ability to timely implement the Lynchburg Market Plan;
  • demand for loan products;
  • deposit flows;
  • competition and demand for financial services in our market area;
  • regulatory compliance costs;
  • accounting principles, policies and guidelines; 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 have based our forward-looking statements on management’s beliefs, assumptions, expectations and projections based on information available as of the date of this Earnings Press Release. You should not place undue reliance on such statements, because the beliefs, assumptions, 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
(6/30/17, 3/31/2017 and 6/30/2016 results unaudited)
(In thousands, except ratios, share and per share data)
3 Months Ended
3 Months Ended
3 Months Ended
Income Statement Highlights06/30/2017
03/31/2017
06/30/2016
Interest Income$4,077 $3,945 $3,735
Interest Expense 416 407 362
Net Interest Income 3,661 3,538 3,373
Provision for Loan Losses 88 105 (2)
Noninterest Income 938 985 893
Noninterest Expense 3,526 3,241 3,238
Net Income 694 817 711
Earnings Per Share (Basic) 0.45 0.54 0.47
Earnings Per Share (Diluted) 0.45 0.53 0.46
6 Months Ended
Year Ended
6 Months Ended
Income Statement Highlights06/30/2017
12/31/2016
06/30/2016
Interest Income$8,022 $15,153 $7,358
Interest Expense 823 1,518 716
Net Interest Income 7,199 13,635 6,642
Provision for Loan Losses 193 87 25
Noninterest Income 1,923 3,896 1,733
Noninterest Expense 6,767 13,043 6,375
Net Income 1,511 3,004 1,357
Earnings Per Share (Basic) 0.99 1.97 0.89
Earnings Per Share (Diluted) 0.98 1.96 0.88
Balance Sheet Highlights06/30/2017
12/31/2016
06/30/2016
Cash and Cash Equivalents$30,911 $48,174 $12,797
Total Loans 350,580 341,241 330,453
Total Securities 40,385 27,569 21,539
Total Assets 450,279 440,104 386,693
Total Deposits 408,598 399,743 346,859
Total Liabilities 412,236 403,555 350,830
Stockholders' Equity 38,043 36,549 35,863
Shares Outstanding 1,529,031 1,522,351 1,525,118
Ratios and Stock Price06/30/2017
12/31/2016
06/30/2016
Gross Loan-to-Deposit Ratio 85.80% 85.39% 95.27%
Net Interest Margin (Year-to-date) 3.53% 3.70% 3.82%
Liquidity 16.41% 17.68% 7.74%
Efficiency Ratio 74.13% 74.66% 76.71%
Return on Average Assets (ROA) 0.68% 0.76% 0.72%
Return on Average Equity (ROE) 8.10% 8.36% 7.67%
Leverage Ratio (Bank) 8.67% 8.94% 9.64%
Tier 1 Capital Ratio (Bank) 10.69% 10.81% 10.89%
Total Capital Ratio (Bank) 11.54% 11.67% 11.77%
Stock Price$27.95 $28.88 $19.31
Book Value$24.88 $24.01 $23.51
Asset Quality Highlights06/30/2017
12/31/2016
06/30/2016
Nonaccruing Loans$3,451 $769 $1,370
Loans 90 Days or More Past Due and Accruing 0 0 0
Total Nonperforming Loans 3,451 769 1,370
Troubled Debt Restructures Accruing 343 347 1,318
Total Impaired Loans 3,794 1,116 2,688
Other Real Estate Owned (OREO) (Foreclosed Assets) 246 642 762
Total Nonperforming Assets 3,697 1,411 2,132
Nonperforming Loans to Total Loans 0.98% 0.23% 0.41%
Nonperforming Assets to Total Assets 0.82% 0.32% 0.55%
Allowance for Loan Losses$3,001 $2,898 $2,855
Allowance for Loan Losses to Total Loans 0.86% 0.85% 0.86%
Allowance for Loan Losses to Nonperforming Loans 86.97% 376.85% 208.39%


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

Source:Pinnacle Bankshares Corporation