Pinnacle Bankshares Corporation Announces 3rd Quarter/Year to Date 2024 Earnings

ALTAVISTA, Va., Oct. 24, 2024 (GLOBE NEWSWIRE) — Net income for Pinnacle Bankshares Corporation (OTCQX:PPBN), the one-bank holding company (the “Company” or “Pinnacle”) for First National Bank (the “Bank”), was $2,085,000, or $0.94 per basic and diluted share, for the third quarter of 2024, while net income for the nine months ended September 30, 2024 was $6,377,000, or $2.88 per basic and diluted share. In comparison, net income was $2,794,000, or $1.27 per basic and diluted share, and $7,483,000, or $3.41 per basic and diluted share, respectively, for the same periods of 2023. Consolidated results for the quarter and the nine-month periods are unaudited.

Income Statement

• Third Quarter Net Income decreased 3% and Year-to-Date Net Income decreased 7%, excluding Bank Owned Life Insurance (BOLI) proceeds of $638,000 received in 2023.

Through nine months:

• Return on Assets was 0.86%.
• Net Interest Margin increased 15 basis points to 3.68%.
• Net Interest Income increased $1,368,000, or 5.5%.
• Provision for Credit Losses increased $330,000 due primarily to loan growth. Asset Quality remains strong with low Nonperforming Loans and no Other Real Estate Owned (OREO).
• Noninterest Income increased $229,000, or 4.6%, excluding BOLI proceeds, driven by higher fees from Merchant Card Processing and Sales of Mortgage Loans.
• Noninterest Expense increased $1,857,000, or 9%, due primarily to higher Core Operating System expenses and Salaries and Employee Benefits.

Balance Sheet

• Cash and Cash Equivalents increased $18.4 million, or 21%.
• Loans increased $37.5 million, or 6%.
• Securities decreased $51.6 million, or 22%, due to maturing U.S. Treasury Notes. The Securities Portfolio is relatively short term in nature with $61 million in U.S. Treasury Notes maturing during the next seven months providing liquidity, funding, and optionality.
• Total Assets decreased less than 1% due to a decline in Deposits.
• Deposits decreased 1%; however, Deposit Accounts have grown 3.5%.
• Liquidity is strong at 34% and 12% excluding Available for Sale Securities.

Capital Ratios & Stock Price

• The Bank’s Leverage Ratio increased to 9.21% due primarily to profitability.
• Total Risk Based Capital Ratio decreased slightly to 13.53% due to loan growth.
• Pinnacle’s Stock Price ended the quarter at $29.73 per share, based on the last trade, which is an increase of $5.72, or 24%. Total Return was 26.95% through nine months.  

Net Income and Profitability

Net income generated during the third quarter of 2024 represents a $71,000, or 3%, decrease as compared to the same time period of 2023, net of $638,000 in BOLI proceeds, while net income generated for the nine months of 2024 represents a $468,000, or 7%, decrease as compared to the prior year, net of BOLI proceeds. The decrease in net income for the third quarter and year-to-date 2024 was driven by higher provision for loan losses and noninterest expense, partially offset by higher net interest income and noninterest income, net of BOLI proceeds.  

Profitability as measured by the Company’s return on average assets (“ROA”) decreased to 0.86% for the nine months ended September 30, 2024, as compared to 1.02% for the same time period of 2023. Correspondingly, return on average equity (“ROE”) decreased to 11.76% for the nine months ended September 30, 2024, as compared to 16.44% for the same time period of 2023.

“We are pleased that Pinnacle’s performance through nine months of 2024 is tracking closely to 2023,” stated Aubrey H. Hall, III, President and Chief Executive Officer for both the Company and the Bank. He further commented, “Our Company is in a solid position with ample funding, an expanding net interest margin, and strong asset quality.”  

Net Interest Income and Margin

The Company generated $8,941,000 in net interest income for the third quarter of 2024, which represents a $707,000, or 8.5%, increase as compared to $8,234,000 for the third quarter of 2023. Interest income increased $1,615,000, or 15%, due to higher yields on earning assets and increased loan volume, while interest expense increased $908,000, or 38%, due to higher interest rates paid on deposits and increased certificates of deposit volume.

The Company generated $26,169,000 in net interest income through nine months of 2024, which represents a $1,368,000, or 5.5%, increase as compared to $24,801,000 for the same time period of 2023. Interest income increased $4,341,000, or 14%, as yield on earning assets increased 55 basis points to 4.94%. Interest expense increased $2,973,000, or 49%, due to higher interest rates paid on deposits as cost to fund earning assets increased 40 basis points to 1.26%. Net interest margin increased to 3.68% for the nine months of 2024 from 3.53% for the same time period of 2023.

Reserves for Credit Losses and Asset Quality

The provision for credit losses was $136,000 in the third quarter of 2024 as compared to $4,000 in the third quarter of 2023. Through nine months of 2024, the provision for credit losses was $396,000 as compared to $66,000 for the same time period of 2023. Provision expense has increased as a result of higher loan volume and recent trends in economic indicators.

The allowance for credit losses (ACL) was $4,795,000 as of September 30, 2024, which represented 0.71% of total loans outstanding. In comparison, the ACL was $4,511,000 or 0.70% of total loans outstanding as of December 31, 2023. Non-performing loans to total loans decreased to 0.14% as of September 30, 2024, compared to 0.24% as of year-end 2023. ACL coverage of non-performing loans was 502% as of September 30, 2024, compared to 290% as of year-end 2023. Management views the allowance balance as being sufficient to offset potential future losses in the loan portfolio.

Noninterest Income and Expense

Noninterest income for the third quarter of 2024 increased $94,000, or 5.6%, to $1,763,000 as compared to $1,669,000, net of BOLI proceeds, for the third quarter of 2023. The increase was primarily due to a $76,000 increase in fees generated from sales of mortgage loans, a $30,000 increase in merchant card fees, and a $16,000 increase in service charges on loan accounts.

Noninterest income through nine months of 2024 increased $229,000, or 4.6%, to $5,198,000 as compared to $4,969,000 for the same time period in 2023, net of BOLI proceeds. The increase was mainly due to a $103,000 increase in merchant card processing fees, a $53,000 increase in fees generated from sales of mortgage loans, a $41,000 increase in service charges on loan accounts, and a $33,000 increase in in commissions and fees from sales of investment and insurance products.  

Noninterest expense for the third quarter of 2024 increased $753,000, or 10%, to $7,961,000 as compared to $7,208,000 for the third quarter of 2023. The increase was primarily due to a $332,000 increase in salary and benefits, a $179,000 increase in core operating system expenses, and an $81,000 increase in occupancy expense.

Noninterest expense through nine months of 2024 increased $1,857,000, or 9%, to $23,044,000 as compared to $21,187,000 for the same time period of 2023. The increase was mainly due to a $694,000 increase in core operating system expenses, a $448,000 increase in salary and benefits, a $138,000 increase in occupancy expense, and a $109,000 increase dealer loan expenses.  

The Balance Sheet and Liquidity

Total assets as of September 30, 2024, were $1,015,994,000, down less than 1% from $1,016,528,000 as of December 31, 2023. The principal components of the Company’s assets as of September 30, 2024, were $678,893,000 in total loans, $182,010,000 in securities, and $106,009,000 in cash and cash equivalents. Through nine months of 2024, total loans have increased $37,456,000, or 6%, from $641,437,000, securities have decreased $51,569,000, or 22%, from $233,579,000, and cash and cash equivalents have increased $18,420,000, or 21%, from $87,589,000.00.  

The majority of the Company’s securities portfolio is relatively short-term in nature. Forty-eight percent (48%) of the Company’s securities portfolio is invested in U.S. Treasury Notes having an average maturity of 1.22 years with $61,000,000 maturing during the next seven months. The Company’s entire securities portfolio was classified as available for sale on September 30, 2024, which provides transparency regarding unrealized losses. Unrealized losses associated within the available for sale securities portfolio were $9,915,000 as of September 30, 2024, or five percent (5%) of book value, an improvement from $14,943,000 as of December 31, 2023.  

The Company had a strong liquidity ratio of 34% as of September 30, 2024. The liquidity ratio excluding the available for sale securities portfolio was 12% 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. None of these contingency funding sources have been utilized.

Total liabilities as of September 30, 2024, were $938,622,000, down $9,501,000, or 1%, from $948,123,000 as of December 31, 2023, as deposits have decreased $11,081,000, or 1%, through nine months of 2024 to $921,363,000 from $932,444,000. First National Bank’s number of deposit accounts increased 3.5% during the same time period as the Bank has benefited from the closures of large national bank branches and bank mergers within markets served along with its reputation for providing extraordinary customer service.

Total stockholders’ equity as of September 30, 2024, was $77,372,000 and consisted primarily of $66,787,000 in retained earnings. In comparison, as of December 31, 2023 total stockholders’ equity was $68,405,000. The increase in stockholders’ equity is due primarily to 2024 profitability and an increase in the market value of the securities portfolio and pension assets. Both the Company and Bank remain “well capitalized” per all regulatory definitions.

Loan Production Office and New Branch in South Boston

On July 15, 2024, First National Bank announced plans to open a Loan Production Office (LPO) and a Full-Service Branch in Halifax County, Virginia. Since this announcement, an experienced team of bankers has been hired and the LPO has opened at 97A Main Street, South Boston, Virginia. Additionally, regulatory approval has been received for the branch, which has temporarily opened at the same location. The permanent branch will open at 4027 Halifax Road, South Boston, Virginia later this year.

Company Information

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, Halifax, 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. A Loan Production Office and a temporary full-service branch have been opened in South Boston, with the Bank having plans to open a permanent full-service branch location in the near future to serve South Boston and the greater Halifax County market. First National Bank is in its 116^th year of operation.         

Cautionary Statement Regarding Forward-Looking Statements

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 and our growth initiatives. 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: changes in consumer spending and saving habits that may occur, including 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 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.