Pinnacle Bankshares Corporation Announces Third Quarter 2015 Earnings

ALTAVISTA, Va., Oct. 27, 2015 (GLOBE NEWSWIRE) -- Net income for Pinnacle Bankshares Corporation (OTCQX:PPBN), the one-bank holding company (the “Company”) for First National Bank (the “Bank”), was $567,000 or $0.37 per basic and diluted share for the quarter ended September 30, 2015, and $1,733,000 or $1.14 per basic share and $1.13 per diluted share for the nine months ended September 30, 2015.  Net income was $601,000 or $0.40 per basic and $0.39 per diluted share and $1,682,000 or $1.11 per basic share and $1.10 per diluted share, respectively, for the same periods of 2014.  Consolidated results for the quarter and nine month periods are unaudited.

Net income generated during the third quarter of 2015 represents a 6% decrease as compared to the third quarter of 2014.  This decline was due to an increase in non-interest expenses primarily associated with growth initiatives.  On a year to date basis net income through nine months increased 3% as compared to the same time period of the previous year, which was driven by higher noninterest income derived from the sale of mortgage loans, investment commissions and services charges and fees on deposit accounts. 

Profitability as measured by the Company’s return on average assets (“ROA”) was 0.63% for the nine months ended September 30, 2015, which is flat compared to the 0.63% generated during the first nine months of 2014.  Return on average equity (“ROE”) increased for the nine month period of 2015 to 6.92%, compared to 6.80% for the same time period of the prior year.      

“We are pleased to report an increase in year to date net income compared to last year, despite third quarter returns being down slightly,” stated Aubrey H. Hall, III, President and Chief Executive Officer for both the Company and the Bank.  He further commented, “We are also encouraged by loan growth of over 12 million dollars during the third quarter, which should increase our net interest margin, provide additional net interest income and help to improve future returns.”

The Company produced $9,082,000 in net interest income for the first nine months of 2015, which represents a 1% increase as compared to the $9,031,000 generated for the same time period of 2014.  Interest income decreased $208,000 or approximately 2%, which was outpaced by a decline in interest expense of $259,000.  The Company’s net interest margin declined to 3.53% for the nine months of 2015 as compared to 3.62% for the first nine months of 2014 due mainly to lower yields on interest earning assets.  However, net margin increased in the third quarter of 2015 to 3.62% from 3.43% in the second quarter of 2015 as yields increased 15 basis points due to over $12,000,000 in new loan volume. Additionally, the cost to fund earning assets decreased 3 basis points during the same time period.

The provision for loan losses increased to $130,000 in the first nine months of 2015 as compared to ($8,000) for the first nine months of 2014 due to changes in the assessment of qualitative factors utilized to determine the Company’s allowance for loan losses balance and an increase in loan volume.  Net charge-offs through the first nine months of the year were $237,000, representing a decrease of $117,000 compared to same time period of the prior year.  

Noninterest income for the first nine months of 2015 increased $247,000 or approximately 11% to $2,583,000 from $2,336,000 for the first nine months of 2014. This increase was driven by a $62,000 increase in fees generated from the sale of mortgage loans, a $58,000 increase in investment and insurance commissions and a $55,000 increase in service charges and fees on deposit accounts, which was mainly due to strong ATM card and Visa debit card revenue.  

Noninterest expense for the first nine months of 2015 increased $76,000 or approximately 1% to $8,998,000 from $8,922,000 for the first nine months of 2014.  The slight increase is attributed to a $302,000 increase in salaries and benefits due to increases in commissions, retirement expense and new personnel intended to help facilitate planned growth.  This increase was partially offset by decreases of $50,000 in occupancy expense, $70,000 in furniture and repair expenses and $130,000 in other losses associated with the sale of real estate acquired through foreclosure.  Decreases in other noninterest expense categories were also realized as the Company continues its efforts to improve efficiency.

Total assets as of September 30, 2015 were $374,899,000, up approximately 4% from $362,188,000 as of December 31, 2014.  The principal components of the Company’s assets as of September 30, 2015 were $292,891,000 in total loans, $28,727,000 in cash and cash equivalents and $33,314,000 in securities. During the first nine months of 2015, total loans increased approximately 3% or $9,372,000 from $283,519,000 as of December 31, 2014, while securities increased approximately 14% or $4,036,000 from $29,277,000. The Bank’s proactive approach to seeking new loan opportunities is paying off as loan volume increased $12,856,000 in the third quarter, which has offset a $3,484,000 decline experienced during in the first half of 2015. 

The allowance for loan losses was $2,954,000 as of September 30, 2015, which represented 1.01% of total loans outstanding.  In comparison, the allowance for loan losses was $3,070,000 or 1.08% of total loans outstanding as of December 31, 2014.  The decrease in the Company’s allowance is reflective of further improved asset quality as non-performing loans to total loans decreased from 1.51% as of December 31, 2015 to 0.97% as of September 30, 2015 and past dues approach near pre-recession levels.  Non-performing assets to total assets also improved from 1.49% to 1.21% during the same time period.  Management views the allowance’s current level as being sufficient to offset potential future losses associated with problem loans.

Total liabilities as of September 30, 2015 were $340,740,000, up $11,206,000 or 3% from $329,534,000 as of December 31, 2014.  Higher levels of savings and NOW account balances drove the increase, which grew by $15,201,000 or approximately 9%.  The Company also experienced an 8% or $4,136,000 increase in demand accounts.  The Company continues to focus on the expansion of core deposit relationships, which has helped lower the Company’s cost of funds, decrease its dependency on time deposits and provide relationship expansion opportunities.  The increases in savings, NOW and demand accounts were partially offset by a 7% or $7,907,000 decline in time deposits as compared to those respective balances as of December 31, 2014. 

Total stockholders’ equity as of September 30, 2015 was $34,159,000 and consisted primarily of $29,564,000 in retained earnings.  In comparison, as of December 31, 2014, total stockholders’ equity was $32,654,000.  The Company has continued to increase capital while also paying a cash dividend to shareholders in each of the last eleven quarters.  Both the Company and Bank remain “well capitalized” per all regulatory definitions.

In other news, the Board of Directors approved reactivation and continuance of Pinnacle Bankshares Corporation’s Share Repurchase Program until December 31, 2015 during the third quarter.  This program will potentially increase trading volume in the Company’s stock, which the Board and Management believe is in the best interest of shareholders.

Finally, the Bank’s Lynchburg Market Plan continues to move forward with construction commencing on its Timberlake Road Branch renovation and Old Forest Branch relocation projects. These projects are scheduled for completion in early to mid-2016.

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.  First National Bank is in its 108th 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, the lowering of our cost of funds, the maintenance of our net interest margin, the continuation of improved returns, the cost savings related to the deregistration of our common stock, 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
(9/30/15, 6/30/2015 and 9/30/2014 results unaudited)
(In thousands, except ratios, share and per share data)
 3 Months Ended3 Months Ended3 Months Ended
Income Statement Highlights09/30/201506/30/201509/30/2014 
Interest Income$3,522 $3,424 $3,480  
Interest Expense 388  426  488  
Net Interest Income 3,134  2,998  2,992  
Provision for Loan Losses 24  77  6  
Noninterest Income 835  907  820  
Noninterest Expense 3,111  2,983  2,931  
Net Income 567  580  601  

Earnings Per Share (Basic)
 0.37  0.38  0.40  
Earnings Per Share (Diluted) 0.37  0.38  0.39  
 9 Months EndedYear Ended9 Months Ended 
Income Statement Highlights09/30/201512/31/201409/30/2014 
Interest Income$10,332 $14,035 $10,540  
Interest Expense 1,250  1,979  1,509  
Net Interest Income 9,082  12,056  9,031  
Provision for Loan Losses 130  91  (8) 
Noninterest Income 2,583  3,162  2,336  
Noninterest Expense 8,998  12,008  8,922  
Net Income 1,733  2,149  1,682  

Earnings Per Share (Basic)
 1.14  1.42  1.11  
Earnings Per Share (Diluted) 1.13  1.40  1.10  
Balance Sheet Highlights09/30/201512/31/201409/30/2014 
Cash and Cash Equivalents$28,727 $29,451 $41,716  
Total Loans 292,891  283,519  270,493  
Total Securities 33,314  29,277  29,858  
Total Assets 374,899  362,188  361,841  
Total Deposits 336,635  325,204  323,861  
Total Liabilities 340,740  329,534  328,170  
Stockholders' Equity 34,159  32,654  33,671  
Shares Outstanding 1,520,221  1,511,970  1,515,144  
Ratios and Stock Price09/30/201512/31/201409/30/2014 
Gross Loan-to-Deposit Ratio 87.01% 87.18% 83.52% 
Net Interest Margin (Year-to-date) 3.53% 3.60% 3.62% 
Liquidity 16.47% 15.80% 20.16% 
Efficiency Ratio 77.12% 78.80% 78.40% 
Return on Average Assets (ROA) 0.63% 0.60% 0.63% 
Return on Average Equity (ROE) 6.92% 6.59% 6.80% 
Leverage Ratio (Bank) 9.54% 9.36% 9.57% 
Tier 1 Capital Ratio (Bank) 11.62% 11.09% 11.64% 
Total Capital Ratio (Bank) 12.63% 12.12% 12.70% 
Stock Price$17.70 $17.80 $17.61  
Book Value$22.47 $21.60 $22.22  
Asset Quality Highlights09/30/201512/31/201409/30/2014 
Nonaccruing Loans$2,843 $4,284 $1,888  
Loans 90 Days or More Past Due and Accruing 0  0  0  
Total Nonperforming Loans (Impaired Loans) 2,843  4,284  1.888  
Other Real Estate Owned (OREO) (Foreclosed Assets) 1,697  1,107  1,055  
Total Nonperforming Assets 4,540  5,391  2,943  
Nonperforming Loans to Total Loans 0.97% 1.51% 0.70% 
Nonperforming Assets to Total Assets 1.21% 1.49% 0.81% 
Allowance for Loan Losses$2,954 $3,070 $3,043  
Allowance for Loan Losses to Total Loans 1.01% 1.08% 1.12% 
Allowance for Loan Losses to Nonperforming Loans 103.90% 71.66% 161.18% 


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