Pinnacle Bankshares Corporation Announces Record High Third Quarter and Year-to-Date 2022 Earnings

Rhea-AI Summary

Pinnacle Bankshares Corporation (OTCQX:PPBN) reported record net income for Q3 2022, at $2,398,000 or $1.10 per share, a 37% increase year-over-year. For the first nine months, net income reached $5,681,000 or $2.61 per share, a 46% rise compared to 2021. Key drivers included a 15% increase in net interest income to $21,624,000, primarily due to higher loan volumes and yields. However, noninterest income fell by 3% to $5,385,000, attributed to lower mortgage loan sales amid rising interest rates. The company's total assets decreased 2% to $999,147,000.

Positive

• Record net income of $2,398,000 for Q3 2022, a 37% increase YoY.
• Net income for nine months reached $5,681,000, a 46% increase compared to 2021.
• Net interest income rose 15% to $21,624,000, driven by higher loan volumes.
• Return on average assets increased to 0.75%, up from 0.57% in 2021.
• Non-performing loans decreased to 0.22%, improving from 0.26% at year-end 2021.

Negative

• Noninterest income fell by 3% to $5,385,000 due to lower mortgage loan sales.
• Total assets decreased by 2% to $999,147,000 compared to year-end 2021.
• Total stockholders’ equity decreased to $50,808,000 from $62,367,000 at year-end 2021.

ALTAVISTA, Va., Oct. 27, 2022 (GLOBE NEWSWIRE) -- Pinnacle Bankshares Corporation (OTCQX:PPBN), the one-bank holding company (the “Company” or “Pinnacle”) for First National Bank (the “Bank”), has produced record net income for the third quarter and through nine months of 2022. Net income for the third quarter of 2022 was $2,398,000, or $1.10 per basic and diluted share. Net income for the nine months ended September 30, 2022 was $5,681,000, or $2.61 per basic and diluted share.   In comparison, net income was $1,747,000, or $0.80 per basic and diluted share, and $3,902,000, or $1.80 per basic and diluted share, respectively, for the same periods of 2021.   Consolidated results for the quarter and nine-month periods are unaudited.

Net income generated through nine months of 2022 represents a $1,779,000, or 46%, increase as compared to the same time period of the prior year, which was mainly driven by higher net interest income, partially offset by lower noninterest income and higher noninterest expense. Net interest income increased due to higher volume of loans and securities as well as higher yields on federal funds sold. 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. Noninterest expense increased due to higher salaries and employee benefits along with higher core operating system expense.

Net income generated during the third quarter of 2022 represents a $651,000, or 37%, increase as compared to the third quarter of 2021, due to the same factors impacting year-to-date performance through September 30, 2022.

Profitability as measured by the Company’s return on average assets (“ROA”) increased to 0.75% for the nine months ended September 30, 2022, as compared to 0.57% generated during the first nine months of 2021. Correspondingly, return on average equity (“ROE”) increased for the nine-month period of 2022 to 13.47%, compared to 8.79% for the same time period of the prior year.

“We are pleased to announce Pinnacle’s record net income for the third quarter and through nine months of 2022,” stated Aubrey H. Hall, III, President and Chief Executive Officer for both the Company and the Bank. Mr. Hall further commented, “As previously stated, we are beginning to recognize the earnings potential of growth initiatives pursued over the past few years and remain optimistic regarding further enhancement of Pinnacle’s performance, despite volatile economic conditions.”

The Company produced $21,624,000 in net interest income through nine months of 2022, which represents a 15% increase as compared to the $18,805,000 generated for the same time period of 2021. Interest income increased $2,259,000, or approximately 11%, due to higher loan and investment volume. Yield on earning assets decreased 1 basis point to 3.13% due to deferred PPP loan fees recognized through yield in 2021. Interest expense decreased $560,000, or approximately 40%, despite higher deposit volume, as cost to fund earning assets decreased 9 basis points to 0.12%. Net interest margin has increased from 2.93% through nine months of 2021 to 3.01% through nine months of 2022.  

The Company produced $8,178,000 in net interest income for the third quarter of 2022, which represents a $1,521,000, or 23%, increase as compared to the $6,657,000 generated in the third quarter of 2021. Interest income increased $1,413,000, or approximately 20%, due to increased loan and investment volume, while interest expense decreased $108,000, or approximately 30%, despite higher deposit volume, as cost of funds decreased. Yield on earning assets increased from 3.17% in the second quarter of 2022 to 3.50% in the third quarter of 2022 due to increases in loans and securities and higher interest rates paid on federal funds sold.

Provision for loan losses was $76,000 through nine months of 2022 as compared to $129,000 through nine months of 2021. Provision for the third quarter of 2022 was $40,000 compared to $44,000 for the third quarter of 2021. The decline in provision expense has been the result of Pinnacle’s strong credit quality. The Company has net recoveries of $78,000 through nine months of 2022 and has experienced a 50% year-to-date decrease in its criticized and classified loans.   

The allowance for loan losses was $3,763,000 as of September 30, 2022, which represented 0.60% 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 acquired through Pinnacle’s merger with Virginia Bank Bankshares, Inc. was $1,365,000 as of September 30, 2022. The allowance for loan losses plus the net credit mark was $5,128,000 or 0.82% of the Company’s total loans as of September 30, 2022. Non-performing loans to total loans decreased to 0.22% as of September 30, 2022, compared to 0.26% as of year-end 2021. Allowance coverage of non-performing loans was 277% 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 through nine months of 2022 decreased $143,000, or approximately 3%, to $5,385,000, from $5,528,000 through nine months of 2021. The decrease was mainly due to a $509,000 decrease in fees generated from sales of mortgage loans and a $190,000 decrease in loan fee income due mainly to the origination of PPP loans that occurred in 2021. These decreases were partially offset by a $351,000 increase in debit card interchange fees and a $168,000 increase in overdraft fees.  

Noninterest income for the third quarter of 2022 decreased $54,000, or approximately 3%, to $1,727,000, from $1,781,000 for the third quarter of 2021 as fees generated from sales of mortgage loans fees decreased by $181,000. This decrease was partially offset by a $79,000 increase in debit card interchange fees and a $53,000 increase in overdraft fees.  

Noninterest expense through nine months of 2022 increased $405,000, or approximately 2%, to $19,742,000, from $19,337,000 through nine months of 2021 as core operating system expenses increased $470,0000, salaries and employee benefits increased $171,000 and FDIC insurance increased $115,000.

Noninterest expense for the third quarter of 2022 increased $636,000, or 10%, to $6,820,000 from $6,184,000 for the third quarter of 2021 due to the same factors impacting year-to-date performance through September 30, 2022.  

Total assets as of September 30, 2022 were $999,147,000, down 2% from $1,015,863,000 as of December 31, 2021. The principal components of the Company’s assets as of September 30, 2022 were $623,389,000 in total loans, $251,427,000 in securities and $75,680,000 in cash and cash equivalents. Through nine months of 2022, total loans have increased $71,153,000, or 13%, and securities have increased $130,718,000, or 108%, while cash and cash equivalents have decreased $222,915,000, or 75%.   The security portfolio increase includes over $100,000,000 in two- and three-year U.S. Treasury notes purchased during the first four months of 2022 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 September 30, 2022 were $948,339,000, down $5,157,000, or less than 1%, from $953,496,000 as of December 31, 202. Deposits have decreased $7,436,000, or less than 1%, since year-end 2021 to $930,643,000 as of September 30, 2022.  

Total stockholders’ equity as of September 30, 2022 was $50,808,000 and consisted primarily of $52,444,000 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 $16,461,000 increase in the Company’s unrealized accumulated other comprehensive losses on available for sale securities portfolio resulting from the rapid increase in interest rates. Both the Company and Bank remain “well capitalized” per all regulatory definitions as these unrealized losses are excluded from regulatory capital ratio calculations.

___________________________

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 and our growth initiatives and their results. 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 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 (9/30/22, 6/30/2022 and 9/30/2021 results unaudited)
(In thousands, except ratios, share and per share data)
	3 Months Ended	3 Months Ended	3 Months Ended
Income Statement Highlights	9/30/2022	6/30/2022	09/30/2021
Interest Income	$8,432	$7,602	$7,019
Interest Expense	254	280	362
Net Interest Income	8,178	7,322	6,657
Provision for Loan Losses	40	13	44
Noninterest Income	1,727	1,665	1,781
Noninterest Expense	6,820	6,594	6,184
Net Income	2,398	1,892	1,747
Earnings Per Share (Basic)	1.10	0.87	0.80
Earnings Per Share (Diluted)	1.10	0.87	0.80
	9 Months Ended	Year Ended	9 Months Ended
Income Statement Highlights	9/30/2022	12/31/2021	09/30/2021
Interest Income	$22,453	$26,817	$20,194
Interest Expense	829	1,728	1,389
Net Interest Income	21,624	25,089	18,805
Provision for Loan Losses	76	233	129
Noninterest Income	5,385	7,187	5,528
Noninterest Expense	19,742	26,826	19,337
Net Income	5,681	4,375	3,902
Earnings Per Share (Basic)	2.61	2.02	1.80
Earnings Per Share (Diluted)	2.61	2.02	1.80
Balance Sheet Highlights	9/30/2022	12/31/2021	9/30/2021
Cash and Cash Equivalents	$75,680	$298,595	$280,613
Total Loans	623,389	552,236	541,968
Total Securities	251,427	120,709	91,725
Total Assets	999,147	1,015,863	953,184
Total Deposits	930,643	938,079	874,439
Total Liabilities	948,339	953,496	892,484
Stockholders' Equity	50,808	62,367	60,700
Shares Outstanding	2,178,486	2,170,311	2,170,311
Ratios and Stock Price	9/30/2022	12/31/2021	9/30/2021
Gross Loan-to-Deposit Ratio	66.98%	58.87%	61.98%
Net Interest Margin (Year-to-date)	3.01%	2.86%	2.93%
Liquidity	35.94%	47.46%	43.48%
Efficiency Ratio	73.12%	83.14%	79.52%
Return on Average Assets (ROA)	0.75%	0.47%	0.57%
Return on Average Equity (ROE)	13.47%	7.31%	8.79%
Leverage Ratio (Bank)	7.68%	7.37%	7.54%
Tier 1 Capital Ratio (Bank)	11.82%	12.54%	12.79%
Total Capital Ratio (Bank)	12.42%	13.20%	13.47%
Stock Price	$20.14	$24.70	$23.49
Book Value	$23.32	$28.74	$27.97
Asset Quality Highlights	9/30/2022	12/31/2021	9/30/2021
Nonaccruing Loans	$1,219	$1,434	$1,266
Loans 90 Days or More Past Due and Accruing	141	0	65
Total Nonperforming Loans	1,360	1,434	1,331
Troubled Debt Restructures Accruing	1,064	1,096	1,587
Total Impaired Loans	2,424	2,530	2,918
Other Real Estate Owned (OREO) (Foreclosed Assets)	0	0	0
Total Nonperforming Assets	1,360	1,434	1,331
Nonperforming Loans to Total Loans	0.22%	0.26%	0.25%
Nonperforming Assets to Total Assets	0.14%	0.14%	0.14%
Allowance for Loan Losses	$3,763	$3,663	$3,605
Allowance for Loan Losses to Total Loans	0.60%	0.66%	0.67%
Allowance for Loan Losses Plus Net Credit Mark to Total Loans(1)	0.82%	0.99%	1.02%
Allowance for Loan Losses to Nonperforming Loans	277%	255%	271%

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 $3,763 plus the net credit mark of $1,365 by total loans $623,389 which equals 0.82% for 9/30/2022. 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 September 30, 2021, the allowance for loan losses of $3,605 was added to the credit marker of $1,902 and divided by the totals loans of $541,968 which equals 1.02%

FAQ

What was Pinnacle Bankshares Corporation's net income for Q3 2022?

Pinnacle Bankshares Corporation reported a net income of $2,398,000 for Q3 2022.

How did Pinnacle Bankshares' net income for the first nine months of 2022 compare to 2021?

The net income for the first nine months of 2022 was $5,681,000, which is a 46% increase compared to $3,902,000 in 2021.

What contributed to the increase in net interest income for Pinnacle Bankshares in 2022?

The increase in net interest income was driven by higher loan volumes and improved yields, totaling $21,624,000 for the first nine months.

What were the key factors affecting Pinnacle Bankshares' noninterest income in 2022?

The decline in noninterest income was primarily due to lower sales of mortgage loans and reduced loan fee income.

How did Pinnacle Bankshares' stockholders' equity change by September 30, 2022?

As of September 30, 2022, total stockholders’ equity was $50,808,000, down from $62,367,000 at year-end 2021.