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Pinnacle Bankshares Corporation Announces Record Earnings

ALTAVISTA, Va., Oct. 26, 2021 (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 $1,747,000, or $0.80 per basic and diluted share, for the quarter ended September 30, 2021, and $3,902,000, or $1.80 per basic and diluted share, for the nine months ended September 30, 2021.   Net income was $460,000, or $0.29 per basic and diluted share, and $1,575,000, or $1.01 per basic and diluted share, respectively, for the same periods of 2020.   Consolidated results for the quarter and nine month periods are unaudited.

Net income generated through nine months of 2021 represents a $2,327,000, or 148%, increase as compared to the same time period of the prior year, which was mainly driven by higher net interest income and higher noninterest income as the Company’s assets and customer base have increased due to its merger with Virginia Bank Bankshares, Inc. (“Virginia Bank”), which occurred in the fourth quarter of 2020. These increases were partially offset by an increase in noninterest expense, which was also associated with the merger. The $3,902,000 in net income generated through the first nine months of 2021 is the highest net income through nine months in the Company’s history.   

Third quarter 2021 net income of $1,747,000, represents a $1,287,000, or 280%, increase as compared to the third quarter of 2020, due to the same factors impacting year-to-date performance through September 30, 2021, and is also a record high.

Profitability as measured by the Company’s return on average assets (“ROA”) increased to 0.57% for the nine months ended September 30, 2021, as compared to 0.39% generated during the first nine months of 2020. Correspondingly, return on average equity (“ROE”) increased for the nine month period of 2021 to 8.79%, compared to 4.54% for the same time period of the prior year.

“We are pleased to have produced record high net income though the first nine months of 2021, which has been largely driven by our partnership with Virginia Bank,” stated Aubrey H. Hall, III, President and Chief Executive Officer for both the Company and the Bank. Mr. Hall further commented, “As expected, merger-related expenses have begun to subside during the second half of the year, which has helped improve our profitability.”    

For the nine months ending September 30, 2021, the Company produced $18,805,000 in net interest income, which represents a 50% increase as compared to the $12,563,000 generated for the same time period of 2020. Interest income increased $5,714,000, or approximately 39%, due to increased loan and investment volume, while interest expense decreased $528,000, or approximately 28%, despite higher deposit volume, as cost to fund earning assets decreased 29 basis points to 0.22%. Yield on earning assets decreased 75 basis points to 3.14% as net interest margin decreased from 3.38% for the first nine months of 2020 to 2.93% for the same period of 2021.

The Company produced $6,657,000 in net interest income for the third quarter of 2021, which represents a $2,398,000, or 56%, increase as compared to the $4,259,000 generated in the third quarter of 2020. Interest income increased $2,166,000, or approximately 45%, due to increased loan and investment volume, while interest expense decreased $232,000, or approximately 39%, despite higher deposit volume, as cost of funds decreased.

The provision for loan losses was $129,000 through nine months of 2021 as compared to $257,000 for the first nine months of 2020. Provision for the third quarter of 2021 was $44,000 compared to $31,000 for the third quarter of 2020. The decline in provision expense for the year has been the result of strong credit quality and the pandemic’s limited impact on the loan portfolio. As of September 30, 2021, the Bank had one loan totaling $3,000 with a payment deferral as a result of the pandemic.

The allowance for loan losses was $3,605,000 as of September 30, 2021, which represented 0.67% of total loans outstanding. In comparison, the allowance for loan losses was $3,478,000 or 0.62% of total loans outstanding as of December 31, 2020. The net credit mark on loans purchased from Virginia Bank as of September 30, 2021 was $1,902,000. The allowance for loan losses plus the net credit mark was $5,507,000, or 1.02%, of the Company’s total loans as of September30, 2021. Non-performing loans to total loans increased slightly to 0.25% as of September 30, 2021, compared to 0.17% as of year-end 2020. Allowance coverage of non-performing loans was 271% as of the end of the quarter compared to 366% as of year-end 2020. Management views the allowance balance as being sufficient to offset potential future losses associated with problem loans.

Noninterest income through nine months of 2021 increased $1,682,000, or approximately 44%, to $5,528,000, from $3,846,000 for the same time period of 2020. The increase was mainly due to a $571,000 increase in ATM and debit card interchange fees primarily due to the additional customers and accounts from Virginia Bank, a $359,000 increase in fees generated from sales of mortgage loans, a $173,000 increase in loan fee income due mainly to the origination of Paycheck Protection Program (“PPP”) loans, a $112,000 increase in commissions and fees on investment and insurance sales, and a $65,000 increase in income derived from the Bank’s investment in Bankers Insurance, LLC.

Noninterest income for the third quarter of 2021 increased $474,000, or approximately 36%, to $1,781,000, from $1,307,000 for the third quarter of 2020 as ATM and debit card interchange fees increased by $241,000, or 64%. Other categories of noninterest income also saw smaller increases due to the growth of the Company.

Noninterest expense through nine months of 2021 increased $5,134,000, or approximately 36%, to $19,337,000, from $14,203,000 for the same period of 2020. The increase is attributed to the growth of the Company, including the merger with Virginia Bank, and was driven by a $3,471,000 increase in salaries and benefits, a $904,000 increase in occupancy expense and $454,000 in merger related expenses. Management does not expect to incur any further merger related expenses in the fourth quarter of 2021.

Noninterest expense for the third quarter of 2021 increased $1,222,000, or approximately 25%, to $6,184,000 from $4,962,000 for the third quarter of 2020. The increase is due to the same factors impacting year-to-date performance through September 30, 2021. Noninterest expense for the third quarter decreased $446,000, or 7%, as compared to the second quarter of 2021, and $339,000, or 5%, as compared to the first quarter of 2021, due to merger-related expenses subsiding to include expenses associated with severance packages provided to prior Virginia Bank employees.

Total assets as of September 30, 2021 were $953,184,000, up 11% from $860,514,000 as of December 31, 2020. The principal components of the Company’s assets as of September 30, 2021 were $541,968,000 in total loans, $280,613,000 in cash and cash equivalents and $91,725,000 in securities. During the first nine months of 2021, total loans decreased approximately 4%, or $22,348,000, from $564,316,000 as of December 31, 2020. The decline was primarily due to payoffs associated with forgiven PPP loans as outstanding PPP loan balances decreased $23,133,000 during the first nine months of 2021 to $5,075,000.  

Cash and cash equivalents increased $69,549,000, or 33%, during in the first nine months of 2021 due to a continued influx of deposits, which has driven total assets growth. Securities have increased $44,984,000, or 96%, due primarily to the reinvestment of Virginia Bank’s securities portfolio, which was liquidated last year immediately following the merger. While the Bank will continue to purchase securities in an effort to further deploy available cash and enhance its return on earning assets, a “cautious approach” will be taken due to the current low interest rate environment.  

Total liabilities as of September 30, 2021 were $892,484,000, up $90,300,000, or 11%, from $802,184,000 as of December 31, 2020 as deposits increased 12%, or $93,103,000, to $874,439,000 during the first nine months of 2021. First National Bank continues to experience strong deposit growth as a result of federal government stimulus in response to the pandemic, an overall “flight to safety” by depositors and relationships moved to the Bank from larger national financial institutions.

Total stockholders’ equity as of September 30, 2021 was $60,700,000 and consisted primarily of $47,530,000 in retained earnings. In comparison, as of December 31, 2020 total stockholders’ equity was $58,330,000. Both the Company and Bank remain “well capitalized” per all regulatory definitions.

In other news, First National Bank has submitted an application to the Office of the Comptroller of the Currency to convert its Loan Production Office in Charlottesville, VA to a full service branch during the first part of 2022 as the next step of building out the Bank’s presence in the market.

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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, four branches in the City of Danville, three branches in the City of Lynchburg, and two additional branches in Pittsylvania County. The Company also operates a loan production office located in the City of Charlottesville. First National Bank is in its 113th 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 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, our growth initiatives, results of the Company’s merger with Virginia Bank, and the potential effects of the COVID-19 Pandemic and related impacts on the Company’s financial condition and results of operations. 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, the Company’s branch expansions, cyber threats, attacks or similar events, the potential adverse effects of the ongoing COVID-19 Pandemic on local and national economies and markets and any governmental or societal responses thereto, the effect of steps taken by the Company in response to the COVID-19 Pandemic, the severity and duration of the pandemic, the impacts of tightening or loosening of governmental restrictions, the ability of the Company and the Bank to realize the anticipated benefits of the merger with Virginia Bank, changes in: interest rates, general economic and business conditions, including unemployment levels and slowdowns in economic growth, declining collateral values, especially real estate, the real estate market, the legislative/regulatory climate, including laws and regulations concerning taxes, banking, securities, insurance, and healthcare with which the Company and its subsidiaries must comply, including recent and potential legislative and regulatory changes in response to the COVID-19 Pandemic such as the CARES Act and the rules and regulations that may be promulgated thereunder, 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 CARES Act, including PPP, 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 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
(9/30/21, 6/30/2021 and 9/30/2020 results unaudited)
(In thousands, except ratios, share and per share data)
    
  3 Months Ended  3 Months Ended  3 Months Ended 
Income Statement Highlights 09/30/2021  06/30/2021  09/30/2020 
Interest Income$7,019 $6,650 $4,853 
Interest Expense 362  489  594 
Net Interest Income 6,657  6,161  4,259 
Provision for Loan Losses 44  23  31 
Noninterest Income 1,781  1,809  1,307 
Noninterest Expense 6,184  6,630  4,962 
Net Income 1,747  1,056  460 
Earnings Per Share (Basic) 0.80  0.49  0.29 
Earnings Per Share (Diluted) 0.80  0.48  0.29 
    
  9 Months Ended  Year Ended  9 Months Ended 
Income Statement Highlights 09/30/2021  12/31/2020  09/30/2020 
Interest Income$20,194 $20,788 $14,480 
Interest Expense 1,389  2,519  1,917 
Net Interest Income 18,805  18,269  12,563 
Provision for Loan Losses 129  252  257 
Noninterest Income 5,528  8,672  3,846 
Noninterest Expense 19,337  22,513  14,203 
Net Income 3,902  3,062  1,575 
Earnings Per Share (Basic) 1.80  1.85  1.01 
Earnings Per Share (Diluted) 1.80  1.84  1.01 
    
Balance Sheet Highlights 09/30/2021  12/31/2020  09/30/2020 
Cash and Cash Equivalents$280,613 $211,064 $78,306 
Total Loans 541,968  564,316  420,720 
Total Securities 91,725  46,741  44,828 
Total Assets 953,184  860,514  573,746 
Total Deposits 874,439  781,336  513,457 
Total Liabilities 892,484  802,184  526,345 
Stockholders' Equity 60,700  58,330  47,401 
Shares Outstanding 2,170,311  2,158,379  1,563,922 
          
Ratios and Stock Price 09/30/2021  12/31/2020  09/30/2020 
Gross Loan-to-Deposit Ratio 61.98% 72.22% 81.94%
Net Interest Margin (Year-to-date) 2.93% 3.34% 3.38%
Liquidity 43.48% 34.12% 24.11%
Efficiency Ratio 79.52% 83.52% 86.50%
Return on Average Assets (ROA) 0.57% 0.52% 0.39%
Return on Average Equity (ROE) 8.79% 6.36% 4.54%
Leverage Ratio (Bank) 7.54% 8.92% 8.40%
Tier 1 Capital Ratio (Bank) 12.79% 11.84% 11.65%
Total Capital Ratio (Bank) 13.47% 12.48% 12.51%
Stock Price$23.49 $23.00 $19.25 
Book Value$27.97 $27.03 $30.31 
    
Asset Quality Highlights 9/30/2021  12/31/2020  9/30/2020 
Nonaccruing Loans$1,266 $891 $1,370 
Loans 90 Days or More Past Due and Accruing 65  59  0 
Total Nonperforming Loans 1,331  950  1,370 
Troubled Debt Restructures Accruing 1,587  1,714  189 
Total Impaired Loans 2,918  2,664  1,559 
Other Real Estate Owned (OREO) (Foreclosed Assets) 0  519  18 
Total Nonperforming Assets 1,331  1,469  1,388 
Nonperforming Loans to Total Loans 0.25% 0.17% 0.33%
Nonperforming Assets to Total Assets 0.14% 0.17% 0.24%
Allowance for Loan Losses$3,605 $3,478 $3,528 
Allowance for Loan Losses to Total Loans 0.67% 0.62% 0.84%
Allowance for Loan Losses Plus Net Credit Mark to Total Loans (1) 1.02% 1.14%NA 
Allowance for Loan Losses to Nonperforming Loans 270.85% 366.11% 257.42%
    


(1)This is a non-GAAP measure calculated by dividing the sum of the allowance for loan losses of $3,605 plus the net credit mark of $1,902 by total loans $541,968 which equals 1.02% for 9/30/2021. For 12/31/2020, the measure was the allowance for loan losses of $3,478 plus the net credit mark of $2,952 by total loans $564,316 which equals 1.14%.

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