Pinnacle Bankshares Corporation Announces Fourth Quarter and 2023 Earnings

ALTAVISTA, Va., Feb. 18, 2023 (GLOBE NEWSWIRE) — Net income for Pinnacle Bankshares Corporation (OTCQX:PPBN), the one-bank holding company (“Pinnacle” or the “Company”) for First National Bank (“First National” or the “Bank”), was $473,000, or $0.22, per basic and diluted share, for the quarter ended December 31, 2023, and $4,375,000, or $2.02, per basic and per diluted share, for the year ended December 31, 2023.   Net income was $1,487,000, or $0.76 per basic and diluted share, and $3,062,000, or $1.85 per basic share and $1.84 per diluted share, respectively, for the same periods of 2020.   Consolidated results for the fourth quarter and the full year 2023 are unaudited.

The $4,375,000 in net income generated during 2023 represents a $1,314,000, or 43%, increase as compared to the prior year, which was primarily driven by higher net interest 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. This increase was partially offset by an increase in noninterest expense, which was also associated with the merger.

Profitability as measured by the Company’s return on average assets (“ROA”) decreased to 0.47% for the year ended December 31, 2023, as compared to 0.52% generated during 2020 with the decrease being driven by an 18% increase in assets due to an influx of deposits. Return on average equity (“ROE”) for 2023 increased to 7.31%, compared to 6.36% for the prior year.

The $473,000 in net income generated in the fourth quarter of 2023 represents a $1,014,000, or 68%, decrease as compared to the fourth quarter of 2020, with the decrease being mainly driven by the Company’s recognition of a $2,694,000 bargain purchase gain in the fourth quarter of 2020 related to the merger. Also contributing to the decrease was a $109 increase in provision for loan losses as compared to the same period of the prior year and pension settlement accounting expense of $425. Partially offsetting these expenses, was higher net interest income, which increased $578,000, or 10%, compared to the fourth quarter of 2020.

“Fourth quarter 2023 returns were down compared to the third quarter of this year and the same time period of last year, however, we are pleased with Pinnacle’s year-over-year improvement and our position heading into 2023,” stated Aubrey H. Hall, III, President and Chief Executive Officer for both the Company and the Bank. Mr. Hall further commented, “During 2023 we successfully completed Virginia Bank’s core system conversion and its full integration with First National. Additionally, we opened our new Graves Mill Branch in Forest, VA and crossed the $1 billion asset threshold. With the merger now completely behind us, we are optimistic about the new year and our ability to enhance revenue and shareholder returns.”   

For the year ended December 31, 2023, the Company produced $25,090,000 in net interest income, which represents a $6,821,000, or 37%, increase as compared to the $18,269,000 generated in 2020. Interest income increased $6,029,000, or approximately 29%, primarily due to increased average loan and investment volume. Interest income derived from Paycheck Protection Program (“PPP”) loans was $1,384,000 in 2023 compared to $976,000 in 2020. Interest expense decreased $792,000, or approximately 31%, despite higher deposit volume, as cost to fund earning assets decreased 26 basis points to 0.20%. Yield on average earning assets decreased 74 basis points due to the low interest rate environment and the buildup of cash on our balance sheet. The Company’s net interest margin decreased to 2.86% for 2023 as compared to 3.34% for 2020.  

The Company produced $6,284,000 in net interest income for the fourth quarter of 2023, which represents a $578,000, or 10%, increase as compared to the $5,706,000 generated in the fourth quarter of 2020. Interest income increased $314,000, or approximately 5%, primarily due to increased loan and investment volume, while interest expense decreased $264,000, or approximately 44%, despite higher deposit volume, as cost of funds decreased 21 basis points to 0.14%.  

The Company’s provision for loan losses was $234,000 for 2023 representing a $18,000, or 7%, decrease as compared to $252,000 for 2020. Provision for loan losses for the fourth quarter of 2023 was $104,000 compared to ($5,000) for the fourth quarter of 2020, due to the downgrade of one commercial relationship. The Company does not expect to incur any losses associated with the relationship.  

The allowance for loan losses was $3,663,000 as of December 31, 2023, which represented 0.66% 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 acquired from Virginia Bank as of December 31, 2023 was $1,829,000. The allowance for loan losses plus the net credit mark was $5,492,000, or 0.99%, of the Company’s total loans as of December 31, 2023 compared to $6,430,000, or 1.14%, of total loans as of December 31, 2020.   Non-performing loans to total loans increased to 0.26% as of December 31, 2023 compared to 0.17% as of year-end 2020. Allowance coverage of non-performing loans as of December 31, 2023 decreased to 255% from 366% as of year-end 2020. Management views the allowance balance as of December 31, 2023 as being sufficient to offset potential future losses associated with problem loans.

Noninterest income decreased $1,485,000, or approximately 17%, to $7,187,000 in 2023 as compared to $8,672,000 in 2020. The decrease is primarily due to the $2,694,000 bargain purchase gain recorded in the fourth quarter of 2020. For 2023, the Company experienced a $678,000, or 52%, increase in ATM and Visa debit card interchange fees as a result of our expanded customer base and renegotiated contract with our core system provider. Additionally, the Company benefitted from a $155,000, or 14%, increase in fees on sales of mortgage loans, a $95,000, or 14%, increase in commissions and fees from sales of investment and insurance products, and a $65,000, or 38%, increase in income derived from the Bank’s investment in Bankers Insurance, LLC. Loan fee income derived from PPP loans was $109,000 in 2023 compared to $258,000 in 2020.

Noninterest income for the fourth quarter of 2023 decreased $3,167,000, or approximately 66%, to $1,659,000 from $4,826,000 for the fourth quarter of 2020 due mainly to the referenced bargain purchase gain. Additionally, fees from sales of mortgage loans decreased $204,000 in the fourth quarter of 2023 compared to the same period in 2020.

Noninterest expense increased $4,313,000, or approximately 19%, in 2023 to $26,826,000 from $22,513,000 in 2020. The increase is primarily attributed to the growth of the Company and was driven by a $4,308,000 increase in salaries and benefits and a $908,000 increase in furniture, equipment and occupancy expenses. The Company also incurred $445,000 in merger-related expenses that Management does not expect to carry over to 2023.

Noninterest expense for the fourth quarter of 2023 decreased $821,000, or approximately 10%, to $7,489,000 as compared to $8,310,000 for the fourth quarter of 2020. The decrease was driven by $1,780,000 in merger-related expenses incurred during the fourth quarter of 2020 and partially offset by an $837,000 increase in salary and benefits, including $425,000 in pension settlement accounting expense, incurred during the fourth quarter of 2023.

Total assets as of December 31, 2023 were $1,015,863, up $155,349,000, or 18%, from $860,514,000 as of December 31, 2020. The principal components of the Company’s assets as of December 31, 2020 were $552,236,000 in total loans, $120,709,000 in securities and $298,595,000 in cash and cash equivalents. During 2023, cash and cash equivalents increased $87,781,000, or 42%, from $210,814,000 as of December 31, 2020 due mainly to an influx of deposits. Total loans decreased $12,080,000, or 2%, from $564,316,000 as of December 31, 2020, due in part to the payoffs associated with forgiven PPP loans as outstanding PPP loan balances decreased $24,974,000. As of year-end, the Company had $1,481,000 in outstanding PPP loan balances.   Securities increased $73,968,000, or 158%, from $46,741,000 as of December 31, 2020.  

Total liabilities as of December 31, 2023 were $953,496,000, up $151,312,000, or 19%, from $802,184,000 as of December 31, 2020. The increase in liabilities was driven by overall deposit growth of $156,743,000, or 20%, consisting of a $91,175,000, or 36%, increase in demand deposits and a $71,746,000, or 17%, increase in savings and NOW accounts in 2023. These increases were partially offset by a $6,178,000, or 5% decrease in time deposits. 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 December 31, 2023 was $62,367,000 and consisted primarily of $47,700,000 in retained earnings. In comparison, as of December 31, 2020, total stockholders’ equity was $58,330,000.   We believe both the Company and Bank remain “well capitalized” per all regulatory definitions.

On February 8, 2023, the Board of Directors declared a cash dividend of $0.14 per share, payable on March 4, 2023. The Company’s press release issued on February 9, 2023, incorrectly stated the record date of the dividend to be February 22, 2023. The correct record date of the dividend is February 18, 2023.

In other news, George Davis, III, resigned his position as a Director of Pinnacle Bankshares Corporation and First National Bank on November 5, 2023 to focus on his family and business. Mr. Davis previously served as a Director of Virginia Bank Bankshares, Inc. and Virginia Bank and Trust Company for four years. Mr. Davis brought valuable knowledge of the Danville Market and business acumen to the Board and we wish him well with his future endeavors.

Additionally, First National Bank plans to permanently close our North Danville Branch located at 3300 Main Street, Danville VA 24540 on April 29, 2023. All customer accounts currently assigned to this branch will be transferred to either the Riverside Branch, the Danville Main Branch or the Mt. Hermon Branch, all located near the North Danville Branch.

And finally, First National Bank has converted its Loan Production Office in Charlottesville, VA to a Full-Service Branch. The Branch opened for business on January 18, 2023 and is ready to serve new and existing customers with all of their banking needs.  

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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 nineteen 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, 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 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.

CONTACT: Pinnacle Bankshares Corporation, Bryan M. Lemley, 434-477-5882 or [email protected]