Pinnacle Bancshares Announces Results for Second Quarter Ended June 30, 2023

JASPER, Ala.--(BUSINESS WIRE)--Robert B. Nolen, Jr., President and Chief Executive Officer of Pinnacle Bancshares, Inc. (OTCBB: PCLB), today announced the Company’s second quarter results of operations.

• For the three months ended June 30, 2023, net income was $1,145,000 which resulted in basic/diluted earnings per share to be $1.26. Net income for the three months ended June 30, 2022 was $1,210,000, which resulted in basic/diluted earnings per share of $1.25 per share.
• For the six months ended June 30, 2023, Pinnacle reported net income of $2,325,000 which resulted in basic/diluted earnings per share to be $2.56. Net income for the six months ended June 30, 2022 was $2,320,000, which resulted in basic/diluted earnings per share of $2.39 per share. Included in net income for the six months ended June 30, 2022 are Paycheck Protection Program (“PPP”) amortized loan fees of approximately $190,000. There were no PPP amortized loan fees recorded during the six months ended June 30, 2023.
• For the three and six months ended June 30, 2023, return on average assets was 1.36%, and 1.38%, respectively, compared to 1.39% and 1.33%, respectively, in the comparable 2022 period.

The Company’s net interest margin was 3.35 and 3.43% for the three and six months ended June 30, 2023, respectively, as compared to 3.28% for the three and six months ended June 30, 2022. The Company anticipates that interest expense relating to its funding will continue to increase during the remainder of the year as a result of several factors such as increased deposit exception pricing and increased deposit migration to higher yielding deposit products.

Mr. Nolen commented, “In response to concerns about liquidity and capital strength related to bank failures that occurred earlier in the year, we remain confident in our risk status. Our primary focus is, and will continue to be, the Bank’s safety and soundness, and the protection of our depositors.”

At June 30, 2023, the Company’s allowance for loan losses as a percent of total loans was 2.13%, compared to 2.16% at December 31, 2022. Nonperforming assets were $482,000 at June 30, 2023, compared to $0 at December 31, 2022. The ratio of nonperforming assets to total loans was .41% and .00% at June 30, 2023. Effective January 1, 2023, the Company adopted the current expected credit loss (CECL) model to account for credit losses on financial instruments, including loans. The adoption of the CECL model did not have an impact on the Company’s loan loss reserve due to minimal net losses that have occurred during the past five years.

Pinnacle Bank was classified as “well capitalized” at June 30, 2023. All capital ratios are significantly higher than the requirements for a well-capitalized institution. As of June 30, 2023, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 17.66%. As of June 30, 2023, its total capital ratio was 18.74%, and its Tier 1 leverage ratio was 10.94%.

Management believes that the Company has ample liquidity through its low loan to deposit ratio at June 30, 2023, as well as available funding from outside sources. Our net funding availability, as a percentage of our franchise funding, is 103.75% as compared to our established minimal limit of 25%. In addition, the Bank provides access to additional FDIC insurance coverage for accounts that would otherwise exceed deposit insurance coverage. The Company also retested its Federal Funds line and other borrowing lines during the first half of 2023.

The Company’s total deposits at June 30, 2023 decreased $11.7 million, or 3.6%, as compared to December 31, 2022. As mentioned previously, pricing of deposits is anticipated to become more competitive during the remainder of the year, and thus deposits could continue to decrease as they did during the first half of 2023.

Effects of Inflation

Inflation caused a substantial rise in interest rates during 2022 which has had a negative effect in the securities market. As a result of rising interest rates, the Company recorded an accumulated other comprehensive loss on securities available for sale of approximately $30.2 million as of December 31, 2022. The Company’s other comprehensive loss as of June 30, 2023 has been lowered to $27.9 million. Although these unrealized losses recorded as of June 30, 2023 and December 31, 2022 were significant, management does not anticipate these losses to be other than temporary as these unrealized losses do not currently appear related to any credit deterioration within the portfolio but from higher interest rates. In addition, these losses do not impact our regulatory capital ratios.

The Company conducts monthly internal stress testing scenarios of its liquidity to confirm that the Company continues to maintain ample liquidity.

Forward-Looking Statements

Information contained in this press release, other than historical information, may be considered forward-looking in nature and is subject to various risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected. Pinnacle undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in Pinnacle’s expectations. Certain tabular presentations may not reconcile because of rounding.

Pinnacle Bancshares, Inc.’s wholly owned subsidiary Pinnacle Bank has seven offices located in central and northwest Alabama.

PINNACLE BANCSHARES, INC.
Unaudited Financial Highlights
(In Thousands, except share and per share data)
	Three Months Ended June 30,
	2023			2022
Net income	$	1,145,000		$	1,210,000
Basic and diluted earnings per share	$	1.26		$	1.25
Performance ratios (annualized):
Return on average assets		1.36	%		1.39	%
Return on average equity (excluding OCI)		12.30	%		13.82	%
Interest rate spread		3.04	%		3.19	%
Net interest margin		3.35	%		3.28	%
Operating cost to assets		2.25	%		2.02	%
Weighted average basic and diluted shares outstanding		909,534			969,445
Dividends per share	$	0.27		$	0.25
Provision for loan losses	$	-		$	-
	Six Months Ended June 30,
	2023			2022
Net income	$	2,325,000		$	2,320,000
Basic and diluted earnings per share	$	2.56		$	2.39
Performance ratios (annualized):
Return on average assets		1.38	%		1.33	%
Return on average equity (excluding OCI)		12.64	%		13.30	%
Interest rate spread		3.20	%		3.20	%
Net interest margin		3.43	%		3.28	%
Operating cost to assets		2.31	%		2.03	%
Weighted average basic and diluted shares outstanding		909,534			970,114
Dividends per share	$	0.54		$	0.50
Provision for loan losses	$	-		$	-
				(Audited)
	June 30, 2023			December 31, 2022
Total assets	$	338,114,000		$	332,718,000
Loans receivable, net	$	116,197,000		$	115,956,000
Deposits	$	310,540,000		$	322,261,000
Brokered CD’s included in deposits	$	13,694,000		$	11,756,000
Total stockholders’ equity	$	9,986,000		$	5,738,000
Book value per share (excluding OCI)	$	41.19		$	39.17
Total average stockholders’ equity to assets ratio (excluding OCI)		10.95	%		10.47	%
Asset quality ratios:
Nonperforming loans as a percent of total loans		.41	%		.00	%
Nonperforming assets as a percent of total loans		.41	%		.00	%
Allowance for loan losses as a percent of total loans		2.13	%		2.16	%

FINANCIAL INFORMATION
PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
	(Unaudited)			(Audited)
	June 30,			December 31,
	2023			2022
Assets
Cash and cash equivalents	$	2,244,095		$	1,742,938
Interest bearing deposits in banks		19,423,428			12,185,982
Securities available for sale		167,661,860			170,580,649
Restricted equity securities		769,800			773,600
Loans		118,728,829			118,516,666
Less Allowance for loan losses		2,531,388			2,561,079
Loans, net		116,197,441			115,955,587
Premises and equipment, net		7,971,425			6,926,631
Right-of-use lease assets – operating		350,183			398,364
Goodwill		306,488			306,488
Bank owned life insurance		10,402,946			10,206,335
Accrued interest receivable		1,999,655			2,070,895
Deferred tax assets, net		9,884,589			10,594,339
Other assets		902,163			976,361
Total assets	$	338,114,073		$	332,718,169
Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing	$	92,050,511		$	94,784,231
Interest-bearing		218,489,024			227,476,410
Total deposits		310,539,535			322,260,641
Subordinated debentures		3,093,000			3,093,000
Other borrowings		12,500,000			-
Accrued interest payable		474,757			111,652
Operating lease liabilities		350,183			398,364
Other liabilities		1,170,744			1,116,596
Total liabilities		328,128,219			326,980,253
Stockholders’ equity
Common stock, par value $.01 per share; 2,400,000 authorized; 1,872,313 issued; 909,534 shares outstanding, respectively.		18,723			18,723
Additional paid‑in capital		8,923,223			8,923,223
Treasury stock (962,779 shares, respectively)		(15,588,799	)		(15,588,799	)
Retained earnings		44,108,334			42,274,372
Accumulated other comprehensive loss, net of tax		(27,475,627	)		(29,889,603	)
Total stockholders’ equity		9,985,854			5,737,916
Total liabilities and stockholders’ equity	$	338,114,073		$	332,718,169

PINNACLE BANCSHARES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Interest income
Loans, including fees	$	1,853,182	$	1,590,490	$	3,583,300	$	3,245,439
Securities available for sale		1,382,618		1,367,724		2,795,107		2,582,022
Other interest		194,438		35,438		338,294		45,759
Total interest income		3,430,238		2,993,652		6,716,701		5,873,220
Interest expense
Deposits		382,578		125,070		609,629		231,305
Borrowings and repurchase agreements		138,121		-		140,330		-
Subordinated debentures		39,050		36,710		78,100		75,310
Total interest expense		559,749		161,780		828,059		306,615
Net interest income		2,870,489		2,831,872		5,888,642		5,566,605
Provision for loan losses		-		-		-		-
Net interest income after provision for loan losses		2,870,489		2,831,872		5,888,642		5,566,605
Other income
Fees and service charges on deposit accounts		389,931		382,786		752,226		740,619
Service fee income, net		716		811		1,487		1,697
Bank owned life insurance		97,806		95,973		196,612		191,946
Mortgage fee income		5,065		12,887		10,768		27,248
Total other income		493,518		492,457		961,093		961,510
Other expense:
Salaries and employee benefits		1,100,851		1,026,255		2,236,649		2,051,838
Occupancy expense		216,178		203,934		456,339		433,556
Marketing and professional expense		67,772		63,764		136,591		128,665
Other operating expenses		506,441		467,623		1,049,113		929,464
Total other expenses		1,891,242		1,761,576		3,878,692		3,543,523
Income before income taxes		1,472,765		1,562,753		2,971,043		2,984,592
Income tax expense		327,829		353,134		645,934		664,213
Net income	$	1,144,936	$	1,209,619	$	2,325,109	$	2,320,379
Cash dividend per share	$	0.27	$	0.25	$	0.54	$	0.50
Basic and diluted earnings per share	$	1.26	$	1.25	$	2.56	$	2.39
Weighted –average basic and diluted shares outstanding		909,534		969,445		909,534		970,114

PINNACLE BANCSHARES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Six Months Ended June 30, 2023 and 2022
												Accumulated
				Additional								Other			Total
	Common Stock			Paid-in		Treasury			Retained			Comprehensive			Stockholders’
	Shares	Amount		Capital		Stock			Earnings			Income			Equity
Balance December 31, 2021	1,872,313	$	18,723	$	8,923,223	$	(13,533,621	)	$	38,710,339		$	1,540,479		$	35,659,143
Net income	-		-		-		-			2,320,379			-			2,320,379
Cash dividends declared
($.50 per share)	-		-		-		-			(485,395	)		-			(485,395	)
Purchase of treasury stock	-		-		-		(2,055,178	)		-			-			(2,055,178	)
Other comprehensive loss	-		-		-		-			-			(24,825,029	)		(24,825,029	)
Balance June 30, 2022	1,872,313	$	18,723	$	8,923,223	$	(15,588,799	)	$	40,545,323		$	(23,284,550	)	$	10,613,920

												Accumulated
				Additional								Other			Total
	Common Stock			Paid-in		Treasury			Retained			Comprehensive			Stockholders’
	Shares	Amount		Capital		Stock			Earnings			Loss			Equity
Balance December 31, 2022	1,872,313	$	18,723	$	8,923,223	$	(15,588,799	)	$	42,274,372		$	(29,889,603	)	$	5,737,916
Net income	-		-		-		-			2,325,109			-			2,325,109
Cash dividends declared
($.54 per share)	-		-		-		-			(491,147	)		-			(491,147	)
Other comprehensive income	-		-		-		-			-			2,413,976			2,413,976
Balance June 30, 2023	1,872,313	$	18,723	$	8,923,223	$	(15,588,799	)	$	44,108,334		$	(27,465,627	)	$	9,985,854

PINNACLE BANCSHARES, INC,
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	For the Six Months Ended
	June 30,
	2023			2022
OPERATING ACTIVITIES:
Net income	$	2,325,109		$	2,320,379
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		199,301			220,219
Net investment amortization expense		85,736			121,027
Bank owned life insurance		(196,612	)		(191,946	)
(Increase) decrease in accrued interest receivable		71,241			(51,994	)
Increase in accrued interest payable		363,105			14,859
Net other operating activities		(9,928	)		(128,162	)
Net cash provided by operating activities		2,837,952			2,304,382
INVESTING ACTIVITIES:
Net (increase) decrease in loans		(241,853	)		3,765,214
Net (increase) decrease in interest bearing deposits in other banks		(7,237,446	)		202,984
Purchase of securities available for sale		-			(32,299,292	)
Proceeds from maturing, sale and payments received on securities available for sale		6,094,227			3,958,469
Net (purchase) redemption of restricted equity securities		3,800			(32,000	)
Purchase of premises and equipment		(1,244,094	)		(205,952	)
Net cash used in investing activities		(2,625,366	)		(24,610,577	)
FINANCING ACTIVITIES:
Net increase (decrease) in deposits		(11,720,282	)		25,142,388
Proceeds from other borrowings		16,100,000			-
Repayments of other borrowings		(3,600,000	)		-
Purchase of treasury stock		-			(2,055,178	)
Payments of cash dividends		(491,147	)		(485,395	)
Net cash provided by financing activities		288,571			22,601,815
Net increase in cash and cash equivalents		501,157			295,620
Cash and cash equivalents at beginning of period		1,742,938			1,730,327
Cash and cash equivalents at end of period	$	2,244,095		$	2,025,947
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest	$	464,954		$	291,756
Taxes	$	604,928		$	677,568
OTHER NONCASH TRANSACTIONS
Real estate acquired through foreclosure	$	-		$	-
Internally financed sales of other real estate owned	$	-		$	-