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

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

$

-

 

 

$

-

 

 

Contacts

Joe B. Adams, III

Chief Financial Officer

(205) 221-8866

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