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Pinnacle Bankshares Corporation (OTCQB: PPBN), the one-bank holding company (the “Company”) for First National Bank (the “Bank”), reported net income today of $399,000 or $0.26 per basic and diluted share for the quarter ended September 30, 2012, and $1,089,000 or $0.72 per basic and diluted share for the nine months ended September 30, 2012. While net income for the quarter was lower than the net income of $608,000 generated during the same time period for the prior year, year to date net income for nine months was ahead of the $841,000 produced through September 30, 2011.
Profitability as measured by the Company’s annualized return on average assets (“ROA”) was 0.43% for the nine months ended September 30, 2012, which is a 10 basis points increase over the 0.33% generated for the same time period of 2011. Correspondingly, annualized return on average equity (“ROE”) improved 110 basis points to 5.27% for the nine months ended September 30, 2012, as compared to 4.17% for the same time period in 2011.
Aubrey H. Hall, III, President and Chief Executive Officer of both the Company and the Bank, commented, “We are pleased to report that Pinnacle’s net income for the first nine months of 2012 has outpaced last year’s performance for the same time period. Significant improvement in the quality of our loan portfolio combined with a material decline in loan charge-offs has resulted in a lower provision for loan losses, which has driven these results.”
The Company’s net interest income was $8,728,000 for the nine months ended September 30, 2012 compared to $9,010,000 for the same period of 2011. Interest income decreased approximately 6% or $686,000 to $11,724,000 for the nine months ended September 30, 2012, while interest expense was down approximately 12% or $404,000 to $2,996,000 for the nine months ended September 30, 2012. These decreases in interest income and interest expense were attributable to a decline in yields versus volume, as total loans and deposits as of September 30, 2012 have not materially changed compared to the same point in time for the prior year. The larger dollar decline in interest income compared to interest expense has caused net interest margin to decrease eighteen basis points to 3.56% for the first nine months of 2012 compared to the same time period of 2011. Per Mr. Hall, “As loans continue to be refinanced and modified to lower interest rates it is becoming increasingly difficult to maintain our net interest margin. However, we should benefit from a lowering of our cost of funds in the near future due to the re-pricing of some longer term certificates of deposit. Going forward we will attempt to improve our net interest margin by continuing to proactively seek opportunities to book quality loans and prudently invest excess funds, while being mindful of both credit quality and interest rate risk.”