Pinnacle Bankshares Corporation Reports Improved Earnings In 2010

Pinnacle Bankshares Corporation (OTCBB:PPBN), the one-bank holding company (the Company) of First National Bank, (the Bank) (quarterly and 2010 annual consolidated results unaudited) reported today net income after taxes of $63,000 or $0.04 per basic and diluted share for the quarter ended December 31, 2010, and $687,000 or $0.46 per basic and diluted share for the year ended December 31, 2010 compared to net income after taxes of $78,000 or $0.06 per basic and diluted share and net income of $351,000 or $0.24 per basic and diluted share, respectively, for the same periods of 2009.

“We are pleased to report improved earnings in 2010 as net income after taxes rose 96% over 2009 net income after taxes despite the challenging economic environment which led to an increase in our provision for loan losses. The combination of improved margins, stability in noninterest income and a decrease in noninterest expense more than offset the effects of the increase in provision,” stated Bryan Lemley, Chief Financial Officer for both the Company and the Bank.

Net interest income was $10,776,000 for the year ended December 31, 2010 compared to $10,004,000 for the year ended December 31, 2009. Net interest income was $2,955,000 for the three months ended December 31, 2010 compared to $2,648,000 for the three months ended December 31, 2009. The net interest margin increased to 3.37% for the year ended December 31, 2010, from 3.23% for the year ended December 31, 2009. Net interest margin increased in the fourth quarter of 2010 to 3.68% as compared to 3.49% in the fourth quarter of 2009 and 3.34% in the third quarter of 2010.

Provision for loan losses was $915,000 in the fourth quarter of 2010 compared to $501,000 in the fourth quarter of 2009. Provision for loan losses was $1,878,000 in 2010 compared with $1,530,000 in 2009.

Noninterest income for the year ended December 31, 2010 decreased $14,000 or less than 1% in 2010 compared to 2009. Noninterest income increased $115,000 or 15% for the three months ended December 31, 2010 compared to the same period of 2009. The increase in noninterest income for the three-month period in 2010 was due to increases in fees from the sale of mortgage loans and investment sales.

Noninterest expense for the year ended December 31, 2010 decreased $134,000 or 1% in 2010 compared to 2009. Noninterest expense increased $34,000 or 1% for the three months ended December 31, 2010 compared to the same period of 2009. The decrease in noninterest expense for the year is attributed primarily to reduced personnel expenses. The increase in the three-month period in 2010 was due to increased commission payments associated with sales of mortgage loans and investments.

Total assets at December 31, 2010 were $337,113,000, up 1% from $332,210,000 at December 31, 2009. The principal components of the Company’s assets at the end of the period were $265,030,000 in net loans, $32,533,000 in cash and cash equivalents and $26,517,000 in securities. During 2010, net loans decreased less than 1% or $874,000 from $265,904,000 at December 31, 2009. Also during 2010, securities increased 32% or $6,361,000.

Total liabilities at December 31, 2010 were $310,631,000, up 1% from $306,359,000 at December 31, 2009, as a result of an increase in savings and NOW accounts of $14,499,000 or 14%. This increase in savings and NOW was partially offset by a decrease in demand deposits of $1,092,000 or 3% and a decrease in time deposits of $8,572,000 or 5%. The increase in deposits is mainly attributable to the success of our “KaChing! Checking” product which offers rates that are favorable to time deposit rates with the benefit of funds being available for withdrawal.

Total stockholders’ equity at December 31, 2010 was $26,482,000 consisting primarily of $21,918,000 in retained earnings. At December 31, 2009, total stockholders’ equity was $25,851,000.

The allowance for loan losses was $4,037,000 as of December 31, 2010, representing 1.50% of total loans outstanding compared to $3,723,000 or 1.38% of total loans outstanding as of December 31, 2009.

Nonperforming loans (including nonaccruing loans and accruing loans more than 90 days past due) totaled $7,843,000, or 2.92% of total loans, as of December 31, 2010, versus $4,017,000, or 1.49% of total loans, at December 31, 2009. Nonperforming loans increased $792,000 in the fourth quarter of 2010, up from $7,051,000 as of September 30, 2010.

Selected financial highlights are shown below.

_______________________________

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 Campbell, Pittsylvania, Franklin, Bedford, Amherst and the City of Lynchburg. The Company operates two branches in the Town of Altavista, one branch in the Town of Amherst, one branch in the Town of Rustburg, two branches in Campbell County, one branch in the City of Lynchburg, one branch in Bedford County at Forest and a loan production office at Smith Mountain Lake in Franklin County at Moneta. First National Bank is celebrating its 103rd year in 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 may include, but are not limited to, statements regarding future operating results and business performance. 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, changes in: interest rates, general economic and business conditions, the real estate market, the legislative/regulatory climate, including the Dodd-Frank Act and regulations adopted thereunder may have on us, 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 Emergency Economic Stabilization Act of 2008, 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.

______________________________

Pinnacle Bankshares Corporation Selected Financial Highlights (Dollar amounts in thousands)

     
Income Statement Highlights            

3 Months Ended12/31/2010

3 Months Ended09/30/2010

3 Months Ended12/31/2009
(Unaudited) (Unaudited) (Unaudited)

Interest Income
$4,295 $4,124 $4,311
 
Interest Expense 1,340 1,470 1,663
 
Net Interest Income 2,955 2,654 2,648
 
Provision for Loan Losses

915

191

501
 
Noninterest Income 894 855 779
 
Noninterest Expense 2,853 2,764 2,819
 
Net Income 63 374 78
 
ROA 0.08% 0.25% 0.10%
 
ROE 0.95% 3.17% 1.22%
 
Net Interest Margin   3.68%   3.34%   3.49%
 
     
Income Statement Highlights            

Year Ended12/31/2010

Year Ended12/31/2009

Year Ended12/31/2008
(Unaudited) (Audited) (Audited)

Interest Income
$16,611 $17,316 $18,555
 
Interest Expense 5,835 7,312 8,346
 
Net Interest Income 10,776 10,004 10,209
 
Provision for Loan Losses

1,878

1,530

2,881
 
Noninterest Income 3,134 3,148 2,896
 
Noninterest Expense 11,037 11,171 9,846
 
Net Income 687 351 306
 
ROA 0.21% 0.11% 0.10%
 
ROE 2.62% 1.40% 1.14%
 
Net Interest Margin   3.37%   3.23%   3.60%
 
     
Balance Sheet Highlights            
12/31/2010 12/31/2009 12/31/2008
(Unaudited) (Audited) (Audited)
Cash and Cash Equivalents

$32,533

$32,060

$15,926
 
Net Loans 265,030 265,904 279,199
 
Total Securities 26,517 20,156 13,931
 
Total Assets 337,113 332,210 321,243
 
Total Deposits 306,954 302,119 287,233
 
Total Liabilities 310,631 306,359 296,324
 
Stockholders’ Equity   26,482   25,851   24,919
 
     
Asset Quality Highlights            
12/31/2010   9/30/2010   12/31/2009
(Unaudited) (Unaudited) (Audited)
Nonperforming Loans to Total Loans

2.92%

2.67%

1.49%
 

Allowance for Loan Losses to Total Loans

1.50%

1.42%

1.38%
 

Allowance for Loan Losses to Nonperforming Loans

51.47%

53.23%

92.68%
 
Nonperforming Loans

$7,843

$7,051

$4,017
 
Other Real Estate Owned (OREO)

474

599

461
 
Allowance For Loan Losses  

4,037
 

3,753
 

3,723
 

Copyright Business Wire 2010

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