Pinnacle Bankshares Corporation Fourth Quarter And 2012 Earnings Report

Net income for Pinnacle Bankshares Corporation (OTCQB:PPBN), the one-bank holding company (the “Company”) for First National Bank (the “Bank”), was $249,000 or $0.17 per basic and diluted share for the quarter ended December 31, 2012, and $1,338,000 or $0.89 per basic and diluted share for the year ended December 31, 2012. These results compare favorably to net income of $222,000 or $0.15 per basic and diluted share and net income of $1,063,000 or $0.71 per basic and diluted share, respectively, for the same periods of 2011. Quarterly and 2012 annual consolidated results are unaudited.

Profitability as measured by the Company’s return on average assets (“ROA”) was 0.39% for 2012, which is an 8 basis points increase over the 0.31% produced for 2011. Correspondingly, return on average equity (“ROE”) improved 88 basis points in 2012 to 4.83%, compared to 3.95% for the prior year.

“We are pleased to report that 2012 was another year of improved earnings as net income rose approximately 26% compared to 2011. The combination of material improvement in our asset quality and a higher level of noninterest income more than offset an increase in noninterest expense and a lower net interest margin,” stated Aubrey H. Hall, III, President and Chief Executive Officer for both the Company and the Bank.

The Company’s net interest income was $11,601,000 for the year ended December 31, 2012 compared to $12,091,000 for the year ended December 31, 2011. For the three months ended December 31, 2012, net interest income was $2,873,000 compared to $3,081,000 for the same period in 2011. The Company’s net interest margin decreased to 3.55% for the year ended December 31, 2012, from 3.71% for the year ended December 31, 2011. On a quarterly basis, net interest margin decreased to 3.48% for the quarter ended December 31, 2012, from 3.77% for the quarter ended December 31, 2011. The decrease in net interest income and net interest margin were driven by lower loan and investment yields as a result of a continued low interest rate environment. The Company is expecting its cost of funds to decline during 2013 due to anticipated re-pricing of some longer term certificates of deposit during 2013.