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

About this update from Pinnacle Bancshares, Inc.

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 $ -     $ -     View source version on businesswire.com: https://www.businesswire.com/news/home/20230814464982/en/

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