Pinnacle Bancshares Announces Results for Third Quarter

JASPER, Ala.--(BUSINESS WIRE)--Robert B. Nolen, Jr., President and Chief Executive Officer of Pinnacle Bancshares, Inc. (OTCBB:PCLB), today announced Pinnacle’s third quarter results of operations.

“Declines in charge-offs and non-performing asset ratios reflect our continued success in resolving problems loan issues aggressively”

“We are pleased with the strength and stability of our Company,” said Mr. Nolen. “Our earnings and asset quality have continued to improve, and our capital ratios remain strong.”

For the three months ended September 30, 2012, net income was $551,000, compared with net income of $429,000 for the three months ended September 30, 2011.

For the nine months ended September 30, 2012, net income was $1,448,000, compared with net income of $776,000 for the nine months ended September 30, 2011.

Basic and diluted earnings per share for the three and nine month periods ended September 30, 2012, were $0.46 and $1.17 per share, respectively, compared to $0.34 and $0.61 per share, respectively, for the same periods last year.

The Company’s net interest margin was 3.98% and 3.96% for the three months and nine months ended September 30, 2012, respectively, compared to 4.09% and 4.14% for the three months and nine months ended September 30, 2011, respectively.

Mr. Nolen commented: “Our positive results for the third quarter were primarily due to improvements in credit quality, a significant decline in provisions to the loans loss reserve, and a reduction in charge-offs.”

Pinnacle’s provision for loan losses decreased from $100,000 and $1,050,000 in the three and nine months ended September 30, 2011, respectively, to no provision in the three months ended September 30, 2012, and $200,000 in the nine months ended September 30, 2012.

Charge-offs, net of recoveries, were $165,000 and $619,000 for the three and nine months ended September 30, 2012, respectively, compared to $286,000 and $837,000 for the three and nine months ended September 30, 2011, respectively. The ratio of non-performing assets to total loans was 0.76% at September 30, 2012, compared to 1.14% at September 30, 2011 and 1.01% December 31, 2011. “Declines in charge-offs and non-performing asset ratios reflect our continued success in resolving problems loan issues aggressively,” said Mr. Nolen.

For the three and nine months ended September 30, 2012, recoveries were $13,000 and $126,000, respectively, compared to $134,000 and $188,000 for the three and nine months ended September 30, 2011, respectively.

At September 30, 2012, the Company’s allowance for loan losses as a percent of total loans was 1.90%, compared to 1.14% at September 30, 2011 and 2.13% at December 31, 2011. At September 30, 2012, the Company’s allowance for loan losses as a percent of non-performing loans was 240.37%, compared to 223.09%, at September 30, 2011 and 211.68% at December 31, 2011. Based on current real estate valuations, Pinnacle believes its allowance for loan losses is adequate. If economic conditions do not improve, additional charge-offs and further significant increases in the allowance may be necessary.

Pinnacle was classified as “well capitalized” at the end of the third quarter of 2012. At September 30, 2012, total risk-based capital was 18.58% for the holding company and 18.26% for the bank, compared with a regulatory requirement of 10.0% for a well capitalized institution. Tier 1 risk-based capital was 17.41% for the holding company and 17.10% for the bank; both ratios were significantly higher than the 6.0% requirement for a well capitalized institution.

In June 2012, the Federal Reserve Board issued proposed new rules to implement revised capital requirements under the Dodd-Frank Act and the Based III international capital standards. Management will evaluate the potential impact of these rules to ensure the capital levels of both the holding company and the bank continue to exceed amounts required to be deemed “well capitalized.”

Mr. Nolen again reminded investors that, although Pinnacle remains well capitalized and has been able to avoid liquidity issues, Pinnacle continues to operate in a challenging and uncertain economic and regulatory environment. Financial institutions in Alabama and throughout the U. S. have been, and continue to be, affected by significant declines in economic conditions and constrained financial markets. Pinnacle retains direct exposure to the residential and commercial real estate markets.

The Company believes declines in economic conditions and financial stresses as a result of the uncertain economic environment, including job losses, have had and could continue to have an adverse affect on Pinnacle’s borrowers or their customers, which could adversely affect Pinnacle’s financial condition and results of operations.

Deterioration in local economic conditions in Pinnacle’s markets could drive losses beyond those which are provided for in the allowance for loan losses and result in a number of adverse consequences, including increases in loan delinquencies; increases in non-performing assets; decreases in demand for Pinnacle’s products and services, which could affect Pinnacle’s liquidity position; and decreases in the value of the collateral securing Pinnacle’s loans, which could reduce customers’ borrowing power.

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 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 September 30,
	2012			2011
Net income	$	551,000		$	429,000
Basic and diluted earnings per share	$	0.46		$	0.34
Performance ratios (annualized):
Return on average assets		1.08	%		0.83	%
Return on average equity		9.71	%		7.89	%
Interest rate spread		3.97	%		4.08	%
Net interest margin		3.98	%		4.09	%
Operating cost to assets		2.99	%		3.28	%
Weighted average basic and diluted shares outstanding		1,205,128			1,270,128
Dividends per share	$	0.11		$	0.11
Provision for loan losses	$	0		$	100,000
	Nine Months Ended September 30,
	2012			2011
Net income	$	1,448,000		$	776,000
Basic and diluted earnings per share	$	1.17		$	0.61
Performance ratios (annualized):
Return on average assets		0.94	%		0.50	%
Return on average equity		8.57	%		4.87	%
Interest rate spread		3.94	%		4.13	%
Net interest margin		3.96	%		4.14	%
Operating cost to assets		2.94	%		3.29	%
Weighted average basic and diluted shares outstanding		1,251,557			1,270,128
Dividends per share	$	0.33		$	0.33
Provision for loan losses	$	200,000		$	1,050,000
	September 30, 2012			December 31, 2011
Total assets	$	204,698,000		$	199,231,000
Loans receivable, net	$	93,426,000		$	102,446,000
Deposits	$	174,641,000		$	170,577,000
Total stockholders’ equity	$	22,977,000		$	22,334,000
Book value per share	$	19.07		$	17.58
Stockholders’ equity to assets ratio		11.22	%		11.21	%
Asset quality ratios:
Nonperforming loans as a percent of total loans		0.79	%		1.01	%
Nonperforming assets as a percent of total assets		0.76	%		1.39	%
Allowance for loan losses as a percent of total loans		1.90	%		2.13	%
Allowance for loan losses as a percent of nonperforming loans		240.37	%		211.68	%

FINANCIAL INFORMATION   PINNACLE BANCSHARES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
	September 30,			December 31,
	2012			2011
Assets
Cash and cash equivalents	$	1,147,734		$	2,510,642
Interest bearing deposits in banks		5,919,184			1,613,466
Securities available-for-sale		86,333,800			75,734,778
Restricted equity securities		985,800			957,800
Loans held for sale		596,958			0
Loans receivable, net of allowances for loan losses of $1,810,117 and $2,228,644 respectively		93,426,125			102,445,514
Foreclosed Assets		797,902			403,881
Premises and equipment, net		6,094,387			6,186,794
Goodwill		306,488			306,488
Bank owned life insurance Accrued interest receivable Other assets		7,377,323			7,117,402
		824,567			1,018,331
		887,386			935,476
Total assets	$	204,697,654		$	199,230,572
Liabilities and stockholders’ equity
Deposits	$	174,640,872		$	170,576,626
Subordinated debt		3,093,000			3,093,000
Repurchase agreements		1,113,183			984,957
Official checks outstanding		1,030,772			771,362
Accrued interest payable		145,323			182,020
Other liabilities		1,697,146			1,288,204
Total liabilities		181,720,296			176,896,169
Stockholders’ equity
Common stock, par value $.01 per share; 2,400,000 authorized; 1,872,313 issued at September 30, 2012 and December 31, 2011, respectively; 1,205,125 and 1,270,128 outstanding at September 30, 2012 and December 31, 2011, respectively		18,723			18,723
Additional paid-in capital		8,923,223			8,923,223
Treasury shares, at cost (667,185 and 602,185 shares outstanding at September 30, 2012 and December 31, 2011, respectively)		(7,974,814	)		(7,320,909	)
Retained earnings		19,652,905			18,609,374
Accumulated other comprehensive loss, net of tax		2,357,321			2,103,992
Total stockholders’ equity		22,977,358			22,334,403
Total liabilities and stockholders’ equity	$	204,697,654		$	199,230,572

PINNACLE BANCSHARES, INC.   UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	Three Months Ended September 30,					Nine Months Ended September 30,
	2012		2011			2012		2011
INTEREST REVENUE:
Interest & fee Income on loans	$	1,417,472	$	1,627,091		$	4,381,122	$	4,994,665
Interest and dividends on securities		615,610		625,105			1,829,374		1,855,726
Other interest		12,781		16,744			29,250		28,396
		2,045,863		2,268,940			6,239,746		6,878,787
INTEREST EXPENSE:
Interest on deposits		167,143		280,957			577,577		935,453
Interest on subordinated debt		26,624		24,997			80,306		74,835
Interest on borrowed funds		89		0			463		72
		193,856		305,954			658,346		1,010,360
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES		1,852,007		1,962,986			5,581,400		5,868,427
PROVISION FOR LOAN LOSSES		0		100,000			200,000		1,050,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		1,852,007		1,862,986			5,381,400		4,818,427
NONINTEREST INCOME:
Fees and service charges on deposit accounts		248,174		224,598			657,273		710,563
Service fee income		10,053		12,453			32,149		39,476
Bank owned life insurance		86,640		85,075			259,920		255,225
Net gain (loss)on sale or write-down of:
Loans held for sale		13,987		47,316			57,892		47,316
Real estate owned		43,377		(120,049	)		52,667		(106,663	)
		402,231		249,393			1,059,901		945,917
NONINTEREST EXPENSE:
Compensation and benefits		686,968		746,522			2,117,317		2,460,832
Occupancy		267.978		367,239			820,063		1,046,051
Marketing and professional		120,911		100,516			346,671		284,312
Other		443,988		350,571			1,254,288		1,126,547
		1,519,845		1,564,848			4,538,339		4,917,742
INCOME BEFORE INCOME TAXES		734,393		547,531			1,902,962		846,602
INCOME TAX EXPENSE (BENEFIT)		183,768		118,111			454,596		71,040
NET INCOME	$	550,625	$	429,420			1,448,366	$	775,562
Cash dividend per share	$	0.11	$	0.11		$	0.11	$	0.33
Basic and diluted earnings per share	$	0.46	$	0.34		$	1.17	$	0.61
Weighted –average basic and diluted shares outstanding		1,205,128		1,270,128			1,235,967		1,270,128

PINNACLE BANCSHARES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE SIX MONTHS ENDED SEPTEMBER 30 2012 AND 2011
												Accumulated
				Additional								Other		Total
	Common Stock			Paid-in		Treasury			Retained			Comprehensive		Stockholders’
	Shares	Amount		Capital		Stock			Earnings			Income		Equity
Balance December 31, 2010	1,872,313	$	18,723	$	8,923,223	$	(7,320,909	)	$	17,836,009		$	1 ,185,580	$	20,642,626
Net income	0		0		0		0			657,806			0		657,806
Cash dividends declared ($.22 per share)	0		0		0		0			(419,143	)		0		(419,143	)
Other comprehensive income	0		0		0		0			0			830,188		830,188
Balance September 30, 2011	1 ,872,313	$	18,723	$	8,923,223	$	(7,320,909	)	$	18,074,672		$	2,015,768	$	21,711,477
												Accumulated
				Additional								Other		Total
	Common Stock			Paid-in		Treasury			Retained			Comprehensive		Stockholders’
	Shares	Amount		Capital		Stock			Earnings			Income		Equity
Balance December 31, 2011	1,872,313	$	18,723	$	8,923,223	$	(7,320,909	)		18,609,374		$	2,103,992	$	22,334,403
Net income	0		0		0		0			1,448,366			0		1,448,366
Cash dividends declared ($.22 per share)	0		0		0		0			(404,835	)		0		(404,835	)
Repurchase of 65,000 shares of common stock	0		0		0		(653,905	)		0			0		(653,905	)
Other comprehensive income	0		0		0		0			0			253,329		253,329
Balance September 30, 2012	1 ,872,313	$	18,723	$	8,923,223	$	(7,974,814	)	$	19,652,905		$	2,357,321	$	22,977,358

PINNACLE BANCSHARES, INC,   UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	For the Nine Months Ended
	September 30,
	2012			2011
OPERATING ACTIVITIES:
Net income	$	1,448,366		$	775,562
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		358,666			369,537
Provision for loan losses		200,000			1,050,000
Provision for losses on real estate owned					(139,215	)
Amortization expense, net		179,235			(26,727	)
Bank owned life insurance		(259,921	)		(255,226	)
Gain on sale of loans held for sale		(57,892	)		(30,996	))
Loss on sale of or write-down of real estate owned, net		(43,377	)		137,659
Gain on securities held for sale					(47,316	)
Proceeds from sales of loans held for sale		4,282,359			2,959,141
Origination of loans held for sale		(4,821,425	)		(2,947,438	)
Decrease (increase)in accrued interest receivable		193,764			(55,340	)
Decrease in other assets		48,090			337,473
Decrease in accrued interest payable		(36,697	)		(139,265	)
Increase (decrease) in other liabilities		253,677			(228,365	)
Net provided by operating activities		1,744,845			1,759,484
INVESTING ACTIVITIES:
Net loan repayments		8,125,238			9,534,398
Net increase in interest bearing deposits in other banks		(4,305,718	)		(14,179,054	)
Purchase of securities available-for-sale		(19,600,681	)		(17,678,133	)
Proceeds from maturing, sale and payments received on securities available-for-sale		9,231,018			14,324,847
Purchase of correspondent bank stock		(163,900	)		0
Proceeds from sales of correspondent bank stock		135,900			219,300
Purchase of premises and equipment		(266,259	)		(60,574	)
Proceeds from sales or capital expenditures related to real estate owned		343,507			590,808
Net cash used in investing activities		(6,500,895	)		(7,248,408	)
FINANCING ACTIVITIES:
Net increase in deposits		4,064,246			5,195,539
Increase in official checks outstanding		259,410			259,252
Increase in repurchase agreements		128,226			0
Repurchase of common stock		(653,905	)		0
Payments of cash dividends		(404,835	)		(419,138	)
Net cash provided by financing activities		3,393,142			5,035,653
NET DECREASE IN CASH AND CASH EQUIVALENTS		(1,362,908	)		(453,271	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		2,510,642			3,486,659
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,147,734		$	3,033,388
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest on deposits, borrowed funds, and subordinated debentures	$	695,043		$	1,149,625
Cash payments for income taxes	$	354,000		$	6,000
OTHER NONCASH TRANSACTIONS
Real estate acquired through foreclosure	$	694,151			705,632