Pinnacle Bancshares Announces Results for Third Quarter

Nov 06, 2009 - 6:12 PM EST

Nov. 6, 2009 (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.

Mr. Nolen stated: “We are pleased with the results for the third quarter which showed an increase in net income of 35%. For the three months ended September 30, 2009, net income was $453,000, compared with net income of $335,000 for the three months ended September 30, 2009. Net interest income before the provision for loan losses increased 9% or $159,000 which was the principal reason for the increase in net income.”

For the nine months ended September 30, 2009, net loss was $(114,000), compared with net income of $916,000 for the nine months ended September 30, 2008. Net interest income before the provision for loan losses for the nine months ended September 30, 2009 was $5,619,000, compared with $5,129,000 in the same period last year.

The net interest margin was 3.93% and 3.80% for the three and nine months ended September 30, 2009, respectively, compared to 3.43% and 3.31% for the three and six months ended September 30, 2008, respectively.

Mr. Nolen also stated: “While we are pleased with our results for the third quarter and are optimistic about the prospect for improvements in the future, we continue to have significant concerns for weakening commercial real estate markets and the overall economy. The provision for loan losses increased from $226,000 and $727,000 in the three and nine months ended September 30, 2008, respectively, to $281,000 and $2,552,000 in the three and nine months ended September 30, 2009, respectively. The increase in the provision is primarily related to three credits totaling approximately $6,000,000, which relate to participations in commercial real estate loans. Although each of these loans is currently performing, our management determined that weaknesses in these credits, due principally to significant declines in real estate values, supported a decision to establish these additional reserves.”

At September 30, 2009, the Company’s allowance for loan losses as a percent of total loans was 2.84%, compared to 1.21% at September 30, 2008 and 1.19% at December 31, 2008. At September 30, 2009, the Company’s allowance for loan losses as a percent of nonperforming loans was 624.24%, compared to 909.04% at September 30, 2008 and 971.18% at December 31, 2008. 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.

Net charge-offs were $491,000 and $779,000 for the three and nine months ended September 30, 2009, respectively, compared to $143,000 and $825,000 in the three and nine months ended September 30, 2008, respectively. Non-performing loans were .45% of loans at September 30, 2009, compared to .13% at September 30, 2008 and .12% at December 31, 2008. Non-performing assets were 0.59% of total assets at September 30, 2009, compared to 1.66% as of September 30, 2008 and 1.20% as of December 31, 2008.

At September 30, 2009, total stockholders’ equity and book value per share were $20,851,000 and $16.42 per share, respectively, compared to $20,572,000 and $15.35 per share, respectively, at December 31, 2008. Total assets at September 30, 2009, were $217,053,000, compared to total assets at December 31, 2008, of $225,783,000. Pinnacle’s strong equity to assets ratio was 9.61% at September 30, 2009.

Mr. Nolen reminded investors that, although Pinnacle remains well capitalized and has been able to avoid liquidity issues, Pinnacle is operating in a challenging and uncertain economic environment. Financial institutions 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 on borrowers as a result of the uncertain economic environment, including job losses, could have an adverse affect on Pinnacle’s borrowers or their customers, which could adversely affect Pinnacle’s financial condition and results of operations. In addition, 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 nonperforming 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.

Mr. Nolen also observed that on September 29, 2009, the FDIC Board of Directors adopted a notice of proposed rulemaking and request for comment which would require insured depository institutions to repay their quarterly risk-based assessments for the fourth quarter of 2009 and full years 2010 through 2012 on December 29, 2009. This action was taken in connection with the adoption of an Amended Restoration Plan to meet immediate liquidity needs and return the Deposit Insurance Fund to its federally mandated level, without imposing additional special assessments. Further, the prepayment of assessments does not prevent the FDIC from changing assessment rates or revising the risk-based assessment system in future periods.

Pinnacle is generally unable to control the amount of premiums that it is required to pay for FDIC insurance. If there are additional bank or financial institution failures, Pinnacle may be required to pay even higher FDIC premiums than the recently increased levels. Additionally, the FDIC may make material changes to the calculation of the prepaid assessment from the current proposal. Any future changes in the calculation or assessment of FDIC insurance premiums may have a material adverse effect on Pinnacle’s results of operations, financial condition and ability to continue to pay dividends on its common shares.

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,
		2009				2008
Net income		$	453,000			$	335,000
Basic earnings per share		$	0.36			$	0.26
Diluted earnings per share		$	0.36			$	0.26
Performance ratios (annualized):
Return on average assets			0.85	%			0.59	%
Return on average equity			8.82	%			6.97	%
Interest rate spread			3.92	%			3.46	%
Net interest margin			3.93	%			3.43	%
Operating cost to assets			2.93	%			2.77	%
Weighted average basic shares
Outstanding			1,270,128				1,312,019
Weighted average diluted shares
Outstanding			1,270,128				1,310,396
Dividends per share		$	0.11			$	0.11
Provision for loan losses		$	281,500			$	226,000
		Nine Months ended September 30,
		2009				2008
Net income (loss)		$	(114,000	)		$	916,000
Basic earnings per share		$	(0.09	)		$	0.67
Diluted earnings per share		$	(0.09	)		$	0.67
Performance ratios (annualized):
Return on average assets			(0.07	%)			0.53	%
Return on average equity			(0.73	%)			6.10	%
Interest rate spread			3.78	%			3.32	%
Net interest margin			3.80	%			3.31	%
Operating cost to assets			2.95	%			2.65	%
Weighted average basic shares
Outstanding			1,270,128				1,363,421
Weighted average diluted shares
Outstanding			1,270,128				1,363,080
Dividends per share		$	0.33			$	0.33
Provision for loan losses		$	2,552,400			$	727,000

		September 30, 2009				December 31, 2008
Total assets		$	217,053,000			$	225,783,000
Loans receivable, net		$	122,507,000			$	137,001,000
Deposits		$	189,605,000			$	197,479,000
Total stockholders’ equity		$	20,851,000			$	20,572,000
Book value per share		$	16.42			$	15.35
Stockholders’ equity to assets ratio			9.61	%			9.11	%
Asset quality ratios:
Nonperforming loans as a percent of total loans			0.45	%			0.12	%
Nonperforming assets as a percent of total assets			0.59	%			1.20	%
Allowance for loan losses as a percent of total loans			2.84	%			1.19	%
Allowance for loan losses as a percent of nonperforming loans			624.24	%			971.18	%

FINANCIAL INFORMATION
PINNACLE BANCSHARES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
		September 30,				December 31,
		2009				2008
ASSETS:
Cash and cash equivalents		$	4,370,271			$	3,896,727
Interest-bearing deposits in other banks			530,738				88
Securities available-for-sale			71,060,005				65,495,201
FHLB stock			817,500				424,200
First National Bankers Bancshares stock			525,000				525,000
Loans held for sale			1,356,314				801,390
Loans receivable, net of allowances for loan losses of $3,477,496 and $1,650,705 respectively			122,506,658				137,000,890
Real estate owned, net			733,237				2,542,249
Premises and equipment, net			6,746,346				6,913,553
Goodwill			306,488				306,488
Bank owned life insurance			6,359,974				6,108,755
Accrued interest receivable			1,003,382				1,065,640
Other assets			736,896				702,391
Total assets		$	217,052,809			$	225,782,572
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Deposits		$	189,605,415			$	197,478,504
Subordinated debt			3,093,000				3,093,000
Borrowed funds			1,270,000				2,025,000
Official checks outstanding			733,574				696,324
Accrued interest payable			454,663				844,912
Other liabilities			1,045,425				1,072,441
Total liabilities			196,202,077				205,210,181
STOCKHOLDERS’ EQUITY:
Common stock, par value $.01 per share; 2,400,000 authorized; 1,872,313 issued at September 30, 2009 and December 31, 2008, respectively; 1,270,128 outstanding at September 30, 2009 and December 31, 2008, respectively			18,723				18,723
Additional paid in capital			8,923,223				8,923,223
Treasury shares, at cost (602,185 shares outstanding at September 30, 2009 and December 31, 2008, respectively)			(7,320,909	)			(7,320,909	)
Retained earnings			17,661,236				18,194,136
Accumulated other comprehensive loss, net of tax			1,568,459				757,218
Total stockholders’ equity			20,850,732				20,572,391
Total liabilities and stockholders’ equity		$	217,052,809			$	225,782,572
See accompanying notes to these condensed consolidated financial statements.

PINNACLE BANCSHARES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		Three Months Ended						Six Months Ended
		September 30,						September 30,
		2009			2008			2009			2008
INTEREST REVENUE:
Interest on loans		$1,961,266			$2,297,016			$5,994,863			$7,148,175
Interest and dividends on securities		670,954			744,050			2,090,023			2,285,437
Other interest		2,668			25,022			5,950			56,619
		2,634,888			3,066,088			8,090,836			9,490,231
INTEREST EXPENSE:
Interest on deposits		704,104			1,203,856			2,374,388			4,055,759
Interest on subordinated debt		27,054			45,085			89,681			145,149
Interest on borrowed funds		432			72,830			7,461			159,967
		731,590			1,321,771			2,471,530			4,360,875
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES		1,903.298			1,744,317			5,649,306			5,129,356
PROVISION FOR LOAN LOSSES		281,500			226,000			2,552,400			727,300
NET INTEREST INCOME (LOSS) AFTER PROVISION FOR LOAN LOSSES		1,621,798			1,518,317			3,066,906			4,402,056
NONINTEREST INCOME:
Fees and service charges on deposit accounts		340,572			233,279			874,291			706,855
Service fee income		19,968			24,277			63,656			75,540
Fees and charges on loans		54,182			47,904			143,820			162,467
Bank owned life insurance		83,740			89,591			251,220			268,773
Net gain (loss) on sale or write-down of:
Securities available for sale		3,965			(576	)		3,965			13,022
Loans held for sale		53,326			94,413			234,294			183,386
Real estate owned		4,722			(1,083	)		(297,545	)		(1,126	)
		560,475			487,805			1,273,701			1,408,917
NONINTEREST EXPENSE:
Compensation and benefits		785,516			825,766			2,464,327			2,454,313
Occupancy		347,853			299,839			1,033,259			885,149
Marketing and professional		85,082			97,931			287,987			299,109
Other		347,892			349,377			1,049,124			927,019
		1,566,343			1,572,913			4,834,697			4,565,590
INCOME (LOSS) BEFORE INCOME TAXES		615,930			433,209			(494,090	)		1,245,383
INCOME TAX EXPENSE (CREDIT)		162,757			98,000			(380,331	)		329,717
NET INCOME (LOSS)		$453,173			$335,209			$(113,759	)		$ 915,666
Basic earnings (loss) per share		$0.36			$0.26			$(0.09	)		$0.67
Diluted earnings (loss) per share		$0.36			$0.26			$(0.09	)		$0.67
Cash dividends per share		$0.11			$0.11			$0.33			$0.33
Weighted average basic shares outstanding		1,270,128			1,312,019			1,270,128			1,363,421
Weighted average diluted shares outstanding		1,270,128			1,310,396			1,270,128			1,363,080

PINNACLE BANCSHARES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
																		Accumulated
							Additional											Other				Total
		Common Stock					Paid-in			Treasury				Retained				Comprehensive				Stockholders’
		Shares		Amount			Capital			Stock				Earnings				(Loss) Income				Equity
BALANCE, December 31, 2007		1,872,313		$	18,723		$	8,923,223		$	(5,317,798	)		$	17,554,085			$	(244,551	)		$	20,933,682
Comprehensive income (loss)
Net income		0			0			0			0				915,666				0				915,666
Change in fair value of securities available-for-sale, net of tax		0			0			0			0				0				(106,926	)			(106,926	)
Comprehensive income																							808,740
Cash dividends declared ($.33 per share)		0			0			0			0				(445,078	)			0				(445,078	)
Repurchase 192,231 shares of common stock		0			0			0			(2,003,111	)			0				0				(2,003,111	)
BALANCE, September 30, 2008		1,872,313		$	18,723		$	8,923,223		$	(7,320,909	)		$	18,024,673			$	(351,477	)		$	19,924,233
BALANCE, December 31, 2008		1,872,313		$	18,723		$	8,923,223		$	(7,320,909	)		$	18,194,136			$	757,218			$	20,572,391
Comprehensive income (loss):
Net income		0			0			0			0				(113,759	)			0				(113,759	)
Change in fair value of securities available-for-sale, net of tax		0			0			0			0				0				811,241				811,241
Comprehensive income																							697,482
Cash dividends declared ($.33 per share)		0			0			0			0				(419,141	)			0				(419,141	)
BALANCE September 30, 2009		1,872,313		$	18,723		$	8,923,223		$	(7,320,909	)		$	17,661,236			$	1,568,459			$	20,850,732

PINNACLE BANCSHARES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		For the Six Months Ended
		September 30,
		2009				2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	(113,759	)		$	915,666
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			369,597				347,579
Provision for loan losses			2,552,400				727,300
Amortization, net			(12,202	)			(72,187	)
Bank owned life insurance income			(251,219	)			(268,773	)
Net (gain) loss on sale or write-down of:
Securities available for sale			(3,965	)			(13,023	)
Loans held for sale			(234,294	)			(183,386	)
Real estate owned			297,545				1,126
Proceeds from sale of loans			19,913,391				21,115,422
Loans originated for sale			(20,234,021	)			(21,358,966	)
Decrease in accrued interest receivable			62,258				424,896
Increase in other assets			(33,002	)			(23,926	)
Decrease in accrued interest payable			(390,249	)			(325,838	)
Decrease (increase) in other liabilities			(524,535	)			240,420
Net cash used in provided by operating activities			1,397,945				1,526,310
CASH FLOWS FROM INVESTING ACTIVITIES:
Net loan (originations) repayments			11,318,539				(5,845,042
Net change in interest bearing deposits in other banks			(530,650	)			(2,476,186	)
Purchase of securities available-for-sale			(15,471,997	)			(34,670,067	)
Proceeds from maturing, called and payments received on securities available-for-sale			11,191,002				52,552,193
Proceeds from sale of Federal Home Loan Bank stock			369,300				1,642,500
Purchase of Federal Home Loan Bank stock			(762,600	)			(1,745,800	)
Purchase of premises and equipment			(202,390	)			(218,109	)
Proceeds from sales or capital expenditures related to real estate owned			2,174,375				1,381,368
Net cash provided by investing activities			8,085,579				10,620,857
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in passbook, NOW and money market deposit accounts			5,682,327				(158,225	)
Proceeds from sales of time deposits			18,709,606				14,453,994
Payments on maturing time deposits			(32,265,022	)			(24,855,004	)
Decrease (increase) in borrowed funds			(755,000	)			1,150,000
(Increase (decrease) in official checks outstanding			37,250	)			(573,506	)
Repurchase of common stock			(0	)			(2,003,111	)
Payments of cash dividends			(419,141	)			(445,078	)
Net cash used in financing activities			(9,009,980	)			(12,430,930	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			473,544				(283,763	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			3,896,727				4,783,834
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	4,370,271			$	4,500,071
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest on deposits, borrowed funds, and subordinated debentures		$	2,861,779			$	4,686,483
Cash payments for income taxes			150,000				363,000
Real estate acquired through foreclosure			662,908				2,414,760

Source: Business Wire (November 6, 2009 - 6:12 PM EST)

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