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*BOLI proceeds of $779,000 and $725,000 were received during the 4^th Quarter of 2024 and 2023, respectively. BOLI proceeds of $779,000 and $1,363,000 were received during full-year 2024 and 2023, respectively.

Net Income and Profitability

Net income generated during the fourth quarter of 2024 represents a $521,000, or 23%, increase as compared to the same time period of 2023. Net of BOLI proceeds, net income generated during the fourth quarter of 2024 represents a $467,000, or 30%, increase as compared to the same time period of 2023. The increase was driven by higher net interest income and noninterest income, partially offset by higher noninterest expense and higher provision for credit losses.

Net income generated for 2024 represents a $584,000, or 6%, decrease as compared to the prior year. Net of BOLI proceeds, net income generated for 2024 and was approximately equal to the prior year.   The overall decrease was driven by higher noninterest expense and provision for credit losses, partially offset by higher net interest income.   

Profitability as measured by the Company’s return on average assets (“ROA”) decreased to 0.92% for 2024, as compared to 1.00% for the same time period of 2023. Correspondingly, return on average equity (“ROE”) decreased to 12.49% for 2024, as compared to 15.69% for the same time period of 2023.

“We are pleased with Pinnacle’s 2024 core performance and investments made for our future through market expansion and talent acquisition,” stated Aubrey H. Hall, III, President and Chief Executive Officer for both the Company and the Bank. He further commented, “Our Company continues to perform very well compared to peers and has benefitted from ample liquidity, an expanding net interest margin, and strong asset quality. These factors have contributed to enhanced returns for our shareholders through increased dividends and share price appreciation.”

Net Interest Income and Margin

The Company generated $9,279,000 in net interest income for the fourth quarter of 2024, which represents a $908,000, or 11%, increase as compared to $8,371,000 for the fourth quarter of 2023. Interest income increased $1,514,000, or 14%, due to higher yields on earning assets and increased loan volume, while interest expense increased $606,000, or 23%, due to higher interest rates paid on deposits and increased certificates of deposit volume.

The Company generated $35,448,000 in net interest income for 2024, which represents a $2,276,000, or 7%, increase as compared to $33,172,000 for 2023. Interest income increased $5,855,000, or 14%, as yield on earning assets increased 54 basis points to 4.98%. Interest expense increased $3,579,000, or 41%, due to higher interest rates paid on deposits as cost to fund earning assets increased 36 basis points to 1.28%. Net interest margin increased to 3.70% for 2024 from 3.52% for 2023.

Reserves for Credit Losses and Asset Quality

Provision for credit losses was $356,000 in the fourth quarter of 2024 as compared to $4,000 in the fourth quarter of 2023. For 2024, the provision for credit losses was $752,000 as compared to $70,000 in 2023. Provision expense increased for the quarter and year as a result of higher loan volume.

The allowance for credit losses (ACL) was $5,084,000 as of December 31, 2024, which represented 0.71% of total loans outstanding.   In comparison, the ACL was $4,511,000 or 0.70% of total loans outstanding as of December 31, 2023. Non-performing loans to total loans decreased to 0.22% as of December 31, 2024, compared to 0.24% as of year-end 2023. ACL coverage of non-performing loans was 321% as of December 31, 2024, compared to 290% as of year-end 2023.   Management views the allowance balance as being sufficient to offset potential future losses in the loan portfolio.

Noninterest Income and Expense

Noninterest income for the fourth quarter of 2024 increased $324,000, or 14%, to $2,681,000 as compared to $2,357,000 for the fourth quarter of 2023. The increase was primarily due to a $100,000 increase in fees generated from sales of mortgage loans, a $100,000 increase in other recoveries, a $45,000 increase in BOLI returns, including earlier referenced proceeds, a $23,000 increase in merchant card fees, and a $20,000 increase in service charges on loan accounts.

Noninterest income for 2024 decreased $85,000, or 1%, to $7,879,000 as compared to $7,964,000 for 2023. The slight decrease was mainly due to a $538,000 decrease in BOLI returns, including earlier referenced proceeds, and a $106,000 decrease in interchange fees. These decreases were partially offset by a $153,000 increase in fees generated from the sale of mortgage loans, a $126,000 increase in merchant card fees, a $98,000 increase in other recoveries, a $63,000 increase in nonsufficient funds and other deposit service charges, a $58,000 increase in service charges on loan accounts, and a $53,000 increase in commissions and fees from sales of investment and insurance products. Excluding BOLI proceeds, noninterest income increased $499,000, 7.5%, year-over-year.

Noninterest expense for the fourth quarter of 2024 increased $280,000, or 3%, to $8,373,000 as compared to $8,093,000 for the fourth quarter of 2023. The increase was primarily due to a $310,000 increase in salaries and employee benefits, a $75,000 increase in occupancy expense, and a $24,000 increase in dealer loan expense partially offset by a $293,000 decrease in core operating system expenses.

Noninterest expense for 2024 increased $2,137,000, or 7%, to $31,417,000 as compared to $29,280,000 for 2023. The increase was mainly due to a $758,000 increase in salaries and employee benefits, a $401,000 increase in core operating system expenses, a $213,000 increase in occupancy expense, a $210,000 in other losses, and a $133,000 increase dealer loan expenses.

The Balance Sheet and Liquidity

Total assets as of December 31, 2024, were $1,043,994,000, up $27,465,000, or 3%, from $1,016,528,000 as of December 31, 2023. The principal components of the Company’s assets as of December 31, 2024, were $711,918,000 in total loans, $175,816,000 in securities, and $108,213,000 in cash and cash equivalents. For 2024, total loans increased $70,481,000, or 11%, from $641,437,000, securities decreased $57,762,000, or 25%, from $233,579,000, and cash and cash equivalents increased $20,624,000, or 24%, from $87,589,000.

The majority of the Company’s securities portfolio is relatively short-term in nature with forty-nine percent (49%) invested in U.S. Treasury Notes having an average maturity of less than a year with $58,000,000 maturing during the first four months of 2025. The Company’s entire securities portfolio was classified as available for sale on December 31, 2024, which provides transparency regarding unrealized losses. Unrealized losses associated within the available for sale securities portfolio were $11,817,000 as of December 31, 2024, or six percent (6%) of book value, an improvement from $14,943,000 as of December 31, 2023.

The Company had a strong liquidity ratio of 33% as of December 31, 2024. The liquidity ratio excluding the available for sale securities portfolio was 12% providing the opportunity to sell excess funds at an attractive federal funds rate. The Company has access to multiple liquidity lines of credit through its correspondent banking relationships and the Federal Home Loan Bank. None of these contingency funding sources have been utilized.

Total liabilities as of December 31, 2024 were $965,608,000, up $17,485,000, or 2%, from $948,123,000 as of December 31, 2023, as deposits increased $18,475,000, or 2%, in 2024 to $950,919,000 from $932,444,000. First National Bank’s number of deposit accounts increased 4% during the same time period as the Bank has benefited from the closures of large national bank branches and bank mergers within markets served along with its reputation for providing extraordinary customer service.

Total stockholders’ equity as of December 31, 2024 was $78,386,000 and consisted primarily of $69,035,000 in retained earnings. In comparison, as of December 31, 2023 total stockholders’ equity was $68,405,000. The increase is due primarily to 2024 profitability and an increase in the market value of the securities portfolio and pension assets.   Both the Company and Bank remain “well capitalized” per all regulatory definitions.

New Full Service Branch in South Boston

On January 2, 2025, First National Bank opened a full service branch at 4027 Halifax Road, South Boston, Virginia. This is in addition to the Bank opening a Loan Production Office (LPO) at 97A Main Street, South Boston, Virginia in the third quarter of 2024. We have had great response from the South Boston and Halifax community and look forward to servicing customers with a community bank approach.

Company Information

Pinnacle Bankshares Corporation is a locally managed community banking organization serving Central and Southern Virginia. The one-bank holding company of First National Bank serves market areas consisting primarily of all or portions of the Counties of Amherst, Bedford, Campbell, Halifax, and Pittsylvania, and the Cities of Charlottesville, Danville, and Lynchburg. The Company has a total of nineteen branches with one branch in Amherst County within the Town of Amherst, two branches in Bedford County; five branches in Campbell County, including two within the Town of Altavista, where the Bank was founded; one branch in the City of Charlottesville, three branches in the City of Danville; three branches in the City of Lynchburg; and three branches in Pittsylvania County, including one within the Town of Chatham. A Loan Production Office and a full-service branch have recently been opened in the South Boston area of Halifax County. First National Bank is in its 117^th year of operation.

Cautionary Statement Regarding Forward-Looking Statements

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, including statements made in Mr. Hall’s quotes may include, but are not limited to, statements regarding the credit quality of our asset portfolio in future periods, the expected losses of nonperforming loans in future periods, returns and capital accretion during future periods, our cost of funds, the maintenance of our net interest margin, future operating results and business performance and our growth initiatives. 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 consumer spending and saving habits that may occur, including increased inflation; changes in general business, economic and market conditions; attracting, hiring, training, motivating and retaining qualified employees; changes in fiscal and monetary policies, and laws and regulations; changes in interest rates, inflation rates, deposit flows, loan demand and real estate values; changes in the quality or composition of the Company’s loan portfolio and the value of the collateral securing loans; changes in macroeconomic trends and uncertainty, including liquidity concerns at other financial institutions, and the potential for local and/or global economic recession; changes in demand for financial services in Pinnacle’s market areas; increased competition from both banks and non-banks in Pinnacle’s market areas; a deterioration in credit quality and/or a reduced demand for, or supply of, credit; increased information security risk, including cyber security risk, which may lead to potential business disruptions or financial losses; volatility in the securities markets generally, including in the value of securities in the Company’s securities portfolio or in the market price of Pinnacle common stock specifically; and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. 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.

Selected Financial Highlights are shown on the next page.

CONTACT: Pinnacle Bankshares Corporation, Bryan M. Lemley, 434-477-5882 or bryanlemley@1stnatbk.com