(Source: Business Wire)Pinnacle Bankshares Corporation (OTCBB:PPBN), the one-bank holding company (the Company) of First National Bank (quarterly consolidated results unaudited) reported today net income after taxes of $237,000 or $0.16 per basic and diluted share for the quarter ended September 30, 2009, and $273,000 or $0.18 per basic and diluted share for the nine months ended September 30, 2009 compared to net income after taxes of $462,000 or $0.31 per basic and diluted share and $1,507,000 or $1.01 per basic and diluted share, respectively, for the same periods of 2008.

"Despite a challenging economic environment, we continue to be encouraged by another positive quarter," stated Bryan Lemley, Chief Financial Officer for both the Company and First National Bank.

Net interest income was $7,356,000 for the nine months ended September 30, 2009 compared to $7,709,000 for the nine months ended September 30, 2008. Net interest income was $2,539,000 for the three months ended September 30, 2009 compared to $2,645,000 for the three months ended September 30, 2008. The net interest margin decreased to 3.21% for the nine months ended September 30, 2009, from 3.71% for the nine months ended September 30, 2008, although the net interest margin increased in the third quarter of 2009 to 3.29% as compared to 3.21% in the second quarter of 2009.

Interest income from loans, securities and federal funds sold decreased 6.65% and 8.53% for the nine and three months ended September 30, 2009, respectively, compared to the same periods of 2008 as net loans decreased by $10,089,000 since September 30, 2008 while the yield on interest-earning assets decreased by 80 basis points in the same time period. The decrease in yield on interest earning assets is due mainly to the lower interest rate environment resulting in lower yields in both our loan and investment portfolios. Reduced loan demand has caused an increase in cash balances which in the current rate environment are earning substantially lower levels of interest compared to the prior year.

Interest and fees from loans was $12,512,000 for the nine-month period ended September 30, 2009, down from $13,188,000 for the same period in 2008. Interest and fees from loans was $4,185,000 for the three-month period ended September 30, 2009, down from $4,542,000 for the same period in 2008. Interest from securities and federal funds sold was $493,000 for the nine months ended September 30, 2009, down from $744,000 for the nine months ended September 30, 2008. Interest from securities and federal funds sold was $175,000 for the three months ended September 30, 2009, down from $225,000 for the three months ended September 30, 2008. The decrease in interest from securities and federal funds sold from the nine-month and three-month periods in 2008 were mainly due to the decrease in the rate paid on federal funds sold.

Interest expense decreased 9.22% for the nine months ended September 30, 2009 and decreased 14.18% for the three months ended September 30, 2009, compared to the same periods of 2008. Deposits have increased by $16,771,000 in the past twelve months; however, the cost to fund earning assets has fallen by 59 basis points in the same time period. The decrease in the cost to fund earning assets is due mainly to the lower interest rate environment and repricing of certificates of deposit in the past year.

Interest expense was $5,649,000 for the nine months ended September 30, 2009, down from $6,223,000 for the nine months ended September 30, 2008. Interest expense was $1,821,000 for the three months ended September 30, 2009, down from $2,122,000 for the three months ended September 30, 2008.

Provision for loan losses expense decreased $60,000 in the third quarter of 2009 compared to the same period in 2008. Provision for loan losses expense increased $486,000 in the first nine months of 2009 compared with the first nine months of 2008.

"We continue to experience some challenges in asset quality although nonperforming loans and other real estate owned decreased during the third quarter. We may see additional collection issues in our loan portfolio during the remainder of the year due to the recession; however, our balance sheet and capital levels remain strong," stated Lemley.

Noninterest income increased $177,000 or 8.07% for the nine months ended September 30, 2009 compared to the same period of 2008. Noninterest income increased $113,000 or 14.99% for the three months ended September 30, 2009 compared to the same period of 2008. The increases from the nine-month and three-month periods in 2008 were due mainly to 133.85% and 69.39% increases, respectively, in fees on sales of mortgage loans between 2009 and 2008.

Noninterest expense increased $1,207,000 or 16.89% for the nine months ended September 30, 2009 compared to the same period of 2008. Noninterest expense increased $406,000 or 16.41% for the three months ended September 30, 2009 compared to the same period of 2008.