<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark one)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1997
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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Commission file number 1-12707
Pinnacle Bancshares, Inc.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 72-1370314
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(State or Other Jurisdiction of (I.R.S. Employer)
Incorporation or Organization) Identification No.)
1811 Second Avenue, Jasper, Alabama 35502-1388
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(Address of Principal Executive Offices)
(205) 221-4111
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(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 889,823
Transitional Small Business Disclosure Format (check one):
Yes No X
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
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<S> <C> <C>
ASSETS
Cash on hand and in banks $ 2,879,396 $ 3,600,999
Interest-bearing deposits at other banks 3,868,664 3,084,064
Securities available for sale 48,944,812 47,633,063
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55,692,872 54,318,126
Loans receivable, net 129,857,656 135,284,759
Loans held for sale (fair value $1,428,742 and $1,462,882
at December 31, 1996 and March 31, 1997, respectively) 1,428,742 1,462,882
Real estate owned 1,010,340 1,023,833
Premises and equipment, net 5,176,990 5,298,636
Other assets 2,335,776 2,213,969
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$ 195,502,376 $ 199,602,205
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LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits 173,407,101 177,847,147
Borrowed funds 3,750,000 3,640,000
Official checks outstanding 1,675,929 1,247,203
Other liabilities 1,384,646 1,424,697
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180,217,676 184,159,047
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STOCKHOLDERS' EQUITY
Preferred stock, par $.01 per share, no shares issued,
100,000 authorized 0 0
Common stock, par $.01 per share, 889,824 and
889,823 outstanding, 10,000,000 and 2,400,000 authorized 9,320 8,898
Additional paid-in capital 8,376,037 8,031,142
Treasury stock, at cost, 42,176 shares at December 31, 1996 (345,317) 0
Retained earnings 7,315,182 7,640,083
Unrealized loss on securities for sale, net (70,522) (236,965)
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15,284,700 15,443,158
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$ 195,502,376 $ 199,602,205
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</TABLE>
See accompanying notes to consolidated financial statements.
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PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL OPERATIONS
<TABLE>
<CAPTION>
Three months Ended
March 31,
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1996 1997
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(unaudited)
<S> <C> <C>
INTEREST REVENUE:
Interest on Loans $2,702,772 $2,997,638
Interest on securities held to maturity 503,410 --
Interest and dividends on securities 351,606 777,649
Other interest 94,921 75,284
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3,652,709 3,850,571
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INTEREST EXPENSE:
Interest on deposits 2,004,599 2,132,471
Interest on borrowed funds 132,331 51,829
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Net interest income before provision for 2,136,930 2,184,300
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loan losses 1,515,779 1,666,271
Provision for losses on loans 60,000 75,000
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Net interest income after provision for
losses on loans 1,455,779 1,591,271
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NONINTEREST INCOME
Fees and service charges on 159,795 152,253
Real estate operations, net 38,185 35,141
Net gain (loss) on sale of:
Loans 77,293 69,849
Other Income 76,910 60,750
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352,183 317,993
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NONINTEREST EXPENSE
Compensation and benefits 545,244 599,946
Occupancy 247,384 265,223
FDIC insurance 92,278 6,074
Marketing and professional 132,986 33,297
Other 208,445 203,599
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1,226,337 1,108,139
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Earnings before income tax expense 581,625 801,125
Income Tax expense 221,304 298,796
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Net earnings $ 360,321 $ 502,329
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Net earnings per share $ 0.41 $ .056
Cash dividend per share $ 0.18 $ 0.20
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Weighted average shares outstanding 889,824 889,823
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</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
PINNACLE BANCSHARES, INC,
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1996 1997
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CASH FLOW PROVIDED BY OPERATING ACTIVITIES: (unaudited)
<S> <C> <C>
Net earnings $ 360,321 $ 502,329
Adjustments to reconcile earnings to net cash flows
provided by operating activities:
Depreciation 118,057 122,344
Provision for losses on loans 60,000 75,000
Net (gain) loss on sale of:
Loans held for sale (67,570) (69,849)
Amortization, net 164,919 60,724
Proceeds from sale of loans 11,017,260 9,057,577
Loans originated for sale (10,432,406) (9,091,717)
(Decrease) increase in other assets 80,027 (121,807)
(Increase) decrease in other liabilities (896,906) (40,051)
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Net cash provided by (used in) operating activities 403,702 494,550
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CASH FLOW PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Principal collected on loans and securities 30,114,959 20,210,455
Loans originated for portfolio (17,610,630) (23,731,621
Loans purchased for portfolio (594,000) --
(Increase) decrease in interest-bearing deposits at other banks (4,702,141) (784,600)
Proceeds from sale of securities 6,169,750 196,000
Proceeds from purchase of securities (5,031,000) --
Proceeds from sale of securities (239,934) (1,113,340)
Proceeds from sale of fixed assets -- 869,351
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Net cash provided by (used in) investing activities 8,107,004 (4,353,755)
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CASH FLOW USED IN FINANCING ACTIVITIES:
Net (increase) decrease in passbook, NOW and money market
deposit accounts (1,275,920) 1,782,627
Proceeds from sales of time deposits 7,799,348 9,368,146
Payments from maturing time deposits (5,560,483) (6,710,726)
Payments on borrowed funds (10,100,000) (110,000)
Increase (decrease) in official checks 592,547 428,726
Payments of dividends (160,168) (177,965)
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Net cash provided by (used in) financing activities (8,704,676) 4,580,808
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NET (INCREASE) DECREASE IN CASH (193,970) 721,603
CASH AT BEGINNING OF PERIOD 2,512,007 2,879,396
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CASH AT END OF PERIOD 2,318,037 3,600,999
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SUPPLEMENTAL DISCLOSURES:
Cash payments for interest on deposits and borrowed funds 2,003,295 1,965,358
Cash payments for income taxes 75,000 85,000
Real estate acquired through foreclosure 63,061 1,023,833
</TABLE>
See accompanying notes to consolidated financial statements.
4
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PINNACLE BANCSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying unaudited interim condensed consolidated financial statements
include the accounts of Pinnacle Bancshares Inc., and the wholly owned
subsidiary Pinnacle Bank and its wholly owned subsidiaries First General
Service(s) Corporation, and First General Ventures Corporation. All significant
intercompany transactions and accounts have been eliminated in consolidation.
In the opinion of management, all adjustments (none of which are other than
normal recurring accruals) necessary for a fair presentation of the results of
such interim periods have been included. The results of operations for the three
month period ending March 31, 1997, are not necessarily indicative of the
results of operations which may be expected for the entire year.
These condensed Financial Statements should be read in conjunction with the
Financial Statements and the notes thereto included in the Company's annual
report on Form 10KSB for the year ended December 31, 1996. The accounting
policies followed by the company are set forth in the summary of Significant
Accounting Policies in the Company's Financial Statements.
2. CONVERSION AND REORGANIZATION:
On January 29, 1997, the stockholders of the Bank approved the conversion of the
Bank from a federal stock savings bank to an Alabama-chartered commercial bank
and the reorganization of the converted Bank into the holding company form of
ownership by approving an Agreement and Plan of Conversion and Reorganization,
pursuant to which the converted bank subsidiary of Pinnacle Bancshares, Inc., a
Delaware corporation (the "Holding Company"), and each outstanding share of
common stock of the Bank was converted into one share of common stock of the
Holding Company. The fiscal year of the Holding company and the converted Bank
ends on December 31, of each year.
3. NEW ACCOUNTING STANDARD:
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share.
This statement established standards for computing and presenting earnings per
share (EPS) and applies to entities with publicly held common stock or potential
common stock. This Statement simplifies the standards for computing earnings per
share previously found in APB Opinion No.15, Earnings per share, and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS and requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.
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This Statement is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods; earlier application is not
permitted. This Statement requires restatement of all prior-period EPS data
presented. The company will adopt the Statement at fiscal year-end 1997. Basic
and diluted earnings per share under SFAS #128 would be identical to earnings
per share as presented in the financial statements.
4. LITIGATION:
The Bank is currently a defendant in litigations arising in the normal course of
business. Although it is not possible to determine with any certainty at this
point the potential exposure related to damages in connection with any pending
or threatened litigations against the Bank, it is the opinion of management,
based upon consultation with legal council, that the ultimate resolutions of all
pending litigation against the Bank will not have a materially adverse effect on
the Bank's financial condition.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
PINNACLE BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONVERSION AND REORGANIZATION: On January 29, 1997, the stockholders of Pinnacle
Bank (the "Bank") approved both the conversion of the Bank from a federal stock
savings bank to an Alabama-chartered commercial bank and the reorganization of
the converted Bank into the holding company form of ownership by approving an
Agreement and Plan of Conversion and Reorganization, pursuant to which the
converted Bank became a wholly-owned commercial bank subsidiary of Pinnacle
Bancshares, Inc., a Delaware corporation (the "Holding Company"), and each
outstanding share of common stock of the Bank was converted into one share of
the common stock of the Holding Company. The conversion and reorganization were
consummated on January 31, 1997. The fiscal year of the Holding Company and the
converted Bank ends on December 31 of each year.
FINANCIAL CONDITION: Total assets increased from $195.5 million as of December
31, 1996 to $199.6 million as of September 30, 1996. This increase was due
primarily to an increase in net loans receivable of approximately $5.4 million.
INVESTMENTS: The Bank's investment portfolio at December 31, 1996 and at March
31, 1996 consisted primarily of U.S. Treasury and Agency securities with a
majority maturing in two years or less. During December 1995, the Bank
reclassified $29.9 million in mortgage-backed securities from "held to maturity"
to "available for sale". The Bank presently intends to sell most long-term
fixed-rate mortgage loans as they are originated.
NET EARNINGS: The Bank reported a net income for the first quarter ending March
31, 1997 of $502,329 or $0.56 per share, compared with a net income of $360,321,
or $0.41 per share, in the first quarter last year. This increase was primarily
due to an increase in interest on loans.
CAPITAL RESOURCES: Historically, funds provided by operations, mortgage loan
principal repayments, savings deposits and short-term borrowings have been the
Bank's principal sources of funds. In addition, the Bank has the ability to
obtain funds through the sale of mortgage loans, through borrowings from the
FHLB of Atlanta and other borrowings sources. At March 31, 1997, the Bank's
total loan commitments, including construction loans in process and unused lines
of credit were approximately $19.1 million. Management believes that the Bank's
liquidity and other sources of funds are sufficient to fund all commitments
outstanding and other cash needs. The Holding Company and the Bank are required
to maintain certain levels of regulatory
7
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capital. At March 31, 1997 the Holding Company and the Bank were in requirement
with all regulatory capital requirements.
RESULTS OF OPERATIONS: Net interest income after the provision for loans losses
on loans showed an increase of $135,492 or 9.3% for the three month period ended
March 31, 1997 as compared to the corresponding period in the previous year. The
increase was primarily due to an increase in interest rate spread offset by a
decrease in expense on borrowed funds. Market interest rates have remained
relatively steady during the three months ended March 31, 1997, However if rates
were to rise rapidly, the Banks net income would be adversely affected.
The Bank's yield on interest-bearing assets increased from approximately 8.09 %
in the three months ended March 31, 1997 to approximately 8.18% for the current
year period. This increase was due in part to an increase in interest rates. The
average deposits increased by $13.3 million and was offset by a decrease in
average borrowed funds of $3.4 million The Bank's cost of funds decreased from
approximately 4.96% in the three month period ended March 31, 1996 to 4.92% in
the current year period.
Other noninterest income, which includes fees and services charges , Real estate
operations, net, net gain (loss) on sale of loans and other income decreased
approximately $34,190 in the three month period ended March 31, 1997, as
compared to the corresponding prior year period. This decrease was due primarily
to a decrease in gain on sale of mortgage loans as well as slight decreases in
all other noninterest income.
Other expenses decreased approximately $118,198. This decrease was due primarily
to a decrease in FDIC deposit insurance of $86,204, and a decrease in marketing
and professional expense of $99,689 and was off set by an increase in
compensation and benefits and occupancy expense.
8
<PAGE> 9
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
PINNACLE BANCSHARES, INC
DATE: May 14, 1997 By: /s/ Robert B. Nolen, Jr.
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Robert B.Nolen, Jr.
President and Chief
Executive Officer
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
9
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PINNACLE BANK FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,600,999
<INT-BEARING-DEPOSITS> 3,084,064
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 47,633,063
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 135,284,759
<ALLOWANCE> 1,198,537
<TOTAL-ASSETS> 199,602,205
<DEPOSITS> 177,847,147
<SHORT-TERM> 120,000
<LIABILITIES-OTHER> 2,671,900
<LONG-TERM> 3,520,000
0
0
<COMMON> 9,320
<OTHER-SE> 15,433,838
<TOTAL-LIABILITIES-AND-EQUITY> 199,602,205
<INTEREST-LOAN> 2,997,638
<INTEREST-INVEST> 777,649
<INTEREST-OTHER> 75,284
<INTEREST-TOTAL> 3,850,571
<INTEREST-DEPOSIT> 2,132,471
<INTEREST-EXPENSE> 2,184,300
<INTEREST-INCOME-NET> 1,666,271
<LOAN-LOSSES> 75,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,108,139
<INCOME-PRETAX> 801,125
<INCOME-PRE-EXTRAORDINARY> 502,329
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 502,329
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
<YIELD-ACTUAL> 8.2
<LOANS-NON> 2,035,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,189,441
<CHARGE-OFFS> 69,628
<RECOVERIES> 3,724
<ALLOWANCE-CLOSE> 1,198,537
<ALLOWANCE-DOMESTIC> 1,198,537
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
