<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 September 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _________________ to __________________
Commission file number 1-12707
Pinnacle Bancshares, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 72-1370314
(State or Other Jurisdiction of (I.R.S. Employer)
Incorporation or Organization) Identification No.)
1811 Second Avenue, Jasper, Alabama 35502-1388
----------------------------------------------
(Address of Principal Executive Offices)
(205) 221-4111
--------------
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(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
--- ---
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 1,779,646
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE> 2
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Financial Condition
at September 30, 1997 (Unaudited) and December 31, 1996 2
Condensed Consolidated Statements of Income (Unaudited) for the three
months and nine months ended September 30, 1997 and 1996 3
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine
months ended September 30, 1997 and 1996 4
The Condensed Consolidated Financial Statements furnished have not been
audited by independent certified public accountants, but reflect, in the
opinion of management, all adjustments necessary for a fair presentation of
financial condition and the results for the periods presented.
Item 2. Management's Discussion and Analysis or Plan of Operation 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
1
<PAGE> 3
PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Cash on hand and in banks $ 2,879,396 $ 2,599,229
Interest-bearing deposits at other banks 3,868,664 6,964,572
Securities available for sale 48,944,812 40,986,934
------------- -------------
55,692,872 50,550,735
Loans receivable, net 129,857,656 138,060,527
Loans held for sale (fair value $1,428,742 and $1,610,581
at December 31, 1996 and September 30, 1997, respectively) 1,428,742 1,610,581
Real estate owned 1,010,340 2,348,075
Premises and equipment, net 5,176,990 5,427,489
Other assets 2,335,776 2,102,828
------------- -------------
$ 195,502,376 $ 200,100,235
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits 173,407,101 177,050,010
Borrowed funds 3,750,000 3,640,000
Official checks outstanding 1,675,929 1,856,337
Other liabilities 1,384,646 1,223,051
------------- -------------
180,217,676 183,769,398
------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock, par $.01 per share, no shares issued,
100,000 authorized 0 0
Common stock, par $.01 per share, 1,779,648 and 1,779,646
outstanding, 20,000,000 and 4,800,000 authorized 18,640 17,796
Additional paid-in capital 8,366,717 8,022,244
Treasury stock, at cost, 84,352 shares at December 31, 1996 (345,317) 0
Retained earnings 7,315,182 8,361,684
Unrealized loss on securities for sale, net (70,522) (70,887)
------------- -------------
15,284,700 16,330,837
------------- -------------
$ 195,502,376 $ 200,100,235
------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL OPERATIONS
<TABLE>
<CAPTION>
Three months Ended Nine months Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
---------- ------------ ----------- ------------
(unaudited)
<S> <C> <C> <C> <C>
INTEREST REVENUE:
Interest on loans $3,192,781 $ 2,768,932 $ 9,304,472 $ 8,153,727
Interest and dividends on securities 713,843 861,952 2,246,961 2,571,757
Other interest 94,901 38,214 255,441 181,579
---------- ------------ ----------- ------------
4,001,525 3,669,098 11,806,874 10,907,063
INTEREST EXPENSE:
Interest on deposits 2,191,068 2,048,942 6,483,577 6,038,033
Interest on borrowed funds 51,829 57,003 155,488 242,982
---------- ------------ ----------- ------------
2,242,897 2,105,945 6,639,065 6,281,015
Net interest income before provision for
loan losses 1,758,628 1,563,153 5,167,809 4,626,048
Provision for losses on loans 75,000 70,000 224,274 190,000
---------- ------------ ----------- ------------
Net interest income after provision for
losses on loans 1,683,628 1,493,153 4,943,535 4,436,048
---------- ------------ ----------- ------------
NONINTEREST INCOME
Fees and service charges 206,696 235,704 639,163 679,469
Real estate operations, net 33,471 38,747 92,657 114,893
Net gain (loss) on sale of:
Loans 78,991 43,695 270,328 204,011
Assets 0 0 0 275
Real estate 6,376 0 0 857
Investments 1,276 574 1,276 (234)
Other income 174 451 1,074 622
---------- ------------ ----------- ------------
326,984 319,171 1,004,498 999,893
---------- ------------ ----------- ------------
NONINTEREST EXPENSE
Compensation and benefits 616,100 556,737 1,873,244 1,662,615
FDIC insurance 28,066 1,193,496 61,910 1,378,377
Occupancy 253,216 266,424 772,224 756,501
Marketing and professional 42,847 31,370 140,959 199,119
Other 188,555 165,302 579,274 552,960
---------- ------------ ----------- ------------
1,128,784 2,213,329 3,427,611 4,549,572
---------- ------------ ----------- ------------
Earnings before income tax expense 881,828 (401,005) 2,520,422 886,369
Income tax expense 328,659 (142,435 940,026 347,185
---------- ------------ ----------- ------------
Net earnings (loss) $ 553,169 $ (258,570) $ 1,580,396 $ 539,184
---------- ------------ ----------- ------------
Net earnings per share $ 0.31 $ (.15) $ .89 $ .30
Cash dividend per share $ .09 $ .10 $ .09 $ .10
---------- ------------ ----------- ------------
Weighted average shares outstanding 1,779,646 1,779,648 1,779,646 1,779,648
---------- ------------ ----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------
1996 1997
------------ ------------
(unaudited)
<S> <C> <C>
CASH FLOW PROVIDED BY OPERATING ACTIVITIES:
Net earnings $ 539,186 $ 1,580,396
Adjustments to reconcile net earnings to net cash flows provided by operating
activities:
Depreciation 375,154 335,155
Provision for losses on loans 190,000 224,274
Net (gain) loss on sale of:
Loans held for sale (204,011) (270,328)
Securities (234) (1,276)
Real estate owned (857) 0
Assets (275) 0
Amortization, net 104,889 (223,045)
Proceeds from sale of loans 24,847,784 25,256,603
Loans originated for sale (24,705,314) (25,438,441)
(Decrease) increase in other assets (96,268) 232,948
(Decrease) increase in other liabilities (2,086,801) (161,595)
------------ ------------
Net cash provided by (used in) operating activities ($ 1,036,747) $ 1,534,691
============ ============
CASH FLOW PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Principal collected on loans and securities 61,900,790 69,011,734
Loans originated for portfolio (59,023,739) (74,202,516)
Loans purchased for portfolio (1,516,792) 0
Net change in interest-bearing deposits at other banks 6,943,960 (3,095,908)
Proceeds from sale of securities 6,008,861 196,000
Purchase of securities (21,009,575) (998,852)
Proceeds from maturing securities 12,905,741 6,022,380
Purchase of premises and equipment (974,319) (585,654)
Proceeds from sales of fixed assets 275 0
Net change in real estate owned (11,831) (1,337,735)
------------ ------------
Net cash provided by (used in) investing activities 5,223,371 (4,990,551)
============ ============
CASH FLOW USED IN FINANCING ACTIVITIES:
Net (increase) decrease in passbook, NOW and money market
deposit accounts 45,755 554,931
Proceeds from sales of time deposits 16,569,063 24,626,753
Payments for maturing time deposits (13,161,732) (21,538,775)
Proceeds from borrowed funds 4,250,000 0
Payments on borrowed funds (11,350,000) (110,000)
(Increase) decrease in official checks (119,986) 180,408
Payments of dividends (480,504) (537,624)
------------ ------------
Net cash provided by (used in) financing activities ($ 4,247,404) 3,175,693
------------ ------------
NET (INCREASE) DECREASE IN CASH (60,780) (280,167)
CASH AT BEGINNING OF PERIOD 2,512,007 2,879,396
------------ ------------
CASH AT END OF PERIOD $ 2,451,227 $ 2,599,229
============ ============
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest on deposits and borrowed funds $ 5,821,571 $ 6,123,617
Cash payments for income taxes $ 462,393 $ 1,022,844
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 6
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., a Delaware corporation (the
"Holding Company"), the Holding Company's wholly owned subsidiary, Pinnacle
Bank, an Alabama-chartered commercial bank (the "Bank"), and the Bank's wholly
owned subsidiaries, First General Service(s) Corporation and First General
Ventures Corporation (collectively, the "Company"). 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 nine
month period ended September 30, 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 10-KSB 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 became a subsidiary of 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 years of the Holding
company and the converted Bank end on December 31 of each year.
3. STOCK SPLIT
On September 24, 1997 the Company's Board of Directors declared a two-for-one
stock split of the Company's Common Stock to be effected in the form of a one
hundred percent (100%) share dividend. In the distribution, stockholders
received one share of common stock for each one share of common stock they owned
as of the record date. Net income and dividends per share for the current and
prior years have been adjusted to the two-for-one stock split.
5
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4. NEW ACCOUNTING STANDARDS:
ACCOUNTING FOR EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS
128). SFAS 128 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.
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.
REPORTING OF COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No 130, "Reporting of Comprehensive Income" (SFAS
130"), which establishes standards for reporting and display of comprehensive
income and its components (revenue, expenses, gains, and losses) in a full set
of financial statements. This statement also requires that all items that are
required to be reorganized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements.
This statement is effective for fiscal years beginning after December 15, 1997.
Earlier application is permitted. Reclassification of financial statements for
earlier periods provided for comparative purposes is required.
DISCLOSURE ABOUT SEGMENTS AND RELATED INFORMATION
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No 131, "Disclosures about Segment of an
Enterprise and Related Information" ("SFAS 131"). Which establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to stockholders. This statement also establishes standards for
related disclosures about products and services, geographic areas, and major
customers, This statement requires the reporting of financial and descriptive
information about an enterprise's reportable operating segments.
6
<PAGE> 8
His statement is effective for financial statements for periods beginning
December 15, 1997. In the initial year of application, comparative information
for earlier years is to be restated.
5. LITIGATION:
The Company 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 Company, it is the opinion of management,
based upon consultation with legal council, that the ultimate resolutions of all
pending litigation against the Company will not have a materially adverse effect
on the Company's financial condition.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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 "Company"), and each outstanding
share of common stock of the Bank was converted into one share of the common
stock of the Company. The conversion and reorganization were consummated on
January 31, 1997. The fiscal years of the Company and the converted Bank end on
December 31 of each year.
STOCK SPLIT: On September 24, 1997 the Company's Board of Directors declared a
two-for-one stock split of the Company's Common Stock to be effected in the form
of a one hundred percent (100%) share dividend. In the distribution,
stockholders received one share of common stock for each one share of common
stock they owned as of the record date. Net income and dividends per share for
the current and prior years have been adjusted to the two-for-one stock split.
FINANCIAL CONDITION: Total assets increased from $195.5 million as of December
31, 1996 to $200.1 million as of September 30, 1997. This increase was due
primarily to an increase in cash and interest bearing deposits of $2.8 million,
an increase in net loans receivable of $8.2 million, and an increase in real
estate owned of $1.3 million. This increase was offset by a decrease in
securities available for sale of $.8.0 million.
INVESTMENTS: The Company's investment portfolio at December 31, 1996 and at
September 30, 1997 consisted primarily of U.S. Treasury and Agency securities
with a majority maturing in two years or less.
NET EARNINGS: The Company reported net income for the three months ended
September 30, 1997 of $553,000, or $0.31 per share, compared with a net loss of
($259,000), or ($0.15) per share, for the three months ended September 30, 1996.
The Company reported net income for the nine month period ended September 30,
1997 of $1.6 million, or $.89 per share, compared to $539,000, or $0.30 per
share, for the nine month periods ended September 30, 1996. Both the three month
and the nine month periods ended September 30, 1996 reflect the one-time SAIF
assessment of approximately $1.1 million.
CAPITAL RESOURCES: Historically, funds provided by operations, mortgage loan
principal repayments, savings deposits and short-term borrowings have been the
Company's principal sources of funds. In addition, the Company has the ability
to obtain funds through the sale of mortgage loans, through borrowings from the
Federal Home Bank of Atlanta and other borrowing sources. At September 30, 1997,
the Company's total loan commitments, including construction loans in process
and unused lines of credit were approximately $18.6 million. Management believes
that the Company's liquidity and other sources of funds are sufficient to fund
all commitments outstanding and other cash needs. The
8
<PAGE> 10
Company and the Bank are required to maintain certain levels of regulatory
capital. At September 30, 1997 the Company and the Bank were in compliance with
all regulatory capital requirements.
RESULTS OF OPERATIONS: Net interest income after the provision for loans losses
on loans showed an increase of $190,000, or 12.8%, for the three month period
ended September 30, 1997, as compared to the corresponding period in the
previous year. Net interest income after the provision for loan losses on loans
increased $507,000, or 11.4%, for the nine month period ended September 30,
1997, as compared to the corresponding period in the previous year. This
increase resulted primarily from increased interest and fees on a higher average
balance of earning assets discussed above.
The Company's increase in interest income for both periods was due to an
increase in the yield on interest bearing assets as well as an increase in the
average balance of interest bearing assets. Average deposits increased by $12.7
million and were offset by a decrease in average borrowed funds of $1.2 million.
The Company's cost of funds decreased from approximately 4.93% in the nine month
period ended September 30, 1996 to 4.92% in the current year period.
Noninterest income, which includes fees and service charges , real estate
operations, net, net gain (loss) on sale of loans and other income increased
approximately $8,000 in the three month period ended September 30, 1997, as
compared to the corresponding prior year period. This increase was due primarily
to a increase in gain on sale of mortgage loans of $35,000 and was offset by a
decrease in fees and service charges of $29,000, as well as slight increases in
other noninterest income.
Noninterest expenses decreased approximately $1.1 million in each of the three
and nine-month periods ended September 30, 1997, as compared to the
corresponding prior year periods. The decrease in the three month period ended
September 30, 1997 was primarily due to a decrease in FDIC insurance premiums of
approximately $1.2 million and was offset by an increase in compensation expense
of approximately $59,000 as well as slight increases in other noninterest
expense. The decrease in the nine month period ended September 30, 1997 was due
primarily to an increase in FDIC insurance premiums of approximately $1.3
million and was offset by an increase in compensation expense of approximately
$210,000 as well as slight increases in other noninterest expense. FDIC
insurance premiums for 1996 reflected the one-time SAIF special assessment of
approximately $1.1 million.
9
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule (SEC use only)
(b) No reports on Form 8-K were filed.
10
<PAGE> 12
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: November 14, 1997 By: /s/ Robert B. Nolen, Jr.
---------------------------------
Robert B.Nolen, Jr.
President and Chief
Executive Officer
(Principal Executive Officer and
Principal Financial Officer)
/s/ Marie Guthrie
---------------------------------
Marie Guthrie
Controller
(Principal Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PINNACLE FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,599,229
<INT-BEARING-DEPOSITS> 6,964,572
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 40,986,934
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 138,060,527
<ALLOWANCE> 1,037,792
<TOTAL-ASSETS> 200,100,235
<DEPOSITS> 177,050,010
<SHORT-TERM> 120,000
<LIABILITIES-OTHER> 3,079,388
<LONG-TERM> 3,520,000
0
0
<COMMON> 17,796
<OTHER-SE> 16,313,041
<TOTAL-LIABILITIES-AND-EQUITY> 200,100,235
<INTEREST-LOAN> 9,304,472
<INTEREST-INVEST> 2,246,961
<INTEREST-OTHER> 255,441
<INTEREST-TOTAL> 11,806,874
<INTEREST-DEPOSIT> 6,483,577
<INTEREST-EXPENSE> 6,639,065
<INTEREST-INCOME-NET> 5,167,809
<LOAN-LOSSES> 224,274
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,427,611
<INCOME-PRETAX> 2,520,422
<INCOME-PRE-EXTRAORDINARY> 1,580,396
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,580,396
<EPS-PRIMARY> .89
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.26
<LOANS-NON> 433,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,197,854
<CHARGE-OFFS> 406,610
<RECOVERIES> 22,274
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,037,792
</TABLE>
