<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 June 30, 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.
- --------------------------------------------------------------------------------
(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: 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, June 30,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash on hand and in banks $2,879,396 $3,298,052
Interest-bearing deposits at other banks 3,868,664 5,025,041
Securities available for sale 48,944,812 45,945,291
------------ ------------
55,692,872 54,268,384
Loans receivable, net 129,857,656 134,818,914
Loans held for sale (fair value
$1,428,742 and $2,754,272
at December 31, 1996 and
June 30, 1997, respectively) 1,428,742 2,754,272
Real estate owned 1,010,340 1,398,940
Premises and equipment, net 5,176,990 5,303,483
Other assets 2,335,776 2,189,378
------------ ------------
$195,502,376 $200,733,371
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits 173,407,101 177,712,258
Borrowed funds 3,750,000 3,640,000
Official checks outstanding 1,675,929 2,255,996
Other liabilities 1,384,646 1,188,641
------------ ------------
180,217,676 184,796,895
------------ ------------
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 7,986,479
Unrealized loss on securities for sale, net (70,522) (90,043)
------------ ------------
15,284,700 15,936,476
------------ ------------
$195,502,376 $200,733,371
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
INTEREST REVENUE:
Interest on loans $2,682,023 $3,114,052 $5,384,794 $6,111,690
Interest and dividends
on securities 854,791 755,471 1,709,805 1,533,120
Other interest 48,441 83,755 143,366 159,038
3,585,255 3,953,278 7,237,965 7,803,848
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on deposits 1,984,492 2,160,038 3,989,091 4,292,509
Interest on borrowed funds 53,648 51,829 185,979 103,659
---------- ---------- ---------- ----------
2,038,140 2,211,867 4,175,070 4,396,168
Net interest income
before provision for
loan losses 1,547,115 1,741,410 3,062,895 3,407,681
Provision for losses on loans 60,000 74,274 120,000 149,274
---------- ---------- ---------- ----------
Net interest income
after provision for
losses on loans 1,487,115 1,667,136 2,942,895 3,258,407
---------- ---------- ---------- ----------
NONINTEREST INCOME
Fees and service charges 217,133 219,473 443,254 432,466
Real estate operations, net 37,940 24,046 76,146 59,187
Net gain (loss) on sale of:
Loans 71,968 107,960 149,263 177,809
Real estate 1,625 7,152 11,910 7,152
Investments (1,084) 0 (808) 0
Other Income 957 1,203 957 902
---------- ---------- ---------- ----------
328,539 359,834 680,722 677,516
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Compensation and benefits 560,633 657,197 1,105,878 1,257,144
Occupancy 242,692 253,784 490,076 519,008
Marketing and professional 34,763 64,814 167,749 98,111
Other 271,815 213,706 572,537 423,065
---------- ---------- ---------- ----------
1,109,903 1,189,501 2,336,240 2,297,328
---------- ---------- ---------- ----------
Earnings before income
tax expense 705,751 837,469 1,287,376 1,638,595
Income Tax expense 268,316 312,572 489,620 611,369
---------- ---------- ---------- ----------
Net earnings $ 437,435 $ 524,897 $ 797,756 $1,027,226
---------- ---------- ---------- ----------
Net earnings per share $ 0.49 $ .059 $ 0.90 $ 1.15
Cash dividend per share $ 0.18 $ 0.20 $ 0.18 0.20
---------- ---------- ---------- ----------
Weighted average
shares outstanding 889,824 889,823 889,824 889,823
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated finanial statements.
3
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PINNACLE BANCSHARES, INC,
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1996 1997
---- ----
CASH FLOW PROVIDED BY OPERATING ACTIVITIES: (unaudited)
<S> <C> <C>
Net earnings $ 797,756 $ 1,027,226
Adjustments to reconcile earnings to net cash flows
provided by operating activities:
Depreciation 250,967 237,910
Provision for losses on loans 120,000 149,274
Net (gain) loss on sale of:
Loans held for sale (213,852) (177,809)
Securities 808 0
Real estate owned (12,066) 0
Amortization, net (140,042) (116,699)
Proceeds from sale of loans 19,740,209 18,205,648
Loans originated for sale (19,107,910) (19,531,178)
Decrease (increase) in other assets (230,502) 108,452
Increase(decrease) in other liabilities 592,623 (305,593)
------------ ------------
Net cash provided by (used in) operating activities $ 1,797,991 ($ 402,769)
------------ ------------
CASH FLOW PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Principal collected on loans and securities 40,420,718 45,231,987
Loans originated for portfolio (37,491,833) (48,276,684)
Loans purchased for portfolio (1,108,700) 0
(Increase) decrease in interest-bearing
deposits at other banks 4,325,016 (1,156,377)
Proceeds from sale of securities 3,008,866 196,000
Proceeds from purchase of securities (13,009,675) (998,852)
Proceeds from maturing securities 11,000,000 2,010,000
Purchase of premises and equipment (506,423) (363,677)
Proceeds from sales of other real estate, net 110,625 28,354
Net change in real estate owned 0 (416,954)
------------ ------------
Net cash provided by (used in) investing activities 6,748,594 (3,746,203)
------------ ------------
CASH FLOW USED IN FINANCING ACTIVITIES:
Net (increase) decrease in passbook, NOW and
money market deposit accounts (40,588) 2,103,532
Proceeds from sales of time deposits 11,233,261 14,241,163
Payments from maturing time deposits (9,194,631) (12,039,538)
Proceeds from borrowed funds 1,250,000 0
Payments on borrowed funds (11,350,000) (110,000)
(Increase) decrease in official checks (362,844) 728,400
Payments of dividends (320,257) (355,929)
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Net cash provided by (used in) financing activities ($ 8,785,059) 4,567,628
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NET (INCREASE) DECREASE IN CASH (238,474) 418,656
CASH AT BEGINNING OF PERIOD 2,512,007 2,879,396
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CASH AT END OF PERIOD $ 2,273,533 $ 3,298,052
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SUPPLEMENTAL DISCLOSURES:
Cash payments for interest on deposits
and borrowed funds $ 4,351,064 $ 3,937,930
Cash payments for income taxes $ 432,393 $ 787,844
</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., 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 six
month period ended June 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. 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
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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 (revenues, expenses, gains, and losses)
in a full set of financial statements. This statement also requires that all
items that are required to be recognized 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. Reclassfication 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 Standard No. 131, "Disclosures about Segments 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.
This statement is effective for financial statements for periods beginning after
December 15, 1997. In the initial year of application, comparative information
for earlier years is to be restated.
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4. 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.
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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 "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 years of the Holding Company and the
converted Bank end on December 31 of each year.
FINANCIAL CONDITION: Total assets increased from $195.5 million as of December
31, 1996 to $200.7 million as of June 30, 1997. This increase was due primarily
to an increase in net loans receivable of approximately $5.0 million.
INVESTMENTS: The Company's investment portfolio at December 31, 1996 and at June
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 June
30, 1997 of $524,897 or $0.59 per share, compared with net income of $437,435,
or $0.49 per share, for the three months ended June 30, 1996. The Company
reported net income for the six month period ended June 30, 1997 of $1,027,226,
or $1.15 per share, compared to $797,756, or $0.90 per share, for the six month
period ended June 30, 1996. 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
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 Loan Bank of Atlanta and other borrowing sources. At June 30, 1997,
the Company's total loan commitments, including construction loans in process
and unused lines of credit were approximately $19.8 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 Holding Company and the
Bank are required to maintain certain levels of regulatory capital. At June 30,
1997 the Holding 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 $180,021, or 12.1% for the three month period
ended June 30, 1997, as compared to the corresponding period in the previous
year. Net interest income after the provision for loan losses on loans increased
$315,512, or 10.7% for the six month period ended June 30, 1997, as compared to
the corresponding period in the previous year. This increase resulted primarily
from increased interest and fees on higher average balance in earning assets
discussed above.
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The Company's yield on interest-bearing assets increased from approximately
8.03% in the six months ended June 30, 1996 to approximately 8.22% for the
current year period. This increase was due in part to an increase in interest
rates. Average deposits increased by $13.5 million and were offset by a decrease
in average borrowed funds of $1.8 million The Company's cost of funds decreased
from approximately 4.93% in the six month period ended June 30, 1996 to 4.91% 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 $31,295 in the three month period ended June 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 as well as slight increases in all
other noninterest income.
Noninterest expenses increased approximately $79,598 in the three month period
ended June 30, 1997 and decreased approximately $38,912 in the six month period
ended June 30, 1997, as compared to the corresponding prior year periods. The
increase in the three month period ended June 30, 1997 was due primarily to an
increase of $137,707 in compensation, occupancy and marketing and professional
expense which was off set by a decrease $58,109 in all other expenses. The
decrease in the six month period ending June 30, 1997 was primarily due to a
decrease in other expense, including Federal Deposit Insurance Corporation
insurance premiums.
9
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 28, 1997, the Holding Company held its Annual Meeting of
Stockholders at which the following matter was considered and voted on:
PROPOSAL I -- ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
NOMINEES FOR WITHHELD
- -------- --- --------
<S> <C> <C>
James W. Cannon 641,635 2,690
Robert B. Nolen, Jr. 641,635 2,690
Max W. Perdue 641,520 2,805
</TABLE>
There were no abstentions or broker non-votes.
Item 6. Exhibit and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) No Reports on Form 8-K were filed.
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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: August 14, 1997 By: /s/ Robert B. Nolen, Jr.
-----------------------------------
Robert B. Nolen, Jr.
President and Chief
Executive Officer
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,298,052
<INT-BEARING-DEPOSITS> 5,025,041
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 45,945,291
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 134,818,914
<ALLOWANCE> 1,188,981
<TOTAL-ASSETS> 200,733,371
<DEPOSITS> 177,712,258
<SHORT-TERM> 120,000
<LIABILITIES-OTHER> 3,444,637
<LONG-TERM> 3,520,000
0
0
<COMMON> 8,898
<OTHER-SE> 15,927,578
<TOTAL-LIABILITIES-AND-EQUITY> 200,733,371
<INTEREST-LOAN> 6,111,690
<INTEREST-INVEST> 1,533,120
<INTEREST-OTHER> 159,038
<INTEREST-TOTAL> 7,803,848
<INTEREST-DEPOSIT> 4,292,509
<INTEREST-EXPENSE> 4,396,168
<INTEREST-INCOME-NET> 3,407,681
<LOAN-LOSSES> 149,274
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,297,328
<INCOME-PRETAX> 1,638,595
<INCOME-PRE-EXTRAORDINARY> 1,027,226
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,027,226
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
<YIELD-ACTUAL> 8.22
<LOANS-NON> 1,962,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,189,441
<CHARGE-OFFS> 171,271
<RECOVERIES> 21,537
<ALLOWANCE-CLOSE> 1,188,981
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
