<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, 2000
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: 1,792,086
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 March 31, 2000
(Unaudited) and December 31, 1999. 2
Condensed Consolidated Statements of Financial Operations for the three
months ended March 31, 2000 and 1999 (Unaudited). 3
Condensed Consolidated Statements of Stockholders Equity for the three
months ended March 31, 2000 and 1999 (Unaudited). 4
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 (Unaudited). 5
Notes to Condensed Consolidated Financial Statements. 6
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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS:
Cash on hand and in banks $ 3,576,775 $ 5,289,619
Interest-bearing deposits in other banks 1,393,064 2,177,294
Securities available-for-sale 63,467,974 64,599,164
Loans held for sale 2,146,311 893,733
Loans receivable, net of allowance for loan losses
of $1,152,152 and $1,222,978, respectively 146,263,471 146,429,690
Real estate owned, net 2,179,836 1,521,533
Premises and equipment, net 6,887,209 6,995,375
Excess cost over net assets acquired 378,004 388,220
Accrued interest receivable 1,869,424 1,982,134
Other assets 900,651 754,801
------------- -------------
Total assets $ 229,062,719 $ 231,031,563
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits $ 188,151,067 $ 189,174,804
Borrowed funds 20,753,060 21,890,000
Official checks outstanding 1,449,392 1,529,946
Other liabilities 828,801 588,051
------------- -------------
211,182,320 213,182,801
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share, no shares issued,
100,000 authorized 0 0
Common stock, par $.01 per share, 1,792,086 issued and
outstanding, 10,000,000 authorized 17,921 17,921
Additional paid-in capital 8,131,746 8,131,746
Retained earnings 10,678,750 10,414,858
Accumulated other comprehensive income, net of tax (948,018) (715,763)
------------- -------------
Total stockholders' equity 17,880,399 17,848,762
------------- -------------
Total liabilities and stockholders' equity $ 229,062,719 $ 231,031,563
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements
2
<PAGE> 4
PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
2000 1999
----------- -----------
(unaudited)
<S> <C> <C>
INTEREST REVENUES:
Interest on loans $ 3,323,770 $ 2,864,726
Interest and dividends on securities 973,826 812,295
Other interest 28,525 219,630
----------- -----------
4,326,121 3,896,651
INTEREST EXPENSE:
Interest on deposits 2,185,304 2,254,401
Interest on borrowed funds 334,069 47,726
----------- -----------
2,519,373 2,302,127
----------- -----------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 1,806,748 1,594,524
PROVISION FOR LOAN LOSSES 120,000 127,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,686,748 1,467,524
----------- -----------
NON-INTEREST INCOME:
Fees and service charges 161,549 174,016
Service fee income, net 44,547 49,127
Real estate operations, net 13,866 32,207
Net gain (loss) on sale or write-down of:
Loans held for sale 70,242 187,413
Real estate owned (2,333) (1,787)
----------- -----------
287,871 440,976
----------- -----------
NON-INTEREST EXPENSE:
Compensation and benefits 709,840 716,629
Occupancy 284,957 292,464
Marketing and Professional 37,670 34,714
Other 231,098 251,704
----------- -----------
1,263,565 1,295,511
----------- -----------
INCOME BEFORE INCOME TAX EXPENSE 711,054 612,989
INCOME TAX EXPENSE 267,962 226,720
----------- -----------
NET INCOME $ 443,092 $ 386,269
=========== ===========
BASIC EARNINGS PER SHARE $ 0.25 $ 0.22
DILUTED EARNINGS PER SHARE $ 0.25 $ 0.21
CASH DIVIDENDS PER SHARE $ 0.10 $ 0.10
WEIGHTED AVERAGE SHARES OUTSTANDING 1,792,086 1,789,586
WEIGHTED AVERAGE DILUTED SHARES 1,792,086 1,799,563
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 5
PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1999, AND 2000
(unaudited)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other Total
------------------- Paid-in Retained Comprehensive Stockholders'
Shares Amount Capital Earnings Income Equity
--------- ------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 1,789,586 $17,895 $8,109,740 $ 9,453,693 $ 30,779 $ 17,612,107
Comprehensive Income:
Net income 0 0 0 386,269 0 386,269
Change in unrealized gain (loss) on securities
available-for-sale, net of tax of $49,190 0 0 0 0 (95,487) (95,487)
------------
Comprehensive Income 290,782
Cash dividends declared ($.10 per share) 0 0 0 (178,951) 0 (178,951)
--------- ------- ---------- ----------- --------- ------------
BALANCE, March 31, 1999 1,789,586 $17,895 $8,109,740 $ 9,661,011 $ (64,708) $ 17,723,938
========= ======= ========== =========== ========= ============
BALANCE, December 31, 1999 1,792,086 $17,921 $8,131,746 $10,414,858 $(715,763) $ 17,848,762
------------
Comprehensive Income:
Net income 0 0 0 443,092 0 443,092
Change in unrealized gain (loss) on securities
available-for-sale, net of tax of $158,088 0 0 0 0 (232,255) (232,255)
------------
Comprehensive Income 210,837
Cash dividends declared ($.10 per share) 0 0 0 (179,200) 0 (179,200)
--------- ------- ---------- ----------- --------- ------------
BALANCE, March 31, 2000 1,792,086 $17,921 $8,131,746 $10,678,750 $(948,018) $ 17,880,399
========= ======= ========== =========== ========= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 6
PINNACLE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
---------
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 443,092 $ 386,269
Adjustment to reconcile net income to net cash used in operating activities:
Depreciation 147,762 137,957
Provision for losses on loans 120,000 127,000
Benefit for deferred taxes (218,114) (56,390)
Net (gain) loss on sale and write down of:
Loans held for sale (70,242) (187,413)
Real estate owned 2,333 1,787
Amortization, net (99,137) (92,718)
Proceeds from sale of loans 7,863,042 15,477,935
Loans originated for sale (9,045,378) (15,843,192)
(Increase) decrease in accrued interest receivable 112,710 (276,574)
Change in official checks (80,554) 328,028
(Increase) decrease in other assets 240,568 (2,745)
Increase in other liabilities 240,750 177,946
------------ ------------
Net cash used in operating activities (343,168) 177,890
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collected on loans and securities 20,749,194 30,653,584
Loans originated for portfolio (20,581,702) (28,511,261)
Net change in interest bearing deposits at other banks 784,230 28,126,297
Purchase of securities available-for-sale (50,000) (31,920,911)
Proceeds from maturing and callable securities 0 3,119,700
Purchase of premises and equipment (39,596) (244,731)
Proceeds from sales of real estate owned 108,075 219,785
------------ ------------
Net cash provided by investing activities 970,201 1,442,463
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in passbook, NOW and money market deposit accounts 164,063 (1,076,973)
Proceeds from sales of time deposits 6,749,836 6,800,690
Payments on maturing time deposits (7,937,636) (7,211,000)
Payments on borrowed funds (14,840,000) (130,000)
Proceeds from borrowed funds 13,703,060 0
Payments of cash dividends (179,200) (178,951)
------------ ------------
Net cash used in financing activities (2,339,877) (1,796,234)
------------ ------------
NET DECREASE IN CASH (1,712,844) (175,881)
CASH AT BEGINNING OF PERIOD 5,289,619 3,960,991
------------ ------------
CASH AT END OF PERIOD $ 3,576,775 $ 3,785,110
============ ============
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest on deposits and borrowed funds $ 2,296,801 2,037,334
Cash payments for income taxes 246,000 400,474
Other real estate acquired through foreclosure 768,710 196,500
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE> 7
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. (the "Company"), and Pinnacle
Bank (the "Bank"). 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 ended March 31, 2000, are not necessarily indicative of the results
of operations which may be expected for the entire year.
These condensed consolidated 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, 1999. The
accounting policies followed by the Company are set forth in the summary of
Significant Accounting Policies in the Company's audited financial statements.
2. EARNINGS PER SHARE:
The following table represents the earnings per share calculations for the three
month periods ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
PER
SHARE
FOR THE THREE MONTHS ENDED NET INCOME SHARES AMOUNT
-------------------------- ---------- ------ ------
<S> <C> <C> <C>
MARCH 31, 2000
Basic earnings per share $443,092 1,792,086 $0.25
Dilutive securities -- -- --
-------- --------- -----
Diluted earnings per share $443,092 1,792,086 $0.25
======== ========= =====
MARCH 31, 1999
Basic earnings per share $386,269 1,789,586 $0.22
Dilutive securities -- 9,977 0.01
-------- --------- -----
Diluted earnings per share $386,269 1,799,563 $0.21
======== ========= =====
</TABLE>
Options to purchase 48,500 shares of common stock at $10.125 per share and
options to purchase 54,560 shares of common stock at $8.8125 per share were
outstanding during the first quarter of 2000. These options were not included in
the computation of diluted EPS because the options exercise price was greater
than the average market price of the common shares. The options which expire on
August 28, 2006 and May 26, 2009 were still outstanding at March 31, 2000.
6
<PAGE> 8
3. COMPREHENSIVE INCOME:
Comprehensive income is the change in equity during a period from transactions
and other events and circumstances from non-owner sources. It includes all
changes in equity during a period except those resulting from investments by
owners and distributions to owners.
In addition to net income, the Company has identified changes related to other
non-owner transactions in the condensed consolidated statements of changes in
stockholders' equity. For the Company, changes in other non-owner transactions
consist entirely of changes in unrealized gains and losses on securities
available-for-sale.
In the calculation of comprehensive income, certain reclassification adjustments
are made to avoid double-counting items that are displayed as part of net
income and accumulated other comprehensive income in that period or earlier
periods. The following table reflects the reclassification amounts and the
related tax effects for the three months ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
2000
-------------------------------------------
Before After
Tax Tax Tax
Amount Effect Amount
--------- -------- -----------
<S> <C> <C> <C>
Unrealized gains (losses) arising during the period $(390,343) $158,088 $ (232,255)
Less reclassification for adjustments for gains
(losses) included in net income 0 0 0
--------- -------- -----------
Net change in unrealized gain/(loss) on securities $(390,343) $158,088 $ (232,255)
========= ======== ===========
<CAPTION>
1999
-------------------------------------------
Before After
Tax Tax Tax
Amount Effect Amount
--------- -------- -----------
<S> <C> <C> <C>
Unrealized gains (losses) arising during the period $(144,677) $ 49,190 $ (95,487)
Less reclassification for adjustments for gains
(losses) included in net income 0 0 0
--------- -------- -----------
Net change in unrealized gain/(loss) on securities $(144,677) $ 49,190 $ (95,487)
========= ======== ===========
</TABLE>
7
<PAGE> 9
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
FORWARD-LOOKING STATEMENTS: This Quarterly Report on Form 10-QSB contains
forward-looking statements. Additional written or oral forward-looking
statements may be made by the Company from time to time in filings with the
Securities and Exchange Commission or otherwise. The words "believe," "expect,"
"seek" and "intend," and similar expressions identify forward-looking
statements, which speak only as of the date the statement is made. Such
forward-looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such statements may include, but are not
limited to, projections of income or loss, expenditures, acquisitions, plans for
future operations, financing needs or plans relating to services of the Company,
as well as assumptions relating to the foregoing. Forward- looking statements
are inherently subject to risk and uncertainties, some of which cannot be
predicted or qualified. Future events and actual results could differ materially
from those set forth in, contemplated by or underlying the forward-looking
statements.
The Company does not undertake, and specifically disclaims, any obligation to
publicly release the results of revisions which may be made to forward-looking
statements to reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
COMPARISON OF FINANCIAL CONDITION AS OF MARCH 31, 2000 AND DECEMBER 31, 1999.
Total deposits decreased to $188.2 million at March 31, 2000 as compared to
$189.2 million at December 31, 1999. This decrease was a result of rate
competition. Total assets decreased to $229.1 million at March 31, 2000 as
compared to $231.0 million at December 31, 1999. This decrease was due primarily
to a decrease in cash and interest bearing deposits of approximately $2.5
million, a decrease in securities available-for-sale of approximately $1.1
million and an increase in other assets of approximately $100,000 and was
off-set by an increase in loans receivable and loans held for sale of
approximately $1.1 million and an increase in other real estate owned of
approximately $700,000.
At March 31, 2000, the Company's investment portfolio of $63.5 million consisted
primarily of U. S. agency securities and mortgage-backed-securities. The entire
investment portfolio is classified as "available-for-sale," which is
marked-to-market with the unrealized gains/losses reflected directly in
stockholders' equity.
RESULTS OF OPERATIONS-COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 AND
1999. Net interest income after the provision for loan losses increased $219,224
or 14.94% for the three month period ended March 31, 2000, as compared to the
corresponding period in the previous year. This increase was primarily due to an
increase in interest on loans and securities of $620,575, a decrease in the
provision for loan losses of $7,000 and was off-set by a decrease in other
interest of approximately $191,105 and an increase in interest expense of
$217,246.
If rates were to rise rapidly, net income may be adversely affected. Under a
scenario simulating a hypothetical 100 basis point rate increase applied to all
fixed rate interest earning assets and interest-bearing liabilities, the Company
would expect a net loss in fair value of the underlying instruments of
approximately $1,478,000. This hypothetical loss is not a precise indicator of
future events. Instead, it
8
<PAGE> 10
is a reasonable estimate of the results anticipated if the assumptions used in
the modeling techniques were to occur.
The Bank's yield on interest-earning assets increased from 7.59% in the three
month period ended March 31, 1999, to 8.05% in the current year period. This
increase was due to an increase in rates as well as an increase in the average
balance of interest bearing assets outstanding of $8.5 million. The Banks cost
of funds increased from 4.7% at March 31, 1999 to 4.9% in the current year
period. This increase was due in part to an increase in the average balance of
interest-bearing liabilities of $11.5 million.
Non-interest income, which includes fees and service charges, real estate
operations, net gain (loss) on sale of loans and other income decreased
approximately $153,105 in the three month period ended March 31, 2000, as
compared to the corresponding prior year periods. The decrease in the three
month period ended March 31, 2000, was due primarily to a decrease in the gain
on sale of mortgage loans of approximately $117,171, a decrease in fees and
service charges of approximately $17,047, a decrease in real estate operations,
net of approximately $18,341.
Provisions for loan losses are made to maintain the allowance for loan losses at
an adequate level. The allowance for loan losses reflects management's
estimates, which took into account historical experience, the amount of
non-performing assets, and general economic conditions. The Bank determined an
additional $120,000 provision was required for the three month period ended
March 31, 2000.
Non-interest expense increased approximately $31,946 in the three month period
ended March 31, 2000, as compared to the corresponding prior year periods. The
increase in the three month period ended March 31, 2000 was due primarily to a
decrease in compensation expense of approximately $6,789, a decrease in
occupancy expense of approximately $7,507 and a decrease in all other
non-interest expense of approximately $17,650.
The Company reported net income for the three month period ended March 31, 2000
of $443,092 or $0.25 per share, compared with net income of $386,269 or $0.22
per share for the three month period ended March 31, 1999. The increase in the
three month period ended March 31, 2000 was primarily attributable to an
increase in interest income of approximately $429,000. This increase exceeded an
increase in interest expense of approximately $217,000 and a decrease in
non-interest income of approximately $153,000.
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
Federal Home Loan Bank of Atlanta and other borrowing sources. At March 31,
2000, the Bank's total loan commitments, including construction loans in process
and unused lines of credit, were approximately $21.3 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 Company and the Bank
are required to maintain certain levels of regulatory capital. At March 31, 2000
the Company and the Bank exceeded all regulatory capital requirements.
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: May 15, 2000 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,576,775
<INT-BEARING-DEPOSITS> 1,393,064
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 63,467,974
<LOANS> 146,263,471
<ALLOWANCE> 1,152,152
<TOTAL-ASSETS> 229,062,719
<DEPOSITS> 188,151,067
<SHORT-TERM> 20,753,060
<LIABILITIES-OTHER> 2,278,193
<LONG-TERM> 0
0
0
<COMMON> 17,921
<OTHER-SE> 17,862,478
<TOTAL-LIABILITIES-AND-EQUITY> 229,062,719
<INTEREST-LOAN> 3,323,770
<INTEREST-INVEST> 973,826
<INTEREST-OTHER> 28,525
<INTEREST-TOTAL> 4,326,121
<INTEREST-DEPOSIT> 2,185,304
<INTEREST-EXPENSE> 2,519,373
<INTEREST-INCOME-NET> 1,806,748
<LOAN-LOSSES> 120,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,263,565
<INCOME-PRETAX> 711,054
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 443,092
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.25
<YIELD-ACTUAL> 8.05
<LOANS-NON> 1,203,019
<LOANS-PAST> 150,611
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,222,978
<CHARGE-OFFS> 200,320
<RECOVERIES> 9,494
<ALLOWANCE-CLOSE> 1,152,152
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
