<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999
Commission File Number: 000-23909
PINNACLE BANKSHARES CORPORATION
(Exact name of small business issuer as specified in its charter)
VIRGINIA 54-1832714
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 29
Altavista, Virginia 24517
(Address of principal executive offices)
(804) 369-3000
(Issuer's telephone number, including area code)
Check whether the issuer (1) has 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
---------- -----------
At July 13, 1999, 719,925 shares of Pinnacle Bankshares Corporation's common
stock, $3 par value, were outstanding.
Transitional small business disclosure format: Yes No x .
--- ---
<PAGE>
PINNACLE BANKSHARES CORPORATION
FORM 10-QSB
June 30, 1999
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998 3
Consolidated Statements of Income and
Comprehensive Income for the three month periods
ended June 30, 1999 and 1998 4
Consolidated Statements of Income and
Comprehensive Income for the six month periods
ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flows for the six
month periods ended June 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 10-15
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of
Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PINNACLE BANKSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands of dollars)
================================================================================
Assets June 30, 1999 December 31, 1998
Cash and cash equivalents: (note 2)
Cash and due from banks $3,948 $3,323
Federal funds sold 2,196 7,359
---------------- -----------------
Total cash and cash equivalents 6,144 10,682
Securities (note 3):
Available-for-sale, at fair value 21,903 20,352
Held-to-maturity, at amortized cost 15,885 14,720
Federal Reserve Bank stock, at cost 75 75
Federal Home Loan Bank Stock, at cost 427 409
Loans, net (note 4) 96,357 90,532
Bank premises and equipment, net 4,461 3,547
Other real estate owned -- 48
Accrued income receivable 1,234 1,112
Other assets 1,218 981
---------------- -----------------
Total assets $147,704 $142,458
================================================================================
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Demand 10,733 10,993
Savings and NOW accounts 42,609 39,575
Time 77,035 74,619
---------------- -----------------
Total deposits 130,377 125,187
Note payable to Federal Home Loan Bank 850 900
Accrued interest payable 590 587
Other liabilities 586 642
---------------- -----------------
Total liabilities 132,403 127,316
---------------- -----------------
Stockholders' equity:
Common stock, $3 par value. Authorized
3,000,000 shares, issued and
outstanding 719,925 shares in 1999 and
719,025 shares in 1998 2,160 2,157
Capital surplus 367 338
Retained earnings 12,916 12,424
Accumulated other comprehensive income (142) 223
---------------- -----------------
Total stockholders' equity 15,301 15,142
Total liabilities and stockholders' equity $147,704 $142,458
================================================================================
See accompanying notes to consolidated financial statements.
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PINNACLE BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(Amounts in thousands of dollars, except for per share amounts)
================================================================================
<TABLE>
<CAPTION>
For Three Months For Three Months
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C>
Interest Income:
Interest and fees on loans $2,103 $1,983
Interest on securities:
U.S. Treasury 52 57
U.S. Government agencies 261 252
Corporate 73 53
States and political subdivisions
(tax exempt) 156 139
Other 23 28
Interest on federal funds sold 74 103
---------------------------------
Total interest income 2,742 2,615
---------------------------------
Interest expense:
Interest on deposits:
Savings and NOW accounts 315 281
Time - other 889 834
Time - $100,000 and over 179 169
Other interest expense 13 15
---------------------------------
Total interest expense 1,396 1,299
---------------------------------
Net interest income 1,346 1,316
Provision for loan losses 75 75
---------------------------------
Net interest income after provision for loan losses 1,271 1,241
Noninterest income:
Service charges on deposit accounts 71 67
Net gain on calls and sales of securities 4 3
Other operating income 99 46
---------------------------------
Total noninterest income 174 116
---------------------------------
Noninterest expense:
Salaries and employee benefits 529 468
Occupancy expense 47 44
Furniture and equipment 83 75
Other operating expenses 308 232
---------------------------------
Total noninterest expense 967 819
---------------------------------
Income before income tax expense 478 538
Income tax expense 119 160
---------------------------------
Net income 359 378
Other comprehensive income, net of income tax expense:
Net unrealized gains(losses) on securities
available for sale (248) 2
---------------------------------
Comprehensive income $111 $380
================================================================================
Net income per share (note 5):
Basic $0.50 $0.53
Diluted $0.49 $0.52
================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
4
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PINNACLE BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(Amounts in thousands of dollars, except for per share amounts)
For Six Months For Six Months
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
Interest Income:
Interest and fees on loans $4,180 $3,979
Interest on securities:
U.S. Treasury 108 115
U.S. Government agencies 501 498
Corporate 143 98
States and political subdivisions
(tax exempt) 307 268
Other 45 43
Interest on federal funds sold 198 198
----------------------------------
Total interest income 5,482 5,199
----------------------------------
Interest expense:
Interest on deposits:
Savings and NOW accounts 625 564
Time - other 1,778 1,646
Time - $100,000 and over 380 336
Other interest expense 27 30
----------------------------------
Total interest expense 2,810 2,576
----------------------------------
Net interest income 2,672 2,623
Provision for loan losses 150 150
----------------------------------
Net interest income after provision for
loan losses 2,522 2,473
Noninterest income:
Service charges on deposit accounts 132 129
Net gain on calls and sales of securities 4 4
Other operating income 208 104
----------------------------------
Total noninterest income 344 237
----------------------------------
Noninterest expense:
Salaries and employee benefits 1,028 926
Occupancy expense 95 79
Furniture and equipment 160 149
Other operating expenses 573 467
----------------------------------
Total noninterest expense 1,856 1,621
----------------------------------
Income before income tax expense 1,010 1,089
Income tax expense 258 320
----------------------------------
Net income 752 769
Other comprehensive income, net of income tax expense:
Net unrealized gains(losses) on securities
available for sale (365) ---
----------------------------------
Comprehensive income $387 $769
================================================================================
Net income per share (note 5):
Basic $1.05 $1.07
Diluted $1.04 $1.06
================================================================================
See accompanying notes to consolidated financial statements.
5
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PINNACLE BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands of dollars)
For Six Months For Six Months
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
Cash flows from operating activities:
Net income $752 $769
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation of bank premises and equipment 119 99
Amortization of core deposit premium 6 7
Amortization of organization costs --- 3
Amortization of net unearned fees (66) (65)
Net amortization (accretion) of premiums and
discounts on securities 17 11
Provision for loan losses 150 150
Provision for deferred income taxes 47 (39)
Net gain on sale of premises and equipment --- (6)
Net gain on calls and sales of securities (4) (4)
Net (increase) decrease in:
Accrued income receivable (122) (73)
Other assets 8 (76)
Net increase (decrease) in:
Accrued interest payable 3 17
Other liabilities (56) 106
---------------------------------
Net cash provided by operating activities 854 899
===============================================================================
Cash flows from investing activities:
Purchases of held-to-maturity
securities (2,875) (3,386)
Purchases of available-for-sale
securities (5,497) (7,003)
Proceeds from maturities and calls
of held-to-maturity securities 1,700 539
Proceeds from paydowns and maturities
of held-to-maturity
mortgage-backed securities 2 2
Proceeds from maturities and calls
of available-for-sale
securities 2,200 7,155
Proceeds from paydowns and maturities
of available-for-sale
mortgage-backed securities 1,188 791
Purchase of Federal Home Loan Bank stock (18) ---
Net (increase) decrease in loans (6,103) 1,843
Recoveries on loans charged off 84 59
Purchases of bank premises and
equipment (1,003) (605)
Proceeds from sale of bank premises
and equipment --- 10
Sale of and rent payments on
other real estate owned 48 151
----------------------------------
Net cash used in investing activities (10,304) (444)
===============================================================================
Cash flows from financing activites:
Net increase in demand, savings
and NOW deposits 2,774 279
Net increase (decrease) in
time deposits 2,416 (1,155)
Dividends paid (260) (244)
Dividends reinvested 32 ---
Repayment of note payable to
Federal Home Loan Bank (50) (50)
----------------------------------
Net cash used by financing activities 4,912 (1,170)
===============================================================================
Net increase in cash and cash equivalents (4,538) (715)
Cash and cash equivalents, beginning of
period 10,682 6,691
----------------------------------
Cash and cash equivalents, end of period $6,144 $5,976
===============================================================================
See accompanying notes to consolidated financial statements.
6
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PINNACLE BANKSHARES CORPORATION
Notes to Consolidated Financial Statements
June 30, 1999
(Unaudited)
(In thousands, except for share data)
(1) General
The consolidated financial statements include the accounts of Pinnacle
Bankshares Corporation (the "Company") and its wholly-owned subsidiary, The
First National Bank of Altavista (the "Bank"). All material intercompany
accounts and transactions have been eliminated. The consolidated financial
statements conform to generally accepted accounting principles and to general
banking industry practices. In the opinion of the Company's management, the
accompanying unaudited consolidated financial statements contain all adjustments
of a normal recurring nature, necessary to present fairly the financial position
as of June 30, 1999, the results of operations for the three-month and six-month
periods ended June 30, 1999 and 1998, and cash flows for the six-month periods
ended June 30, 1999 and 1998.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in Pinnacle
Bankshares Corporation's Annual Report for the year ended December 31, 1998.
The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year ending December 31,
1999.
(2) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, interest-bearing deposits, and federal
funds sold.
(3) Securities
The amortized costs, gross unrealized gains, gross unrealized losses, and
fair values for securities at June 30, 1999, are shown in the table below. As of
June 30, 1999, securities with amortized costs of $2,271 and fair values of
$2,239 were pledged as collateral for public deposits.
7
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(3) (Continued)
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Available-for-Sale: Costs Gains Losses Values
------------------- --------- ---------- ---------- -------
<S> <C>
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 14,995 16 (286) 14,725
Obligations of states and
political subdivisions 3,999 58 (13) 4,044
Mortgage-backed securities-
Government 3,017 26 (16) 3,027
Other securities 107 - - 107
--------------------------------------------------------------------------------------------
Totals $ 22,118 100 (315) 21,903
--------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Held-to-Maturity: Costs Gains Losses Values
----------------- --------- ---------- ---------- ------
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 2,412 1 (30) 2,383
Obligations of states and
political subdivisions 13,468 113 (263) 13,318
Mortgage-backed securities-
Private 5 - - 5
--------------------------------------------------------------------------------------------
Totals $ 15,885 114 (293) 15,706
--------------------------------------------------------------------------------------------
</TABLE>
(4) Allowance for Loan Losses
Changes in the allowance for loan losses are as follows:
1999 1998
---- ----
Balance at January 1, $877 $747
Provision for loan losses 150 150
Loans charged off (167) (141)
Recoveries 84 59
---- ----
Balance at June 30, $944 $815
====== =====
(5) Net Income Per Share
Basic net income per share excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted net income per share reflects the
potential dilution that could occur if securities or other contracts to issue
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common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
The following is a reconciliation of the numerators and denominators of the
basic and diluted net income per share computations for the periods indicated:
Net Income Shares Per Share
Three Months Ended June 30, 1999 (Numerator) (Denominator) Amount
- -------------------------------- ----------- ------------- ---------
Basic net income per share $ 359 719,707 $ .50
Effect of dilutive stock options - 6,158 ============
---------- -----------
Diluted net income per share $ 359 725,865 $ .49
========== =========== ============
Three Months Ended June 30, 1998
- --------------------------------
Basic net income per share $ 378 719,025 $ .53
Effect of dilutive stock options - 5,244 ============
---------- -----------
Diluted net income per share $ 378 724,269 $ .52
=========== =========== ============
Net Income Shares Per Share
Six Months Ended June 30, 1999 (Numerator) (Denominator) Amount
- ------------------------------ ----------- ------------- ---------
Basic net income per share $ 752 719,368 $ 1.05
Effect of dilutive stock options - 6,093 ============
---------- -----------
Diluted net income per share $ 752 725,461 $ 1.04
=========== =========== ============
Six Months Ended June 30, 1998
- ------------------------------
Basic net income per share $ 769 719,025 $ 1.07
Effect of dilutive stock options - 4,520 ============
---------- -----------
Diluted net income per share $ 769 723,545 $ 1.06
=========== =========== ============
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Amounts in 000's)
The following discussion supplements and provides information about the
major components of the results of operations and financial condition, liquidity
and capital resources of Pinnacle Bankshares Corporation (the "Company"). The
discussion below reflects the Consolidated Financial Statements of the Company
and its subsidiary. This discussion and analysis should be read in conjunction
with the Consolidated Financial Statements, and supplemental financial data.
OVERVIEW
Total assets at June 30, 1999 were $147,704, up 3.68% from $142,458 at
December 31, 1998. The principal components of the Company's assets at the end
of the period were $37,788 in securities and $96,357 in net loans. During the
six month period, gross loans increased 6.38% or $5,855. The Company's lending
activities are a principal source of income. The Company's premises and
equipment grew 25.77%, which was related to construction of the new First
National Bank Airport Branch facility.
Total liabilities at June 30, 1999 were $132,403, up from $127,316 at
December 31, 1998, with the increase reflective of an increase in deposits of
5,190 or 4.15%. Non-interest bearing demand deposits decreased $260 or 2.37% and
represented 8.23% of total deposits. The Company's deposits are provided by
individuals and businesses located within the communities served.
Total stockholders' equity at June 30, 1999 was $15,301. At December 31,
1998, total shareholder's equity was $15,142.
The Company had net income of $752 for the six months ended June 30, 1999,
compared with net income of $769 for the comparable period in 1998, a decrease
of 2.21%. The Company had net income of $359 for the three months ended June 30,
1999, compared with net income of $378 for the comparable period in 1998, a
decrease of 5.03%. The results of operations for the six month periods ended
June 30, 1999 and 1998 are not necessarily indicative of the results to be
expected for the full year.
Profitability as measured by the Company's return on average assets (ROA)
was 1.01% for the six months ended June 30, 1999, down from 1.15% for the same
period of 1998. Another key indicator of performance, the return on average
equity (ROE) for the six months ended June 30, 1999 was 9.88%, compared to
10.75% for the six months ended June 30, 1998.
10
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NET INTEREST INCOME
Net interest income represents the principal source of earnings for the
Company. Net interest income equals the amount by which interest income exceeds
interest expense. Changes in the volume and mix of earning assets and
interest-bearing liabilities, as well as their respective rates and yields, have
a significant impact on the level of net interest income.
The net interest margin decreased from 4.35% for the six months ended June
30, 1998, to 4.02% for the six months ended June 30, 1999. Net interest income
was $2,672 for the six months ended June 30, 1999 and is attributable to
interest income from loans and securities exceeding the cost associated with
interest paid on deposits.
Net interest income for the three months ended June 30, 1999 was $1,346,
up $30, or 2.28% from $1,316 for the same three months of 1998.
NON-INTEREST INCOME
The Company's principal sources of non-interest income are service charges
and fees on deposit accounts, particularly transaction accounts, and fees from
loans. Non-interest income increased $107 or 45.15% for the six month period
ended June 30, 1999 over the same period of 1998. Non-interest income increased
$58, or 50.00% when comparing the three months ended June 30, 1999 to the same
period of 1998. Income generated from fees on various loan products increased
$99. Finance charges on the Business Manager Receivables Financing Program was
another source of the increase. In addition, in May, the Bank began surcharging
foreign customers at all three ATM locations.
NON-INTEREST EXPENSE
Non-interest expense increased $235 or 14.50%, for the six month period
ended June 30, 1999 over the same period of 1998. An increase of $148 or 18.07%
is reflected when comparing the three month period ended June 30, 1999 to the
same period of 1998. The increase in non-interest expense when comparing the two
periods is attributed to the effect of overall growth of the Company on
personnel expenses, fixed asset costs associated with bank premises additions
and other operating expenses. The new Airport Branch facility opened in late
June, 1999.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
A provision for loan losses of $150 was made for the first six months of
1999 and 1998. The provisions for loan losses for the three month periods ended
June 30, 1999 and 1998 were both $75. Provisions are in recognition of
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management's estimate of risks inherent with lending activities. Among other
factors, management considers the Company's historical loss experience, the size
and composition of the loan portfolio, the value and adequacy of collateral and
guarantors, non-performing credits, and current and anticipated economic
conditions. There are additional risks of future loan losses which cannot be
precisely quantified or attributed to particular loans or classes of loans.
Since those risks include general economic trends as well as conditions
affecting individual borrowers, the allowance for loan losses is an estimate.
The allowance is also subject to regulatory examinations and determination as to
adequacy, which may take into account such factors as the methodology used to
calculate the allowance. The allowance for loan losses was $944 as of June 30,
1999, and represents approximately .97% of gross loans outstanding. The
allowance for loan losses was $877 as of December 31, 1998, and represented .96%
of gross loans outstanding. The allowance for loan losses was $815 as of June
30, 1998, and represented .95% of gross loans outstanding. Management believes
the allowance was adequate as of June 30, 1999. Management evaluates the
reasonableness of the allowance for loan losses on a quarterly basis and adjusts
the provision as deemed necessary.
NON-PERFORMING ASSETS
Total nonperforming assets, which consist of nonaccrual loans, were $306
at June 30, 1999 and $45 at December 31, 1998. Management believes losses will
be minimal. Loans are generally placed in nonaccrual status when the collection
of principal and interest is 90 days or more past due, unless the obligation is
both well-secured and in the process of collection.
LIQUIDITY
Liquidity represents an institution's ability to meet present and future
financial obligations through either the sale or maturity of existing assets or
the acquisition of additional funds from alternative funding sources. Liquid
assets include cash, interest bearing deposits with banks, federal funds sold,
and investments and loans maturing within one year. The Company's ability to
obtain deposits and purchase funds at favorable rates also affects it liquidity.
As a result of the Company's management of liquid assets and the ability to
generate liquidity through alternative funding sources, management believes that
the bank maintains overall liquidity which is sufficient to satisfy its
depositors' requirements and to meet customers' credit needs. At June 30, 1999,
cash, securities classified as available for sale and federal funds sold were
20.31% of total earning assets compared to 23.05% at December 31,1998.
Additional sources of liquidity available to the Company include its capacity to
borrow additional funds through correspondent banks.
12
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CAPITAL
The Company's financial position at June 30, 1999 reflects liquidity and
capital levels currently adequate to fund anticipated future business expansion.
Capital ratios are well in excess of required regulatory minimums for a
well-capitalized institution. The assessment of capital adequacy depends on a
number of factors such as asset quality, liquidity, earnings performance, and
changing competitive conditions and economic forces. The adequacy of the
Company's capital is reviewed by management on an ongoing basis. Management
seeks to maintain a capital structure that will assure an adequate level of
capital to support anticipated asset growth and to absorb potential losses.
Stockholders' equity reached $15,301 at the end of the second quarter of
1999 compared to $15,142 at December 31, 1998. The leverage ratio consists of
Tier I capital divided by quarterly average assets. At June 30, 1999, the
Company's leverage ratio was 10.31% compared to 10.66% at December 31, 1998.
Each of these exceeds the required minimum leverage ratio of 4%.
OTHER
The Company is cognizant of the risks posed by the Year 2000(Y2K) issue
for both our operation and our borrowers. The Company continues to place a high
priority on our Y2K efforts to identify any potential problems and to take
necessary corrective action. Our Y2K committee, which has representation from
all areas of the Bank, including senior management, continues to meet at least
monthly to monitor servicers and business partners in their efforts to be Y2K
prepared as well as complete our internal testing and remediation projects.
Inventory and assessment of all Y2K related items was initially completed in
April 1998.
The Company neither develops or supports code for any information systems;
therefore, our remediation efforts have been toward soliciting compliance from
our vendors, business partners and servicers and on-site testing. The Company
has identified all core and business critical applications and the hardware
utilized for each. Our environmental systems such as HVAC and security systems
have been addressed. Y2K compliance from the vendors for these areas has been
sought, and the Company notes that these applications are currently compliant or
the vendor has submitted an acceptable timeline for compliance. The Company is
monitoring the compliance efforts of such vendors and notes that in all cases,
timelines are being substantially adhered to.
A written testing strategy has been developed and internal mission
critical testing is now completed without a single testing failure. Internal
testing included, but was not limited to, the century rollover date on all
hardware and software components followed by a complete update of core financial
13
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programs. Six other critical dates were tested utilizing unit tests, as well as
integrated tests, where appropriate. Testing with third party servicers has been
completed. The Federal Reserve Bank of Richmond has provided comprehensive
testing opportunities for our on-line connection. The Company has completed Y2K
testing for each of the applications in use with the Federal Reserve.
Third-party testing included data exchange where appropriate. All testing is
documented and reviewed for acceptance by our internal audit department. In
addition, documentation of the acceptance process will be made available for
review by our federal regulators. The Company continues to be vigilant regarding
any newly acquired Information Technology (IT) products and applications and
performs appropriate testing. Testing and evaluation of testing has been
completed and all remediated items are in production.
The Company has identified credit risks associated with borrowers who may
not be Y2K prepared through inquiry and completion of a readiness questionnaire.
A bankwide credit risk assessment was completed and submitted to the Board of
Directors in the fall of 1998. All new commercial credits continue to be
evaluated for Y2K risk. Our lending area has completed reevaluation of any
credit risk originally designated with medium or higher risk to determine their
current Y2K status. This reevaluation showed that less than 2% of the Company's
commercial loan portfolio was rated above low risk. The Company continues to
monitor these credits. Methods to further reduce Company risk in this area have
also been established. Methods to reduce risk would be to require additional
collateral, require additional cosigners, or call the note.
The Company continues to focus on the validation of the contingency plans
developed to ensure business continuity throughout potential disruptions
possible in the century change. A separate contingency task force has been
established to direct the implementation and training necessary for a successful
plan. This plan would enable the Company to continue to operate in the event of
disruption of service from outside partners. The Y2K contingency plan has been
incorporated into the Company's business continuity plan and is in independent
review. Eleven teams have been developed to address contingency concerns in
identified areas. Contingency team training and validation will continue
throughout the year.
Although contingency plans address a number of scenarios, the Company does
not believe it is possible for any business to address the potentially unlimited
number of scenarios related to Y2K issues. Management does not believe, in the
most likely worse case scenarios, Y2K will have a material effect on the
Company's results of operations, liquidity or financial condition. Although
considered highly unlikely, management realizes that if its Y2K assessment,
14
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remediation or contingency plans prove to be inadequate, it could have a
material adverse effect on the Company's results of operations, liquidity or
financial condition.
The Company notes that resources to address Y2K issues have been included
in the budget approved by the Board of Directors. The estimated 1999 Y2K budget
is $15. Less than $2 was expensed for the six months ended June 30, 1999.
The Company has confidence in our preparedness for the millennium change
and in our ability to continue to successfully operate and handle the
transactions of our customers.
15
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PART II - OTHER INFORMATION
Item 1 - LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or of which the property of the Company is subject.
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The 1999 Annual Meeting of Shareholders of Pinnacle Bankshares
Corporation was held on April 13, 1999.
(b) The April 13, 1999, annual meeting of the shareholders of the Company
involved the election of directors. The following persons were elected to serve
as Class II Directors, serving until the 2002 Annual Meeting.
Name For Against Abstain
---- --- ------- -------
Alvah P. Bohannon, III 535,727 0 21,066
James E. Burton, IV 535,727 0 21,066
James P. Kent, Jr. 535,727 0 1,000
Percy O. Moore 535,727 0 21,066
The following person was elected to serve as a Class I Director, serving
until the 2001 Annual Meeting.
Name For Against Abstain
---- --- ------- -------
A. Willard Arthur 535,727 0 1,000
Class I and III directors will continue in office until the 2001 and 2000
Annual Meetings of Shareholders, respectively.
Class I Class III
-------- ---------
John P. Erb Herman P. Rogers, Jr.
Robert L. Finch Carroll E. Shelton
Robert H. Gilliam, Jr. Kenneth S. Tyler, Jr.
R.B. Hancock, Jr. John L. Waller
(c) None
(d) None
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27-Financial Data Schedule
(b) Reports on Form 8-K
None
16
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
PINNACLE BANKSHARES CORPORATION
AUGUST 3, 1999 /s/ Robert H. Gilliam, Jr.
- -------------------- ------------------------------------
Date Robert H. Gilliam, Jr., President and
Chief Executive Officer
AUGUST 3, 1999 /s/ Dawn P. Crusinberry
- -------------------- ------------------------------------
Date Dawn P. Crusinberry, Secretary,
Treasurer and Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-QSB FOR THE QUARTERLY PERIOD ENDING JUNE 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH 10-QSB.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 6,144
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,196
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 21,903
<INVESTMENTS-CARRYING> 15,885
<INVESTMENTS-MARKET> 15,706
<LOANS> 96,357
<ALLOWANCE> 944
<TOTAL-ASSETS> 147,704
<DEPOSITS> 130,377
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,026
<LONG-TERM> 0
0
0
<COMMON> 2,160
<OTHER-SE> 13,141
<TOTAL-LIABILITIES-AND-EQUITY> 147,704
<INTEREST-LOAN> 4,180
<INTEREST-INVEST> 1,104
<INTEREST-OTHER> 198
<INTEREST-TOTAL> 5,482
<INTEREST-DEPOSIT> 2,783
<INTEREST-EXPENSE> 2,810
<INTEREST-INCOME-NET> 2,672
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 4
<EXPENSE-OTHER> 1,856
<INCOME-PRETAX> 1,010
<INCOME-PRE-EXTRAORDINARY> 1,010
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 752
<EPS-BASIC> 1.05
<EPS-DILUTED> 1.04
<YIELD-ACTUAL> 4.02
<LOANS-NON> 306
<LOANS-PAST> 334
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 877
<CHARGE-OFFS> 167
<RECOVERIES> 84
<ALLOWANCE-CLOSE> 944
<ALLOWANCE-DOMESTIC> 944
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 561
</TABLE>
