##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-QSB
  þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2007
 o
    
    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.
  Delaware
    
    72-1370314(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 1811 Second Avenue, Jasper, Alabama 35502-1388
 (205) 221-4111
 þ o
 o þ
  o þ




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##### 



CONTENTS
 PagePART I     FINANCIAL INFORMATIONItem 1. Financial StatementsUnaudited Condensed Consolidated Statements of Financial Condition at September 30, 2007
and December 31, 2006.
    
    3Unaudited Condensed Consolidated Statements of Operations for the three and nine-months
ended September 30, 2007 and 2006.
    
    4Unaudited Condensed Consolidated Statements of Stockholders Equity for the nine-months
ended September 30, 2007 and 2006.
    
    5Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2007 and 2006.
    
    6Notes to Unaudited Condensed Consolidated Financial Statements.
    
    7Item 2. Managements Discussion and Analysis or Plan of Operation
    
    10Item 3. Controls and Procedures
    
    15Part II OTHER INFORMATIONItem 2. Unregistered Sales of Equity Securities and use of Proceeds
    
    16Item 6. Exhibits
    
    16Signatures
    
    17EX-31.1 Section 302 Certification of the CEO & CFOEX-32.1 Section 906 Certification of the CEO & CFO
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 PINNACLE BANCSHARES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 September 30,
    
    
    December 31,2007
    
    
    2006ASSETS:Cash and cash equivalents
    
    $
    3,336,448
    
    
    $
    4,206,018Interest-bearing deposits in other banks
    
    
    2,892,296
    
    
    
    8,599,278Securities available-for-sale
    
    
    87,836,975
    
    
    
    87,852,495FHLB stock
    
    
    561,600
    
    
    
    532,100First National Bankers Bancshares stock
    
    
    525,000
    
    
    
    525,000Loans held for sale
    
    
    890,778
    
    
    
    975,951Loans receivable, net of allowances for loan losses
of $1,403,768 and $1,382,190 respectively
    
    
    127,628,046
    
    
    
    113,489,632Real estate owned, net
    
    
    185,853
    
    
    
    208,903Premises and equipment, net
    
    
    7,028,078
    
    
    
    7,075,617Goodwill
    
    
    306,488
    
    
    
    306,488Bank owned life insurance
    
    
    5,666,101
    
    
    
    5,413,237Accrued interest receivable
    
    
    1,543,305
    
    
    
    1,535,638Other assets
    
    
    1,120,604
    
    
    
    1,513,250Total assets
    
    $
    239,521,572
    
    
    $
    232,233,607LIABILITIES AND STOCKHOLDERS EQUITY:Deposits
    
    $
    207,364,640
    
    
    $
    206,569,999Subordinated debt
    
    
    3,093,000
    
    
    
    3,093,000Borrowed Funds
    
    
    3,200,000
    
    
    
    0Official checks outstanding
    
    
    3,095,054
    
    
    
    1,005,512Accrued interest payable
    
    
    1,327,464
    
    
    
    1,262,887Other liabilities
    
    
    891,388
    
    
    
    896,672Total liabilities
    
    
    218,971,546
    
    
    
    212,828,070STOCKHOLDERS EQUITY:Common stock, par value $.01 per share; 2,400,000 authorized; 1,872,313
issued at September 30, 2007 and December 31, 2006, respectively;
1,462,359 and 1,464,538 outstanding at September 30, 2007 and December
31, 2006, respectively
    
    
    18,723
    
    
    
    18,723Additional paid-in capital
    
    
    8,923,223
    
    
    
    8,923,223Treasury shares, at cost (409,954 and 407,775 at September 30, 2007 and
December 31, 2006, respectively)
    
    
    (5,317,798
    )
    
    
    (5,285,739
    )Retained earnings
    
    
    17,658,159
    
    
    
    17,103,780Accumulated other comprehensive loss, net of tax
    
    
    (732,281
    )
    
    
    (1,354,450
    )Total stockholders equity
    
    
    20,550,026
    
    
    
    19,405,537Total liabilities and stockholders equity
    
    $
    239,521,572
    
    
    $
    232,233,607
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PINNACLE BANCSHARES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006INTEREST REVENUE:Interest on loans
    
    $
    2,578,224
    
    
    $
    2,318,758
    
    
    $
    7,430,705
    
    
    $
    6,542,560Interest and dividends on securities
    
    
    1,042,082
    
    
    
    864,755
    
    
    
    3,106,787
    
    
    
    2,533,427Other interest
    
    
    42,910
    
    
    
    228,097
    
    
    
    291,664
    
    
    
    693,9103,663,216
    
    
    
    3,411,610
    
    
    
    10,829,156
    
    
    
    9,769,897INTEREST EXPENSE:Interest on deposits
    
    
    1,910,580
    
    
    
    1,667,211
    
    
    
    5,760,517
    
    
    
    4,640,032Interest on subordinated debentures
    
    
    65,394
    
    
    
    66,555
    
    
    
    195,401
    
    
    
    187,070Interest on borrowed funds
    
    
    2,739
    
    
    
    0
    
    
    
    2,739
    
    
    
    14,6941,978,713
    
    
    
    1,733,766
    
    
    
    5,958,657
    
    
    
    4,841,796NET INTEREST INCOME BEFORE PROVISION
FOR LOAN LOSSES
    
    
    1,684,503
    
    
    
    1,677,844
    
    
    
    4,870,499
    
    
    
    4,928,101PROVISION FOR LOAN LOSSES
    
    
    134,500
    
    
    
    135,000
    
    
    
    234,500
    
    
    
    382,500NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES
    
    
    1,550,003
    
    
    
    1,542,844
    
    
    
    4,635,999
    
    
    
    4,545,601NONINTEREST INCOME:Fees and service charges on deposit accounts
    
    
    225,609
    
    
    
    221,645
    
    
    
    652,554
    
    
    
    643,583Service fee income, net
    
    
    28,754
    
    
    
    32,429
    
    
    
    89,489
    
    
    
    100,112Fees and charges on loans
    
    
    37,334
    
    
    
    26,403
    
    
    
    87,458
    
    
    
    99,608Bank owned life insurance
    
    
    84,288
    
    
    
    79,270
    
    
    
    252,864
    
    
    
    237,810Net gain (loss) on sale or write-down of:Loans held for sale
    
    
    48,832
    
    
    
    91,842
    
    
    
    216,577
    
    
    
    298,903Real estate owned
    
    
    0
    
    
    
    86,150
    
    
    
    (16,888
    )
    
    
    74,658Securities available-for-sale
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    60Premises and equipment
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    14,737424,817
    
    
    
    537,739
    
    
    
    1,282,054
    
    
    
    1,469,471NONINTEREST EXPENSE:Compensation and benefits
    
    
    811,502
    
    
    
    948,656
    
    
    
    2,525,118
    
    
    
    2,656,316Occupancy
    
    
    286,920
    
    
    
    292,356
    
    
    
    845,181
    
    
    
    846,716Marketing and professional
    
    
    114,516
    
    
    
    95,055
    
    
    
    335,819
    
    
    
    276,872Other
    
    
    217,908
    
    
    
    273,276
    
    
    
    725,159
    
    
    
    794,7651,430,846
    
    
    
    1,609,343
    
    
    
    4,431,277
    
    
    
    4,574,669INCOME BEFORE INCOME TAXES
    
    
    543,974
    
    
    
    471,240
    
    
    
    1,486,776
    
    
    
    1,440,403INCOME TAX EXPENSE
    
    
    159,305
    
    
    
    146,350
    
    
    
    449,240
    
    
    
    448,122NET INCOME
    
    $
    384,669
    
    
    $
    324,890
    
    
    $
    1,037,536
    
    
    $
    992,281Basic earnings per share
    
    $
    0.26
    
    
    $
    0.22
    
    
    $
    0.71
    
    
    $
    0.66Diluted earnings per share
    
    $
    0.26
    
    
    $
    0.22
    
    
    $
    0.71
    
    
    $
    0.65Cash dividends per share
    
    $
    0.11
    
    
    $
    0.11
    
    
    $
    0.33
    
    
    $
    0.33Weighted average basic shares outstanding
    
    
    1,463,267
    
    
    
    1,471,126
    
    
    
    1,464,110
    
    
    
    1,502,904Weighted average diluted shares outstanding
    
    
    1,468,303
    
    
    
    1,476,567
    
    
    
    1,469,652
    
    
    
    1,523,414
  4




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PINNACLE BANCSHARES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    Other
    
    TotalCommon Stock
    
    Paid-in
    
    Treasury
    
    Retained
    
    Comprehensive
    
    StockholdersShares
    
    Amount
    
    Capital
    
    Stock
    
    Earnings
    
    (Loss) Income
    
    EquityBALANCE, December 31, 2005
    
    
    1,827,813
    
    
    $
    18,278
    
    
    $
    8,479,921
    
    
    $
    (3,488,724
    )
    
    $
    16,405,863
    
    
    $
    (2,005,364
    )
    
    $
    19,409,974Comprehensive income:Net income
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    992,281
    
    
    
    0
    
    
    
    992,281Change in fair value of securities available-
for-sale, net of tax
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    147,899
    
    
    
    147,899Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,140,180Exercise of stock options, net of tax benefits
    
    
    44,500
    
    
    
    445
    
    
    
    443,302
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    443,747Repurchase of common stock (121,140 shares at cost)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (1,797,015
    )
    
    
    0
    
    
    
    0
    
    
    
    (1,797,015
    )Cash dividends declared ($.33 per share)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (491,887
    )
    
    
    0
    
    
    
    (491,887
    )BALANCE, September 30, 2006
    
    
    1,872,313
    
    
    $
    18,723
    
    
    $
    8,923,223
    
    
    $
    (5,285,739
    )
    
    $
    16,906,257
    
    
    $
    (1,857,465
    )
    
    $
    18,704,999BALANCE, December 31, 2006
    
    
    1,872,313
    
    
    $
    18,723
    
    
    $
    8,923,223
    
    
    $
    (5,285,739
    )
    
    $
    17,103,780
    
    
    $
    (1,354,450
    )
    
    $
    19,405,537Comprehensive loss:Net income
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1,037,536
    
    
    
    0
    
    
    
    1,037,536Change in fair value of securities available-
for-sale, net of tax
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    622,169
    
    
    
    622,169Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,659,705Repurchase of common stock (2,179 shares at cost)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (32,059
    )
    
    
    0
    
    
    
    0
    
    
    
    (32,059
    )Cash dividends declared ($.33 per share)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (483,157
    )
    
    
    0
    
    
    
    (483,157
    )BALANCE, September 30, 2007
    
    
    1,872,313
    
    
    $
    18,723
    
    
    $
    8,923,223
    
    
    $
    (5,317,798
    )
    
    $
    17,658,159
    
    
    $
    (732,281
    )
    
    $
    20,550,026
  5




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PINNACLE BANCSHARES, INC,
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Nine Months EndedSeptember 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    1,037,536
    
    
    $
    992,281Adjustments to reconcile net income to net cash provided by (used in) operating activities:Depreciation
    
    
    371,824
    
    
    
    375,935Provision for loan losses
    
    
    234,500
    
    
    
    382,500Accretion, net
    
    
    (111,611
    )
    
    
    (125,550
    )Increase in cash surrender value of Bank owned life insurance
    
    
    (252,864
    )
    
    
    (237,810
    )Excess tax benefits on stock options
    
    
    0
    
    
    
    (51,590
    )Net (gain) loss on sale or write-down of:Loans held for sale
    
    
    (216,577
    )
    
    
    (298,903
    )Securities available-for-sale
    
    
    0
    
    
    
    (60
    )Real estate owned
    
    
    16,888
    
    
    
    (74,658
    )Premises and equipment
    
    
    0
    
    
    
    (14,737
    )Proceeds from sale of loans
    
    
    20,158,597
    
    
    
    20,301,457Loans originated for sale
    
    
    (19,856,847
    )
    
    
    (20,816,357
    )(Increase) decrease in accrued interest receivable
    
    
    (7,667
    )
    
    
    17,543(Increase) decrease in other assets
    
    
    12,821
    
    
    
    (41,666
    )Increase in accrued interest payable
    
    
    64,577
    
    
    
    472,880(Decrease) increase in other liabilities
    
    
    (5,284
    )
    
    
    95,955Net cash provided by operating activities
    
    
    1,445,893
    
    
    
    977,220CASH FLOWS FROM INVESTING ACTIVITIES:Net loan originations
    
    
    (14,496,232
    )
    
    
    (4,044,638
    )Net change in interest bearing deposits in other banks
    
    
    5,706,982
    
    
    
    (6,527,321
    )Purchase of securities available-for-sale
    
    
    (10,164,010
    )
    
    
    (5,654,191
    )Proceeds from sales of securities available-for-sale
    
    
    0
    
    
    
    3,000,000Proceeds from maturing, called and payments received on securities available-for-sale
    
    
    11,147,232
    
    
    
    4,483,251Proceeds from sale of Federal Home Loan Bank stock
    
    
    22,700
    
    
    
    0Purchase of Federal Home Loan Bank stock
    
    
    (52,200
    )
    
    
    (24,800
    )Purchase of premises and equipment
    
    
    (324,285
    )
    
    
    (1,656,497
    )Proceeds from sale of premises and equipment
    
    
    0
    
    
    
    16,936Proceeds from sales of real estate owned
    
    
    275,383
    
    
    
    313,469Net cash used in investing activities
    
    
    (7,884,430
    )
    
    
    (10,093,791
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in passbook, NOW and money market deposit accounts
    
    
    2,747,828
    
    
    
    2,766,170Proceeds from sales of time deposits
    
    
    23,510,927
    
    
    
    27,273,111Payments on maturing time deposits
    
    
    (25,464,114
    )
    
    
    (16,802,123
    )(Increase) decrease in borrowed funds
    
    
    3,200,000
    
    
    
    (2,375,000
    )Increase (decrease) in official checks outstanding
    
    
    2,089,542
    
    
    
    (307,825
    )Proceeds from exercise of stock options
    
    
    0
    
    
    
    392,157Excess tax benefits on stock options
    
    
    0
    
    
    
    51,590Repurchase of common stock
    
    
    (32,059
    )
    
    
    (1,797,015
    )Payments of cash dividends
    
    
    (483,157
    )
    
    
    (491,887
    )Net cash provided by financing activities
    
    
    5,568,967
    
    
    
    8,709,178NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (869,570
    )
    
    
    (407,393
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    4,206,018
    
    
    
    3,784,867CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    3,336,448
    
    
    $
    3,377,474SUPPLEMENTAL DISCLOSURES:Cash payments for interest on deposits, borrowed funds, and subordinated debentures
    
    $
    5,894,080
    
    
    $
    4,368,916Cash payments for income taxes
    
    
    435,000
    
    
    
    616,870Real estate acquired through foreclosure
    
    
    269,221
    
    
    
    180,091
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PINNACLE BANCSHARES, INC
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION :
    7




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2. EARNINGS PER SHARE:
  PerShareFor The Three Months Ended
    
    Net Income
    
    
    Shares
    
    
    AmountSeptember 30, 2007Basic earnings per share
    
    $
    384,669
    
    
    
    1,463,267
    
    
    $
    0.26Dilutive securities
    
    
    
    
    
    
    5,306Diluted earnings per share
    
    $
    384,669
    
    
    
    1,468,303
    
    
    $
    0.26
 PerShareFor The Three Months Ended
    
    Net Income
    
    
    Shares
    
    
    AmountSeptember 30, 2006Basic earnings per share
    
    $
    324,890
    
    
    
    1,471,126
    
    
    $
    0.22Dilutive securities
    
    
    
    
    
    
    5,441Diluted earnings per share
    
    $
    324,890
    
    
    
    1,476,567
    
    
    $
    0.22
 PerShareFor The Nine Months Ended
    
    Net Income
    
    
    Shares
    
    
    AmountSeptember 30, 2007Basic earnings per share
    
    $
    1,037,536
    
    
    
    1,464,110
    
    
    $
    0.71Dilutive securities
    
    
    
    
    
    
    5,542Diluted earnings per share
    
    $
    1,037,536
    
    
    
    1,469,652
    
    
    $
    0.71
 PerShareFor The Nine Months Ended
    
    Net Income
    
    
    Shares
    
    
    AmountSeptember 30, 2006Basic earnings per share
    
    $
    992,281
    
    
    
    1,502,904
    
    
    $
    0.66Dilutive securities
    
    
    
    
    
    
    20,510Diluted earnings per share
    
    $
    992,281
    
    
    
    1,523,414
    
    
    $
    0.65
 3. RECENT ACCOUNTING PRONOUNCEMENTS :
   8




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4. SUBSQUENT EVENT :
  9




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Item 2. Managements Discussion and Analysis or Plan of Operation
 Forward-Looking Statements:
  Critical Accounting Policies:
     10




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Accounting for Sales of Real Estate.
 Comparison of Financial Condition as of December 31, 2006 and September 30, 2007:
      Results of Operations-Comparison of the Three and Nine-Months Ended September 30, 2007 and 2006: .
 11




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C
   . .
 12




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Asset/Liability Management
 13




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Stock Repurchases:
 Total
    
    
    
    
    
    Total Number of
    
    Maximum NumberNumber
    
    Average Price
    
    Shares Purchased
    
    of Shares that Mayof Shares
    
    Paid per
    
    As Part of Publicly
    
    Yet Be PurchasedPeriod
    
    Purchased
    
    Share
    
    Announced Programs
    
    Under the ProgramsJanuary 1-31, 2007
    
    
    0
    
    
    $
    0
    
    
    
    0
    
    
    
    16,696February 1-28, 2007
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0March 1-31, 2007
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0April 1-30, 2007
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0May 1-31, 2007
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0June 1-30, 2007
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0July 1-31, 2007
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0August 1-31,2007
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0September 1-30,
2007
    
    
    2,179
    
    
    $
    14.71
    
    
    
    2,179
    
    
    
    14,517
  Capital Resources: .
 Asset Quality Ratios:
 September 30,
    
    December 31,2007
    
    2006Nonperforming loans as a percent of total loans
    
    
    0.26
    %
    
    
    0.37
    %Nonperforming assets as a percent of total assets
    
    
    0.22
    %
    
    
    0.27
    %Allowance for loan losses as a percent of total loans
    
    
    1.09
    %
    
    
    1.20
    %Allowance for loan losses as a percent of nonperforming loans
    
    
    414.16
    %
    
    
    329.05
    %
 New Branch Office
 14




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##### Table of Contents



Item 3. Controls and Procedures
      15




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 ITEM 6. Exhibits
   16




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##### Table of Contents



SIGNATURES
  PINNACLE BANCSHARES, INCDATE  : November, 14, 2007
    BY:
    
    /s/ Robert B. Nolen Jr.Robert B. Nolen, Jr.President and Chief
Executive Officer
(Principal Executive Officer and
Principal Financial Officer)/s/ Marie GuthrieMarie GuthrieTreasurer
(Principal Accounting Officer) 17