##### Table of Contents



UNITED STATES
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
  o
    
    Transition report under Section 13 or 15(d) of the Exchange Act
   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
  x o
  o x
   o x




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##### Table of Contents



CONTENTS
 PagePART I FINANCIAL INFORMATIONItem 1. Financial StatementsUnaudited Condensed Consolidated Statements of Financial Condition at June 30, 2007
and December 31, 2006.
    
    
    3Unaudited Condensed Consolidated Statements of Operations for the three and six-months
ended June 30, 2007 and 2006.
    
    
    4Unaudited Condensed Consolidated Statements of Stockholders Equity for the six-months
ended June 30, 2007 and 2006.
    
    
    5Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended
June 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
    
    
    14Part II OTHER INFORMATIONItem 2. Changes in Securities and Small Business Issuer Purchases of Equity Securities
    
    
    15Item 4. Submission of Matters to a Vote of Security Holders
    
    
    15Item 6. Exhibits
    
    
    15Signatures
    
    
    16Ex-31.1 Section 302 Certification of the CEO and CFOEx-32.1 Section 906 Certification of the CEO and 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
 June 30,
    
    
    December 31,2007
    
    
    2006ASSETS:Cash and cash equivalents
    
    $
    4,543,129
    
    
    $
    4,206,018Interest-bearing deposits in other banks
    
    
    7,933,499
    
    
    
    8,599,278Securities available-for-sale
    
    
    93,689,967
    
    
    
    87,852,495FHLB stock
    
    
    509,400
    
    
    
    532,100First National Bankers Bancshares stock
    
    
    525,000
    
    
    
    525,000Loans held for sale
    
    
    664,279
    
    
    
    975,951Loans receivable, net of allowances for loan losses
of $1,411,310 and $1,382,190 respectively
    
    
    119,688,171
    
    
    
    113,489,632Real estate owned, net
    
    
    150,217
    
    
    
    208,903Premises and equipment, net
    
    
    6,934,227
    
    
    
    7,075,617Goodwill
    
    
    306,488
    
    
    
    306,488Bank owned life insurance
    
    
    5,581,813
    
    
    
    5,413,237Accrued interest receivable
    
    
    1,521,157
    
    
    
    1,535,638Other assets
    
    
    1,586,812
    
    
    
    1,513,250Total assets
    
    $
    243,634,159
    
    
    $
    232,233,607LIABILITIES AND STOCKHOLDERS EQUITY:Deposits
    
    $
    217,573,293
    
    
    $
    206,569,999Subordinated debt
    
    
    3,093,000
    
    
    
    3,093,000Official checks outstanding
    
    
    1,236,683
    
    
    
    1,005,512Accrued interest payable
    
    
    1,430,460
    
    
    
    1,262,887Other liabilities
    
    
    759,300
    
    
    
    896,672Total liabilities
    
    
    224,092,736
    
    
    
    212,828,070STOCKHOLDERS EQUITY:Common stock, par value $.01 per share; 2,400,000 authorized; 1,872,313
issued at June 30, 2007 and December 31, 2006, respectively; 1,464,538
outstanding at June 30, 2007 and December 31, 2006, respectively
    
    
    18,723
    
    
    
    18,723Additional paid-in capital
    
    
    8,923,223
    
    
    
    8,923,223Treasury shares, at cost (407,775 at June 30, 2007 and December 31, 2006,
respectively)
    
    
    (5,285,739
    )
    
    
    (5,285,739
    )Retained earnings
    
    
    17,434,449
    
    
    
    17,103,780Accumulated other comprehensive loss, net of tax
    
    
    (1,549,233
    )
    
    
    (1,354,450
    )Total stockholders equity
    
    
    19,541,423
    
    
    
    19,405,537Total liabilities and stockholders equity
    
    $
    243,634,159
    
    
    $
    232,233,607
  3




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PINNACLE BANCSHARES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006INTEREST REVENUE:Interest on loans
    
    $
    2,450,901
    
    
    $
    2,138,658
    
    
    $
    4,852,481
    
    
    $
    4,223,802Interest and dividends on securities
    
    
    1,053,029
    
    
    
    829,246
    
    
    
    2,064,705
    
    
    
    1,668,672Other interest
    
    
    147,167
    
    
    
    264,432
    
    
    
    248,754
    
    
    
    465,8133,651,097
    
    
    
    3,232,336
    
    
    
    7,165,940
    
    
    
    6,358,287INTEREST EXPENSE:Interest on deposits
    
    
    1,976,585
    
    
    
    1,565,558
    
    
    
    3,849,937
    
    
    
    2,972,821Interest on subordinated debentures
    
    
    64,655
    
    
    
    62,408
    
    
    
    130,007
    
    
    
    120,515Interest on borrowed funds
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    14,6942,041,240
    
    
    
    1,627,966
    
    
    
    3,979,944
    
    
    
    3,108,030NET INTEREST INCOME BEFORE PROVISION
FOR LOAN LOSSES
    
    
    1,609,857
    
    
    
    1,604,370
    
    
    
    3,185,997
    
    
    
    3,250,257PROVISION FOR LOAN LOSSES
    
    
    25,000
    
    
    
    112,500
    
    
    
    100,000
    
    
    
    247,500NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES
    
    
    1,584,857
    
    
    
    1,491,870
    
    
    
    3,085,996
    
    
    
    3,002,757NONINTEREST INCOME:Fees and service charges on deposit accounts
    
    
    228,892
    
    
    
    214,392
    
    
    
    426,945
    
    
    
    421,938Service fee income, net
    
    
    29,781
    
    
    
    33,391
    
    
    
    60,735
    
    
    
    67,683Fees and charges on loans
    
    
    19,696
    
    
    
    32,562
    
    
    
    50,124
    
    
    
    73,205Bank owned life insurance
    
    
    84,288
    
    
    
    79,270
    
    
    
    168,576
    
    
    
    158,540Net gain (loss) on sale or write-down of:Loans held for sale
    
    
    114,637
    
    
    
    140,632
    
    
    
    167,745
    
    
    
    207,061Real estate owned
    
    
    0
    
    
    
    (11,492
    )
    
    
    (16,888
    )
    
    
    (11,492
    )Securities available-for-sale
    
    
    0
    
    
    
    60
    
    
    
    0
    
    
    
    60Premises and equipment
    
    
    0
    
    
    
    14,737
    
    
    
    0
    
    
    
    14,737477,294
    
    
    
    503,552
    
    
    
    857,237
    
    
    
    931,732NONINTEREST EXPENSE:Compensation and benefits
    
    
    842,136
    
    
    
    842,037
    
    
    
    1,713,616
    
    
    
    1,707,660Occupancy
    
    
    274,554
    
    
    
    271,000
    
    
    
    558,261
    
    
    
    554,360Marketing and professional
    
    
    109,208
    
    
    
    90,158
    
    
    
    221,303
    
    
    
    181,817Other
    
    
    240,023
    
    
    
    241,314
    
    
    
    507,251
    
    
    
    521,4891,465,921
    
    
    
    1,444,509
    
    
    
    3,000,431
    
    
    
    2,965,326INCOME BEFORE INCOME TAXES
    
    
    596,230
    
    
    
    550,913
    
    
    
    942,802
    
    
    
    969,163INCOME TAX EXPENSE
    
    
    190,856
    
    
    
    175,180
    
    
    
    289,935
    
    
    
    301,772NET INCOME
    
    $
    405,374
    
    
    $
    375,733
    
    
    $
    652,867
    
    
    $
    667,391Basic earnings per share
    
    $
    0.28
    
    
    $
    0.25
    
    
    $
    0.45
    
    
    $
    0.44Diluted earnings per share
    
    $
    0.28
    
    
    $
    0.25
    
    
    $
    0.44
    
    
    $
    0.43Cash dividends per share
    
    $
    0.11
    
    
    $
    0.11
    
    
    $
    0.22
    
    
    $
    0.22Weighted average basic shares outstanding
    
    
    1,464,538
    
    
    
    1,497,178
    
    
    
    1,464,538
    
    
    
    1,519,056Weighted average diluted shares outstanding
    
    
    1,470,043
    
    
    
    1,525,258
    
    
    
    1,470,333
    
    
    
    1,547,101
  4




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PINNACLE BANCSHARES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE SIX MONTHS ENDED JUNE 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
    
    
    
    667,391
    
    
    
    0
    
    
    
    667,391Change in fair value of securities available-
for-sale, net of tax
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (976,346
    )
    
    
    (976,346
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (308,955
    )Repurchase of common stock (63,100 shares at cost)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (937,657
    )
    
    
    0
    
    
    
    0
    
    
    
    (937,657
    )Cash dividends declared ($.22 per share)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (332,117
    )
    
    
    0
    
    
    
    (332,117
    )BALANCE, June 30, 2006
    
    
    1,827,813
    
    
    $
    18,278
    
    
    $
    8,479,921
    
    
    $
    (4,426,381
    )
    
    $
    16,741,137
    
    
    $
    (2,981,710
    )
    
    $
    17,831,245BALANCE, 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
    
    
    
    652,867
    
    
    
    0
    
    
    
    652,867Change in fair value of securities available-
for-sale, net of tax
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (194,783
    )
    
    
    (194,783
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    458,084Cash dividends declared ($.22 per share)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (322,198
    )
    
    
    0
    
    
    
    (322,198
    )BALANCE, June 30, 2007
    
    
    1,872,313
    
    
    $
    18,723
    
    
    $
    8,923,223
    
    
    $
    (5,285,739
    )
    
    $
    17,434,449
    
    
    $
    (1,549,233
    )
    
    $
    19,541,423
  5




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PINNACLE BANCSHARES, INC,
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Six Months EndedJune 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    652,867
    
    
    $
    667,391Adjustments to reconcile net income to net cash provided by (used in) operating activities:Depreciation
    
    
    248,065
    
    
    
    249,941Provision for loan losses
    
    
    100,000
    
    
    
    247,500Accretion, net
    
    
    (29,902
    )
    
    
    (104,777
    )Increase in cash surrender value of Bank owned life insurance
    
    
    (168,576
    )
    
    
    (158,540
    )Net (gain) loss on sale or write-down of:Loans held for sale
    
    
    (167,745
    )
    
    
    (207,061
    )Securities available-for-sale
    
    
    0
    
    
    
    (60
    )Real estate owned
    
    
    16,888
    
    
    
    11,492Premises and equipment
    
    
    0
    
    
    
    (14,737
    )Proceeds from sale of loans
    
    
    14,269,421
    
    
    
    12,254,246Loans originated for sale
    
    
    (13,790,004
    )
    
    
    (14,366,681
    )Decrease in accrued interest receivable
    
    
    14,481
    
    
    
    25,991Decrease in other assets
    
    
    46,823
    
    
    
    55,197Increase in accrued interest payable
    
    
    167,573
    
    
    
    426,400Decrease in other liabilities
    
    
    (137,372
    )
    
    
    (308,185
    )Net cash provided by (used in) operating activities
    
    
    1,222,519
    
    
    
    (1,221,883
    )CASH FLOWS FROM INVESTING ACTIVITIES:Net loan originations
    
    
    (6,350,562
    )
    
    
    (3,505,818
    )Net change in interest bearing deposits in other banks
    
    
    665,779
    
    
    
    (3,551,014
    )Purchase of securities available-for-sale
    
    
    (10,164,010
    )
    
    
    0Proceeds from maturing, called and payments received on securities available-for-sale
    
    
    3,935,201
    
    
    
    4,159,006Proceeds from sale of Federal Home Loan Bank stock
    
    
    22,700
    
    
    
    0Purchase of Federal Home Loan Bank stock
    
    
    0
    
    
    
    (24,800
    )Purchase of premises and equipment
    
    
    (106,675
    )
    
    
    (935,665
    )Proceeds from sale of premises and equipment
    
    
    0
    
    
    
    16,936Proceeds from sales of real estate owned
    
    
    199,892
    
    
    
    155,716Net cash used in investing activities
    
    
    (11,797,675
    )
    
    
    (3,685,639
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in passbook, NOW and money market deposit accounts
    
    
    5,983,583
    
    
    
    2,013,641Proceeds from sales of time deposits
    
    
    18,657,958
    
    
    
    17,387,534Payments on maturing time deposits
    
    
    (13,638,247
    )
    
    
    (11,532,609
    )Decrease in borrowed funds
    
    
    0
    
    
    
    (2,375,000
    )Increase in official checks outstanding
    
    
    231,171
    
    
    
    654,508Repurchase of common stock
    
    
    0
    
    
    
    (937,657
    )Payments of cash dividends
    
    
    (322,198
    )
    
    
    (332,117)
    )Net cash provided by financing activities
    
    
    10,912,267
    
    
    
    4,878,300NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    337,111
    
    
    
    (29,222
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    4,206,018
    
    
    
    3,784,867CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    4,543,129
    
    
    $
    3,755,645SUPPLEMENTAL DISCLOSURES:Cash payments for interest on deposits, borrowed funds, and subordinated debentures
    
    $
    3,812,371
    
    
    $
    2,681,680Cash payments for income taxes
    
    
    340,000
    
    
    
    476,000Real estate acquired through foreclosure
    
    
    158,094
    
    
    
    30,353
  6




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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
    
    
    AmountJune 30, 2007Basic earnings per share
    
    $
    405,374
    
    
    
    1,464,538
    
    
    $
    0.28Dilutive securities
    
    
    
    
    
    
    5,505Diluted earnings per share
    
    $
    405,374
    
    
    
    1,470,043
    
    
    $
    0.28
 PerShareFor The Three Months Ended
    
    Net Income
    
    
    Shares
    
    
    AmountJune 30, 2006Basic earnings per share
    
    $
    375,733
    
    
    
    1,497,178
    
    
    $
    0.25Dilutive securities
    
    
    
    
    
    
    28,080Diluted earnings per share
    
    $
    375,733
    
    
    
    1,525,258
    
    
    $
    025
 PerShareFor The Six Months Ended
    
    Net Income
    
    
    Shares
    
    
    AmountJune 30, 2007Basic earnings per share
    
    $
    652,867
    
    
    
    1,464,538
    
    
    $
    0.45Dilutive securities
    
    
    
    
    
    
    5,795Diluted earnings per share
    
    $
    652,867
    
    
    
    1,470,333
    
    
    $
    0.44
 PerShareFor The Six Months Ended
    
    Net Income
    
    
    Shares
    
    
    AmountJune 30, 2006Basic earnings per share
    
    $
    667,391
    
    
    
    1,519,056
    
    
    $
    0.44Dilutive securities
    
    
    
    
    
    
    28,045Diluted earnings per share
    
    $
    667,391
    
    
    
    1,547,101
    
    
    $
    0.43
 3. RECENT ACCOUNTING PRONOUNCEMENTS :
   8




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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 June 30, 2007:
      Results of Operations-Comparison of the Three and Six-Months Ended June 30, 2007 and 2006:
 11




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.
     . .
  12




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Asset/Liability Management .
  Stock Repurchases:
 Capital Resources:
 13




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Asset Quality Ratios:
 June 30,
    
    
    December 31,2007
    
    
    2006Nonperforming loans as a percent of total loans
    
    
    0.39
    %
    
    
    0.37
    %Nonperforming assets as a percent of total assets
    
    
    0.24
    %
    
    
    0.27
    %Allowance for loan losses as a percent of total loans
    
    
    1.28
    %
    
    
    1.20
    %Allowance for loan losses as a percent of nonperforming loans
    
    
    328.14
    %
    
    
    329.05
    %
 New Branch Office
 
 Item 3. Controls and Procedures
      14




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PART II  OTHER INFORMATION
 
 ITEM 2. Changes in Securities and Small Business Issuer Purchases of Equity Securities
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  PROPOSAL I- ELECTION OF DIRECTORS
 NOMINEES
    
    FOR
    
    
    WITHHELD
    
    
    TERMGreg Batchelor
    
    
    1,209,552
    
    
    
    80,339
    
    
    
    2010James T. Waggoner
    
    
    1,202,152
    
    
    
    87,739
    
    
    
    2010
  PROPOSAL II- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
  FOR
    
    AGAINST
    
    ABSTAIN1,281,429
    
    
    4,386
    
    
    
    4,076
  
 ITEM 6. Exhibits
   15




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SIGNATURES
  PINNACLE BANCSHARES, INCDATE: August 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) 16