##### 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 March 31, 2006
 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
Incorporation or Organization)
    
    (I.R.S. Employer
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 March 31, 2006
and December 31, 2005.
    
    
    3Unaudited Condensed Consolidated Statements of Operations for the three months
ended March 31, 2006, and 2005.
    
    
    4Unaudited Condensed Consolidated Statements of Stockholders Equity for the three months
ended March 31, 2006, and 2005.
    
    
    5Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended
March 31, 2006, and 2005.
    
    
    6Notes to Unaudited Condensed Consolidated Financial Statements.
    
    
    7Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    9Item 3. Controls and Procedures
    
    
    13Part II OTHER INFORMATIONItem 6. Exhibits
    
    
    14Signatures
    
    
    15Ex-31.1  Section 302 Certification of the CEO & CFOEx-32.1  Section 906 Certification of the CEO & CFO
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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 PINNACLE BANCSHARES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 March 31,
    
    
    December 31,2006
    
    
    2005ASSETS:Cash and cash equivalents
    
    $
    3,563,330
    
    
    $
    3,784,867Interest-bearing deposits in other banks
    
    
    21,981,355
    
    
    
    13,368,882Securities available-for-sale
    
    
    78,601,641
    
    
    
    80,653,931FHLB stock
    
    
    532,100
    
    
    
    507,300First National Bankers Bancshares, stock
    
    
    525,000
    
    
    
    525,000Loans held for sale
    
    
    1,687,461
    
    
    
    374,192Loans receivable, net of allowances for loan losses
of $1,373,548 and $1,383,410 respectively
    
    
    103,013,892
    
    
    
    106,255,517Real estate owned, net
    
    
    412,335
    
    
    
    381,229Premises and equipment
    
    
    5,841,319
    
    
    
    5,892,093Goodwill
    
    
    306,488
    
    
    
    306,488Bank owned life insurance
    
    
    5,175,427
    
    
    
    5,096,157Accrued interest receivable
    
    
    1,184,832
    
    
    
    1,372,733Other assets
    
    
    1,986,479
    
    
    
    1,730,328Total assets
    
    $
    224,811,659
    
    
    $
    220,248,717LIABILITIES AND STOCKHOLDERS EQUITY:Deposits
    
    $
    199,381,484
    
    
    $
    192,551,915Subordinated debt
    
    
    3,093,000
    
    
    
    3,093,000Borrowed funds
    
    
    0
    
    
    
    2,375,000Official checks outstanding
    
    
    1,443,260
    
    
    
    1,088,302Accrued interest payable
    
    
    932,610
    
    
    
    786,133Other liabilities
    
    
    819,105
    
    
    
    944,393Total liabilities
    
    
    205,669,459
    
    
    
    200,838,743STOCKHOLDERS EQUITY:Common stock, par value $.01 per share; 2,400,000 authorized; 1,827,813
issued at March 31, 2006 and December 31, 2005, respectively;1,541,178
outstanding at March 31, 2006 and December 31, 2005, respectively
    
    
    18,278
    
    
    
    18,278Additional paid-in capital
    
    
    8,479,921
    
    
    
    8,479,921Treasury shares, at cost (286,635 shares at March 31, 2006 and
December 31, 2005, respectively)
    
    
    (3,488,724
    )
    
    
    (3,488,724
    )Retained earnings
    
    
    16,527,992
    
    
    
    16,405,863Accumulated other comprehensive loss, net of tax
    
    
    (2,395,267
    )
    
    
    (2,005,364
    )Total stockholders equity
    
    
    19,142,200
    
    
    
    19,409,974Total liabilities and stockholders equity
    
    $
    224,811,659
    
    
    $
    220,248,717
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PINNACLE BANCSHARES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months endedMarch 31,2006
    
    
    2005INTEREST REVENUE:Interest on loans
    
    $
    2,085,144
    
    
    $
    1,760,278Interest and dividends on securities
    
    
    839,426
    
    
    
    896,098Other interest
    
    
    201,381
    
    
    
    33,4823,125,951
    
    
    
    2,689,858INTEREST EXPENSE:Interest on deposits
    
    
    1,407,263
    
    
    
    922,800Interest on subordinated debentures
    
    
    58,107
    
    
    
    43,106Interest on borrowed funds
    
    
    14,694
    
    
    
    36,2361,480,064
    
    
    
    1,002,142NET INTEREST INCOME BEFORE PROVISION FOR
LOAN LOSSES
    
    
    1,645,887
    
    
    
    1,687,716PROVISION FOR LOAN LOSSES
    
    
    135,000
    
    
    
    156,000NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES
    
    
    1,510,887
    
    
    
    1,531,716NONINTEREST INCOME:Fees and service charges on deposit accounts
    
    
    207,546
    
    
    
    188,424Service fee income, net
    
    
    34,292
    
    
    
    39,548Fees and charges on loans
    
    
    40,643
    
    
    
    31,019Bank owned life insurance
    
    
    79,270
    
    
    
    74,600Net gain (loss) on sale or write-down of:Loans held for sale
    
    
    66,429
    
    
    
    113,857Real estate owned
    
    
    0
    
    
    
    3,737Securities available-for-sale
    
    
    0
    
    
    
    (3,750
    )428,180
    
    
    
    447,435NONINTEREST EXPENSE:Compensation and benefits
    
    
    865,623
    
    
    
    862,709Occupancy
    
    
    283,360
    
    
    
    275,319Marketing and professional
    
    
    94,209
    
    
    
    89,334Other
    
    
    277,625
    
    
    
    283,6731,520,817
    
    
    
    1,511,035INCOME BEFORE INCOME TAXES
    
    
    418,250
    
    
    
    468,116INCOME TAX EXPENSE
    
    
    126,592
    
    
    
    142,061NET INCOME
    
    $
    291,658
    
    
    $
    326,055Basic earnings per share
    
    $
    0.19
    
    
    $
    0.21Diluted earnings per share
    
    $
    0.19
    
    
    $
    0.21Cash dividends per share
    
    $
    0.11
    
    
    $
    0.11Weighted average basic shares outstanding
    
    
    1,541,178
    
    
    
    1,552,078Weighted average diluted shares outstanding
    
    
    1,569,187
    
    
    
    1,586,786
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PINNACLE BANCSHARES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    Other
    
    TotalCommon Stock
    
    Paid-in
    
    Treasury
    
    Retained
    
    Comprehensive
    
    StockholdersShares
    
    Amount
    
    Capital
    
    Stock
    
    Earnings
    
    (Loss) Income
    
    EquityBALANCE, December 31, 2004
    
    
    1,821,780
    
    
    $
    18,218
    
    
    $
    8,418,897
    
    
    $
    (3,220,730
    )
    
    $
    15,571,155
    
    
    $
    (873,110
    )
    
    $
    19,914,430Comprehensive loss:Net income
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    326,055
    
    
    
    0
    
    
    
    326,055Change in fair value of securities available-
for-sale, net of tax
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (1,390,218
    )
    
    
    (1,390,218
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,064,163
    )Repurchase of common stock (4,000 Shares at cost)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (61,605
    )
    
    
    0
    
    
    
    0
    
    
    
    (61,605
    )Cash dividends declared ($.11 per share)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (170,585
    )
    
    
    0
    
    
    
    (170,585
    )BALANCE, March 31, 2005
    
    
    1,821,780
    
    
    $
    18,218
    
    
    $
    8,418,897
    
    
    $
    (3,282,335
    )
    
    $
    15,726,625
    
    
    $
    (2,263,328
    )
    
    $
    18,618,077BALANCE, December 31, 2005
    
    
    1,827,813
    
    
    $
    18,278
    
    
    $
    8,479,921
    
    
    $
    (3,488,724
    )
    
    $
    16,405,863
    
    
    $
    (2,005,364
    )
    
    $
    19,409,974Comprehensive loss:Net income
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    291,658
    
    
    
    0
    
    
    
    291,658Change in fair value of securities available-
For-sale, net of tax
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (389,903
    )
    
    
    (389,903
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98,245
    )Cash dividends declared ($.11 per share)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (169,529
    )
    
    
    0
    
    
    
    (169,529
    )BALANCE, March 31, 2006
    
    
    1,827,813
    
    
    $
    18,278
    
    
    $
    8,479,921
    
    
    $
    (3,488,724
    )
    
    $
    16,527,992
    
    
    $
    (2,395,267
    )
    
    $
    19,142,200
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PINNACLE BANCSHARES, INC,
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Three Months EndedMarch 31,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    291,658
    
    
    $
    326,055Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    125,697
    
    
    
    122,731Provision for loan losses
    
    
    135,000
    
    
    
    156,000Accretion, net
    
    
    (56,658
    )
    
    
    (28,394
    )Increase in cash surrender value of Bank owned life insurance
    
    
    (79,270
    )
    
    
    (74,600
    )Net (gain) loss on sale or write down of:Loans held for sale
    
    
    (66,429
    )
    
    
    (113,857
    )Securities available-for-sale
    
    
    0
    
    
    
    3,750Real estate owned and other assets
    
    
    0
    
    
    
    (3,737
    )Proceeds from sale of loans
    
    
    5,224,852
    
    
    
    9,150,868Loans originated for sale
    
    
    (6,471,692
    )
    
    
    (8,692,388
    )Decrease in accrued interest receivable
    
    
    187,901
    
    
    
    63,280Increase in other assets
    
    
    (16,677
    )
    
    
    (14,728
    )Increase in accrued interest payable
    
    
    146,477
    
    
    
    29,089(Decrease) increase in other liabilities
    
    
    (125,288
    )
    
    
    97,032Net cash (used in) provided by operating activities
    
    
    (704,429
    )
    
    
    1,021,101CASH FLOWS FROM INVESTING ACTIVITIES:Net loan (originations) repayments
    
    
    3,164,893
    
    
    
    (229,069
    )Net change in interest bearing deposits in other banks
    
    
    (8,612,473
    )
    
    
    (747,981
    )Purchase of securities available-for-sale
    
    
    0
    
    
    
    (13,191,025
    )Proceeds from the sale of securities available-for-sale
    
    
    0
    
    
    
    4,000,000Proceeds from maturing, called and payments received on securities available-for-sale
    
    
    1,408,618
    
    
    
    1,661,110Proceeds from sale of Federal Home Loan Bank stock
    
    
    0
    
    
    
    1,500Purchase of Federal Home Loan Bank stock
    
    
    (24,800
    )
    
    
    0Purchase of premises and equipment
    
    
    (74,923
    )
    
    
    (49,720
    )Proceeds from sales of real estate owned
    
    
    0
    
    
    
    143,083Capital expenditures related to real estate owned
    
    
    (18,421
    )
    
    
    0Net cash used in investing activities
    
    
    (4,157,106
    )
    
    
    (8,412,102
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in passbook, NOW and money market deposit accounts
    
    
    2,389,018
    
    
    
    1,174,772Proceeds from sales of time deposits
    
    
    10,243,340
    
    
    
    9,313,132Payments on maturing time deposits
    
    
    (5,802,789
    )
    
    
    (3,160,216
    )Decrease in borrowed funds
    
    
    (2,375,000
    )
    
    
    (205,000
    )Increase (decrease) in official checks outstanding
    
    
    354,958
    
    
    
    (21,465
    )Repurchase of common stock
    
    
    0
    
    
    
    (61,605
    )Payments of cash dividends
    
    
    (169,529
    )
    
    
    (170,585
    )Net cash provided by financing activities
    
    
    4,639,998
    
    
    
    6,869,033NET (INCREASE) DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (221,537
    )
    
    
    (521,968
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    3,784,867
    
    
    
    3,451,046CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    3,563,330
    
    
    $
    2,929,078SUPPLEMENTAL DISCLOSURES:Cash payments for interest on deposits, borrowed funds, and subordinated debentures
    
    $
    1,333,587
    
    
    $
    973,053Cash payments for income taxes
    
    
    60,000
    
    
    
    100,000Real estate acquired through foreclosure
    
    
    12,685
    
    
    
    99,384
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PINNACLE BANCSHARES, INC
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION :
    2. EARNINGS PER SHARE:
  PerShareFor The Three Months Ended
    
    Net Income
    
    
    Shares
    
    
    AmountMarch 31, 2006Basic earnings per share
    
    $
    291,658
    
    
    
    1,541,178
    
    
    $
    0.19Dilutive securities
    
    
    
    
    
    
    28,009Diluted earnings per share
    
    $
    291,658
    
    
    
    1,569,187
    
    
    $
    0.19
 PerShareFor The Three Months Ended
    
    Net Income
    
    
    Shares
    
    
    AmountMarch 31, 2005Basic earnings per share
    
    $
    326,055
    
    
    
    1,552,078
    
    
    $
    0.21Dilutive securities
    
    
    
    
    
    
    34,708Diluted earnings per share
    
    $
    326,055
    
    
    
    1,586,786
    
    
    $
    0.21
 3. RECENT ACCOUNTING PRONOUNCEMENTS:
 The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments
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Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
 Accounting for Certain Hybrid Financial
Instruments  an amendment of FASB Statements No 133 and 140. Accounting for Derivatives and Hedging Activities Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 Accounting for Servicing of Financial Assets an
amendment of FASB Statement No. 140
 8




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Item 2. Managements Discussion and Analysis or Plan of Operation
 Forward-Looking Statements:
  Critical Accounting Policies:
     9




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Accounting for Sales of Real Estate.
 Comparison of Financial Condition as of December 31, 2005 and March 31, 2006:
       Results of Operations-Comparison of the Three-Months Ended March 31, 2006 and 2005:
 10




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Asset/Liability Management
 11
    Table of Contents     Capital Resources:
 Asset Quality Ratios:
 March 31,
    
    December 31,2006
    
    2005Nonperforming loans as a percent of total loans
    
    
    0.27
    %
    
    
    0.22
    %Nonperforming assets as a percent of total assets
    
    
    0.31
    %
    
    
    0.28
    %Allowance for loan losses as a percent of total loans
    
    
    1.32
    %
    
    
    1.28
    %Allowance for loan losses as a percent of nonperforming loans
    
    
    495.67
    %
    
    
    586.02
    %
 12




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Item 3. Controls and Procedures
      13




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PART II  OTHER INFORMATION
 
 ITEM 6. Exhibits
   14




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SIGNATURES
  PINNACLE BANCSHARES, INCDATE: May 15, 2006
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) 15