<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
<PAGE>



                         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.



                                     3
<PAGE>

                         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

<PAGE>

                         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

<PAGE>

                         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
<PAGE>

                         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

<PAGE>



(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
                                       8
<PAGE>

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


<PAGE>




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
<PAGE>


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

                                       11

<PAGE>


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

<PAGE>


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

<PAGE>


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

<PAGE>


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

<PAGE>


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

<PAGE>



                                   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