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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K





(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2007

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number: 000-23909





PINNACLE BANKSHARES CORPORATION

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Virginia                                                       |  | 54-1832714                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|P.O. Box 29, Altavista, Virginia         |  | 24517-0029
|(Address of principal executive offices) |  | (Zip Code)

Registrants telephone number, including area code (434) 369-3000





Securities registered pursuant to Section 12(b) of the Act:



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange on which registered
|n/a                 |  | n/a                                      

Securities registered pursuant to Section 12(g) of the Act:

Common stock, par value $3.00





Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes   ̈    No  x



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 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   ̈

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the Exchange Act. (Check one):



|                                              |  |                         |  |   |  |                           |  |  
|--------------------------------------------- |  | ----------------------- |  | - |  | ------------------------- |  | -
|                                              |  | Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                                              |  |                         |  |  
|                                              |  | Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  | x
|(Do not check if a smaller reporting company) |  |                         |  |  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).    Yes   ̈    No  x

The aggregate market value of the issuers common stock held by non-affiliates as of June 29, 2007 was $36,236,171.

There were
1,485,089 shares of common stock of the issuer outstanding as of March 27, 2008.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2007 Annual Report to Shareholders, which is attached hereto as Exhibit 13, are incorporated by reference in Part II of this report. Portions of the
Proxy Statement for the Companys Annual Meeting of Shareholders to be held on April 8, 2008 are incorporated by reference in Part III of this report.





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PINNACLE BANKSHARES CORPORATION

2007 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS



|           |  |                                                                                                              |  |   
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | --
|PART I    
|           |  |                                                                                                             
|Item 1.    |  | Business                                                                                                     |  | 3 
|           |  | General Development of Business                                                                              |  |   
|           |  | Competition                                                                                                  |  |   
|           |  | Regulation and Supervision                                                                                   |  |   
|           |  | Employees                                                                                                    |  |   
|           |  | Executive Officers of the Registrant                                                                         |  |   
|Item 1A.   |  | Risk Factors                                                                                                 |  | 10
|Item 1B.   |  | Unresolved Staff Comments                                                                                    |  | 10
|Item 2.    |  | Properties                                                                                                   |  | 10
|Item 3.    |  | Legal Proceedings                                                                                            |  | 10
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                          |  | 10
|          
|PART II   
|           |  |                                                                                                             
|Item 5.    |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 11
|Item 6.    |  | Selected Financial Data                                                                                      |  | 11
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operation                         |  | 11
|Item 7A.   |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 11
|Item 8.    |  | Financial Statements and Supplementary Data                                                                  |  | 11
|Item 9.    |  | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure                         |  | 11
|Item 9A.   |  | Controls and Procedures                                                                                      |  | 11
|Item 9B.   |  | Other Information                                                                                            |  | 12
|          
|PART III  
|           |  |                                                                                                             
|Item 10.   |  | Directors, Executive Officers and Corporate Governance                                                       |  | 12
|Item 11.   |  | Executive Compensation                                                                                       |  | 12
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 13
|Item 13.   |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 13
|Item 14.   |  | Principal Accountant Fees and Services                                                                       |  | 13
|          
|PART IV   
|           |  |                                                                                                             
|Item 15.   |  | Exhibits, Financial Statement Schedules                                                                      |  | 13
|           |  |                                                                                                             
|SIGNATURES |  |                                                                                                              |  | 16



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PART I



|Item 1. | Business.
|------- | ---------

General Development of Business

Pinnacle Bankshares Corporation, a Virginia corporation (the
Company), was organized in 1997 and is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended. The Company is headquartered in Altavista, Virginia. The Company conducts all of its business activities
through the branch offices of its wholly-owned subsidiary bank, The First National Bank of Altavista (the Bank). The Company exists primarily for the purpose of holding the stock of its subsidiary, the Bank, and of such other
subsidiaries as it may acquire or establish. The Companys administrative offices are located at 622 Broad Street, Altavista, Virginia.

The Bank was organized as a national bank in 1908 and commenced general banking operations in December of that year, providing services to commercial and agricultural businesses and individuals in the Altavista area. With an emphasis on
personal service, the Bank today offers a broad range of commercial and retail banking products and services including checking, savings and time deposits, individual retirement accounts, merchant bankcard processing, residential and commercial
mortgages, home equity loans, consumer installment loans, agricultural loans, investment loans, small business loans, commercial lines of credit and letters of credit. The Bank also offers a full range of investment, insurance and annuity products
through its association with BI Investment Group and Bankers Insurance, LLC.

The Bank serves a trade area consisting primarily of
Campbell County, northern Pittsylvania County, eastern Bedford County, northern Franklin County, Amherst County and the city of Lynchburg from facilities located in Campbell County, Bedford County, Franklin County, the town of Altavista, the town of
Amherst and the city of Lynchburg, Virginia. In June 1999 the Company opened the Airport facility, located just outside the Lynchburg city limits, and in August 2000, opened the Old Forest Road facility, located on Old Forest Road in Lynchburg, and
the Brookville Plaza facility, located on Timberlake Road in Lynchburg. In August 2004 the Company opened the Forest facility, located in Forest, Bedford County, Virginia. In July 2005 the Company opened the Smith Mountain Lake loan production
facility, located in Moneta, Franklin County, Virginia. In May 2006 the Company relocated the Brookville Plaza facility to Timberlake Road in Campbell County. In November 2006, the Company opened a temporary Amherst facility located in the town of
Amherst. The Bank is scheduled to open a permanent Amherst facility on South Main Street in Amherst in March 2008. In January of 2008, the Company acquired a branch site in Rustburg, Virginia located on Village Highway in the Rustburg Marketplace
Shopping Center which will further increase our presence in Campbell County. The Company is currently developing site and building plans in anticipation of beginning construction of a facility by mid-year 2008.

The Bank has two wholly-owned subsidiaries. FNB Property Corp., which is a Virginia corporation, was formed to hold title to Bank premises real estate.
FNB Property Corp. sold land held for sale in 2003 and purchased land in Forest, Virginia that was used to build the Forest facility. First Properties, Inc., also a Virginia corporation, was formed to hold title to other real estate owned. No
property is being held in other real estate owned as of December 31, 2007.

Competition

The banking business in central Virginia is highly competitive with respect to both loans and
deposits and is dominated by a number of major banks that have offices operating throughout the state and in the Companys market area. The Company actively competes for all types of deposits and loans with other banks and with nonbank
financial institutions, including savings and loan associations, finance companies, credit unions, mortgage companies, insurance companies and other lending institutions.



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Institutions such as brokerage firms, credit card companies and even retail establishments offer
alternative investment vehicles such as money market funds as well as traditional banking services. Other entities (both public and private) seeking to raise capital through the issuance and sale of debt or equity securities also represent a source
of competition for the Company with respect to the acquisition of deposits. Among the advantages that the major banks have over the Company is their ability to finance extensive advertising campaigns and to allocate their investment assets to
regions of highest yield and demand over a more diverse geographic area. Although major banks have these competitive advantages over small independent banks, the Bank actively tries to turn the loss of local independent banks to its competitive
advantage by soliciting customers who prefer the personal service offered by a small independent bank.

The Company does not depend upon a
single customer or industry, the loss of which would have a material adverse effect on the Companys financial condition. Two industries in the Companys market area that have been adversely affected in recent years are the textile and
furniture industries. Cheaper production costs overseas have led to job layoffs and a few plant closings in the immediate area but have not affected the Companys overall profitability.

The Company believes that its prompt response to lending requests is a key factor to the Companys competitive position in its primary service area.
In addition, the accessibility of senior management to customers and local decision-making also distinguish the Company from other area financial institutions.

In order to compete with the other financial institutions in its primary service area, the Company relies principally upon local promotional activities, personal contact by its officers, directors, employees and
stockholders and offering specialized services to customers. The Companys promotional activities emphasize the advantages of dealing with a local bank attuned to the particular needs of the community.

Regulation and Supervision

Set forth below is a brief description of the material laws and regulations that
affect the Company. The description of these statutes and regulations is only a summary and does not purport to be complete. This discussion is qualified in its entirety by reference to the statutes and regulations summarized below. No assurance can
be given that these statutes or regulations will not change in the future.

General. The Company is subject to the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), which include, but are not limited to, the filing of annual, quarterly and other reports with the Securities and Exchange Commission (the
SEC). As an Exchange Act reporting company, the Company is directly affected by the Sarbanes-Oxley Act of 2002 (the SOX), which is aimed at improving corporate governance and reporting procedures and requires additional
corporate governance measures and expanded disclosure with respect to the Companys corporate operations and internal controls. The Company is complying with the SEC and other rules and regulations implemented pursuant to the SOX and intends to
comply with any applicable rules and regulations implemented in the future. Although the Company has incurred and will continue to incur additional expense in complying with the provisions of the SOX and the resulting regulations, this compliance
has not had, and is not expected to have, a material impact on the Companys financial condition or results of operations.

The
Company is a bank holding company within the meaning of the Bank Holding Company Act of 1956, and is registered as such with, and subject to the supervision of, the Board of Governors of the Federal Reserve System (the FRB). Generally, a
bank holding company is required to obtain the approval of the FRB before it may acquire all or substantially all of the assets of any bank, and before it may acquire ownership or control of the voting shares of any bank if, after giving effect to
the acquisition, the bank holding company would own or control more than 5% of the voting shares of such bank. The FRBs approval is also required for the merger or consolidation of bank holding companies.

The Company is required to file periodic reports with the FRB and provide any additional information the FRB may require. The FRB also has the authority
to examine the Company and the Bank, as well as any arrangements between the Company and the Bank, with the cost of any such examinations to be borne by the Company.



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Banking subsidiaries of bank holding companies are also subject to certain restrictions imposed by
Federal law in dealings with their holding companies and other affiliates. Subject to certain restrictions set forth in the Federal Reserve Act, a bank can loan or extend credit to an affiliate, purchase or invest in the securities of an affiliate,
purchase assets from an affiliate or issue a guarantee, acceptance or letter of credit on behalf of an affiliate, as long as the aggregate amount of such transactions of a bank and its subsidiaries with its affiliates does not exceed 10% of the
capital stock and surplus of the bank on a per affiliate basis or 20% of the capital stock and surplus of the bank on an aggregate affiliate basis. In addition, such transactions must be on terms and conditions that are consistent with safe and
sound banking practices. In particular, a bank and its subsidiaries generally may not purchase from an affiliate a low-quality asset, as defined in the Federal Reserve Act. These restrictions also prevent a bank holding company and its other
affiliates from borrowing from a banking subsidiary of the bank holding company unless the loans are secured by marketable collateral of designated amounts. Additionally, the Company and the Bank are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, sale or lease of property or furnishing of services.

A bank holding company is
prohibited from engaging in or acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company engaged in nonbanking activities. A bank holding company may, however, engage in or acquire an interest in a company
that engages in activities which the FRB has determined by regulation or order are so closely related to banking as to be a proper incident to banking. In making these determinations, the FRB considers whether the performance of such activities by a
bank holding company would offer advantages to the public that outweigh possible adverse effects.

As a national bank, the Bank is also
subject to regulation, supervision and regular examination by the Office of the Comptroller of the Currency (the Comptroller). Each depositors account with the Bank is insured by the Federal Deposit Insurance Corporation (the
FDIC) to the maximum amount permitted by law, which is currently $100,000 for each depositor. The Bank is also subject to certain regulations promulgated by the FRB and applicable provisions of Virginia law, insofar as they do not
conflict with or are not preempted by Federal banking law.

The regulations of the FDIC, the Comptroller and the FRB govern most aspects of
the Companys business, including deposit reserve requirements, investments, loans, certain check clearing activities, issuance of securities, payment of dividends, branching, deposit interest rate ceilings and numerous other matters. As a
consequence of the extensive regulation of commercial banking activities in the United States, the Companys business is particularly susceptible to changes in state and Federal legislation and regulations, which may have the effect of
increasing the cost of doing business, limiting permissible activities or increasing competition.

Governmental Policies and
Legislation. Banking is a business that depends primarily on interest rate differentials. In general, the difference between the interest rates paid by the Company on its deposits and its other borrowings and the interest rates received by
the Company on loans extended to its customers and securities held in its portfolio comprise the major portion of the Companys earnings. These rates are highly sensitive to many factors that are beyond the Companys control. Accordingly,
the Companys growth and earnings are subject to the influence of domestic and foreign economic conditions, including inflation, recession and unemployment.

The commercial banking business is affected not only by general economic conditions, but is also influenced by the monetary and fiscal policies of the Federal government and the policies of its regulatory agencies,
particularly the FRB. The FRB implements national monetary policies (with objectives such as curbing inflation and combating recession) by its open-market operations in U.S. Government securities, by adjusting the required level of reserves for
financial institutions subject to its reserve requirements and by varying the discount rates applicable to borrowings by depository institutions. The actions of the FRB in these areas influence the growth of bank loans, investments and deposits, and
also affect interest rates charged on loans and paid on deposits. The nature and impact of any future changes in monetary policies cannot be predicted.

From time to time, legislation is enacted which has the effect of increasing the cost of doing business, limiting or expanding permissible activities or affecting the competitive balance between banks and other
financial institutions. Proposals to change



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the laws and regulations governing the operations and taxation of bank holding companies, banks and other financial institutions are frequently made in
Congress, in the Virginia legislature and brought before various bank holding company and bank regulatory agencies. The likelihood of any major changes and the impact such changes might have are impossible to predict.

Dividends.There are regulatory restrictions on dividend payments by both the Bank and the Company that may affect the
Companys ability to pay dividends on its common stock. See Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Capital Requirements. The FRB, the Comptroller and the FDIC have adopted risk-based capital adequacy guidelines for bank holding companies
and banks. These capital adequacy regulations are based upon a risk-based capital determination, whereby a bank holding companys capital adequacy is determined in light of the risk, both on- and off-balance sheet, contained in the
companys assets. Different categories of assets are assigned risk weightings and are counted as a percentage of their book value.

The regulations divide capital between Tier 1 capital (core capital) and Tier 2 capital. For a bank holding company, Tier 1 capital consists primarily of common stock, related surplus, noncumulative perpetual preferred stock, minority
interests in consolidated subsidiaries and a limited amount of qualifying cumulative preferred securities. Goodwill and certain other intangibles are excluded from Tier 1 capital. Tier 2 capital consists of an amount equal to the allowance for loan
losses up to a maximum of 1.25% of risk weighted assets, limited other types of preferred stock not included in Tier 1 capital, hybrid capital instruments and term subordinated debt. Investments in and loans to unconsolidated banking and finance
subsidiaries that constitute capital of those subsidiaries are excluded from capital. The sum of Tier 1 and Tier 2 capital constitutes qualifying total capital. The guidelines generally require banks to maintain a total qualifying capital to
weighted risk assets ratio of 8% (the Risk-based Capital Ratio). At least 4% of the total qualifying capital to weighted risk assets (the Tier 1 Risk-based Capital Ratio) must be Tier 1 capital.

The FRB, the Comptroller and the FDIC have adopted leverage requirements that apply in addition to the risk-based capital requirements. Banks and bank
holding companies are required to maintain a minimum leverage ratio of Tier 1 capital to average total consolidated assets (the Leverage Ratio) of at least 3.0% for the most highly-rated, financially sound banks and bank holding
companies and a minimum Leverage Ratio of at least 4.0% for all other banks. The FDIC and the FRB define Tier 1 capital for banks in the same manner for both the Leverage Ratio and the Risk-based Capital Ratio. However, the FRB defines Tier 1
capital for bank holding companies in a slightly different manner. An institution may be required to maintain Tier 1 capital of at least 4% or 5%, or possibly higher, depending upon the activities, risks, rate of growth, and other factors deemed
material by regulatory authorities. As of December 31, 2007, the Company and Bank both met all applicable capital requirements imposed by regulation.

Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). There are five capital categories applicable to insured institutions, each with specific regulatory consequences. If
the appropriate Federal banking agency determines, after notice and an opportunity for hearing, that an insured institution is in an unsafe or unsound condition, it may reclassify the institution to the next lower capital category (other than
critically undercapitalized) and require the submission of a plan to correct the unsafe or unsound condition. The Comptroller has issued regulations to implement these provisions. Under these regulations, the categories are:

a. Well Capitalized  The institution exceeds the required minimum level for each relevant capital measure. A well capitalized institution is one
(i) having a Risk-based Capital Ratio of 10% or greater, (ii) having a Tier 1 Risk-based Capital Ratio of 6% or greater, (iii) having a Leverage Ratio of 5% or greater and (iv) that is not subject to any order or written
directive to meet and maintain a specific capital level for any capital measure.

b. Adequately Capitalized  The institution meets
the required minimum level for each relevant capital measure. No capital distribution may be made that would result in the institution becoming undercapitalized. An adequately capitalized institution is one (i) having a Risk-based Capital Ratio
of 8% or greater, (ii) having a Tier 1 Risk-based



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Capital Ratio of 4% or greater and (iii) having a Leverage Ratio of 4% or greater or a Leverage Ratio of 3% or greater if the institution is rated
composite 1 under the CAMELS (Capital, Assets, Management, Earnings, Liquidity and Sensitivity to market risk) rating system.

c.
Undercapitalized  The institution fails to meet the required minimum level for any relevant capital measure. An undercapitalized institution is one (i) having a Risk-based Capital Ratio of less than 8% or (ii) having a Tier 1
Risk-based Capital Ratio of less than 4% or (iii) having a Leverage Ratio of less than 4%, or if the institution is rated a composite 1 under the CAMEL rating system, a Leverage Ratio of less than 3%.

d. Significantly Undercapitalized  The institution is significantly below the required minimum level for any relevant capital measure. A
significantly undercapitalized institution is one (i) having a Risk-based Capital Ratio of less than 6% or (ii) having a Tier 1 Risk-based Capital Ratio of less than 3% or (iii) having a Leverage Ratio of less than 3%.

e. Critically Undercapitalized  The institution fails to meet a critical capital level set by the appropriate Federal banking agency. A critically
undercapitalized institution is one having a ratio of tangible equity to total assets that is equal to or less than 2%.

An institution
which is less than adequately capitalized must adopt an acceptable capital restoration plan, is subject to increased regulatory oversight, and is increasingly restricted in the scope of its permissible activities. Each company having control over an
undercapitalized institution must provide a limited guarantee that the institution will comply with its capital restoration plan. Except under limited circumstances consistent with an accepted capital restoration plan, an undercapitalized
institution may not grow. An undercapitalized institution may not acquire another institution, establish additional branch offices or engage in any new line of business unless determined by the appropriate Federal banking agency to be consistent
with an accepted capital restoration plan, or unless the FDIC determines that the proposed action will further the purpose of prompt corrective action. The appropriate Federal banking agency may take any action authorized for a significantly
undercapitalized institution if an undercapitalized institution fails to submit an acceptable capital restoration plan or fails in any material respect to implement a plan accepted by the agency. A critically undercapitalized institution is subject
to having a receiver or conservator appointed to manage its affairs and for loss of its charter to conduct banking activities.

An insured
depository institution may not pay a management fee to a bank holding company controlling that institution or any other person having control of the institution if, after making the payment, the institution, would be undercapitalized. In addition,
an institution cannot make a capital distribution, such as a dividend or other distribution that is in substance a distribution of capital to the owners of the institution, if following such a distribution the institution would be undercapitalized.
Thus, if payment of such a management fee or the making of such would cause the Bank to become undercapitalized, it could not pay a management fee or dividend to the Company.

As of December 31, 2007, both the Company and the Bank were considered well capitalized.

Deposit Insurance Assessments. The Banks deposits are insured up to applicable limits by the Deposit Insurance Fund (DIF)
of the FDIC. The DIF is the successor to the Bank Insurance Fund and the Savings Association Insurance Fund, which were merged in 2006. The FDIC amended its risk-based assessment system for 2007 to implement authority granted by the Federal Deposit
Insurance Reform Act of 2005 (FDIRA). Under the revised system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors. An institutions
assessment rate depends upon the category to which it is assigned. Unlike the other categories, Risk Category I, which contains the least risky depository institutions, contains further risk differentiation based on the FDICs analysis of
financial ratios, examination component ratings and other information. Assessment rates are determined by the FDIC and currently range from five to seven basis points for the healthiest institutions (Risk Category I) to 43 basis points of assessable
deposits for the riskiest (Risk Category IV). The FDIC may adjust rates uniformly from one quarter to the next, except that no single adjustment can exceed three basis points. FDIRA also provided for the possibility that the FDIC may pay dividends
to insured institutions if the DIF reserve ratio equals or exceeds 1.35% of estimated insured deposits.



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Mortgage Banking Regulation. The Banks mortgage banking operation is subject
to the rules and regulations of, and examination by the U.S. Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA), the Veterans Administration (VA) and state regulatory
authorities with respect to originating, processing and selling mortgage loans. Those rules and regulations, among other things, establish standards for loan origination, prohibit discrimination, provide for inspections and appraisals of property,
require credit reports on prospective borrowers and, in some cases, restrict certain loan features, and fix maximum interest rates and fees. In addition to other Federal laws, mortgage origination activities are subject to the Equal Credit
Opportunity Act, Truth-in-Lending Act, Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, and the Home Ownership Equity Protection Act, and the regulations promulgated thereunder. These laws prohibit discrimination, require the
disclosure of certain basic information to mortgagors concerning credit and settlement costs, limit payment for settlement services to the reasonable value of the services rendered and require the maintenance and disclosure of information regarding
the disposition of mortgage applications based on race, gender, geographical distribution and income level.

Gramm-Leach-Bliley Act
of 1999. The Gramm-Leach-Bliley Act of 1999 (the GLBA) implemented major changes to the statutory framework for providing banking and other financial services in the United States. The GLBA, among other things, eliminated many of
the restrictions on affiliations among banks and securities firms, insurance firms and other financial service providers. A bank holding company that qualifies and elects to be a financial holding company will be permitted to engage in activities
that are financial in nature or incidental or complimentary to financial activities. The activities that the GLBA expressly lists as financial in nature include insurance underwriting, sales and brokerage activities, providing financial and
investment advisory services, underwriting services and limited merchant banking activities.

To become eligible for these
expanded activities, a bank holding company must qualify and elect to be a financial holding company. To qualify as a financial holding company, each insured depository institution controlled by the bank holding company must be well-capitalized,
well-managed and have at least a satisfactory rating under the CRA (discussed below). In addition, the bank holding company must file with the FRB a declaration of its intention to become a financial holding company. While the Company satisfies
these requirements, the Company has not elected for various reasons to be treated as a financial holding company under the GLBA.

The GLBA
has not had a material adverse impact on the Companys or the Banks operations. To the extent that it allows banks, securities firms and insurance firms to affiliate, the financial services industry has experienced further consolidation.
The GLBA probably has the result of increasing competition that we face from larger institutions and other companies offering financial products and services, many of which may have substantially greater financial resources.

The GLBA and other regulations issued by Federal banking agencies also provide protections against the transfer and use by financial institutions of
consumer nonpublic personal information. A financial institution must provide to its customers, at the beginning of the customer relationship and annually thereafter, the institutions policies and procedures regarding the handling of
customers nonpublic personal financial information. These privacy provisions generally prohibit a financial institution from providing a customers personal financial information to unaffiliated third parties unless the institution
discloses to the customer that the information may be so provided and the customer is given the opportunity to opt out of such disclosure.

Community Reinvestment Act. The Bank is subject to the requirements of the Community Reinvestment Act (the CRA). The CRA imposes on financial institutions an affirmative and ongoing obligation to meet the credit
needs of their local communities, including low and moderate-income neighborhoods, consistent with the safe and sound operation of those institutions. A financial institutions efforts in meeting community credit needs is evaluated as part of
the examination process pursuant to twelve assessment factors and then given a rating of Outstanding, Satisfactory, Needs to improve or Substantial noncompliance. These factors also are considered in
evaluating mergers, acquisitions and applications to open a branch or facility. The Bank received a rating of Satisfactory in its most recent CRA performance evaluation as of December 8, 2007.



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USA PATRIOT Act.The USA PATRIOT Act became effective on October 26, 2001 and provides
for the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering. Among other provisions, the USA PATRIOT Act permits financial institutions, upon
providing notice to the United States Treasury, to share information with one another in order to better identify and report to the Federal government concerning activities that may involve money laundering or terrorists activities. The USA
PATRIOT Act is considered a significant banking law in terms of information disclosure regarding certain customer transactions. Certain provisions of the USA Patriot Act impose the obligation to establish anti-money laundering programs, including
the development of a customer identification program, and the screening of all customers against any government lists of known or suspected terrorists. Although it created a reporting obligation, the USA PATRIOT Act has not materially affected and
is not expected to materially affect the Banks products, services or other business activities.

Reporting Terrorist
Activities.The Federal Bureau of Investigation (FBI) has sent, and will send, our banking regulatory agencies lists of the names of persons suspected of involvement in terrorism. The Bank has been requested, and will be
requested, to search its records for any relationships or transactions with persons on those lists. If the Bank finds any relationships or transactions, it must file a suspicious activity report and contact the FBI.

The Office of Foreign Assets Control (OFAC), which is a division of the Department of the Treasury, is responsible for helping to insure that
United States entities do not engage in transactions with enemies of the United States, as defined by various Executive Orders and Acts of Congress. OFAC has sent, and will send, our banking regulatory agencies lists of names of persons
and organizations suspected of aiding, harboring or engaging in terrorist acts. If the Bank finds a name on any transaction, account or wire transfer that is on an OFAC list, it must freeze such account, file a suspicious activity report and notify
the FBI. The Bank has appointed an OFAC compliance officer to oversee the inspection of its accounts and the filing of any notifications. The Bank actively checks high-risk OFAC areas such as new accounts, wire transfers and customer files. The Bank
performs these checks utilizing software, which is updated each time a modification is made to the lists provided by OFAC and other agencies of Specially Designated Nationals and Blocked Persons.

Consumer Laws and Regulations. The Bank is also subject to certain consumer laws and regulations that are designed to protect consumers in
transactions with banks. While the list set forth herein is not exhaustive, these laws and regulations include the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal
Credit Opportunity Act, the Fair Credit Reporting Act and the Fair Housing Act, among others. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions transact business with
customers. The Bank must comply with the applicable provisions of these consumer protection laws and regulations as part of its ongoing customer relations.

Employees

As of December 31, 2007, the Company had 100 full-time and part-time employees. The
Companys management believes that its employee relations are good.

Executive Officers of the Registrant



|                            |  |                                                                                                                                                                                                                                                                                                                                         
|--------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name (Age)                  |  | Principal Occupation During Past Five Years                                                                                                                                                                                                                                                                                             
|Robert H. Gilliam, Jr. (62) |  | President & Chief Executive Officer of Pinnacle Bankshares Corporation and President, Chief Executive Officer and Trust Officer of The First National Bank of Altavista since 1980;
Director, Pinnacle Bankshares Corporation since 1980.                                                                                               
|                            | 
|Carroll E. Shelton (57)     |  | Senior Vice President of Pinnacle Bankshares Corporation since 1990; Senior Vice President and Chief Credit Officer of The First National Bank of Altavista since 2007; Senior Vice President
and Chief Lending Officer of The First National Bank of Altavista from 1990 to 2007; Director, Pinnacle Bankshares Corporation since 1990.
|                            | 
|Bryan M. Lemley (36)        |  | Secretary, Treasurer and Chief Financial Officer of Pinnacle Bankshares Corporation since 2000 and Vice President, Cashier and Chief Financial Officer of The First National Bank of Altavista
since June 2000.                                                                                                                         



9



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##### Table of Contents

|Item 1A. | Risk Factors.
|-------- | -------------

Not required.



|Item 1B. | Unresolved Staff Comments.
|-------- | --------------------------

Not required.



|Item 2. | Properties.
|------- | -----------

The Companys main office
and corporate headquarters, located at 622 Broad Street in downtown Altavista, Virginia, is owned and principally occupied by the Bank.

The Vista Office, located at 1301 N. Main Street in Altavista, Virginia, consists of a single-story building owned by the Bank.

The Airport Office, located at 14580 Wards Road in Campbell County, Virginia, consists of a single-story building owned by the Bank.

The Old Forest Road Office, located at 3309 Old Forest Road in Lynchburg, Virginia, consists of a single-story building owned by the Bank.

The Timberlake Office, located at 20865 Timberlake Road in Campbell County, Virginia, consists of a single-story building leased for $4,042 per month through April 2011.

The Forest Office, located at 14417 Forest Road in Forest, Virginia, consists of a single-story building owned by the Bank.

The Amherst Office, located at 130 South Main Street in Amherst, Virginia, consists of a single-story building leased for $11,233 per month through March
2012.

The Smith Mountain Lake loan production office, located at 74 Scruggs Road, Suite 102, in Moneta, Virginia, consists of office space
leased for $1,485 per month on a month to month basis by the Bank. The Bank does not expect to terminate the lease in the near future.

All
of these properties are in good operating condition and are adequate for the Companys present and anticipated future needs. The Company maintains comprehensive general liability and casualty loss insurance covering its properties and
activities conducted in or about its properties. The Company believes this insurance provides adequate protection for liabilities or losses that might arise out of the ownership and use of such properties.



|Item 3. | Legal Proceedings.
|------- | ------------------

Neither the Company nor
the Bank nor any of their properties is involved in any pending legal proceedings, nor are any such proceedings threatened, other than nonmaterial proceedings arising in the ordinary course of the Companys and the Banks business.



|Item 4. | Submission of Matters to a Vote of Security Holders.
|------- | ----------------------------------------------------

No matters were submitted to a vote of security holders during the fourth quarter of the Companys fiscal year ended December 31, 2007.



10



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##### Table of Contents

PART II



|Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|------- | -------------------------------------------------------------------------------------------------------------

The information contained on the inside back cover of the 2007 Annual Report to Shareholders, under the caption, Market for Common Equity and
Related Stockholder Matters, is incorporated herein by reference.



|Item 6. | Selected Financial Data.
|------- | ------------------------

The information
presented under the caption Selected Consolidated Financial Information on page 6 of the 2007 Annual Report to Shareholders is incorporated herein by reference.



|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operation.
|------- | -------------------------------------------------------------------------------------

The information presented under the caption Managements Discussion and Analysis of Financial Condition and Results of Operation on pages
7 through 25 of the 2007 Annual Report to Shareholders is incorporated herein by reference.



|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk.
|-------- | -----------------------------------------------------------

Not required.



|Item 8. | Financial Statements and Supplementary Data.
|------- | --------------------------------------------

The consolidated financial statements of the Company and its subsidiary, including the accompanying notes, and independent auditors report thereon, contained on pages 26 through 57 of the 2007 Annual Report to Shareholders, are
incorporated herein by reference.



|Item 9. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
|------- | -------------------------------------------------------------------------------------

None.



|Item 9A. | Controls and Procedures.
|-------- | ------------------------

Disclosure
Controls and Procedures. The Company maintains a system of disclosure controls and procedures that is designed to ensure that material information is accumulated and communicated to management, including the Companys Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As required, management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, evaluated
the effectiveness of the design and operation of the Companys disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the Companys Chief Executive Officer and Chief Financial
Officer concluded that the Companys disclosure controls and procedures were operating effectively to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in the rules and forms of the SEC.

Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that the Companys disclosure controls and procedures will detect or uncover every situation involving the failure of persons within the Company to
disclose material information otherwise required to be set forth in the Companys periodic reports.

Managements Report on
Internal Control over Financial Reporting. The Companys management is also responsible for establishing and maintaining adequate internal control



11



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##### Table of Contents

over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Companys internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Companys internal control over financial reporting as of December 31, 2007. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control  Integrated Framework. Based on this assessment, the Companys management concluded that, as of December 31, 2007, the Companys internal control over
financial reporting was effective based on those criteria.

This annual report does not include an attestation report of the Companys
registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the SEC that permit
the Company to provide only managements report in this annual report.

Changes in Internal Controls. No changes in the
Companys internal control over financial reporting occurred during the quarter ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial
reporting.



|Item 9B. | Other Information.
|-------- | ------------------

None.

PART III

Except as otherwise indicated, information called for by the following items under Part III is
contained in the Proxy Statement for the Companys 2008 Annual Meeting of Shareholders (2008 Proxy Statement) to be held on April 8, 2008.



|Item 10. | Directors, Executive Officers and Corporate Governance.
|-------- | -------------------------------------------------------

The information with respect to the directors of the Company required by this item is contained on pages 3 through 7 of the 2008 Proxy Statement under the caption Election of Directors, and is incorporated
herein by reference. The information regarding the Section 16(a) reporting requirements of the directors and executive officers is contained on page 13 of the 2008 Proxy Statement under the caption Section 16(a) Beneficial Ownership
Reporting Compliance, and is incorporated herein by reference. The information concerning the executive officers of the Company required by this item is included in Part I of this Form 10-K under the caption Executive Officers of the
Registrant. The information regarding the Companys Audit Committee required by this item is contained on page 5 of the 2008 Proxy Statement under the caption Meetings and Committees of the Board of Directors-Audit Committee,
and is incorporated herein by reference.

The Company has adopted a Code of Conduct and Conflict of Interest Policy that applies to the
directors, executives and employees of the Company and the Bank, including the Companys Chief Executive Officer, Chief Financial Officer, Controller and other persons performing similar functions. See Exhibit 14 hereto.



|Item 11. | Executive Compensation.
|-------- | -----------------------

The information on
Executive Compensation required by this item is contained on pages 8 through 12 of the 2008 Proxy Statement under the caption Executive Compensation and is incorporated herein by reference. Information on compensation of directors is
contained on pages 6 and 7 of the 2008 Proxy Statement under the caption Directors Fees and is incorporated herein by reference.



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##### Table of Contents

|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|-------- | -----------------------------------------------------------------------------------------------

The information on security ownership of certain beneficial owners and management required by this item is contained on page 2 of the 2008 Proxy Statement
under the caption Securities Ownership of Certain Beneficial Owners and is incorporated herein by reference.

The following
table sets forth information as of December 31, 2007 with respect to certain compensation plans under which equity securities of the Company are authorized for issuance.

Equity Compensation Plan Information



|                                                       |  |                                                                                          |     |  |                                                                           |       |                                                                                                                                          |         |    
|------------------------------------------------------ |  | ---------------------------------------------------------------------------------------- | --- |  | ------------------------------------------------------------------------- | ----- | ---------------------------------------------------------------------------------------------------------------------------------------- | ------- | ---
|Plan Category                                          |  | Number ofsecurities to beissued uponexercise ofoutstandingoptions, warrantsand
rights(a) |     |  | Weighted-averageexercise
priceof outstandingoptions,warrants andrights(b) |       | Number of securitiesremaining availablefor future issuanceunder equitycompensation plans(excluding securitiesreflected in column(a)) (c) |        
|Equity compensation plans approved by shareholders     |  | 17,000                                                                                   | (1) |  | $                                                                         | 14.33 |                                                                                                                                          | 100,000 | (2)
|Equity compensation plans not approved by shareholders |  |                                                                                         |     |  |                                                                           |      |                                                                                                                                          |        |    
|                                                       |  |                                                                                          |     |  |                                                                           |       |                                                                                                                                          |         |    
|Total                                                  |  | 17,000                                                                                   |     |  | $                                                                         | 14.33 |                                                                                                                                          | 100,000 |    
|                                                       |  |                                                                                          |     |  |                                                                           |       |                                                                                                                                          |         |    



|(1) | Reflects shares to be issued pursuant to outstanding options granted under the Companys 1997 Incentive Stock Plan and 2004 Incentive Stock Plan.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Reflects shares available to be granted in the form of options, restricted stock or stock appreciation rights under the Companys 2004 Incentive Stock Plan. The Companys
1997 Incentive Stock Plan expired May 1, 2007, and no additional awards may be granted under the plan.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 13. | Certain Relationships and Related Transactions, and Director Independence.
|-------- | --------------------------------------------------------------------------

The information on the interest of management in certain transactions and certain committees of the board of directors required by this item is contained on pages 4, 5 and 7 of the 2008 Proxy Statement under the
captions Meetings and Committees of the Board of Directors and Interest of Management in Certain Transactions, and is incorporated herein by reference.



|Item 14. | Principal Accountant Fees and Services.
|-------- | ---------------------------------------

The information contained on pages 14 and 15 of the 2008 Proxy Statement under the captions Principal Accountant Fees and Pre-Approval Policies is incorporated herein by reference.

PART IV



|Item 15. | Exhibits, Financial Statement Schedules.
|-------- | ----------------------------------------



|(a)(1) | The response to this portion of Item 15 is included in Item 8 above.
|------ | --------------------------------------------------------------------



13



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##### Table of Contents

|(a)(2) | All schedules are omitted because they are not applicable, or the required information is either not material or is shown in the financial statements or the related notes.
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(a)(3) | Exhibits
|------ | --------



|               |  |                                                                                                                                                                                                                             
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                 
|3.1            |  | Amended and Restated Articles of Incorporation (incorporated by reference to Appendix 1 to registrants amended registration statement on Form S-4 (File No. 333-20399) filed on
January 30, 1997)                          
|               | 
|3.2            |  | Bylaws (incorporated by reference to Exhibit 3(ii) to registrants registration statement on Form S-4 (File No. 333-20399) filed on January 24, 1997)                                                                       
|               | 
|10.1*          |  | 1997 Incentive Stock Plan (incorporated by reference to Exhibit 4.3 to registrants registration statement on Form S-8 filed September 14, 1998)                                                                            
|               | 
|10.2*          |  | Change in Control Agreement between Pinnacle Bankshares Corporation and Robert H. Gilliam, Jr., dated May 26, 2006 (incorporated by reference to Exhibit 10.2 to registrants current
report on Form 8-K filed June 2, 2006)
|               | 
|10.3*          |  | VBA Directors Deferred Compensation Plan for Pinnacle Bankshares Corporation, effective December 1, 1997 (incorporated by reference to Exhibit 10.3 to registrants annual report
on Form 10-KSB filed March 25, 2003)     
|               | 
|10.4*          |  | 2004 Incentive Stock Plan (incorporated by reference to Exhibit 10.4 to registrants quarterly report on Form 10-QSB filed May 10, 2004)                                                                                    
|               | 
|10.5*          |  | Directors Annual Compensation                                                                                                                                                                                              
|               | 
|10.6*          |  | Base Salaries of Named Executive Officers of the Registrant                                                                                                                                                                 
|               | 
|10.7*          |  | Change in Control Agreement between Pinnacle Bankshares Corporation and Bryan M. Lemley, dated May 26, 2006 (incorporated by reference to Exhibit 10.7 to registrants current report on
Form 8-K filed June 2, 2006)       
|               | 
|10.8*          |  | Change in Control Agreement between Pinnacle Bankshares Corporation and Carroll E. Shelton, dated May 26, 2006 (incorporated by reference to Exhibit 10.8 to registrants current report
on Form 8-K filed June 2, 2006)    
|               | 
|13             |  | 2007 Annual Report to Shareholders                                                                                                                                                                                          
|               | 
|14             |  | Pinnacle Bankshares Corporation Code of Conduct and Conflict of Interest Policy (incorporated by reference to Exhibit 14 to registrants annual report on Form 10-KSB filed March 17,
2004)                                 
|               | 
|21             |  | Subsidiaries of Registrant                                                                                                                                                                                                  
|               | 
|23.1           |  | Consent of Cherry, Bekaert & Holland, L.L.P.                                                                                                                                                                                
|               | 
|31.1           |  | CEO Certification Pursuant to Rule 13a-14(a)                                                                                                                                                                                
|               | 
|31.2           |  | CFO Certification Pursuant to Rule 13a-14(a)                                                                                                                                                                                
|               | 
|32.1           |  | CEO/CFO Certification Pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)                                                                                                                                



14



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##### Table of Contents



|* | Denotes management contract.
|- | ----------------------------

|(b) | Exhibits  See exhibit index included in Item 15(a)(3) above.
|--- | -------------------------------------------------------------

|(c) | Financial Statement Schedules  See Item 15(a)(2) above.
|--- | --------------------------------------------------------



15



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|               |  |  |  |                                                              
|-------------- |  |  |  | -------------------------------------------------------------
|               |  |  |  | PINNACLE BANKSHARES CORPORATION                              
|               |  |  |  | (Registrant)                                                 
|               |  | 
|MARCH 27, 2008 |  |  |  | /s/ Robert H. Gilliam, Jr.                                   
|Date           |  |  |  | Robert H. Gilliam, Jr., President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                                  |  |                                                                                               |  |               
|------------------------------------------------- |  | --------------------------------------------------------------------------------------------- |  | --------------
|Signature                                         |  | Title                                                                                         |  | Date          
|                                                  |  |                                                                                              
|/s/ Robert H. Gilliam, Jr. Robert H. Gilliam, Jr. |  | President, Chief Executive Officer and Director (principal executive officer)                 |  | March 27, 2008
|                                                  |  |                                                                                              
|/s/ Bryan M. Lemley Bryan M. Lemley               |  | Secretary, Treasurer and Chief Financial Officer (principal financial and accounting officer) |  | March 27, 2008
|                                                  |  |                                                                                              
|/s/ A. Willard Arthur A.
Willard Arthur           |  | Director                                                                                      |  | March 27, 2008
|                                                  |  |                                                                                              
|/s/ James E. Burton, IV James E. Burton, IV       |  | Director                                                                                      |  | March 27, 2008
|                                                  |  |                                                                                              
|/s/ John P. Erb John P.
Erb                       |  | Director                                                                                      |  | March 27, 2008
|                                                  |  |                                                                                              
|/s/ R.B. Hancock, Jr. R.B. Hancock, Jr.           |  | Director                                                                                      |  | March 27, 2008
|                                                  |  |                                                                                              
|/s/ James P. Kent, Jr. James P. Kent, Jr.         |  | Director                                                                                      |  | March 27, 2008
|                                                  |  |                                                                                              
|/s/ William F. Overacre William F. Overacre       |  | Director                                                                                      |  | March 27, 2008
|                                                  |  |                                                                                              
|/s/ Carroll E. Shelton Carroll E. Shelton         |  | Director                                                                                      |  | March 27, 2008
|                                                  |  |                                                                                              
|/s/ John L. Waller John
L. Waller                 |  | Director                                                                                      |  | March 27, 2008
|                                                  |  |                                                                                              
|/s/ Michael E. Watson Michael E. Watson           |  | Director                                                                                      |  | March 27, 2008



16