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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark one)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2001
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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Commission file number 1-12707
Pinnacle Bancshares, Inc.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 72-1370314
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(State or Other Jurisdiction of (I.R.S. Employer)
Incorporation or Organization) (Identification No.)
1811 Second Avenue, Jasper, Alabama 35502-1388
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(Address of Principal Executive Offices)
(205) 221-4111
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(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) 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 [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 1,775,384
Transitional Small Business Disclosure Format (check one):
Yes [X] No [ ]
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PART I
FINANCIAL INFORMATION
PAGE
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of Financial Condition at March 31, 2001
(Unaudited) and December 31, 2000 3
Condensed Consolidated Statements of Financial Operations for the three months
ended March 2001 and 2000 (unaudited) 4
Condensed Consolidated Statements of Stockholders Equity for the three months
ended March 31, 2001 and 2000 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows for the three
ended March 31, 2001 and 2000 (Unaudited) 6
Notes to Unaudited Condensed Consolidated Financial Statements 7
The Condensed Consolidated Financial Statements furnished have not been audited
by independent certified public accountants, but reflect, in the opinion of
management, all adjustments necessary for a fair presentation of financial
condition and the results for the periods presented
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 9
Signatures 11
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PINNACLE BANCSHARES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, December 31,
2001 2000
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ASSETS:
Cash on hand and in banks $ 3,946,909 $ 3,480,036
Interest-bearing deposits in other banks 3,320,901 1,135,957
Securities available-for-sale 55,901,108 61,068,531
Loans held for sale 2,348,356 1,337,032
Loans receivable, net of allowance for loan losses
of $1,323,788 and $1,338,631 respectively 143,193,848 152,020,585
Real estate owned, net 1,177,597 1,420,143
Premises and equipment, net 6,338,639 6,463,478
Goodwill 337,138 347,355
Accrued interest receivable 1,800,951 2,331,537
Other assets 497,542 664,373
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Total assets $ 218,862,989 $ 230,269,027
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits $ 192,065,088 $ 187,470,754
Borrowed funds 3,100,000 20,500,000
Official checks outstanding 1,721,072 964,038
Accrued interest payable 1,310,079 1,431,604
Other liabilities 938,242 672,306
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199,134,481 211,038,702
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STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share, no shares issued,
100,000 authorized 0 0
Common stock, par value $.01 per share, 1,775,384 issued, 2,400,000
authorized 17,921 17,921
Additional paid-in capital 8,131,746 8,131,746
Treasury stock, at cost (16,702 shares at March 31, 2001 and
December 31, 2000) (128,075) (128,075)
Retained earnings 11,593,500 11,440,810
Accumulated other comprehensive income (loss), net of tax 113,416 (232,077)
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Total stockholders' equity 19,728,508 19,230,325
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Total liabilities and stockholders' equity $ 218,862,989 $ 230,269,027
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See accompanying notes to condensed consolidated financial statements.
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PINNACLE BANCSHARES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL OPERATIONS
Three Months Ended
March 31,
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2001 2000
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INTEREST REVENUES:
Interest on loans $3,393,848 $ 3,323,770
Interest and dividends on securities 786,533 973,826
Other interest 126,571 28,525
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4,306,952 4,326,121
INTEREST EXPENSE:
Interest on deposits 2,415,105 2,185,304
Interest on borrowed funds 230,992 334,069
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2,646,097 2,519,373
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NET INTEREST INCOME BEFORE PROVISION FOR
LOAN LOSSES 1,660,855 1,806,748
PROVISION FOR LOAN LOSSES 120,000 120,000
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NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 1,540,855 1,686,748
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NON-INTEREST INCOME:
Fees and service charges 185,561 161,549
Service fee income, net 40,773 44,547
Real estate operations, net 35,329 13,866
Net gain (loss) on sale or write-down of:
Loans held for sale 147,038 70,242
Securities available-for-sale 60,313 0
Real estate owned 4,389 (2,333)
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473,403 287,871
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NON-INTEREST EXPENSE:
Compensation and benefits 739,596 709,840
Occupancy 318,985 284,957
Marketing and professional 34,751 37,670
Other 389,156 231,098
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1,482,488 1,263,565
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INCOME BEFORE INCOME TAX EXPENSE 531,770 711,054
INCOME TAX EXPENSE 201,542 267,962
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NET INCOME $ 330,228 $ 443,092
========== ===========
BASIC EARNINGS PER SHARE $ 0.19 $ 0.25
DILUTED EARNINGS PER SHARE $ 0.19 $ 0.25
CASH DIVIDENDS PER SHARE $ 0.10 $ 0.10
WEIGHTED AVERAGE SHARES OUTSTANDING 1,775,384 1,792,086
WEIGHTED AVERAGE DILUTED SHARES 1,775,384 1,792,086
See accompanying notes to condensed consolidated financial statements.
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PINNACLE BANCSHARES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
------------------ PAID-IN TREASURY RETAINED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCK EARNINGS GAIN (LOSS) EQUITY
--------- ------- ---------- --------- ------------ --------- ------------
BALANCE, December 31, 1999 1,792,086 $17,921 $8,131,746 $ 0 $ 10,414,858 $(715,763) $ 17,848,762
Comprehensive Income:
Net Income 0 0 0 0 443,092 0 443,092
Change in unrealized gain (loss) on
securities available-for-sale,
net of tax 0 0 0 0 0 (232,255) (232,255)
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Comprehensive Income 0 0 0 0 0 0 210,837
Cash dividends ($.10 per share) 0 0 0 0 (179,200) 0 (179,200)
--------- ------- ---------- --------- ------------ --------- ------------
BALANCE, March 31, 2000 1,792,086 17,921 8,131,746 0 10,678,750 (948,018) 17,880,399
========= ======= ========== ========= ============ ========= ============
BALANCE, December 31, 2000 1,775,384 17,921 8,131,746 (128,075) 11,440,810 (232,077) 19,230,325
========= ======= ========== ========= ============ ========= ============
Comprehensive Income:
Net Income 0 0 0 0 330,228 0 330,228
Change in unrealized gain (loss) on
securities available-for-sale,
net of tax 0 0 0 0 0 345,493 345,493
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Comprehensive Income 675,721
Cash dividends ($.10 per share) 0 0 0 0 (177,538) 0 (177,538)
--------- ------- ---------- --------- ------------ --------- ------------
BALANCE, March 31, 2001 1,775,384 $17,921 $8,131,746 $(128,075) $ 11,593,500 $ 113,416 $ 19,728,508
========= ======= ========== ========= ============ ========= ============
See accompanying notes to condensed consolidated financial statements.
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PINNACLE BANCSHARES, INC,
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31,
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2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 330,228 $ 443,092
Adjustment to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation 146,662 147,762
Provision for loan losses 120,000 120,000
Net (gain) loss on sale and write down of:
Loans held for sale (147,038) (70,242)
Securities available-for-sale (60,313) 0
Real estate owned (4,389) 2,333
Amortization, net (88,218) (99,137)
Proceeds from sale of loans 12,930,775 7,863,042
Loans originated for sale (13,795,061) (9,045,378)
(Increase) decrease in accrued interest receivable 530,586 112,710
(Increase) decrease in other assets 177,048 240,568
Increase (decrease) in other liabilities (90,756) 22,636
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Net cash provided by (used in) operating activities 49,524 (262,614)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collected on loans and securities 24,877,424 20,749,194
Loans originated for portfolio (15,448,074) (20,581,702)
Net change in interest bearing deposits at other banks (2,184,944) 784,230
Purchase of securities available-for-sale (13,000,000) (50,000)
Proceeds from callable securities 15,000,000 0
Proceeds from the sale of securities available-for-sale 3,060,313 0
Purchase of premises and equipment (21,823) (39,596)
Proceeds from sales of real estate owned 360,623 108,075
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Net cash provided by investing activities 12,643,519 970,201
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in passbook, NOW and money market deposit accounts 2,595,997 164,063
Proceeds from sales of time deposits 7,042,075 6,749,836
Payments on maturing time deposits (5,043,738) (7,937,636)
Payments on borrowed funds (17,400,000) (14,840,000)
Proceeds from borrowed funds 0 13,703,060
Increase (decrease) in official checks outstanding 757,034 (80,554)
Payments of cash dividends (177,538) (179,200)
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Net cash used in financing activities (12,226,170) (2,420,431)
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NET DECREASE IN CASH 466,873 (1,712,844)
CASH AT BEGINNING OF PERIOD 3,480,036 5,289,619
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CASH AT END OF PERIOD $ 3,946,909 $ 3,576,775
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SUPPLEMENTAL DISCLOSURES:
Cash payments for interest on deposits and borrowed funds $ 2,767,622 2,296,801
Cash payments for income taxes 281,000 246,000
Other real estate acquired through foreclosure 113,688 768,710
See accompanying notes to condensed consolidated financial statements.
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PINNACLE BANCSHARES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying unaudited interim condensed consolidated financial statements
include the accounts of Pinnacle Bancshares, Inc. (the "Company") and Pinnacle
Bank (the "Bank"). All significant intercompany transactions and accounts have
been eliminated in consolidation.
In the opinion of management, all adjustments (none of which are other than
normal recurring accruals) necessary for a fair presentation of the results of
such interim periods have been included. The results of operations for the three
month period ended March 31, 2001, are not necessarily indicative of the results
of operations which may be expected for the entire year.
These unaudited interim condensed consolidated financial statements should be
read in conjunction with the audited financial statements and the notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2000. The accounting policies followed by the Company are set forth
in the summary of Significant Accounting Policies in the Company's audited
financial statements.
2. EARNINGS PER SHARE:
The following table represents the earnings per share calculations for the
three-month periods ended March 31, 2001, and 2000:
PER
SHARE
FOR THE THREE MONTHS ENDED NET INCOME SHARES AMOUNT
-------------------------- ---------- ------ ------
MARCH 31, 2001
Basic earnings per share $330,228 1,775,384 $ 0.19
Dilutive securities -- -- --
-------- --------- --------
Diluted earnings per share $330,228 1,775,384 $ 0.19
======== ========= ========
MARCH 31, 2000
Basic earnings per share $443,092 1,792,086 $ 0.25
Dilutive securities -- --
-------- --------- --------
Diluted earnings per share $443,092 1,792,086 $ 0.25
======== ========= ========
Options to purchase 48,500 shares of common stock at $10.125 per share and
options to purchase 54,560 shares of common stock at $8.8125 per share were
outstanding at the periods ending March 31, 2001 and 2000. These options were
not included in the computations of diluted EPS because the options' exercise
prices were greater than the average market price of the common shares. The
options, which expire on August 28, 2006 and May 26, 2009, were outstanding at
March 31, 2001 and 2000.
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3. PENDING ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standard Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. This Statement establishes accounting and
reporting standards for derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
Under certain conditions, a derivative may be specifically designated as a
hedge. Accounting for changes in fair value of derivatives will depend on their
designation. In June 1999, the FASB issued SFAS No. 137 Accounting for
Derivative Instruments and Hedging Activities- A Deferral of the Effective Date
of FASB Statement No. 133. This Statement amends the effective date of SFAS No.
133, which will now be effective for all fiscal quarters of all fiscal years
beginning June 15, 2000. In June 2000, the FASB issued SFAS No. 138, Accounting
for Certain Derivative Instruments and Certain Hedging Activities-An Amendment
to FASB Statement No. 133. This Statement addresses a limited number of issues
causing implementation difficulties for numerous entities that apply SFAS133 and
amends the accounting and reporting standards of SFAS No. 133 for certain
derivative instruments and certain hedging activities.
The Bank uses derivatives to hedge interest rate exposures by mitigating the
interest rate risk of mortgage loans held for sale and mortgage loans in
process. The Bank regularly enters into derivative financial instruments in the
form of forward contracts, as part of its normal asset/liability management
strategies. The Bank's obligations under forward contracts consist of "best
effort" commitments to deliver mortgage loans originated into the secondary
market at a future date. In addition, the FASB's Derivatives Implementation
Group ("DIG") recently announced that interest rate lock commitments related to
loans that are originated for later sale are to be classified as derivatives. In
the normal course of business, the Bank regularly extends these rate lock
commitments to customers during the loan origination process.
On January 1, 2001, the Bank adopted SFAS No. 133, as amended. Management
completed its assessment of the impact of this Statement on the Bank's financial
position and results of operations and such impact is immaterial.
In September 2000, the FASB issued SFAS No.140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, a replacement
of FASB Statement No.125. This Statement revises the standards for accounting
for securitizations and other transfers of financial assets and collateral and
requires certain disclosures. The Statement is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
March 31, 2001. However, the Statement is currently effective for recognition
and reclassification of collateral and for disclosures relating to
securitization transactions and collateral.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PINNACLE BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS: This Quarterly Report on Form 10-QSB contains
forward-looking statements. Additional written or oral forward-looking
statements may be made by the Company from time to time in filings with the
Securities and Exchange Commission or otherwise. The words "believe," "expect,"
"seek" and "intend," and similar expressions, identify forward-looking
statements, which speak only as of the date the statement is made. Such
forward-looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such statements may include, but are not
limited to, projections of income or loss, expenditures, acquisitions, plans for
future operations, financing needs or plans relating to services of the Company,
as well as assumptions relating to the foregoing. Forward-looking statements are
inherently subject to risk and uncertainties, some of which cannot be predicted
or qualified. Future events and actual results could differ materially from
those set forth in, contemplated by or underlying the forward-looking
statements.
The Company does not undertake, and specifically disclaims, any obligation to
publicly release the results of revisions which may be made to forward-looking
statements to reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
COMPARISON OF FINANCIAL CONDITION AS OF MARCH 31, 2001 AND DECEMBER 31, 2000.
Total assets decreased $11.4 million, to $218.9 million at March 31, 2001 from
$230.3 million at December 31, 2000. Total loans receivable, net decreased
approximately $8.8 million primarily due to refinancing activities and principal
repayments. Available-for-sale securities decreased approximately $5.2 million
due to calls and sales. During the three month period ended March 31, 2001, the
Bank had $15.0 million in agency securities called. The Bank purchased $13.0
million in agency securities. Also during the period ended March 31, 2001 the
Bank sold $3.0 million in agency securities. Gross gains of $60,313 were
realized on these sales. Total cash and interest bearing deposits increased
approximately $ 2.7 million.
At March 31, 2001, the Company's investment portfolio of $55.9 million consisted
primarily of U. S. agency securities and mortgage-backed-securities. The entire
investment portfolio is classified as "available-for-sale," which is
marked-to-market with the unrealized gains/losses reflected directly in the
stockholders' equity.
During the three month period ended March 31, 2001, the Company paid down $17.4
million of borrowed funds, to $3.1 million at March 31, 2001 from $20.5 million
at December 31, 2000.
Total deposits increased $4.6 million, to $192.1 million at March 31, 2001 from
$187.5 million at December 31, 2000. This increase was primarily due to an
increase in the passbook, NOW and money market deposit accounts of $2.6 million
and an increase in time deposits of $2.0 million.
RESULTS OF OPERATIONS-COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2001 AND
2000. Net interest income after the provision for loan losses decreased $145,893
or 8.65% for the three-month period March 31, 2001, as compared to the
corresponding period in the previous year. This decrease was primarily due to a
decrease in interest and dividends on securities-available-for-sale of $187,293,
an increase in interest expense on deposits of $229,801 offset by a decrease in
interest on borrowed funds of $103,077, an increase in interest on loans of
$70,078, and an increase in other interest of $98,046.
If rates were to rise rapidly, net income may be adversely affected. Under a
scenario simulating a hypothetical 100 basis point rate increase applied to all
fixed rate interest-earning assets and interest-bearing liabilities, the Company
would expect a net loss in the fair value of the underlying instruments of
approximately $830,000. This
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hypothetical loss is not a precise indicator of future events. Instead, it is
believed to be a reasonable estimate of the results anticipated if the
assumptions used in the modeling techniques were to occur.
The Bank's yield on interest-earning assets increased from approximately 8.05%
in the three-month period ended March 31, 2000 to approximately 8.09% in the
current three-month period. This increase was due to an increase in interest
rates. The Bank's cost of funds increased from 4.94% at March 31, 2000 to 5.10%
in the current three month period. This increase was also due to an increase in
interest rates.
Non-interest income, which includes fees and service charges, real estate
operations, net gain (loss) on sale of loans and other income, increased
$185,532 in the three-month period ended March 31, 2001 as compared to the
corresponding prior year period. The increase in the three-month period ended
March 31, 2001, was due primarily to an increase in the gain on sale of mortgage
loans of $76,796, a gain on the sale of securities available-for-sale of
$60,313, an increase in fees and service charges of $24,012, an increase in real
estate operations, net of $21,463 and an increase in all other non-interest
income of $2,948.
Provisions for loan losses are made to maintain the allowance for loan losses at
an adequate level. The allowance for loan losses reflects management's
estimates, which take into account historical experience, the amount of
non-performing assets, and general economic conditions. The Bank determined an
additional $120,000 was required for the three month period ended March 31,
2001, which is consistent with the same period a year ago.
Non-interest expense increased $218,923 in the three month period ended March
31, 2001 as compared to the corresponding prior year period. The increase in the
three month period ended March 31, 2001 was primarily due to an increase in
compensation expense of $29,756, an increase in occupancy expense of $34,028,
and an increase in all other non-interest expense of $155,139. The increase in
non-interest expense was primarily a result of $170,000 in prepayment penalties
on Federal Home Loan Bank advances.
NET INCOME: The Company reported net income for the three month period ended
March 31, 2001 of $330,228, or $0.19 per share, compared with net income of
$443,092, or $0.25 per share, for the three- month period ended March 31, 2000.
The decrease in the three month period ended March 31, 2001 was primarily
attributable to an increase in non-interest expense which was the result of
$170,000 in prepayment penalties on Federal Home Loan Bank advances totaling
$16,500,000. The advances would have matured in July, November and December of
2001. The Company also incurred a $127,000 increase in interest expense. These
increases exceeded a $186,000 increase in non-interest income.
CAPITAL RESOURCES: Historically, funds provided by operations, mortgage loan
principal repayments, savings deposits and short-term borrowings have been the
Bank's principal sources of funds. In addition, the Bank has the ability to
obtain funds through the sale of mortgage loans, through borrowings from the
Federal Home Bank of Atlanta and other borrowing sources. At March 31, 2001, the
Bank's total loan commitments, including construction loans in process and
unused lines of credit, were approximately $19.2 million. Management believes
that the Bank's liquidity and other sources of funds are sufficient to fund all
commitments outstanding and other cash needs. The Company and the Bank are
required to maintain certain levels of regulatory capital. At March 31, 2001 the
Company and the Bank exceeded all regulatory capital requirements.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PINNACLE BANCSHARES, INC
DATE: May 14, 2001 BY:/s/ Robert B. Nolen Jr.
---------------- -----------------------------------------
Robert B. Nolen, Jr.
President and Chief Executive Officer
(Principal Executive Officer and
Principal Financial Officer)
BY: /s/ Marie Guthrie
----------------------------------------
Marie Guthrie
Treasurer
(Principal Accounting Officer)
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