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 September 30, 2000
| | 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
----- -----
As of November 13, 2000, 1,780,384 shares of Common Stock were issued and
outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No
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PART I
FINANCIAL INFORMATION
PAGE
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of Financial Condition at September 30, 2000
(Unaudited) and December 31, 1999. 3
Condensed Consolidated Statements of Financial Operations for the three months
ended September 30, 2000 and 1999 and for the nine months ended
September 30, 2000 and 1999 (unaudited). 4
Condensed Consolidated Statements of Stockholders Equity for the nine
months ended September 30, 2000 and 1999 (Unaudited). 5
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 2000 and 1999 (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
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
Signatures 13
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PINNACLE BANCSHARES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, December 31,
2000 1999
---- ----
ASSETS:
Cash on hand and in banks $ 3,686,432 $ 5,289,619
Interest-bearing deposits in other banks 1,835,924 2,177,294
Securities available-for-sale 62,466,887 64,599,164
Loans held for sale 902,118 893,733
Loans receivable, net of allowance for loan losses
of $1,243,476 and $1,222,978 respectively 151,820,117 146,429,690
Real estate owned, net 1,944,003 1,521,533
Premises and equipment, net 6,605,300 6,995,375
Excess cost over net assets acquired 357,571 388,220
Accrued interest receivable 2,085,677 1,982,134
Other assets 620,303 754,801
------------ ------------
Total assets $232,324,332 $231,031,563
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits $190,121,965 $189,174,804
Borrowed funds 20,750,000 21,890,000
Official checks outstanding 1,634,606 1,529,946
Other liabilities 968,947 588,051
------------ ------------
213,475,518 213,182,801
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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, 1,791,684 and 1,792,086
outstanding at September 30, 2000 and December 31, 1999, 10,000,000
authorized 17,921 17,921
Treasury stock , at cost, 402 shares (3,403) 0
Additional paid-in capital 8,131,746 8,131,746
Retained earnings 11,241,662 10,414,858
Accumulated other comprehensive income, net of tax (539,112) (715,763)
------------ ------------
Total stockholders' equity 18,848,814 17,848,762
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Total liabilities and stockholders' equity $232,324,332 $231,031,563
============ ============
See accompanying notes to condensed consolidated financial statements.
3
PINNACLE BANCSHARES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
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2000 1999 2000 1999
---- ---- ---- ----
INTEREST REVENUES:
Interest on loans $ 3,576,154 $ 3,036,220 $10,283,048 $ 8,813,003
Interest and dividends on securities 950,962 974,315 2,865,821 2,747,932
Other interest 42,460 29,850 136,793 306,371
------------ ------------ ------------ ------------
4,569,576 4,040,385 13,285,662 11,867,306
INTEREST EXPENSE:
Interest on deposits 2,386,270 2,193,012 6,834,768 6,644,569
Interest on borrowed funds 345,244 68,323 1,006,209 164,284
------------ ------------ ------------ ------------
2,731,514 2,261,335 7,840,977 6,808,853
------------ ------------ ------------ ------------
NET INTEREST INCOME BEFORE PROVISION FOR
LOAN LOSSES 1,838,062 1,779,050 5,444,685 5,058,453
PROVISION FOR LOAN LOSSES 170,000 20,000 410,000 267,000
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 1,668,062 1,759,050 5,034,685 4,791,453
------------ ------------ ------------ ------------
NON-INTEREST INCOME:
Fees and service charges 186,203 172,586 544,330 519,454
Service fee income, net 42,361 47,327 130,128 144,583
Real estate operations, net 21,985 42,137 46,221 114,494
Net gain (loss) on sale or write-down of:
Loans held for sale 109,076 100,833 281,481 367,583
Assets 0 500 0 500
Investments 0 0 0 (93)
Real estate owned (13,069) (100,428) (18,621) (102,215)
------------ ------------ ------------ ------------
346,556 262,955 983,539 1,044,306
------------ ------------ ------------ ------------
NON-INTEREST EXPENSE:
Compensation and benefits 722,587 685,289 2,133,970 2,092,540
Occupancy 307,021 291,151 905,965 855,293
Marketing and professional 46,046 39,353 118,343 112,854
Other 204,195 226,658 669,531 718,662
------------ ------------ ------------ ------------
1,279,849 1,242,451 3,827,809 3,779,349
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAX EXPENSE 734,769 779,554 2,190,415 2,056,410
INCOME TAX EXPENSE 276,768 290,899 826,001 770,826
------------ ------------ ------------ ------------
NET INCOME $ 458,001 $ 488,655 $ 1,364,414 $ 1,285,584
============ ============ ============ ============
BASIC EARNINGS PER SHARE $ 0.26 $ 0.27 $ 0.76 $ 0.72
DILUTED EARNINGS PER SHARE $ 0.26 $ 0.27 $ 0.76 $ 0.72
CASH DIVIDENDS PER SHARE $ 0.10 $ 0.10 $ 0.10 $ 0.10
WEIGHTED AVERAGE SHARES OUTSTANDING 1,792,034 1,792,086 1,792,068 1,790,740
WEIGHTED AVERAGE DILUTED SHARES 1,792,034 1,796,247 1,792,068 1,797,816
See accompanying notes to condensed consolidated financial statements.
4
PINNACLE BANCSHARES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
Accumulated
Additional Other Total
Common Stock Treasury Paid-in Retained Comprehensive Stockholders'
Shares Amount Stock Capital Earnings Income Equity
------ ------ ----- ------- -------- ------ ------
BALANCE, December 31, 1998 1,789,586 $17,895 $ 0 $8,109,740 $ 9,453,693 $ 30,779 $17,612,107
-----------
Comprehensive Income:
Net income 0 0 0 1,285,584 0 1,285,584
Change in unrealized gain (loss)
on securities available-
For-sale, net of tax of $298,685 0 0 0 0 0 (579,801) (579,801)
----------
Comprehensive Income 705,783
Exercise of stock options 2,500 26 22,006 22,032
Cash dividends declared
($.10 per share) 0 0 0 (537,354) (537,354)
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BALANCE, September 30, 1999 1,792,086 $17,921 $ 0 $8,131,746 $10,201,923 $(549,022) $17,802,568
========= ======= ======= ========== =========== ========= ===========
BALANCE, December 31, 1999 1,792,086 $17,921 $ 0 $8,131,746 $10,414,858 $(715,763) $17,848,762
-----------
Comprehensive Income:
Net income 0 0 0 1,364,414 0 1,364,414
Change in unrealized gain (loss)
on securities available-
for-sale, net of tax of $120,242 0 0 0 0 0 176,651 176,651
-----------
Comprehensive Income 1,541,065
Repurchases of 402 shares of
common stock (402) (3,403) (3,403)
Cash dividends declared
($.10 per share) 0 0 0 (537,610) 0 (537,610)
--------------------------------------------------------------------------------
BALANCE, September 30, 2000 1,791,684 $17,921 $(3,403) $8,131,746 $11,241,662 $(539,112) $18,848,814
========= ======= ======= ========== =========== ========= ===========
See accompanying notes to condensed consolidated financial statements.
5
PINNACLE BANCSHARES, INC,
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
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2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,364,414 $ 1,285,584
Adjustment to reconcile net income to
net cash provided by operating
activities:
Depreciation 444,784 415,601
Provision for loan losses 410,000 267,000
Net (gain) loss on sale and write down of:
Loans held for sale (281,481) (367,583)
Securities available for sale 0 93
Assets 0 (500)
Real estate owned 18,621 102,215
Amortization, net (303,194) (362,895)
Proceeds from sale of loans 27,908,527 37,512,419
Loans originated for sale (27,635,431) (35,557,110)
(Increase) decrease in accrued interest receivable (103,543) (356,339)
(Increase) decrease in other assets 44,905 28,442
Increase (decrease) in other liabilities 380,896 (377,068)
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Net cash provided by operating activities 2,248,498 2,589,859
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CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collected on loans and securities 67,018,110 76,860,046
Loans originated for portfolio (71,927,691) (81,336,431)
Net change in interest bearing deposits at other banks 341,370 29,446,160
Purchase of securities available-for-sale (50,000) (46,920,911)
Proceeds from maturing and callable securities 0 11,000,000
Proceeds from the sale of securities available-for-sale 12,017 4,619,700
Purchase of premises and equipment (74,163) (586,456)
Proceeds from the sale of premises and equipment 19,454 0
Proceeds from sales of real estate owned 1,438,410 501,818
----------- -----------
Net cash used in investing activities (3,222,493) (6,416,074)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (increase) decrease in passbook, NOW and
money market deposit accounts (2,078,893) (1,273,184)
Proceeds from sales of time deposits 23,120,770 19,458,547
Payments on maturing time deposits (20,094,716) (20,178,923)
Payments on borrowed funds (31,040,000) (10,230,000)
Proceeds from borrowed funds 29,900,000 16,100,000
Increase(decrease) in official checks outstanding 104,660 78,637
Repurchases of shares of common stock (3,403) 0
Proceeds from stock options exercised 0 22,032
Payments of cash dividends (537,610) (537,354)
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Net cash provided by (used in) financing activities (629,192) 3,439,755
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NET DECREASE IN CASH (1,603,187) (386,460)
CASH AT BEGINNING OF PERIOD 5,289,619 3,960,991
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CASH AT END OF PERIOD $ 3,686,432 $ 3,574,531
============ ============
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest on deposits and borrowed funds $ 6,982,041 6,186,689
Cash payments for income taxes 466,000 993,579
Other real estate acquired through foreclosure 1,879,501 144,425
See accompanying notes to condensed consolidated financial statements.
6
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
nine-month period ended September 30, 2000, 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, 1999. The accounting policies followed by the Company are set forth
in the summary of Significant Accounting Policies in the Company's audited
financial statements.
7
2. EARNINGS PER SHARE:
------------------
The following table represents the earnings per share calculations for the three
and nine-month periods ended September 30, 2000:
PER
SHARE
FOR THE THREE MONTHS ENDED NET INCOME SHARES AMOUNT
-------------------------- ---------- ------ ------
SEPTEMBER 30, 2000
Basic earnings per share $ 458,001 1,792,034 $0.26
Dilutive securities -- -- --
---------- --------- -----
Diluted earnings per share $ 458,001 1,792,034 $0.26
========== ========= =====
SEPTEMBER 30, 1999
Basic earnings per share $ 488,655 1,792,086 $0.27
Dilutive securities -- 4,161 --
---------- --------- -----
Diluted earnings per share $ 488,655 1,796,247 $0.27
========== ========= =====
PER
SHARE
FOR THE NINE MONTHS ENDED NET INCOME SHARES AMOUNT
------------------------- ---------- ------ ------
SEPTEMBER 30, 2000
Basic earnings per share $1,364,414 1,792,068 $0.76
Dilutive securities -- -- --
---------- --------- -----
Diluted earnings per share $1,364,414 1,792,068 $0.76
========== ========= =====
SEPTEMBER 30, 1999
Basic earnings per share $1,285,584 1,790,740 $0.72
Dilutive securities -- 7,076 --
---------- --------- -----
Diluted earnings per share $1,285,584 1,797,816 $0.72
========== ========= =====
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 during all three quarters of 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, respectively, were still outstanding
at September 30, 2000.
8
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 SEPTEMBER 30, 2000 AND DECEMBER 31,
1999. Total assets increased to $232.3 million at September 30, 2000 as compared
to $231.0 million at December 31, 1999. This increase was due primarily to an
increase in loans and loans held for sale of approximately $5.4 million. This
increase was off-set by decreases in cash and interest-bearing deposits of
approximately $1.9 million which were primarily used to fund loan growth and a
decrease in securities available-for-sale of approximately $2.1 million due to
principal repayments. Total deposits increased to $190.1 million at September
30, 2000 as compared to $189.2 million at December 31, 1999.
At September 30, 2000, the Company's investment portfolio of $62.5 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.
RESULTS OF OPERATIONS-COMPARISON OF THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2000. Net interest income after the provision for loan losses decreased
$90,988 or 5.17% for the three-month period ended September 30, 2000, as
compared to the corresponding period in the previous year. This decrease was
primarily due to an increase in interest expense of $470,179, and an increase in
the provision for loan loss of $150,000, and was offset by an increase in
interest on loans and securities of $516,581 and an increase in other interest
income of $12,610. Net interest income after the provision for loan losses
increased $243,232 or 5.08% for the nine-month period ended September 30, 2000,
as compared to the corresponding period in the previous year. This increase was
primarily due to an increase in interest on loans and securities of $1,587,934
and was offset by a decrease in other interest income of $169,578, an increase
in the provision for loan loss of $143,000 and an increase in interest expense
of $1,032,124.
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-
9
earning assets and interest-bearing liabilities, the Company would expect a net
loss in the fair value of the underlying instruments of approximately $76,000.
This 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 7.94%
in the three-month period ended September 30, 1999 to approximately 8.47% in the
current three-month period. This increase was due to an increase in interest
rates as well as an increase in the average balance of interest-earning assets
of approximately $11.2 million. The Bank's yield on interest-earning assets
increased from approximately 7.76% in the nine-month period ended September 30,
1999 to approximately 8.24% in the current nine-month period. This increase was
due to an increase in interest rates as well as an increase in the average
balance of interest-earning assets of approximately $10.0 million. The Bank's
cost of funds increased from 4.56% at September 30, 1999 to 5.27% in the current
year period. This increase was due to an increase in interest rates as well as
an increase in the average balance of interest-bearing liabilities of
approximately $11.2 million.
Non-interest income, which includes fees and service charges, real estate
operations, net gain (loss) on sale of loans and other income, increased $83,601
in the three-month period ended September 30, 2000. Non-interest income
decreased $60,767 in the nine-month period ended September 30, 2000 as compared
to the corresponding prior year period. The increase in the three-month period
ended September 30, 2000, was due primarily to an decrease in the loss on sale
and write down of other real estate owned of $87,359 and by decreases in all
other non-interest income of $3,758. The decrease in the nine-month period ended
September 30, 2000 was due primarily to a decrease in the gain on sale of
mortgage loans of $86,102, a decrease in real estate operations, net of $68,273.
This decrease was offset by a decrease in the loss on sale and write down of
other real estate owned of $83,594 and an increase on all other non-interest
income of $10,014.
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 $170,000 was required for the three month period ended September 30,
2000 and an additional $410,000 was required for the nine month period ended
September 30, 2000. This increase was primarily due to an increase of $232,000
in charge-offs.
Non-interest expense increased $37,398 and $48,460 in the three and nine-month
periods ended September 30, 2000, respectively, as compared to the corresponding
prior year periods. The increase in the three month period ended September 30,
2000 was primarily due to an increase in compensation expense of $37,298 and an
increase in occupancy expense of $15,870 which was off-set by slight decreases
in all other non-interest expense of $15,770. The increase in non-interest
expense for the nine-month period ended September 30, 2000 was primarily due to
an increase in compensation expense of $41,430 and an increase in occupancy
expense of $50,672 which was off-set by a decrease in all other non-interest
income of $43,642.
NET INCOME: The Company reported net income for the three month period ended
September 30, 2000 of $458,001, or $0.26 per share, compared with net income of
$488,655, or $0.27 per share, for the three- month period ended September 30,
1999. The Company reported net income for the nine-month period ended September
30, 2000 of $1,364,414, or $0.76 per share, compared with net income of
$1,285,584, or $0.72 per share, for the nine-month period ended September 30,
1999. The decrease in the three-month period ended September 30, 2000 was
primarily attributable to a $150,000 increase in the provision for loan losses.
The increase in the nine-month period ended September 30, 2000 was primarily
attributable to an increase in
10
interest income of $1,418,356. This increase exceeded an increase in interest
expense of $1,032,124, an increase in the provision for loan loss of $143,000, a
decrease in non-interest income of $60,767, and an increase in non-interest
expense of $48,460.
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 September 30, 2000,
the Bank's total loan commitments, including construction loans in process and
unused lines of credit, were approximately $22.9 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 September 30, 2000
the Company and the Bank exceeded all regulatory capital requirements.
11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27- Financial Data Schedule (SEC use only)
(b) No reports on Form 8-K were filed
12
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: November 14, 2000 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)
13