Pinnacle Bankshares Announces Third Quarter 2008 Earnings

ALTAVISTA, Va.--(Business Wire)--
Pinnacle Bankshares Corporation (OTCBB:PPBN), the one-bank holding
company (the Company) of The First National Bank of Altavista
(quarterly consolidated results unaudited) reported today net income
after taxes of $462,000 or $0.31 per basic and diluted share for the
quarter ended September 30, 2008, and $1,507,000 or $1.01 per basic
and $1.01 per diluted share for the nine months ended September 30,
2008 compared to net income after taxes of $786,000 or $0.53 per basic
and diluted share and $2,014,000 or $1.36 per basic and $1.35 per
diluted share, respectively, for the same periods of 2007.

Profitability as measured by the Company's annualized return on
average assets (ROA) was 0.68% for the nine months ended September 30,
2008, compared to 1.01% for the same period of 2007. Another key
indicator of performance, the annualized return on average equity
(ROE) for the nine months ended September 30, 2008 was 7.37%, compared
to 10.63% for the nine months ended September 30, 2007. The lower
returns in 2008 were mainly attributable to the lower interest rate
environment, a higher loan loss provision expense and an increase in
noninterest expense associated with the growth of the Company.

Interest income increased 1.30% or $61,000 in the third quarter of
2008 compared to the same period in 2007. Interest income increased
2.27% or $309,000 in the first nine months of 2008 compared to the
first nine months of 2007. Interest income increased as a result of
net loans outstanding increasing by $54,004,000 since September 30,
2007, partially offset by the lower yields on earning assets in 2008
compared with 2007.

Interest expense increased 1.97% or $41,000 in the third quarter
of 2008 compared to the same period in 2007. Interest expense
increased 2.69% or $163,000 in the first nine months of 2008 compared
to the first nine months of 2007. Interest expense increased in the
first nine months of 2008 compared to the first nine months of 2007 as
a result of deposits increasing by $28,379,000 since September 30,
2007, partially offset by the lower cost of funds in 2008 compared
with 2007.

Net interest income was $2,645,000 for the three months ended
September 30, 2008 compared with $2,625,000 for the three months ended
September 30, 2007. Net interest income was $7,709,000 for the nine
months ended September 30, 2008 compared to $7,563,000 for the same
period in 2007. Net interest margin was 3.71% for the nine-month
period ended September 30, 2008 compared to 4.03% for the nine-month
period ended September 30, 2007.

"These are clearly historic times in which we are operating,"
stated Rob Gilliam, President and CEO for both Pinnacle Bankshares and
The First National Bank of Altavista. "Basics of our company remain
intact and we are benefiting from our 100 year heritage of strength
and stability," Gilliam continued. "The two factors that are primarily
impacting our performance currently are declining interest margins and
the impact of the economy and lower property values on the ability of
our borrowers to repay debt. Margins will continue to decline at least
through the fourth quarter of this year. In recognition of the
increase in the level of our nonperforming loans, we made a special
loan loss provision of $100,000 at the end of the third quarter. We
will continue to closely monitor credit quality in the fourth quarter
with an eye toward the possibility of additional special provisions
prior to the end of 2008," Gilliam concluded.

Provision for loan losses increased $162,000 in the third quarter
of 2008 compared to the same period in 2007. Provision for loan losses
increased $266,000 in the first nine months of 2008 compared with the
first nine months of 2007. Nonperforming loans totaled $1,995,000 or
0.71% of total loans as of September 30, 2008 compared to $967,000 or
0.43% of total loans as of September 30, 2007.

Noninterest income increased 10.88% or $74,000 in the third
quarter of 2008 compared to the same period of 2007. Noninterest
income increased 12.64% or $246,000 for the nine months ended
September 30, 2008 compared to the same period of 2007. The increase
in noninterest income was primarily due to an increase in service
charges, fees on sales of mortgage loans and in commissions from sales
of investment products, although commissions decreased $23,000 in the
third quarter of 2008 when compared to the third quarter of 2007.

Noninterest expense increased 20.33% or $418,000 in the third
quarter of 2008 compared to the same period of 2007. Noninterest
expense increased 13.99% or $877,000 for the nine months ended
September 30, 2008 compared to the same period of 2007. The increase
in noninterest expense is attributed primarily to the effect of
overall growth of the Company on personnel expenses and fixed asset
costs.

Total assets at September 30, 2008 were $313,019,000, up 11.83%
from $279,913,000 at December 31, 2007. The principal components of
the Company's assets at the end of the period were $278,486,000 in net
loans and $16,338,000 in securities. During the nine-month period
ended September 30, 2008, net loans increased 19.65% or $45,734,000
from $232,752,000 at December 31, 2007.

Total liabilities at September 30, 2008 were $285,384,000, up
12.76% from $253,097,000 at December 31, 2007, as deposits increased
10.64% or $26,787,000 from December 31, 2007. As of September 30,
2008, the Company had $5,000,000 outstanding from an established line
of credit with the Federal Home Loan Bank of Atlanta to help fund loan
growth.

Total stockholders' equity at September 30, 2008 was $27,635,000,
including $22,525,000 in retained earnings. At December 31, 2007,
stockholders' equity totaled $26,816,000.

The allowance for loan losses was $2,075,000 as of September 30,
2008, representing approximately 0.74% of total loans outstanding.
Management believes the allowance was adequate as of September 30,
2008 to provide for any loan losses inherent in the Company's loan
portfolio.

Selected financial highlights are shown below.

Pinnacle Bankshares Corporation is a locally managed community
banking organization based in Central Virginia. The one-bank holding
company of The First National Bank of Altavista serves an area
consisting primarily of all or portions of the Counties of Campbell,
Pittsylvania, Franklin, Bedford and Amherst and the City of Lynchburg.
The Company operates two branches in the Town of Altavista, two
branches in Campbell County, one branch in the City of Lynchburg and
one branch in Bedford County at Forest. A loan production office at
Smith Mountain Lake in Moneta, Franklin County, Virginia opened in May
2005. The Company opened a new permanent branch facility in March 2008
in Amherst, Virginia to replace the temporary branch facility opened
in November 2006.

Construction is underway for a new full-service branch facility in
Rustburg, Virginia, which is expected to open in the first quarter of
2009. The First National Bank of Altavista is currently celebrating
its 100th Anniversary.

This press release may contain "forward-looking statements" within
the meaning of federal securities laws that involve significant risks
and uncertainties. These statements are based on certain assumptions
and analyses by the Company and may relate to the Company's future
plans and performance. Although we believe our plans and expectations
reflected in these forward-looking statements are reasonable, our
ability to predict results or the actual effect of future plans or
strategies is inherently uncertain, and we can give no assurance that
these plans or expectations will be achieved. Factors that could cause
actual results to differ materially from management's expectations
include, but are not limited to, changes in: interest rates, general
economic conditions, the legislative/regulatory climate, monetary and
fiscal policies of the U.S. Government, including policies of the U.S.
Treasury and the Board of Governors of the Federal Reserve System and
any policies or programs implemented pursuant to the Emergency
Economic Stabilization Act of 2008, the quality or composition of the
loan or investment portfolios, demand for loan products, deposit flows
and funding costs, competition, demand for financial services in our
market area and accounting principles, policies and guidelines. These
risks and uncertainties should be considered in evaluating the
forward-looking statements contained herein, and you should not place
undue reliance on such statements, which reflect our position as of
the date of this release.

-0-
*T

Pinnacle Bankshares Corporation
Selected Financial Highlights
(Amounts in thousands)

9 Months Year 9 Months
Ended Ended Ended
9/30/2008 12/31/2007 9/30/2007
----------- ------------ -----------
Income Statement Highlights (Unaudited) (Audited) (Unaudited)

Net Interest Income $7,709 $10,181 $7,563

Provision for Loan Losses 543 462 277

Noninterest Income 2,192 2,632 1,946

Noninterest Expense 7,145 8,524 6,268

Net Income 1,507 2,600 2,014

9/30/2008 12/31/2007 9/30/2007
----------- ------------ -----------
Balance Sheet Highlights (Unaudited) (Audited) (Unaudited)

Net Loans $278,486 $232,752 $224,482

Total Investments 16,338 19,635 21,170

Total Assets 313,019 279,913 277,908

Total Deposits 278,653 251,866 250,274

Total Liabilities 285,384 253,097 251,786

Stockholders' Equity 27,635 26,816 26,122

9/30/2008 12/31/2007 9/30/2007
----------- ------------ -----------
Asset Quality Highlights (Unaudited) (Audited) (Unaudited)

Nonperforming Loans to Total
Loans 0.71% 0.27% 0.43%

Allowance for Loan Losses to
Total Loans 0.74% 0.73% 0.80%

Allowance for Loan Losses to
Nonperforming Loans 104.01% 271.29% 186.35%

Nonperforming Loans $1,995 $634 $967

Other Real Estate Owned 0 0 0

Allowance for Loan Losses 2,075 1,720 1,802
*T

Pinnacle Bankshares Corporation
Bryan M. Lemley, 434-477-5882
bryanlemley@1stnatbk.com

Copyright Business Wire 2008