Pinnacle Bancshares Announces Results for Fourth Quarter and Year Ended December 31, 2008

For the year ended December 31, 2008, net income was $1,225,000, compared with net income of $1,094,000 in the prior year. Net interest income before the provision for loan losses for the year ended December 31, 2008, was $6,871,000, compared with $6,572,000 in the prior year.

For the three months ended December 31, 2008, net income was $309,000, compared with net income of $57,000 for the three months ended December 31, 2007. Net interest income before the provision for loan losses for the three months ended December 31, 2008, was $1,741.000, compared with $1,702,000 in the same period last year.

Basic and diluted earnings were each $0.91 per share for the year ended December 31, 2008. In 2007, basic and diluted earnings were each $0.75 per share. For the three months ended December 31, 2008, basic and diluted earnings were each $0.24 per share. For the same period last year, basic and diluted earnings were each $0.04 per share.

The Company's net interest margin was 3.33% for the year ended December 31, 2008, compared to 3.00% for the year ended December 31, 2007.

Mr. Nolen observed that declines in real estate values in Pinnacle's lending area began in the second half of 2007 and continued in 2008. Substantial deterioration in the housing market adversely affected Pinnacle's residential construction loan and non-owner occupied residential loan portfolios and resulted in increases in loan losses, non-performing loans and foreclosed real estate.

Net charge-offs were $967,000 in 2008, compared to $707,000 in the prior year. Nonperforming assets were $2,712,000 at December 31, 2008, compared to $2,956,000 at December 31, 2007. The ratio of nonperforming assets to total assets was 1.20% at December 31, 2008, compared to 1.25% at December 31, 2007.

At December 31, 2008, Pinnacle's allowance for loan losses as a percent of total loans was 1.19%, compared to 1.22% at December 31, 2007. At December 31, 2008, Pinnacle's allowance for loan losses as a percent of nonperforming loans was 971.18%, compared to 359.38% at December 31, 2007. Based on current real estate valuations, Pinnacle believes its allowance for loan losses is adequate. If real estate values and economic conditions do not improve, additional charge-offs and increases in the allowance may be necessary.

Mr. Nolen commented that, although Pinnacle remains well capitalized and has not suffered from liquidity issues, Pinnacle is operating in a challenging and uncertain economic environment. Financial institutions have been, and continue to be, affected by significant declines in real estate market values and constrained financial markets. Pinnacle retains direct exposure to the residential and commercial real estate markets.

The Company believes declines in real estate values and home sales volumes, and financial stresses on borrowers as a result of the uncertain economic environment, including job losses, could have an adverse affect on Pinnacle's borrowers or their customers, which could adversely affect Pinnacle's financial condition and results of operations. In addition, deterioration in local economic conditions in Pinnacle's markets could drive losses beyond those which are provided for in the allowance for loan losses and result in a number of adverse consequences, including increases in loan delinquencies; increases in nonperforming assets and foreclosures; decreases in demand for Pinnacle's products and services, which could affect Pinnacle's liquidity position; and decreases in the value of the collateral securing Pinnacle's loans, especially real estate, which could reduce customers' borrowing power.

At December 31, 2008, total stockholders' equity and book value per share were $20,572,000 and $15.35 per share, respectively, compared to $20,934,000 and $14.30 per share, respectively, at December 31, 2007. Total assets at December 31, 2008, were $225,783,000, compared to total assets at December 31, 2007, of $235,945,000.

In response to continuing market concerns regarding the mortgage lending industry, Mr. Nolen again noted that the Company does not originate or hold subprime loans.

Information contained in this press release, other than historical information, may be considered forward-looking in nature and is subject to various risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected.

Pinnacle Bancshares, Inc.'s wholly owned subsidiary Pinnacle Bank has seven offices located in central and northwest Alabama.

PINNACLE BANCSHARES, INC.
Unaudited Financial Highlights
                                   Three Months Ended December 31,
                                   2008                2007
Net income                         $   309,000         $   57,000
Basic earnings per share           $   0.24            $   .04
Diluted earnings per share         $   0.24            $   .04
Performance ratios (annualized):
Return on average assets               0.54      %         0.10      %
Return on average equity               6.27      %         1.08      %
Interest rate spread                   3.40      %         3.08      %
Net interest margin                    3.40      %         3.13      %
Operating cost to assets               2.79      %         2.63      %
Weighted average basic shares          1,270,128           1,462,359
outstanding
Weighted average diluted shares        1,270,128           1,466,217
outstanding
Dividends per share                $   0.11            $   0.11
Provision for loan losses          $   172,500         $   504,000
                                   Year Ended December 31,
                                   2008                2007
Net income                         $   1,225,000       $   1,094,000
Basic earnings per share           $   0.91            $   0.75
Diluted earnings per share         $   0.91            $   0.75
Performance ratios:
Return on average assets               0.53      %         0.46      %
Return on average equity               6.14      %         5.45      %
Interest rate spread                   3.34      %         2.96      %
Net interest margin                    3.33      %         3.00      %
Operating cost to assets               2.68      %         2.51      %
Weighted average basic shares          1,340,162           1,463,668
outstanding
Weighted average diluted shares        1,340,162           1,468.790
outstanding
Dividends per share                $   0.44            $   0.44
Provision for loan losses          $   900,000         $   739,000

                                                                December 31,
                                                                2008              2007
Total assets                                                    $ 225,783,000     $ 235,945,000
Loans receivable, net                                           $ 137,000,000     $ 130,580,000
Deposits                                                        $ 197,479,000     $ 201,801,000
Total stockholders' equity                                      $ 20,572,000      $ 20,934,000
Book value per share                                            $ 15.35           $ 14.30
Stockholders' equity to assets ratio                              9.11        %     8.87        %
Asset quality ratios:
Nonperforming loans as a percent of total loans                   0.12        %     0.34        %
Nonperforming assets as a percent of total assets                 1.20        %     1.25        %
Allowance for loan losses as a percent of total loans             1.19        %     1.22        %
Allowance for loan losses as a percent of nonperforming loans     971.18      %     359.38      %

SOURCE: Pinnacle Bancshares, Inc.

Pinnacle Bancshares, Inc. 
Robert B. Nolen, Jr., 205-221-4111 
President and Chief Executive Officer