~~Table~~UNITED ~~of Contents~~STATES

~~UNITED~~SECURITIES ~~STATES~~AND EXCHANGE COMMISSION

~~SECURITIES~~WASHINGTON, ~~AND~~DC ~~EXCHANGE COMMISSION~~ 20549

~~Washington,~~FORM ~~D.C. 20549~~ 10-Q

~~FORM~~(Mark ~~10-Q~~ One)

x☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2012~~ 2020

or 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~~Name of ~~registrant~~Registrant as ~~specified~~Specified in its ~~charter~~Charter)

VIRGINIA		54-1832714
Virginia	54-1832714
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
( State or other jurisdiction of incorporation or organization)	(I.R.S. EmployerIdentification No.)
622 Broad Street Altavista, Virginia	24517-1830
(Address of principal executive offices)	(Zip Code)

~~622~~Registrant’s ~~Broad~~telephone ~~Street~~number, including area code: (434) 369-3000

~~Altavista,~~Securities ~~Virginia~~registered ~~24517~~pursuant to Section 12(b) of the Act:

~~(Address~~Title of ~~principal~~each ~~executive~~class ~~offices)~~Trading Symbol(~~Zip Code~~s) Name of each exchange on which registered

Indicate by check mark whether the registrant (~~434~~1) ~~369-3000~~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 ☐ No ☒

~~(Registrant’s~~Indicate ~~telephone~~by ~~number,~~check ~~including~~mark ~~area~~whether ~~code~~the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

~~N/A~~ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

~~(Former~~Large ~~name,~~accelerated ~~former~~filer ~~address~~☐ ~~and~~Accelerated ~~former~~filer ~~fiscal~~☐ ~~year,~~Non-accelerated iffiler ~~changed~~☒ ~~since~~Smaller ~~last~~reporting ~~report)~~company ☒ Emerging growth company ☒

~~Indicate~~If an emerging growth company, indicate by check mark ~~whether~~if the registrant ~~(1)~~ has ~~filed~~elected ~~all~~not ~~reports required~~ to beuse ~~filed by Section 13 or 15(d) of~~ the ~~Securities~~extended ~~Exchange~~transition ~~Act~~period offor ~~1934~~complying ~~during~~with ~~the~~any ~~preceding~~new ~~12 months (~~or ~~for such~~revised ~~shorter~~financial ~~period~~accounting ~~that~~standards ~~the~~provided ~~registrant~~pursuant ~~was required~~ to ~~file~~Section ~~such reports), and~~ 13(2a) ~~has~~ ~~been~~of ~~subject to such filing requirements for~~ the ~~past~~Exchange ~~90 days~~Act. ~~Yes x No ¨~~ ☐

Indicate by check mark whether the registrant ~~has~~is ~~submitted~~a ~~electronically~~shell ~~and~~company ~~posted~~(as ondefined ~~its~~in ~~corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to~~ Rule ~~405~~ ~~of Regulation S~~12b-T2 ~~(§232.405~~ of ~~this chapter) during~~ the ~~preceding~~Exchange ~~12 months (or for such shorter period that the registrant was required to submit and post such files~~Act). Yes x☒ No ¨ ☐

~~Indicate~~As byof ~~check~~October ~~mark~~29, ~~whether~~2020, the registrant ishad ~~a large accelerated filer~~1, ~~an accelerated filer~~563,922 ashares ~~non-accelerated~~of ~~filer~~common stock, ~~or a smaller reporting company~~$3.00 ~~See~~par ~~the~~value ~~definitions~~per ~~of “large accelerated filer~~share,” ~~“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act~~outstanding.

~~Large~~Table ~~accelerated~~of ~~filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company x~~Contents

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

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income	2
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Statements of Changes in Stockholders' Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	48
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50
Signatures		52

~~At November 12, 2012, 1,507,589 shares of Pinnacle Bankshares Corporation’s common stock, $3 par value, were outstanding.~~ i

~~Table~~PART ofI—FINANCIAL ~~Contents~~INFORMATION

~~PINNACLE~~Item ~~BANKSHARES~~1. ~~CORPORATION~~Financial Statements.

~~FORM~~PINNACLE ~~10-Q~~BANKSHARES CORPORATION AND SUBSIDIARY

~~September 30,~~CONDENSED ~~2012~~CONSOLIDATED BALANCE SHEETS

~~INDEX~~September 30, 2020 and December 31, 2019

		Page Number
Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets		3
	Condensed Consolidated Statements of Income		4-5
	Condensed Consolidated Statements of Comprehensive Income		6
	Condensed Consolidated Statement of Changes in Stockholders’ Equity		7
	Condensed Consolidated Statements of Cash Flows		8
	Notes to Condensed Consolidated Financial Statements		9-27
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28-38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		38
Item 4.	Controls and Procedures		38-39
Part II. OTHER INFORMATION
Item 1.	Legal Proceedings		39
Item 6.	Exhibits		39-41
SIGNATURES			42

(In thousands of dollars, except share data)

Assets	September 30, 2020			December 31, 2019
	(Unaudited)			(Audited)
Cash and cash equivalents:
Cash and due from banks	$	78,306		$	32,903
Certificates of deposits		250			250
Securities:
Available-for-sale, at fair value		44,328			43,194
Held-to-maturity, at amortized cost		500			1,764
Federal Reserve Bank stock, at cost		159			154
Federal Home Loan Bank stock, at cost		450			423
Loans, net		416,485			389,849
Bank premises and equipment, net		17,193			15,546
Accrued interest receivable		1,335			1,277
Bank owned life insurance		10,504			10,335
Goodwill		539			539
Other real estate owned		18			666
Other assets		3,679			3,630
Total assets	$	573,746		$	500,530
Liabilities and Stockholders' Equity
Liabilities:
Deposits
Demand	$	130,336		$	110,419
Savings and NOW accounts		288,050			244,941
Time		95,071			94,923
Total deposits		513,457			450,283
Subordinated notes payable		8,000		-
Accrued interest payable		193			205
Other liabilities		4,695			4,597
Total liabilities		526,345			455,085
Stockholders' equity:
Common stock, $3 par value. Authorized 3,000,000 shares, issued and outstanding 1,563,922 shares in 2020 and 1,551,339 shares in 2019		4,575			4,564
Capital surplus		1,581			1,461
Retained earnings		43,324			42,404
Accumulated other comprehensive loss, net		(2,079	)		(2,984	)
Total stockholders' equity		47,401			45,445
Commitments, contingencies and other matters
Total liabilities and stockholders' equity	$	573,746		$	500,530

~~Table~~See ofaccompanying ~~Contents~~notes to condensed consolidated financial statements.

~~PINNACLE BANKSHARES CORPORATION AND SUBSIDIARY~~ 1

~~CONDENSED~~PINNACLE ~~CONSOLIDATED~~BANKSHARES ~~BALANCE~~CORPORATION ~~SHEETS~~AND SUBSIDIARY

~~(Amounts~~CONDENSED inCONSOLIDATED ~~thousands~~STATEMENTS ofOF ~~dollars)~~ INCOME

~~except~~Three ~~share~~ and ~~per~~Nine ~~share~~Months ~~data~~Ended September 30, 2020 and 2019

	September 30, 2012(Unaudited)			12/31/2011*
Assets
Cash and cash equivalents (note 2):
Cash and due from banks	$	41,770		$	37,547
Securities (note 3):
Available-for-sale, at fair value		18,338			18,780
Held-to-maturity, at amortized cost		7,474			5,989
Federal Reserve Bank stock, at cost		140			137
Federal Home Loan Bank stock, at cost		513			528
Loans, net (note 4)		265,524			267,123
Bank premises and equipment, net		6,471			6,537
Accrued interest receivable		988			1,009
Prepaid FDIC Insurance		780			991
Goodwill		539			539
Other assets		4,347			3,304
Total assets	$	346,884		$	342,484
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Demand	$	38,663		$	33,432
Savings and NOW accounts		136,828			132,501
Time		138,256			144,460
Total deposits		313,747			310,393
Note payable under line of credit		1,941			2,000
Accrued interest payable		411			419
Other liabilities		2,596			2,725
Total liabilities	$	318,695		$	315,537
Stockholders’ equity
Common stock, $3 par value. Authorized 3,000,000 shares, issued and outstanding 1,507,589 shares in 2012 and 1,496,589 shares in 2011	$	4,487		$	4,473
Capital surplus		970			923
Retained earnings		24,070			22,981
Accumulated other comprehensive loss, net		(1,338	)		(1,430	)
Total stockholders’ equity		28,189			26,947
Total liabilities and stockholders’ equity	$	346,884		$	342,484

(In thousands of dollars, except per share data)

* Derived from audited consolidated financial statements.(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Interest income:
Interest and fees on loans	$	4,628	$	4,704	$	13,684	$	13,981
Interest on securities:
U.S. Treasury
U.S. Government agencies		134		205		471		633
States and political subdivisions (taxable)		15		15		44		55
States and political subdivisions (tax-exempt)		52		54		151		175
Other		24		107		129		316
Interest on federal funds sold	-		-			1		1
Total interest income		4,853		5,085		14,480		15,161
Interest expense:
Interest on deposits:
Savings and NOW accounts		223		342		751		791
Time - under $250,000		245		243		767		672
Time - $250,000 and over		126		130		399		371
Interest on federal funds purchased	-			2	-			2
Total interest expense		594		717		1,917		1,836
Net interest income		4,259		4,368		12,563		13,325
Provision for loan losses and unfunded commitments		31		150		257		151
Net interest income after provision for loan losses		4,228		4,218		12,306		13,174
Noninterest income:
Service charges on deposit accounts		506		504		1,442		1,442
Mortgage loan fees		306		173		660		407
Commissions and fees		167		133		475		485
Service charges on loan accounts		91		112		406		310
Other operating income		237		218		863		764
Total noninterest income		1,307		1,140		3,846		3,408
Noninterest expense:
Salaries and employee benefits		2,436		2,191		7,012		6,415
Occupancy expense		285		262		835		743
Furniture and equipment expense		323		302		908		793
Office supplies and printing		51		35		152		158
Federal deposit insurance premiums		67	-			179		126
Capital stock tax		77		60		225		179
Advertising expense		27		29		136		143
Legal expense		134		10		821		66
Core system expense		464		470		1,431		1,383
Other operating expenses		1,098		716		2,504		1,989
Total noninterest expense		4,962		4,075		14,203		11,995
Income before income tax expense		573		1,283		1,949		4,587
Income tax expense		113		240		374		875
Net income	$	460	$	1,043	$	1,575	$	3,712
Basic net income per share	$	0.29	$	0.67	$	1.01	$	2.40
Diluted net income per share	$	0.29	$	0.67	$	1.01	$	2.38

3 2

~~Table~~See ofaccompanying ~~Contents~~notes to condensed consolidated financial statements.

~~PINNACLE BANKSHARES CORPORATION AND SUBSIDIARY~~ 3

~~CONDENSED~~PINNACLE ~~CONSOLIDATED~~BANKSHARES ~~STATEMENTS~~CORPORATION OFAND ~~INCOME~~ SUBSIDIARY

~~(Unaudited)~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

~~(Amounts~~Three inand ~~thousands~~Nine ofMonths ~~dollars,~~Ended ~~except~~September ~~for~~30, ~~per~~2020 ~~share~~and ~~amounts)~~ 2019

	Three MonthsEndedSeptember 30, 2012		Three MonthsEndedSeptember 30, 2011
Interest income:
Interest and fees on loans	$	3,713	$	3,979
Interest on securities:
U.S. Government agencies		74		107
States and political subdivisions (taxable)		25		29
States and political subdivisions (tax exempt)		44		41
Other		21		16
Total interest income		3,877		4,172
Interest expense:
Interest on deposits:
Savings and NOW accounts		150		155
Time - under $100		517		571
Time - $100 and over		330		340
Total interest expense		997		1,066
Net interest income		2,880		3,106
Provision for loan losses		174		309
Net interest income after provision for loan losses		2,706		2,797
Noninterest income:
Service charges and fees on deposit accounts		381		372
Fees on sales of mortgage loans		178		160
Commissions and fees from investments and insurance sales		157		147
Other operating income		141		179
Total noninterest income		857		858
Noninterest expense:
Salaries and employee benefits		1,524		1,459
Occupancy expense		180		184
Furniture and equipment		241		265
Office supplies and printing		61		53
Federal deposit insurance premiums		76		69
Capital stock tax		59		57
Advertising expense		41		26
Other operating expense		789		637
Total noninterest expense		2,971		2,750
Income before income tax expense		592		905
Income tax expense		193		297
Net income	$	399	$	608
Basic net income per share (note 5)	$	0.26	$	0.40
Diluted net income per share (note 5)	$	0.26	$	0.40

(In thousands of dollars)

~~See accompanying notes to unaudited condensed consolidated financial statements.~~ (Unaudited)

	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Net income	$	460		$	1,043		$	1,575		$	3,712
Other comprehensive income, net of related income taxes:
Unrealized gains on available-for-sale securities
Before tax		119			126			1,146			1,275
Income tax expense		(26	)		(27	)		(241	)		(268	)
Total other comprehensive income		93			99			905			1,007
Comprehensive income	$	553		$	1,142		$	2,480		$	4,719

~~Table~~See ofaccompanying ~~Contents~~notes to condensed consolidated financial statements.

~~PINNACLE BANKSHARES CORPORATION AND SUBSIDIARY~~ 4

~~CONDENSED~~PINNACLE ~~CONSOLIDATED~~BANKSHARES ~~STATEMENTS~~CORPORATION OFAND ~~INCOME~~ SUBSIDIARY

~~(Unaudited)~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

~~(Amounts~~Three inand ~~thousands~~Nine ofMonths ~~dollars~~Ended September 30, ~~except~~2020 ~~for~~and ~~per~~September ~~share~~30, ~~data)~~ 2019

	Nine MonthsEndedSeptember 30, 2012		Nine MonthsEndedSeptember 30, 2011
Interest income:
Interest and fees on loans	$	11,216	$	11,802
Interest on securities:
U.S. Government agencies		239		336
States and political subdivisions (taxable)		71		88
States and political subdivisions (tax exempt)		128		126
Other		70		58
Total interest income		11,724		12,410
Interest expense:
Interest on deposits:
Savings and NOW accounts		444		584
Time - under $100		1,567		1,800
Time - $100 and over		985		1,016
Total interest expense		2,996		3,400
Net interest income		8,728		9,010
Provision for loan losses		809		1,691
Net interest income after provision for loan losses		7,919		7,319
Noninterest income:
Service charges and fees on deposit accounts		1,113		1,075
Fees on sales of mortgage loans		454		289
Commissions and fees from investment and insurance sales		467		574
Other operating income		535		454
Total noninterest income		2,569		2,392
Noninterest expense:
Salaries and employee benefits		4,593		4,540
Occupancy expense		534		538
Furniture and equipment		760		785
Office supplies and printing		181		167
Federal deposit insurance premiums		227		338
Capital stock tax		176		172
Advertising expense		145		73
Other operating expenses		2,257		1,880
Total noninterest expense		8,873		8,493
Income before income tax expense		1,615		1,218
Income tax expense		526		377
Net income	$	1,089	$	841
Basic net income per share (note 5)	$	0.72	$	0.56
Diluted net income per share (note 5)	$	0.72	$	0.56

(In thousands of dollars, except share and per share data)

~~See accompanying notes to unaudited condensed consolidated financial statements.~~ (Unaudited)

													Accumulated
													Other
	Common Stock						Capital			Retained			Comprehensive
	Shares			Par Value			Surplus			Earnings			Income (Loss)			Total
Balances, December 31, 2018		1,540,054		$	4,547		$	1,333		$	38,853		$	(2,622	)	$	42,111
Net income											1,301						1,301
Other comprehensive gain														471			471
Issuance of restricted stock and related expense		3,297			14			109									123
Stock options exercised		324
Cash dividends declared by
Bankshares ($0.125 per share)											(193	)					(193	)
Balances, March 31, 2019		1,543,675		$	4,561		$	1,442		$	39,961		$	(2,151	)	$	43,813
Net income											1,368						1,368
Other comprehensive gain														437			437
Issuance of restricted stock and related expense		7,700			(6	)		(66	)								(72	)
Stock options exercised		2,367
Cash dividends declared by
Bankshares ($0.14 per share)											(218	)					(218	)
Balances, June 30, 2019		1,553,742		$	4,555		$	1,376		$	41,111		$	(1,714	)	$	45,328
Net income											1,043						1,043
Other comprehensive gain														99			99
Issuance of restricted stock and related expense		(2,403	)		4			43									47
Cash dividends declared by
Bankshares ($0.14 per share)											(216	)					(216	)
Balances, September 30, 2019		1,551,339		$	4,559		$	1,419		$	41,938		$	(1,615	)	$	46,301
Balances, December 31, 2019		1,551,339		$	4,564		$	1,461		$	42,404		$	(2,984	)	$	45,445
Net income											448						448
Other comprehensive loss														(480	)		(480	)
Issuance of restricted stock and related expense		3,347			8			76									84
Stock options exercised		2,412
Cash dividends declared by
Bankshares ($0.14 per share)											(218	)					(218	)
Balances, March 31, 2020		1,557,098		$	4,572		$	1,537		$	42,634		$	(3,464	)	$	45,279
Net income											667						667
Other comprehensive loss														1,292			1,292
Issuance of restricted stock and related expense					(2	)		4									2
Stock options exercised		1,564
Cash dividends declared by
Bankshares ($0.14 per share)											(218	)					(218	)
Balances, June 30, 2020		1,558,662		$	4,570		$	1,541		$	43,083		$	(2,172	)	$	47,022
Net income											460						460
Other comprehensive loss														93			93
Issuance of restricted stock and related expense		5,260			5			40									45
Stock options exercised
Cash dividends declared by
Bankshares ($0.14 per share)											(219	)					(219	)
Balances, September 30, 2020		1,563,922		$	4,575		$	1,581		$	43,324		$	(2,079	)	$	47,401

~~Table~~See ofaccompanying ~~Contents~~notes to condensed consolidated financial statements.

~~PINNACLE BANKSHARES CORPORATION AND SUBSIDIARY~~ 5

~~CONDENSED~~PINNACLE ~~CONSOLIDATED~~BANKSHARES ~~STATEMENTS~~CORPORATION OFAND ~~COMPREHENSIVE INCOME~~ SUBSIDIARY

~~(Unaudited)~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(Amounts~~Nine inMonths ~~thousands~~Ended ofSeptember ~~dollars)~~30, 2020 and 2019

	Three MonthsEndedSeptember 30, 2012		Three MonthsEndedSeptember 30, 2011
Net Income	$	399	$	608
Other Comprehensive Income, net of tax:
Unrealized gains on securities		28		131
Comprehensive Income	$	427	$	739
	Nine MonthsEndedSeptember 30, 2012		Nine MonthsEndedSeptember 30, 2011
Net Income	$	1,089	$	841
Other Comprehensive Income, net of tax:
Unrealized gains on securities		92		207
Comprehensive Income	$	1,181	$	1,048

(In thousands of dollars)

~~See accompanying notes to unaudited condensed consolidated financial statements.~~ (Unaudited)

	September 30, 2020			September 30, 2019
Cash flows from operating activities:
Net income	$	1,575		$	3,712
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of bank premises and equipment		589			526
Net (accretion) amortization of unearned fees, net		(508	)		15
Net amortization of premiums and discounts on securities		230			252
Provision for loan losses		257			151
Stock based compensation expense		131			98
Increase in cash value of bank owned life insurance		(169	)		(175	)
Net (increase) decrease in:
Accrued interest receivable		(58	)		124
Other assets		(290	)		(339	)
Net (decrease) increase in:
Accrued interest payable		(12	)		45
Other liabilities		98			720
Net cash provided by operating activities		1,843			5,129
Cash flows from investing activities:
Purchases of available-for-sale securities		(6,969	)		(4,968	)
Proceeds from maturities and calls of available-for-sale securities		2,000			2,990
Proceeds from sales of available-for-sale securities		—			1,887
Proceeds from paydowns and maturities of available-for-sale mortgage- backed securities		4,755			4,483
Proceeds from maturities and calls of held-to-maturity securities		1,260			—
Proceeds from the sale of OREO		666			—
Purchase of Federal Reserve Stock		(5	)		(5	)
Purchase of Federal Home Loan Bank Stock		(27	)		(24	)
Net increase in loans made to customers		(26,403	)		(15,590	)
Purchases of bank premises and equipment		(2,236	)		(582	)
Disposals of bank premises and equipment		—			300
Net cash used in investing activities		(26,959	)		(11,509	)
Cash flows from financing activities:
Net increase in demand, savings and NOW deposits		63,026			10,412
Net increase (decrease) in time deposits		148			(4,350	)
Proceeds from subordinated notes issued		8,000		-
Cash dividends paid		(655	)		(627	)
Net cash provided by financing activities		70,519			5,435
Net increase in cash and cash equivalents		45,403			(945	)
Cash and cash equivalents, beginning of period		32,903			15,717
Cash and cash equivalents, end of period	$	78,306		$	14,772
Supplemental disclosure of cash flows information
Cash paid during the period for:
Income taxes	$	400		$	1,480
Interest		1,929			1,791

Transfer from loans to foreclosed assets	$	18		$	18
Loans charged against the allowance for loan losses		442			451
Unrealized gains on available-for-sale securities		1,146			1,275

~~Table~~See ofaccompanying ~~Contents~~notes to condensed consolidated financial statements.

~~PINNACLE BANKSHARES CORPORATION AND SUBSIDIARY~~ 6

~~CONDENSED~~Notes ~~CONSOLIDATED~~to ~~STATEMENT~~Condensed OFConsolidated ~~CHANGES~~Financial ~~IN STOCKHOLDERS’ EQUITY~~ Statements

~~Nine~~(In ~~Months~~thousands, ~~Ended~~except ~~September 30~~ratios, ~~2012~~share and ~~2011~~per share data)(Unaudited)

(~~Unaudited~~1) Summary of Significant Accounting Policies and Practices

The accompanying unaudited condensed consolidated financial statements of Pinnacle Bankshares Corporation (~~Amounts~~“Pinnacle” or the “Company”) have been prepared in ~~thousands~~accordance with accounting principles generally accepted in the United States of ~~dollars,~~America ~~except~~(“GAAP”) ~~share~~for ~~data~~interim financial reporting and with applicable quarterly reporting regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with Pinnacle’s consolidated financial statements and notes thereto for the year ended December 31, 2019. The results of operations for the three-month and nine-month periods ended September 30, 2020 and 2019, are not necessarily indicative of the results of operations for the full year or any other interim periods.

									Accumulated
									Other
	Common Stock				Capital		Retained		Comprehensive
	Shares		Par Value		Surplus		Earnings		Income (Loss)			Total
Balances, December 31, 2010		1,495,589	$	4,462	$	850	$	21,918	$	(748	)	$	26,482
Net income		—		—		—		841		—			841
Change in net unrealized gains on available-for-sale securities, net of deferred income tax expense of $107		—		—		—		—		207			207
Restricted stock expense		1,000		9		21		—		—			30
Stock option expense		—		—		36		—		—			36
Balances, September 30, 2011		1,496,589	$	4,471	$	907	$	22,759	$	(541	)	$	27,596
									Accumulated
									Other
	Common Stock				Capital		Retained		Comprehensive
	Shares		Par Value		Surplus		Earnings		Income (Loss)			Total
Balances, December 31, 2011		1,496,589	$	4,473	$	923	$	22,981	$	(1,430	)	$	26,947
Net income		—		—		—		1,089		—			1,089
Change in net unrealized gains on available-for-sale securities, net of deferred income tax expense of $46		—		—		—		—		92			92
Restricted stock expense		11,000		14		26		—		—			40
Stock option expense		—		—		21		—		—			21
Balances, September 30, 2012		1,507,589	$	4,487	$	970	$	24,070	$	(1,338	)	$	28,189

The accounting and reporting policies of Pinnacle conform to GAAP and general practices within the banking industry. As of September 30, 2020, the most recent notification from Office of the Comptroller of the Currency categorized Pinnacle and First National Bank (Altavista, Virginia) (“First National Bank” or the “Bank”), Pinnacle’s wholly-owned banking subsidiary, as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed Pinnacle and the First National Bank’s category.

~~See~~On ~~accompanying~~October ~~notes~~30, to2020, ~~unaudited~~Pinnacle ~~condensed~~completed ~~consolidated~~the ~~financial~~acquisition ~~statements~~of Virginia Bank Bankshares, Inc. (“Virginia Bank”) and its banking subsidiary, Virginia Bank and Trust Company (Danville, Virginia), for an aggregate purchase price of $23,199 of cash and stock. Additional information about this merger is presented in Note 12.]

7The following is a summary of the more significant accounting policies and practices:

~~Table~~(a) ~~of Contents~~Consolidation

~~PINNACLE~~The ~~BANKSHARES~~condensed ~~CORPORATION~~consolidated ~~AND~~financial ~~SUBSIDIARY~~statements include the accounts of Pinnacle and First National Bank. All material intercompany balances and transactions have been eliminated.

~~CONDENSED~~(b) ~~CONSOLIDATED~~Use ~~STATEMENTS~~of ~~OF CASH FLOWS~~ Estimates

~~(Unaudited)~~In preparing the condensed consolidated financial statements in accordance with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the condensed consolidated balance sheets and revenues and expenses for the nine months ended September 30, 2020. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for loan losses, payments/obligations under benefit and pensions plans, other real estate owned and fair value of investments. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of operations in these condensed consolidated financial statements, have been made.

~~(Amounts~~The outbreak of the novel coronavirus and the resulting COVID-19 illness has caused a significant disruption in ~~thousands~~economic activity worldwide, and Pinnacle expects that it may have a significant impact on businesses and consumers in its market areas and on its results of ~~dollars)~~operations. It is unknown how long these conditions will last and what the ultimate financial impact will be to Pinnacle.

	Nine MonthsEndedSeptember 30, 2012			Nine MonthsEndedSeptember 30, 2011
Cash flows from operating activities:
Net income	$	1,089		$	841
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of bank premises and equipment		370			407
Accretion of unearned fees, net		9			—
Net amortization of premiums and discounts on securities		46			44
Provision for loan losses		809			1,691
Accrual of stock based compensation		61			66
Net decrease (increase) in:
Accrued interest receivable		21			135
Prepaid FDIC insurance		211			315
Other assets		16			(475	)
Net increase (decrease) in:
Accrued interest payable		(8	)		(88	)
Other liabilities		(129	)		161
Net cash provided by operating activities		2,495			3,097
Cash flows from investing activities:
Purchases of available-for-sale securities		(13,005	)		(8,770	)
Purchases of held-to-maturity securities		(1,516	)		(1,550	)
Proceeds from maturities and calls of available-for-sale securities		13,427			12,645
Proceeds from paydowns and maturities of available-for-sale mortgage-backed securities		143			286
Purchase of Federal Reserve Bank stock		(3	)		(2	)
Sale of Federal Home Loan Bank stock		15			38
Net increase in loans made to customers		(324	)		(1,835	)
Purchases of bank premises and equipment		(304	)		(136	)
Net cash provided by (used in) investing activities		(1,567	)		676
Cash flows from financing activities:
Net increase in demand, savings and NOW deposits		9,558			17,684
Net decrease in time deposits		(6,204	)		(10,738	)
Repayment of line of credit		(59	)		—
Net cash provided by financing activities		3,295			6,946
Net decrease in cash and cash equivalents		4,223			10,719
Cash and cash equivalents, beginning of period		37,547			32,533
Cash and cash equivalents, end of period	$	41,770		$	43,252
Supplemental disclosure of noncash activities
Net change in other assets acquired in settlement of loans	$	1,105		$	331

(c)

Borrowings

~~See~~As ~~accompanying~~of ~~notes~~September to30, ~~unaudited~~2020 ~~condensed~~and ~~consolidated~~December ~~financial~~31, ~~statements~~2019, Pinnacle’s available borrowing limit with the FHLB was approximately $137,722 and $117,198, respectively.

8Pinnacle had $0 in borrowings from the FHLB outstanding at September 30, 2020. Pinnacle also has a $5,000 line of credit commitment of which $5,000 is currently available. The line of credit is secured by the authorized capital stock of First National Bank with a correspondent bank. The line of credit had $0 outstanding as of September 30, 2020 and December 31, 2019.

~~Table of Contents~~7

~~PINNACLE~~On ~~BANKSHARES~~September ~~CORPORATION~~21, ~~AND~~2020, ~~SUBSIDIARY~~Pinnacle completed a private placement of $8,000 in fixed-to-floating rate subordinated notes due 2030 (the “Notes”). The Notes have been structured to qualify as Tier 2 capital under bank regulatory guidelines. The proceeds from the sale of the Notes were utilized to fund a portion of the cash consideration paid by Pinnacle in connection with its merger with Virginia Bank and to provide optionality for various growth opportunities and for general corporate purposes. The Notes bear interest at 5.25% per annum, beginning September 18, 2020 to but excluding September 30, 2025, payable quarterly in arrears. From September 30, 2025 to but excluding September 30, 2030, or up to an early redemption date, the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month Secured Overnight Financing Rate (“SOFR”) plus 513 basis points, payable quarterly in arrears. Beginning on September 30, 2025 through maturity, the Notes may be redeemed, at Pinnacle’s option and subject to any required regulatory approval, on any scheduled interest payment date. The Notes will mature on September 30, 2030.

~~Notes~~(d) toRevenue ~~Condensed Consolidated Financial Statements~~ Recognition

~~September 30,~~Pinnacle ~~2012~~recognizes revenue from contracts with customers. Noninterest revenue streams such as service charges on deposit accounts and commissions and fees are recognized in accordance with Accounting Standards Codification (~~Unaudited~~“ASC”) Topic 606. Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans, securities and mortgage banking. In addition, certain noninterest income streams such as financial guarantees, derivatives, and certain credit card fees are outside the scope of the guidance. Noninterest revenue streams within the scope of Topic 606 are discussed below.

~~(Amounts~~Service inCharges ~~thousands~~on ofDeposit ~~dollars, except share and per share data)~~ Accounts

~~(1)~~Service ~~General~~charges on deposit accounts consist of monthly service fees, overdraft and nonsufficient funds fees, and VISA debit card interchange fees. Pinnacle’s performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Payment for service charges on deposit accounts is primarily received immediately or at the end of each month through a direct charge to customers’ accounts. Overdraft and nonsufficient funds fees and other deposit account related fees are transactional based, and therefore, Pinnacle’s performance obligation is satisfied, and related revenue recognized, at a point in time when the service is delivered. Debit card fees are primarily comprised of interchange fee income. Interchange fees are earned whenever Pinnacle’s debit cards are processed through the Visa network. Pinnacle’s performance obligation for interchange fee income is satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month. Interchange income for vendors using terminals Pinnacle has sold and commissions from VISA related to Pinnacle’s principal status are also included in other operating income. Pinnacle’s performance obligation is satisfied, and the related revenue recognized, when the commissions or fees are earned and are generally based on a percentage of activity.

~~The~~Commissions ~~condensed consolidated financial statements include the accounts of Pinnacle Bankshares Corporation (“Bankshares”)~~ and ~~its~~ wholly-owned subsidiary, First National Bank (the “Bank”), (collectively the “Company”). All material intercompany accounts and transactions have been eliminated. The unaudited condensed consolidated financial statements conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and to general banking industry practices. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all adjustments of a normal recurring nature, necessary to present fairly the financial position as of September 30, 2012, and the results of operations and comprehensive income for the three and nine months ended September 30, 2012 and 2011 and changes in stockholders’ equity and cash flows for the nine months ended September 30, 2012 and 2011. Fees

~~These~~Commissions ~~interim~~and ~~period~~fees ~~condensed~~consists ~~consolidated~~of ~~financial~~commissions ~~statements~~received on investment product and ~~financial~~insurance ~~information~~policies ~~should~~sales. beFor ~~read~~insurance insales, ~~conjunction~~Pinnacle ~~with~~acts ~~the~~as ~~consolidated~~an ~~financial~~intermediary ~~statements~~between Pinnacle’s customer and ~~notes~~the ~~thereto~~insurance ~~included~~carrier ~~in Bankshares~~or Bankers Insurance, LLC. Pinnacle’s ~~2011~~performance ~~Annual~~obligation ~~Report~~is tosatisfied ~~Shareholders~~upon the issuance of the insurance policy. Pinnacle retains a certain percentage of the policy premium for each policy sold. Investment commissions consists of recurring revenue streams such as commissions from sales of mutual funds and ~~additional~~other ~~information~~investments. ~~supplied~~Commissions infrom the ~~2011~~sale ~~Annual~~of ~~Report~~investments are recognized on ~~Form~~trade 10date, which is when Pinnacle has satisfied its performance obligation. Commissions and fees that total $475 and $485 for the nine month periods ended September 30, 2020 and 2019, respectively, on the condensed consolidated statements of operations includes $148 and $126 in loan late fees that are out-Kof-scope of Topic 606. Commissions and fees that total $167 and $133 for the three month periods ended September 30, 2020 and 2019, respectively, on the condensed consolidated statements of operations includes $53 and $40 in loan late fees that are out-of-scope of Topic 606.

~~The~~Other ~~results~~Operating ~~of operations for the interim periods ended September 30, 2012 are not necessarily indicative of the results to be expected for the full year ending December 31, 2012.~~ Income

~~The~~Included ~~Company~~in ~~has~~other operating income are various transaction based revenue streams such as wire transfer fees, foreign ATM fees, ACH origination fees, cashier check fees and miscellaneous services provided such as assistance with balancing a ~~single~~customer’s ~~reportable~~checking ~~segment~~account ~~for~~or ~~purposes~~making copies. Each of ~~segment reporting~~these fees are transactional based, and therefore, Pinnacle’s performance obligation is satisfied, and related revenue recognized, at a point in time when the service is delivered.

~~(2) Cash and Cash Equivalents~~8

~~For~~The ~~purposes~~following ofpresents ~~reporting~~noninterest ~~cash flows~~income, ~~cash~~segregated ~~and~~by ~~cash~~revenue ~~equivalents~~streams ~~include~~in-scope ~~cash~~and onout-of-scope ~~hand,~~of ~~amounts~~Topic ~~due~~606, ~~from~~for ~~banks, interest-bearing~~the ~~deposits,~~three and ~~federal~~nine ~~funds~~months ~~sold.~~ended At September 30, ~~2012~~2020 and ~~December 31~~2019, ~~2011, the Company had no federal funds sold.~~ respectively:

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Non-interest Income
In-scope of Topic 606:
Service charges on deposit accounts	$	506	$	482	$	1,442	$	1,420
Commissions and fees		114		93		327		281
Other operating income		167		151		509		497
Non-interest Income (in-scope of Topic 606)	$	787	$	726	$	2,278	$	2,198
Non-interest Income (out-of-scope of Topic 606)		520		414		1,568		1,210
	$	1,307	$	1,140	$	3,846	$	3,408

~~Table~~(e) ofNet ~~Contents~~Income per Share

~~(3)~~Basic ~~Securities~~net income per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock that are not anti-dilutive were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of Pinnacle.

The ~~amortized~~following ~~costs,~~is ~~gross~~a ~~unrealized~~reconciliation ~~gains,~~of ~~gross~~the ~~unrealized~~numerators ~~losses,~~ and ~~fair~~denominators ~~values~~of ~~for securities at September 30, 2012 and December 31, 2011, are shown in~~ the ~~table~~basic ~~below. As of September 30, 2012, securities with amortized costs of $4,669~~ and ~~fair~~diluted ~~values~~net ofincome ~~$4,837~~per ~~were~~share ~~pledged~~computations ~~as collateral~~ for ~~public deposits and securities with amortized costs of $388 and fair values of $428 were pledged as collateral with~~ the ~~Federal~~periods ~~Reserve Bank.~~ indicated:

September 30, 2012

	Net income		Shares		Per share
Three months ended September 30, 2020	(numerator)		(denominator)		amount
Basic net income per share	$	460		1,562,292	$	0.29
Effect of dilutive stock options		—		2,196
Diluted net income per share	$	460		1,564,488	$	0.29

Available-for-Sale:	AmortizedCosts		GrossUnrealizedGains		GrossUnrealizedLosses		FairValues
	Net income		Shares		Per share
Obligations of U.S. government corporations and agencies	$	14,154	$	256	$	—	$	14,410
Three months ended September 30, 2019	(numerator)		(denominator)		amount
Obligations of states and political subdivisions		2,817		199		—		3,016
Basic net income per share	$	1,043		1,551,626	$	0.67
Mortgage-backed securities- government		730		72		—		802
Effect of dilutive stock options		—		9,872
Other securities		110		—		—		110
Diluted net income per share	$	1,043		1,561,498	$	0.67
Totals	$	17,811	$	527	$	—	$	18,338

Held-to-Maturity:	AmortizedCosts		GrossUnrealizedGains		GrossUnrealizedLosses		FairValues
	Net income		Shares		Per share
Obligations of states andpolitical subdivisions	$	7,474	$	246	$	9	$	7,711
Nine months ended September 30, 2020	(numerator)		(denominator)		amount
Basic net income per share	$	1,575		1,558,732	$	1.01
Effect of dilutive stock options		—		3,453
Diluted net income per share	$	1,575		1,562,185	$	1.01

December 31, 2011

	Net income		Shares		Per share
Nine months ended September 30, 2019	(numerator)		(denominator)		amount
Basic net income per share	$	3,712		1,548,384	$	2.40
Effect of dilutive stock options		—		9,965
Diluted net income per share	$	3,712		1,558,349	$	2.38

Available-for-Sale:	AmortizedCosts		GrossUnrealizedGains		GrossUnrealizedLosses			FairValues
Obligations of U.S. government corporations and agencies	$	14,567	$	174	$	(3	)	$	14,738
Obligations of states and political subdivisions		2,841		139		—			2,980
Mortgage-backed securities- government		875		77		—			952
Other securities		110		—		—			110
Totals	$	18,393	$	390	$	(3	)	$	18,780

Held-to-Maturity:		AmortizedCosts				GrossUnrealizedGains				GrossUnrealizedLosses				FairValues
Obligations of states and political subdivisions		$	5,989			$	176			$	—			$	6,165

(f)

Condensed Consolidated Statements of Cash Flows

10For purposes of the condensed consolidated statements of cash flows, cash and cash equivalents include cash on hand, amounts due from banks (with original maturities of three months or less), and federal funds sold. Generally, federal funds are purchased and sold for one‑day periods.

~~Table~~(g) ofCurrent ~~Contents~~Accounting Developments

~~The~~For ~~Company~~each ~~evaluates securities in a loss position for other-than-temporary impairment, considering such factors as the length~~ of ~~time and~~ the ~~extent~~accounting topronouncements ~~which~~that ~~the~~affect ~~market value has been below cost,~~ the ~~credit standing of the issuer and the~~ Company’s ability and intent to hold the security until its market value recovers. Activity related to the credit loss component of other-than-temporary impairment is recognized in earnings. For debt securities, the ~~portion~~Company ofelected ~~other-than-temporary impairment related~~ to ~~all~~follow ~~other factors is recognized in other comprehensive income. The primary cause of~~ the ~~temporary~~rule ~~impairments~~that inallows ~~the~~companies ~~Company’s~~engaging ~~investments~~ in ~~debt~~an ~~securities~~initial ~~was~~public ~~fluctuations~~offering inas ~~interest~~an ~~rates.~~Emerging ~~Because~~Growth ~~the~~ Company ~~does not intend~~ to ~~sell~~follow ~~these investments and it is more likely than not that~~ the ~~Company~~private ~~will not~~company beimplementation required to sell these investments before a recovery of unrealized losses, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2012 and no impairment has been recognizeddates. ~~The Company had no other-than-temporary impairments in its securities portfolios as of September 30, 2012.~~

~~The~~In ~~Company’s~~January ~~investment in~~2016, ~~Federal~~the ~~Home~~Financial ~~Loan~~Accounting ~~Bank~~Standards Board (“~~FHLB~~FASB”) ~~stock~~Accounting ~~totaled~~Standards ~~$513~~Update at(“ASU”) ~~September 30~~2016-01, ~~2012~~Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ~~FHLB~~The ~~stock~~new guidance is ~~generally~~intended ~~viewed~~to asimprove athe ~~long~~recognition and measurement of financial instruments. ASU 2016-~~term~~01 ~~investment~~affects public and asprivate acompanies, ~~restricted~~not-for-profit ~~investment security~~organizations, ~~which~~and isemployee ~~carried~~benefit atplans ~~cost,~~that ~~because~~hold ~~there~~financial isassets noor ~~market~~owe financial liabilities. The new guidance makes targeted improvements to existing U.S. GAAP by 1) requiring equity investments (except those accounted for under the ~~stock~~equity method of accounting, ~~other~~or ~~than~~those that result in consolidation of the ~~FHLBs~~investee) orto ~~member~~be ~~institutions.~~measured ~~Therefore,~~at ~~when~~fair ~~evaluating~~value ~~FHLB~~with ~~stock~~changes ~~for~~in ~~impairment~~fair value recognized in net income; 2) requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., ~~its~~securities ~~value~~or isloans ~~based~~and receivables) on the ~~ultimate~~balance ~~recoverability~~sheet or the accompanying notes to the financial statements; 3) eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; and 4) requiring a reporting organization to present separately in other comprehensive income the ~~par~~portion of the total change in the fair value ~~rather~~of ~~than~~a byliability ~~recognizing~~resulting ~~temporary~~from ~~declines~~a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. ~~The~~In ~~Company~~January ~~does not~~2018, ~~consider~~FASB ~~its~~issued ~~investment~~ASU in2018-03, ~~FHLB~~Technical ~~stock~~Corrections and Improvements to beFinancial ~~other~~Instruments ~~than~~– ~~temporarily~~Overall ~~impaired~~(Subtopic on825-10): ~~September 30~~Recognition and Measurement of Financial Assets and Financial Liabilities to clarify certain aspects of the guidance issued in ASU 2016-01. The new guidance is effective for private companies for fiscal years beginning after December 15, ~~2012~~2018, and nofor ~~impairment~~interim ~~has~~periods ~~been~~within ~~recognized~~fiscal years beginning after December 15, 2019. The adoption of this guidance did not have an impact to the condensed consolidated financial statements.

~~FHLB~~In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The FASB issued this ASU to increase transparency and ~~Federal~~comparability ~~Reserve~~among ~~Bank~~organizations ~~stock~~by ~~are~~recognizing ~~shown~~lease asassets ~~separate~~and ~~line~~lease ~~items~~liabilities on the balance sheet by lessees for those leases classified as operating leases under current U.S. GAAP and ~~are~~disclosing key information about leasing arrangements. The core principle is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in its balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not ~~part~~to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. In July 2019, FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements to provide entities with additional guidance related to the transition method selected, as well as on separating components of a contract to the ~~available~~original information issued in ASU 2016-02. In November 2019, FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which clarified the amendments and delayed the effective dates of the previously issued ASU’s. The amendments in this ASU are effective for ~~sale~~private ~~securities~~companies ~~portfolio~~for fiscal years beginning after December 15, 2021, and interim periods beginning after December 15, 2022. Early application of this ASU is permitted for all entities. The Company is currently evaluating the impact of adopting the new guidance on its condensed consolidated financial statements.

11In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments, which sets forth a "current expected credit loss" ("CECL") model requiring the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. In November 2018, FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses to clarify that operating lease receivables are within the scope of ASC 842 rather than ASC Topic 326. In November 2019, FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which clarified the amendments and delayed the effective dates of the previously issued ASU’s. ASU 2016-13 is effective for private companies for fiscal years beginning after December 15, 2022. Early application of this ASU is permitted for all entities. The Company is currently assessing the potential impact of this ASU and collecting loan data needed to measure the required calculation.

~~Table of Contents~~10

In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (4Subtopic 310-20) ~~Loans~~– Premium Amortization on Purchased Callable Debt Securities. The update shortens the amortization period for certain callable debt securities held at a premium. Specifically, the update requires the premium to be amortized to the earliest call date. The update does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments of this ASU are effective for public business entities that are SEC filers for annual periods beginning after December 15, 2018, and ~~Allowance~~interim periods within those annual periods, for ~~Loan~~public ~~Losses~~entities that are not SEC filers for annual periods beginning after December 15, 2019 and for all other entities for annual periods beginning after December 15, 2020 with early adoption permitted. An entity should apply the amendments in this update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. The Company does not expect the adoption of this guidance to be material to the condensed consolidated financial statements.

AIn ~~summary~~July 2017, FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815 ): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of ~~loans~~the ~~at September 30~~Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.” Companies that provide earnings per share (EPS) data will adjust their basic EPS calculation for the effect of the feature when triggered (i.e., ~~2012~~when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature) and will also recognize the effect of the trigger within equity. Amendments in this ASU simplifies the accounting for certain financial instruments with down round features, a provision in an equity-linked financial instrument (or embedded feature) that provides a downward adjustment of the current exercise price based on the price of future equity offerings. For public business entities, the amendments of this ASU are effective for fiscal years beginning after December 31 15, ~~2011~~2018, ~~follows:~~and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company is evaluating the provisions of ASU 2017-11 but believes that its adoption will not have a material impact on the Company’s condensed consolidated financial statements.

	September 30, 2012			December 31, 2011
Commercial	$	21,939		$	21,756
Commercial Real Estate		84,796			86,293
Consumer		49,512			47,192
Residential		112,877			116,006
Total loans, gross		269,124			271,247
Less unearned income and fees		(97	)		(109	)
Loans, net of unearned income and fees		269,027			271,138
Less allowance for loan losses		(3,503	)		(4,015	)
Loans, net	$	265,524		$	267,123

In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from non-employees. The new guidance is effective for private companies for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption of Topic 606. The Company does not expect the adoption of this guidance to be material to the condensed consolidated financial statements.

~~Activity~~In inAugust 2018, the ~~allowance~~FASB ~~for~~issued ~~loan~~ASU ~~losses~~2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU modify the ~~nine months~~disclosure ~~ended~~requirements ~~September 30~~on fair value measurement in Topic 820, ~~2012~~Fair ~~and~~Value ~~2011~~Measurement, based on the ideas in the Concepts Statements, including the consideration of costs and benefits. The amendments in this ASU are effective for ~~the~~all ~~year~~entities ~~ended~~for fiscal years, and interim periods within those fiscal years, beginning after December 31 15, ~~2011~~2019. Early adoption is aspermitted ~~follows:~~upon issuance of this ASU. The adoption of this guidance did not have a material impact to the condensed consolidated financial statements.

	September 30,2012			December 31,2011			September 30,2011
Balance at January 1,	$	4,015		$	4,037		$	4,037
Provision for loan losses		809			2,227			1,691
Loans charged off		(1,527	)		(2,487	)		(1,832	)
Recoveries		206			238			176
Balance at end of period,	$	3,503		$	4,015		$	4,072

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This ASU clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement including improvements resulting from various TRG Meetings. The amendments are effective for private companies for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently assessing the impact that ASU 2019-04 will have on its condensed consolidated financial statements.

In May 2019, the FASB issued ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief. The ~~following~~amendments ~~tables~~in ~~present~~this ~~information~~ASU provide entities that have certain instruments within the scope of Subtopic 326-20 with an option to irrevocably elect the fair value option in Subtopic 825-10, applied on an instrument-by-instrument basis for eligible instruments, upon the ~~Company’s~~ ~~allowance~~adoption of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. An entity that elects the fair value option should subsequently measure those instruments at fair value with changes in fair value flowing through earnings. The amendments are effective for ~~loan~~fiscal ~~losses~~years beginning after December 15, 2022, and ~~evaluations~~interim ~~for~~periods ~~impairment~~within ~~for~~those fiscal years. The amendments should be applied on a modified-retrospective basis by means of a cumulative-effect adjustment to the ~~periods~~opening ~~indicated:~~balance of retained earnings balance in the balance sheet. Early adoption is permitted. The Company is currently assessing the impact that ASU 2019-05 will have on its condensed consolidated financial statements.

~~Allowance for Loan Losses and Recorded Investment in Loans~~ 11

~~For~~(2) ~~the~~Restrictions ~~Nine~~on ~~Months Ended September 30, 2012~~ Cash

	Commercial			CommercialRealEstate			Consumer			Residential			Total
Allowance for Loan Losses:
Beginning balance	$	448		$	1,489		$	394		$	1,684		$	4,015
Charge-offs		(79	)		(267	)		(226	)		(955	)		(1,527	)
Recoveries		—			80			108			18			206
Provision for loan losses		(121	)		(284	)		170			1,044			809
Ending Balance	$	248		$	1,018		$	446		$	1,791		$	3,503
Ending balance: individually evaluated for impairment	$	—		$	5		$	—		$	100		$	105
Ending balance: collectively evaluated for impairment		248			1,014			446			1,690			3,398
Loans:
Total loans ending balance	$	21,939		$	84,796		$	49,512		$	112,877		$	269,124
Ending balance: loans individually evaluated for impairment		188			1,692			198			2,785			4,863
Ending balance: loans collectively evaluated for impairment	$	21,751		$	83,104		$	49,314		$	110,092		$	264,261

To comply with Federal Reserve regulations, Pinnacle is required to maintain certain average reserve balances; however, due to the COVID-19 pandemic, the daily average reserve requirement for the week including September 30, 2020 was $0. The daily average reserve requirement for the week including December 31, 2019 was $5,892.

12(3) Securities

~~Table~~The amortized costs, gross unrealized gains, gross unrealized losses and fair values for securities as of ~~Contents~~September 30, 2020 are as follows:

Allowance for Loan Losses and Recorded Investment in Loans

	September 30, 2020
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
Available-for-Sale	costs		gains		losses			values
U.S. Treasury securities and obligations of
U.S. Government corporations and agencies	$	2,701		99		—			2,800
Obligations of states and political subdivisions		10,657		742		—			11,399
Mortgage-backed securities – government		29,497		722		(90	)		30,129
Total available-for-sale	$	42,855		1,563		(90	)		44,328

For the Nine Months Ended September 30, 2011

September 30, 2020

Gross

Amortized

unrealized

Fair

Held-to-Maturity

costs

gains

losses

values

Obligations of states and political subdivisions

500

—

501

	Commercial			CommercialRealEstate			Consumer			Residential			Total
	December 31, 2019
Allowance for Loan Losses:
				Gross			Gross
Beginning balance	$	258		$	1,126		$	424		$	2,229		$	4,037
	Amortized			unrealized			unrealized			Fair
Charge-offs		(81	)		(394	)		(400	)		(957	)		(1,832	)
Available-for-Sale	costs			gains			losses			values
Recoveries		31			3			135			7			176
U.S. Treasury securities and obligations of
Provision for loan losses		200			352			233			906			1,691
U.S. Government corporations and agencies	$	5,986			30			(15	)		6,001
Ending Balance	$	408		$	1,087		$	392		$	2,185		$	4,072
Obligations of states and political subdivisions		8,897			370			—			9,267
Ending balance: individually evaluated for impairment	$	—		$	—		$	—		$	—		$	—
Mortgage-backed securities – government		27,984			179			(237	)		27,926
Ending balance: collectively evaluated for impairment		408			1,087			392			2,185			4,072
Total available-for-sale	$	42,867			579			(252	)		43,194
Loans:
Total loans ending balance	$	22,929		$	51,602		$	46,355		$	148,029		$	268,915
Ending balance: loans individually evaluated for impairment		80			170			51			5,139			5,440
Ending balance: loans collectively evaluated for impairment	$	22,849		$	51,432		$	46,304		$	142,890		$	263,475

December 31, 2019

Gross

Amortized

unrealized

Fair

Held-to-Maturity

costs

gains

losses

values

Obligations of states and political subdivisions

1,764

—

1,780

~~Table~~The following table shows the gross unrealized losses and fair value of ~~Contents~~Pinnacle’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of September 30, 2020:

The following tables illustrate the Company’s credit quality indicators as of the dates indicated:

	Less than 12 months				More than 12 months				Total
			Gross				Gross		Gross		Gross
	Fair		unrealized		Fair		unrealized		Fair		unrealized
Description of Securities	value		losses		value		losses		value		losses
U.S. Treasury securities and obligations of
U.S. Government corporations and agencies	$	—		—		—		—		—		—
Obligations of states and political subdivisions		—		—		—		—		—		—
Mortgage-backed securities-government		4,372		26		8,100		64		12,472		90
Total	$	4,372		26		8,100		64		12,472		90

~~Credit Quality Indicators~~ 12

Pinnacle does not consider the unrealized losses other-than-temporary losses based on the volatility of the securities market price involved, the credit quality of the securities, and Pinnacle’s ability, if necessary, to hold the securities until maturity. As of September 30, ~~2012~~2020, the securities included 6 bonds that had continuous losses for less than 12 months and 22 bonds that had continuous losses for more than 12 months. There were no realized gains and losses in the first nine months of 2020.

Credit Exposure	Commercial		CommercialRealEstate		Consumer		Residential		Total
Pass	$	21,265	$	79,919	$	49,308	$	107,083	$	257,575
Special Mention		279		2,228		45		989		3,541
Substandard		395		2,649		159		4,805		8,008
Total	$	21,939	$	84,796	$	49,512	$	112,877	$	269,124

The following table shows the gross unrealized losses and fair value of Pinnacle’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of December 31, 2019:

Credit Quality Indicators

	Less than 12 months				More than 12 months				Total
			Gross				Gross		Gross		Gross
	Fair		unrealized		Fair		unrealized		Fair		unrealized
Description of Securities	value		losses		value		losses		value		losses
U.S. Treasury securities and obligations of
U.S. Government corporations and agencies	$	1,457		9		995		6		2,452		15
Obligations of states and political subdivisions		—		—		—		—		—		—
Mortgage-backed securities-government		9,482		80		11,175		157		20,657		237
Total	$	10,939		89		12,170		163		23,109		252

AsFor ~~of December 31~~2019, ~~2011~~the securities included 15 bonds that had continuous losses for less than 12 months and 28 bonds that had continuous losses for more than 12 months. There were $2 in net realized losses on securities sold in 2019.

Credit Exposure	Commercial		CommercialRealEstate		Consumer		Residential		Total
Pass	$	17,752	$	76,879	$	47,058	$	106,431	$	248,120
Special Mention		3,636		5,754		—		1,549		10,939
Substandard		368		3,660		134		8,026		12,188
Total	$	21,756	$	86,293	$	47,192	$	116,006	$	271,247

The amortized costs and fair values of available‑for‑sale and held‑to‑maturity securities as of September 30, 2020 and December 31, 2019, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The Company had no loans included in the “Doubtful” or “Loss” category as of September 30, 2012 or December 31, 2011.

	September 30, 2020
	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	costs		values		costs		values
Due in one year or less	$	998		1,001		500		501
Due after one year through five years		1,628		1,723		—		—
Due after five years through ten years		8,072		8,761		—		—
Due after ten years		2,660		2,714		—		—
		13,358		14,199		500		501
Mortgage-backed securities		29,497		30,129		—		—
Totals		42,855		44,328		500		501

	December 31, 2019
	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	costs		values		costs		values
Due in one year or less	$	1,997		2,001		1,264		1,273
Due after one year through five years		3,128		3,171		500		507
Due after five years through ten years		8,453		8,784		—		—
Due after ten years

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