PINNACLE BANCSHARES, INC.

AUDIT COMMITTEE CHARTER

PURPOSE

To assist the Board of Directors of Pinnacle Bancshares, Inc. (the "Company") and Pinnacle Bank (the "Bank") in fulfilling its oversight responsibilities for the financial reporting process, the system of internal control, the audit process, and the Company's process for monitoring compliance with laws and regulations.

AUTHORITY

The Audit Committee has authority to conduct or authorize investigations into any matters within its scope of responsibility. It is empowered to:

• Select, appoint, compensate, oversee and, if necessary, discharge any registered public accounting firm employed by the organization.

• Resolve any disagreements between management and the auditor regarding financial reporting.

• Pre-approve all auditing and related services.

• Retain independent counsel, accountants, or others to advise the Committee or assist in the conduct of an investigation.

• Seek any information it requires from employees or external parties.

• Meet with Company officers, external auditors, and internal auditors or outside counsel, as necessary.

COMPOSITION

The Audit Committee will consist of at least two members of the Board of Directors. The Board of Directors of the Company will appoint Committee members and the Committee Chairman. It is the Chairman's responsibility to schedule all meetings of the Committee and provide the Committee with a written agenda for all meetings.

Each Committee member will be both independent, as defined by applicable legislation and regulation, and financially literate. If a member of the Committee is an "audit committee financial expert," as defined by applicable legislation and regulation, then that fact must be determined by the Committee and reported to the Board.

MEETINGS

The Committee will meet at least four times a year, with authority to convene additional meetings, as circumstances require. Committee members are expected to attend meetings in person or via tele- or video-conference. The Committee will invite members of management, auditors or others to attend meetings and provide pertinent information, as
necessary. It will hold private meetings with auditors (see below) and executive sessions. Meeting agendas will be prepared and provided in advance to members, along with appropriate briefing materials. Meeting minutes will be prepared by an individual appointed by the Committee.

RESPONSIBILITIES

Financial Statements

• Through discussions with management and the external auditors, review significant accounting and reporting issues, including complex or unusual transactions and highly judgmental areas, and recent professional and regulatory pronouncements, and understand their impact on the financial statements.

• Review with management and the external auditors the results of the audit, including any difficulties encountered.

• Review the annual financial statements, and consider whether they are complete, consistent with information known to Committee members, and reflect appropriate accounting principles.

• The Chairman of the Audit Committee shall review other sections of the annual report and related regulatory filings before release and consider the accuracy and completeness of the information.

• Review with management and the external auditors all matters required to be communicated to the Committee under generally accepted auditing standards.

• Understand how management develops interim financial information, and the nature and extent of internal and external auditor involvement.

• The Chairman of the Audit Committee shall review interim financial reports with management and the external auditors before filing with regulators, and consider whether they are complete and consistent with the information known to Committee members.

Internal Control

• Consider the effectiveness of the Company's internal control system through review of internal audit reports and discussions with management and the external auditors.

• Understand the scope of internal and external auditors' review of internal control over financial reporting, and obtain reports on significant findings and recommendations, together with management's responses.

Internal Audit

• Review with management the plans, activities and organizational structure of the internal audit function.

• Continually review the effectiveness of the internal audit function.

External Audit

• Select, appoint and, if necessary, discharge the external auditors, and pre-approve any non-audit services to be rendered to the Company by that firm.

• Review the external auditors' proposed audit scope and approach, including coordination of audit effort with internal audit.

• Review the performance of the external auditors, and exercise final approval on the selection, appointment or discharge of the auditors.

• Review and confirm the independence of the external auditors by obtaining statements from the auditors on relationships between the auditors, and the Company that may impact the objectivity and independence of the auditors, including non-audit services, and discussing the relationships with the auditors.

• Meet separately with the external auditors at least semi-annually to discuss any matters that the Committee or auditors believe should be discussed privately.

• Receive from the external auditors a formal written statement delineating all relationships between the auditors and the Company, consistent with Independence Standards Board Standard 1.

Compliance

• Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of management's investigation and follow-up (including disciplinary action) of any instances of noncompliance.

• Review the findings of any examinations by regulatory agencies, and any auditor observations.

• Obtain regular updates from management and Company legal counsel regarding compliance matters.

• Review with the Company's counsel and others any legal, tax or regulatory matters which may have a material impact on operations and the financial statements, policies and procedures at the Company and the Bank, or on reports received from or furnished to the regulators.

Reporting Responsibilities

• Regularly report to the Board of Directors about Committee activities, issues, and related recommendations.

• Report annually to the stockholders in the Company's proxy statement, describing the Committee's composition, responsibilities and how they were discharged, and any other information required by rule, including approval of non-audit services.

• Review any other reports the Company issues that relate to Committee
responsibilities.

Other Responsibilities

• Establish procedures for the receipt, retention, and treatment of complaints received by the Company or the Bank regarding accounting, internal accounting controls, or auditing matters.

• Establish procedures for the confidential, anonymous submission by Company and Bank employees of concerns regarding questionable accounting or auditing matters.

• Institute and oversee special investigations as needed.

• Review and assess the adequacy of this Charter annually, requesting Board approval for proposed changes, and ensure appropriate disclosure as may be required by law or regulation.

• Annually confirm that all responsibilities outlined in this Charter have been carried out.

• Evaluate the Committee's and individual members' performance regularly.

• Perform other activities related to this Charter as requested by the Board of Directors of the Company.
• Conduct an appropriate review of all related party transactions (i.e., transactions required to be disclosed pursuant to Securities and Exchange Commission Regulation S-K, Item 404) for potential conflict of interest situations prior to approval of such transactions.

Funding

The Company shall provide for appropriate funding of the Committee, as determined by the Committee, for payment of:

• Compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company.

• Compensation to any advisers employed by the Committee as authorized under this Charter.

• Ordinary administrative expenses of the Committee that are necessary or appropriate to carry out its duties.