The pilot reported that on his first low pass attempt he had missed picking up an advertising banner with the airplane’s grapple hook assembly. On the second pass he thought he had again missed the aerial pickup towline and he made a shallow climb out instead of the steep climb required when the banner is picked up. The pilot was then unaware that during the airplane’s second pass the nose gear had inadvertently snagged the forward end of the 300 foot long towline. The banner could not be jettisoned and it was dragged on the ground during the shallow climb out. The pilot reported an abrupt downward pull on the nose of the airplane, which caused him to lose control. The airplane impacted terrain about 1,000 feet south of the pickup location. The impact resulted in substantial damage to the lower fuselage, the engine mount and forward firewall. The pilot also reported that there was no preimpact mechanical malfunction or failure.