SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                   FORM 10-KSB

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

                          COMMISSION FILE NO. 33-67528


                         PINNACLE FINANCIAL CORPORATION
                  ---------------------------------------------
                 (Name of small business issuer in its charter)

      Georgia                                                 58-1538862
--------------------------------------------------------------------------------

(State or other jurisdiction                                 (I.R.S. Employer
of incorporation or organization)                         Identification Number)

884 Elbert Street, P.O. Box 430, Elberton, Georgia                30635-0430
--------------------------------------------------------------------------------
(Address of principal executive offices)                          (Zip Code)

Registrant's telephone number, including area code:  (706) 283-2854

Securities registered pursuant to Section 12(b) of the Act:  None.

Securities registered pursuant to Section 12(g) of the Act:  None.

Check  whether  the Issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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 X   No.

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and  no-disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated  by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB.                        Not Applicable.

Registrant is not required to be registered under the Securities Exchange Act of
1934.

State Issuer's revenue for its most recent fiscal year:             $22,866,244

State the  aggregate  market  value of the voting  stock held by  non-affiliates
(which for purposes  hereof are all holders  other than  executive  officers and
directors and JAM Family Partnership II, L.P.). As of March 15, 2000, there were
350,232  shares  of  Common  Stock,   $10.00  par  value   outstanding  held  by
non-affiliates of the issuer, with an aggregate value of $28,719,024 (based upon
approximate  market  value of  $82/share)  (the  last  sale  price  known to the
Registrant  for the Common  Stock,  for which  there is no  established  trading
market).

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable date: As of March 15, 2000, Common Stock,
                                             -----------------------------------
$10.00 par value - 768,000 shares outstanding.
---------------------------------------------


--------------------------------------------------------------------------------

<PAGE>



                                          PINNACLE FINANCIAL CORPORATION

                                                    FORM 10-KSB

                                                       INDEX

<TABLE>
<CAPTION>

                                                                                                          PAGE
                                                                                                          ----

Part I

<S>           <S>                                                                                          <C>
     Item 1.   Description of Business....................................................................  1
     Item 2.   Description of Property.................................................................... 11
     Item 3.   Legal Proceedings.......................................................................... 12
     Item 4.   Submission Of Matters To A Vote Of Security Holders........................................ 12

Part II

     Item 5.   Market For Common Equity And Related Stockholder Matters................................... 12
     Item 6.   Management's Discussion and Analysis or Plan of Operation.................................. 13
     Item 7.   Financial Statements ...................................................................... 30
     Item 8.   Changes In And Disagreements With Accountants On Accounting
               And Financial Disclosure................................................................... 30

Part III

     Item 9.   Directors and Executive Officers, Promoters and Control
               Persons.................................................................................... 31
     Item 10.  Executive Compensation......................................................................33
     Item 11.  Security Ownership Of Certain Beneficial Owners And
               Management..................................................................................36
     Item 12.  Certain Relationships And Related Transactions..............................................36
     Item 13.  Exhibits and Reports on Form 8-K............................................................38

     SIGNATURES............................................................................................39
</TABLE>

<PAGE>


                                     PART I.


Item 1.  DESCRIPTION OF BUSINESS

General

         Pinnacle   Financial   Corporation   (hereinafter   "Pinnacle"  or  the
"Company") is a registered one-bank holding company,  headquartered in Elberton,
Georgia.  The Company's  full service  banking  activities  are conducted by its
wholly-owned  banking  subsidiary,  Pinnacle Bank,  N.A. (the "Bank"),  based in
Elberton,  Georgia with eight offices which are located in Elbert,  Franklin and
Hart Counties,  Georgia.  Pinnacle was incorporated under the laws of Georgia in
1982.  In 1983,  the Company  acquired 100% of the  outstanding  shares of First
National Bank in Elberton  ("Elberton") and in 1994 acquired  Tri-County Bank of
Royston  (Royston).  The two  subsidiary  banks merged as of January 1, 1998 and
became  Pinnacle Bank,  N.A. The Bank has been  organized as a national  banking
association since 1934.

         The  Bank is  community-oriented  and  offers  such  customary  banking
services as consumer and commercial  checking  accounts,  NOW accounts,  savings
accounts, certificates of deposit, lines of credit, MasterCard and VISA accounts
and money  transfers.  The Bank finances  commercial and consumer  transactions,
makes  secured and  unsecured  loans,  and  provides a variety of other  banking
services.


                                        1

<PAGE>


         As of December  31, 1999,  Pinnacle  had total assets of  approximately
$273.1 million,  total deposits of  approximately  $218.3 million,  net loans of
approximately  $154.3 million and  shareholders'  equity of approximately  $38.5
million.  The  principal  executive  office of Pinnacle is located at 884 Elbert
Street, Elberton,  Georgia 30635-0430,  and its telephone number at that address
is (706) 283-2854.

Forward-Looking Statements

         This discussion contains  forward-looking  statements under the private
Securities  Litigation  Reform Act of 1995 that involve risk and  uncertainties.
Although Pinnacle believes that the assumptions  underlying the  forward-looking
statements  contained in the discussion are  reasonable,  any of the assumptions
could be  inaccurate,  and  therefore,  no assurance can be made that any of the
forward-looking  statements in this  discussion  will be accurate.  Factors that
could cause actual results to differ from results  discussed in  forward-looking
statements include,  but are not limited to: economic conditions (both generally
and in the markets where the Company operates); competition from other providers
of  financial  services  offered  by  the  Bank;   government   regulations  and
legislation;  changes  in  interest  rates;  material  unforseen  changes in the
financial  stability and liquidity of the Bank's credit customers,  all of which
are  difficult  to predict and which may be beyond the  control of the  Company.
Pinnacle  undertakes  no  obligation  to revise  forward-looking  statements  to
reflect  events or changes  after the date of this  discussion or to reflect the
occurrence of unanticipated events.

         Markets.   Pinnacle  conducts  banking   activities  through  the  Bank
primarily  in Elbert,  Franklin  and Hart  Counties.  Customers  of the Bank are
generally consumers and small businesses.

         Deposits.  The Bank  offers a full  range of  depository  accounts  and
services to both  consumers  and  businesses.  At December 31, 1999,  the Bank's
deposit base, totaling approximately $218.3 million,  consisted of approximately
$41.7 million in noninterest  bearing demand deposits (19.1% of total deposits),
approximately $51.6 million in interest-bearing demand deposits (including money
market  accounts)  (23.6% of total  deposits),  approximately  $17.8  million in
savings deposits (8.2% of total deposits),  approximately  $81.3 million in time
deposits of less than  $100,000  (37.2% of total  deposits),  and  approximately
$25.9 million in time deposits of $100,000 or more (11.9% of total deposits).

         Interest Rate  Sensitivity.  Management  seeks to maximize net interest
income as a result of changing  interest rates, but to do so without  subjecting
the interest margin to an imprudent degree of risk. Pinnacle attempts to do this
by structuring the balance sheet so that repricing  opportunities exist for both
assets and liabilities in roughly  equivalent  amounts at approximately the same
time intervals. Imbalances in these repricing opportunities at any point in time
constitutes a bank's interest sensitivity.


                                        2

<PAGE>


         An indicator of the interest rate sensitivity  structure of a financial
institution's  balance  sheet  is  the  difference  between  its  interest  rate
sensitive assets and interest rate sensitive  liabilities,  which is referred to
as the "gap".  Pinnacle  attempts to keep the gap between rate- sensitive assets
and rate-sensitive  liabilities at a minimum,  preferring to increase the spread
between  matched  assets and  liabilities  rather than place earnings at risk by
attempting  to predict the  frequency,  direction and magnitude of interest rate
fluctuations.

         Table 8 in the  statistical  information  reflects  the gap position of
Pinnacle's  consolidated  balance sheet as of December 31, 1999. At December 31,
1999,  the  gap  analysis  reflects  a  negative  gap at the  one-year  interval
equivalent  to 36.3% of earning  assets,  as compared  to 39.6% at December  31,
1998.

         The  rate  sensitivity   analysis  table  is  designed  to  demonstrate
Pinnacle's  sensitivity  to  changes  in  interest  rates  by  setting  forth in
comparative form the repricing  maturities of Pinnacle's  assets and liabilities
for the period shown.  A ratio of interest  earning  assets to interest  bearing
liabilities  (more  interest  earnings  assets  repricing in a given period than
interest  bearing  liabilities)  greater than 100% indicates that an increase in
interest rates will  generally  result in an increase in net income for Pinnacle
and a decrease  in interest  rates will  result in a decrease  in net income.  A
ratio of  earning  assets  to  interest-bearing  liabilities  of less  than 100%
indicates that a decrease in interest rates will generally result in an increase
in net income for  Pinnacle  and an increase in interest  rates will result in a
decrease in net income. Since all interest rates and yields do not adjust at the
same  velocity,  the  interest  sensitivity  gap is  only  an  indicator  of the
potential effects of interest rate changes on net interest income.  See also the
Asset/Liability Management section below.

         Loans.  The Bank makes both secured and unsecured loans to individuals,
firms and  corporations,  and both consumer and  commercial  lending  operations
include  various types of credit for its customers.  Secured loans include first
and second real estate  mortgage loans.  The Bank also makes direct  installment
loans to consumers on both a secured and unsecured  basis. At December 31, 1999,
consumer, real estate (including mortgage and construction loans) and commercial
loans  represented  approximately  17.3%,  70.3%,  and 12.4%,  respectively,  of
Pinnacle's total loan portfolio.  The real estate loans made by the Bank include
residential real estate construction, acquisition and development loans, as well
as loans for other purposes which are secured by real estate.

         Lending  Policy.  The current  lending  strategy of the Bank is to make
loans only to persons  who reside or work in the  Bank's  primary  trade  areas.
Unsecured  loans  normally  are made only to  persons  who  maintain  depository
relationships  with the Bank.  Secured  loans are made to  persons  who are well
established  and have net worth,  collateral  and cash flow to support the loan.


                                        3

<PAGE>


Real  estate  loans  usually  are made only when such loans are  secured by real
property located in Elbert, Franklin and Hart Counties, the Bank's market area.

         The Bank  provides  each lending  officer with written  guidelines  for
lending activities.  Lending authority is delegated by the Board of Directors of
the Bank to loan officers,  each of whom is limited in the amount of loans which
he can make to a single  borrower or related  group of  borrowers.  All loans in
excess of $100,000  must have the  approval of the  President or CEO of the Bank
prior to being  committed.  Lending  relationships  exceeding  $200,000  must be
approved by one of the Officer Loan Committees.  These committees consist of the
Bank's Chief Credit officer,  President,  CEO and other loan officers. All loans
over $500,000 require Senior Loan Committee approval.  The Senior Loan Committee
consists  of the Bank's  executive  officers  and other  senior  loan  officers.
Lending relationships  exceeding $500,000 are reviewed annually by the Executive
Loan Committee which includes outside directors.

         Making loans to  businesses  to fund working  capital is a  traditional
function of  commercial  banks.  Such loans are expected to be repaid out of the
current  earnings of the commercial  entity,  and the ability of the borrower to
service its debt is dependent upon the success of the commercial enterprise.  It
is the Bank's policy to secure these loans with  collateral.  Many of the Bank's
commercial  loans are secured by real estate because such collateral is superior
to other types of  collateral  available to small  businesses.  Loans secured by
commercial  real estate,  however,  particularly  if collateral  dependent,  are
subject to certain  inherent risks.  Commercial real estate may be substantially
illiquid and  commercial  real estate  values are  difficult  to  ascertain  and
subject to wide fluctuation depending upon economic conditions.

         Inter-agency  guidelines  adopted by federal bank regulators  including
the  Office  of  the   Comptroller  of  the  Currency   mandate  that  financial
institutions  establish real estate lending  policies and  establishing  certain
minimum real estate loan-to-value  standards. The Bank has adopted these federal
standards as its minimum standards.  These standards limit loan-to-value  ratios
for various types of real estate loans as set forth below, although the Bank may
make  exceptions to the standards,  which  exceptions  must be accounted for and
tracked:

         Loan category                            Loan-to Value Limit (percent)
         -------------                            -----------------------------

         Raw Land                                   65
         Land Development                           75
         Construction:
           Commercial, multifamily <F1> and
                  Other nonresidential              80
           1- to 4- family residential              85
--------------
 [FN]
 <F1>    Multifamily construction includes condominiums and cooperatives.
</FN>


                                        4

<PAGE>

         Improved Property                          85
         Owner-occupied 1- to 4- family and         <F2>
           home equity


         Loan  Review  and  Nonperforming  Assets.  The  Bank  reviews  its loan
portfolio to determine  deficiencies and corrective  action to be taken.  Senior
lending  officers  conduct  periodic  reviews of borrowers with total direct and
indirect  indebtedness  of $100,000  or more and ongoing  review of all past due
loans.  Past due loans are  reviewed at least  weekly by lending  officers and a
summary  report is reviewed  monthly by the Board of Directors of the Bank.  The
Board of Directors reviews all loan relationships over $500,000, whether current
or past due, at least once annually.

         Asset/Liability Management. A committee composed of officers is charged
with  managing the Bank's assets and  liabilities.  The  committee's  task is to
manage asset  growth,  liquidity  and capital.  To meet these  objectives  while
maintaining  prudent  management  of risks,  the  committee  directs  the Bank's
overall  acquisition  and allocation of funds.  At its quarterly  meetings,  the
committee  reviews and discusses (a) growth and performance of the bank compared
to  projections  and  the  annual  budget,  (b)  peer  group  comparisons,   (c)
simulations  prepared by an independent  outside vendor summarizing the interest
rate risk  inherent in the balance  sheet of the  institution,  (d) the ratio of
loan loss reserve to outstanding loans and (e) other variables, such as expected
loan demand,  investment  opportunities,  core deposit  growth within  specified
categories,  regulatory  changes,  monetary  policy  adjustments and the overall
state of the economy.

         Investment  Policy.  The  Bank's  investment  portfolio  policy  is  to
maximize  income  consistent  with  liquidity,   asset  quality  and  regulatory
constraints. The policy is reviewed from time to time by the Board of Directors.
Individual  transactions and investment portfolio composition,  characteristics,
and performance are reviewed periodically by the Board of Directors.

         Management has  classified  all investment  securities as available for
sale and believes specific gains and losses are temporary. Management recognizes
the bond market may significantly fluctuate from time to time and has no plan to
sell large  amounts  of its  investment  securities  portfolio.  Management  has
confidence in the diversity of its securities  portfolio and is prepared to sell
certain securities before


--------------
[FN]
<F2>     A loan-to-value  limit has not been established for permanent  mortgage
         or home equity  loans on  owner-occupied,  1- to 4- family  residential
         property.  However,  for any such loan with a loan-to-value  ratio that
         equals  or  exceeds  90  percent  at  origination,  appropriate  credit
         enhancements  in the  form of  either  mortgage  insurance  or  readily
         marketable collateral is required.
</FN>


                                        5

<PAGE>


maturity  as needed  for  liquidity,  tax  planning,  and other  valid  business
purposes.

         Year 2000. The Bank did not experience any material  disruptions in its
operations or activities as a result of the so-called  "Year 2000" problem.  The
Bank did not incur material  expenses in correcting  perceived or suspected Year
2000 problems.  In addition,  the Bank is not aware that any of its suppliers or
customers  has  experienced  any material  disruptions  in their  operations  or
activities.  The Bank does not  expect to  encounter  any such  problems  in the
foreseeable future, although it continues to monitor its computer operations for
signs or indications of such problem.

         It is possible,  however,  that if "Year 2000" problems are incurred by
the customers of the Bank,  such problems could have a negative impact on future
operations and financial performance of the Bank, although the Bank has not been
able to specifically  identify any such problems among its clients or suppliers.
Furthermore, the Year 2000 problem may impact other entities with which the Bank
transacts  business  and the Bank  cannot  predict  the  effect of the Year 2000
problem on such entities or the resulting effect on the Bank.

         Employees.  At December 31,  1999,  the Bank had 100  full-time  and 13
part-time employees.  Pinnacle has no employees.  The Bank is not a party to any
collective  bargaining  agreement,  and the Bank  believes  that their  employee
relations are good.

         Competition.  The  banking  business  is highly  competitive.  The Bank
competes  with  seven  other  commercial  banks  in  Elbert,  Franklin  and Hart
Counties.  The Bank also competes with other  financial  service  organizations,
including savings and loan associations,  finance  companies,  credit unions and
certain  governmental   agencies.   To  the  extent  that  banks  must  maintain
noninterest-earning  reserves  against  deposits,  they may be at a  competitive
disadvantage when compared with other financial service  organizations  that are
not required to maintain reserves against  substantially  equivalent  sources of
funds.  Further,  the increased  competition from investment bankers and brokers
and other financial service  organizations may have a significant  impact on the
competitive environment in which the Bank operates.

         At December  31, 1999,  the Bank ranked on the basis of total  deposits
and assets of $218.3  million and $273.1  million,  respectively,  as one of the
larger depository institutions located in Elbert, Franklin and Hart Counties.

         Supervision  and  Regulation.  Pinnacle is a  registered  bank  holding
company  subject to regulation by the Board of Governors of the Federal  Reserve
under the Bank Holding Company Act of 1956, as amended (the "Act").  Pinnacle is


                                       6

<PAGE>


required to file financial information with the Federal Reserve periodically and
is subject to periodic examination by the Federal Reserve.

         The Act  requires  every  bank  holding  company  to  obtain  the prior
approval  of the Federal  Reserve  (I) before it may acquire  direct or indirect
ownership  or control  of more than 5% of the voting  shares of any bank that is
not already controlled; (ii) before it or any of its subsidiaries,  other than a
bank,  may acquire all or  substantially  all of the assets of a bank; and (iii)
before it may merge or  consolidate  with any other  bank  holding  company.  In
addition,  a bank holding  company is generally  prohibited from engaging in, or
acquiring  direct or indirect control of voting shares of any company engaged in
non-banking activities.  This prohibition does not apply to activities listed in
the act found by the Federal Reserve,  by order or regulation,  to be so closely
related to banking or managing or controlling  banks as to be a proper  incident
thereto.  Some of the  activities  that the Federal  Reserve has  determined  by
regulation  or order to be closely  related to banking are:  making or servicing
loans and certain types of leases;  performing certain data processing services;
acting as fiduciary or  investment  or financial  advisor;  providing  brokerage
services;  and making investments in corporations or projects designed primarily
to promote community welfare.

         In addition,  effective  March 11, 2000,  bank holding  companies whose
banking  subsidiaries  are all  well-capitalized  and  well-managed may apply to
become  a  financial  holding  company.  Financial  holding  companies  have the
authority to engage in  activities  that are  "financial in nature" that are not
permitted for other bank holding companies.  Some of the activities that the Act
provides are financial in nature are:

    o    lending, exchanging, transferring, investing for others or safeguarding
         money or securities;
    o    insuring,  guaranteeing,  or indemnifying  against loss, harm,  damage,
         illness,  disability, or death, or providing and issuing annuities, and
         acting as principal, agent, or broker with respect thereto;
    o    providing  financial,   investment,   or  economic  advisory  services,
         including advising an investment company;
    o    issuing  or  selling  instruments  representing  interests  in pools of
         assets permissible for a bank to hold directly; and
    o    underwriting, dealing in or making a market in securities.

We have no immediate plans to register as a financial holding company.

         Pinnacle must also register with the Georgia  Department of Banking and
Finance (DBF) and must file periodic information with the DBF. Such registration
includes  information  with  respect  to the  financial  condition,  operations,
management and  intercompany  relationships of Pinnacle and the Bank and related
matters. The DBF may also require such other information as is necessary to keep
itself  informed as to whether the provisions of Georgia law and the regulations
and orders issued thereunder


                                        7

<PAGE>


by the DBF have been  complied  with,  and the DBF may examine  Pinnacle and the
Bank.

         Pinnacle is an "affiliate"  of the Bank under the Federal  Reserve Act,
which imposes certain  restrictions  on (I) loans by the Bank to Pinnacle,  (ii)
investments  in the stock or securities of Pinnacle by the Bank,  (iii) the Bank
taking the stock or securities of an  "affiliate"  as collateral for loans by it
to a  borrower  and (iv) the  purchase  of  assets  from  Pinnacle  by the Bank.
Further,  a bank  holding  company  and its  subsidiaries  are  prohibited  from
engaging in certain  tie-in  arrangements  in  connection  with any extension of
credit, lease or sale of property or furnishing of services.

         The Bank is a National Bank  chartered  under the National Bank Act and
is subject to the  supervision  of, and is regularly  examined by, the Office of
the  Comptroller of the Currency (the "OCC").  The OCC regulates or monitors all
areas of its operations and  activities,  including  reserves,  loans,  mergers,
issuances of securities, payments of dividends, interest rates and establishment
of branches. The Financial Institutions Reform,  Recovery and Enforcement Act of
1989  provides  that a bank can be held  liable  for any loss  incurred  by,  or
reasonably  expected to be incurred by, the FDIC in connection  with the default
of a commonly controlled institution.

         Payment of Dividends.  Pinnacle is a legal entity separate and distinct
from the Bank. Most of the revenues of Pinnacle result from dividends paid to it
by the Bank. There are statutory and regulatory  requirements  applicable to the
payment of dividends by the Bank as well as by Pinnacle to its shareholders.

         The Bank is  regulated  by the OCC.  Under the  regulations  of the OCC
dividends may be declared out of net profits of the association. The approval of
the OCC is required if the total of all dividends  declared by such  association
exceed the total of its net profits for the year  combined with its retained net
profits for the preceding two years.

         The payment of dividends of Pinnacle and its bank  subsidiary  may also
be affected or limited by other factors,  such as the  requirements  to maintain
adequate capital above regulatory guidelines. In addition, if, in the opinion of
the applicable regulatory authority, a bank under its jurisdiction is engaged in
or is about to engage in an unsafe or unsound  practice  (which,  depending upon
the financial  condition of the bank,  could include the payment of  dividends),
such authority may require,  after notice and hearing,  that such bank cease and
desist from such practice. The FDIC has issued a policy statement which provides
that insured banks should generally only pay dividends out of current  operating
earnings.

         Monetary Policy.  The results of operations of the Bank are affected by
credit policies of monetary  authorities,  particularly the Federal Reserve. The
instruments  of monetary  policy  employed by the Federal  Reserve  include open
market operations in U.S. government securities, changes in the discount rate on
bank borrowings and changes in

                                        8

<PAGE>


reserve  requirements  against bank deposits.  In view of changing conditions in
the national  economy and in the money markets,  as well as the effect of action
by monetary and fiscal authorities, including the Federal Reserve, no prediction
can be made as to possible  future changes in interest  rates,  deposit  levels,
loan demand, or the business and earnings of the Bank.

         Capital  Adequacy.  The  Federal  Reserve,  the  FDIC  and the OCC have
implemented substantially identical risk-based rules for assessing bank and bank
holding company capital adequacy.  These  regulations  establish minimum capital
standards in relation to assets and off-balance  sheet exposures as adjusted for
credit risk. Banks and bank holding companies are required to have (1) a minimum
level of total  capital (as defined) to risk  weighted  assets of eight  percent
(8%);  (2) a minimum  Tier One Capital (as defined) to risk  weighted  assets of
four  percent  (4%);  and (3) a minimum  stockholders'  equity to risk  weighted
assets of four percent (4%). In addition,  the Federal Reserve, the FDIC and the
OCC have  established  a minimum four percent  (4%)  leverage  ratio of Tier One
Capital to average total assets for the most highly rated banks and bank holding
companies.  "Tier One Capital"  generally  consists of common  equity,  minority
interests in equity accounts of consolidated  subsidiaries and certain perpetual
preferred stock less certain intangibles.  The Federal Reserve, the FDIC and the
OCC will require a bank holding company and a bank, respectively,  to maintain a
leverage  ratio  greater  than  four  percent  (4%)  if  it is  experiencing  or
anticipating  significant growth or is operating with less than well diversified
risks in the opinion of the Federal Reserve.  The Federal Reserve,  the FDIC and
the OCC use the  leverage  ratio in tandem  with the risk based  ratio to assess
capital adequacy of banks and bank holding companies.

         The FDIC,  the OCC and the  Federal  Reserve  have  amended,  effective
January 1, 1997, the capital adequacy standards to provide for the consideration
of interest rate risk in the overall  determination  of a bank's  capital ratio,
requiring banks with greater interest rate risk to maintain adequate capital for
the  risk.  The  revised  standards  have not had a  significant  effect  on the
Company's capital requirements.

         The  Federal  Deposit  Insurance  Corporation  Improvement  Act of 1991
requires prompt corrective active provisions to be established by all depository
institution  regulators.  The prompt corrective action provisions set forth five
regulatory  zones in which all banks are placed  largely  based on their capital
positions.  Regulators  are  permitted  to take  increasingly  harsh action as a
bank's financial condition  declines.  Regulators are also empowered to place in
receivership  or require  the sale of a bank to another  depository  institution
when a bank's  capital  leverage ratio reaches two percent.  Better  capitalized
institutions  are generally  subject to less onerous  regulation and supervision
than banks with lesser amounts of capital.

         The OCC has  adopted  regulations  implementing  the prompt  corrective
action provisions of the 1991 Act, which place financial


                                        9

<PAGE>


institutions in the following five categories based upon capitalization  ratios:
(1) a "well capitalized"  institution has a total risk-based capital ratio of at
least 10%, a Tier One risk-based ratio of at least 6% and a leverage ratio of at
least 5%; (2) an "adequately  capitalized"  institution  has a total  risk-based
capital ratio of at least 8%, a Tier One  risk-based  ratio of at least 4% and a
leverage ratio of at least 4%; (3) an "undercapitalized" institution has a total
risk-based  capital  ratio of under 8%, a Tier One risk- based ratio of under 4%
or a  leverage  ratio  of  under  4%;  (4)  a  "significantly  undercapitalized"
institution  has a total  risk-based  capital  ratio  of  under  6%,  a Tier One
risk-based  ratio of  under  3% or a  leverage  ratio  of  under  3%;  and (5) a
"critically  undercapitalized"  institution  has a leverage ratio of 2% or less.
Institutions in any of the three undercapitalized categories would be prohibited
from declaring dividends or making capital distributions.  The OCC's regulations
also  establish  procedures  for  "downgrading"  an institution to lower capital
category  based on  supervisory  factors  other  than  capital.  Under the OCC's
regulations the Bank is a "well capitalized" institution.

The following table presents the Bank's capital ratios at December 31, 1999:


                                                 Minimum            Minimum
                                                 Capital            for well
                                   Actual        Requirement       Capitalized
                                   ------        -----------       -----------

Tier 1 Capital to
   Risk weighted
   Assets                          22.36%          4.0%               6.0%


Total Capital to
   Risk weighted
   Assets                          23.57%          8.0%              10.0%

Leverage Ratio (Tier 1
   Capital to Total
   Average Assets)                 14.40%          4.0%               5.0%



                                       10

<PAGE>


         Recent  Legislative  and  Regulatory  Action.  On  November  12,  1999,
President Clinton signed the Gramm-Leach-Bliley Act, a very significant piece of
legislation  intended to modernize the  financial  services  industry.  The bill
repeals the anti-affiliation  provisions of the 1933 Glass-Steagall Act to allow
for the merger of banking  and  securities  organizations  and  permits  banking
organizations   to   engage  in   insurance   activities   including   insurance
underwriting. The bill also allows bank holding companies to engage in financial
activities  that are  "financial  in  nature  or  complementary  to a  financial
activity."  The act lists the  expanded  areas that are  financial in nature and
includes  insurance  and  securities  underwriting  and merchant  banking  among
others. The bill also:

    o    prohibits  non-financial  entities  from  acquiring or  establishing  a
         thrift while  grandfathering  existing  thrifts owned by non- financial
         entities.

    o    establishes state regulators as the appropriate  functional  regulators
         for  insurance  activities  but provides that state  regulators  cannot
         "prevent or significantly  interfere" with  affiliations  between banks
         and insurance firms.

    o    contains  provisions  designed to protect  consumer  privacy.  The bill
         requires financial institutions to disclose their policy for collecting
         and protecting  confidential  information and allows  consumers to "opt
         out" of information  sharing except with unaffiliated third parties who
         market the institutions' own products and services or pursuant to joint
         agreements between two or more financial institutions.

    o    provides for functional regulation of a bank's securities activities by
         the Securities and Exchange Commission.

Various  portions  of the bill have  different  effective  dates,  ranging  from
immediately to more than a year for implementation.


Item 2.  DESCRIPTION OF PROPERTY

         The Company's  main office is located at 884 Elbert  Street,  Elberton,
Georgia  30636-0430,  and its telephone number at that office is (706) 283-2854.
The Bank has six branches that it owns while it leases one supermarket branch.

         The Bank's  main  office is located at 884 Elbert  Street in  Elberton,
Georgia and consists of approximately 22,500 square feet of usable office space.
The downtown Elberton office is located at 32 College Avenue, Elberton,  Georgia
and consists of  approximately  4,200 square feet of usable  office  space.  The
Bowman office is located at 27 North Broad


                                      11

<PAGE>


Street,  Bowman,  Georgia and contains approximately 2,700 square feet of usable
office  space.  The  Hartwell  office is  located at 135 East  Franklin  Street,
Hartwell,  Georgia and  consists of  approximately  4,200  square feet of usable
office space.  The Royston  location is located at 861 Church  Street,  Royston,
Georgia and contains approximately 9,440 square feet of usable office space. The
Franklin Springs branch is located at 2311 West Main Street,  Franklin  Springs,
Georgia  and  contains  approximately  2,300  square feet of office  space.  The
Lavonia  office is located  at 12321  Augusta  Road,  Lavonia,  Georgia  and has
approximately  4,200 square feet of usable office space. The supermarket branch,
which is leased from Dill's Food City supermarket, is located at 721 Cook Street
and  contains  approximately  540 square feet of space.  Management  of the Bank
believes that these properties are adequately covered by insurance.


Item 3.  LEGAL PROCEEDINGS

         Pinnacle  Bank,  N.A.  is a defendant  in a lawsuit  brought by Capital
Resource  Funding in U.S.  District  Court for the Middle  District  of Georgia,
filed in March 1997, File No.  3;97-C-116 (HL) that alleges unlawful  conversion
of assets and seeks  damages of $270,000  plus  interest,  attorneys  fees,  and
punitive  damages.  The outcome of the  litigation  is  uncertain  at this time.
Management  believes,  based on the advice of legal  counsel,  that any ultimate
loss will be  immaterial  to the  financial  statements.  Legal  costs are being
expensed as incurred.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of security  holders of the Company
during the fourth quarter of its fiscal year.


                                    PART II.

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS

         Stock.  There is no established public trading market for the Company's
Common Stock. As of March 15, 2000, the Company had 375  shareholders of record.
Management  is  aware  of 14  sales  of  Pinnacle  stock  in  1999,  aggregating
approximately  3,858 shares in blocks  ranging from 10 shares to 1,464 shares at
prices ranging from $70 to $82 per share.  Management is aware of eight sales of
its stock in 1998,  aggregating  approximately 945 shares in blocks ranging from
20 shares to 500 shares at prices ranging from $65 to $78 per share.

         Dividends.  In 1999 and  1998,  the  Company  declared  cash  dividends
aggregating  $4,684,800  ($6.10  per share) and  $1,651,200  ($2.15 per  share),
respectively. The 1999 amount includes $1,497,600 ($1.95 per share)


                                       12
<PAGE>


that was not paid until January  2000.  The Company  intends to continue  paying
cash  dividends  on a  quarterly  basis.  However  the amount and  frequency  of
dividends  will be determined  by the  Company's  Board of Directors in light of
earnings,  capital  requirements and the financial condition of the Company, and
no  assurances  can be  given  that  dividends  will  be  paid  in  the  future.
Information on  restrictions  on the amount of dividends  payable by the Company
appears in Note 18 to the Company's consolidated financial statements.


Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
         OPERATION

         Management's  Discussion  and Analysis or Plan of Operation of Pinnacle
analyzes  the major  elements  of  Pinnacle's  consolidated  balance  sheets and
statements of income. The financial  condition and operating results of Pinnacle
are primarily  determined by its wholly-owned  subsidiary  bank,  Pinnacle Bank,
N.A.

         On January 1, 1998,  First  National  Bank in Elberton  and Tri- County
Bank in Royston merged,  with the resulting bank being named Pinnacle Bank, N.A.
Management  believes the merger is a positive move that will increase Pinnacle's
ability  to  operate  as a  strong,  well-capitalized  regional  bank.  Customer
convenience  has  been  greatly  enhanced  by  having  more  banking  locations.
Management  has  maintained  all the banks'  officers and staff  throughout  the
consolidation  while  reducing  duplication  of duties by  moving  personnel  to
frontline  positions  working  directly with  customers.  Name  recognition  for
Pinnacle Bank has been improved through coordinated  advertising over the entire
trade area.

         Pinnacle   continues  to  weigh  the  merits  of  additional   business
combinations  while  maintaining a focus on its general  mission to  responsibly
serve the needs of its customers and communities and to enhance profit potential
and shareholder value.

         For a comprehensive  presentation of Pinnacle's financial condition and
results of operations,  the following analysis should be viewed along with other
information  contained  in this  report,  including  the  financial  statements,
selected  statistical  information  and  accompanying  disclosures.  All amounts
throughout this section are rounded to the nearest 1,000 dollars, the nearest .1
million  dollars  or the  nearest  .1 percent  to  represent  approximations  of
reported amounts.


Liquidity And Capital Resources
-------------------------------

         The  objective  of  liquidity  management  is to  maintain  cash  flows
adequate to meet immediate and ongoing  future needs for credit demand,  deposit
withdrawal,  maturing  liabilities and corporate  operating  expenses.  Pinnacle
seeks to meet liquidity requirements primarily through the


                                       13

<PAGE>


management  of  federal  funds  (both  sold and  purchased)  and the  investment
securities  portfolio.  At December 31, 1999, 5.3% of the investment  securities
portfolio  had  maturity  dates  within  the next year and an  additional  64.4%
matures  within the next 5 years.  All  investment  securities are classified as
available  for  sale  and may be sold or  used  as a  source  of  collateralized
borrowings in the event of a liquidity shortfall. Other sources of liquidity are
payments on commercial and  installment  loans and repayment of maturing  single
payment  loans.  The  Bank  has  short  term  borrowing  relationships  with two
correspondent  banks that could  provide up to $10.75  million on short  notice.
Additionally,  the Bank has established membership in the Federal Home Loan Bank
of Atlanta  (hereinafter  the "FHLB") and has granted a blanket floating lien on
its mortgage portfolio that  collateralizes up to $20 million of borrowings on a
short or long term basis.  Pinnacle's  management intends to continue to closely
monitor  and  maintain   appropriate  levels  of  interest-bearing   assets  and
liabilities  in  future  periods  so that  maturities  of  assets  are such that
adequate  funds are  available to meet  customer  withdrawals  and loan requests
while net interest margins are maximized.  Pinnacle's Asset/Liability management
policies are outlined in more detail on page 4 of this Form 10-KSB.

         Regulatory  policy  generally  requires the  maintenance of a liquidity
ratio of 25%, which is generally defined as cash plus liquid investments divided
by deposits plus  borrowings due within one year. The desired level of liquidity
is determined by management based in part on Pinnacle's commitment to make loans
and an  assessment  of its ability to generate  funds.  At  December  31,  1999,
Pinnacle's liquidity ratio was 36.9%.

         Management  continues to give priority to the importance of maintaining
high  levels of assets  with  interest  rate  sensitivity  while  attempting  to
minimize  the  amount  of cash and  overnight  investments  held.  Cash and cash
equivalents  decreased  from  December  31,  1998 levels by $7.4  million  while
securities  available for sale  increased by $2.3 million from December 31, 1998
to  December  31,  1999.  The  average  balance in these  investment  securities
increased by $8.9 million in the current year  compared to 1998.  These  changes
reflect  management's closer monitoring of cash and overnight  investments.  The
average  balance  of Federal  Funds sold  during  1999 was $4.6  million.  It is
anticipated  that average  Federal  Funds sold will  decrease as a percentage of
assets in the future. See discussion below regarding sources of funds.

         Total  interest-earning  assets  increased by $7.8 million or 3.2% from
December 31, 1998 to December 31, 1999. Average net loans increased $2.7 million
or 1.9% to $145.1  million in 1999 over  1998.  As  reflected  in Table 4 of the
statistical  information  presented below, fixed rate mortgages  increased $14.4
million to $74.6  million at December  31, 1999 while  variable  rate  mortgages
increased  $766,000 to $28.8 million at that same date. The higher percentage of
fixed rate mortgages reflects borrower's  preference for and the availability of
fixed rate financing in Pinnacle's lending area.


                                       14

<PAGE>


         The allowance for loan losses is  established  by management at a level
estimated to be adequate to absorb losses  inherent in the loan  portfolio.  The
allowance  remained at $2.1 million December 31, 1999 and December 31, 1998. The
Bank  experienced  loan  charge-offs  of $425,000 in the year ended December 31,
1999 compared to $333,000 in 1998. Net charge-offs  amounted to $256,000 in 1999
compared to $193,000 in 1998. The allowance for loan losses  represents  1.4% of
total loans outstanding at December 31, 1999 and 1998.

         Loans with  carrying  values of  $651,000  and $1.7  million  have been
recognized as impaired in conformity with SFAS 114,  Accounting by Creditors for
Impairment  of  a  Loan,  as  of  December  31,  1999  and  December  31,  1998,
respectively.  The total  allowance for loan losses  associated with those loans
was $477,000 and  $726,000,  respectively.  The average  investment  in impaired
loans  was  $1.1  million  in both  years.  The  accrual  of  interest  has been
discontinued  on loans  totaling  $49,000 as of December  31,  1999  compared to
$139,000 at December 31, 1998.  Unrecorded  income on nonaccrual  loans for 1999
was  $9,000.  Real  estate  secures  $41,000 of the  nonaccual  loans  while the
remainder are unsecured.

         The  balance of  foreclosed  real  estate  declined  from  $496,000  at
December  31, 1998 to $175,000 at December 31,  1999.  This  decrease is the net
result of the sale of six properties  and the  foreclosure of two new properties
during 1999.

         Pinnacle continues to maintain a concentration of core deposits from an
established  customer  base which  provides a stable  funding  source.  Deposits
decreased  $2.6  million to $218.3  million at  December  31,  1999 from  $220.9
million at December 31, 1998. This decrease  resulted in large part from unusual
end of year  activity by a few large  customers;  average  deposits for December
1999 were  actually  up from  December  1998 by $2.1  million.  Demand  deposits
increased  $300,000 to $41.7 million at December 31, 1999 while interest bearing
deposits decreased $2.9 million to $176.6 million at December 31, 1999.

         As indicated  above,  Bank  management  actively  manages its liquidity
position and has obtained several sources of both secured and unsecured borrowed
funds.  These sources have allowed the bank to invest a higher percentage of its
funds in loans and investment securities that earn a higher yield than overnight
investments.  As a  consequence,  1999  includes  increased use of federal funds
purchased and, for the first time,  borrowings  from the FHLB. The $10.5 million
of FHLB advances  existing at December 31, 1999 were used to purchase $3 million
of investment  securities to improve the net interest  income of Pinnacle and to
meet short term liquidity  needs at the end of the year. All short term advances
existing at December 31, 1999 were repaid by February 2000. The Bank anticipates
continued use of these sources of funds to enhance its earnings while continuing
to monitor the maturities and interest rate risk of interest-bearing  assets and
liabilities.

         Shareholders' equity declined $2.2 million to $38.5 million at December
31, 1999 from $40.7 million at December 31, 1998. Net earnings  retained  during
the year  amounted  to  $400,000  while equity  decreased $2.6 million  due to a


                                       15

<PAGE>


decline from a $1 million net unrealized gain on investments  available for sale
to an unrealized loss of $1.6 million (all  unrealized  amounts are reported net
of their tax impact).  The shift from an unrealized gain to loss resulted in the
recording of a deferred tax asset,  causing much of the increase in other assets
from  December  31,  1998.  The  change  in  unrealized   amounts  reflects  the
significant  increase in interest  rates from  December 31, 1998 and widening of
spreads on non-treasury instruments.

         Dividends declared increased by $3.95 per share from $2.15 per share in
1998 to  $6.10  in 1999  due to the  declaration  of two  special  dividends  by
Pinnacle's  Board  of  Directors  in the  fourth  quarter  of  1999.  These  two
dividends,  totaling  approximately  $3.0  million,  were  declared  and paid in
recognition  of  the  Bank's  earnings  history  and  strong  capital  position.
Approximately  $1.5 million of the special  dividend was paid in December  1999,
with the  remainder  paid in January 2000.  The declared but unpaid  dividend is
reflected in the balance  sheet at December  31, 1999 as a  liability,  with the
amount reduced from retained earnings.

         Pinnacle continues to maintain adequate capital ratios (see "Risk Based
Capital Ratios" below).  Pinnacle  maintained a level of capital, as measured by
its average equity to average assets ratio, of 15.3% in 1999.

         Pinnacle's  financial statements include a disclosure of the fair value
of  financial  instruments.  The fair value and carrying  amounts of  Pinnacle's
financial  assets at  December  31, 1999  amounted to $273.2  million and $273.1
million,  respectively,  compared  to the fair  value and  carrying  amounts  of
liabilities  of $223.5  million  and $234.6  million,  respectively.  Comparable
values of assets at December  31, 1998 were $265.9  million and $265.2  million,
respectively, while comparable liability values at December 31, 1998 were $216.4
million  and  $224.5  million.  The  details  of the fair  value  estimates  and
assumptions can be found in Note 17 of the financial statements.

         The bank is a defendant in a lawsuit that alleges  unlawful  conversion
of assets and seeks  damages of $270,000  plus  interest,  attorneys  fees,  and
punitive  damages.  The outcome of the  litigation is uncertain  but  management
believe,  based upon the advice of legal counsel, that any ultimate loss will be
immaterial to the financial statements.  Legal expenses of the lawsuit are being
expensed as incurred.

         Management is not aware of any trends, events or uncertainties that are
reasonably  likely to have a material  effect on Pinnacle's  liquidity,  capital
resources,  or  results  of  operations.  Pinnacle  is not aware of any  current
recommendations by the regulatory  authorities that, if implemented,  would have
such an effect.  Loans  classified  for regulatory  purposes as loss,  doubtful,
substandard or special mention do not represent  trends or  uncertainties  which
management reasonable expects will materially impact future operational trends.


                                       16

<PAGE>
Results Of Operations
---------------------


         Pinnacle's  operational results primarily depend on the earnings of the
Bank.  The  earnings  depend  to a large  degree  on net  interest  income,  the
difference between the interest income received from investments (such as loans,
investment  securities,  federal funds sold, etc.) and the interest expense paid
on deposits and borrowings.

         Interest income on interest  bearing assets  decreased by $107,000 as a
decline  in  average  yields  from 8.3% to 8.2%  offset an  increase  in average
earning assets in 1999.  The slight decline in yield reflects a general  decline
in interest rates during much of the period, a higher proportion of total assets
being investment securities,  and increasing competition for loans, resulting in
the need to price more competitively. Interest expense declined by $450,000 from
1998 even though average deposits increased by approximately  $4.0 million.  The
decrease in interest  expense resulted from more  non-interest  bearing deposits
and  lower  interest  rates  paid on all  deposit  accounts.  Consequently,  net
interest  income in the year ended  December  31, 1999  increased by $342,000 or
2.7% as compared to 1998.  Management  continues to match rate sensitive  assets
with rate  sensitive  liabilities  in such a way that net interest  margins have
remained  stable from the prior  year.  The  analysis of interest  rates and the
interest  differential  in  the  selected  statistical   information,   included
elsewhere in this report,  illustrates  the trends  occurring in interest  rates
during 1999.

         The provision for loan losses is the charge to operating  expenses that
management  believes is necessary  to fund the  allowance  for loan losses.  The
provision  reflects  management's  estimate  of  potential  loan  losses and the
creation of an allowance for loan losses  adequate to absorb losses  inherent in
the portfolio. Pinnacle provided $300,000 in 1999 and $225,000 for possible loan
losses in 1999 and 1998, respectively.

         Pinnacle's  other income decreased by $131,000 to $2.3 million in 1999.
The  decline is  associated  with a decrease of  approximately  $150,000 in fees
related to the  origination  of  mortgage  loans.  Other fee income and  service
charges were stable in 1999.  Operating  expenses decreased $158,000 as declines
in various expenses areas offset increased branch occupancy  expenses related to
branches  open in late 1998.  The largest  expense  decline was in  professional
expenses as they declined by approximately $120,000.

         Pinnacle's income tax expense  increased  $147,000 in 1999 over 1998 as
the effective  income tax rate increased to 31.1% in 1999 from 30.3% in 1998 and
taxable income increased.  The increased  effective tax rate primarily  resulted
from decreased tax-exempt interest income.

         Net income for the year ended  December  31, 1999 was $5.1  million and
represents returns of 12.3% on average  shareholders' equity and 1.9% on average
assets.  Comparable  amounts  during  1998  were $4.9  million,  12.6% and 1.9%,
respectively.  As  indicated  above,  net  income  increased  primarily  due  to
increased net interest income offsetting a slight increase in operating expenses
while the operating ratios reflect the increased earnings compared to a slightly
larger asset and equity base.


                                       17

<PAGE>


The following tables present Pinnacle's  regulatory capital position at December
31, 1999:

<TABLE>
<CAPTION>
                          (Rounded to nearest thousand)


<S>                                                             <C>               <C>
Total Risk Adjusted Assets                                      $176,336
                                                                 =======

Risk Based Capital Ratios:

TIER 1 CAPITAL
         Common stock                                           $  7,680           4.36%
         Surplus                                                   7,280           4.13%
         Retained earnings                                        25,060          14.21%
                                                                  ------          -----

         Total Tier 1 capital                                     40,020          22.70%
         Tier 1 minimum requirement                                7,053           4.00%
                                                                  ------          -----

         Excess (shortfall)                                     $ 32,967          18.70%
                                                                 =======          =====

TOTAL CAPITAL
         Tier 1 from above                                      $ 40,020          22.70%
         Allowance from loan losses, limited to 1.25%
            of risk weighted assets                                2,114           1.20%
                                                                  ------          -----

         Total Tier 2 capital                                     42,134          23.89%
         Tier 2 minimum requirement                               14,107           8.00%
                                                                  ------          -----

         Excess (shortfall)                                     $ 28,027          15.89%
                                                                 =======          =====

LEVERAGE RATIO
         Tier 1 capital                                         $ 40,020          14.59%
         Minimum requirement                                      10,786           4.00%
                                                                  ------          -----

         Excess (shortfall)                                     $ 29,234          10.59%
                                                                 =======          =====

Average total assets, net of goodwill                           $269,640
                                                                 =======
</TABLE>


                                       18

<PAGE>



Selected Statistical Information

   The following  section  presents  consolidated  statistical  information  for
Pinnacle, which supplements the financial data discussed elsewhere herein.

Index to Selected Statistical Information

          Table 1            Average Balance Sheets and Net Interest Earnings
          Table 2                                        Volume-Rate Analysis
          Table 3                                        Investment Portfolio
          Table 4                                              Loan Portfolio
          Table 5                                   Allowance for Loan Losses
          Table 6                                                    Deposits
          Table 7                                             Selected Ratios
          Table 8                       Analysis of Interest Rate Sensitivity




                                       19

<PAGE>


Table 1
Pinnacle Financial Corporation and Subsidiary
Average Balance Sheets and Net Interest Earnings

<TABLE>
<CAPTION>
                                           _____________ 1999 _____________              _________________ 1998 ____________________

                                                            Interest                                      Interest
                                              Average         Income/     Yield/              Average       Income/       Yield/
                                             Balances         Expense      Rate              Balances       Expense        Rate
                                           ------------     ----------    ------           -----------    ----------      -----
<S>                                         <C>              <C>           <C>             <C>             <C>             <C>
Assets:
Interest-earning assets:
  Loans (including loan fees)              $145,141,797    $14,527,573    10.01%          $142,418,653   $14,850,838      10.43%


  Investment securities:
    Taxable                                  80,885,666      4,905,061     6.06%            74,335,476     4,602,324       6.19%
    Nontaxable (a)                           17,161,110      1,354,012     7.89%            14,771,090     1,202,689       8.14%
  Federal funds sold                          4,591,789        242,797     5.29%             7,501,804       385,785       5.14%
                                          -------------    -----------     -----          ------------   -----------       -----


    Total interest-earning assets           247,780,362     21,029,443     8.49%           239,027,023    21,041,636       8.80%

Noninterest earning assets:
  Cash and due from bank                      8,750,038                                      7,781,657
  Premises & equipment                        8,399,884                                      7,838,467
  Other assets                                4,710,160                                      4,743,047
                                           ------------                                  -------------

  Total assets                             $269,640,444                                   $259,390,194
                                           ============                                   ============

Liabilities and shareholders' equity:
Interest bearing liabilities:
   Interest bearing demand deposits         $51,450,881      1,277,067     2.48%           $47,241,779     1,226,874       2.60%
   Savings deposits                          18,385,791        485,745     2.64%            17,501,057       528,857       3.02%
   Time deposits                            110,188,748      5,637,386     5.12%           112,620,899     6,171,025       5.48%
   Borrowings                                 1,330,767         77,179     5.80%                11,178           657       5.88%
                                         --------------      ---------     -----         -------------      --------       -----

    Total interest bearing liabilities      181,356,187      7,477,377     4.12%           177,374,913     7,927,413       4.47%

Noninterest bearing liabilities:
  Noninterest bearing demand                 43,410,734                                     39,613,496
  Other liabilities                           3,733,700                                      3,396,896
                                           ------------                                   ------------

                                            228,500,621                                    220,385,305
   Shareholders' equity                      41,139,823                                     39,004,889
                                          -------------                                   ------------

    Total liabilities and shareholders'
     equity                                $269,640,444                                   $259,390,194
                                           ============                                   ============

Excess of interest-earning assets over
 interest bearing liabilities               $66,424,175                                    $61,652,110
Ratio of interest-earning assets to
 interest-bearing liabilities                   136.63%                                        134.76%
Net interest income                                        $13,552,066                                   $13,114,223
                                                           ===========                                   ===========
Net interest spread                                                                 4.37%                                  4.33%
Net interest yield on interest earning assets                                       5.47%                                  5.49%
</TABLE>

Non-accrual  loans and the  interest  income  which was  recorded on these loans
(both  prior and  subsequent  to the time the loans were  placed on  non-accrual
status,  if any) are not material and are included in the yield  calculation for
loans in all periods reported.
(a) Tax exempt income is calculated  on a tax  equivalent  basis using a 34% tax
rate.


                                       20

<PAGE>


Table 1 - (continued)
Pinnacle Financial Corporation and Subsidiary
Average Balance Sheets and Net Interest Earnings


<TABLE>
<CAPTION>
                                                    ______________   1997   ______________

                                                                     Interest
                                                       Average         Income/     Yield/
                                                      Balances         Expense      Rate
                                                      --------         -------      ----
<S>                                                 <C>             <C>            <C>
Assets:
Interest-earning assets:
  Loans (including loan fees)                       $135,338,705    $14,536,043    10.74%
  Investment securities:
    Taxable                                           70,188,579      4,436,518     6.32%
    Nontaxable (a)                                    14,862,542      1,288,067     8.67%
  Federal funds sold                                   3,374,104        184,154     5.46%
                                                      ----------   ------------     ----

    Total interest-earning assets                    223,763,930     20,444,782     9.14%
Noninterest earning assets:
  Cash and due from banks                              7,450,484
  Premises & equipment                                 6,562,675
  Other assets                                         4,507,345
                                                      ----------

    Total assets                                    $242,284,434
                                                     ===========

Liabilities and shareholders' equity:
Interest bearing liabilities:
   Interest bearing demand deposits                  $43,971,090      1,148,097     2.61%
   Savings deposits                                   16,864,104        515,858     3.06%
   Time deposits                                     109,036,301      5,930,099     5.44%
   Borrowings                                            215,501         11,184     5.19%
                                                   -------------    -----------     -----

    Total interest bearing liabilities               170,086,996      7,605,238     4.47%

Noninterest bearing liabilities:
  Noninterest bearing demand                          34,808,902
  Other liabilities                                    2,605,010
                                                     -----------
                                                     207,500,908
Shareholders' equity                                  34,783,526
                                                     -----------

    Total liabilities and shareholders'
     equity                                         $242,284,434
                                                     ===========

Excess of interest-earning assets over
 interest bearing liabilities                        $53,676,934

Ratio of interest-earning assets to
 interest-bearing liabilities                            131.56%

Net interest income                                                 $12,839,544
                                                                    ===========

Net interest spread                                                                 4.67%
Net interest yield on interest earning assets                                       5.74%
</TABLE>


Table 2
Pinnacle Financial Corporation and Subsidiaries
Volume/Rate Analysis


                                       21

<PAGE>





The  following  table  shows a summary  of the  changes in  interest  income and
interest expense  resulting from changes in volume and changes in rates for each
major category of interest earning assets and  interest-bearing  liabilities for
1999 over 1998 and 1998 over 1997.
<TABLE>
<CAPTION>

                                                      1999 over 1998                                1998 over 1997
                                                      --------------                                --------------

                                         Increase (decrease) due to changes in:          Increase (decrease) due to changes in:
                                         --------------------------------------          --------------------------------------


Interest income on:
                                            Volume         Rate         Total              Volume        Rate          Total
                                           -------      ---------     ---------            -------     ---------      ---------
<S>                                      <C>           <C>            <C>               <C>           <C>              <C>
  Loans (including loan fees)            $ 284,024     $( 607,289)    $(323,265)        $  818,482    $( 503,687)      $314,795

  Investment securities:
    Taxable                                399,373      (  96,636)      302,737            269,504     ( 103,698)       165,806
    Non-taxable (a)                        188,251      (  36,928)      151,323          (   7,651)    (  77,727)      ( 85,378)
  Federal funds sold                      (154,241)        11,253      (142,988)           238,967     (  37,336)       201,631
                                          --------      ---------      --------          ---------     ---------        -------
      Total interest earning assets      $ 717,407     $( 729,600)   $ ( 12,193)        $1,319,302    $( 722,448)      $596,854
                                          ========      =========      =========         =========     =========        =======

Interest expense on:

  Deposits:
    Interest-bearing demand              $  106,883    $(  56,690)    $  50,193         $   87,675    $(   8,898)      $  78,777
    Savings                                  26,719     (  69,831)     ( 43,112)            19,879         6,880)         12,999
    Time                                   (133,282)                    400,357)         ( 533,639)      196,889          44,037
            240,926
    Borrowings                               76,531     (       9)       76,522          (  12,244)        1,717        ( 10,527)
                                           ---------    ---------      --------          ---------      --------        --------
 Total interest-bearing liabilities      $    76,851   $( 526,887)    $(450,036)        $  292,199     $  29,976       $ 322,175
                                           =========    =========      ========          =========      ========        ========
</TABLE>




Rate/volume  variances were allocated on a weighted average basis between volume
and rate.


(a) Tax exempt income is calculated on a tax equivalent basis.


                                       22

<PAGE>



Table 3
Pinnacle Financial Corporation and Subsidiary
Investment Portfolio


The following  table presents the amortized cost and market value of investments
by category at December 31, 1999, 1998, and 1997:

<TABLE>
<CAPTION>

                                                1999                             1998                            1997
                                                ----                             ----                            ----

                                    Amortized                        Amortized                        Amortized
                                    ---------                        ---------                        ---------
                                      Cost            Market           Cost            Market           Cost             Market
                                      ----            ------           ----            ------           ----             ------

<S>                                <C>             <C>              <C>             <C>              <C>              <C>
U.S. Treasury and
  U.S. Gov't Agencies              $75,792,343     $73,592,108      $74,446,250     $75,410,866      $66,422,877      $66,834,518
State, county and municipal         19,571,315      19,296,812       15,736,579      16,391,370       15,086,787       15,727,218
Other investments                    2,252,136       2,211,800          982,069       1,005,050          134,400          134,400
                                    ----------      ----------       ----------      ----------       ----------       ----------
       Totals                      $97,615,794     $95,100,720      $91,164,898     $92,807,286      $81,644,064      $82,696,136
                                    ==========      ==========       ==========      ==========       ==========       ==========
</TABLE>



The following  table  presents the  maturities of  investment  securities  using
market  values and the  weighted  average  yields  for each range of  maturities
presented.  The weighted average yields reflect taxable  equivalent  adjustments
using a tax rate of 34% on nontaxable securities.


<TABLE>
<CAPTION>
                                           U.S. Treasury and       State, County        Other          Weighted
Maturities at December 31, 1999           U.S. Gov't Agencies      and Municipal     Investments    Average Yields
-------------------------------           -------------------      -------------     -----------    --------------
<S>                                              <C>                <C>               <C>                    <C>
Within 1 year                                    $  2,003,737        $ 3,163,176      $        0             8.09%
After 1 through 5 years                            66,401,075          7,480,333         490,950             6.08%
After 5 through 10 years                            5,187,296          4,808,741         497,550             6.61%
After 10 years                                              0          3,844,562       1,223,300             7.19%
                                                   ----------         ----------      ----------             ----
Totals                                            $73,592,108        $19,296,812      $2,211,800             6.33%
                                                   ==========         ==========      ==========             ====
</TABLE>



                                       23

<PAGE>



Table 4
Pinnacle Financial Corporation and Subsidiary
Loan Portfolio

The following  table  presents loans by type at the end of each of the last five
years.

<TABLE>
<CAPTION>
                                              1999               1998             1997              1996             1995
                                              ----               ----             ----              ----             ----
<S>                                      <C>                <C>               <C>              <C>              <C>
Commercial, financial
  and agricultural                       $ 19,369,499       $ 22,383,379      $ 23,267,802     $ 18,406,805     $ 17,273,462
Real estate - construction                  6,602,735          5,017,757         5,780,973        2,975,741        1,495,269
Real estate - mortgage                    103,411,277         88,232,782        87,272,975       88,013,785       80,136,557
Installment loans to individuals           27,000,807         28,461,144        28,004,470       23,838,085       22,560,447
                                          -----------         ----------        ----------      -----------       ----------

    Totals                               $156,384,318       $144,095,062      $144,326,220     $133,234,416     $121,465,735
                                          ===========        ===========       ===========      ===========      ===========
</TABLE>

As of December 31, 1999,  maturities of loans in the  indicated  classifications
were as follows:

<TABLE>
<CAPTION>
                                           Commercial,
                                         Financial and                Real Estate
  Maturity                                Agricultural               Construction                  Total
  --------                                ------------               ------------                  -----

<S>                                        <C>                         <C>                      <C>
Within 1 year                              $ 7,194,922                 $6,284,908               $13,479,830
1 to 5 years                                10,066,531                    317,827                10,384,358
After 5 years                                2,108,046                          0                 2,108,046
                                            ----------                  ---------                ----------
Totals                                     $19,369,499                 $6,602,735               $25,972,234
                                            ==========                  =========                ==========
</TABLE>

As of  December  31,  1999,  the  interest  terms  of  loans  in  the  indicated
classifications for the indicated maturity ranges are as follows:

<TABLE>
<CAPTION>
                                                    Fixed                    Variable
                                               Interest Rates             Interest Rates              Total
                                               --------------             --------------              -----
<S>                                                <C>                       <C>                  <C>
Commercial, financial and
  agricultural:
    1 to 5 years maturity                          $9,250,915                $   815,616          $10,066,531
    After 5 years maturity                            161,037                  1,947,009            2,108,046
                                                     --------                  ---------           ----------
                                                    9,411,952                  2,762,625           12,174,577
                                                    ---------                  ---------           ----------
Real estate-construction:
    1 to 5 years maturity                             317,827                      --                 317,827
    After 5 years maturity                             --                          --                      --
                                                    ---------                  ---------           ----------
                                                      317,827                      --                 317,827
                                                    ---------                  ---------           ----------

                                                   $9,729,779                 $2,762,625          $12,492,404
                                                    =========                  =========           ==========
</TABLE>

Pinnacle's commercial, financial and agricultural loans and installment loans to
individuals include secured and unsecured loans as detailed below:

<TABLE>
<CAPTION>
                                                         1999                     1998                1997
                                                         ----                     ----                ----
<S>                                                <C>                        <C>                 <C>
Commercial, financial and agricultural
    Secured                                        $16,680,933                $18,694,505         $19,626,449
    Unsecured                                        2,688,566                  3,688,874           3,641,353
                                                    ----------                 ----------          ----------

                                                   $19,369,499                $22,383,379         $23,267,802
                                                    ==========                 ==========          ==========


Installment loans to individuals
    Secured                                        $21,360,405                $22,646,210         $25,965,091
    Unsecured                                        5,640,402                  5,814,934           2,039,379
                                                    ----------                 ----------          ----------

                                                   $27,000,807                $28,461,144         $28,004,470
                                                    ==========                 ==========          ==========
</TABLE>

                                       24

<PAGE>



Table 4
Pinnacle Financial Corporation and Subsidiary
Loan Portfolio - (continued)


The  collateral  for these  various types of secured  loans  generally  includes
vehicles, commercial and farm machinery and equipment, and stock.

Pinnacle's  real estate - mortgage loans and consumer loans are primarily  fixed
rate loans.
<TABLE>
<CAPTION>
                                                1999               1998                1997
                                                ----               ----                ----
<S>                                        <C>                 <C>                <C>
Real estate - mortgage:
    Fixed                                  $ 74,578,960        $60,166,600        $56,110,206
    Variable                                 28,832,317         28,066,182         31,162,769
                                             ----------         ----------         ----------
                                           $103,411,277        $88,232,782        $87,272,975
                                            ===========         ==========         ==========

Installment loans to individuals:
    Fixed                                   $26,381,583        $26,048,737        $26,903,297
    Variable                                    619,224          2,412,407          1,101,173
                                             ----------         ----------         ----------

                                            $27,000,807        $28,461,144        $28,004,470
                                             ==========         ==========         ==========
</TABLE>




The following  summarizes  past due,  non-accrual and  restructured  loans as of
December 31, 1999, 1998, 1997, 1996, and 1995:


<TABLE>
<CAPTION>
                                                 1999               1998             1997             1996               1995
                                                 ----               ----             ----             ----               ----

<S>            <C>                            <C>                <C>             <C>              <C>                 <C>
Accruing loans 90 days or more past due       $237,571           $233,337        $ 934,134        $2,669,721          $339,655
Non-accrual loans                               48,641            139,087          102,185           234,594           282,434
Restructured loans                             188,835            196,262          251,356           228,375            77,663
</TABLE>


Accruing  loans 90 days or more past due as of December 31, 1996 includes  three
loans  to one  group of  three  customers  with  outstanding  balances  totaling
$1,948,342 which paid out in May, 1997 as expected by management.

As a result of  management's  ongoing  review of the loan  portfolio,  loans are
classified  as  non-accrual  generally  when they are past due in  principal  or
interest  payments for more than 90 days or it is otherwise  not  reasonable  to
expect collection of principal and interest under the original terms. Exceptions
are  allowed for 90 day past due loans when such loans are  well-secured  and in
process of collection.  Generally,  payments  received on non-accrual  loans are
applied directly to principal.

The  restructured  loans are secured by real estate and approved by the Board of
Directors.



                                       25

<PAGE>


Table 5
Pinnacle Financial Corporation and Subsidiary
Allowance for Loan Losses

The following  table  summarizes  information  concerning the allowance for loan
losses:


<TABLE>
<CAPTION>
                                                        1999             1998              1997             1996              1995
                                                        ----             ----              ----             ----              ----

<S>                                                <C>                <C>               <C>              <C>              <C>
Balance at beginning of year                       $2,070,005         $2,038,015        $1,842,152       $1,828,722       $1,774,567
                                                    ---------          ---------         ---------        ---------        ---------

Charge-offs:

  Commercial, financial and agricultural              351,864            193,748           109,846          309,746          191,904
  Real estate-construction                               --                  --                --                --             --
  Real estate-mortgage                                 55,049             80,992               --                --           83,115
  Installment loans to individuals                     18,421             57,762            79,377          136,747           62,297
                                                    ---------          ---------         ---------        ---------        ---------

                                                      425,334            333,502           189,223          446,493          337,316
                                                    ---------          ---------         ---------        ---------        ---------

Recoveries:

  Commercial, financial and agricultural               38,969             28,895            80,388           17,846           34,682
  Real estate-construction                                --                  --              --               --               --
  Real estate-mortgage                                110,335             92,380            52,801           10,780            2,390
  Installment loans to individuals                     19,760             18,217            17,897           21,997           24,399
                                                    ---------          ---------         ---------        ---------        ---------

                                                      169,064            139,492           151,086           50,623           61,471
                                                    ---------          ---------         ---------        ---------        ---------

  Net charge-offs                                     256,270            193,010            38,137          395,870          275,845
                                                    ---------          ---------         ---------        ---------        ---------

  Additions charged to operations                     300,000            225,000           234,000          409,300          330,000
                                                    ---------          ---------         ---------        ---------        ---------

  Balance at end of year                           $2,113,735         $2,070,005        $2,038,015       $1,842,152       $1,828,722
                                                    =========          =========        ==========        =========        =========


Ratio of net charge-offs during the period to
  average loans outstanding during the period            .18%               .14%              .03%             .32%             .25%
                                                         ====               ====              ====             ===              ===
</TABLE>


The objective of management in  establishing  an allowance for loan losses is to
maintain a balance in the allowance which reflects an estimate of potential loan
losses  and  create an  allowance  adequate  to absorb  losses  inherent  in the
portfolio.  The  allowance  for loan  losses is  evaluated  by  management  on a
quarterly  basis  based  upon  the  collectibility  of the  loans  in  light  of
historical  experience,  the  nature  and  size of the loan  portfolio,  adverse
situations that may affect the borrower's  ability to repay,  estimated value of
underlying collateral and prevailing economic conditions.  Based on this review,
the provision necessary to maintain this allowance is recorded.

The following  narrative  addresses the risk elements in the loan  portfolio and
the factors  considered  in  determining  the amount of the  allowance  for loan
losses:

The general risk elements which are found in the loan portfolio  include changes
in the  ability of the  borrower to repay due to  changing  economic  conditions
caused  by  unemployment,  inflation,  reduced  cash  flow,  rising  taxes,  and
increased  costs for borrowers on fixed incomes.  Inherent  credit risks include
possible  undervalued  collateral due to depreciation  over time,  environmental
concerns, and excessive indebtedness by individual borrowers.


                                       26

<PAGE>



Table 5
Pinnacle Financial Corporation and Subsidiary
Allowance for Loan Losses (continued)


         Specific risk  elements  associated  with each lending  category are as
follows:

Commercial, financial, and agricultural    Industry concentrations, inability to
                                           monitor the condition  of  collateral
                                           (inventory, accounts  receivable, and
                                           vehicles),   lack   of     management
                                           expertise,  increased competition and
                                           specialized or obsolete equipment  as
                                           collateral.

Real estate - construction                 Inadequate collateral.

Real estate - mortgage                     Changes   in   local   economy    and
                                           inadequate collateral.

Installment                                loans   to    individuals   Loss   of
                                           employment, changes in local economy,
                                           and   the    inability   to   monitor
                                           collateral   (vehicle, boats,  mobile
                                           homes).


Allocation of the Allowance for Loan Losses:

<TABLE>
<CAPTION>
                                                  1999             1998              1997             1996             1995
                                                  ----             ----              ----             ----             ----

<S>                                           <C>               <C>               <C>              <C>              <C>
Domestic:
 Commercial, financial and agricultural       $  563,252        $  612,820        $  483,911       $  363,000       $  246,000
 Real Estate-construction                         51,000            36,000                 0                0                0
 Real Estate-mortgage                             84,300            99,300           241,777          155,000          141,500
 Installment loans to individuals                 82,852           122,500            92,706           18,000           17,000
Unallocated                                    1,332,331         1,199,385         1,219,621        1,306,152        1,424,222
                                               ---------         ---------         ---------        ---------        ---------
                                              $2,113,735        $2,070,005        $2,038,015       $1,842,152       $1,828,722
                                               =========         =========         =========        =========        =========
</TABLE>



                                       27

<PAGE>



Table 6
Pinnacle Financial Corporation and Subsidiary
Deposits


The following table presents  average balances of deposits and the average rates
paid on such deposits for 1999, 1998, and 1997.


<TABLE>
<CAPTION>
                                            1999                           1998                           1997
                               -----------------------------  ----------------------------  -------------------------------

                                    Amount           Rate           Amount          Rate          Amount            Rate
                                    ------           ----           ------          ----          ------            ----
<S>                              <C>                 <C>         <C>               <C>          <C>                 <C>
Demand deposits:
  Noninterest bearing          $ 43,410,734             --     $ 39,613,496           --      $ 34,808,902             --
  Interest-bearing               51,450,881          2.48%       47,241,779        2.60%        43,971,090          2.61%
Savings deposits                 18,385,791          2.64%       17,501,057        3.02%        16,864,104          3.06%
Time deposits                   110,188,748          5.12%      112,620,899        5.48%       109,036,301          5.44%
                                -----------                     -----------                    -----------

    Totals                     $223,436,154                    $216,977,231                   $204,680,397
                                ===========                     ===========                    ===========
</TABLE>



Maturities of time  certificates  of deposit of $100,000 or more  outstanding at
December 31, 1999 are summarized as follows:

                                                Time Certificates
                                                   of Deposit

Within 3 month                                     $ 6,514,417
After 3 through 6 months                             6,725,326
After 6 through 12 months                           10,279,434
After 12 months                                      2,357,316
                                                    ----------

     Total                                         $25,876,493
                                                   ===========



Table 7
Selected Ratios

The following table sets out certain ratios of Pinnacle for the years indicated.

                                             1999         1998        1997
                                             ----         ----        ----

Net income to:
  Average shareholders' equity              12.34%       12.64%      14.54%
  Average assets                             1.88%        1.91%       2.08%
Dividends to net income                     92.30%       33.50%      29.60%
Average equity to average assets            15.26%       15.04%      14.35%




                                       28

<PAGE>



Table 8
Pinnacle Financial Corporation and Subsidiary
Analysis of Interest Rate Sensitivity


The following  table includes a listing of earning  assets and interest  bearing
liabilities and the distribution according to the earliest repricing opportunity
or remaining maturity at December 31, 1999 with no prepayment assumptions.  Also
included are the related periodic and cumulative gaps for each period.

<TABLE>
<CAPTION>
                                                                                     One Year
                                                  0-3                 4-12            Through           Over
                                                 Months              Months         Five Years       Five Years          Total
                                                 ------              ------         ----------       ----------          -----
Earning assets:
--------------

<S>                                          <C>                <C>               <C>              <C>              <C>
Federal funds sold                           $    430,000       $          0      $          0     $          0     $    430,000
Taxable investment securities                     199,866          2,211,065        67,419,358        7,434,695       77,264,984
Nontaxable investment securities                1,107,654          1,648,328         6,953,000        8,126,754       17,835,736
Loans                                          53,884,386         16,462,404        78,270,507        5,653,286      154,270,583
                                               ----------         ----------       -----------      -----------      -----------

Total earning assets                         $ 55,621,906       $ 20,321,797      $152,642,865     $21,214,735      $249,801,303


Interest bearing liabilities:
----------------------------

Time deposits                                $ 26,234,353       $ 63,509,458      $ 17,434,663     $      2,284     $107,180,758
Other interest bearing deposits                69,445,774                  0                 0                0       69,445,774
Borrowings                                      7,500,000                  0         3,000,000                0       10,500,000
                                              -----------         ----------       -----------     ------------      -----------
Total interest bearing liabilities           $103,180,127       $ 63,509,458      $ 20,434,663     $      2,284     $187,126,532

Gap summary
Periodic net earning assets                  ($47,558,221)      ($43,187,661)     $132,208,202     $ 21,212,451     $ 62,674,771

Cumulative net earnings assets               ($47,558,221)      ($90,745,882)      $41,462,320     $ 62,674,771     $ 62,674,771

Cumulative ratio of earning assets
  to interest bearing liabilities                   53.91%             45.60%           122.16%          135.94%          133.49%
</TABLE>


The rate  sensitivity  analysis  table is  designed  to  demonstrate  Pinnacle's
sensitivity to changes in interest  rates by setting forth in  comparative  form
the repricing of Pinnacle's assets and liabilities for the period shown. A ratio
of greater than 100% of earning  assets to interest  bearing  liabilities  (more
interest  earning  assets  repricing  in a given  period than  interest  bearing
liabilities) indicates that an increase in interest rates would generally result
in an increase in net income for Pinnacle and a decrease in interest  rates will
result  in a  decrease  in net  income.  Conversely,  a ratio  less than 100% of
earning assets to interest  bearing  liabilities  (less interest  earning assets
repricing in a given period than interest bearing liabilities)  indicates that a
decrease in interest rates would  generally  result in an increase in net income
and an  increase in  interest  rates  would  result in a decrease in net income.
However,  shifts in the structure of interest  sensitive  assets and liabilities
are made by management in response to interest rate movements. These changes are
made by sale of investment  securities  with varying  maturity  ranges and/or by
varying the rates charged on loans and the rates paid on deposits.



                                       29

<PAGE>


Item 7.  FINANCIAL STATEMENTS

         The  financial   statements  and the  independent auditor's  report are
included  in this  report  beginning  at page F-1 of this Form 10-KSB.



Item 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

         During the Company's two most recent fiscal years,  the Company did not
change  accountants and had no disagreements with its accountants on any matters
of accounting principle or practices or financial statement disclosure.


                                       30

<PAGE>

                                    PART III.

Item 9.  DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND
         CONTROL PERSONS

         The  directors  and executive  officers of Pinnacle,  their  respective
ages,  positions with Pinnacle,  principal  occupations  and the Pinnacle common
stock owned beneficially by them as of January 31, 2000 are as follows.  None of
Pinnacle's  directors have  directorships  in other  publicly  owned  companies.
Percentages of shares beneficially owned are based on 768,000 shares outstanding
on March 15, 2000.

<TABLE>
<CAPTION>
                                                                                             Number of
                                                                                            Shares Owned                  (Percent
      Name                           Age          Position with Pinnacle                    Beneficially                  of Class)
      ----                           ---          ----------------------                    -------------                 ---------
<S>                                  <C>          <S>                                           <C>                        <C>
Maurice Bond                         65           Director                                          896                       *
Charles Bradshaw                     76           Director                                        1,600                       *
H. Thomas Brown                      48           Director                                          100                       *
Anderson Dilworth                    70           Director                                        4,720                       *
Linton W. Eberhardt                  60           Vice-Chairman & Director                          600<F1>                   *
Don C. Fortson                       50           Senior Vice-President & Director                  830                       *
Ret. Judge William F. Grant          69           Director                                        5,064                       *
Robert H. Hardy                      51           Director                                          224                       *
Calvin Hill                          67           Director                                        2,104                       *
Robert E. Lee, III                   48           Director                                          400                       *
J. Daniel McAvoy, M.D.               49           Director                                          612                       *
L. Jackson McConnell                 62           Chairman, Chief                               201,323<F2>                (26.2%)
                                                  Executive Officer & Director
L. Jackson McConnell, Jr.            33           Executive Vice-President                          200                       *
                                                  & Director
James E. Purcell                     59           President, Chief Credit Officer                 3,400                       *
                                                  & Director
Steven A. Williams                   46           Director                                        1,832                       *

All directors and executive
  officers as a group (15 persons)                                                                223,905                    (29.2%)
-----------------
*Less than one percent.

<FN>
<F1>     Does not include 193,863 shares held by the JAM Family  Partnership II,
         L.P.  pursuant to which Mr.  Eberhardt's wife, Alice Eberhardt has sole
         voting  and  investment  power and 300  shares  held  directly  by Mrs.
         Eberhardt. Mr. Eberhardt disclaims beneficial ownership with respect to
         the shares to which Mrs. Eberhardt has voting power.

<F2>     Includes  197,950  shares  held by the JAM Family  Partnership  I, L.P.
         pursuant to which Mr.  McConnell has sole voting and investment  power.
         Does not include 333 shares held by Mr.  McConnell's  wife with respect
         to which he disclaims beneficial ownership.
</FN>
</TABLE>



                                       31

<PAGE>



         The following is a brief description of the business  experience of the
directors and  executive  officers of Pinnacle.  Except as otherwise  indicated,
each  director  has  been  or was  engaged  in his  present  or  last  principal
employment,  in the same or a similar  position,  for more than five years.  All
"Bank"  dates are based upon the date of  association  with  either  Elberton or
Royston,  the  predecessors  to Pinnacle Bank, N.A. Since 1998, all directors of
the bank have also served as directors of Pinnacle.

         Mr.  Bond is  President  and the  owner of Bond  Realty  and has been a
director of the Bank since 1975 and director of Pinnacle since March 1996.

         Mr.  Bradshaw  was the  General  Administrator  of  Advocate  Press,  a
printing company,  until his retirement in 1991. He has been the Chairman of the
Board for Emmanuel College since 1979. Mr. Bradshaw has been a director the Bank
since 1969 and has been a director of Pinnacle since March 1996.

         Mr. Brown is the  CEO/President of Ty Cobb Healthcare  System,  Inc. in
Royston.  He has been a  director  of the Bank  since  1991  and a  director  of
Pinnacle since March 1996.

         Mr.  Dilworth is owner of Dill's Food City,  a chain of retail  grocery
stores. He has been a director of the Bank since 1981 and a director of Pinnacle
since March 1998.

         Mr.  Eberhardt  has been a director of the Bank since 1972.  He was the
Chairman,  President,  and CEO of  Royston  from  1986 to 1997.  He was  elected
President and a director of Pinnacle in March 1995 and has been Vice-Chairman of
Pinnacle since March 1997.

         Mr. Fortson has been an officer of the Bank since 1975 and Senior Vice-
President  since March 1997. He has been a director of the Bank since 1992 and a
director of Pinnacle since March 1998.

         Judge Grant is a retired  Superior  Court Judge and has been a director
of the Bank since 1968. He has been a director of Pinnacle since March 1998.

         Mr. Hardy is an owner of J. C. Poole Company,  Inc., a retail  clothing
and shoe store in Elberton.  He has been a director of the Bank since 1991 and a
director of Pinnacle since March 1997.

         Mr. Hill is owner of  Hillcrest  Granite  Company,  Inc. and has been a
director of the Bank since 1977 and a director of Pinnacle since March 1998.

         Mr. Lee is co-owner of Elbert  Insurance Agency and has been a director
of the Bank since 1987 and a director of Pinnacle since March 1998.

         Dr.  McAvoy is a physician  in Elberton  and has been a director of the
Bank since 1986 and a director of Pinnacle since March 1998.

         Mr. L. Jackson  McConnell  has been Chairman and a director of Pinnacle
since 1983 and Chairman and CEO of the Bank since 1990.  Mr.  McConnell was also
President  of the Bank from 1983 through  March 1990.  He has been a director of
the Bank since 1963.


                                       32

<PAGE>


         Mr. Jackson  McConnell,  Jr. has been an officer of the Bank since 1994
and has been Executive  Vice-President  since March 1999. He has been a director
of the Bank since 1994 and a director of Pinnacle since March 1998.

         Mr.  Purcell  has  been  President  of the  Bank  since  1992  and  was
previously  Executive Vice- President.  He has been a Director of the Bank since
1977 and a director of Pinnacle since 1983.  Mr.  Williams is owner of Tri-State
Distributors,  Inc.,  a  heating  and air  conditioning  wholesale  distributing
business.  He has been a director of the Bank since March 1997 and a director of
Pinnacle since 1997.

         Mr. Eberhardt and Mr. L. Jackson McConnell are  brothers-in-law and the
two McConnells are father and son. There are no other family relationships among
the directors of Pinnacle.


Item 10.  EXECUTIVE COMPENSATION

         The following  table sets forth the annual and  long-term  compensation
paid to the chief executive officer and each executive officer of Pinnacle whose
salary and bonus  exceeded  $100,000 for fiscal years ending  December 31, 1999,
1998, and 1997 (the "Named Executive Officers").


                                       33

<PAGE>
<TABLE>
<CAPTION>
                                              Summary Compensation Table

                                                  Annual Compensation
                                                  -------------------
  Name and Principal                                                                      All Other
      Position                              Year              Salary($)<F1>              Compensation
--------------------------------------------------------------------------------------------------------
<S>                                         <C>               <C>                       <C>
L. Jackson McConnell                        1999              $188,177                  $28,667 <F3>
Chairman and Chief                          1998              $187,963                  $28,667 <F4>
Executive Officer                           1997              $192,848 (<F2>            $28,667 <F5>

James E. Purcell                            1999              $172,235                  $28,667 <F6>
President and Chief Credit                  1998              $164,014                  $28,032 <F7>
Officer                                     1997              $149,657                  $25,996 <F8>

Linton W. Eberhardt                         1999              $162,718                  $27,632 <F9>
Vice Chairman                               1998              $164,329                  $28,069 <F10>
                                            1997              $129,874                  $23,611 <F11>


<FN>
<F1>     Includes directors fees.

<F2>     Includes salary and directors fees Mr. McConnell received in 1997 as an
         officer and director of Royston.

<F3>     Includes  $28,000 and $667  contributed by Pinnacle to Mr.  McConnell's
         account in Pinnacle's profit sharing plan and 401-K Plan, respectively.

<F4>     Includes  $28,000 and $667  contributed by Pinnacle to Mr.  McConnell's
         account in Pinnacle's profit sharing plan and 401-K Plan, respectively.

<F5>     Includes  $28,000 and $667  contributed by Pinnacle to Mr.  McConnell's
         account in Pinnacle's ESOP and 401-K Plan, respectively.

<F6>     Includes  $28,000 and $667  contributed  by  Pinnacle to Mr.  Purcell's
         account in Pinnacle's profit sharing plan
         and 401-K Plan, respectively.

<F7>     Includes  $27,048 and $984  contributed  by  Pinnacle to Mr.  Purcell's
         account in Pinnacle's profit sharing plan and 401-K Plan, respectively.

<F8>     Includes  $23,994 and $2,002  contributed by Pinnacle to Mr.  Purcell's
         account in Pinnacle's ESOP and 401-K Plan, respectively.

<F9>     Includes  $27,069 and $563  contributed by Pinnacle to Mr.  Eberhardt's
         account in Pinnacle's profit sharing plan and 401-K Plan, respectively.

<F10>    Includes  $27,104 and $965  contributed by Pinnacle to Mr.  Eberhardt's
         account in Pinnacle's profit sharing plan and 401-K Plan, respectively.

<F11>    Includes $21,408 and $2,203  contributed by Pinnacle to Mr. Eberhardt's
         account in Pinnacle's ESOP and 401-K Plan, respectively.
</FN>
</TABLE>


                                       34

<PAGE>

Director's Compensation
-----------------------

         Compensation  is  paid  for  service  as  directors  of  the  Bank.  No
additional  compensation  is paid for service as a director of Pinnacle.  During
1999 and the last nine months of 1998, directors received a monthly fee of $800.
The directors  received a fee of $750 per month during the first three months of
1998.

Salary Continuation Agreement
-----------------------------

         L.  Jackson  McConnell,  Chairman  and Chief  Executive  Officer  and a
Director of Pinnacle, James E. Purcell, President and Chief Credit Officer and a
Director  of  Pinnacle,  Linton W.  Eberhardt,  Vice-Chairman  and a Director of
Pinnacle, and Jackson McConnell, Jr., Executive-Vice President and a Director of
Pinnacle,  have entered into non-qualified  salary continuation  agreements (the
"Salary  Continuation Plans") with the bank which provides certain benefits upon
their  retirement  and upon their death.  Both the retirement and death benefits
are determined at December 31st of each year based on the income  performance of
a single  premium  split dollar life  insurance  policy.  Generally,  the annual
addition to their  benefits is  calculated  based on the  increase in the policy
surrender value less a calculated charge for the use of the bank's money to fund
the increase.

         The Salary  Continuation  Plans provides that, upon their retirement at
age 65, the  executive  officers  named  above will  receive  annual  retirement
benefits for their lifetime.  In addition,  the plan provides a death benefit to
their  beneficiaries.  If the executive officers should be discharged for cause,
all  benefits  under the  Salary  Continuation  Plan will be  forfeited.  If the
executive  officers  are  terminated  after a change of control of Pinnacle  (as
defined in the Salary  Continuation  Plan), they will be entitled to receive the
death benefits and the retirement  benefits after reaching age 65 as if they had
been  continually  employed by their respective banks until that time. The table
below  indicates  the  value of the  death  benefits  and  estimated  retirement
benefits,  which are dependent upon the income performance of the life insurance
policy, as of December 31, 1999 and 1998.

<TABLE>
<CAPTION>
                                            Estimated                             Estimated
                                              Death              Annual             Death              Annual
                                             Benefit           Retirement          Benefit           Retirement
                              Date of         Value             Benefits             Value            Benefits
ExecutiveOfficer             Agreement      12/31/99           12/31/99            12/31/98           12/31/98
-----------------            ---------      --------           --------            --------           --------

<S>                          <C>            <C>                <C>                 <C>                <C>
L. Jackson McConnell         10-24-95       $582,675           $28,949             $557,567           $30,947

James E. Purcell             12-16-94       $247,749           $25,834             $236,755           $21,748

Linton W. Eberhardt          11-10-94       $247,472           $18,299             $236,546           $20,212

Jackson McConnell, Jr.       03-19-99       $104,897           $61,496                  N/A               N/A
</TABLE>


Employment Security Agreement
-----------------------------

         James E. Purcell entered into an employment security agreement with the
bank on June 9, 1999  that  provides,  among  other  things,  that the bank will

                                       35

<PAGE>

continue to compensate  Mr.  Purcell at an annual rate of $125,000 from the time
of his  retirement from the bank until age 62.  No funding  under the  agreement
occurred in 1999.  Mr.  Purcell has  announced his intention to retire and it is
anticipated such retirement will occur in the second quarter of 2000.

         Pinnacle has never granted restricted stock, stock appreciation rights,
or similar awards to any of its present or past executive officers.


Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT

Principal Holders of Stock

         The  following  table  provides  for  each  person  who,  to  the  best
information and knowledge of the Company,  beneficially  owned 5% or more of the
outstanding   shares  of  Company  Stock  on  March  15,  2000,   the  following
information:  (a) the  owner's  name and  address,  (b) the  number of shares of
Company  Stock  owned,  and (c) the  percentage  such number  represents  of the
outstanding  shares of Company Stock.  Unless  otherwise  indicated,  the listed
owners are the record owners of and have sole voting and investment  powers over
their shares.

                                                       Number of Shares
   Name and Address of                                      Owned
    Beneficial Owner                                  (Percent of Class)
    ----------------                                 ---------------------

L. Jackson McConnell                                201,123 <F1>  (26.2%)
884 Elbert Street
Elberton, Georgia 30635

JAM Family Partnership I, L.P.                      197,950       (25.8%)
884 Elbert Street
Elberton, Georgia  30635

Alice Eberhardt                                     194,163 <F2>  (25.3%)
390 Virginia Hills Road
Royston, Georgia 30624

JAM Family Partnership II, L.P.                     193,863       (25.2%)
390 Virginia Hills Road
Royston, Georgia  30624

[FN]
<F1>     Includes  197,950  shares  held by the JAM Family  Partnership  I, L.P.
         pursuant to which Mr.  McConnell has sole voting and investment  power.
         Does not include 333 shares held by Mr.  McConnell's  wife with respect
         to which he disclaims beneficial ownership.

<F1>     Includes  193,863  shares held by the JAM Family  Partnership  II, L.P.
         pursuant to which Mrs.  Eberhardt has sole voting and investment power.
         Does not  include  600 shares  held by Mrs.  Eberhardt's  husband  with
         respect to which he disclaims beneficial ownership.
</FN>


Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The  Bank  has  had,  and  expects  to  have  in  the  future,  banking
transactions  in the ordinary  course of business with directors and officers of


                                       36

<PAGE>


Pinnacle and their associates,  including corporations in which such officers or
directors  are  shareholders,  directors  and/or  officers,  on the  same  terms
(including  interest rates and  collateral) as those  prevailing at the time for
comparable  transactions with other persons. Such transactions have not involved
more than the normal  risk of  collectibility  or  presented  other  unfavorable
features.


                                       37

<PAGE>


Item 13.  EXHIBITS AND REPORTS ON FORM 8-K

          (a)      The registrant submits herewith as exhibits to this report on
                   Form 10-KSB the  exhibits  required by Item 601 of Regulation
                   S-B, subject to Rule 12b-23 under the Securities Exchange Act
                   of 1934.


       Exhibit No.               Document
       -----------               --------

          3.1           Articles of Incorporation of  Pinnacle, as amended. <F1>

          3.2           Bylaws of Pinnacle, as amended. <F1>

          4.1           See exhibit 3.1 and 3.2  for provisions  of the Articles
                        of  Incorporation and Bylaws which  define the rights of
                        the holders of Common Stock of Pinnacle.

         10.1           Flexible Premium Life Insurance Plan. <F1><F2>

         10.2           Indexed Executive Salary Continuation Plan. <F1><F2>

         10.3           Employment Security Agreement.

         21.0           Subsidiaries of Pinnacle Financial Corporation. <F3>

         24.0           A Power of Attorney is set  forth on the signature pages
                        to this Form 10-KSB.

         27.0          Financial Data Schedule. (for SEC use only)
------------------
[FN]
        <F1>  Incorporated by reference from Pinnacle's Form S-4, filed with the
Securities and Exchange Commission, dated August 16, 1993.
        <F2>  Management  Contract or Compensatory  Plan required to be filed as
an exhibit.
        <F3>  Incorporated  by reference from  Pinnacle's Form 10-KSB filed with
the Securities and Exchange Commission dated March 30, 1999.
</FN>

         (b)  Pinnacle  did not file any  reports  on Form 8-K during the fourth
quarter of 1999.


                                       38


<PAGE>

                              PINNACLE FINANCIAL CORPORATION
                                   AND SUBSIDIARY


                              INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                                                         Page
     <S>                                                                  <C>
     INDEPENDENT AUDITOR'S REPORT  . . . . . . . . . . . . . . . . . . .  F-1

     FINANCIAL STATEMENTS

       Consolidated Balance Sheet dated as of
          December 31, 1999  . . . . . . . . . . . . . . . . . . . . . .  F-2
       Consolidated Statements of Income for the
          years ended December 31, 1999 and 1998 . . . . . . . . . . . .  F-3
       Consolidated Statements of Shareholders' Equity
          for the years ended December 31, 1999 and 1998 . . . . . . . .  F-4
       Consolidated Statements of Cash Flows for the
          years ended December 31, 1999 and 1998 . . . . . . . . . . . .  F-5
       Notes to consolidated financial statements  . . . . . . . . . . .  F-6 through F-22
</TABLE>


<PAGE>


                                January 14, 2000





To the Board of Directors and Shareholders
Pinnacle Financial Corporation and Subsidiaries
Elberton, Georgia  30635


                          Independent Auditor's Report

We  have  audited  the  accompanying  consolidated  balance  sheet  of  Pinnacle
Financial  Corporation and  Subsidiaries as of December 31, 1999 and the related
consolidated  statements  of income,  changes in  shareholders'  equity and cash
flows for the years ended December 31, 1999 and 1998. These financial statements
are the responsibility of the corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the consolidated financial position of Pinnacle Financial
Corporation and Subsidiaries at December 31, 1999 and the  consolidated  results
of their  operations  and their cash flows for the years ended December 31, 1999
and 1998 in conformity with generally accepted accounting principles.



                                        /s/ Whittemore & Smith, LLP




                                      F-1

<PAGE>

                   PINNACLE FINANCIAL CORPORATION & SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1999

<TABLE>
<CAPTION>

ASSETS
------
<S>                                                                 <C>
  Cash and due from banks                                           $     9,418,050
  Federal funds sold                                                        430,000
                                                                    ---------------
        Total cash and cash equivalents                                   9,848,050

  Securities available for sale                                          95,100,720
  Loans, net of allowance for loan losses of $2,113,735                 154,270,583

  Premises and equipment                                                  8,145,809
  Accrued interest receivable                                             2,678,597
  Other assets                                                            3,033,386
                                                                    ---------------

       Total assets                                                 $   273,077,145
                                                                    ===============

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

Liabilities
  Deposits:
    Noninterest-bearing                                             $    41,717,909
    Interest-bearing                                                    176,626,532
                                                                    ---------------
       Total deposits                                                   218,344,441

  Federal Home Loan Bank Advances                                        10,500,000
  Declared dividends payable                                              1,497,600
  Accrued interest and other liabilities                                  4,274,302
                                                                    ---------------

       Total liabilities                                                234,616,343
                                                                    ---------------

SHAREHOLDERS' EQUITY
--------------------
  Common stock, $10 par value; 5,000,000 shares
    authorized, 768,000 shares issued and outstanding                     7,680,000
  Capital surplus                                                         7,280,000
  Retained earnings                                                      25,060,148
  Accumulated other comprehensive income (loss)                     (     1,559,346)
                                                                    ---------------

       Total shareholders' equity                                        38,460,802
                                                                    ---------------

       Total liabilities and shareholders' equity                   $   273,077,145
                                                                    ===============
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                      F-2
<PAGE>
                   PINNACLE FINANCIAL CORPORATION & SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                     YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>

                                                                 1999                    1998
                                                                 ----                    ----
<S>                                                         <C>                      <C>
Interest Income
   Loans, including fees                                    $  14,527,573          $  14,850,838
   Securities available for sale                                5,799,190              5,440,598
   Federal funds sold and other                                   242,797                385,129
                                                            -------------          -------------

        Total interest income                                  20,569,560             20,676,565
                                                            -------------          -------------

Interest expense
   Deposits                                                     7,400,198              7,926,755
   Borrowings                                                      77,179                 -
                                                            -------------          -------------

        Total interest expense                                  7,477,377              7,926,755
                                                            -------------          -------------

Net interest income                                            13,092,183             12,749,810
   Provision for loan losses                                      300,000                225,000
                                                            -------------          -------------

        Net interest income after provision
          for loan losses                                      12,792,183             12,524,810
                                                            -------------          -------------

Other income
  Service charges on deposit accounts                           1,319,731              1,298,148
  Other service charges and fees                                  782,650                896,940
  Net realized gains on sales of securities
    available for sale                                             -                      28,254
  Other income                                                    194,303                204,445
                                                            -------------          -------------

        Total other income                                      2,296,684              2,427,787
                                                            -------------          -------------

Other expenses
   Salaries and employee benefits                               4,597,725              4,595,496
   Occupancy expense                                            1,204,433              1,109,520
   Net realized losses on sales of securities
     available for sale                                             4,089                 -
   Other expenses                                               1,918,101              2,177,292
                                                            -------------          -------------

        Total other expenses                                    7,724,348              7,882,308
                                                            -------------          -------------

Income before income taxes                                      7,364,519              7,070,289
Income tax expense                                              2,289,000              2,141,588
                                                            -------------          -------------

Net income                                                  $   5,075,519          $   4,928,701
                                                            =============          =============

Net income per share of common stock                                $6.61                  $6.42
                                                                    =====                  =====

Average shares outstanding                                        768,000                768,000
                                                                  =======                =======
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.


                                      F-3
<PAGE>

                   PINNACLE FINANCIAL CORPORATION & SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


<TABLE>
<CAPTION>
                                                                                               Accumulated
                                                                                                  Other             Total
                                                     Common        Capital      Retained      Comprehensive     Shareholders'
                                                     Stock         Surplus      Earnings      Income (Loss)        Equity
                                                     -----         -------      --------      -------------        ------

<S>                                               <C>           <C>           <C>             <C>               <C>
Balance, December 31, 1997                        $ 7,680,000   $ 7,280,000   $ 21,391,928    $    694,367      $ 37,046,295
                                                                                                                 -----------

Comprehensive income:
  Net income for 1998                                                            4,928,701                         4,928,701

  Change in unrealized gain (loss) on
    securities available for sale,
    net of reclassification adjustments
    and tax effects                                                                                323,913           323,913
                                                                                                                 -----------

      Total comprehensive income                                                                                   5,252,614
                                                                                                                 -----------

Cash dividends declared - $2.15 per share                                       (1,651,200)                      ( 1,651,200)
                                                  -----------   -----------   ------------    ------------       -----------

Balance, December 31, 1998                          7,680,000     7,280,000     24,669,429       1,018,280        40,647,709
                                                                                                                 -----------

Comprehensive income:
  Net income for 1999                                                            5,075,519                         5,075,519

  Change in unrealized gain (loss) on
    securities available for sale,
    net of reclassification adjustments
    and tax effects                                                                            ( 2,577,626)      ( 2,577,626)
                                                                                                                 -----------

      Total comprehensive income                                                                                   2,497,893
                                                                                                                 -----------

Cash dividends declared - $6.10 per share                                      ( 4,684,800)                      ( 4,684,800)
                                                  -----------   -----------   ------------    ------------       -----------

Balance, December 31, 1999                        $ 7,680,000   $ 7,280,000   $ 25,060,148    $( 1,559,346)     $ 38,460,802
                                                  ===========   ===========   ============    =============     ============
</TABLE>



The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                      F-4
<PAGE>


                  PINNACLE FINANCIAL CORPORATION & SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>

                                                                       1999            1998
                                                                       ----            ----
<S>                                                                <C>             <C>
Cash flows from operating activities
  Net income                                                       $   5,075,519   $  4,928,701
                                                                   -------------   ------------
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation and amortization                                      608,560        550,163
      Provision for loan losses                                          300,000        225,000
      (Gain) loss on sale of premises and equipment                       18,791   (      2,302)
      Deferred income taxes                                        (      17,968)  (     63,462)
      Net realized (gains) losses on securities
        available for sale                                                 4,089   (     28,254)
      Net change in:
          Accrued interest receivable and other assets             (   1,209,577)  (    227,729)
          Accrued expenses and other liabilities                         676,086      1,015,481
                                                                   -------------   ------------
      Total adjustments                                                  379,981      1,468,897
                                                                   -------------   ------------

  Net cash provided by operating activities                            5,455,500      6,397,598
                                                                   -------------   ------------


Cash flows from investing activities
  Purchase of securities available for sale                        (  36,366,849)  ( 38,864,848)
  Proceeds from sales of securities available
     for sale                                                          8,653,513      1,497,344
  Proceeds from maturities, prepayments and calls
     of securities available for sale                                 22,838,187     27,608,521
  Net change in loans                                              (  12,545,526)        38,148
  Proceeds from sale of premises and equipment                            24,161         33,185
  Purchases of premises and equipment                              (     160,533)  (  1,565,580)
                                                                   -------------   ------------

  Net cash used by investing activities                            (  17,557,047)  ( 11,253,230)
                                                                   -------------   ------------


Cash flows from financing activities
  Net change in deposits                                           (   2,597,117)     8,653,901
  Net change in federal funds purchased                                   -        (    360,000)
  Proceeds from borrowings                                            10,500,000         -
  Cash dividends paid                                              (   3,187,200)  (  1,651,200)
                                                                   -------------   ------------

  Net cash provided by financing activities                            4,715,683      6,642,701
                                                                 ---------------   ------------


Net change in cash and cash equivalents                            (   7,385,864)     1,787,069
Cash and cash equivalents at January 1                                17,233,914     15,446,845
                                                                   -------------   ------------

Cash and cash equivalents at December 31                           $   9,848,050   $ 17,233,914
                                                                   =============   ============


Interest paid on deposits and borrowings                           $   7,057,025   $  7,316,086
                                                                   =============   ============

Income taxes paid                                                  $   2,278,269   $  2,311,965
                                                                   =============   ============
</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                      F-5
<PAGE>

                  PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The  accounting  and  reporting  practices of the company  conform with
generally accepted accounting principles and general practice within the banking
industry. The following is a summary of the more significant policies:

         Nature of operations. Pinnacle Financial Corporation (the Company) is a
         --------------------
bank holding company whose principal activity is the ownership and management of
its wholly-owned subsidiary, Pinnacle Bank, N.A. (the Bank). The bank provides a
variety of financial services to individuals and corporate customers through its
eight  locations in  Northeast  Georgia.  The bank's  primary  deposit  products
include non-interest and interest-bearing  checking accounts,  savings accounts,
and certificates of deposit.  The bank also offers various lending products with
a substantial  portion of the portfolio  collateralized by real estate. The bank
operates  under a national  bank  charter  and is subject to  regulation  by the
Office  of the  Comptroller  of the  Currency  (OCC)  and  the  Federal  Deposit
Insurance Corporation.

         Basis of Consolidation.  The consolidated  financial statements include
         ----------------------
the  accounts  of  Pinnacle   Financial   Corporation   (the  Company)  and  its
wholly-owned  commercial  bank  subsidiary,  Pinnacle Bank, N.A. All significant
intercompany accounts and transactions have been eliminated in consolidation.

         Use of Estimates. The preparation of financial statements in conformity
         ----------------
with  generally  accepted  accounting  principles  requires  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting  period.  Actual results could differ from those estimates.
Material  estimates that are particularly  susceptible to significant  change in
the near term relate to the  determination  of the allowance for loan losses and
the valuation of deferred tax assets.

         The  determination  of the adequacy of the allowance for loan losses is
based on estimates that are particularly  susceptible to significant  changes in
the  economic  environment  and  market  conditions.   In  connection  with  the
determination of the estimated losses on loans,  management obtains  independent
appraisals for significant collateral.

         The bank's loans are generally  secured by specific items of collateral
including real property, consumer assets, and business assets. Although the bank
has a diversified loan portfolio,  a substantial portion of its debtors' ability
to honor their  contracts  is  dependent  on local  economic  conditions  in the
granite and agricultural industries.

         While  management  uses available  information  to recognize  losses on
loans,  further  reductions  in the  carrying  amounts of loans may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an  integral  part of their  examination  process,  periodically  review  the
estimated  losses on loans.  Such  agencies  may require  the bank to  recognize
additional losses based on their judgments about  information  available to them
at the time of their examination.


                                      F-6

<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

         Significant Group  Concentrations of Credit Risk. Most of the company's
         ------------------------------------------------
activities are with customers located in the Northeast Georgia area. The company
has significant  concentrations,  as defined by their regulators, in the granite
and agricultural industries.

         Cash and cash  equivalents.  For the  purpose  of  presentation  in the
         --------------------------
consolidated  statements of cash flows,  cash and cash equivalents  include cash
and due from banks and federal  funds sold,  all of which mature  within  ninety
days. The prior year cash flow statement has been changed to be comparable  with
this presentation.

         Securities available for sale. Securities available for sale consist of
         -----------------------------
all debt  securities  and certain  equity  securities  not classified as trading
securities  nor as held to maturity  securities.  The company has classified all
debt securities as available for sale. Securities available for sale are carried
at  fair  value  with  unrealized  gains  and  losses,  net of  reclassification
adjustments and tax effects,  reported in accumulated other comprehensive income
(loss).

         Purchase premiums and discounts are recognized in interest income using
the interest method over the terms of the securities. Declines in the fair value
of available  for sale  securities  below their cost that are deemed to be other
than  temporary are  reflected in earnings as realized  losses.  Realized  gains
(losses) on the sale of securities  available for sale are recorded on the trade
date and are determined using the specific-identification method.

         The  company's   investment  policy  states  that  derivative  security
instruments  will not be  purchased.  Therefore,  the  company  does not own any
derivative  security   instruments  nor  does  it  participate  in  any  hedging
activities.

         Loans.  The  bank  grants  agribusiness,  commercial,  residential  and
         -----
consumer loans to individuals  and a variety of firms and  corporations  located
primarily in counties of Northeast  Georgia.  Although the subsidiary bank has a
diversified  loan  portfolio,  a  substantial  portion of the loan  portfolio is
collateralized  by improved and unimproved real estate and is dependent upon the
real  estate  market.  Loans are stated at the  amount of the  unpaid  principal
balances reduced by the allowance for loan losses.

         Interest  on loans is  accrued  and  credited  to  income  based on the
principal amount outstanding. Accrual of interest is discontinued on a loan when
management  believes,  after  considering  economic and business  conditions and
collection  efforts,  there is a doubt  concerning full  collectibility  of both
principal and interest.  Interest income is subsequently  recognized only to the
extent cash payments are received. Loans are returned to accrual status when all
the principal and interest  amounts  contractually  due are brought  current and
future payments are reasonably assured.

         The  effect of the  capitalization  of loan  fees and loan  origination
costs has been computed by management  and does not have a material  impact upon
these financial statements.


                                      F-7

<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

         Allowance for loan losses. The allowance for loan losses is established
         -------------------------
as losses are  estimated to have  occurred  through a provision  for loan losses
charged to  earnings.  Loan  losses  are  charged  against  the  allowance  when
management  believes  the  uncollectibility  of a  loan  balance  is  confirmed.
Subsequent recoveries, if any, are credited to the allowance.

         The  allowance  for loan  losses is  evaluated  on a  regular  basis by
management and is based upon management's  periodic review of the collectibility
of the loans in light of historical experience,  the nature and size of the loan
portfolio,  adverse  situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral and prevailing economic conditions.
This  evaluation is  inherently  subjective  as it requires  estimates  that are
susceptible to significant revision as more information becomes available.

         A loan is considered  impaired when,  based on current  information and
events,  it is probable that the company will be unable to collect the scheduled
payments of principal or interest when due according to the contractual terms of
the loan agreement.  Factors considered by management in determining  impairment
include  payment  status,  collateral  value,  and the probability of collecting
scheduled  principal  and  interest  payments  when due.  Loans that  experience
insignificant payment delays and payment shortfalls generally are not classified
as  impaired.  Management  determines  the  significance  of payment  delays and
payment shortfalls on a case-by-case basis, taking into consideration all of the
circumstances surrounding the loan and the borrower, including the length of the
delay, the reasons for the delay,  the borrower's prior payment record,  and the
amount  of the  shortfall  in  relation  to the  principal  and  interest  owed.
Impairment  is measured  on a loan by loan basis by either the present  value of
expected future cash flows discounted at the loan's effective interest rate, the
loan's  obtainable market price, or the fair value of the collateral if the loan
is collateral  dependent.  Substantially  all of the company's  loans which have
been  identified  as impaired  have been  measured by the fair value of existing
collateral (generally real estate).

         Large  groups of smaller  balance  homogeneous  loans are  collectively
evaluated for impairment.  Accordingly, the company does not separately identify
individual consumer loans for impairment disclosures.

         Off-balance-sheet  financial  instruments.  In the  ordinary  course of
         -----------------------------------------
business, the company has entered into  off-balance-sheet  financial instruments
consisting of commitments to extend credit,  commitments under personal lines of
credit,  commercial  lines of credit,  credit  card  arrangements,  and  standby
letters of credit. Such financial instruments are recorded when they are funded.

         Premises and  equipment.  Land is carried at cost.  Other  premises and
         -----------------------
equipment  are recorded at cost less  accumulated  depreciation  computed by the
straight line method over the estimated useful lives of the assets.  Maintenance
and repairs are expensed as incurred while major additions and  improvements are
capitalized.


                                      F-8
<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

         Foreclosed  real  estate.   Real  estate  properties  acquired  through
         ------------------------
foreclosure are initially recorded at the lower of the bank's carrying amount or
fair value less cost to sell,  establishing  a new cost basis.  Any  write-downs
based on the asset's  fair value at the date of  acquisition  are charged to the
allowance  for loan  losses.  Costs of  significant  property  improvements  are
capitalized. Subsequent to foreclosure, valuations are periodically performed by
management and the assets are adjusted as needed to the lower of carrying amount
or fair value less cost to sell. Income and expenses for foreclosed real estate,
including  adjustments to the carrying  amount  subsequent to  foreclosure,  are
included in current earnings.

         Income taxes. Provisions for income taxes are based on taxes payable or
         ------------
refundable  for the current year (after  exclusion of nontaxable  income such as
interest on state and  municipal  securities)  and  deferred  taxes on temporary
differences  between the amount of taxable income and pretax  financial  income.
Deferred income tax assets and  liabilities  are determined  using the liability
(or balance  sheet)  method.  Under this  method,  the net deferred tax asset or
liability is determined  based on the tax effects of the  temporary  differences
between  the  book  and tax  bases  of the  various  balance  sheet  assets  and
liabilities and gives current recognition to changes in tax rates and laws.

         Consolidated  federal  and state  income tax  returns are filed for the
holding  company  and  subsidiary  and the  actual tax  liability  or benefit is
allocated  to each  member  of the  group  for the  taxable  year  as  would  be
determined  on a separate  return  basis in  accordance  with the  executed  tax
allocation agreement between the company and its subsidiary.  Any carryovers and
carrybacks of tax attributes from separate return years are given full effect in
determining  separate company tax liability or benefit if such items are availed
of in reducing the consolidated tax liability of the affiliated group.

         Net  income per share of common  stock.  Net income per share of common
         --------------------------------------
stock is computed  by  dividing  net income by the  weighted  average  number of
shares of common stock outstanding during the year.

         Comprehensive  income.  The company  adopted  FAS No.  130,  "Reporting
         ---------------------
Comprehensive  Income," as of January 1, 1998.  Accounting  principles generally
require that recognized revenue,  expenses,  gains and losses be included in net
income.  Although certain changes in assets and liabilities,  such as unrealized
gains and losses on  available-for-sale  securities,  are reported as a separate
component of the equity section of the balance sheet, such items, along with net
income, are components of comprehensive  income. The adoption of FAS No. 130 had
no effect on the company's net income or shareholders' equity.

         The change in unrealized  gain (loss) on securities  available for sale
and related tax effects are as follows:
<TABLE>
<CAPTION>
                                                            Years Ended December 31
                                                             1999              1998
                                                             ----              ----
<S>                                                      <C>                 <C>
         Net unrealized gain (loss) on securities
           available for sale                            ($2,497,466)       $ 1,670,956
         Reclassification adjustment for gains
           (losses) realized in income                   (    17,608)       (    28,568)
                                                         -----------        -----------
         Net unrealized gains (losses)                   ( 2,515,074)         1,642,388
         Tax effects                                         955,728        (   624,108)
                                                         -----------        -----------

         Net-of-tax amount                               ($1,559,346)       $ 1,018,280
                                                         ===========        ===========
</TABLE>


                                      F-9
<PAGE>


                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 2 - RESTRICTION ON CASH AND DUE FROM BANKS

         The Federal  Reserve  Bank  requires  the  company to maintain  certain
levels of cash on hand or on deposit with the Federal Reserve Bank. The required
cash  level  at  December  31,  1999 and 1998  was  $3,803,000  and  $2,740,000,
respectively.  The company is also  required to maintain a minimum  deposit with
the Federal Reserve for clearings.  The required deposit was $25,000 at December
31, 1999 and 1998.


NOTE 3 - SECURITIES AVAILABLE FOR SALE

         The amortized cost and fair value of investment securities,  with gross
unrealized gains and losses, are summarized below:
<TABLE>
<CAPTION>
                                                                       Gross               Gross
                                                   Amortized         Unrealized          Unrealized           Fair
                                                      Cost              Gains              Losses             Value
                                                      ----              -----              ------             -----
<S>                                               <C>                <C>                <C>                <C>
     December 31, 1999:
     U.S. Treasury                                $ 5,761,533        $   24,748         ($   17,422)       $ 5,768,859
     U.S. Government agencies                      52,206,081               --          ( 1,728,631)        50,477,450
     State and Municipals                          19,571,315           170,693         (   445,196)        19,296,812
     Mortgage-backed securities                    17,824,729             2,089         (   481,019)        17,345,799
     Other securities                               2,252,136               --          (    40,336)         2,211,800
                                                   ----------         ---------         -----------        -----------

                                                  $97,615,794        $  197,530         ($2,712,604)       $95,100,720
                                                   ==========         =========         ===========        ===========

     December 31, 1998:
     U.S. Treasury                                $13,733,050        $  387,125          $      --         $14,120,175
     U.S. Government agencies                      56,509,268           600,719         (    67,869)        57,042,118
     State and Municipals                          15,736,579           662,004         (     7,213)        16,391,370
     Mortgage-backed securities                     4,203,932            44,641              --              4,248,573
     Other securities                                 982,069            22,981              --              1,005,050
                                                   ----------         ---------         -----------        -----------

                                                  $91,164,898        $1,717,470         ($   75,082)       $92,807,286
                                                   ==========         =========         ===========        ===========
</TABLE>

         Other  securities  include  stock in the Federal Home Loan Bank and the
Federal Reserve Bank. The total investments in these stocks at December 31, 1999
and 1998 was  $1,223,300 and $448,800,  respectively.  The stocks are carried at
cost,  since they do not have a readily  determinable  fair value  because their
ownership is restricted  and lacks a market.  These stocks are classified as due
after ten years for contractual maturities.

         The amortized cost and fair value of securities by contractual maturity
at December 31, 1999 were as follows:
                                                     Amortized         Fair
                                                       Cost            Value
                                                       ----            -----

     Due in one year or less                        $ 5,148,297     $ 5,163,869
     Due after one year through five years           62,921,356      61,256,334
     Due after five years through ten years           6,757,438       6,560,160
     Due after ten years                              4,963,974       4,774,558
                                                     ----------      ----------

                                                     79,791,065      77,754,921
     Mortgage-backed securities                      17,824,729      17,345,799
                                                     ----------      ----------

                                                    $97,615,794     $95,100,720
                                                     ==========      ==========

                                      F-10
<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 3 - SECURITIES AVAILABLE FOR SALE - (CONTINUED)

     Actual maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations.

     Nontaxable  and taxable  interest  income on securities  available for sale
were as follows:
                                                    1999              1998
                                                    ----              ----

          Nontaxable                            $  894,129         $  838,274
          Taxable                                4,905,061          4,602,324
                                                 ---------          ---------

                                                $5,799,190         $5,440,598
                                                 =========          =========


     For the years  ended  December  31, 1999 and 1998,  proceeds  from sales of
securities amounted to $8,653,513 and $1,497,344,  respectively.  Gross realized
gains  amounted to $22,733 and  $30,678,  respectively.  Gross  realized  losses
amounted to $26,822 and $2,424, respectively.

     Securities  available  for sale,  with a  carrying  value of  approximately
$27,770,981  and $28,098,934 at December 31, 1999 and 1998,  respectively,  were
pledged to secure public  deposits and for other purposes  required or permitted
by law.


NOTE 4 - LOANS

     Components of loans at December 31, 1999 and 1998 were as follows:

                                                1999                  1998
                                                ----                  ----

     Commercial                             $ 19,369,499          $ 22,383,379
     Real estate construction                  6,602,735             5,017,757
     Commercial real estate                   61,718,106            48,711,718
     Residential real estate                  41,693,171            39,521,064
     Consumer                                 27,000,807            28,461,144
                                             -----------           -----------

         Total loans                         156,384,318           144,095,062
     Allowance for loan losses              (  2,113,735)         (  2,070,005)
                                             -----------           -----------

        Net loans                           $154,270,583          $142,025,057
                                             ===========           ===========


         The accrual of interest  has been  discontinued  on loans  amounting to
$48,641 at December  31, 1999 and  $139,087 at  December  31,  1998.  Unrecorded
interest  income on non-accrual  loans was $9,267 and $11,851 for 1999 and 1998,
respectively.

                                      F-11


<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 5 - ALLOWANCE FOR LOAN LOSSES

         Activity in the allowance for loan losses follows:


                                                       Years Ended December 31
                                                     ---------------------------
                                                        1999            1998
                                                        ----            ----

         Balance at January 1                        $2,070,005      $2,038,015
                                                      ---------       ---------
            Loans charged off                        (  425,334)     (  332,502)
            Recoveries                                  169,064         139,492
                                                      ---------       ---------
               Net loans charged off                 (  256,270)     (  193,010)
           Provision for loan losses                    300,000         225,000
                                                      ---------       ---------

         Balance at December 31                      $2,113,735      $2,070,005
                                                      =========       =========


         Loans having  carrying  values of $650,741 and  $1,718,154  in 1999 and
1998,  respectively,  have been recognized as impaired.  The total allowance for
loan losses  related to those loans was  $476,752 and $725,820 in 1999 and 1998,
respectively.  The average recorded investment in impaired loans during 1999 and
1998 was $1,107,352 and  $1,076,924,  respectively.  Interest income on impaired
loans of $98,230 and $70,062 was recognized  for cash payments  received in 1999
and 1998, respectively.


NOTE 6 - PREMISES AND EQUIPMENT

         Premises and equipment at December 31, 1999 and 1998 were as follows:

                                                        1999           1998
                                                        ----           ----

         Land                                      $ 1,302,199      $ 1,270,252
         Land improvements                             356,073          345,872
         Buildings and improvements                  5,891,761        5,900,142
         Furniture & fixtures                        4,438,857        4,727,564
                                                    ----------       ----------
             Total cost                             11,988,890       12,243,830
         Accumulated depreciation                  ( 3,843,081)     ( 3,607,042)
                                                    ----------       ----------

             Net premises and equipment            $ 8,145,809      $ 8,636,788
                                                    ==========       ==========

     Depreciation  expense  included in occupancy  expense for 1999 and 1998 was
$608,560 and $550,163, respectively.


                                      F-12

<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 7 - OTHER ASSETS AND OTHER LIABILITIES

         The components of other assets and other liabilities were as follows:

<TABLE>
<CAPTION>
                                                                 1999             1998
                                                                 ----             ----
<S>                                                           <C>              <C>
         Other assets:
           Deferred income taxes                              $1,412,254       $   --
           Cash surrender value of life insurance              1,197,731        1,067,419
           Foreclosed real estate                                175,434          495,566
           Prepaid income tax                                     96,162           83,138
           Other                                                 151,805          185,204
                                                               ---------        ---------

                                                              $3,033,386       $1,831,327
                                                               =========        =========


         Accrued interest and other liabilities:
           Deferred income taxes                              $    --          $  185,550
           Accrued interest payable                            2,812,410        2,392,058
           Compensation and retirement deferral                  525,798          415,152
           Other                                                 936,094          605,456
                                                               ---------        ---------

                                                              $4,274,302       $3,598,216
                                                               =========        =========
</TABLE>


NOTE 8 - DEPOSITS

         Deposits by maturity at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
                                                                                          Over
                                       0-3 Months       4-12 Months        1-5 Years     5 Years           Total
                                       ----------       -----------        ---------     -------           -----
<S>                                   <C>                   <C>              <C>           <C>          <C>
Demand deposits, savings
   and NOW deposits                   $111,163,683          $   --           $    --       $ --         $111,163,683
 Time deposits under $100,000           19,719,936       46,504,698        15,077,347      2,284          81,304,265
Time deposits over $100,000              6,514,417       17,004,760         2,357,316        --           25,876,493
                                       -----------       ----------        ----------       ----         -----------

                                      $137,398,036      $63,509,458       $17,434,663     $2,284        $218,344,441
                                       ===========       ==========        ==========      =====         ===========
</TABLE>


         The amount of demand  deposits  reclassified  as loans was $111,090 and
$245,114 at December 31, 1999 and 1998, respectively.


NOTE 9 - FEDERAL FUNDS PURCHASED

         Federal funds purchased  generally  mature within one to four days from
the  transaction  date.  The company had federal  funds  purchased for a minimum
number of days  during 1999 and 1998.  Interest  expense in the amount of $5,596
was incurred on these amounts in 1999 and is included  with interest  expense on
borrowed funds.  For 1998, the interest  expense on these funds in the amount of
$657 was netted with interest income on federal funds sold.

                                      F-13

<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 10 - FEDERAL HOME LOAN BANK ADVANCES

         Federal  Home Loan Bank (FHLB)  advances at December  31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>

                                                               1999              1998
                                                               ----              ----

<S>                                                        <C>                    <C>
         Federal Home Loan Bank Short-Term Advances        $ 7,500,000            $  --
         Federal Home Loan Bank Callable Advance             3,000,000               --
                                                            ----------             -----

                                                           $10,500,000            $  --
                                                            ==========             =====
</TABLE>

         The FHLB  advances  are  secured by the  company's  investment  in FHLB
stock,  which  totaled  $774,500  at  December  31,  1999 and also by a  blanket
floating lien on portions of the company's loan portfolio.

         The short-term advances require monthly interest payments and mature in
2000. Short-term advances of $5,500,000 accrue interest at a floating rate which
reprices daily based on the Federal Funds rate and $2,000,000 accrue interest at
a rate of 5.91%.  The callable  advance requires  quarterly  interest  payments,
matures in 2004,  and accrues  interest at a rate of 5.71%.  The FHLB may demand
payment on the callable advance beginning in September 2001.


NOTE 11 - OTHER EXPENSES

         The major components of other expenses were as follows:
<TABLE>
<CAPTION>
                                                            1999              1998
                                                            ----              ----
<S>                                                    <C>               <C>
         Professional fees                             $  271,550        $  442,560
         Stationary, supplies and printing expense        196,250           255,521
         Advertising and public relations expense         225,126           240,815
         Other expenses                                 1,225,175         1,238,396
                                                        ---------         ---------

                                                       $1,918,101        $2,177,292
                                                        =========         =========
</TABLE>


NOTE 12 - EMPLOYEE BENEFIT PLANS

         401(K) Plan. The company maintains a defined contribution 401(k) profit
sharing  plan  covering   substantially   all  full-time   employees.   Employee
contributions to the plan are based on salary levels and are discretionary,  but
the maximum employer  matching  contribution may not exceed 6% of gross salaries
in any year.  The plan was amended  during 1998 to provide an additional  profit
sharing  contribution  allocated to employees  based on four  employee  classes.
During 1999, the plan was amended to allow  participants to borrow from the plan
and to  change  the  entry  dates  from  semi-annually  to  quarterly.  Employer
contribution expense included in salaries and employee benefits for the plan was
$200,486 in 1999 and $226,568 in 1998.


                                      F-14
<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 12 - EMPLOYEE BENEFIT PLANS - (CONTINUED)

         Employee Stock  Ownership Plan. An Employee Stock Ownership Plan (ESOP)
was adopted by the bank in 1992. The ESOP is a non-contributory  qualified stock
bonus plan established to accumulate  shares of Pinnacle  Financial  Corporation
common  stock in the ESOP  trust  for the  benefit  of all  eligible  employees.
Contributions  to the plan are made at the discretion of the Board of Directors.
There were no  contributions  for the ESOP in 1999 or 1998.  As of December  31,
1999, the ESOP had purchased no qualified employer securities.

         Executive Retirement Benefits.  The bank subsidiary has a non-qualified
executive salary  continuation  plan which will provide benefits to the Chairman
and Vice-Chairman of the Board of Directors and selected executive officers upon
retirement.  This retirement benefit amount will be determined each year using a
life  insurance  contract  indexed as if purchased on the effective  date of the
plan.  The bank is not required to fund the plan nor  obligated to purchase such
life insurance policies.


NOTE 13 - INCOME TAXES

         The provision for income taxes consisted of the following:

<TABLE>
<CAPTION>
                                                          Years Ended December 31
                                                          -----------------------
                                                        1999                   1998
                                                        ----                   ----
<S>                                                   <C>                    <C>
         Current provision - federal                  $2,180,578             $2,123,747
         Current provision - state                       130,294                 81,303
         Deferred portion                             (   21,872)            (   63,462)
                                                       ---------              ---------

                                                      $2,289,000             $2,141,588
                                                       =========              =========
</TABLE>


         The  provision  for federal  income taxes is less than that computed by
applying the federal statutory rate of 34% in 1999 and 1998, as indicated in the
following analysis:

<TABLE>
<CAPTION>
                                                                 1999          1998
                                                                 ----          ----

<S>                                                              <C>            <C>
         Statutory federal rate                                  34.0%          34.0%
         Increase (decrease) resulting from:
            State taxes net of federal tax benefit                1.2%            .7%
            Tax-exempt income                                   ( 5.1%)        ( 4.4%)
            Interest and other nondeductible expenses             1.6%           1.1%
            Other, net                                          (  .6%)        ( 1.1%)
                                                                 -----          -----

                                                                  31.1%         30.3%
                                                                  =====         =====
</TABLE>

                                      F-15

<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 13 - INCOME TAXES - (CONTINUED)

         The components of the deferred income tax asset (liability) included in
other assets (liabilities) at December 31, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
                                                       1999                 1998
                                                       ----                 ----
<S>                                                  <C>                <C>
   DEFERRED TAX ASSETS:
         Net unrealized loss on securities
           available for sale                        $ 955,728           $    --
         Allowance for loan losses                     629,747              613,130
         Deferred directors' fees and interest         153,371              129,534
         Other, net                                     97,260               94,631
                                                     ---------             --------

                                                     1,836,106              837,295
                                                     ---------            ---------

   DEFERRED TAX LIABILITIES:
         Net unrealized gain on securities
            available for sale                           --                 624,108
         Depreciation                                  404,885              380,822
         Other, net                                     18,967               17,915
                                                     ---------            ---------

                                                       423,852            1,022,845
                                                     ---------            ---------

         Net deferred tax asset (liability)          $1,412,254          $( 185,550)
                                                      =========           =========
</TABLE>

NOTE 14 - RELATED-PARTY TRANSACTIONS

         In the normal course of business,  executive  officers and directors of
the company and its bank  subsidiary,  and certain  business  organizations  and
individuals  associated with them,  maintain a variety of relationships with the
bank.  Such  related  party  transactions  were made in the  ordinary  course of
business on  substantially  the same terms and  conditions,  including  interest
rates  and  collateral,  as those  prevailing  at the same  time for  comparable
transactions  with other  customers,  and did not, in the opinion of management,
involve  more than normal  credit risk or present  other  unfavorable  features.
Activity in related party loans follows:

                                                 Years Ended December 31
                                                 -----------------------
                                                 1999               1998
                                                 ----               ----

         Balance at January 1                 $3,834,451         $3,486,622
               New loans                       6,935,859          2,808,180
               Repayments                     (4,281,651)        (2,460,351)
                                               ---------          ---------

         Balance at December 31               $6,488,659          $3,834,451
                                               =========          =========

         The  company  has also  approved  lines of  credit  for  directors  and
executive  officers.  These  commitments  to extend  credit for related  parties
totaled $3,080,386 and $4,890,549 at December 31, 1999 and 1998, respectively.

         The company had deposits of approximately $3,376,190 and $3,452,488 for
related parties at December 31, 1999 and 1998, respectively.


                                      F-16
<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 15 - CONTINGENT LIABILITIES

         The  company is party to  litigation  and claims  arising in the normal
course of business.  Management, after consultation with legal counsel, believes
that the  liabilities,  if any, arising from such litigation and claims will not
be material to the consolidated financial statements.


NOTE 16 - OFF-BALANCE-SHEET ACTIVITIES

         The company is a party to financial instruments with  off-balance-sheet
risk in the  normal  course  of  business  to meet  the  financial  needs of its
customers.  These financial instruments consist of commitments to extend credit,
personal  lines  of  credit,   commercial  lines  of  credit,  and  credit  card
arrangements  and  standby  letters of credit.  Those  instruments  involve,  to
varying  degrees,  elements  of credit and  interest-rate  risk in excess of the
amount recognized in the consolidated balance sheet.

         The company's exposure to credit loss in the event of nonperformance by
the  other  party  to  the  financial   instrument  for  all  off-balance  sheet
commitments is represented by the contractual amount of those  instruments.  The
company  uses the same credit  policies in making  commitments  and  conditional
obligations as it does for on-balance-sheet instruments.

         A summary of the company's financial instruments whose contract amounts
represent credit risk at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>

                                                        1999                    1998
                                                        ----                    ----
<S>                                                 <C>                     <C>
         Commitments to extend credit               $ 2,546,260             $ 3,561,294
         Credit card arrangements                     2,862,217               2,354,855
         Undisbursed lines of credit                 17,836,666              17,137,046
         Standby letters of credit                    2,323,044                 571,700
         Commitment to issue letter of credit            --                   1,750,000
                                                     ----------             -----------

                                                    $25,568,187             $25,374,895
                                                    ==========               ==========
</TABLE>


         Commitments  to extend  credit are  agreements to lend to a customer as
long as there is no  violation of any  condition  established  in the  contract.
Commitments  generally have fixed expiration dates or other termination  clauses
and may require  payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future credit exposure or cash requirements.  The amount of collateral
obtained,  if it is deemed  necessary by the company,  is based on  management's
credit evaluation of the customer.

         Standby  letters of credit are  conditional  commitments  issued by the
company to  guarantee  the  performance  of a customer to a third  party.  Those
letters  of credit  are issued to support  both  public  and  private  borrowing
arrangements.  The  credit  risk  involved  in  issuing  letters  of  credit  is
essentially  the same as that  involved in  extending  loans to  customers.  The
company may hold collateral supporting these commitments if deemed necessary.


                                      F-17
<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS

         The fair value of a financial  instrument  is the  current  amount that
would be exchanged between willing parties,  other than in a forced liquidation.
Fair value is best determined based upon quoted market prices.  However, in many
instances, there are no quoted market prices for the company's various financial
instruments.  In cases where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques.  Those
techniques are  significantly  affected by the assumptions  used,  including the
discount  rate and estimates of future cash flows.  Accordingly,  the fair value
estimates  may not be realized in an  immediate  settlement  of the  instrument.
Certain financial instruments and all nonfinancial instruments are excluded from
fair  value  disclosure  requirements.  Accordingly,  the  aggregate  fair value
amounts presented may not necessarily represent the underlying fair value of the
company.

         The  estimated  fair  values,  and  related  carrying  amounts,  of the
company's financial instruments were as follows ($ in thousands):
<TABLE>
<CAPTION>

                                           December 31, 1999      December 31, 1998
                                         --------------------   --------------------
                                         Carrying      Fair     Carrying     Fair
                                          Amount       Value     Amount      Value
                                          ------       -----     ------      -----
<S>                                       <C>        <C>        <C>        <C>
Financial assets:
  Cash and cash equivalents               $  9,848   $  9,848   $ 17,234   $ 17,234
  Securities available for sale             95,101     95,101     92,807     92,807
  Loans, net                               154,270    154,414    142,025    142,755
  Accrued interest receivable &
     other assets                           13,858     13,858     13,121     13,121

Financial liabilities:
  Deposits                                $218,344   $207,249   $220,941   $212,840
  Borrowings                                10,500     10,458       --         --
  Accrued interest payable &
     other liabilities                       5,772      5,772      3,598      3,598

Off-balance-sheet instruments:
  Commitments, commercial lines
    of credit, and standby
    letters of credit                                $     47              $    151
</TABLE>



         The  following  methods  and  assumptions  were used by the  company in
estimating fair value disclosures for financial instruments:

         Cash and cash equivalents - The carrying amounts of cash and short-term
instruments approximate fair values.

         Securities  available for sale - Fair values for securities,  excluding
Federal  Home Loan Bank and  Federal  Reserve  Bank  Stock,  are based on quoted
market prices.  The carrying value of Federal Home Loan Bank and Federal Reserve
Bank Stock approximates fair value based on redemption provisions.


                                      F-18
<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS - (CONTINUED)

         Loans - For  variable-rate  loans that reprice  frequently  and have no
significant  change in credit  risk,  fair values are based on carrying  values.
Fair values for certain mortgage loans (e.g.,  one-to-four family  residential),
credit card loans, and other consumer loans are based on quoted market prices of
similar loans sold in conjunction with securitization transactions, adjusted for
differences in loan characteristics.  Fair values for commercial real estate and
commercial  loans are  estimated  using  discounted  cash flow  analyses,  using
interest rates currently being offered for loans with similar terms to borrowers
of similar credit  quality.  Fair values for impaired loans are estimated  using
discounted cash flow analyses or underlying collateral values, where applicable.

         Deposit  liabilities - The fair values  disclosed  for demand  deposits
(e.g.,  interest and noninterest  checking,  passbook savings,  and money market
accounts) are equal to the amount  payable on demand at the reporting date (that
is, their carrying amounts).  The carrying amounts of variable-rate,  fixed-term
certificates  of deposit  approximate  their fair values at the reporting  date.
Fair  values for  fixed-rate  certificates  of  deposit  are  estimated  using a
discounted  cash flow  calculation  that applies  interest rates currently being
offered on certificates to a schedule of aggregated  expected monthly maturities
on time deposits.

         Borrowings - The carrying  amounts of federal funds purchased and other
short-term borrowings maturing within ninety days approximate their fair values.
The fair  values of the  company's  long-term  borrowings  are  estimated  using
discounted  cash  flow  analyses  based  on the  company's  current  incremental
borrowing rates for similar types of borrowing arrangements.

         Accrued interest - The carrying amounts of accrued interest approximate
fair values.

         Off-balance-sheet  instruments  -  Fair  values  for  off-balance-sheet
lending  commitments  are based on fees currently  charged to enter into similar
agreements,  taking into account the remaining  terms of the  agreements and the
counterparties' credit standing.


NOTE 18 - REGULATORY MATTERS AND DIVIDEND RESTRICTIONS

         The  Bank  is  subject  to  various  regulatory  capital   requirements
administered  by the federal banking  agencies.  Failure to meet minimum capital
requirements  can  initiate  certain   mandatory  --  and  possibly   additional
discretionary -- actions by regulators that, if undertaken,  could have a direct
material  effect on the Bank's  financial  statements.  Under  capital  adequacy
guidelines and the regulatory  framework for prompt corrective  action, the Bank
must meet specific capital guidelines that involve quantitative  measures of the
Bank's assets,  liabilities,  and certain  off-balance-sheet items as calculated
under  regulatory   accounting   practices.   The  Bank's  capital  amounts  and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.


                                      F-19

<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 18 - REGULATORY MATTERS AND DIVIDEND RESTRICTIONS - (CONTINUED)

         Quantitative  measures  established  by  regulation  to ensure  capital
adequacy  require the Bank to maintain  minimum  amounts and ratios of total and
Tier I capital to risk-weighted  assets,  and a leverage ratio of Tier I capital
to average assets.  Management believes,  as of December 31, 1999, that the Bank
meets all capital adequacy requirements to which it is subject.

         As of December 31, 1999, the most recent  notification  from the Office
of the  Comptroller  of the Currency  categorized  the Bank as well  capitalized
under the regulatory  framework for prompt corrective  action. To be categorized
as well  capitalized  the Bank must maintain  minimum total  risk-based,  Tier I
risk-based,  and Tier I leverage  ratios as set forth in the table below.  There
are no conditions or events since that  notification  that  management  believes
have changed the institution's category.

         The Bank's actual capital amounts and ratios are presented in the table
below ($ in thousands):
<TABLE>
<CAPTION>
                                                                                                        Minimum
                                                                                                      To Be Well
                                                                             Minimum               Capitalized Under
                                                                             Capital               Prompt Corrective
                                                    Actual                 Requirement             Action Provisions
                                                    ------                 -----------             -----------------
                                              Amount       Ratio         Amount      Ratio        Amount        Ratio
                                              ------       -----         ------      -----        ------        -----
<S>                                          <C>           <C>           <C>          <C>         <C>           <C>
AS OF DECEMBER 31, 1999:
 Total Capital to Risk
    Weighted Assets                          $42,134       23.89%        $14,107      8.0%        $17,634       10.0%
 Tier I Capital to Risk
    Weighted Assets                           40,020       22.70           7,053      4.0          10,580        6.0
 Tier I Capital to Average
    Assets                                    40,020       14.59          10,968      4.0          13,711        5.0

AS OF DECEMBER 31, 1998:
 Total Capital to Risk
    Weighted Assets                          $41,647       25.81%        $12,911      8.0%        $16,139       10.0%
 Tier I Capital to Risk
    Weighted Assets                           39,629       24.56           6,455      4.0           9,683        6.0
 Tier I Capital to Average
    Average Assets                            39,629       14.97          10,585      4.0          13,232        5.0
</TABLE>


         Dividends  paid by the bank  subsidiary are the primary source of funds
available to the company.  Statutes and regulations  impose  restrictions on the
amount of dividends  that may be declared by the bank  subsidiary  without prior
regulatory approval. At December 31, 1999, approximately $11,640,187 of retained
earnings  were  available  for dividend  declaration  without  prior  regulatory
approval.


                                      F-20
<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 19  -  PINNACLE  FINANCIAL  CORPORATION  (PARENT  COMPANY  ONLY)  FINANCIAL
            INFORMATION
<TABLE>
<CAPTION>
                                  Balance Sheet
                                December 31, 1999
                                -----------------


<S>                                                           <C>                  <C>
Assets
------
Cash in subsidiary bank                                       $    28,638
Securities available for sale                                     590,119
Investment in subsidiary                                       37,823,995
Premises and equipment                                              --
Other assets                                                       23,513
Due from subsidiary                                             1,499,890
                                                               ----------

                                                              $39,966,155
                                                              ===========

Liabilities and Shareholders' Equity
------------------------------------
Accrued expenses                                              $     7,753
Declared dividends payable                                      1,497,600
Common stock                                                    7,680,000
Capital surplus                                                 7,280,000
Retained earnings                                              25,060,148
Accumulated other comprehensive income (loss)                 ( 1,559,346)
                                                              -----------

                                                              $39,966,155
                                                              ===========

                              Statements of Income
                     Years ended December 31, 1999 and 1998
                     --------------------------------------

                                                                   1999               1998
                                                                   ----               ----
Income:
   Dividends from subsidiary                                   $5,037,400          $1,697,200
   Interest income - securities available for sale                 26,569              14,713
                                                               ----------           ---------
                                                                5,063,969           1,711,913
Expenses:
   Other expenses                                                 114,078             115,572
                                                               ----------           ---------

         Income before income taxes and equity in
         undistributed income of subsidiary                     4,949,891           1,596,341

Income tax benefit                                                 43,000              80,762
                                                                ---------           ---------

         Net income before equity in undistributed
         income of subsidiary                                   4,992,891           1,677,103

Equity in undistributed income of subsidiary                       82,628           3,251,598
                                                                ---------           ---------

         Net income                                            $5,075,519          $4,928,701
                                                                =========           =========
</TABLE>

                                      F-21
<PAGE>

                 PINNACLE FINANCIAL CORPORATION AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


NOTE 19  -  PINNACLE  FINANCIAL  CORPORATION  (PARENT  COMPANY  ONLY)  FINANCIAL
            INFORMATION (CONTINUED)

                            Statements of Cash Flows
                     Years ended December 31, 1999 and 1998
                     --------------------------------------

<TABLE>
<CAPTION>
                                                                      1999              1998
                                                                      ----              ----
<S>                                                               <C>                 <C>
Cash flows from operating activities
   Net income                                                     $ 5,075,519         $ 4,928,701
   Adjustments to reconcile net income to
     net cash provided by operating activities:
         Depreciation and amortization                                 12,703               1,901
         Deferred income taxes                                    (     3,769)                863
         Equity in undistributed income of
            subsidiary                                            (    82,628)        ( 3,251,598)
         Net change in:
              Other assets                                        (     3,080)        (       783)
              Increase in due from subsidiary                     ( 1,493,890)        (     6,000)
              Accrued expenses                                          7,151         (    41,177)
                                                                   ----------          ----------

       Net cash provided by operating activities                    3,512,006           1,631,907
                                                                   ----------          ----------

Cash flows from investing activities
   Other changes in securities available for sale                 (        66)        (        64)
   Purchase of securities available for sale                      (   325,000)              --
   Proceeds from sale of securities available for sale                  5,000               --
                                                                   ----------          ----------

       Net cash used by investing activities                      (   320,066)        (        64)
                                                                   ----------          ----------

Cash flows from financing activities
   Cash dividends paid                                            ( 3,187,200)        ( 1,651,200)
                                                                   ----------          ----------

       Net cash used by financing activities                      ( 3,187,200)        ( 1,651,200)
                                                                   ----------          ----------


Net change in cash and cash equivalents                                 4,740         (    19,357)

Cash and cash equivalents at January 1                                 23,898              43,255
                                                                   ----------          ----------

Cash and cash equivalents at December 31                          $    28,638         $    23,898
                                                                   ==========          ==========
</TABLE>


                                      F-22
<PAGE>


                                   SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, PINNACLE FINANCIAL CORPORATION has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Elberton, State of Georgia, on the 28th day of March, 2000.


                                PINNACLE FINANCIAL CORPORATION


Date: March 28, 2000            By: /s/ L. Jackson McConnell
      --------------                -------------------------------------------
                                    L. Jackson McConnell
                                    Chairman and Chief Executive Officer
                                    (Principal Executive and Financial Officer)

Date: March 28, 2000            By: /s/ James E. Purcell
      --------------                -------------------------------------------
                                    James E. Purcell
                                    President and Chief Credit Officer



                                POWER OF ATTORNEY

         KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below  constitutes and appoints L. Jackson  McConnell or Linton W. Eberhardt and
either  of them  (with  full  power in each to act  alone),  as true and  lawful
attorneys-in-fact,  with full  power of  substitution,  for him and in his name,
place and  stead,  in any and all  capacities,  to sign any  amendments  to this
Registration Statement and to file the same, with all exhibits thereto and other
documents in connection therewith,  with the Securities and Exchange Commission,
hereby  ratifying  and  confirming  all  that  said  attorney-in-fact,  or their
substitute  or  substitutes,  may  lawfully  do or  cause  to be done by  virtue
thereof.

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this Report Statement has been signed by the following persons in the capacities
indicated on the 28th day of March, 2000.

        Signature                                    Title
        ---------                                    -----

 /S/ L. Jackson McConnell             Chairman and Chief Executive Officer
-------------------------             and Director
L. Jackson McConnell


 /S/ Linton W. Eberhardt              Vice-Chairman  and Director
------------------------
Linton W. Eberhardt



                                       39

<PAGE>



 /S/ James E. Purcell                 President and Chief Credit Officer
-------------------------------       and Director
James E. Purcell

 /S/ L. Jackson McConnell, Jr.        Executive-vice President and Director
------------------------------
L. Jackson McConnell, Jr.

 /S/ Maurice Bond                     Director
------------------------------
Maurice Bond

                                      Director
------------------------------
Charles Bradshaw

/S/ H. Thomas Brown                   Director
------------------------------
H. Thomas Brown

/S/ Steven A. Williams                Director
------------------------------
Steven A. Williams

                                      Director
------------------------------
Anderson Dilworth

/S/ Don C. Fortson                    Director
------------------------------
Don C. Fortson

                                      Director
------------------------------
Ret. Judge William F. Grant

/S/ Robert H. Hardy                   Director
------------------------------
Robert H. Hardy

                                      Director
------------------------------
Calvin Hill

/S/ Robert E. Lee, III                Director
------------------------------
Robert E. Lee, III

/S/ J. Daniel McAvoy, M.D.            Director
------------------------------
J. Daniel McAvoy, M.D.

/S/ H. Thomas Warren III              Chief Financial Officer/Principal
------------------------------        Accounting Officer
H. Thomas Warren III




                                       40

<PAGE>


                                  EXHIBIT INDEX


Exhibit No.               Description of Exhibit                           Page
-----------               ----------------------                           ----

10.3             Employment Security Agreement

24.0             A Power of Attorney is set forth on the signature
                 pages to this Form 10-K.                                    39

27.0             Financial Date Schedule (for SEC use only)