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, 2000

   |_|  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:  $24,351,810

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, 2001, there were
363,630  shares  of  Common  Stock,   $10.00  par  value   outstanding  held  by
non-affiliates of the issuer, with an aggregate value of $30,908,550 (based upon
approximate  market value of $85/share) (the last sale price known to the Issuer
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
                                                                                                               ----
<S>      <C>         <C>                                                                                       <C>
PART I

         Item 1.     Description of Business....................................................................  1
         Item 2.     Description of Property.................................................................... 10
         Item 3.     Legal Proceedings.......................................................................... 11
         Item 4.     Submission Of Matters To A Vote Of Security Holders........................................ 11

PART II

         Item 5.     Market For Common Equity And Related Stockholder Matters................................... 11
         Item 6.     Management's Discussion and Analysis or Plan of Operation.................................. 12
         Item 7.     Financial Statements ...................................................................... 30
         Item 8.     Changes In And Disagreements With Accountants On Accounting
                     And Financial Disclosure................................................................... 30

PART III

         Item 9.     Directors, Executive Officers, Promoters and Control Persons............................... 31
         Item 10.    Executive Compensation..................................................................... 33
         Item 11.    Security Ownership Of Certain Beneficial Owners And Management............................. 35
         Item 12.    Certain Relationships And Related Transactions............................................. 35
         Item 13.    Exhibits and Reports on Form 8-K........................................................... 35
</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.

         As of December  31, 2000,  Pinnacle  had total assets of  approximately
$281.8 million,  total deposits of  approximately  $221.7 million,  net loans of
approximately  $166.8 million and  shareholders'  equity of approximately  $42.5
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

                                        1

<PAGE>

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, 2000,  the Bank's
deposit base, totaling approximately $221.7 million,  consisted of approximately
$43.3 million in noninterest  bearing demand deposits (19.5% of total deposits),
approximately $51.1 million in interest-bearing demand deposits (including money
market  accounts)  (23.0% of total  deposits),  approximately  $16.8  million in
savings deposits (7.6% of total deposits),  approximately  $81.4 million in time
deposits of less than  $100,000  (36.7% of total  deposits),  and  approximately
$29.1 million in time deposits of $100,000 or more (13.1% of total deposits).

         INTEREST  RATE  SENSITIVITY.  The  absolute  level  and  volatility  of
interest rates can have a significant  impact on Pinnacle's  profitability.  The
objective  of  interest  rate risk  management  is to  identify  and  manage the
sensitivity  of net  interest  income to changing  interest  rates,  in order to
achieve Pinnacle's  overall financial goals.  Management  establishes  tolerance
ranges for interest rate  sensitivity  and manages  within these ranges by using
income  simulation  modeling as the primary tool to measure  interest rate risk.
The most  recent  simulations  indicate  Pinnacle is only  slightly  impacted by
changes in interest rates in the short term but an extended  period of increased
interest rates will negatively impact future earnings.

         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  manages  the gap  between  rate-  sensitive  assets and
rate-sensitive  liabilities to keep it at an acceptable level, rather than place
significant  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.  At December 31, 2000, the gap analysis
reflects a negative gap at the one-year interval  equivalent to 29.1% of earning
assets, as compared to 36.3% at December 31, 1999.

         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

                                        2

<PAGE>

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 changes in interest  rates
do not result in identical  changes in all assets and  liabilites,  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.  These loans to consumers and  businesses  include open
ended, installment, and revolving types of credit for its customers. At December
31, 2000, consumer,  real estate (including mortgage and construction loans) and
commercial   loans   represented   approximately   13.6%,   74.8%,   and  11.6%,
respectively,  of Pinnacle's total loan portfolio. The real estate loans made by
the Bank include  residential  construction,  first and second  mortgage  loans,
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 and  businesses  who reside,  work,  or are located in the
Bank's primary trade areas. Loans are made to borrowers who are well established
and have  collateral and cash flow to support  repayment of the loan.  Unsecured
loans  normally are made only to  borrowers  who have an  unblemished  repayment
history.  Real estate loans usually are made only when such loans are secured by
real  property  located in  Elbert,  Franklin  and Hart  Counties,  or  counties
contiguous to 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 (or loan relationships  where the aggregate exceeds $100,000,
excluding  amortizing mortgage loans) are reviewed at least annually.  All loans
above the lending  officer's  authority  up to $350,000  must be approved by the
Chief Credit Officer prior to being  committed.  All loans over $350,000 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.  The  Executive  Loan  Committee  also reviews and
approves  the  adequacy of the Bank's  allowance  for loan losses on a quarterly
basis.

         Making working capital loans to businesses is a traditional function of
commercial  banks.  Such loans are expected to be repaid out of the current cash
flow of the commercial entity as 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. Many of the Bank's commercial loans are secured by
real  estate.  Loans  secured by  commercial  real estate are subject to certain
inherent risks. Commercial real estate can be considered illiquid and commercial
real  estate  values  are  subject  to   fluctuation   depending  upon  economic
conditions.

                                        3

<PAGE>

         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  establish  certain
minimum  real  estate  loan-to-value  standards.  The  Bank  has  adopted  these
standards.  These standards limit loan-to-value ratios for various types of real
estate loans as set forth below.  The Bank may make exceptions to the standards,
which are identified and reported.

       LOAN CATEGORY                               LOAN-TO VALUE LIMIT (PERCENT)

       Raw Land                                              65
       Land Development                                      75
       Construction:
         Commercial, multifamily (1) and

                Other nonresidential                         80
         1- to 4- family residential                         85
       Improved Property                                     85
       Owner-occupied 1- to 4- family and                    (2)
         home equity



         LOAN  REVIEW  AND  NONPERFORMING  ASSETS.  The  Bank  reviews  its loan
portfolio  to  identify  deficiencies  and to take  corrective  action.  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 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,  and (d) other
variables, such as expected loan

-----------------
(1)      Multifamily construction includes condominiums and cooperatives.

(2)      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.


                                        4

<PAGE>

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

         EMPLOYEES.  At December 31,  2000,  the Bank had 100  full-time  and 19
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, 2000,  the Bank ranked on the basis of total  deposits
and assets of $221.7  million and $281.8  million,  respectively,  as one of the
largest 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
required to file financial information with the Federal Reserve quarterly 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;

                                        5

<PAGE>

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,  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 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

                                        6

<PAGE>

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.

         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 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  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 and the OCC have  established a
minimum three  percent (3%) 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

                                        7

<PAGE>

accounts of consolidated subsidiaries and certain perpetual preferred stock less
certain intangibles. The Federal Reserve and the OCC will require a bank holding
company and a bank,  respectively,  to maintain a leverage  ratio  greater  than
three percent (3%) 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 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 capital adequacy standards also 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  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  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.

                                        8

<PAGE>

The following table presents the Bank's capital ratios at December 31, 2000:

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

Tier 1 Capital to
   Risk weighted

   Assets                        21.41%              4.0%                6.0%


Total Capital to
   Risk weighted

   Assets                        22.62%              8.0%               10.0%

Leverage Ratio (Tier 1
   Capital to Total
   Average Assets)               15.14%             3.0%                 5.0%




                                        9

<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.


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 and one  supermarket  branch  that it
leases.

         The Bank's main office 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  Street,
Bowman,  Georgia and contains  approximately  2,700 square feet of usable office
space. The Hartwell office is located at 135 East Franklin Street,

                                       10

<PAGE>

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 party to litigation 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.

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, 2001, the Company had 380  shareholders of record.
Management  is aware of 20 sales of Pinnacle  stock in 2000,  aggregating  2,231
shares in blocks ranging from 10 shares to 400 shares at prices ranging from $82
to $95 per  share.  Management  is  aware  of 14  sales  of its  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.

         DIVIDENDS.  In 2000 and  1999,  the  Company  declared  cash  dividends
aggregating  $1,843,200  ($2.40  per share) and  $4,684,800  ($6.10 per  share),
respectively. The 1999 amount includes $1,497,600 ($1.95 per share) that was not
paid until January 2000. The Company  intends to continue  paying cash dividends
on a quarterly  basis. The amount and frequency of dividends will,  however,  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

                                       11

<PAGE>

be given that dividends will be paid in the future.  Information on restrictions
on the amount of dividends  payable by the Company  appears in the  "Supervision
and  Regulation"  section  of  this  10-KSB  and in  Note  15 to  the  Company's
consolidated financial statements.

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

         Management's  Discussion  and  Analysis 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.

         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.

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 management of federal
funds (both sold and  purchased)  and the investment  securities  portfolio.  At
December 31, 2000,  5.3% of the  investment  securities  portfolio  had maturity
dates within the next year and an  additional  57.8%  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,  monthly  repayments from  mortgage-backed  securities,  and
repayment of maturing  single payment  loans.  The Bank has short term borrowing
relationships  with two  correspondent  banks  that  could  provide  up to $22.0
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 either short
term or long term  borrowings up to 15% of assets  (approximately  $42 million).
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.

         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  increased  from  December  31,  1999 l evels by  $2.7 million while


                                       12

<PAGE>

while securities  available for sale decreased by $7.9 million from December 31,
1999 to December 31, 2000. The average  balance in these  investment  securities
decreased  by $9.0  million in the current  year  compared to 1999.  The average
balance  in  Federal  Funds  sold in 2000 and 1999  was  $1.5  million  and $4.6
million,  respectively.  The  decline  in  investments  and  Federal  Funds sold
reflects improved  management of lower yielding Federal funds sold, their use to
fund  increased  loan demand,  and a security  restructuring  transaction in the
third  quarter of 2000.  This  transaction  involved the sale of $9.8 million of
securities at a pretax loss of approximately $390,000. The proceeds were used to
purchase  approximately $4.1 million of longer term, higher yielding  securities
and to repay short term  borrowings of the Bank. See discussion  below regarding
sources of funds.

         Total  interest-earning  assets  increased by $5.2 million or 2.1% from
December  31, 1999 to December  31,  2000.  Average  net loans  increased  $18.7
million or 12.9% to $163.8 million in 2000 over 1999. As reflected in Table 4 of
the statistical information presented below, fixed rate mortgages increased $5.3
million to $79.9  million at December  31, 2000 while  variable  rate  mortgages
increased  $11.0  million  to  $39.8  million  at that  same  date.  The  higher
percentage of fixed rate  mortgages  reflects the  preference of borrower's  for
fixed rate financing in Pinnacle's lending area.

         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  increased  to $2.3  million at December 31, 2000 from $2.1 million at
December 31, 1999. The Bank experienced loan charge-offs of $459,000 in the year
ended December 31, 2000 compared to $425,000 in 1999. Net  charge-offs  amounted
to $261,000 in 2000 compared to $256,000 in 1999.  The allowance for loan losses
represented 1.4% of total loans outstanding at December 31, 2000 and 1999.

         The  balance of other real  estate  owned  increased  from  $175,000 at
December  31, 1999 to $384,000 at December 31,  2000.  This  increase is the net
result  of the  sale of  nine  properties  and the  foreclosure  of  twelve  new
properties  during 2000. Loans with carrying values of $4.5 million and $651,000
have been  recognized as impaired as of December 31, 2000 and December 31, 1999,
respectively.  The total  allowance for loan losses  associated with those loans
was $1,215,000 and $477,000,  respectively.  The average  investment in impaired
loans was $2.1 and $1.1 million,  respectively.  Unrecorded income on nonaccrual
loans for 2000 was $126,000. The significant increase in nonperforming assets is
the  result  of  one  large  commercial   relationship   that  has  discontinued
operations. The borrower has filed for protection under Chapter 7 of the Federal
Bankruptcy Code.  Management does not believe the increase represents a trend in
the entire  portfolio.  Real estate  secures $3.7 million of the impaired  loans
while the remainder are unsecured or secured by other forms of collateral.

         Pinnacle continues to maintain a concentration of core deposits from an
established  customer  base which  provides a stable  funding  source.  Deposits
increased  $3.4  million to $221.7  million at  December  31,  2000 from  $218.3
million   at   December   31,   1999,    due   primarily   to   normal   growth.

                                       13

<PAGE>

Noninterest-bearing deposits increased $1.6 million to $43.3 million at December
31,  2000  while  interest-bearing  deposits  increased  $1.7  million to $178.3
million.

         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.  The Bank has continued to use both Federal Funds borrowed and FHLB
advances  to meet  short  term  liquidity  needs and to  leverage  its  existing
capital.  The Bank repaid all $7.5 million of the short term FHLB  advances that
existed as of December 31, 1999 and  subsequently  increased  its  borrowings as
needed,  primarily to fund loan growth. As part of the third quarter  securities
restructuring  transaction  mentioned  above,  the Bank extended the maturity of
some of its  borrowings  so that a total of $3 million of FHLB  advances  have a
maturity of one year or greater.  Pinnacle had no federal funds  purchased as of
December 31, 2000 but averaged  approximately $555,000 during the year. 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  increased  $4.0  million  to  $42.5  million  at
December 31, 2000 from $38.5 million at December 31, 1999. Net earnings retained
during the year amounted to $2.4 million while equity increased $1.7 million due
to an increase from a $1.6 million net unrealized loss on investments  available
for sale to an unrealized gain of $152,000 (all unrealized  amounts are reported
net of their  tax  impact).  The  change  in  unrealized  amounts  reflects  the
significant decrease in interest rates in November and December 2000.

         Dividends declared decreased by $3.70 per share from $6.10 per share in
1999 to  $2.40  in 2000  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.  The  dividends  in 2000  reflect the
returning to a "normal" level of dividends.

         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 14.5% in 2000.

         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, 2000  amounted to $281.6  million and $281.8
million,  respectively,  compared  to the fair  value and  carrying  amounts  of
liabilities  of $226.8  million  and $239.2  million,  respectively.  Comparable
values of assets at December  31, 1999 were $273.2  million and $273.1  million,


                                       14

<PAGE>

respectively, while comparable liability values at December 31, 1999 were $223.5
million  and  $234.6  million.  The  details  of the fair  value  estimates  and
assumptions can be found in Note 14 of the financial statements.

         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.

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.  As mentioned in the  "Interest  Rate  Sensitivity"
section, future earnings are impacted by changes in interest rates.

                  Interest income on interest  bearing assets  increased by $1.6
million  (7.6%) as a result of increases in average yields from 8.2% to 8.6% and
in average earning assets.  The increase in yield reflects a general increase in
interest rates during the period as Federal  Reserve policy  resulted in several
changes in prime rate during the year.  Consequently,  a significant  portion of
the loan portfolio repriced upward while new lending and purchases of investment
securities  were  made at  higher  rates  than in the  previous  year.  Finally,
management's attention to the Federal Funds sold position and decision to sell a
portion of the  investment  portfolio  for  restructuring  purposes  resulted in
higher  overall  yields.  Correspondingly,  interest  expense  increased by $1.3
million  from 1999 as a result of growth in deposits and  borrowings  as well as
increased costs of funds.  The increase in interest expense reflects an increase
in the use of borrowings  that have a higher cost than core  deposits,  a slight
increase in average  deposits,  and increased costs of funds in our certificates
of deposits resulting from the aforementioned  change in Federal Reserve policy.
As a result of the above  changes in the bank's loan  portfolio and increases in
interest  rates,  net  interest  income  in the year  ended  December  31,  2000
increased  by $246,000 or 1.9% as  compared  to 1999.  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 2000.

         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 $500,000 in 2000 and $300,000 for possible loan
losses  in  1999.  The  increased  provision  reflects  the  growth  in the loan
portfolio as well as an increase in impaired and delinquent  loans. As indicated


                                       15

<PAGE>

earlier,  the bank  has one  significant  loan  relationship  that has  caused a
significant increase in the level of impaired loans.

         Pinnacle's  other income decreased by $102,000 to $2.2 million in 2000.
The  decline is  associated  with a decrease of  approximately  $200,000 in fees
related to the  origination  of mortgage  loans.  This decline  resulted  from a
reduction in mortgage  originations as a result of higher interest rates.  Other
fee income and  service  charges  increased  slightly to  partially  offset this
reduction.

         Other expenses increased by $1.3 million in 2000 primarily due to three
nonrecurring  charges  recognized  by  Pinnacle.  The first item  relates to the
retirement  of the Bank's  president  that was announced in the first quarter of
2000. The Company recognized the expected payments to be made under the terms of
an employment  security  agreement  between the former president and the Bank as
compensation  expense in the amount of $237,000.  Payments  under the  agreement
result in charges to the established liability account and do not have an impact
on future earnings.  The second charge is the result of an unfavorable ruling in
a lawsuit in which the court granted Capital  Resource  Funding ("CRF") a motion
for summary judgement on its claim regarding  unlawful  conversion of assets. In
May 2000,  Pinnacle  reached  an  agreement  with CRF and paid a  settlement  of
approximately $325,000.  Finally, the Bank restructured its investment portfolio
in the third quarter to sell under performing assets,  invest in higher yielding
investment  securities,  and  decrease  its  reliance  on short term debt.  This
transaction  resulted  in  a  loss  of  approximately   $390,000.   These  three
transactions  cumulatively increased other expenses by $952,000. Other increases
in expenses during the period amounted to approximately  $316,000,  or 4.1%, and
included normal  increases in compensation and related  expenses,  and increased
occupancy expenses (especially equipment and property maintenance).

         Pinnacle's  income tax expense  decreased  $451,000 in 2000 compared to
1999 as the effective  income tax rate  decreased to 30.4% in 2000 from 31.1% in
1999 and taxable income  decreased.  The decreased  effective tax rate primarily
resulted from tax-exempt interest income being a more significant  percentage of
taxable income.

         Net income for the year ended  December  31, 2000 was $4.2  million and
represents returns of 10.4% on average  shareholders' equity and 1.5% on average
assets.  Comparable  amounts  during  1999  were $5.1  million,  12.3% and 1.9%,
respectively.  As  indicated  above,  net  income  decreased  primarily  due  to
increased operating expenses caused in large part by three separate nonrecurring
items and  increased  loan loss  provisions.  The operating  ratios  reflect the
decreased earnings compared to a slightly larger asset base.

                                       16

<PAGE>

The following tables present Pinnacle's  regulatory capital position at December
31, 2000:
<TABLE>
<CAPTION>
                          (Rounded to nearest thousand)


<S>                                                                        <C>                 <C>
Total Risk Adjusted Assets                                                 $192,795
                                                                            =======

Risk Based Capital Ratios:

TIER 1 CAPITAL
         Common stock                                                      $   7,680              3.98%
         Surplus                                                               7,280              3.78%
         Retained earnings                                                    27,420             14.22%
                                                                            --------             -----

         Total Tier 1 capital                                                 42,380             21.98%
         Tier 1 minimum requirement                                            7,712              4.00%
                                                                            --------             -----

         Excess (shortfall)                                                $  34,668             17.98%
                                                                            ========             =====

TOTAL CAPITAL
         Tier 1 from above                                                  $ 42,380             21.98%
         Allowance from loan losses, limited to 1.25%
            of risk weighted assets                                            2,352              1.22%
                                                                            --------             -----

         Total Tier 2 capital                                                 44,732             23.20%
         Tier 2 minimum requirement                                           15,424              8.00%
                                                                            --------             -----

         Excess (shortfall)                                                $  29,308             15.20%
                                                                            ========             =====

LEVERAGE RATIO
         Tier 1 capital                                                     $ 42,380             15.34%
         Minimum requirement                                                   8,286              3.00%
                                                                               -----             -----

         Excess (shortfall)                                                 $ 34,094             12.34%
                                                                             =======             =====

Average total assets, net of goodwill                                       $276,200
                                                                             =======
</TABLE>



                                       17

<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



                                       18

<PAGE>

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

<TABLE>
<CAPTION>
                                            --------------- 2000 -----------------        -------------------- 1999 ----------------
                                                               Interest                                      Interest
                                                Average         Income/     Yield/              Average       Income/       Yield/
                                               Balances         Expense      Rate              Balances       Expense        Rate
                                             ------------     ----------    ------           -----------    ----------      ------
<S>                                                                          <C>                 <C>
Assets:
Interest-earning assets:
  Loans (including loan fees)                $163,825,573    $16,629,961    10.15%          $145,141,797   $14,527,573      10.01%


  Investment securities:
    Taxable                                    71,538,421      4,522,416     6.32%            80,885,666     4,905,061       6.06%
    Nontaxable (a)                             17,606,405      1,359,083     7.72%            17,161,110     1,354,012       7.89%
  Federal funds sold                            1,570,798        106,950     6.81%             4,591,789       242,797       5.29%
                                             ------------    -----------     -----          ------------   -----------       -----


    Total interest-earning assets             254,541,197     22,618,410     8.89%           247,780,362    21,029,443       8.49%

Noninterest earning assets:
  Cash and due from bank                        9,125,713                                      8,750,038
  Premises & equipment                          8,194,715                                      8,399,884
  Other assets                                  6,871,743                                      4,710,160
                                             ------------                                   ------------

  Total assets                               $278,733,368                                   $269,640,444
                                             ============                                   ============


Liabilities and shareholders' equity:
Interest bearing liabilities:
   Interest bearing demand deposits           $53,735,905      1,612,554     3.00%           $51,450,881     1,277,067       2.48%
   Savings deposits                            17,532,246        460,489     2.63%            18,385,791       485,745       2.64%
   Time deposits                              109,612,174      6,112,211     5.58%           110,188,748     5,637,386       5.12%
   Borrowings                                   9,963,661        633,468     6.36%             1,330,767        77,179       5.80%
                                             ------------      ---------     -----          ------------   -----------       -----

    Total interest bearing liabilities        190,843,986      8,818,722     4.62%           181,356,187     7,477,377       4.12%

Noninterest bearing liabilities:
  Noninterest bearing demand                   43,867,765                                     43,410,734
  Other liabilities                             4,237,010                                      3,733,700
                                             ------------                                   ------------

                                              238,948,761                                    228,500,621
   Shareholders' equity                        39,784,607                                     41,139,823
                                             ------------                                   ------------

    Total liabilities and shareholders'
     equity                                  $278,733,368                                   $269,640,444
                                             ============                                   ============

Excess of interest-earning assets over
 interest bearing liabilities                 $63,697,211                                    $66,424,175
Ratio of interest-earning assets to
 interest-bearing liabilities                     133.38%                                        136.63%
Net interest income                                          $13,799,688                                   $13,552,066
                                                             ===========                                   ===========
Net interest spread                                                          4.27%                                           4.37%
Net interest yield on interest earning assets                                5.42%                                           5.47%
</TABLE>



                                       19

<PAGE>

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>

                                                   ----------------- 1998 ----------------
                                                                     Interest
                                                       Average        Income/     Yield/
                                                      Balances        Expense      Rate
                                                    ------------    ----------    ------
<S>                                                 <C>             <C>            <C>
Assets:
Interest-earning assets:
  Loans (including loan fees)                       $142,418,653    $14,850,838    10.43%
  Investment securities:
    Taxable                                           74,335,476      4,602,324     6.19%
    Nontaxable (a)                                    14,771,090      1,202,689     8.14%
  Federal funds sold                                   7,501,804        385,785     5.14%
                                                     -----------     ----------     ----

    Total interest-earning assets                    239,027,023     21,041,636     8.80%
Noninterest earning assets:
  Cash and due from banks                              7,781,657
  Premises & equipment                                 7,838,467
  Other assets                                         4,743,047
                                                     -----------

    Total assets                                    $259,390,194
                                                     ===========

Liabilities and shareholders' equity:
Interest bearing liabilities:
   Interest bearing demand deposits                  $47,241,779      1,226,874     2.60%
   Savings deposits                                   17,501,057        528,857     3.02%
   Time deposits                                     112,620,899      6,171,025     5.48%
   Borrowings                                             11,178            657     5.88%
                                                     -----------     ----------     -----

    Total interest bearing liabilities               177,374,913      7,927,413     4.47%

Noninterest bearing liabilities:
  Noninterest bearing demand                          39,613,496
  Other liabilities                                    3,396,896
                                                     -----------
                                                     220,385,305

Shareholders' equity                                  39,004,889
                                                     -----------

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

Excess of interest-earning assets over
 interest bearing liabilities                       $ 61,652,110

Ratio of interest-earning assets to
 interest-bearing liabilities                            134.76%

Net interest income                                                 $13,114,223
                                                                    ===========

Net interest spread                                                                 4.33%
Net interest yield on interest earning assets                                       5.49%

</TABLE>


                                       21

<PAGE>

Table 2
Pinnacle Financial Corporation and Subsidiaries
Volume/Rate Analysis


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
2000 over 1999 and 1999 over 1998.
<TABLE>
<CAPTION>

                                                           2000 over 1999                                1999 over 1998
                                                           --------------                                --------------

                                             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)               $ 1,899,189    $   203,199    $ 2,102,388    $   284,024    $  (607,289)   $  (323,265)

  Investment securities:
    Taxable                                    (592,948)       210,303       (382,645)       399,373        (96,636)       302,737
    Non-taxable (a)                              34,245        (29,174)         5,071        188,251        (36,928)       151,323
  Federal funds sold                           (205,642)        69,795       (135,847)      (154,241)        11,253       (142,988)
                                            -----------    -----------    -----------    -----------    -----------    -----------
      Total interest earning assets         $ 1,134,844    $   454,123    $ 1,588,967    $   717,407    $  (729,600)   $   (12,193)
                                            ===========    ===========    ===========    ===========    ===========    ===========

Interest expense on:

  Deposits:
    Interest-bearing demand                 $    56,669    $   278,818    $   335,487    $   106,883    $   (56,690)   $    50,193
    Savings                                     (23,417)        (1,839)       (25,256)        26,719        (69,831)       (43,112)
    Time                                        (29,521)       504,346        474,825       (133,282)      (400,357)      (533,639)
    Borrowings                                  548,837          7,452        556,289         76,531             (9)        76,522
                                            -----------    -----------    -----------    -----------    -----------    -----------
 Total interest-bearing liabilities         $   552,568    $   788,777    $ 1,341,345    $    76,851    $  (526,887)   $  (450,036)
                                            ===========    ===========    ===========    ===========    ===========    ===========
</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, 2000, 1999, and 1998:
<TABLE>
<CAPTION>

                                                2000                             1999                              1998
                                                ----                             ----                              ----

                                   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             $63,123,148     $63,209,810        $75,792,343     $73,592,108        $74,446,250      $75,410,866
State, county and municipal        19,066,843      19,209,016         19,571,315      19,296,812         15,736,579       16,391,370
Other investments                   4,738,865       4,756,760          2,252,136       2,211,800            982,069        1,005,050
                                   ----------      ----------       ------------      ----------            -------        ---------
       Totals                     $86,928,856     $87,175,586        $97,615,794     $95,100,720        $91,164,898      $92,807,286
                                   ==========      ==========         ==========      ==========         ==========       ==========
</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, 2000           U.S. Gov't Agencies      and Municipal     Investments    Average Yields
-------------------------------           -------------------      -------------     -----------    --------------
<S>                                               <C>                <C>              <C>                    <C>
Within 1 year                                     $ 3,493,313        $ 1,099,000      $        0             6.60%
After 1 through 5 years                            56,777,608          9,414,626       2,559,605             6.34%
After 5 through 10 years                            2,938,889          5,942,434       1,748,655             6.96%
After 10 years                                              0          2,752,956         448,500             7.02%
                                                   ----------         ----------       ---------             ----
Totals                                            $63,209,810        $19,209,016      $4,756,760             6.45%
                                                   ==========         ==========      ==========             ====
</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>
                                                      2000               1999              1998            1997             1996
                                                      ----               ----              ----            ----             ----
<S>                                              <C>                <C>               <C>              <C>              <C>
Commercial, financial
  and agricultural                               $ 19,566,350       $ 19,369,499      $ 22,383,379     $ 23,267,802     $ 18,406,805
Real estate - construction                          6,893,572          6,602,735         5,017,757        5,780,973        2,975,741
Real estate - mortgage                            119,624,187        103,411,277        88,232,782       87,272,975       88,013,785
Installment loans to individuals                   23,058,750         27,000,807        28,461,144       28,004,470       23,838,085
                                                  -----------        -----------       -----------      -----------      -----------

    Totals                                       $169,142,859       $156,384,318      $144,095,062     $144,326,220     $133,234,416
                                                  ===========        ===========       ===========      ===========      ===========
</TABLE>

As of December 31, 2000,  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                                               $ 7,149,322                 $5,991,996               $13,141,318
1 to 5 years                                                 10,304,507                    901,576                11,206,083
After 5 years                                                 2,112,521                     --                     2,112,521
                                                             ----------                  ---------                ----------
Totals                                                      $19,566,350                 $6,893,572               $26,459,922
                                                             ==========                  =========                ==========
</TABLE>

As of December 31, 2000,  the interest terms of loans maturing after one year 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                                    $7,998,563                 $2,305,944               $10,304,507
    After 5 years maturity                                      181,427                  1,931,094                 2,112,521
                                                              ---------                  ---------               -----------
                                                              8,179,990                  4,237,038                12,417,028
                                                              ---------                  ---------               -----------
Real estate-construction:
    1 to 5 years maturity                                       901,576                      --                      901,576
    After 5 years maturity                                       --                          --                        --
                                                              ---------                  ---------               -----------
                                                                901,576                      --                      901,576
                                                              ---------                  ---------               -----------

                                                             $9,081,566                 $4,237,038               $13,318,604
                                                              =========                  =========                ==========

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

                                                                  2000                       1999                     1998
                                                                  ----                       ----                     ----
Commercial, financial and agricultural
    Secured                                                 $16,055,742                $16,680,933               $18,694,505
    Unsecured                                                 3,510,608                  2,688,566                 3,688,874
                                                             ----------                  ---------                 ---------

                                                            $19,566,350                $19,369,499               $22,383,379
                                                             ==========                 ==========                ==========

Installment loans to individuals
    Secured                                                 $17,929,544                $21,360,405               $22,646,210
    Unsecured                                                 5,129,206                  5,640,402                 5,814,934
                                                             ----------                 ----------                 ---------

                                                            $23,058,750                $27,000,807               $28,461,144
                                                             ==========                 ==========                ==========
</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>
                                                                2000                      1999                       1998
                                                                ----                      ----                       ----
<S>                                                        <C>                        <C>                        <C>
Real estate - mortgage:

    Fixed                                                  $ 79,871,781               $ 74,578,960               $60,166,600
    Variable                                                 39,752,406                 28,832,317                28,066,182
                                                             ----------                -----------                ----------
                                                           $119,624,187               $103,411,277               $88,232,782
                                                            ===========                ===========                ==========

Installment loans to individuals:
    Fixed                                                  $ 22,268,023               $ 26,381,960               $26,048,737
    Variable                                                    790,727                    619,224                 2,412,407
                                                            -----------                -----------                ----------

                                                           $ 23,058,750               $ 27,000,807                28,461,144
                                                            ===========                ===========                ==========
</TABLE>



The following  summarizes  past due,  non-accrual and  restructured  loans as of
December 31, 2000, 1999, 1998, 1997, and 1996:

<TABLE>
<CAPTION>
                                                      2000               1999             1998             1997             1996
                                                      ----               ----             ----             ----             ----
<S>            <C>                                <C>                 <C>             <C>                <C>             <C>
Accruing loans 90 days or more past due            $918,476           $235,571        $ 233,337          $934,134        $2,669,721
Non-accrual loans                                 4,059,027             48,641          139,087           102,185           234,594
Restructured loans                                  181,389            188,835          196,262           251,356           228,375
</TABLE>

Accruing  loans 90 days or more past due as of December 31, 2000 includes  three
significant loans totaling $753,167.  One of these loans,  amounting to $385,932
was subsequently  brought current.  One loan totaling  $241,776 was subseqeuntly
placed on nonaccrual  while the collateral for the remaining loan was foreclosed
upon in  February  2001.  The  nonaccual  loans at December  31,  2000  includes
$3,720,354 to one commercial relationship that has discontinued operations.

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  loan is 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>
                                                       2000               1999            1998             1997             1996
                                                       ----               ----            ----             ----             ----

<S>                                               <C>                <C>               <C>              <C>              <C>
Balance at beginning of year                      $2,113,735         $2,070,005        $2,038,015       $1,842,152       $1,828,722
                                                   ---------          ---------         ---------        ---------        ---------
Charge-offs:

  Commercial, financial and agricultural             281,344            351,864           193,748          109,846          309,746
  Real estate-construction                                --                 --                --               --               --
  Real estate-mortgage                               167,985             55,049            80,992               --               --
  Installment loans to individuals                    10,145             18,421            57,762           79,377          136,747
                                                   ---------             ------            ------           ------         --------

                                                     459,474            425,334           332,502          189,223          446,493
                                                   ---------            -------        ----------        ---------         --------
Recoveries:

  Commercial, financial and agricultural              79,994             38,969            28,895           80,388           17,846
  Real estate-construction                                --                 --                --               --               --
  Real estate-mortgage                               116,876            110,335            92,380           52,801           10,780
  Installment loans to individuals                     1,114             19,760            18,217           17,897           21,997
                                                    --------             ------            ------         --------          -------

                                                     197,984            169,064           139,492          151,086           50,623
                                                   ---------            -------           -------          -------        ---------

  Net charge-offs                                    261,490            256,270           193,010           38,137          395,870
                                                    --------            -------           -------          -------         --------

  Additions charged to operations                    500,000            300,000           225,000          234,000          409,300
                                                    --------            -------           -------         --------         --------

  Balance at end of year                          $2,352,245         $2,113,735        $2,070,005       $2,038,015       $1,842,152
                                                   =========          =========        ==========        =========        =========

Ratio of net charge-offs during the period to
  average loans outstanding during the period            .16%               .18%              .14%             .03%             .32%
                                                         ====               ====              ====             ===              ===
</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)

<TABLE>
<CAPTION>

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

<S>                                            <C>
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).
</TABLE>


Allocation of the Allowance for Loan Losses:

<TABLE>
<CAPTION>
                                                      2000              1999             1998             1997            1996
                                                      ----              ----             ----             ----            ----
<S>                                              <C>               <C>               <C>              <C>              <C>
Domestic:
 Commercial, financial and agricultural          $ 1,357,106       $   563,252       $   612,820      $   483,911      $   363,000
 Real Estate-construction                             36,000            51,000            36,000                0                0
 Real Estate-mortgage                                 46,000            84,300            99,300          241,777          155,000
 Installment loans to individuals                     55,000            82,852           122,500           92,706           18,000
Unallocated                                          858,139         1,332,331         1,199,385        1,219,621        1,306,152
                                                     -------         ---------         ---------        ---------        ---------
                                                  $2,352,245        $2,113,735        $2,070,005       $2,038,015       $1,842,152
                                                   =========         =========         =========        =========        =========
</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 2000, 1999, and 1998.

<TABLE>
<CAPTION>
                                           2000                           1999                             1998
                               ---------------------------    ---------------------------    ----------------------------

                                    Amount           Rate           Amount          Rate          Amount            Rate
                                    ------           ----           ------          ----          ------            ----
<S>                            <C>                             <C>                            <C>
Demand deposits:
  Noninterest bearing          $ 43,867,765             --     $ 43,410,734           --      $ 39,613,496             --
  Interest-bearing               53,735,905          3.00%       51,450,881        2.48%        47,241,779          2.60%
Savings deposits                 17,532,246          2.63%       18,385,791        2.64%        17,501,057          3.02%
Time deposits                   109,612,174          5.58%      110,188,748        5.12%       112,620,899          5.48%
                                -----------                     -----------                    -----------

    Totals                     $224,748,090                    $223,436,154                   $216,977,231
                                ===========                     ===========                    ===========
</TABLE>

Maturities of time  certificates  of deposit of $100,000 or more  outstanding at
December 31, 2000 are summarized as follows:

                                            Time Certificates
                                               of Deposit
                                               ----------

Within 3 months                               $ 5,529,576
After 3 through 6 months                        9,314,514
After 6 through 12 months                       9,885,655
After 12 months                                 4,410,962
                                               ----------

     Total                                    $29,140,707
                                               ==========


Table 7
Selected Ratios

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

                                           2000            1999           1998
                                           ----            ----           ----

Net income to:
  Average shareholders' equity            10.38%          12.34%         12.64%
  Average assets                           1.51%           1.88%          1.91%
Dividends to net income                   43.85%          92.30%         33.50%
Average equity to average assets          14.53%          15.26%         15.04%



                                       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, 2000 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
                                                     ------              ------         ----------       ----------          -----
<S>                                               <C>                <C>              <C>               <C>             <C>
Earning assets:
--------------

Federal funds sold                                $ 1,030,000        $         0       $         0       $        0     $  1,030,000
Taxable investment securities                       2,506,873          5,961,658        53,417,218        7,684,040       69,569,789
Nontaxable investment securities                      475,328            618,327         8,399,721        8,112,421       17,605,797
Loans                                              58,515,781         21,218,041        83,144,726        3,912,066      166,790,614
                                                   ----------         ----------        ----------        ---------      -----------

Total earning assets                              $62,527,982        $27,798,026      $144,961,665      $19,708,527     $254,996,200


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

Time deposits                                     $19,288,814       $ 67,398,356      $ 23,894,683      $         0     $110,581,853
Other interest bearing deposits                    67,727,838                  0                 0                0       67,727,838
Borrowings                                          4,500,000          5,600,000         3,000,000                0       13,100,000
                                                   ----------         ----------    ---------------     -----------      -----------
Total interest bearing liabilities                $91,516,652       $ 72,998,356      $ 26,894,683     $          0     $191,409,691

Gap summary

Periodic net earning assets                      ($28,988,670)      ($45,200,330)     $118,066,982      $19,708,527     $ 63,586,509

Cumulative net earnings assets                   ($28,988,670)      ($74,189,000)      $43,877,982      $63,586,509     $ 63,586,509

Cumulative ratio of earning assets
  to interest bearing liabilities                      68.32%             54.90%           122.92%          133.22%          133.22%
</TABLE>


The  rate  sensitivity   analysis  table  is  designed  to  indicate  Pinnacle's
sensitivity to changes in interest  rates by setting forth in  comparative  form
the repricing of assets and liabilities for the period shown. In the first year,
35% of all  interest  earning  assets will  reprice  compared to 86% of interest
bearing  liabilities.  Changes  in  the  mix of  earning  assets  or  supporting
liabilities  can either  increase or decrease  the net interest  margin  without
affecting  interest  rate  sensitivity.  In addition,  the interest  rate spread
between an asset and its supporting  liability can vary significantly  while the
timing of repricing for both the asset and the liability  remains the same, thus
impacting net interest  income.This  characteristic is referred to as basis risk
and generally relates to the possibility that the repricing  characteristics  of
short-term assets tied to Pinnacle's prime lending rate are different from those
of short-term  funding  sources such as NOW accounts or certificates of deposit.
Varying interest rate environments can create  unexpected  changes in prepayment
levels of assets and  liabilities  that are not  reflected in the interest  rate
sensitivity  analysis.  Consequently,  an  interest  rate gap  analysis  may not
provide an accurate  assessment  of  Pinnacle's  exposure to changes in interest
rates. See the "interest rate sensitity"  section of this 10KSB for a discussion
of significance of the cumulative ratios presented above.

                                       29

<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

         The  financial   statements  and  the  report  of  independent   public
accountants  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, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

                  The  directors  and  executive  officers  of  Pinnacle,  their
respective  ages,  positions with Pinnacle,  and the Pinnacle common stock owned
beneficially  by them as of March 15,  2001 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,
2001.

<TABLE>
<CAPTION>
                                                                                  NUMBER OF SHARES
                                                                                 OWNED BENEFICIALLY
      NAME                           AGE          POSITION WITH PINNACLE         (PERCENT OF CLASS)
      ----                           ---          ----------------------         ------------------
<S>                                  <C>           <C>                              <C>
Maurice Bond                         66            Director                             896*
H. Thomas Brown                      49            Director                             100*
Linton W. Eberhardt                  61            President & Director                 600* (1)
Don C. Fortson                       51            Director                             830*
Robert H. Hardy                      52            Director                             224*
Robert E. Lee, III                   49            Director                             400*
J. Daniel McAvoy, M.D.               50            Director                             612* (2)
L. Jackson McConnell                 63            Chairman & Director              201,323  (3) (26.2%)
L. Jackson McConnell, Jr.            34            Director                             200*
James E. Purcell                     60            Director                           3,400*
Steven A. Williams                   47            Director                           1,832* (4)

All directors and executive officers as a group (11 persons)                        210,417     (27.4%)

-----------------
*Less than one percent.

(1)     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.

(2)     Does not include 100 shares held by Margaret McAvoy,  Dr. McAvoy's wife. Dr McAvoy disclaims
        beneficial  ownership with respect to the shares to which Mrs. McAvoy has voting power.

(3)     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.

(4)     Does not include Mr. Williams 14% ownership of J. A. Williams Family partnership which
        owns 26,170 shares.  Mr. Williams does not have voting power and disclaims beneficial
        ownership of these shares.
</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.

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

         Mr.  Brown is the Chief  Executive  Officer  and  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 1995.

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

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

         Mr. Hardy is an owner of J. C. Pool  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 1997.

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

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

         Mr. L. Jackson  McConnell  has been Chairman and a director of Pinnacle
since 1983 and Chairman and Chief Executive  Officer of the Bank since 1990. Mr.
McConnell  also served as President of the Bank from 1974 through  1990.  He has
been a director of the Bank since 1963.

         Mr. Jackson  McConnell,  Jr. has been an officer of the Bank since 1994
and served as an Executive  Vice-President from March 1999 until April 2000. Mr.
McConnell was named  President of the Bank in April 2000. He has been a director
of the Bank since 1994 and a director of Pinnacle since 1998.

         Mr.  Purcell  served as  President of the Bank from 1990 until 2000 and
was previously an 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 1996 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.

                                       32

<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION

                  The  following  table  sets  forth the  annual  and  long-term
compensation for each of our last three fiscal years paid to the chief executive
officer and each  executive  officer of Pinnacle whose salary and bonus exceeded
$100,000 for fiscal year 2000 (the "Named Executive Officers").

<TABLE>
<CAPTION>
                                            SUMMARY COMPENSATION TABLE

                                               Annual Compensation
  Name and Principal                                                                    All Other
      Position                              Year             Salary($)(1)              Compensation
_______________________________________________________________________________________________________

<S>                                         <C>               <C>                       <C>
L. Jackson McConnell                        2000              $190,300                  $29,750 (2)
Chairman                                    1999              $188,177                  $28,667 (3)
                                            1998              $187,963                  $28,667 (4)

(1)     Includes directors fees.

(2)     Consists of $29,750 contributed by Pinnacle to Mr. McConnell's account in Pinnacle's profit sharing plan.

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

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


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. Beginning
in April 2000, directors received a monthly fee of $1,000. From April 1998 until
April 2000, directors received a monthly fee of $800.

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

         L.  Jackson  McConnell,  James E.  Purcell,  Linton W.  Eberhardt,  and
Jackson  McConnell,  Jr., have entered into  non-qualified  salary  continuation
agreements (the "Salary Continuation Plans") with the Bank which provide 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 provide 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  Plans will be  forfeited.  If the
executive  officers  are  terminated  after a change of control of Pinnacle  (as
defined in the Salary Continuation  Plans), they will be entitled to receive the
death benefits and the retirement  benefits after reaching age 65 as if they had
been  continually  employed until that time. The table below indicates the value


                                       33

<PAGE>

of the death  benefits and estimated  retirement  benefits,  which are dependent
upon the income  performance  of the life insurance  policy,  as of December 31,
2000 and 1999.

<TABLE>
<CAPTION>
                                                                                 Estimated
                                           Estimated           Annual              Death              Annual
                              Date of        Death           Retirement           Benefit           Retirement
                             Benefits       Benefit             Value             Benefits             Value
Executive Officer            Agreement      12/31/00           12/31/00           12/31/99           12/31/99
------------------           ---------      --------           --------           --------           --------
<S>                          <C>            <C>                <C>                 <C>                <C>
L. Jackson McConnell         10-24-95       $608,379           $28,949             $582,675           $28,949

James E. Purcell             12-16-94       $259,055           $25,834             $247,749           $25,834

Linton W. Eberhardt          11-10-94       $258,703           $18,299             $247,472           $18,299

Jackson McConnell, Jr.       03-19-99       $111,199           $61,496             $104,897           $61,496
</TABLE>

Life Insurance Agreement
------------------------

         The Bank has entered into split dollar, joint life insurance agreements
for the benefit of L. Jackson  McConnell and Linton W. Eberhardt.  The Bank paid
the premium on the policies and is the sole owner of both policies. The policies
are "last survivor"  policies that provide benefits to named  beneficiaries upon
the death of the surviving  spouse. At that time, the Bank will receive the cash
surrender value of the policy while remaining death proceeds will be paid to the
beneficiaries  named by the  executive.  The death  benefits and cash  surrender
value are adjusted annually based on the income performance of the policies. The
table below  summarizes  the cash  surrender  values and death  benefits of both
policies as of December 31, 2000.

                                                     Cash             Death
                                                   Surrender         Benefit
                                      Date of        Value            Value
     Executive Officer               Agreement      12/31/00         12/31/00
     -----------------               ---------      --------         --------

L. Jackson McConnell                  04-17-00     $1,060,164       $2,093,208

Linton W. Eberhardt                   04-17-00       $690,819       $1,731,338

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
continue to compensate  Mr.  Purcell at an annual rate of $125,000 from the time
of his retirement from the bank until age 62. Mr. Purcell, 60, retired in May of
2000 and funding under the agreement began at that time.

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

                                       34

<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL HOLDERS OF STOCK

         The following table sets forth, for each person who beneficially  owned
5% or more of the  outstanding  shares of Common  Stock on March 15,  2001,  the
following  information:  (a) the  owner's  name and  address,  (b) the number of
shares of Common Stock owned,  and (c) the percentage such number  represents of
the  outstanding  shares of Common  Stock at March 15,  2001.  Unless  otherwise
indicated,  the listed  owners are the record owners of and have sole voting and
investment  powers  over  their  shares.  See  Item 9 of this  Form  10- KSB for
information  related to  beneficial  ownership of stock by other  directors  and
executive officers.

 NAME AND ADDRESS OF                             NUMBER OF SHARES OWNED
   BENEFICIAL OWNER                                (PERCENT OF CLASS)
----------------------                            -------------------
L. Jackson McConnell                               201,323 (1) (26.2%)
884 Elbert Street
Elberton, Georgia 30635

Alice Eberhardt                                    194,163 (2) (25.3%)
390 Virginia Hills Road
Royston, Georgia 30624


(1)      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.

(2)      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 she disclaims beneficial ownership.

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
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.

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.

                                       35

<PAGE>

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

            3.1      Articles of Incorporation of Pinnacle, as amended. (1)

            3.2      Bylaws of Pinnacle, as amended. (1)

            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. (1) (2)

           10.2      Indexed Executive Salary Continuation Plan. (1) (2)

           10.3      Employment Security Agreement. (3)

           10.4      Split Dollar Life Insurance Agreement.

           21.0      Subsidiaries of Pinnacle Financial Corporation. (4)

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

                           ___________________________


         (1)  Incorporated by reference from Pinnacle's Form S-4, filed with the
         Securities  and  Exchange  Commission,   dated  August  16,  1993.
         (2)  Management Contract or Compensatory Plan required to be filed as
         an exhibit.
         (3)  Incorporated by reference  from Pinnacle's  Form 10-KSB filed with
         the Securities and Exchange Commission dated March 28, 2000.
         (4)  Incorporated  by reference from  Pinnacle's Form 10-KSB filed with
         the Securities and Exchange Commission dated March 30, 1999.

                 (b)       Pinnacle did not file any reports on Form 8-K during
                           the fourth quarter of 2000.



                                       36


<PAGE>









                   PINNACLE FINANCIAL CORPORATION & SUBSIDIARY
                        CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2000 AND 1999


                         INDEX TO FINANCIAL STATEMENTS
                         -----------------------------


<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                        <C>
INDEPENDENT AUDITOR'S REPORT ..............................................F-1

FINANCIAL STATEMENTS
   Consolidated Balance Sheet dated as of
      December 31, 2000 ...................................................F-2
   Consolidated Statements of Income for the
      years ended December 31, 2000 and 1999 ..............................F-3
   Consolidated Statements of Shareholders' Equity
     for the years ended December 31, 2000 and 1999 .......................F-4
   Consolidated Statements of Cash Flows for the
     years ended December 31, 2000 and 1999 ...............................F-5
   Notes to Consolidated Financial Statements .............................F-6 through F-22
</TABLE>




                                      -i-

<PAGE>

                               January 12, 2001







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 Subsidiary as of December 31, 2000 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the years ended December 31, 2000 and 1999. 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, 2000 and the consolidated results
of their operations and their cash flows for the years ended December 31, 2000
and 1999 in conformity with generally accepted accounting principles.



                                  /s/ Smith, Burch & Company, LLP


                                       F-1

<PAGE>

                   PINNACLE FINANCIAL CORPORATION & SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2000


ASSETS

  Cash and due from banks                                 $ 11,489,980
  Federal funds sold                                         1,030,000
                                                          ------------
        Total cash and cash equivalents                     12,519,980

  Securities available for sale                             87,175,586
  Loans, net of allowance for loan losses of $2,352,245    166,790,614

  Premises and equipment                                     8,173,811
  Accrued interest receivable                                2,722,559
  Other assets                                               4,396,905
                                                          ------------

       TOTAL ASSETS                                       $281,779,455
                                                          ============

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
  Deposits:
    Noninterest-bearing                                   $ 43,342,315
    Interest-bearing                                       178,309,691
                                                          ------------
       Total deposits                                      221,652,006

  Federal Home Loan Bank Advances                           13,100,000
  Accrued interest and other liabilities                     4,494,026
                                                          ------------

       Total liabilities                                   239,246,032
                                                          ------------

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                                         27,420,450
  Accumulated other comprehensive income (loss)                152,973
                                                          ------------

       Total shareholders' equity                           42,533,423
                                                          ------------

       TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         $281,779,455
                                                          ============

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, 2000 AND 1999


                                                   2000              1999
                                                   ----              ----

INTEREST INCOME
   Loans, including fees                        $16,629,961        $14,527,573
   Securities available for sale                  5,419,411          5,799,190
   Federal funds sold and other                     106,950            242,797
                                                -----------        -----------

        Total interest income                    22,156,322         20,569,560
                                                -----------        -----------

INTEREST EXPENSE
   Deposits                                       8,185,254          7,400,198
   Borrowings                                       633,468             77,179
                                                -----------        -----------

        Total interest expense                    8,818,722          7,477,377
                                                -----------        -----------

NET INTEREST INCOME                              13,337,600         13,092,183
   Provision for loan losses                        500,000            300,000
                                                -----------        -----------

        Net interest income after provision
          for loan losses                        12,837,600         12,792,183
                                                -----------        -----------

OTHER INCOME
  Service charges on deposit accounts             1,325,949          1,319,731
  Other service charges and fees                    636,961            782,650
  Other income                                      232,578            194,303
                                                -----------        -----------

        Total other income                        2,195,488          2,296,684
                                                -----------        -----------

OTHER EXPENSES
   Salaries and employee benefits                 5,003,313          4,597,725
   Occupancy expense                              1,277,607          1,204,433
   Net realized losses on sales of securities       416,478              4,089
   Other expenses                                 2,294,188          1,918,101
                                                -----------        -----------

        Total other expenses                      8,991,586          7,724,348
                                                -----------        -----------

Income before income taxes                        6,041,502          7,364,519
Income tax expense                                1,838,000          2,289,000
                                                -----------        -----------

NET INCOME                                      $ 4,203,502        $ 5,075,519
                                                ===========        ===========

Net income per share of common stock            $      5.47        $      6.61
                                                       ====               ====
Average shares outstanding                          768,000            768,000
                                                ===========        ===========

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, 2000 AND 1999

<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, 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

Comprehensive income:
  Net income for 2000                                                             4,203,502                       4,203,502

  Change in unrealized gain (loss) on
    securities available for sale,
    net of reclassification adjustments
    and tax effects                                                                               1,712,319       1,712,319

      Total comprehensive income                                                                                  5,915,821
                                                                                                               ------------

Cash dividends declared - $2.40 per share                                      (  1,843,200)                      1,843,200)
                                                  -----------   ------------  -------------   -------------    ------------

Balance, December 31, 2000                        $ 7,680,000   $  7,280,000  $  27,420,450   $     152,973    $ 42,533,423
                                                  ===========   ============  =============   =============    ============
</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, 2000 AND 1999
<TABLE>
<CAPTION>

                                                                                2000                    1999
                                                                                ----                    ----
<S>                                                                        <C>                  <C>
Cash flows from operating activities
  Net income                                                               $     4,203,502      $      5,075,519
                                                                            ---------------      ----------------
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation and amortization                                                616,091               608,560
      Provision for loan losses                                                    500,000               300,000
      Loss on sale of premises and equipment                                         8,590                18,791
      Deferred income taxes                                                 (      265,543)      (        21,872)
      Net realized losses on securities                                            416,478                 4,089
      Net change in:
          Accrued interest receivable and other assets                      (    1,141,937)      (     1,205,673)
          Accrued expenses and other liabilities                                   219,724               676,086
                                                                            ---------------      ----------------
      Total adjustments                                                            353,403               379,981
                                                                            ---------------      ----------------

  Net cash provided by operating activities                                      4,556,905             5,455,500
                                                                            ---------------      ----------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Available for sale securities:
    Sales                                                                       18,571,604             8,653,513
    Maturities, prepayments, and calls                                           6,713,601            22,838,187
    Purchases                                                               (   16,064,231)      (    36,366,849)
  Net change in loans                                                       (   13,020,031)      (    12,545,526)
  Proceeds from sale of premises and equipment                                      18,700                24,161
  Purchases of premises and equipment                                       (      671,383)      (       160,533)
                                                                            ---------------      ----------------

  Net cash used by investing activities                                     (    4,451,740)      (    17,557,047)
                                                                            ---------------      ----------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Net change in deposits                                                         3,307,565       (     2,597,117)
  Borrowings:
    Proceeds from issuance                                                      36,150,000            10,500,000
    Repayments                                                              (   33,550,000)                 -
  Cash dividends paid                                                       (    3,340,800)      (     3,187,200)
                                                                            ---------------      ----------------

  Net cash provided by financing activities                                      2,566,765             4,715,683
                                                                            ---------------      ----------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                          2,671,930       (     7,385,864)

Cash and cash equivalents at January 1                                           9,848,050            17,233,914
                                                                            ---------------      ----------------
Cash and cash equivalents at December 31                                   $    12,519,980      $      9,848,050
                                                                            ===============      ================

SUPPLEMENTARY CASH FLOW INFORMATION:
  Interest paid                                                            $     8,557,398      $      7,057,025
                                                                            ===============      ================
  Income taxes paid                                                        $     1,848,492      $      2,278,269
                                                                            ===============      ================
</TABLE>


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

                                       F-5
<PAGE>

                   PINNACLE FINANCIAL CORPORATION & SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Basis of Presentation and  Consolidation.  The  consolidated  financial
         ----------------------------------------
statements of Pinnacle Financial  Corporation (the company) and its wholly-owned
commercial  bank  subsidiary,  Pinnacle  Bank,  N.A.  (the bank) are prepared in
conformity with generally  accepted  accounting  principles and general practice
within  the  banking  industry.   All  significant   intercompany  accounts  and
transactions have been eliminated in consolidation.

         Nature of  operations.  The  company is a bank  holding  company  whose
         ---------------------
principal activity is the ownership and management of the bank and is subject to
regulation by the Federal Reserve 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 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.

         Use of Estimates.  In preparing  consolidated  financial  statements in
         ----------------
conformity with generally accepted accounting principles, management is required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent  assets and liabilities as of 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,  the
valuation of foreclosed real estate, and 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.

         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 poultry industries.

         Cash and cash equivalents.  For purposes of the consolidated statements
         -------------------------
of cash flows, cash and cash equivalents  include cash, balances due from banks,
and federal funds sold, all of which mature within ninety days.

         Securities  available for sale.  Securities are classified as available
         ------------------------------
for sale and are carried at fair value. Unrealized holding gains and losses, net
of  reclassification  adjustments  and related tax effects,  are  excluded  from
earnings and are reported in accumulated other comprehensive income (loss).

                                       F-6
<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999


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

         Securities  available  for sale -  (Continued).  Purchase  premiums and
         -------------------------------
discounts are recognized in interest  income using the interest  method over the
terms of the  securities.  Interest  and  dividend  income are  recognized  when
earned. A decline in the fair value of any security below cost that is deemed to
be other than temporary is charged to income resulting in the establishment of a
new  cost  basis  for the  security.  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  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  Northeast  Georgia.  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 is collateralized by improved and unimproved real estate and
is dependent upon the real estate market,  economic conditions,  and the granite
and poultry industries. Loans are stated at the amount of the outstanding unpaid
principal balances adjusted for charge-offs and the allowance for loan losses.

         Interest on loans is recognized at the  applicable  interest rate 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.

         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 volume 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.

         While  management  uses available  information  to recognize  losses on
loans, further reductions in the carrying amounts of loans may be necessary.  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-7
<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

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

         Allowance for loan losses - (Continued).  A loan is considered impaired
         -------------------------
when, based on current information and events, it is probable that the bank 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.  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.

         Foreclosed  real  estate.   Real  estate  properties  acquired  through
         ------------------------
foreclosure are initially recorded at the lower of the bank's carrying amount or
estimated  fair market value less cost to sell,  establishing  a new cost basis.
Any losses  recognized at the date of  foreclosure  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  carried at the lower of  carrying  amount or fair value less
cost  to  sell.  Income  and  expenses  of  foreclosed  real  estate,  including
adjustments to the carrying amount  subsequent to  foreclosure,  are included in
current earnings.

         Income  taxes.  The  provision  for  income  taxes is  based on  income
         -------------
reported for  consolidated  financial  statement  purposes and consists of taxes
currently due plus deferred  taxes  resulting  from the  recognition  of certain
revenues  and  expenses in  different  periods  for tax  reporting  purposes.  A
deferred  tax asset or  liability  is  recognized  for the tax  consequences  of
temporary  differences  between the financial statement carrying amounts and the
tax bases of existing assets and liabilities.  The tax consequence is calculated
by applying  enacted  statutory tax rates,  applicable to future years, to these
temporary  differences.  The company files consolidated  income tax returns with
its subsidiary.

                                       F-8
<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

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

         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.


NOTE 2 - SECURITIES AVAILABLE FOR SALE

         Securities available for sale at December 31 were as follows: <
<TABLE>
<CAPTION>
                                                                   Gross                     Gross
                                            Amortized            Unrealized               Unrealized                Fair
                                              Cost                 Gains                     Losses                 Value
                                              ----                 -----                     ------                 -----
<S>                                        <C>                    <C>                      <C>                   <C>
      2000
U.S. Treasury                              $   756,072            $    3,158              ($        90)          $   759,140
U.S. Government agencies                    41,201,072               169,601              (     95,666)           41,175,007
State and Municipals                        19,066,843               312,749              (     70,576)           19,209,016
Mortgage-backed securities                  21,166,004               169,111              (     59,452)           21,275,663
Corporate bonds                              3,515,565                36,875              (     18,980)            3,533,460
Other securities                             1,223,300                 --                        --                1,223,300
                                            ----------             ---------                ----------            ----------

                                           $86,928,856            $  691,494               ($  444,764)          $87,175,586
                                            ==========             =========                 =========            ==========
     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               (    45,196)           19,296,812
Mortgage-backed securities                  17,824,729                 2,089               (   481,019)           17,345,799
Corporate bonds                              1,028,836                 --                  (    40,336)              988,500
Other securities                             1,223,300                 --                        --                1,223,300
                                            ----------             ---------                 --------             ----------

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

         Other securities consist of stock in the Federal Home Loan Bank and the
Federal  Reserve Bank. 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, 2000 were as follows:

<TABLE>
<CAPTION>
                                                           Amortized               Fair
                                                             Cost                  Value
                                                             ----                  -----
<S>                                                       <C>                    <C>
       Due in one year or less                            $ 4,593,471            $ 4,586,570
       Due after one year through five years               50,316,227             50,420,808
       Due after five years through ten years               7,388,349              7,380,095
       Due after ten years                                  3,464,805              3,512,450
                                                           ----------             ----------

                                                           65,762,852             65,899,923
       Mortgage-backed securities                          21,166,004             21,275,663
                                                           ----------             ----------

                                                          $86,928,856            $87,175,586
                                                           ==========             ==========
</TABLE>

                                       F-9
<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 2 - SECURITIES AVAILABLE FOR SALE - (CONTINUED)

     Expected  maturities  will  differ  from  contractual   maturities  because
borrowers may have the right to call or prepay  obligations with or without call
or prepayment penalties.

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

                                           2000                  1999
                                           ----                  ----

         Nontaxable                   $  896,995              $  894,129
         Taxable                       4,522,416               4,905,061
                                       ---------               ---------

                                      $5,419,411              $5,799,190
                                       =========               =========


     For the years  ended  December  31, 2000 and 1999,  proceeds  from sales of
securities amounted to $18,571,604 and $8,653,513,  respectively. Gross realized
gains  amounted to $23,900 and  $22,733,  respectively.  Gross  realized  losses
amounted to $440,378 and $26,822, respectively.

     Securities  available  for sale,  with a  carrying  value of  approximately
$32,847,096  and $27,770,981 at December 31, 2000 and 1999,  respectively,  were
pledged to secure public  deposits and for other purposes  required or permitted
by law.

NOTE 3 - LOANS

     Components of loans at December 31 were as follows:

                                             2000                 1999
                                             ----                 ----

       Commercial                         $  19,566,350         $ 19,369,499
       Real estate construction               6,893,572            6,602,735
       Commercial real estate                78,419,567           61,718,106
       Residential real estate               41,204,620           41,693,171
       Consumer                              23,058,750           27,000,807
                                            -----------          -----------

               Total loans                  169,142,859          156,384,318
       Allowance for loan losses           (  2,352,245)        (  2,113,735)
                                            -----------          -----------

               Net loans                  $ 166,790,614         $154,270,583
                                            ===========          ===========


         The accrual of interest  has been  discontinued  on loans  amounting to
$4,059,027  at December 31, 2000 and $48,641 at December  31,  1999.  Unrecorded
interest income on these  non-accrual loans was $125,583 and $9,267 for 2000 and
1999, respectively.

                                       F-10
<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 3 - LOANS - (CONTINUED)

         In the normal course of business,  executive  officers and directors of
the bank and certain  business  organizations  and  individuals  associated with
them,  maintain  borrowing  relationships with the bank. Such loans were made 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

                                                2000               1999
                                                ----               ----

         Balance at January 1                $6,488,659         $3,834,451
            New loans                         3,495,526          6,935,859
            Repayments                       (3,719,718)        (4,281,651)
                                              ---------          ---------

         Balance at December 31              $6,264,467         $6,488,659
                                              =========          =========


NOTE 4 - ALLOWANCE FOR LOAN LOSSES

         Activity in the allowance for loan losses follows:

                                                    Years Ended December 31

                                                 2000                  1999
                                                 ----                  ----

         Balance at January 1                    $2,113,735        $2,070,005
            Provision for loan losses              500,000            300,000
            Loans charged off                    (   459,474)     (   425,334)
            Recoveries                             197,984             169,064
                                                 ---------           ---------

         Balance at December 31                  $2,352,245         $2,113,735
                                                  =========          =========


         Loans having  carrying  values of  $4,492,467  and $650,741 in 2000 and
1999,  respectively,  have been recognized as impaired.  The total allowance for
loan losses related to those loans was $1,214,856 and $476,752 in 2000 and 1999,
respectively.  The average recorded investment in impaired loans during 2000 and
1999 was $2,087,350 and  $1,107,352,  respectively.  Interest income on impaired
loans of $56,941 and $98,230 was recognized  for cash payments  received in 2000
and 1999, respectively.

                                       F-11
<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 5 - PREMISES AND EQUIPMENT

         Premises and equipment at December 31 were as follows:

                                                       2000               1999
                                                       ----               ----

            Land                                   $ 1,302,199      $ 1,302,199
            Land improvements                          392,574          356,073

            Buildings and improvements               6,139,341        5,891,761
            Furniture & fixtures                     3,956,988        4,438,857
                                                    ----------       ----------
                Total cost                          11,791,102       11,988,890
            Accumulated depreciation              (  3,617,291)    (  3,843,081)
                                                    ----------       ----------

                Net premises and equipment           8,173,811      $ 8,145,809
                                                    ==========       ==========


         Depreciation  expense  included in occupancy  expense for 2000 and 1999
was $616,091 and $608,560, respectively.

NOTE 6 - OTHER ASSETS AND OTHER LIABILITIES

         The  components  of other assets and other  liabilities  at December 31
were as follows:

                                                  2000          1999
                                                  ----          ----
OTHER ASSETS:

      Deferred income taxes                    $  628,311   $1,412,254
      Cash surrender value of life insurance    2,984,431    1,197,731
      Foreclosed real estate                      384,434      175,434
      Prepaid income tax                           11,385       96,162
      Other                                       388,344      151,805
                                               ----------   ----------

                                               $4,396,905   $3,033,386
                                               ==========   ==========

                                                     2000         1999
                                               ----------   ----------
OTHER LIABILITIES:

      Accrued interest payable                 $3,073,734   $2,812,410
      Compensation and retirement deferral        830,506      525,798
      Income taxes payable                        217,859         --
      Other                                       371,927      936,094
                                               ----------   ----------

                                               $4,494,026   $4,274,302
                                               ==========   ==========

         The bank has purchased  life  insurance on certain key employees and is
the  beneficiary of these  policies.  There are no  restrictions  or outstanding
borrowings against the cash surrender value of these policies.

                                       F-12
<PAGE>


                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 7 - TIME DEPOSITS

         The aggregate  amount of time deposits in  denominations of $100,000 or
more at  December  31,  2000 and  1999 was  $29,140,707  and  $25,876,493.  Time
deposits are included in interest-bearing  deposits on the consolidated  balance
sheets.

         At December 31, 2000, the scheduled  maturities of time deposits are as
follows:

                        2001                                $ 86,687,171
                        2002                                  17,501,592
                        2003                                   4,344,896
                        2004 and thereafter                    2,048,194
                                                             -----------

                                                            $110,581,853
                                                             ===========

         The company had deposits of  approximately  $2,171,598  and  $3,376,190
from related parties at December 31, 2000 and 1999, respectively.

NOTE 8 - BORROWINGS

         Federal Home Loan Bank (FHLB) advances at December 31 were as follows:

<TABLE>
<CAPTION>
                                                               2000               1999
                                                               ----               ----

<S>                                                        <C>               <C>
         Federal Home Loan Bank Short-Term Advances        $10,100,000       $ 7,500,000
         Federal Home Loan Bank Long-Term Advances           3,000,000         3,000,000
                                                            ----------        ----------

                                                           $13,100,000       $10,500,000
                                                           ===========       ===========
</TABLE>


         The FHLB  advances  are  secured by the  company's  investment  in FHLB
stock,  which totaled  $774,500 at December 31, 2000 and 1999,  and by a blanket
floating lien on portions of the company's loan portfolio.

         Non-callable  advances  require  monthly  interest  payments,  whereas,
callable advances require quarterly interest payments.  Of the total outstanding
advances as of December 31, 2000,  $4,000,000 are callable by the FHLB beginning
in  September  2001.  If the  callable  advances  are called  prior to maturity,
replacement funds will be offered by the FHLB at a then-current  rate.  Advances
that are callable or mature within one year are classified as short-term.

         Short-term  advances  accrue  interest  as  follows:  $4,500,000  at  a
floating rate, which reprices daily based on the Federal Funds rate,  $3,000,000
at a rate of 5.71% and $2,600,000 at a rate of 6.23%.

         Long-term advances accrue interest as follows:  $2,000,000 at a rate of
6.79% and $1,000,000 at a rate of 6.39% and mature or are callable in 2002.

         Federal funds purchased  generally  mature within one to four days from
the transaction  date. The company  periodically  purchased federal funds during
2000 and 1999. Interest expense in the amount of $34,046 and $5,596 was incurred
on these amounts in 2000 and 1999,  respectively,  and is included with interest
expense on borrowings.

                                       F-13
<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 9 - OTHER EXPENSES

         The major components of other expenses were as follows:

<TABLE>
<CAPTION>
                                                               2000              1999
                                                               ----              ----
<S>                                                        <C>               <C>
         Professional fees                                $  306,739        $  271,550
         Stationary, supplies and printing expense           192,692           196,250
         Advertising and public relations expense            237,506           225,126
         Litigation settlement                               248,250               --
         Other expenses                                    1,309,001         1,225,175
                                                           ---------         ---------

                                                          $2,294,188        $1,918,101
                                                          ==========        ==========
</TABLE>

NOTE 10 - 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.  Employer  contribution  expense  included in salaries and employee
benefits for the plan was $250,048 in 2000 and $200,486 in 1999.

         Employee Stock  Ownership Plan. An Employee Stock Ownership Plan (ESOP)
was adopted by the  company 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 2000 or  1999.  As of
December 31, 2000, the ESOP had purchased no qualified employer securities.

         Executive Retirement Benefits.  The bank 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.

         Employment  Security  Agreement.  The bank's former  President  retired
effective  April  15,  2000.  Under the  provisions  of an  employment  security
agreement,  the bank has recognized an  outstanding  liability of $283,538 as of
December 31, 2000.

                                       F-14
<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 11 - INCOME TAXES

         The provision for income taxes consisted of the following:

                                                 Years Ended December 31
                                                 -----------------------
                                                    2000              1999
                                                    ----              ----

         Current tax provision - federal       $1,977,569            $2,180,578
         Current tax provision - state            125,974               130,294
         Deferred tax benefit                 (   265,543)          (    21,872)
                                                ---------             ---------

                                               $1,838,000            $2,289,000
                                                =========             =========


         The  provision  for federal  income taxes is less than that computed by
applying the federal statutory rate of 34% in 2000 and 1999, as indicated in the
following analysis:


                                                        2000            1999
                                                        ----            ----

         Statutory federal tax rate                     34.0%          34.0%
         Increase (decrease) resulting from:
            State taxes net of federal tax benefit       1.4%           1.2%
            Tax-exempt income                          ( 6.6%)        ( 5.1%)
            Interest and other nondeductible expenses     .6%           1.6%
            Other, net                                   1.0%          ( .6%)
                                                        -----          ----

                                                        30.4%          31.1%
                                                        =====          =====


         The  components of the net deferred  income tax asset included in other
assets at December 31 were as follows:

                                                        2000             1999

   DEFERRED TAX ASSETS:
         Net unrealized loss on securities
           available for sale                       $    --         $  955,728
         Allowance for loan losses                    720,381          629,747
         Deferred directors' fees and interest        150,037           153,371
         Employee severance pay                       107,745              --
         Other, net                                   149,417            97,260
                                                    ---------          --------

                                                    1,127,580         1,836,106
                                                    ---------         ---------

   DEFERRED TAX LIABILITIES:
         Net unrealized gain on securities
            available for sale                         93,758             --
         Depreciation                                 391,955           404,885
         Other, net                                    13,556            18,967
                                                    ---------          --------

                                                      499,269           423,852
                                                    ---------         ---------

         Net deferred tax asset                    $  628,311        $1,412,254
                                                    =========         =========

                                       F-15
<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 12 - 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 13 - 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 were as follows:

                                              2000                    1999
                                              ----                    ----
         New loan commitments             $    --                $ 2,546,260
         Credit card arrangements          3,298,890               2,862,217
         Undisbursed lines of credit       17,179,111             17,836,666
         Standby letters of credit          2,269,951              2,323,044
                                           ----------             ----------

                                          $22,747,952            $25,568,187
                                           ==========             ==========

         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-16
<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 14 - 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 at December 31 were as follows ($ in thousands):

                                          2000                 1999
                                 --------------------  --------------------
                                  Carrying    Fair      Carrying     Fair
                                   Amount     Value      Amount      Value

Financial assets:
  Cash and cash equivalents       $ 12,520   $ 12,520   $  9,848   $  9,848
  Securities available for sale     87,175     87,175     95,101     95,101
  Loans, net                       166,791    166,587    154,270    154,414
  Accrued interest receivable &
     other assets                   15,293     15,293     13,858     13,858

Financial liabilities:
  Deposits                        $221,652   $209,099   $218,344   $207,249
  Borrowings                        13,100     13,226     10,500     10,458
  Other liabilities                  4,494      4,494      5,772      5,772

Off-balance-sheet instruments:
  Commitments, commercial lines
    of credit, and standby

    letters of credit                        $     27              $     47


         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-17

<PAGE>


                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 14 - 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 fixed rate 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.

         Other  assets and other  liabilities  - The  carrying  amounts of other
assets and other liabilities approximate fair value.

         Deposits - The fair values of deposits with no defined  maturity (e.g.,
interest and noninterest checking, savings, and money market accounts) are equal
to 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 defined  maturity  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  remaining  borrowings  are  estimated  using
discounted  cash  flow  analyses  based  on the  company's  current  incremental
borrowing rates for similar types of borrowing arrangements.

         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 15 - REGULATORY MATTERS AND 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 capital amounts and classification
are also subject to qualitative  judgments by the regulators  about  components,
risk weightings, and other factors.

         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, 2000 and 1999, that
the bank met all capital adequacy requirements to which it is subject.

                                       F-18

<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 15 - REGULATORY MATTERS AND RESTRICTIONS - (CONTINUED)

         As of December 31, 2000, 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 bank's category.  Because the company is a bank holding company
with only one bank subsidiary,  there are no significant differences between the
consolidated risk-based capital ratios and those of the bank.

         The bank's actual capital amounts and ratios are presented in the table
below ($ in thousands):

                                                                    Minimum
<TABLE>
<CAPTION>
                                                                                                     To Be Well
                                                                             Minimum             Capitalized Under
                                                                             Capital             Prompt Corrective
                                                    Actual                 Requirement           Action Provisions
                                              -------------------       -------------------    -----------------------
                                              Amount       Ratio         Amount      Ratio        Amount        Ratio
                                              ------       -----         ------      -----        ------        -----

AS OF DECEMBER 31, 2000:
 Total Capital to Risk
<S>                                          <C>           <C>           <C>          <C>         <C>           <C>
    Weighted Assets                          $44,070       22.62%        $15,589      8.0%        $19,486       10.0%
 Tier I Capital to Risk
    Weighted Assets                           41,718       21.41           7,794      4.0          11,691        6.0
 Tier I Capital to Average
    Average Assets                            41,718       15.14          11,024      4.0          13,780        5.0

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
</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, 2000,  approximately $7,560,518 of retained
earnings  were  available  for dividend  declaration  without  prior  regulatory
approval.

      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, 2000 and 1999 was $3,928,000 and $3,803,000, 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, 2000 and
1999.

                                       F-19

<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 16 - COMPREHENSIVE INCOME

         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  components  of other  comprehensive  income (loss) and related tax
effects are as follows:

                                                       Years Ended December 31
                                                       -----------------------

                                                        2000          1999
                                                        ----          ----
   Unrealized holding gains (losses) on
     securities available for sale                  $ 2,752,606    ($4,175,069)
   Reclassification adjustment for losses
     (gains) realized in income                           9,199         17,608
                                                    -----------    -----------

   Net unrealized gains (losses)                      2,761,805     (4,157,461)

   Tax effect                                        (1,049,486)     1,579,835
                                                    -----------    -----------

Net-of-tax amount                                   $ 1,712,319    ($2,577,626)
                                                    ===========    ===========

                                       F-20
<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 17 - CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY

         Financial information pertaining only to Pinnacle Financial Corporation
is as follows:

                                 BALANCE SHEET
                                 DECEMBER 31, 2000

                                                             2000
                                                             ----
ASSETS

Cash in subsidiary bank                                  $    43,347
Securities available for sale                                610,346
Investment in subsidiary                                  41,876,907
Other assets                                                  14,675
Due from subsidiary                                            --
                                                       -------------

         TOTAL ASSETS                                    $42,545,275
                                                         ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued expenses                                         $    11,852
Declared dividends payable                                       --
Common stock                                               7,680,000
Capital surplus                                            7,280,000
Retained earnings                                         27,420,450
Accumulated other comprehensive income (loss)                152,973
                                                          ----------

         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY       42,545,275
                                                          ==========


                              STATEMENTS OF INCOME
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                        2000         1999
                                                        ----         ----
INCOME

   Dividends from subsidiary                         $1,873,200   $5,037,400
   Interest income - securities available for sale       30,708       26,569
                                                     ----------   ----------
                                                      1,903,908    5,063,969

OPERATING EXPENSES                                       86,497      114,078
                                                     ----------   ----------

Income before income taxes and equity in
   undistributed income of subsidiary                 1,817,411    4,949,891

Income tax benefit                                       33,000       43,000
                                                     ----------   ----------

Net income before equity in undistributed
   income of subsidiary                               1,850,411    4,992,891

Equity in undistributed income of subsidiary          2,353,091       82,628
                                                     ----------   ----------

NET INCOME                                           $4,203,502   $5,075,519
                                                     ==========   ==========

                                       F-21
<PAGE>

                   PINNACLE FINANCIAL COPORATION & SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE 17 - CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY - (CONTINUED)
<TABLE>
<CAPTION>

                                                STATEMENTS OF CASH FLOWS
                                         YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                                                            2000              1999
                                                                                            ----              ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                    <C>                 <C>
   Net income                                                                          $ 4,203,502         $ 5,075,519
   Adjustments to reconcile net income to
     net cash provided by operating activities:
         Depreciation and amortization                                                       --                 12,703
         Deferred income taxes                                                                 697         (     3,769)
         Equity in undistributed income of
            subsidiary                                                                 ( 2,353,091)        (    82,628)
         Net change in:
              Other assets                                                                     481         (     3,080)
              Due from subsidiary                                                        1,499,890         ( 1,493,890)
              Accrued expenses                                                               4,099               7,151
                                                                                         ---------          ----------

       Net cash provided by operating activities                                         3,355,578           3,512,006
                                                                                         ---------          ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Available for sale securities:
       Purchases                                                                              --           (   325,000)
       Proceeds from calls                                                                    --                 5,000
       Other changes                                                                   (        69)        (        66)
                                                                                        -----------         ----------

       Net cash used by investing activities                                           (        69)        (   320,066)
                                                                                        ----------          ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash dividends paid                                                                 ( 3,340,800)        ( 3,187,200)
                                                                                        ----------          ----------

       Net cash used by financing activities                                           ( 3,340,800)        ( 3,187,200)
                                                                                        ----------          ----------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                                     14,709               4,740
Cash and cash equivalents at January 1                                                      28,638              23,898
                                                                                        ----------          ----------

Cash and cash equivalents at December 31                                               $    43,347         $    28,638
                                                                                        ==========          ==========
</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 23rd day of March, 2001.

                                     PINNACLE FINANCIAL CORPORATION

Date: March 23, 2001         By: /s/ L. Jackson McConnell
      --------------             -----------------------------------------------
                                        L. Jackson McConnell
                                           Chairman and Chief Executive Officer
                                           (Principal Executive Officer)

Date: March 23, 2001         By: /s/ Lint W. Eberhardt
      --------------             -----------------------------------------------
                                        Lint W. Eberhardt
                                        President


                                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 23rd day of March, 2001.

<TABLE>
<CAPTION>
                     Signature                                     Title
                     ---------                                     -----
<S>                                                    <C>
          /S/ L. Jackson McConnell                     Chairman and Chief Executive Officer
         --------------------------------              and Director
         L. Jackson McConnell


          /S/ Linton W. Eberhardt                      President and Director
         --------------------------------
         Linton W. Eberhardt


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




<PAGE>

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

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

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

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

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

         /S/ L. Jackson McConnell, Jr.                  Director
         --------------------------------
          L. Jackson McConnell, Jr.

         /S/ James E. Purcell                          Director
         --------------------------------
         James E. Purcell

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

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








<PAGE>

                                  EXHIBIT INDEX


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

10.4                Split Dollar Life Insurance Agreement

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