<PAGE>

                                 UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-Q


                   Quarterly Report Pursuant to Section 13 or 15(d) of
                          the Securities Exchange Act of 1934

For the quarter ended March 31, 1997          Commission file number #0-17937


                          PINNACLE FINANCIAL SERVICES, INC.
                   (Exact name of registrant as specified in its charter)


              Michigan                               38-2671129
      (State of Incorporation)            (I.R.S. Employer Identification No.)

830 Pleasant Street, St. Joseph, Michigan               49085
 (Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code: (616) 983-6311

Securities registered pursuant to Section 12(g) of the Act:


         COMMON STOCK, NO PAR VALUE, 15,000,000 SHARES AUTHORIZED

Indicate by check mark whether the registrant (1) has filed all reports 
required to be by Section 13 or 15(d) of the Securities Exchange Act of 1934 
during the preceding 12 months (or for such shorter period that registrant 
was required to file such reports), and (2) has been subject to such filing 
requirements for the past 90 days.  Yes  X    No  
                                        ---      ---

The number of common shares, no par value, outstanding as of March 31, 1997 
was 5,980,320.


<PAGE>

PINNACLE FINANCIAL SERVICES, INC.

FORM 10-Q
March 31, 1997


                          TABLE OF CONTENTS                            PAGE
                           
PART I.  FINANCIAL INFORMATION
 Item 1.  Financial Statements

  Consolidated Balance Sheets
   March 31, 1997; March 31, 1996; December 31, 1996                    3

  Consolidated Statements of Income
   Three Months Ended March 31, 1997 and 1996                           4

  Consolidated Statements of Stockholders'  Equity
   Three Months Ended March 31, 1997 and 1996                           5

  Consolidated Statements of Cash Flows
   Three Months Ended March 31, 1997, 1996, and 1995                    6

  Notes to Consolidated Financial Statements                            7

 Item 2.  Management's Discussion and Analysis of Financial 
       Condition and Results of Operation                               9

PART II.  OTHER INFORMATION
 
  Item 6.       Exhibits and Reports on Form 8-K                       27

  Signatures                                                           28

                                      -2-


<PAGE>


PINNACLE FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

(Dollars in thousands)                                   3/31/97       3/31/96     12/31/96
                                                       (UNAUDITED)   (UNAUDITED)  (UNAUDITED)
--------------------------------------------------------------------------------------------
<S>                                                     <C>           <C>           <C>
ASSETS: 
  Cash and cash equivalents:
        Cash and due from banks                         $  25,904     $  23,229      $  30,290 
        Federal funds sold                                      -             -         15,750 
                                                        ---------     ---------      ---------
             Total cash and cash equivalents               25,904        23,229         46,040 

  Interest-bearing deposits with financial institutions     2,016           423          3,223 
  Securities available-for-sale:
        Taxable                                           392,775       313,174        350,685 
        Tax -exempt                                        20,150        19,652         21,472 
  Loans, net of unearned income: 
        Real estate                                       270,566       272,876        276,941 
        Commercial                                        216,275       171,820        210,315 
        Tax -exempt                                         8,121         2,774          8,196 
        Consumer                                          120,062        95,672        114,112 
                                                        ---------     ---------     ----------
           Subtotal Loans                                 615,024       543,142        609,564 
        Less allowance for loan losses                      5,651         5,803          5,643 
                                                        ---------     ---------     ----------
        Net loans                                         609,373       537,339        603,921 
  Premises and equipment, net                              12,923        12,449         12,686 
  Accrued interest receivable and other assets             34,650        29,205         31,094 
                                                      -----------     ---------    -----------
      Total assets                                    $ 1,097,791     $ 935,471    $ 1,069,121 
                                                      -----------     ---------    -----------
                                                      -----------     ---------    -----------
LIABILITIES: 
  Deposits: 
        Noninterest bearing demand                     $   62,080     $  50,152    $   78,365 
        Interest-bearing demand                            76,250        75,329        76,665 
        Savings                                           272,663       260,180       261,997 
        Time                                              346,929       330,998       344,242 
                                                      -----------     ---------   -----------
            Total deposits                                757,922       716,659       761,269 
  Federal Home Loan Bank advances                         180,455       104,108       159,489 
  Securities sold under repurchase agreements and 
     other borrowings                                      78,819        34,640        65,872 
      Accrued interest payable and other liabilities        5,305         6,566         4,442 
                                                      -----------     ---------   -----------
         Total liabilities                              1,022,501       861,973       991,072 

STOCKHOLDERS' EQUITY:
   Common Stock; no par value; 15,000,000 shares 
     authorized; 5,980,320  shares issued and 
     outstanding at March 31, 1997; 5,977,548 shares
     issued and outstanding at December 31, 1996; and  
     5,873,358 shares issued and outstanding at 
     March 31, 1996                                        19,110        19,110        19,110 
   Additional paid in capital                              44,574        43,915        44,526 
   Retained earnings                                       16,354        11,803        14,789 
   Net unrealized (loss) on securities 
     available-for-sale                                    (4,748)       (1,330)         (376)
                                                      -----------     ---------   -----------
         Total stockholders' equity                        75,290        73,498        78,049 
                                                      -----------     ---------   -----------
      Total liabilities and stockholders' equity      $ 1,097,791     $ 935,471   $ 1,069,121 
                                                      -----------     ---------   -----------
                                                      -----------     ---------   -----------
</TABLE>

                                      -3-

<PAGE>


PINNACLE FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED
                                                                                 MARCH 31,
                                                                            ------------------
(Dollars in thousands, except per share data)                                1997        1996
----------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>
INTEREST INCOME:
    Interest and fees on loans:
        Taxable                                                          $  13,025   $  11,577 
        Tax-exempt                                                             122          44 
    Interest and dividends on securities:
        Available-for-sale
             Taxable                                                         6,571       4,767 
             Tax-exempt                                                        273         264 
    Interest on federal funds sold                                              43          90 
    Interest on interest-bearing deposits with financial institutions           31         416 
                                                                         ---------   ---------
        Total interest income                                               20,065      17,158 

INTEREST EXPENSE: 
    Interest on deposits                                                     7,747         228 
    Interest on Federal Home Loan Bank advances                              2,524       7,171 
    Interest on securities sold under repurchase and other borrowings          744       1,890
                                                                         ---------   ---------
        Total interest expense                                              11,015       9,289 
                                                                         ---------   ---------
        Net interest income                                                  9,050       7,869 
    Provision for loan losses                                                  235          80 
                                                                         ---------   ---------
        Net interest income, after provision for loan losses                 8,815       7,789
                                                                         ---------   ---------

NONINTEREST INCOME: 
    Service charges on deposit accounts                                        750         451 
    Trust income                                                               165         144 
    Securities gains and losses, net                                            59         234 
    Other income                                                               917         755 
                                                                         ---------   ---------
        Total noninterest income                                             1,891       1,584 

NONINTEREST EXPENSES: 
    Salaries and benefits                                                    2,765       2,522 
    Occupancy expense                                                          611         522 
    Equipment expense                                                          421         380 
    FDIC insurance premiums                                                     96         219 
    Other expense                                                            2,296       2,108 
                                                                         ---------   ---------
        Total noninterest expenses                                           6,189       5,751 
                                                                         ---------   ---------
    Income before federal income tax expense                                 4,517       3,622 
    Income tax expense                                                       1,547       1,178 
                                                                         ---------   ---------
        Net income                                                       $   2,970   $   2,444 
                                                                         ---------   ---------
                                                                         ---------   ---------
Net income per common share                                              $    0.50   $    0.42 
                                                                         ---------   ---------
                                                                         ---------   ---------
Weighted average shares outstanding                                      5,978,640   5,873,358 
                                                                         ---------   ---------
                                                                         ---------   ---------
Cash dividends declared per common share                                 $    0.24   $    0.19 
                                                                         ---------   ---------
                                                                         ---------   ---------
</TABLE>


                                       -4-

<PAGE>

PINNACLE FINANCIAL SERVICES, INC.
CONSOLIDATED STOCKHOLDERS' EQUITY SCHEDULE

<TABLE>
<CAPTION>

                                                                                              NET UNREALIZED
                                                                                               GAINS (LOSSES)
                                                                    ADDITIONAL                 ON SECURITIES
                                                        COMMON       PAID-IN     RETAINED      AVAILABLE-FOR
(Dollars in thousands)                                   STOCK       CAPTITAL    EARNINGS            SALE          TOTAL 
-------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>         <C>          <C>           <C>              <C>
BALANCE, JANUARY 1, 1996                                19,110         44,174      10,475           1,137         74,896 
Net income                                                   -              -       2,444               -          2,444 
Common stock issuance, net of stock offering costs           -           (259)          -               -           (259)
Cash dividends declared,  $.19 per share                     -              -      (1,116)              -         (1,116)
Change in unrealized losses for securities 
   available-for-sale, net of tax effect of $(1,271)         -              -           -          (2,467)        (2,467)
                                                        ------        -------     -------         -------       -------- 

BALANCE, MARCH 31, 1996                                 19,110         43,915      11,803          (1,330)        73,498 
Net income                                                   -                      6,708               -          6,708 
Common stock issuance                                        -            611           -               -            611 
Cash dividends declared,  $.63 per share                     -                     (3,722)              -         (3,722)
Change in unrealized gains for securities 
   available-for-sale, net of tax effect of $466             -                          -             954            954 
                                                        ------        -------     -------         -------       -------- 

BALANCE, DECEMBER 31, 1996                              19,110         44,526      14,789            (376)        78,049 
Net income                                                   -                      2,970               -          2,970 
Common stock issuance                                        -             48           -               -             48 
Cash dividends declared, $.235 per share                     -                     (1,405)              -         (1,405)
Change in unrealized losses for securities 
  available-for-sale, net of tax effect of $(2,868)          -              -           -          (4,372)        (4,372)
                                                        ------        -------     -------         -------       -------- 
BALANCE, MARCH 31, 1997                                 19,110         44,574      16,354          (4,748)        75,290 
                                                        ------        -------     -------         -------       -------- 
                                                        ------        -------     -------         -------       -------- 
</TABLE>

                                      -5-

<PAGE>

PINNACLE FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                                                   -----------------------

(Dollars in thousands)                                                 1997           1996
------------------------------------------------------------------------------------------
<S>                                                                <C>           <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income                                                   $  2,970       $  2,444 
      Adjustments to reconcile net income to net cash
      provided by operating activities:
            Depreciation and amortization                               646            467 
            Net amortization on loans and securities                    231            440 
            Provision for loan losses                                   235             80 
            Deferred federal income taxes                                 -             83
            Mortgage loans originated for sale                      (22,566)       (15,221)
            Proceeds from sales of loans                             15,172         24,798 
            Gain on sale of securities, net                             (59)          (234)
            Gain on sale of loans, net                                 (177)          (196)
            Increase in interest receivable and other assets         (1,027)           493
            Increase in interest payable and other liabilities          863            270
                                                                   --------         ------
           NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES       (3,712)        13,424
                                                                   --------         ------
CASH FLOWS FROM INVESTING ACTIVITIES:
      Net (increase) decrease in loans, excluding loan sales, 
             purchases, and originated for sale                       6,423        (28,738)
      Purchases of loans                                             (4,684)        (5,834)
      Purchases of securities available-for-sale                    (70,934)       (81,750)
      Proceeds from sales of securities available-for-sale           17,443         23,045 
      Proceeds from maturities and paydowns of securities
             available-for-sale                                       5,478          9,846 
      Proceeds from maturities and paydowns of securities
             held-to-maturity                                             -              - 
      Net increase in interest-bearing deposits with financial 
             institutions                                             1,207         41,088 
      Capital expenditures                                             (566)          (161)
                                                                   --------       -------- 
           NET CASH USED IN INVESTING ACTIVITIES                    (45,633)       (42,504)
                                                                   --------       -------- 
CASH FLOWS FROM FINANCING ACTIVITIES:
      Net increase (decrease) in deposits                            (3,347)         13,559
      Net increase in securities sold under repurchase agreements 
            and other borrowings                                     33,913          11,594
      Common stock issued                                                48            (259)
      Dividends paid                                                 (1,405)         (1,116)
                                                                   --------        -------- 
           NET CASH PROVIDED BY FINANCING ACTIVITIES                 29,209          23,778 
                                                                   --------        -------- 
NET DECREASE IN CASH AND CASH EQUIVALENTS                           (20,136)         (5,302)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                       46,040          28,531 
                                                                   --------        -------- 
CASH AND CASH EQUIVALENTS AT END OF YEAR                          $  25,904       $  23,229 
                                                                   --------        -------- 
                                                                   --------        -------- 
SUPPLEMENTAL DISCLOSURES:
      Interest paid                                               $  17,805       $   9,231 
      Federal income taxes paid                                   $     100       $     870 
      Loans transferred to other real estate owned                $     720       $      75 
-------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.

                                      -6-

<PAGE>


                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements of 
     Pinnacle Financial Services, Inc. (together with its subsidiary, the  
     "Company") have been prepared in conformity with generally accepted 
     accounting principles for interim financial information and with the 
     instruction for Form 10-Q and Rule 10-01 of Regulation S-X.  
     Accordingly, they do not include all the information and footnotes 
     required by generally accepted accounting principles for complete 
     financial statements.

     In the opinion of management, all necessary adjustments (consisting of 
     normal recurring adjustments) considered necessary for a fair 
     presentation have been included.  The operating results for the three 
     month period ended March 31, 1997 are not necessarily indicative of the 
     results to be expected for the year ending December 31, 1997.
     
     For further information, refer to the consolidated financial statements 
     and the notes thereto included in the Company's Annual Report on 
     Form 10-K for the year ended December 31, 1996 as filed with the Securities
     and Exchange Commission.
     
NOTE 2: ACCOUNTING FOR IMPAIRED LOANS
     
     Effective January 1, 1995, the Company adopted Statement of Financial 
     Accounting Standard SFAS No. 114 (as amended by SFAS No. 118), "Accounting
     by Creditors for Impairment of a Loan".
     
     Impaired loans under SFAS 114 and SFAS 118 are nonaccrual loans and 
     restructured loans.  All nonaccrual loans are considered as impaired 
     loans.  Additionally, loans are considered impaired if principal and/or 
     interest is considered at risk, even if the loan is current with all 
     payments of principal and interest.  Impaired loans follow the same 
     criteria as other loans with valuation reserves established at the 
     period deemed to be impaired.
     
     Nonperforming loans are comprised of loans which the accrual of 
     interest has been discontinued, loans contractually past due 90 days or 
     more as the interest and/or principal and not included in nonaccrual 
     loans.  Loans are generally placed on a nonaccrual basis when, in the 
     opinion of management, collection of principal or interest payments is 
     unlikely.  Income on such loans is then recognized only to the extent 
     that cash is received and where future collection of principal is 
     probable.
     

NOTE 3: ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND 
        EXTINGUISHMENT OF LIABILITIES

     The Financial Accounting Standards Board has issued Statement No. 125,
     "Accounting for Transfers and Servicing of Financial Assets and 
     Extinguishment of Liabilities" which is effective, in part, for 
     transactions occurring after December 31, 1996.  This statement provides
     accounting and reporting standards for transfers and servicing of 
     financial assets and extinguishments of liabilities based on consistent
     application of a financial components approach that focuses on control.
     Pinnacle adopted this statement on January 1, 1997, and it did not have
     a material effect on the Company's financial condition, results of 
     operations, or liquidity.

NOTE 4: COMMITMENTS - PROPOSED ACQUISITIONS
     
     On November 14, 1996, Pinnacle entered into a definitive agreement with 
     Indiana Federal Corporation ("IFC") which will add approximately $837 
     million in total assets.  The transaction is contemplated as a merger 
     of equals through the issuance of one share of Pinnacle Common Stock 
     for each share of IFC Common Stock and it is anticipated to be 
     accounted for using the pooling of interests method.  The acquisition, 
     subject to shareholder and regulatory approval is scheduled to close in 
     the second quarter of 1997.

                                      -7-

<PAGE>

     On March 3, 1997, Pinnacle announced the acquisition of CB Bancorp, 
     Inc. ("CB") of Michigan City, Indiana which will add approximately $227 
     million in total assets.  The fixed purchase price is equal to $35.00 
     per CB share, payable in Pinnacle shares.  If Pinnacle's average stock 
     price exceeds $29.00, CB shareholders will receive 1.2069 Pinnacle 
     shares per CB share.  If Pinnacle's average stock price is less than 
     $23.00 per share, CB shareholders will receive 1.5217 Pinnacle shares 
     per CB share.  The acquisition, subject to shareholder and regulatory 
     approval, is expected to close in the second quarter of 1997 and is 
     anticipated to be accounted for using the pooling of interests method.
     
NOTE 5: PER COMMON SHARE DATA

     Earnings per share are calculated by dividing net income by the weighted
     average number of shares of common stock and common stock equivalents 
     outstanding during the period.  Common stock equivalents are calculated
     using the treasury stock method.



                                      -8-     

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

The following discussion provides information regarding Pinnacle's financial 
condition and results of operations for the three month period ended 
March 31, 1997 and are not necessarily indicative of results to be attained 
for any other period.  This discussion should be read in conjunction with the 
consolidated financial statements, results of operations and related notes 
and with the statistical information and financial data appearing in this 
report as well as the 1996 Annual Report and Form 10-K of Pinnacle Financial 
Services, Inc. ( the "Company" or "Pinnacle").

                           DESCRIPTION OF THE COMPANY

Pinnacle Financial Services, Inc. ("Pinnacle") is a registered bank holding 
company that was organized under the laws of the State of Michigan in 1986 in 
connection with the June 30, 1986 reorganization of Pinnacle Bank, a Michigan 
state banking corporation then known as "The Peoples State Bank of St. Joseph" 
("Pinnacle Bank"), into a wholly-owned subsidiary of Pinnacle.  Pinnacle is 
one of the leading full-service community-banking institutions in 
southwestern Michigan and northern Indiana.  Pinnacle's principal executive 
offices are located at 830 Pleasant Street, St. Joseph, Michigan 49085, and 
its telephone number is (616) 983-6311.

Through Pinnacle Bank, Pinnacle offers financial service products which 
include domestic banking services such as consumer, commercial and real 
estate loans, personal and business checking accounts, savings accounts, time 
deposits, safe deposit services, cash management services, and transmission 
of funds, as well as trust and other fiduciary services, full-service 
brokerage services and insurance products.  Commercial customers include 
retailers, commercial developers, professionals, and small manufacturers.  
Retail banking and thrift customers cover a broad spectrum with focus on 
providing personalized, high quality and comprehensive service in order to 
develop and maintain long-term, multiple account relationships with customers.

Pinnacle Bank, which is headquartered in St. Joseph, Michigan, has two 
non-bank subsidiaries:  Starke's, Inc., an insurance agency, and Brookview 
Real Estate, Ltd., a real estate development company.  Pinnacle Bank 
currently operates through 16 branch offices located throughout southwestern 
Michigan, 14 branch offices located throughout northern Indiana, and two loan 
production offices that are located in Merrillville and Indianapolis, 
Indiana, respectively.  Pinnacle Bank focuses on providing personalized, high 
quality and comprehensive service in order to develop and maintain long-term, 
multiple account relationships with customers.

Pinnacle's market, which is adjacent to metropolitan Chicago, Illinois and is 
bisected by Interstate 94 (the primary highway between Chicago and Detroit), 
currently consists of northern Indiana and southwestern Michigan,  The region's 
location has facilitated the development of a diverse economy based 
primarily on manufacturing, service and agriculture.  The region's proximity 
to Chicago and the southeastern expansion of metropolitan Chicago into Lake 
County, Indiana, have led to significant commercial and residential 
development and a strong second-home housing market.  The region's popularity 
as a year-round recreational area also has led to tourism-driven economic 
growth.

Pinnacle had $1.1 billion in total assets as of March 31, 1997.  Pinnacle 
returned 1.14% on average assets for the first quarter of 1997 as compared to 
1.05% for the same period of 1996.

                                      -9-

<PAGE>

For the first quarter of 1997, Pinnacle's return on average equity was 15.62% 
as compared to 13.03% for the same period of 1996.

Pinnacle believes its success is in part attributable to a growth strategy 
that, since the beginning of 1995, has (i) increased assets by more than 168% 
(with total assets growing to $1.1 billion by March 31, 1997), and 
(ii) increased net loans by more than 109.9% (with total loans growing to 
approximately $609.4 million at March 31, 1997).  Pinnacle's loan to deposit 
ratio was approximately 81.1% at March 31, 1997.  Pinnacle's growth has been 
generated internally through customer retention and cross-selling programs 
and externally through acquisitions.  Since 1988, Pinnacle has consummated 
five acquisitions, two of which involved thrifts.

Through its acquisition strategy, Pinnacle seeks to diversify and expand both 
its market area and its asset base, and to increase its profitability.

On December 1, 1995, Pinnacle acquired all of the outstanding capital stock 
of Maco Bancorp, Inc., a Delaware corporation and a registered savings and 
loan holding company ("Maco"), for aggregate consideration of $41.9 million 
(the "Purchase Price"), through the merger of Maco with and into Pinnacle 
(the "Maco Acquisition").  The Purchase Price, which was paid to Mr. Cyrus 
Ansary as the sole stockholder of Maco, consisted of cash, a secured, 
short-term, interest bearing promissory note in the principal amount of $18.0 
million (the "Acquisition Note"), and shares of Pinnacle Common Stock then 
valued at approximately $21.0 million.  As a result of the Maco Acquisition, 
Pinnacle became the sole stockholder of First Federal Savings Bank of 
Indiana, a federal savings bank that was renamed, "Pinnacle Bank" in 1996 and 
was merged with and into Pinnacle Bank effective December 31, 1996, and Mr. 
Ansary became the largest single Pinnacle stockholder.  Mr. Ansary currently 
holds approximately 20% of the shares of Pinnacle Common Stock outstanding.  
(In connection with the Maco Acquisition, Mr. Ansary and Pinnacle entered 
into certain agreements, including a Standstill Agreement dated as of 
December 1, 1995 (the "Standstill Agreement").  The Standstill Agreement 
obligates Mr. Ansary, through December 31, 1999 (unless it is sooner 
terminated) to vote all Pinnacle voting securities of which he is the 
beneficial owner in accordance with the written directions of Pinnacle's 
management.)

On November 14, 1996, Pinnacle entered into an Agreement and Plan of Merger 
with Indiana Federal Corporation, a Delaware corporation and a registered 
savings and loan holding company ("IFC").  On February 27, 1997 Pinnacle 
entered into an Agreement and plan of Merger with CB Bancorp, Inc., a 
Delaware corporation and a registered savings and loan holding company 
("CB").  The agreements contemplate the merger of each of IFC and CB with and 
into Pinnacle, with Pinnacle being the surviving entity.  These transactions 
are expected to qualify as "pooling of interests" for accounting and 
financial reporting purposes and to increase the total assets of Pinnacle by 
more than $1.0 billion.  Consummation of these transactions is subject to 
shareholder and regulatory approval.

In addition to expansion through acquisitions, Pinnacle may consider 
establishing branch facilities as a means of expanding its presence into new 
market areas.  Pinnacle may also consider expanding into businesses closely 
related to its banking activities.  Closely related businesses that Pinnacle 
could acquire or organize include, among others, mortgage lending, mortgage 
servicing, investment and financial advisory services, leasing, insurance, 
data processing, management consulting to depository institutions, and 
courier services.


                                      -10-

<PAGE>

As a result of the Maco Acquisition, Pinnacle acquired First Insurance, Inc., 
an Indiana corporation engaged primarily in the sale of multi-peril homeowner 
s insurance to borrowers of Pinnacle Bank.  On October 1, 1996, and in 
exchange for 99,451 shares of Pinnacle Common Stock then valued at $2.1 
million, Pinnacle Bank acquired Starke's, Inc., a Michigan corporation and 
independent "full-line" insurance agency.  On December 31, 1996, First 
Insurance, Inc. was merged with and into Starke's, Inc.

There can be no assurance that any further acquisitions will be made by 
Pinnacle or, if made, will be successful.  Moreover, there can be no 
assurance that Pinnacle's strategy to achieve growth will be successful.

                            OVERVIEW AND FINANCIAL CONDITION

NET INCOME.  For the three months ended March 31, 1997, the Company reported 
net income of approximately $3.0 million or $.50 per share, as compared to 
net income of approximately $2.4 million, or $.42 per share for the three 
months ended March 31, 1996, an increase in net income of 21.5% and 19.4% on 
a per share basis.  The increase in net income was largely the result of 
higher levels of net interest income associated with higher levels of earning 
assets, as average earning assets grew by $126.3 million or 14.4% in the 
first quarter of 1997 as compared to the first quarter of 1996.

Presented below is an income statement analysis, expressed on a per-share 
basis, comparing the quarter and three months ended March 31, 1997, to the 
same period in 1996.  A more detailed discussion and analysis of the major 
factors outlined below is provided in following sections of this report.

                                                                    QUARTER
                                                                    -------

Net income per-share - Period ended March 31, 1996                   $ .42

Pre-tax increase (decrease) in 1997, as compared to 1996 
  resulting from changes in:
    Net interest income (taxable equivalent)                           .20
    Provision for loan losses                                         (.03)
    Noninterest income                                                 .05
    Noninterest expense                                               (.08)
                                                                     -----
       Pre-tax increase                                                .14

    Income tax expense                                                (.06)
                                                                      ----
Net income per share - Period ended March 31, 1997                   $ .50
                                                                      ----
                                                                      ----


                                      -11-

<PAGE>

BALANCE SHEET.  Average earning assets equaled 94.3% of total average assets 
for the first quarter 1997 and 94.1% for the same period in 1996.  The 
following table summarizes the components of Pinnacle's total assets, total 
loans, total deposits and stockholders' equity for the time periods indicated.

                           OVERVIEW AND FINANCIAL HIGHLIGHTS


                                                       At March 31,
                                                 1997           1996
                                               ---------        -------
                                                (Dollars in thousands)
Total assets                                   $1,097,791       $935,471
Loans, net                                        609,373        537,339
Deposits                                          757,922        716,659
Stockholders' equity                               75,290         73,498


Pinnacle has experienced significant loan growth since March 31, 1996.  
Loans, net, at March 31, 1997 were approximately $609.4 million, which was 
$72.1 million greater than loans, net, at March 31, 1996 of $537.4 million.  
Pinnacle has placed great emphasis on commercial and consumer lending in the 
new Indiana markets entered through its Maco acquisition in December of 1995. 
Commercial and tax exempt loans grew $49.8 million to $224,4 million at 
March 31, 1997 or 28.5% over the March 31, 1996 total of $174.6 million.  
Consumer loans, primarily home equity loans were $120.1 million at March 31, 
1997, an increase of $24.4 million or 25.6% higher than the March 31, 1996 
total of $95.7 million.  Real estate loans remained flat at March 31, 1997 
and totaled $270.6 million as compared to $272.9 million at March 31, 1996.

Total assets at March 31, 1997 were $1.1 billion, or 17.4% greater than the 
total assets of $935.5 million at March 31, 1996.  The growth was primarily 
the result of strong loan demand which was funded by good deposit growth and 
increases in Federal Home Loan Bank advances and securities sold under 
repurchase agreements and other borrowings.

Total deposits at March 31, 1997 were $757.9 million as compared to $716.7 
million for March 31, 1996, an increase of 5.7%.  The growth in deposits was 
obtained in noninterest bearing demand deposits which increased $11.9 million 
or 23.7%, savings deposits increased $12.5 million or 4.8% and time deposits 
which increased $15.9 million or 4.8%.

Federal Home Loan Bank advances, securities sold under repurchase agreements 
and other borrowings were approximately $259.3 million at March 31, 1997, an 
increase of $120.6 million or 87.0% from March 31, 1996 levels of $138.7 
million.  The increase was used primarily to fund strong loan growth and to 
match fund specific investment security purchases with similar adjustable 
rate features and maturities.

Stockholders' equity was approximately $75.3 million at March 31, 1997, as 
compared to $73.5 million at March 31, 1996.  The increase was primarily 
through net income offset by dividends paid while net unrealized losses on 
securities available-for-sale increased from an unrealized loss of $1.3 
million at March 31, 1996 to an unrealized loss of $4.7 million at March 31, 
1997.

                                      -12-

<PAGE>

Pinnacle follows two key financial performance measures.  Pinnacle's return 
on average equity measures how profitably the stockholders  invested capital 
has been deployed.  Pinnacle's return on average equity was 15.62% for the 
first quarter of 1997 compared to 13.03% for the first quarter of 1996.  
Return on average assets measures how profitably the total assets of Pinnacle 
are invested.  Return on average assets was 1.14% for the first quarter of 
1997 compared to 1.05% for the first quarter of 1996.

The Company recognizes the importance of maximizing the use of capital to 
provide improved returns to our stockholders.  This has been accomplished in 
the past by way of growth through acquisition of other financial 
institutions.  While it is management s intention to seize upon favorable 
opportunities which may arise with respect to community banks or other 
financial institutions in the future, at the present time there are no 
ongoing negotiations for any acquisitions.

Pinnacle's most recent acquisitions occurred on December 1, 1995 when the 
Company acquired Maco Bancorp and its subsidiaries of First Federal Savings 
Bank of Indiana, Brookview Real Estate, and First Insurance, Inc., 
headquartered in Merrillville, Indiana and October 1, 1996 with the 
acquisition of Starke's. Inc., a Michigan corporation and an independent  
"full-line" insurance agency.  In addition, two acquisitions are pending.  On 
November  14, 1996, Pinnacle entered into an Agreement and Plan of Merger 
with Indiana Federal Corporation ("IFC"), a Delaware corporation and a 
registered savings and loan holding company.  On February 27, 1997, Pinnacle 
entered into an Agreement and Plan of Merger with CB Bancorp, Inc., a 
Delaware corporation and a registered savings and loan holding company 
("CB").  The agreements contemplate the merger of each of IFC and CB with and 
into Pinnacle with Pinnacle being the surviving entity and is expected to 
close in the second quarter.

                              RESULTS OF OPERATIONS

NET INCOME.  Net income for the three months ended March 31, 1997 was 
approximately $3.0 million, a 21.5% increase as compared to net income of 
$2.4 million for the same period in 1996.  This increase was largely the 
result of higher levels of net interest income associated with higher levels 
of earning assets.

NET INTEREST INCOME.  Net interest income is Pinnacle's primary source of 
earnings and represents the excess of interest earned on earning assets over 
interest expense associated with the deposits and other funding sources used 
to finance those assets.  Net interest income is influenced primarily by 
changes in the volume and mix of earning assets and sources of funding and 
market rates of interest.  Other external factors, such as the strength of 
credit demands by customers, liquidity and maturity preferences of deposit 
customers, and governmental monetary policy, also can have a significant 
impact on earnings.

                                      -13-

<PAGE>

The following table sets forth certain information with respect to Pinnacle's 
consolidated net interest income for the three months ended March 31, 1997, 
1996 and 1995.

                     SUMMARY OF CONSOLIDATED NET INTEREST INCOME

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------

THREE MONTHS ENDED MARCH 31,                    1997                         1996                           1995
----------------------------------------------------------------------------------------------------------------------------
                                    Average             Average   Average             Average    Average            Average
(Dollars in thousands)              Balance   Interest    Rate    Balance   Interest    Rate     Balance   Interest   Rate  
------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>         <C>        <C>      <C>       <C>       <C>        <C>        <C>      <C>  
ASSETS                                    - 
  Federal funds sold              $    3,244  $    43      5.38%  $  6,858    $  90     5.28%    $  1,169     $  17    5.85%
  Interest-bearing deposits     
      with financial institutions      3,198       31      3.93%    29,298      416     5.71%       1,144        15    5.27%
  U.S. Treasury and
      goverment agencies             272,916    4,988      7.41%   178,670    2,952     6.65%      56,450       920    6.55%
  Other securities  (2)              114,146    1,975      7.02%   136,157    2,194     6.48%      47,423       780    6.62%
  Loans (1) (2)                      608,045   13,201      8.80%   524,245   11,641     8.93%     295,910     6,731    9.15%
                                    ----------------------------------------------------------------------------------------
    Total interest-earning assets  1,001,549   20,238      8.19%   875,228   17,293     7.95%     402,096     8,463    8.47%
                                    ----------------------------------------------------------------------------------------
  Cash and due from banks             22,647                        20,416                         12,801 
  Premises and equipment, net         12,846                        12,581                          6,984 
  Allowance for loan losses           (5,629)                       (5,849)                        (5,009)
  Other assets                        30,663                        27,857                         10,033 
                                  -------------------------------------------------------------------------------------------
     Total assets                  $1,062,076  $20,238             $930,233  $17,293              $426,905    $8,463 
                                  -------------------------------------------------------------------------------------------
                                  -------------------------------------------------------------------------------------------
LIABILITIES   
  Interest-bearing demand          $  75,992   $  363      1.94%  $ 75,711  $   397     2.11%    $ 44,836   $   212    1.90%
  Savings and money
      market accounts                269,610    2,511      3.78%   257,923    2,370     3.70%     134,132     1,355    4.06%
  Time deposits of 
      $100,000 or more                66,198      918      5.62%    44,783      632     5.68%      21,778       299    5.52%
  Other time deposits                285,288    3,955      5.62%   283,217    4,000     5.68%     115,646     1,448    5.04%
                                   ------------------------------------------------------------------------------------------
    Total interest-bearing deposits  697,088    7,747      4.51%   661,634    7,399     4.50%     316,392     3,314    4.21%
                                   ------------------------------------------------------------------------------------------
  Federal Home Loan Bank advances    173,404    2,524      5.90%   102,486    1,470     5.77%      16,000       214    5.38%
  Federal funds purchased and
   and securities sold                58,605      744      5.15%    36,748      420     4.60%      19,465       332    6.86%
     Total interest-bearing 
       liabilities                   929,097   11,015      4.81%   800,868    9,289     4.66%     351,857     3,860    4.41%
                                   ------------------------------------------------------------------------------------------
  Noninterest-bearing deposits        51,245                        47,842                         36,770 
  Other liabilities                    4,432                         6,315                          2,733 
                                   ------------------------------------------------------------------------------------------
     Total liabilities               984,774                       855,025                        391,360 
  Stockholders' equity                77,302                        75,208                         35,545       
                                   ------------------------------------------------------------------------------------------
     Total liabilities and                                                                       $426,905 
       stockholders' equity       $1,062,076                     $ 930,233                       $426,905 
                                   ------------------------------------------------------------------------------------------
                                   ------------------------------------------------------------------------------------------
     Net interest income                       $  9,223                      $ 8,004                          $4,603 
                                   ------------------------------------------------------------------------------------------
                                   ------------------------------------------------------------------------------------------
     Net interest rate margin (3)                           3.73%                        3.68%                          4.60%
                                   ------------------------------------------------------------------------------------------
                                   ------------------------------------------------------------------------------------------
</TABLE>

(1)  For purposes of these computations, nonaccrual loans and unearned income 
     are included in the daily average loan amounts outstanding.
(2)  Income from state and political subdivisions securities and loans are 
     stated on a tax equivalent basis.
(3)  Net interest rate margin is equal to total interest income less total 
     interest expense divided by total average earning assets.

                                     -14-

<PAGE>

The following table describes the extent to which changes in interest rates 
and changes in volume of interest-related assets and liabilities have 
effected Pinnacle's interest income and expense during the periods indicated. 
For each category of interest-earnings assets and interest-bearing 
liabilities, information is provided on changes attributable to (i) changes 
in volume (change in volume multiplied by prior year rate), (ii) changes in 
rate (change in rate multiplied by prior year volume), (iii) changes in 
volume and rate combined (change in rate multiplied by change in volume), and 
(iv) total change in rate and volume.

<TABLE>
<CAPTION>

                                              RATE/VOLUME ANALYSIS
----------------------------------------------------------------------------------------------------------
                                              1997/1996                       1996/1995
                                      Change in Interest Due to:        Change in Interest Due to:
----------------------------------------------------------------------------------------------------------
                                                     Rate &    Net                      Rate &     Net
(Dollars in thousands)              Volume    Rate    Volume   Change   Volume   Rate    Volume   Change
----------------------------------------------------------------------------------------------------------
<S>                                 <C>       <C>    <C>       <C>      <C>      <C>    <C>       <C>
ASSETS
    Federal funds sold              $  (191)  $   7   $   137  $  (47)   $   333  $  (7)  $  (253)  $   73
    Interest-bearing deposits
       with financial institutions   (1,491)   (521)    1,627    (385)     1,485      5    (1,089)     401
    U.S. Treasury and 
        goverment agencies            6,263   1,371    (5,598)  2,036      8,011     51    (6,030)   2,032
    Other securities (1)             (1,427)    730       478    (219)     5,870    (64)   (4,392)   1,414
    Loans (1)                         7,484    (661)   (5,263)  1,560     20,890   (644)  (15,336)   4,910
                                    -----------------------------------------------------------------------
         Total interest-earning 
           assets                   $10,638  $  926   $(8,619) $2,945    $36,589  $(659)  $(27,100) $8,830
                                    -----------------------------------------------------------------------
                                    -----------------------------------------------------------------------

LIABILITIES
    Interest-bearing demand         $    6   $ (130)  $    90  $  (34)   $  587   $   93  $  (495)  $  185
    Savings and money market 
      accounts                         432      210      (501)    141     5,030     (493)  (3,522)   1,015
    Time deposits of $100,000 
      or more                        1,216      (23)     (907)    286     1,270       34     (971)     333
    Other time deposits                118     (165)        2     (45)    8,439      745   (6,632)   2,552
                                    -----------------------------------------------------------------------
         Total interest-bearing 
           deposits                  1,772     (108)   (1,316)    348    15,326      379  (11,620)   4,085
                                    -----------------------------------------------------------------------
    Federal Home Loan Bank 
       advances                      4,091      138    (3,175)  1,054     4,652       62   (3,458)   1,256
    Federal funds purchased and      1,005      203      (884)    324     1,186     (441)    (657)      88
        securities sold              1,005      203      (884)    324     1,186     (441)    (657)      88
                                    -----------------------------------------------------------------------
         Total interest-bearing 
           liabilities              $6,868   $  233  $ (5,375) $1,726   $21,164   $    -  $(15,735) $5,429
                                    -----------------------------------------------------------------------
                                    -----------------------------------------------------------------------
          Net interest income       $3,770   $  693   $(3,244) $1,219   $15,425   $ (659) $(11,365) $3,401
                                    -----------------------------------------------------------------------
                                    -----------------------------------------------------------------------
(1)  Income from state and political subdivisions securities and loans are stated on a tax equivalent basis.

</TABLE>

Net interest income on tax-equivalent basis was approximately $9.2 million 
for the first quarter of 1997 as compared to $8.0 million for the first 
quarter of 1996.  The increase of 15% was due primarily to the increase in 
average earning assets which grew $126.3 million or 14.4% at March 31, 1997 
as compared to March 31, 1996.  In addition, the net interest margin 
increased slightly to 3.73% for the three months ended March 31, 1997 as 
compared to 3.68% for the same period of 1996.  Higher yields associated with 
the increase in loans and higher yields on investments increased the yields 
on interest earning assets by .24% to 8.19% for the first quarter of 1997 as 
compared to 7.95% for the first quarter of 1996 while the cost of funds 
increased only .15% to 4.81% in the first quarter of 1997 as compared to 
4.66% in the first quarter of 1996.

                                     -15-

<PAGE>

    NONINTEREST INCOME.  The following table reflects various components of 
noninterest income for each time period reported.

                              NONINTEREST INCOME

                                          Three Months Ended March 31,
                                              1997            1996
                                           -----------     -----------
                                              (Dollars in thousands)
Service charges on deposit accounts        $    750          $    451
Trust fees                                      165               144
Investment services fees                         52                60
Merchant and loan service fees                  247               216
Recoveries on distressed assets                 150                28
Gain (loss) on sale of loans, net               177               192
Investment securities gains, net                 59               234
Other income                                    291               259
                                           -----------     -----------
     Total noninterest income              $  1,891          $  1,584
                                           -----------     -----------
                                           -----------     -----------

Noninterest income for the three months ended March 31, 1997 was 
approximately $1.9 million as compared to $1.6 million for the same period in 
1996.  Service charges on deposit accounts increased $299,000 or 66.3% as fee 
based deposit accounts were introduced in the Company's Indiana market 
including a new line of checking accounts.  Recoveries on distressed assets 
increased from $28,000 for the first quarter ended March 31,1996 to $150,000 
for the same period in 1997 while investment securities gains, net, decreased 
from $234,000 in 1996 to $59,000 for the first quarter of 1997, a decrease of 
$175,000.

NONINTEREST EXPENSE.  The following table presents the major components of 
noninterest expense for each period reported.

                              NONINTEREST EXPENSE

                                          Three Months Ended March 31,
                                              1997            1996
                                           -----------     -----------
                                              (Dollars in thousands)
Salaries                                     $  2,177        $  1,980
Benefits                                          588             542
                                           -----------     -----------
     Total salaries and benefits                2,765           2,522
Occupancy expense                                 611             522
Equipment expense                                 421             380
Postage and delivery                              179             157
Supplies                                          260             193
Marketing and promotion                           292             224
Professional services                             273             113
FDIC insurance                                     96             219
Amortization of intangibles                       317             340
Other expense                                     975           1,081
                                           -----------     -----------
     Total noninterest expense               $  6,189        $  5,751
                                           -----------     -----------

Noninterest expense for the three months ended March 31, 1997 was $6.2 
million as compared to $5.8 million for the same period in 1996.  Total 
salaries and benefits increased $243,000 or 9.6 %

                                     -16-

<PAGE>

to $2.8 million for the three months ended March 31, 1997 as compared to the 
same period for 1996.  Occupancy expense increased $89,000 for the first 
quarter of 1997 or 17.0% as a new short term lease was written in Indiana at 
a higher cost and additional space was leased in the Michigan corporate 
offices.  Marketing costs also increased $68,000 for the three months ended 
March 31, 1997 or 30.4% primarily related to the introduction of the new line 
of checking accounts in the Indiana market.  Professional services expenses 
increased $160,000 in first quarter of 1997 or 141.6% as the company incurred 
costs associated with a consulting firm to assist in the implementation of an 
organizational structure to meet the demands of a larger institution after 
the two pending mergers as well as to eliminate inefficient processes and 
procedures.  FDIC insurance expense decreased $123,000 for the first quarter 
of 1997 or 56.2% as compared to the same period in 1996 as the improvement in 
the fund balances in the Savings Association Insurance Fund was fully 
capitalized in 1996 which allowed it to reduce assessments.

INCOME TAXES.  Income taxes were approximately $1.5 million for the three 
months ended March 31, 1997 and approximately $1.2 million for the same 
period in 1996.  The increase was the result of higher levels of earnings.  
The effective tax rate was 34.2% for the first quarter of 1997 as compared to 
32.5% for the same period in 1997 as the higher level of earnings increased 
the marginal tax rate from 34% to 35% for 1997.

                       ANALYSIS OF FINANCIAL CONDITION

EARNING ASSETS.  Average earning assets equaled 94.3% of total average assets 
for the first quarter ended March 31, 1997 as compared to 94.1% of total 
average assets during the same period in 1996.  Generally, the higher earning 
assets are to total assets, the greater the contribution of Pinnacle's net 
interest margin to profitability.

Average loans outstanding for the first quarter of 1997 were $608.0 million 
as compared to $524.2 million for the same period in 1996, an increase of 
$83.8 million or 16.0%.  The growth was primarily in commercial loans and 
consumer home equity loans as greater emphasis and management was placed on 
this type of lending in the new Indiana market entered in 1995.

Average investment securities, interest-bearing deposits with financial 
institutions and fed funds sold were $393.5 million for the first quarter of 
1997 as compared to $351.0 million for the same period in 1996, an 
increase of $42.5 million or 12.1% as the company increased the level of 
adjustable rate securities that were matched with short-term FHLB advances.

LIQUIDITY AND FUNDING.  Liquidity is the ability to satisfy demands for 
extensions of credit, deposit withdrawals, and other customer and operational 
needs.  Traditional sources of liquidity include asset maturities and core 
deposit growth.  Pinnacle maintains a portion of its assets in liquid form to 
meet anticipated withdrawal requirements and loan demand from customers.  At 
March 31, 1997,  cash and due from banks, federal funds sold, and money 
market instruments equaled approximately $27.9 million.  Additional 
liquidity, is provided by the ability to borrow from the Federal Reserve Bank 
and Federal Home Loan Bank of Indianapolis.  As of March 31, 1997, Pinnacle 
had borrowed $180.5 million from the Federal Home Loan Bank of Indianapolis 
to match longer term loans and specific securities with matching maturities 
and repricing features.

Pinnacle identified investment securities totaling approximately $412.9 
million and $332.8 million, respectively, as being available-for-sale at 
March 31, 1997 and March 31, 1996, respectively, which consequently is 
available to meet liquidity needs of Pinnacle.

                                     -17-

<PAGE>

Proceeds from the sales of securities available-for-sale amounted to $17.4 
million in the first quarter of 1997 and $ 23.0 million in the same period of 
1996, with resulting net gains of $59,000 and $234,000, respectively.  At 
March 31, 1997, net unrealized losses in Pinnacle's total security portfolio 
amounted to $4.7 million and $1.3 million at March 31, 1996.

The focus of liquidity management at Pinnacle is to satisfy general operating 
expenses, to service existing debt, and to take advantage of investment 
opportunities which Pinnacle's management believes will result in an improved 
return to stockholders.  As Pinnacle is a legal entity separate and distinct 
from its bank subsidiary, substantially all of Pinnacle's revenue results 
from dividends paid to it by Pinnacle Bank and from earnings on investments.  
Dividends paid to Pinnacle by Pinnacle Bank amounted to $1.4 million for the 
first quarter of 1997 and $1.2 million for the first quarter of 1996.  Under 
current regulations, the amount of dividends that Pinnacle Bank can declare 
in 1997 is limited to its 1997 net profits (as defined in the Federal Reserve 
Act) plus retained profits for 1996 and 1995, unless regulatory approval is 
obtained.

SHORT-TERM BORROWINGS.  The following table shows short-term borrowings and 
average interest rates for each time period reported.

                            SHORT-TERM BORROWINGS

                                          For the Three Months Ended March 31,
                                              1997        1996       1995
                                          ------------------------------------
                                                  (Dollars in thousands)
FEDERAL FUNDS PURCHASED:
   Balance at end of period                $  8,000     $  8,450    $  9,500
   Weighted average interest rate at 
      end of quarter                           7.22%        5.97%       6.84%
   Maximum amount outstanding (1)          $  18,575    $  8,450    $ 10,400
   Average amount outstanding              $  12,786    $  2,413    $  3,924
   Weighted average interest rate 
      during quarter                            5.85%       5.67%       6.19%

SECURITIES SOLD UNDER REPURCHASE 
     AGREEMENTS:
   Balance at end of period                $  70,819   $  24,286    $ 20,791
   Weighted average interest rate at 
      end of quarter                            5.27%       3.89%       4.78%
   Maximum amount outstanding (1)          $  81,581   $  25,092    $ 24,209
   Average amount outstanding              $  45,819   $  19,698    $ 19,641
   Weighted average interest rate 
      during quarter                            4.95%       3.64%       4.87%

------------------
(1)  Based on amount outstanding at month end during quarter


Federal Home Loan Bank advances, securities sold under repurchase agreements 
and other borrowings increased $120.6 million, or 87.0%, to approximately 
$259.3 million at March 31, 1997. The increase was primarily used to match 
specific adjustable rate security purchases of approximately $40 million and 
to match fund approximately $30 million in longer term 15 year home equity 
loans.

                                ASSET QUALITY

ALLOWANCE FOR LOAN LOSSES.  The following table summarizes the loan loss 
experience and provides a breakdown of the allowance for loan losses during 
the quarters ended March 31, 1997 and 1996.

                                      -18-

<PAGE>

                             LOAN LOSS ANALYSIS TABLE

(Dollars in thousands)                        1997         1996
--------------------------------------------------------------------
Loans Outstanding at end of period,
   net of unearned discount                $  615,024   $  543,142
                                       -----------------------------
                                       -----------------------------

Average loans for the period               $  608,045    $ 524,245
                                       -----------------------------
                                       -----------------------------

Allowance for loans losses,
   beginning of period                       $  5,643     $  5,852
                                       -----------------------------
Charge-offs for period:
     Commercial loans                              40           40
     Real Estate loans                              -           23
     Consumer loans                               234          158
                                       -----------------------------
          Total charge-offs                       274          221
                                       -----------------------------

Recoveries for period:
     Commercial loans                               -           52
     Real Estate loans                              8            4
     Consumer loans                                39           36
                                       -----------------------------
          Total recoveries                         47           92
                                       -----------------------------
Net charge-offs for the period                    227          129
                                       -----------------------------
Allowance recorded for
  acquired loans                                    -            -
Provision for loan losses                         235           80
                                       -----------------------------
Allowance for loan losses,
  end of period                              $  5,651     $  5,803
                                       -----------------------------
                                       -----------------------------
Ratio of net charge-offs during the 
  period to average loans 
  outstanding                                    0.04%        0.02%
                                       -----------------------------
                                       -----------------------------
Allocation of allowance for 
  loan losses:
     Commercial loans                        $  3,050     $  3,181
     Real Estate loans                          1,354        1,456
     Consumer loans                             1,247        1,166
                                       -----------------------------
          Total allowance for 
             loan losses                     $  5,651     $  5,803
                                       -----------------------------
                                       -----------------------------
Percentage of loans to total 
   gross loans:
     Commercial loans                              35%          32%
     Real Estate loans                             44           50
     Consumer loans                                20           18
     Economic development bonds and
       other tax exempt loans                       1            1
                                       -----------------------------
          Total                                   100%         100%
                                       -----------------------------
                                       -----------------------------

                                      -19-

<PAGE>

For the three months ended March 31, 1997, the provision for loan losses 
totaled $235,000 as compared to $80,000 for the same period in 1996.  The 
increase was attributable mainly to loan growth and an increase in net 
charge-offs primarily in consumer loans and lower levels of recoveries in 
real estate loans of $98,000 in the first quarter as compared to the first 
quarter of 1996.  Pinnacle management believes the increase in provision for 
loan losses is primarily from the lending emphasis changing to commercial and 
home equity lending which generally carry higher reserve provisions and not 
to any general decline in credit quality. 

The allowance for loan losses totaled approximately $5.7 million at March 31, 
1997 as compared to approximately $ 5.8 million at March 31, 1996 and the 
allowance as a percentage of total loans was .92% and 1.07% respectively, for 
such dates indicated.  The allowance for loan losses has been allocated 
according to the amount deemed to be reasonably necessary to provide for the 
possibility of losses being incurred within the above categories of loans at 
the dates indicated.  The allowance is based on management's periodic 
evaluation of the loan portfolio and reflects an amount that, in management's 
opinion, is adequate to absorb losses in the existing portfolio.  In 
evaluating the portfolio, management takes into consideration numerous 
factors, including current economic conditions, prior loss experience, the 
composition of the loan portfolio, and management's evaluation of the 
collectability of specific loans.









                                     -20-

<PAGE>

NONPERFORMING ASSETS

Nonperforming assets include nonaccruing loans, restructured loans, 
contractually past due 90 days or more but still accruing loans, and other 
real estate owned.  The following table presents detailed information 
concerning nonperforming assets at March 31, 1996, and December 31, 1995.

                                            March 31,  December 31,
Dollars in thousands                          1997         1996
--------------------------------------------------------------------
 Nonperforming assets (a):
     Nonaccruing loans:
       Real Estate                            $  338       $  293
       Commercial                              1,506          388
       Other                                      93           80
--------------------------------------------------------------------
         Total nonaccruing loans               1,937          761

 Contractually past due but still 
   accruing loans (a)
     Real Estate                               1,709        1,849
     Commercial                                1,731        1,773
     Other                                       404          294
--------------------------------------------------------------------
       Total contractually past due but 
         still accruing loans (a)              3,844        3,916

 Restructured loans                              182          227
--------------------------------------------------------------------
      Total nonperforming loans                5,963        4,904

 Other real estate owned                       1,676        1,698
--------------------------------------------------------------------
      Total nonperforming assets               7,639        6,602
--------------------------------------------------------------------
 Nonperforming loans/loans                      0.97%        0.80%
 Nonperforming assets/loans and 
    other real estate owned                     1.24%        1.08%
 Reserve for possible loan 
    losses/nonperforming loans                 94.77%      115.07%
 Reserve for possible loan 
    losses/nonperforming assets                73.98%       85.47%
--------------------------------------------------------------------
(a)  Accruing loans past due 90 days or more.

The increase in total nonperforming loans from December 31, 1996 to March 31, 
1997 is primarily due to an increase in commercial nonaccruing loans of $1.1 
million.

Management's determination regarding the accrual of interest on loans that 
were 90 days or more past due but still accruing is based on the availability 
and sufficiency of collateral and the status of collection efforts.  In the 
present lending environment, certain of such loans could become nonperforming 
assets and/or result in charge-offs in the future.

Management continues to focus on asset quality and its potential impact on 
the provision and the reserve for possible loan losses.  The Company believes 
that it has responded appropriately to the current economic environment, and 
is prepared to forego transactions which do not meet it quality standards.

                                      -21-

<PAGE>

Effective January 1, 1995, the Company adopted the Financial Accounting 
Standard Board's Statement of Financial Accounting Standards ("SFAS") 114,  
Accounting by Creditors for Impairment of a Loan  and SFAS 118, "Accounting 
by Creditors for Impairment of a Loan Income Recognition and Disclosures".  A 
loan is considered impaired when, based on current information and events, it 
is probable that a creditor will be unable to collect all amounts due.  Under 
SFAS 114 and SFAS 118, "impaired" loans must be measured based on the present 
value of expected future cash flows, discounted at the loan's effective 
interest rate, or, as a practical expedient, at the loan's observable market 
price, or the fair value of the collateral if the loan is 
collateral-dependent.  SFAS 114 and SFAS 118 do not apply to certain groups 
of small-balance homogeneous loans that are collectively evaluated for 
impairment, loans that are measured at fair value or at the lower of cost or 
fair value, leases, or debt securities.  Prior to January 1, 1995, the 
Company's impaired loans were described as, and included in, nonaccrual 
loans.  The adoption of the Statements had no effect on the Company's 
nonperforming assets or financial statements.

SFAS 114 and SFAS 118 also require additional disclosures.  As a result, the 
Company has expanded its accounting policy regarding the recognition of 
interest income on loans to read as follows:  "Interest income is not accrued 
on loans where management has determined that the borrowers may be unable to 
meet contractual principal and/or interest obligations, or where interest or 
principal is 90 days or more past due, unless the loans are adequately 
secured and in the process of collection.  When a loan is placed on 
nonaccrual status (which includes "impaired" loans), interest accruals cease 
and uncollected accrued interest is reversed and charged against current 
income.  Nonaccrual loans are generally not returned to accruing status until 
principal and interest payments have been brought current and full 
collectibility is reasonably assured.  Cash receipts on nonaccrual loans are 
generally applied to the principal balance until the remaining balance is 
considered fully collectible, at which time interest income may be recognized 
when received.  Interest on loans that have been restructured is recognized 
according to the revised terms."

As of March 31, 1997, under SFAS 114 and SFAS 118, the Company's impaired 
loans totaled $861,000 (of which $346,000 were on a nonaccrual basis).  The 
related allowance for loan loss on these impaired loans at March 31, 1997, 
was $387,000.  The Company's impaired loans averaged $828,000 for the three 
months ended March 31, 1997.  Interest income of approximately $13,000 was 
recognized, all of which was on a cash basis, on impaired loans for the three 
months ended March 31, 1997.  Charge-offs of approximately $26,000 were 
recognized on impaired loans during the three months ended March 31, 1997.

The levels of the provision and reserve for possible loan losses are based on 
management's ongoing assessment of the Company's credit exposure and 
consideration of a number of factors, including prevailing and anticipated 
economic conditions, assigned risk ratings on credit exposures, the 
diversification and size of the loan portfolio, the results of the most 
recent regulatory examinations available to the Company, the current and 
projected financial status and creditworthiness of borrowers, certain 
off-balance sheet credit risks, the nature and level of nonperforming assets 
and loans that have been identified as potential problems, the adequacy of 
collateral, past and expected loss experience and other factors deemed 
relevant by management.  The Company's risk rating system and the quarterly 
reporting process for problem and vulnerable credits are utilized by  
management in determining the adequacy of the Company's reserve for possible 
loan losses.

                                     -22-
<PAGE>

Net charge-offs were $227,000 in the first quarter of 1997, compared to 
$129,000 in the first quarter of 1996.  In the first quarter of 1997 and 
1996, respectively, net charge-offs included $40,000 and -$12,000 
(recoveries) related to commercial borrowers, $195,000 and $122,000 in 
consumer credits and -$8,000 (recoveries) and $19,000 in real estate credits.

POTENTIAL PROBLEM LOANS.  In addition to the loans classified as nonaccrual 
or greater than 90 days delinquent and still accruing interest, there were 
other loans of approximately $11.2 million and $9.8 million at March 31, 1997 
and 1996, respectively, where management is closely following the borrower's 
ability to continue to comply with loan payment terms.  Current conditions do 
not warrant classification as nonperforming, nor is any principal loss on 
these loans considered likely at this time.

FOREIGN LOANS.  The Company's loans outstanding to borrowers in foreign 
countries as of March 31, 1997 and 1996 did not exceed 1% of its total assets.

LOAN CONCENTRATIONS.  As of March 31, 1997, there were no concentrations of 
loans to individual borrowers that exceed 10% of total loans.

                                     -23-
<PAGE>

                                   CAPITAL

CAPITAL COMPONENTS.  The Federal Reserve Board measures capital adequacy for 
bank holding companies on the basis of a risk-based capital framework and a 
leverage ratio.  The Federal Deposit Insurance Corporation Improvement Act 
("FDICIA") established a capital-based supervisory system of prompt 
corrective action for all depository institutions.  The bank regulatory 
agencies implementing rule  under FDICIA defines "well-capitalized" 
institutions (the highest possible rating) as those whose capital ratios 
equal or exceed all the following:  Tier I Risk-Based Ratio, 6.00%, Total 
Risk-Based Ratio, 10.00% and Tier I leverage Ratio, 5.00%.  At March 31, 1997 
and March 31, 1996, the Company and its subsidiary reported capital ratios in 
excess of these  well capitalized  standards.

The Company's and the Bank's actual capital amounts and ratios are also 
presented in the table.

<TABLE>
<CAPTION>

                                                                              To Be Well
                                                                           Capitalized Under
                                                         For Capital       Prompt Corrective
                                          Actual      Adequacy Purposes     Action Provisions
                                     -------- -------  -------- -------    ------------------
                                      Amount   Ratio   Amount    Ratio        Amount   Ratio
<S>                                  <C>      <C>     <C>       <C>        <C>        <C>
AS OF MARCH 31, 1997
Total Capital (to Risk 
  Weighted Assets):
    Consolidated                     $ 73,399  13.49% $ 43,543   8.00%       $54,429   10.00%
    Pinnacle Bank                      70,329  12.68    44,370   8.00         55,463   10.00

TIER I CAPITAL (TO RISK 
  WEIGHTED ASSETS):
    Consolidated                     $ 67,748  12.45% $ 21,772   4.00%       $32,658    6.00%
    Pinnacle Bank                      64,678  11.66    22,185   4.00         33,278    6.00
TIER I CAPITAL (TO AVERAGE ASSETS):
    Consolidated                     $ 67,748   6.44% $ 42,095   4.00%       $52,619    5.00%
    Pinnacle Bank                      64,678   6.29    41,114   4.00         51,393    5.00

</TABLE>


On December 31, 1995, Pinnacle adopted the provisions of Statement of 
Financial Accounting Standards ("SFAS") No. 115, Accounting of Certain 
Investments in Debt and Equity Securities.   The unrealized holding gains and 
losses, net of related tax effect, on available-for-sale securities are 
reportable as a separate component of stockholders equity until realized.  
However, for determining risk-based capital ratios, only unrealized holding 
losses on equity securities are considered as a component of qualifying 
capital.

                                      -24-

<PAGE>

INTEREST RATE SENSITIVITY.  Interest rate sensitivity is measured by 
analyzing the maturity and timing of interest rate changes on assets and 
liabilities.  the "gap" is the amount by which interest-sensitive assets 
exceed interest-sensitive liabilities for any given period.  In periods of 
increasing interest rates, a positive gap will generally result in increased 
net interest income; conversely, a negative gap will result in decreased net 
interest income in such periods.  In periods of decreasing interest rates, a 
positive gap will result in decreased net interest income, and a negative gap 
will result in increased net interest income.

To manage Pinnacle's exposure to changes in interest rates, management of 
Pinnacle closely monitors its interest rate risk.  An asset/liability 
committee consisting of senior officers meets regularly and reviews 
Pinnacle's interest rate risk position and makes recommendation for 
adjustments to the position. In addition, the Board of Directors of Pinnacle 
periodically reviews Pinnacle's asset/liability position, including 
simulations of the effect on Pinnacle's earnings and capital of various 
interest rate scenarios.

In managing its asset/liability mix, and depending on the relationship 
between long- and short-term interest rates, market conditions and consumer 
preference, Pinnacle may place somewhat greater emphasis on maximizing its 
net interest margin than on matching the interest rate sensitivity of its 
assets and liabilities in an effort to increase its net income.  Management 
believes that the increased net income resulting from a mismatch in the 
maturity of its asset and liability portfolios can, during periods of 
declining or stable interest rates, provide high enough returns to justify 
the increased exposure to sudden and unexpected increases in interest rates 
which can result from such mismatch.  As a result, there may be relatively 
more exposure to rapid increases in interest rates than some other 
institutions which concentrate principally on matching the duration of their 
assets and liabilities.

Pinnacle is managing its current negative gap position by emphasizing 
variable rate loans, investing in short-term securities, and encouraging 
longer term deposit products through pricing strategies.  The following table 
sets forth management's estimate of the projected maturities and/or repricing 
of Pinnacle's assets an liabilities as of March 31, 1997.  In preparing the 
table, management of Pinnacle has assumed that loans prepay to varying 
degrees based on type, maturity and rate.  Certificates of deposit have been 
entered into the analysis based on contractual maturity.

                                     -25-

<PAGE>

                                        INTEREST RATE SENSITIVITY/GAP ANALYSIS

<TABLE>
<CAPTION>

MARCH 31, 1997                                INTEREST RATE SENSITIVITY PERIOD
------------------------------------------------------------------------------------------------------
                                     0 - 3      4 - 6      7 - 9     10 - 12     Over 1
(Dollars in thousands)               MONTHS     MONTHS     MONTHS     MONTHS       YEAR      TOTAL
------------------------------------------------------------------------------------------------------
<S>                                <C>        <C>         <C>         <C>         <C>        <C>

ASSETS:
  Interest-bearing deposits 
     with financial institutions   $  2,016    $     -     $      -   $      -    $      -    $   2,016
  Securities available for sale     173,827       6,692      10,066     10,928     211,412       412,925
  Loans                             175,185      41,369      32,147     29,762     336,561       615,024
  Nonearning assets                       -           -           -          -           -        67,826
                                  ----------------------------------------------------------------------
      Total Assets                $351,028    $ 48,061    $ 42,213    $ 40,690    $547,973    $1,097,791
                                  ----------------------------------------------------------------------
                                  ----------------------------------------------------------------------
FUNDING SOURCES:
  Interest-bearing demand          $ 66,442   $       -   $        -   $      -    $  9,808    $   76,250
  Savings and time deposits         283,585      76,082       38,518     20,957     200,450       619,592
  Federal Home Loan Bank
     advances                        32,500      40,500            -     33,900      73,555       180,455
  Other borrowings                   48,408      19,095            -     11,316           -        78,819
  Noninterest bearing sources             -           -            -          -           -       142,675
                                  ----------------------------------------------------------------------
      Total funding sources       $ 430,935   $ 135,677   $   38,518   $ 66,173    $283,813    $1,097,791
                                  ----------------------------------------------------------------------
                                  ----------------------------------------------------------------------

REPRICING/MATURITY GAP
  Period                          $ (79,907)   $ (87,616)  $    3,695    $ (25,483)   $264,160
  Cumulative                      $ (79,907)   $(167,523)  $ (163,828)   $(189,311)   $ 74,849
Cumulative rate sensitivity
 assets/Cumulative rate 
 sensitivity funding sources          81.46%       70.43%       72.93%       71.80%     107.84%
                                  ----------------------------------------------------------------------
</TABLE>


Certain shortcomings are inherent in the above analysis.  For example, 
although certain assets and liabilities may have similar maturities or 
periods of repricing, they may react in different degrees to changes in 
market interest rates.  Also, interest rates on certain types of assets and 
liabilities may fluctuate in advance of, or lag behind, changes in market 
rates.  Further, in the event of a change in interest rates, prepayment and 
early withdrawal levels could deviate significantly from those assumed in 
calculating the analysis.  Finally, in the event of rising interest rates, 
management may choose to increase the rates paid on deposit accounts in order 
to retain those accounts.

                      IMPACT OF NEW ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 
128).  SFAS No. 128 supersedes APB Opinion 15, "Earnings Per Share,"  and 
specifies the computation, presentation and disclosure requirements for 
earnings per share (EPS) for entities with publicly held common stock or 
potential common stock.  SFAS No. 128 was issued to simplify the computations 
of EPS and to make the U.S. standard more compatible with the EPS standards 
of the International Accounting Standards Committee.  It replaces the 
presentation of primary and fully-diluted EPS with a presentation of basic 
and diluted EPS, respectively.  It also requires dual presentation of basic 
and diluted EPS on the face of the income statement for all entities with 
complex capital structures and requires a reconciliation of the numerator and 
denominator of the basic EPS computation to the numerator and denominator of 
the diluted EPS computation.

Basic EPS, unlike primary EPS, excludes dilution and is computed by dividing 
income available to common stockholders by the weighted-average number of 
common shares outstanding for the

                                    -26-

<PAGE>

period.  Diluted EPS reflects the potential dilution that could occur if 
securities or other contracts to issue common stock were exercised or 
converted into common stock, or resulted in the issuance of common stock that 
then shared in the earnings of the entity.  Diluted EPS is computed similarly 
to fully-diluted EPS under APB 15.

SFAS No. 128 is effective for financial statements for both interim and 
annual periods ending after December 15, 1997 and is not expected to have a 
material impact on the Company.

In February 1997, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standards No. 129, "Disclosure of Information about 
Capital Structure" (SFAS No. 129).  SFAS No. 129 provides required 
disclosures for the capital structure of both public and nonpublic companies 
and is effective for financial statements for periods ending after December 
15, 1997.  The required disclosures had been included in a number of separate 
statements and opinions.  As such, the issuance of SFAS No. 129 is not 
expected to require significant revision of prior disclosures.

PART II.  OTHER INFORMATION

Item 6.      EXHIBITS AND REPORTS ON FORM 8-K

        a.   Exhibits

             Exhibit 27 - Financial Data Schedule

        b.   Reports on Form 8-K

             The Company filed one Current Report on Form 8-K during the 
             quarterly period ended March 31, 1997.  The report, which was 
             dated March 3, 1997, disclosed under Item 5 the Company's
             proposed merger with CB Bancorp, Inc.


                                     -27-

<PAGE>

                                  SIGNATURES


     In accordance with the requirements of the Exchange Act, the registrant 
caused this report to be signed on its behalf by the undersigned, thereunto 
duly authorized.


                                       Pinnacle Financial Services, Inc.



Date May __, 1997                      ---------------------------------------
                                       Name:  David W. Kolhagen
                                       Its:   Treasurer and Chief
                                              Financial Officer
                                              (Chief Accounting Officer)