<PAGE>

                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                 WASHINGTON, DC 20549
                                           
                                      FORM 10-Q/A
                                           
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
    EXCHANGE ACT OF 1934.

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997

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

For the transition period from                    to 
                               ------------------    ------------------


                           Commission file number #0-17937
                                           
                                           
                          PINNACLE FINANCIAL SERVICES, INC.
                (Exact name of registrant as specified in its charter)
                                           
           MICHIGAN                                38-2671129
(State or other Jurisdiction of         (IRS Employer Identification No.)
Incorporation or Organization)
                                           
 830 PLEASANT STREET, ST. JOSEPH, MICHIGAN                   49085
 (Address of principal executive offices)                  (Zip Code)

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


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


The number of shares of common stock, no par value per share, outstanding was
12,348,632 at November 13, 1997.


<PAGE>

PINNACLE FINANCIAL SERVICES, INC.

FORM 10-Q
September 30, 1997


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

    Consolidated Balance Sheets
    September 30, 1997; December 31, 1996                             3
                                                                     --

    Consolidated Statements of Income
    Nine Months and Quarter Ended September 30, 1997 and 1996         4
                                                                     --

    Consolidated Statements of Stockholders' Equity
    Nine Months Ended September 30, 1997 and 1996                     5
                                                                     --

    Consolidated Statements of Cash Flows
    Nine Months Ended September 30, 1997 and 1996                     6

    Notes to Consolidated Financial Statements                        7
                                                                     --


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operation                          10
                                                                     --


PART II                           OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders         36 
                                                                     -- 

Item 6.  Exhibits and Reports on Form 8-K                            36
                                                                     --

    Signatures                                                       37
                                                                     --


                                          2

<PAGE>

PINNACLE FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
                                                                               (UNAUDITED)         (UNAUDITED)
(Dollars in thousands, except per share data)                                     9/30/97            12/31/96
--------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                 <C>
ASSETS:
    Cash and cash equivalents:
         Cash and due from banks                                               $   44,477          $   60,692
         Federal funds sold                                                             -              15,750
                                                                               ----------          ----------
              Total cash and cash equivalents                                      44,477              76,442

    Interest-bearing deposits with financial institutions                           7,940              13,172
    Securities available-for-sale:
         Taxable                                                                  461,289             504,911
         Tax-exempt                                                                33,225              22,374
    Loans, net of unearned income:
         Real Estate                                                              803,567             750,064
         Commercial                                                               473,829             430,242
         Tax-exempt                                                                10,298               9,686
         Consumer                                                                 246,029             239,186
                                                                               ----------          ----------
              Subtotal Loans                                                    1,533,723           1,429,178
    Less allowance for loan losses                                                 14,414              15,309
                                                                               ----------          ----------               
         Net loans                                                              1,519,309           1,413,869
    Premises and equipments, net                                                   28,152              26,082
    Accrued interest receivable and other assets                                   91,916              79,573
                                                                               ----------          ----------
         Total assets                                                          $2,186,308          $2,136,423
                                                                               ----------          ----------

Liabilities:
    Deposits:
         Noninterest bearing demand                                            $  113,513          $  122,415
         Interest-bearing demand                                                  148,132             153,637
         Savings                                                                  448,092             427,133
         Time                                                                     762,219             776,148
                                                                               ----------          ----------               
         Total deposits                                                         1,471,956           1,479,333
    Federal Home Loan Bank advances                                               428,571             369,238
    Securities sold under repurchase agreements and other borrowings               86,639             102,206
    Accrued interest payable and other liabilities                                 23,445              15,388
                                                                               ----------          ----------               
         Total liabilities`                                                     2,010,611           1,966,165

Stockholders' Equity:
    Common Stock; no par value; 15,000,000 shares authorized;
         12,340,458 shares issued and outstanding at September 30, 1997;
         12,151,855 shares issued and outstanding at December 31,1996.             19,110              19,110
    Additional paid in capital                                                     69,581              78,193
    Treasury Stock                                                                      -             (10,304)
    Guaranteed ESOP Obligation                                                          -                (380)
    R.R.P.                                                                              -                  (4)
    Retained earnings                                                              85,331              83,598
    Net unrealized gain (loss) on securities available-for-sale                     1,675                  45
                                                                               ----------          ----------               
         Total stockholders' equity                                               175,697             170,258
                                                                               ----------          ----------               
         Total liabilities and stockholders' equity                            $2,186,308          $2,136,423
                                                                               ----------          ----------               
                                                                               ----------          ----------               
</TABLE>


                                      3
<PAGE>

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

<TABLE>
                                                                      QUARTER ENDED                  NINE MONTHS ENDED
                                                                      SEPTEMBER 30,                    SEPTEMBER 30,
(Dollars in thousands, except per share data)                     1997              1996           1997             1996    
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>               <C>            <C>              <C>       
INTEREST INCOME:
    Interest and fees on loans:
         Taxable                                               $    32,916       $    28,886    $    94,336      $    83,947
         Tax-exempt                                                    144                99            449              256
    Interest and dividends on securities:
         Available-for-sale                                          
              Taxable                                                8,883             8,002         27,876           21,835
              Tax-exempt                                               463               276          1,029              847
    Interest on federal funds sold                                      67                46            129              150
    Interest on interest-bearing deposits with
     financial institutions                                            198               120            512              742
                                                                -------------------------------------------------------------
         Total interest income                                      42,671            37,429        124,331          107,777

INTEREST EXPENSE:
    Interest on deposits                                            15,989            15,362         47,154           44,805
    Interest on Federal Home Loan Bank advances                      6,623             4,031         18,136           10,734
    Interest on securities sold under repurchase and
     other borrowings                                                1,106               684          3,484            2,109
                                                                -------------------------------------------------------------
         Total interest expense                                     23,718            20,077         68,774           57,648
                                                                -------------------------------------------------------------
         Net interest income                                        18,953            17,352         55,557           50,129
    Provision for loan losses                                          850               810          2,520            1,571
                                                                -------------------------------------------------------------
         Net interest income, after provision for loan losses       18,103            16,542         53,037           48,558
                                                                -------------------------------------------------------------

NONINTEREST INCOME:
    Service charges on deposit accounts                              1,508             1,011          4,167            3,059
    Trust income                                                       221               207            643              620
    Securities gains and losses, net                                   277               139            515              409
    Other income                                                     3,409             1,926          8,474            5,110
                                                                -------------------------------------------------------------
         Total noninterest income                                    5,415             3,283         13,799            9,198

NONINTEREST EXPENSES:
    Salaries and benefits                                            5,570             5,016         17,636           15,830
    Occupancy expense                                                1,121             1,072          3,360            3,112
    Equipment expense                                                  777               859          2,416            2,511
    FDIC insurance premiums                                            170             5,660            502            7,494
    Other expense                                                   16,052             4,582         25,004           12,919
                                                                -------------------------------------------------------------
         Total noninterest expenses                                 23,690            17,189         48,918           41,866
                                                                -------------------------------------------------------------
    Income before federal income tax expense                          (172)            2,636         17,918           15,890
    Income tax expense                                                 959               579          7,099            4,838
                                                                -------------------------------------------------------------
         Net income                                            $    (1,131)      $     2,057    $    10,819      $    11,052
                                                                -------------------------------------------------------------
                                                                -------------------------------------------------------------
Net income per common share                                    $     (0.09)      $      0.17    $      0.89      $      0.92
                                                                -------------------------------------------------------------
                                                                -------------------------------------------------------------
Weighted average shares outstanding                             12,300,642        12,015,540     12,212,113       12,023,194
                                                                -------------------------------------------------------------
                                                                -------------------------------------------------------------
Cash dividends declared per common share                       $     0.235       $      0.21    $      0.71      $      0.61
                                                                -------------------------------------------------------------
                                                                -------------------------------------------------------------
</TABLE>

                                      4
<PAGE>

PINNACLE FINANCIAL SERVICES, INC.
CONSOLIDATED STOCKHOLDERS' EQUITY SCHEDULE

<TABLE>
<CAPTION>
                                                                       ADDITIONAL                              GUARANTEED
                                                         COMMON         PAID-IN       RETAINED     TREASURY       ESOP
(Dollars in thousands)                                    STOCK         CAPITAL       EARNINGS      STOCK      OBLIGATIONS   
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>           <C>            <C>          <C>         <C>           
BALANCE, JANUARY 1, 1996                                  19,110          77,486        76,242       (9,711)          (591)

Net income                                                     -               -        11,052            -              -
Common stock issuance, net of stock, offering costs            -            (259)            -            -              -
Cash dividends declared, $.61 per share                        -               -        (6,619)           -              -
Common stock issuance upon exercise of options                 -             171             -            -              -
Repurchase of common stock                                     -               -             -         (605)             -
Payments made to guaranteed ESOP obligation                    -               -             -            -            161
Amortization of RRP contribution                               -               -             -            -              -
Issuance of treasury stock                                     -             (10)            -           19              -
Change in unrealized losses for securities
  available-for-sale, net of tax effect of $410                -               -             -            -              -
                                                        ---------------------------------------------------------------------

BALANCE, SEPTEMBER 30, 1996                               19,110          77,388        80,675      (10,297)          (430)
Net income                                                     -               -         5,033            -              -
Cash dividends declared, $.21 per share                        -               -        (2,110)           -              -
Common stock issuance upon exercise of options                 -             742             -            -              -
Repurchase of common stock                                     -               -             -           (7)             -
Payments made to guaranteed ESOP obligation                    -               -             -            -             50
Amortization of RRP contribution                               -               -             -            -              -
Tax benefit related to benefit plans                           -              63             -            -              -
Change in unrealized gains for securities
  available-for-sale, net of tax effect of $466                -               -             -            -              -
                                                        ---------------------------------------------------------------------

BALANCE, DECEMBER 31, 1996                                19,110          78,193        83,598      (10,304)          (380)
Net income                                                     -               -        10,819                           -
Common stock issuance upon exercise of options                 -           1,267             -                           -
Cash dividends declared, $.705 per share                       -                        (8,342)                          -
Payments made to guaranteed ESOP obligation                    -                                                      (380)
Amortization of RRP contribution                               -
Issuance of treasury stock                                     -           -1125                      1,550
Retirement of treasury stock                                   -           -8754                      8,754
Adjustment for change in fiscal year                                                      (744)
Change in unrealized gains for securities 
  available-for-sale, net of tax effect of $(757)              -                             -
                                                        ---------------------------------------------------------------------

BALANCE, SEPTEMBER 30, 1997                               19,110          69,581        85,331            -              -
                                                        ---------------------------------------------------------------------
                                                        ---------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

                                                                     NET UNREALIZED
                                                                     GAINS (LOSSES)
                                                                      ON SECURITIES
                                                                      AVAILABLE-FOR
(Dollars in thousands)                                      RRP            SALE        TOTAL
--------------------------------------------------------------------------------------------------
<S>                                                      <C>           <C>            <C>         
BALANCE, JANUARY 1, 1996                                     (21)          1,942       164,457    

Net income                                                     -               -        11,052    
Common stock issuance, net of stock, offering costs            -               -          (259)   
Cash dividends declared, $.61 per share                        -               -        (6,619)   
Common stock issuance upon exercise of options                 -               -           171    
Repurchase of common stock                                     -               -          (605)   
Payments made to guaranteed ESOP obligation                    -               -           161    
Amortization of RRP contribution                             (13)              -            13    
Issuance of treasury stock                                     -               -             9    
Change in unrealized losses for securities
  available-for-sale, net of tax effect of $410                -          (4,937)       (4,937)   
                                                        ------------------------------------------

BALANCE, SEPTEMBER 30, 1996                                   (8)         (2,995)      163,443    
Net income                                                     -               -         5,033    
Cash dividends declared, $.21 per share                        -               -        (2,110)   
Common stock issuance upon exercise of options                 -               -           742    
Repurchase of common stock                                     -               -            (7)   
Payments made to guaranteed ESOP obligation                    -               -            50 
Amortization of RRP contribution                              (4)              -             4
Tax benefit related to benefit plans                           -               -            63
Change in unrealized gains for securities                                                    -
  available-for-sale, net of tax effect of $466                -           3,040         3,040    
                                                        ------------------------------------------

BALANCE, DECEMBER 31, 1996                                    (4)             45       170,258    
Net income                                                                     -        10,819    
Common stock issuance upon exercise of options                                 -         1,267    
Cash dividends declared, $.705 per share                                       -        (8,342)   
Payments made to guaranteed ESOP obligation                                                380        
Amortization of RRP contribution                               4                             4
Issuance of treasury stock                                                                 425
Retirement of treasury stock                                                                 -
Adjustment for change in fiscal year                                                      (744)   
Change in unrealized gains for securities 
  available-for-sale, net of tax effect of $(757)                          1,630         1,630
                                                        ------------------------------------------

BALANCE, SEPTEMBER 30, 1997                                    -           1,675       175,697
                                                        ------------------------------------------
                                                        ------------------------------------------
</TABLE>

                                          5
<PAGE>

PINNACLE FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                     NINE MONTHS ENDED
                                                                                        SEPTEMBER 30, 
                                                                                     1997         1996 
                                                                                  ----------------------
<S>                                                                               <C>          <C>
(Dollars in thousands)                                                            
CASH FLOWS FROM OPERATING ACTIVITIES:                                             
    Net income                                                                    $  10,819    $  11,052
    Adjustments to reconcile net income to net cash
    provided by operating activities:
        Depreciation and amortization                                                 3,559        3,705
        Net amortization on loans and securities                                        516        1,208
        Provision for loan losses                                                     2,520        1,571
        Deferred federal income taxes                                                  (910)        (937)
        Mortgage loans purchased under agreement to resell                         (936,133)    (804,324)
        Proceeds from sales of mortgage loans purchased under agreements to       
         resell                                                                     869,489      782,844
        Mortgage loans originated for sale                                          (34,954)    (130,313)
        Proceeds from sales of loans                                                 91,683      132,706
        Gain on sale of securities, net                                                (515)        (409)
        Gain on sale of loans, net                                                   (1,375)        (653)
        Increase in interest receivable and other assets                            (11,848)      (2,641)
        Increase in interest payable and other liabilities                            8,056          217 
                                                                                  ----------------------
       NET CASH PROVIDED BY OPERATING ACTIVITIES                                        907       (5,974)
                                                                                  ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Net (increase) decrease in loans, excluding loan sales,
        purchases, and originated for sale                                          (59,106)     (88,505)
    Purchases of loans                                                              (38,014)     (58,318)
    Purchases of securities available-for-sale                                     (156,054)    (242,840)
    Purchases of securities held-to-maturity                                              -            -
    Proceeds from sales of securities available-for-sale                            137,483       93,665
    Proceeds from maturities and paydowns of securities
        available-for-sale                                                           51,590       54,320
    Proceeds from maturities and paydowns of securities
        held-to-maturity                                                                  -            -
    Net increase in interest-bearing deposits with financial institutions             5,232       41,147
    Capital expenditures                                                             (4,124)      (2,628)
                                                                                    ----------------------
       NET CASH USED BY INVESTING ACTIVITIES                                        (62,993)    (203,159)
                                                                                  ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Net increase (decrease) in deposits                                              (7,377)      82,106
    Net increase in securities sold under repurchase agreements
        and other borrowings                                                         43,766      133,194
    Common stock issued                                                               1,268         (636)
    Dividends paid                                                                   (8,342)      (6,501)
    Issuance of treasury stock                                                          425            -
    Contributions to fund ESOP                                                          380            -
                                                                                  ----------------------
       NET CASH USED BY FINANCING ACTIVITIES                                         30,120      208,163
                                                                                  ----------------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                           (31,966)        (970)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                       76,442       63,042
                                                                                  ----------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        $  44,476    $  62,072
                                                                                  ----------------------
                                                                                  ----------------------
SUPPLEMENTAL DISCLOSURES:
        Interest paid                                                             $  65,192    $  57,270
        Federal income taxes paid                                                 $   6,910    $   6,582
        Loans transferred to other real estate owned                              $     840    $     550

</TABLE>

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

                                        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 subsidiaries, 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.  Certain amounts included in the prior period financial
    statements have been reclassified to conform with the current financial
    statement presentation.  The operating results for the nine month period
    ended September 30, 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.  MERGERS AND ACQUISITIONS

         On August 1, 1997, the Company issued 4,790,736 and 1,553,144 shares
    of its common stock in exchange for all outstanding common stock of Indiana
    Federal Corporation ("IFC") and CB Bancorp, Inc. ("CB"), respectively, both
    of which are thrift holding companies located in Valparaiso and Michigan
    City, Indiana, respectively.  The business combinations have been accounted
    for as pooling-of-interests transactions, and accordingly, the consolidated
    financial statements for periods prior to the combinations have been
    restated to include the accounts and results of operations of IFC and CB.
         
         The results of the operations previously reported by the separate
    enterprises and the combined amounts presented in the accompanying
    consolidated financial statements are summarized below (in thousands):

                                      Six months ended      Nine months ended
                                          June 30,           September 30,
                                            1997           1997          1996 
                                           ------         ------        ------
         Net interest income:
              Pinnacle                     18,430         26,153        25,031
              IFC                          13,546         21,253        18,956
              CB                            4,628          8,151         6,142
                                           ------         ------        ------
              Consolidated                 36,604         55,557        50,129
                                           ------         ------        ------
                                           ------         ------        ------

         Other noninterest income:
              Pinnacle                      4,338          7,240         5,256
              IFC                           3,076          4,828         2,736
              CB                              970          1,731         1,206
                                           ------         ------        ------
              Consolidated                  8,384         13,799         9,198
                                           ------         ------        ------
                                           ------         ------        ------

         Net income:
              Pinnacle                      6,080          3,181         6,285


                                          7
<PAGE>
              IFC                           4,251          5,739         3,201
              CB                            1,619          1,899         1,566
                                           ------         ------        ------
              Consolidated                 11,950         10,819        11,052
                                           ------         ------        ------
                                           ------         ------        ------

         Prior to the combination, CB's fiscal year ended March 31.  In
    recording the pooling-of-interests combination, CB's financial statements
    for the nine months ended September 30, 1997 were combined with the
    Company's and IFC's financial statements for the same period.  CB's
    financial statements for the nine months ended December 31, 1996 were
    combined with the Company's and IFC's financial statements for the nine
    months ended September 30, 1996.  An adjustment has been made to
    stockholders' equity as of September 30, 1997, to eliminate the effect of
    including CB's results of operations for the three months ended March 31,
    1997 in both the year and nine months ended December 31, 1996 and September
    30, 1997, respectively.

NOTE 3:  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 4:  ACCOUNTING FOR TRANSFERS AND SERVICING 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.  The Company
    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.


                                          8
<PAGE>

NOTE 5:  COMMITMENTS - PROPOSED TRANSACTION
         
         On October 14, 1997 the Company entered into a definitive agreement to
    sell the Company to CNB Bancshares,. Inc. ("CNB") of Evansville, Indiana
    ($4.4 billion in total assets).  The fixed exchange rate was 1.0365 shares
    of CNB Common Stock issued for each share issued and outstanding of
    Pinnacle Common Stock, and it is anticipated to be accounted for using the
    pooling-of-interests method.  The sale is subject to shareholder and
    regulatory approval and expected to close in the second quarter of 1998.

NOTE 6:  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.


                                          9
<PAGE>

    ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                              CONDITION AND
                                RESULTS OF OPERATIONS
                                           
         The following discussion provides information regarding the financial
    condition and results of operations of Pinnacle Financial Services, Inc.
    (the "Company" or "Pinnacle") for the nine month period ended September 30,
    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 the statistical information and financial data appearing in this report
    as well as the 1996 Annual Report on Form 10-K of Pinnacle Financial
    Services, Inc.


DESCRIPTION OF THE COMPANY

         Pinnacle Financial Services, Inc. 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 has 2 non-bank
    subsidiaries, Pinnacle Financial Consultants, Inc., a fully disclosed
    broker dealer and IndFed Mortgage Company.  Pinnacle's principal executive
    offices are located at 830 Pleasant Street, St. Joseph, Michigan  49085,
    and its telephone number is (616) 983-6311.
    
         At the close of business on August 1, 1997, Indiana Federal
    Corporation ("IFC") and CB Bancorp, Inc. ("CB") were merged into Pinnacle,
    creating a $2.2 billion bank holding company.  Each of IFC's and CB's
    principal operating subsidiaries, federally chartered savings institutions,
    was merged into Pinnacle Bank in simultaneous transactions.
    
         Through Pinnacle Bank, Pinnacle offers financial services 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 47 branch offices located in a region extending
    from southwestern Michigan to the Illinois state line, and through 4 loan
    production offices located in Merrillville, Mishawaka, and Lafayette,
    Indiana and St. Joseph, Michigan.  Pinnacle Bank focuses on providing
    personalized, high-quality and comprehensive service in order to develop
    and maintain long-term, multiple account relationships with customers.


                                          10
<PAGE>

         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 a
    tourism-driven economic growth.
    
         Pinnacle has approximately $2.2 billion in total assets as of
    September 30, 1997.  Pinnacle returned (.20%) on average assets for the
    third quarter of 1997 as compared to .42% for the same period of 1996. 
    Pinnacle returned 0.67% on average assets for the nine months ended
    September 30, 1997 as compared to .78% for the same period of 1996. 
    Pinnacle incurred $8.0 million in after tax restructuring charges in
    connection with the acquisition of Indiana Federal Corporation and CB
    Bancorp during the third quarter of 1997.  Additionally, Pinnacle incurred
    $3.6 million after tax as a result of the one time SAIF charge recorded
    during the third quarter of 1996.  Return on assets without the
    restructuring charges would have been 1.24% for the third quarter of 1997
    and 1.19% for the nine months ended September 30, 1997.  Return on assets
    without the one time SAIF charge would have been 1.16% for the third
    quarter of 1996 and 1.03% for the nine months ended September 30, 1996.

         For the third quarter of 1997, Pinnacle's return on average equity was
    (2.54%) as compared to 5.05% for the same period of 1996.  Pinnacle's
    return on average equity was 8.40% for the nine months ended September 30,
    1997 as compared to 9.03% for the same period of 1996.  Without the
    restructuring charges, return on average equity for the third quarter of
    1997 would have been 15.43% and the nine months ended September 30, 1997
    would have been 14.85%.  Without the SAIF charge, return on average equity
    for the third quarter of 1996 would have been 13.88% and the nine months
    ended September 30, 1996 would have been 11.97%.
    
         Pinnacle believes its success is in part attributable to a growth
    strategy that has (i) increased assets to $2.2 billion as of September 30,
    1997, and (ii) increased net loans to $1.5 billion as of September 30,
    1997, primarily through three acquisitions in the Indiana market since
    1995.  On December 1, 1995, Pinnacle entered the Indiana market by way of
    the acquisition of Maco Bancorp ($412.8 million in assets) and on August 1,
    1997 added Indiana Federal Corporation ($837.0 million in assets) and CB
    Bancorp ($227.0 million in assets).  Pinnacle's loan to deposit ratio was
    approximately 104.2% at September 30, 1997.  Pinnacle's growth has been
    generated internally through customer retention and cross-selling programs
    and externally through acquisitions.  Since 1988, Pinnacle has consummated
    seven acquisitions, four of which involved thrifts.
         
         Through its acquisition strategy, Pinnacle seeks to diversify and
    expand both its market area and 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


                                          11
<PAGE>

    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.
         
         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
    obligated 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.
         
         The Standstill Agreement provided that certain limitations imposed by
    it on Mr. Ansary's beneficial ownership of Pinnacle Common Stock would
    terminate if, among other things, the aggregate percentage of voting
    securities of Pinnacle beneficially owned by the directors of Pinnacle as a
    group declined by more than one-third from the aggregate percentage so held
    as of the date of the Maco Acquisition.  Consummation of the IFC and CB
    Mergers caused such aggregate percentage to decline by more than one-third. 
    Accordingly, the foregoing limitations terminated upon consummation of the
    Mergers.
    
         As a result of the Maco Acquisition, Pinnacle acquired First
    Insurance, Inc., an Indiana corporation engaged primarily in the sale of
    multi-peril homeowners 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..
    
         On August 1, 1997, the Company issued 4,790,736 and 1,553,144 shares
    of its common stock in exchange for all outstanding common stock of Indiana
    Federal Corporation ("IFC") and CB Bancorp ("CB"), respectively, both of
    which are thrift holding companies located in Valparaiso and Michigan City,
    Indiana, respectively.  The business combinations have been accounted for
    as pooling-of-interests transactions, and accordingly, the consolidated
    financial statements for periods prior to the combinations have been
    restated to include the accounts and results of operations of IFC and CB.
    
         On October 14, 1997 the Company entered into a definitive agreement to
    sell the Company to CNB Bancshares,. Inc. ("CNB") of Evansville, Indiana
    ($4.4 billion in total assets).  The fixed exchange rate was 1.0365 shares
    of CNB Common Stock issued for each share issued and outstanding of
    Pinnacle Common Stock, and it is anticipated to be accounted for using the
    pooling-of-interests method.  The sale is subject to shareholder and
    regulatory approval and is expected to close in the second quarter of 1998.


                                          12
<PAGE>

                           OVERVIEW AND FINANCIAL CONDITION
                                           

    NET INCOME
         For the three months ended September 30, 1997, the Company reported
    net loss of approximately $1.1 million or $(.09) per share, as compared to
    net income of approximately $2.1 million, or $.17 per share for three
    months ended September 30, 1996, an decrease in net income of 155.0% and
    152.9% on a per share basis.  For the nine months ended September 30, 1997,
    the Company reported net income of approximately $10.8 million or $.89 per
    share, as compared to net income of approximately $11.1 million or $.92 per
    share for the same period in 1996.  The decrease in net income was largely
    the result of the restructuring charges in connection with the acquisition
    of IFC and CB in the third quarter of 1997, offset by the one-time SAIF
    charge in the third quarter of 1996. Net income without the
    restructuring charges would have been $6.9 million or $.56 per share, as
    compared to $5.7 million or $.47 per share for the three months ended
    September 30, 1997 and 1996, respectively, an increase of 21.4%.
    
    BALANCE SHEET
         Total assets at September 30, 1997 and at December 31, 1996 were
    approximately $2.2 billion and $2.1 billion respectively.  Average earning
    assets equaled 94.2% of total average assets for the quarter ended
    September 30, 1997 as compared to 93.4% of total average assets for the
    quarter ended September 30, 1996.  The following table summarizes the
    components of Pinnacle's total assets, loans, net, total deposits and
    stockholders' equity for the time periods indicated.
    
                          OVERVIEW AND FINANCIAL HIGHLIGHTS
                                           
                                     At September 30,   At December 31,
                                          1997                1996
                                          ----                ----

    (Dollars in Thousands)

    Total assets                       $2,186,308          $2,136,423
    Loans, net                          1,519,309           1,413,869
    Deposits                            1,471,956           1,479,333
    Stockholders' equity                  175,697             170,258

         Loans, net, at September 30, 1997 were approximately $1.5 billion,
    which was $105.4 million greater than loans, net, at December 31, 1996 of
    $1.4 billion.  Commercial and tax exempt loans grew $44.2 million, or 10.0%
    to $439.9 million at September 30, 1997 as compared to the December 31,
    1996 total of $439.7 million.  Consumer loans, consisting primarily of home
    equity loans, were $246.0 million at September 30, 1997, an increase of
    $6.8 million, or 2.9% , over the December 31, 1996 total of $239.2 million. 
    Real estate loans increased $53.5 million, or 7.1%, to $803.6 million at
    September 30, 1997 from $750.1 million at December 31, 1996.


                                          13
<PAGE>

         The increase in commercial loans was primarily in the Indiana market 
    experiencing good economic growth.  The growth in consumer loans was 
    controlled through the sale of home equity loans totaling approximately 
    $18 million in 1997.  The increase in real estate loans was primarily 
    through the mortgage loan repurchase product obtained in the CB Bancorp 
    acquisition which increased from $96.5 million as of December 31, 1996 to 
    $163.7 million as of September 30, 1997.
    
         Total deposits at September 30, 1997 and December 31, 1996 were $1.5 
    billion.  Savings deposits increased $21.0 million (to $448.1 million) 
    while time deposits decreased $13.9 million (to $762.2 million), and 
    noninterest bearing demand deposits decreased $8.9 million (to $113.5 
    million) mainly because of seasonal deposits at December 31, 1996 were 
    shifted to other interest bearing accounts.  

         Federal Home Loan Bank advances, securities sold under repurchase 
    agreements and other borrowings were approximately $515.2 million at 
    September 30, 1997, as compared to $471.4 million at December 31, 1996.  
    These increases reflect the use of these funding sources to match 
    specific investment securities purchases with the like maturities or 
    pricing terms and to fund strong loan growth during 1996 and 1997.  
    Stockholders' equity was approximately $175.7 million at September 30, 
    1997 as compared to $170.2 million at December 31, 1996.  The increase in 
    stockholders' equity since December 31, 1996 resulted from net income 
    earned for 1997 offset by changes in the market values of securities 
    available-for-sale and dividends paid.  
    
         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 (2.54%) for the third quarter of 1997 compared to 5.05% for the third 
    quarter of 1996.  Pinnacle's return on average equity was 8.40% for the 
    nine months ended September 30, 1997 as compared to 9.03% for the same 
    period of 1996.  Pinnacle incurred $8.0 million in net after tax 
    restructuring charges in connection with the acquisition of IFC and CB 
    during the third quarter of 1997.  Return on average equity without the 
    restructuring charges would have been 15.43% for the third quarter of 1997 
    and 14.85% for the nine months ended September 30, 1997. Additionally, 
    Pinnacle incurred $3.6 million in net after tax as a result of the 
    one-time SAIF charge during the third quarter of 1996.  Return on average 
    equity without the one-time SAIF charge would have been 13.88% and 11.97% 
    for the third quarter of 1996 and the nine months ended September 30, 1996,
    respectively.

         Return on average assets measures how profitably the total assets of 
    Pinnacle are invested.  Return on average assets was (.20%) for the third 
    quarter of 1997 compared to .42% for the third quarter of 1996.  
    Pinnacle returned .67% on average assets for the nine months ended 
    September 30, 1997 as compared to .78% for the same period of 1996.  
    Pinnacle incurred $8.0 million in net after tax restructuring charges in 
    connection with the acquisition of IFC and CB during the third quarter of 
    1997.  Return on assets without the restructuring charges would have been 
    1.24% for the third quarter of 1997 and 1.19% for the nine months ended 
    September 30, 1997.  Additionally, Pinnacle incurred $3.6 million in net 
    after tax as a result of the one-time SAIF charge during the third 
    quarter of 1996.  Return on average assets without the one-time SAIF 
    charge would have been 1.16% and 1.03% for the third quarter of 1996 and 
    the nine months ended September 30, 1996, respectively.


                                          14
<PAGE>

         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 the 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, except as already 
    disclosed in the notes to the consolidated financial statements.

         Pinnacle has acquired four companies since December 1995 which are 
    Maco Bancorp and its subsidiaries of First Federal Savings Bank of 
    Indiana, Brookview Real Estate, and First Insurance, Inc., headquartered 
    in Merrillville, Indiana on December 1, 1995, Starke's, Inc., a Michigan 
    corporation and an independent "full-line" insurance agency on October 1, 
    1996 and IFC and its subsidiaries Indiana Federal Bank for Savings, 
    IndFed Mortgage Company and IndFed Financial Services, Inc. and CB and 
    its subsidiary Community Bank, A Federal Savings Bank on August 1, 1997.

                                          15
<PAGE>

                                RESULTS OF OPERATIONS


NET INCOME
         For the three months ended September 30, 1997, the Company reported 
    net loss of approximately $1.1 million or $(.09) per share, as compared 
    to net income of approximately $2.1 million, or $.17 per share for three 
    months ended September 30, 1996, an decrease in net income of 155.0% and 
    152.9% on a per share basis.  For the nine months ended September 30, 
    1997, the Company reported net income of approximately $10.8 million or 
    $.89 per share, as compared to net income of approximately $11.1 million 
    or $.92 per share for the same period in 1996.  The decrease in net 
    income was largely the result of the restructuring charges in connection 
    with the acquisition of IFC and CB in the third quarter of 1997, offset 
    by the one-time SAIF charge in the third quarter of 1996. 
    Net income without the restructuring charges would have been $6.9 million 
    or $.56 per share, as compared to $5.7 million or $.47 per share for the 
    three months ended September 30, 1997 and 1996, respectively, an increase 
    of 21.4%.

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.


                                          16
<PAGE>
The following table sets forth certain information with respect to Pinnacle's
consolidated net-interest income for the third quarter ended September 30, 1997
and 1996.


                      SUMMARY OF CONSOLIDATED NET INTEREST INCOME
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
QUARTER ENDED SEPTEMBER 30,                                      1997                                 1996
-----------------------------------------------------------------------------------------------------------------------------
                                                      AVERAGE                    AVERAGE       AVERAGE                  AVERAGE
(Dollars in thousands)                                BALANCE        INTEREST     RATE        BALANCE      INTEREST      RATE
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>            <C>      <C>            <C>          <C>    
ASSETS
    Federal funds sold                              $    4,863     $    67        5.47%    $      3,666   $    46       4.99%
    Interest-bearing deposits
         with financial institutions                     7,920         198        9.92%           3,767       120      12.67%
    U.S. Treasury and 
          government agencies                          366,257       6,513        7.06%         304,939     5,418       7.07%
    Other securities (2)                               171,301       3,043        7.05%         177,805     2,987       6.68%
    Loans (1) (2)                                    1,517,265      33,127        8.66%       1,325,666    29,032       8.71%
-----------------------------------------------------------------------------------------------------------------------------
         Total interest-earning assets               2,067,606      42,948        8.24%       1,815,843    37,603       8.24%
-----------------------------------------------------------------------------------------------------------------------------
    Cash and due from banks                             35,303                                   37,487
    Premises and equipment, net                         27,327                                   26,377
    Allowance for loan losses                          (14,083)                                 (14,101)
    Other assets                                        79,907                                   78,462
-----------------------------------------------------------------------------------------------------------------------------
         Total assets                               $2,196,060     $42,948                   $1,944,068   $37,603
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
    Interest-bearing demand                         $  143,756     $   712        1.96%      $  143,590   $   740       2.05%
    Savings and money
           market accounts                             438,362       3,998        3.62%         430,826     3,809       3.52%
    Time deposits of
           $100,000 or more                            789,175      11,279        5.67%         763,133    10,813       5.64%
    Other time deposits
-----------------------------------------------------------------------------------------------------------------------------
         Total interest-bearing deposits             1,371,293      15,989        4.63%       1,337,549    15,362       4.57%
-----------------------------------------------------------------------------------------------------------------------------
    Federal Home Loan Bank advances                    444,519       6,623        5.91%         281,159     4,031       5.70%
    Federal funds purchased and
            securities sold                             84,043       1,106        5.22%          52,265       684       5.21%
-----------------------------------------------------------------------------------------------------------------------------
         Total interest-bearing
             liabilities                             1,899,855      23,718        4.95%       1,670,973    20,077       4.78%
-----------------------------------------------------------------------------------------------------------------------------
    Noninterest-bearing deposits                       104,972                                   97,261
    Other liabilities                                   14,601                                   13,728
-----------------------------------------------------------------------------------------------------------------------------
         Total liabilities                           2,019,428                                1,781,962
    Stockholders' equity                               176,632                                  162,106
-----------------------------------------------------------------------------------------------------------------------------
         Total liabilities and
              stockholders' equity                  $2,196,060                               $1,944,068
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
          Net interest income                                      $19,230                                $17,526
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
          Net interest rate margin (3)                                            3.69%                                 3.84%
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
</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.


                                          17
<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
QUARTER ENDED SEPTEMBER 30,                                                          CHANGE IN INTEREST DUE TO:
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                    RATE &          NET
(Dollars in thousands)                                                 VOLUME           RATE        VOLUME         CHANGE
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>             <C>          <C>            <C>   
ASSETS
    Federal funds sold                                                $    60         $    18      $    (57)      $   21
    Interest-bearing deposits with financial institutions                 526            (104)         (344)          78
    U.S. Treasury and goverment agencies                                4,335             (30)       (3,210)       1,095
    Other securities  (1)                                                (434)            658           168           56
    Loans (1)                                                          16,688            (663)      (11,930)       4,095
                                                                     ---------------------------------------------------------
         Total interest-earning assets                                $21,175         $  (121)     $(15,709)      $5,345
                                                                     ---------------------------------------------------------
                                                                     ---------------------------------------------------------
Liabilities
    Interest-bearing demand                                           $     3         $  (129)     $    98        $  (28)
    Savings and money market accounts                                     265             431         (507)          189
    Time deposits                                                       1,469             229       (1,232)          466
                                                                     ---------------------------------------------------------
         Total interest-bearing deposits                                1,737             531       (1,641)          627
                                                                     ---------------------------------------------------------
    Federal Home Loan Bank advances                                     9,312             590       (7,310)        2,592
    Federal funds purchased and securities sold                         1,656               5       (1,239)          422
                                                                     ---------------------------------------------------------
         Total interest-bearing liabilities                           $12,705         $ 1,126      $(10,190)      $3,641
                                                                     ---------------------------------------------------------
          Net interest income                                         $ 8,470         $(1,247)     $ (5,119)      $1,704
                                                                     ---------------------------------------------------------
                                                                     ---------------------------------------------------------
</TABLE>

(1)  Income from state and political subdivisions securities and loans are 
     stated on a tax equivalent basis.


                                          18
<PAGE>
The following table sets forth certain information with respect to Pinnacle's
consolidated net-interest income for the nine months ended September 30, 1997
and 1996.

                         SUMMARY OF CONSOLIDATED NET INTEREST INCOME
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30,                                    1997                                   1996
--------------------------------------------------------------------------------------------------------------------------
                                                    AVERAGE                     AVERAGE     AVERAGE                AVERAGE
(Dollars in thousands)                              BALANCE      INTEREST         RATE      BALANCE     INTEREST     RATE
--------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>             <C>            <C>         <C>         <C>        <C>
ASSETS
    Federal funds sold                           $    3,160      $    128       5.42%       $    3,870  $    150    5.18%
    Interest-bearing deposits                    
         with financial institutions                  7,393           512       9.26%           14,869       742    6.67%
    U.S. Treasury and
          goverment agencies                        370,844        20,115       7.25%          271,547    14,017    6.90%
    Other securities  (2)                           178,429         9,254       6.93%          190,021     9,052    6.36%
    Loans (1) (2)                                 1,465,014        94,997       8.67%        1,286,853    84,326    8.75%
                                                 ------------------------------------------------------------------------
         Total interest-earning assets           $2,024,840      $125,006       8.25%        1,767,160   108,287    8.19%
                                                 ------------------------------------------------------------------------
    Cash and due from banks                          34,589                                     34,372
    Premises and equipment, net                      26,613                                     26,057
    Allowance for loan losses                       (14,596)                                   (13,935)
    Other assets                                     78,909                                     77,694
                                                 ------------------------------------------------------------------------
         Total assets                            $2,150,365      $125,006                   $1,891,348  $108,287
                                                 ------------------------------------------------------------------------
                                                 ------------------------------------------------------------------------
Liabilities
    Interest-bearing demand                      $  142,341      $  2,145       2.01%       $  141,757  $  2,207    2.08%
    Savings and money
           market accounts                          436,372        11,682       3.58%          427,578    11,053    3.45%
    Time deposits                                   788,290        33,327       5.65%          746,162    31,545    5.65%
                                                 ------------------------------------------------------------------------
         Total interest-bearing deposits          1,367,003        47,154       4.61%        1,315,497    44,805    4.55%
                                                 ------------------------------------------------------------------------
    Federal Home Loan Bank advances                 415,226        18,136       5.84%          251,420    10,734    5.70%
    Federal funds purchased and
            securities sold                          84,599         3,484       5.51%           53,041     2,109    5.31%
                                                 ------------------------------------------------------------------------
         Total interest-bearing
            liabilities                           1,866,828        68,774       4.93%        1,619,958    57,648    4.75%
                                                 ------------------------------------------------------------------------
    Noninterest-bearing deposits                     97,373                                     92,852
    Other liabilities                                13,978                                     15,095
                                                 ------------------------------------------------------------------------
         Total liabilities                        1,978,179                                  1,727,905
    Stockholders' equity                            172,176                                    163,443
                                                 ------------------------------------------------------------------------
         Total liabilities and
             stockholders' equity                $2,150,355                                 $1,891,348
                                                 ------------------------------------------------------------------------
                                                 ------------------------------------------------------------------------
          Net interest income                                     $56,232                                $50,639
                                                 ------------------------------------------------------------------------
                                                 ------------------------------------------------------------------------
          Net interest rate margin (3)                                          3.71%                               3.83%
                                                 ------------------------------------------------------------------------
                                                 ------------------------------------------------------------------------
</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.


                                          19
<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
NINE MONTHS ENDED SEPTEMBER 30,                                                          CHANGE IN INTEREST DUE TO:
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                      RATE &          NET
(Dollars in thousands)                                                 VOLUME           RATE          VOLUME        CHANGE
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>               <C>           <C>           <C>   
ASSETS
    Federal funds sold                                               $    (37)         $     9       $     6       $   (22)
    Interest-bearing deposits with financial institutions                (499)             385          (116)         (230)
    U.S. Treasury and goverment agencies                                6,851              950        (1,703)        6,098
    Other securities  (1)                                                (737)           1,083          (144)          202
    Loans (1)                                                          15,589           (1,029)       (3,889)       10,671
                                                                     ---------------------------------------------------------
         Total interest-earning assets                               $ 21,167          $ 1,398       $(5,846)      $16,719
                                                                     ---------------------------------------------------------
                                                                     ---------------------------------------------------------
Liabilities
    Interest-bearing demand                                          $     12          $   (99)      $    25       $   (62)
    Savings and money market accounts                                     303              556          (230)          629
    Time deposits                                                       2,380               --          (598)        1,782
                                                                     ---------------------------------------------------------
         Total interest-bearing deposits                                2,695              457          (803)        2,349
                                                                     ---------------------------------------------------------
    Federal Home Loan Bank advances                                     9,337              352        (2,287)        7,402
    Federal funds purchased and securities sold                         1,676              106          (407)        1,375
                                                                     ---------------------------------------------------------
         Total interest-bearing liabilities                          $ 13,708          $   915       $(3,497)      $11,126
                                                                     ---------------------------------------------------------
                                                                     ---------------------------------------------------------
          Net interest income                                        $  7,459          $   483       $(2,349)      $ 5,593
                                                                     ---------------------------------------------------------
                                                                     ---------------------------------------------------------
</TABLE>

(1)  Income from state and political subdivisions securities and loans are 
     stated on a tax equivalent basis.


                                          20
<PAGE>

    Net interest income on a tax-equivalent basis was approximately $19.2 
    million for the third quarter of 1997 as compared to $17.5 million for 
    the third quarter of 1996.  The increase of 9.7% was due primarily to 
    the increase in average earning assets which grew $252.0 million or 13.0% 
    for the quarter ended September 30, 1997 as compared to the same period 
    ended September 30, 1996.  Net interest income was decreased by the lower 
    net interest margin of 3.69% for the three months ended September 30, 
    1997 as compared to 3.84% for the same period of 1996.  The cost of funds
    increased .17% to 4.95% in the third quarter of 1997 as compared to 4.78%
    for the same period of 1996 as higher cost FHLB advances and other
    borrowings were used to fund loan growth.

    Net interest income on a tax-equivalent basis was approximately $56.2 
    million for the nine months ended September 30, 1997 as compared to $50.6 
    million for the nine months ended September 30, 1996.  The increase of 
    11.0% was due primarily to the increase in average earning assets which 
    grew $259.0 million or 13.7% for the nine months ended September 30, 1997 
    as compared to the same period ended September 30, 1996.  Net interest 
    income was decreased by the lower net interest margin of 3.71% for the 
    nine months ended September 30, 1997 as compared to 3.83% 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 .06% to 8.25% for the nine months ended September 30, 1997 as 
    compared to 8.19% for the nine months ended September 30, 1996 while the 
    cost of funds increased .18% to 4.93% in the third quarter of 1997 as 
    compared to 4.75% for the same period of 1996.


                                          21
<PAGE>

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

    NONINTEREST INCOME

<TABLE>
<CAPTION>

                                                     Three Months                   Nine Months
                                                  Ended September 30,              September 30,
                                                  1997           1996           1997           1996
                                                  ----           ----           ----           ----

    (Dollars in thousands)
    <S>                                       <C>            <C>            <C>              <C>   
    Service charges on deposit accounts       $  1,508       $  1,011       $  4,167         $3,059
    Trust fees                                     221            207            643            620
    Investment services fees                       854            429          2,147          1,249
    Merchant and loan service fees                 645            440          1,557          1,291
    Gain (loss) on sale of loans, net              605            459          1,375            639
    Investment securities gains, net               277            139            515            409
    Mortgage repurchase fees                       297            178            719            485
    Other income                                 1,008            420          2,676          1,446
                                              --------       --------       --------         ------

    Total noninterest income                  $  5,415       $  3,283       $ 13,799         $9,198
                                              --------       --------       --------         ------
                                              --------       --------       --------         ------

</TABLE>

         Noninterest income for the three months ended September 30, 1997 was
    approximately $5.4 million as compared to $3.3 million for the same period
    in 1996.  Service charges on deposit accounts increased $497 thousand or
    49.2% as fee based deposit accounts continued to increase in the Company's
    Indiana market from the new line of checking accounts.  Gain on sale of
    loans, net increased $146 thousand or 31.8% as the Company increased loan
    sale activity in the third quarter.  Investment service fees increased $425
    thousand or 99.1%.  Mortgage repurchase fees increased $119 thousand or
    66.9% reflecting growth in this product line.  Noninterest income for the
    nine months ended September 30, 1997 was approximately $13.8 million as
    compared to $9.2 million for the same period in 1996.  Service charges on
    deposit accounts provided most of the increase by growing to $4.2 million
    as compared to $3.1 million for the nine month period ended September 30,
    1996, an increase of 36.2%.  Gain on sale of loans, net also increased $736
    thousand or 115.2%.  Investment service fees increase $898 thousand or
    71.9%.  Mortgage repurchase fees increased $234 thousand or 48.2% reflecting
    growth in this product line.


                                          22
<PAGE>

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

<TABLE>
<CAPTION>
                                   Quarter Ended September 30,   Nine Months Ended September 30,
                                       1997           1996             1997        1996
                                     -------        -------           -------     -------
    (Dollars in thousands)
    <S>                              <C>            <C>               <C>         <C>    
    Salaries                         $ 4,342        $ 3,961           $13,878     $12,587
    Benefits                           1,228          1,055             3,758       3,243
                                     -------        -------           -------     -------

    Total salaries and benefits        5,570          5,016            17,636      15,830

    Occupancy                          1,121          1,072             3,360       3,112
    Equipment                            777            859             2,416       2,511
    Postage and delivery                 331            338               984         887
    Supplies                             370            400               992       1,130
    Marketing and promotion              520            481             1,587       1,496
    Professional services                977            532             1,959       1,335
    FDIC insurance                       170          5,660               502       7,494
    Amortization of intangibles          483            507             1,449       1,503
    Other expense                     13,371          2,324            18,033       6,568
                                     -------        -------           -------     -------

    Total noninterest expense        $23,690        $17,189           $48,918     $41,866
                                     -------        -------           -------     -------
                                     -------        -------           -------     -------
</TABLE>


         Noninterest expense for the three months ended September 30, 1997 was
    $23.7 million as compared to $17.2 million for the same period in 1996. 
    Total salaries and benefits increased $554 thousand or 11.0% to $5.6
    million for the three months ended September 30, 1997 as compared to the
    same period for 1996.  Marketing costs increased $39 thousand for the three
    months ended September 30, 1997 or 8.1% primarily related to the
    introduction of the new line of checking accounts in the Indiana market. 
    Professional services expenses increased $445 thousand in third quarter of
    1997 or 83.6% 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 mergers as well as to
    eliminate inefficient processes and procedures.  FDIC insurance expense
    decreased $5.5 million for the third quarter of 1997 as compared to the
    same period in 1996 as 1996 incurred a one-time charge to recapitalize the
    Savings Association Insurance Fund.  Other expense increased $11.0 million
    primarily from the $11.1 million in merger related restructuring charges. 
    The restructuring charges consisted of approximately $1.0 million for
    legal, $300 thousand for accounting, $4.6 million for compensation and
    employee contracts, $2.4 million for computer contracts written off, $2.4
    million for advisors and $400 thousand for other charges.

         Noninterest expense for the nine months ended September 30, 1997 was
    $48.9 million as compared to $41.9 million for the same period in 1996. 
    Salaries and benefits 


                                          23
<PAGE>
    increased $1.8 million or 11.4% to $15.8 million for the nine months ended
    September 30, 1997 as compared to the same period in 1996.  Occupancy
    expense increased $248 thousand or 8.0% for the first nine months of 1997,
    primarily related to new leased property.  Postage expense increased $94
    thousand or 10.9% because of additional mailings associated with the
    checking account products in the Indiana market.  Marketing expenses
    increased $91 thousand or 6.1% also associated with marketing efforts for
    the checking program in the Indiana market.  Professional services expenses
    increased $624 thousand or 46.7% in the first nine months of 1997 as a
    consulting firm was hired in late 1996 to assist in the review of
    organizational structure and processes and procedures efficiencies.  FDIC
    insurance expense decreased $6.9 million in the first nine months of 1997
    as compared to the same period of 1996 as the Savings Association Insurance
    Fund was re-capitalized with a special one-time charge in 1996.  Other
    expense increased $11.5 million primarily related to the restructuring
    charge of $11.3 million associated with the IFC and CB mergers.
    
    INCOME TAXES
         Income taxes were approximately $1.0 million for the three months
    ended September 30, 1997 and approximately $579 thousand for the same
    period in 1996.  The increase was the result of higher levels of earnings
    and the non-deductibility of certain restructuring charges related to the
    mergers.  Income taxes were approximately $7.1 million for the nine months
    ended September 30, 1997 and approximately $4.8 million for the same period
    in 1996.  The increase was the result of higher levels of earnings.  The
    effective tax rate was 39.6% for the nine months ended September 30, 1997
    as compared to 30.4% for the same period in 1996.


                           ANALYSIS OF FINANCIAL CONDITION

    EARNING ASSETS
         Average earning assets equaled 94.2% of total average assets for the
    third quarter ended September 30, 1997 as compared to 93.4% 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 third quarter of 1997 were $1.5 
    million as compared to $1.3 million for the same period in 1996, an 
    increase of $192 thousand or 14.5%.  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 loans outstanding for the nine months ended 
    September 30, 1997 were $1.5 million as compared to $1.3 million for the 
    same period in 1996, an increase of $178 thousand or 13.8%.  The growth 
    was also primarily in commercial loans and consumer home equity loans.

         Average investment securities, interest-bearing deposits with 
    financial institutions and fed funds sold were $550 million for the third 
    quarter of 1997 as compared to $490 million for the same period in 1996, 
    an increase of $60 million or 12.3% as the Company increased the level of 
    adjustable rate securities that were matched with short-term FHLB 
    advances. Average investment securities, interest-bearing deposits with 
    financial institutions and fed funds sold were $560 million for the nine 
    months ended 

                                          24

<PAGE>

    September 30, 1997 as compared to $480 million for the same period in
    1996, an increase of $80 million or 16.6%.

    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
    September 30, 1997, cash and due from banks, federal funds sold, and money
    market instruments equaled approximately $52.4 million.  Additional
    liquidity, is provided by the ability to borrow from the Federal Reserve
    Bank and Federal Home Loan Bank of Indianapolis.  As of September 30, 1997,
    Pinnacle had borrowed $428.6 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
    $494.5 million and $527.3 million, respectively, as being
    available-for-sale at September 30, 1997 and December 31, 1996,
    respectively, which consequently is available to meet liquidity needs of
    Pinnacle.

         Proceeds from the sale of securities available-for-sale amounted to
    $137.5 million in the nine month period ended September 30, 1997 and
    $93.7 million in the same period of 1996, with resulting net gains of
    $515 thousand and $409 thousand, respectively.  At September 30, 1997, net
    unrealized gains in Pinnacle's total security portfolio amounted to $1.7 
    million and $45 thousand at September 30, 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 $4.5 million for the third quarter of 1997 and $1.5 million for
    the third quarter of 1996.  Dividends paid to Pinnacle by Pinnacle Bank
    amounted to $7.3 million for the nine month period ended September 30,
    1997 and $6.9 million for the same period 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
         

                                          25
<PAGE>

         Federal Home Loan Bank advances, securities sold under repurchase
    agreements and other borrowings increased $43.8 million, or 9.3%, to
    approximately $515.2 million at September 30, 1997.  The increase was
    primarily used to support growth in the mortgage repurchase loan 
    program.

    
                                    ASSET QUALITY

    ALLOWANCE FOR LOAN LOSSES
         The following table summarizes the loan loss experience and provides a
    breakdown of allowance for loan losses during the quarter and nine months
    ended September 30, 1997 and 1996.


                                          26

<PAGE>
LOAN LOSS ANALYSIS TABLE

<TABLE>
<CAPTION>
                                                Quarter-to-date                Year-to-date
                                                 September 30,                 September 30,
(Dollars in thousands)                        1997           1996           1997           1996    
------------------------------------------------------------------------------------------------------
<S>                                       <C>            <C>            <C>            <C>         
Loans Outstanding at end of period,
 net of unearned discount                                               $  1,533,745   $  1,369,331
                                         ------------------------------------------------------------
                                         ------------------------------------------------------------

Average loans for the period              $  1,516,900   $  1,322,797   $  1,464,090   $  1,283,162
                                         ------------------------------------------------------------
                                         ------------------------------------------------------------
Allowance for loans losses,
 beginning of period                      $     14,342   $     14,560   $     15,410   $     14,016
                                         ------------------------------------------------------------
Charge-offs for period:
  Commercial loans                                 331            366          2,153            472
  Real Estate loans                                393             --          1,040             28
  Home Equity loans                                 --             --             19              3
  Consumer loans                                   189            267            714            749
                                         ------------------------------------------------------------
    Total charge-offs                              913            633          3,926          1,252
                                         ------------------------------------------------------------
Recoveries for period:
  Commercial loans                                   7             52              8            220
  Real Estate loans                                 85              9            280            141
  Consumer loans                                    43             41            122            143
                                         ------------------------------------------------------------
    Total recoveries                               135            102            410            504
                                         ------------------------------------------------------------
Net charge-offs for the period                     778            531          3,516            748
                                         ------------------------------------------------------------
Allowance recorded for
  acquired loans                                    --             --             --             --
Provision for loan losses                          850            810          2,520          1,571
                                         ------------------------------------------------------------
Allowance for loan losses,
  end of period                           $     14,414   $     14,839   $     14,414   $     14,839
                                         ------------------------------------------------------------
                                         ------------------------------------------------------------
Ratio of net charge-offs during the 
  period to average loans outstanding              .05%           .04%           .24%           .06%
                                         ------------------------------------------------------------
                                         ------------------------------------------------------------

Allocation of allowance for loan losses:
  Commercial loans                                                      $      7,938   $      9,182
  Real Estate loans                                                            3,620          3,534
  Home Equity loans                                                            1,187            813
  Consumer loans                                                               1,669          1,310
                                         ------------------------------------------------------------
    Total allowance for loan losses                                     $     14,414   $     14,839
                                         ------------------------------------------------------------
                                         ------------------------------------------------------------
Percentage of loans to total gross loans:
  Real Estate loans                                                             52.4%          54.1%
  Commercial loans                                                              30.9%          29.1%
  Home Equity loans                                                             10.7%           9.0%
  Consumer loans                                                                 5.3%           7.2%
  Economic development bonds and
   other tax exempt loans                                                        0.7%           0.6%
                                         ------------------------------------------------------------
    Total                                                                        100%           100%
                                         ------------------------------------------------------------
                                         ------------------------------------------------------------
</TABLE>


                                          27
<PAGE>

         For the three months ended September 30, 1997, the provision for loan
    losses totaled $850 thousand as compared to $810 thousand for the same
    period in 1996.  The increase was attributable mainly to loan growth and an
    increase in net charge-offs primarily in real estate loans of $299 thousand
    in the third quarter as compared to the third quarter of 1996.  For the
    nine months ended September 30, 1997, the provision for loan losses totaled
    $2.5 million as compared to $1.6 million for the same period in 1996.  Net
    charge-offs for the period ended September 30, 1997 was $3.5 as compared
    to $748 thousand for the same period in 1996.  Pinnacle management believes 
    the increase in provisions 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 $14.4 million at
    September 30, 1997 as compared to approximately $15.3 million at September
    30, 1996 and the allowance as a percentage of total loans was .94% 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 loan portfolio, and
    management's evaluation of the collectibility of specific loans.


                                 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 September 30, 1997 and December 31,
    1996.


                                          28
<PAGE>
                                                 SEPTEMBER 30,  DECEMBER 31,
(Dollars in thousands)                              1997           1996
--------------------------------------------------------------------------------
Nonperforming assets  (a) :
 Nonaccruing loans:
 Real estate                                       $  5,479      $  9,662
  Commercial                                          5,339         5,945
  Home equity                                           160            --
  Other                                                  67           118
--------------------------------------------------------------------------------
   Total nonaccruing loans                           11,045        15,725

 Contractually past due but still accruing 
   loans (a)
  Real estate                                      $  5,216      $  5,446
  Commercial                                          2,665         2,239
  Home equity                                           311           161
  Other                                                 543           360
--------------------------------------------------------------------------------
   Total contractually past due but still 
    accruing loans (a)                                8,735         8,206

 Restructured loans                                     476           693
--------------------------------------------------------------------------------
  Total nonperforming loans                          20,256        24,624

 Other real estate owned                              2,633         5,227
--------------------------------------------------------------------------------
   Total nonperforming assets                      $ 22,889      $ 29,851
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

  Nonperforming loans / loans                          1.32%         1.72%
  Nonperforming assets / loans and other 
   real estate owned                                   1.49%         2.08%
  Reserve for possible loan 
   losses / nonperforming loans                       71.16%        62.17%
  Reserve for possible loan 
   losses / nonperforming assets                      62.97%        51.28%
--------------------------------------------------------------------------------
(a) Accruing loans past due 90 days or more.


     The decrease in total nonperforming loans from December 31, 1996 to
September 30, 1997 is primarily due to the decrease in real estate nonaccruing
loans of $4.2 million and other real estate decreasing $2.6 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 is quality standards.


                                          29
<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 according to
     the revised terms."

          As of September 30, 1997, under SFAS 114 and SFAS 118, the Company's
     impaired loans totaled $3.5 million (of which $3.2 million were on a 
     nonaccrual basis).  The related allowance for loan loss on these impaired
     loans at September 30, 1997, was $2.3 million.  The Company's impaired 
     loans averaged $4.0 million for the nine months ended September 30, 1997.
     Interest income of approximately $137 thousand was recognized, of which 
     $113 thousand was on an accrual basis, on impaired loans for the nine 
     months ended September 30, 1997.  Charge-offs of approximately $330 
     thousand were recognized on impaired loans during the nine months ended 
     September 30, 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 


                                          30
<PAGE>

     by management in determining the adequacy of the Company's reserve for
     possible loan losses.
     
          Net charge-offs were $778 thousand in the third quarter of 1997, 
     compared to $531 thousand in the third quarter of 1996.  In the second
     quarter of 1997 and 1996, respectively, net charge-offs included 
     $7 thousand and $52 thousand (recoveries) related to commercial borrowers,
     $43 thousand and $41 thousand in consumer credits and $85 thousand and
     -$9 thousand (recoveries) in real estate credits.
     
          Net charge-offs were $3.5 million for the nine months ended 
     September 30, 1997, compared to $748 thousand for the same period of 1996.
     For the nine month period ended September 30, 1997 and 1996, respectively,
     net charge-offs included $8 thousand and -$172 thousand (recoveries) 
     related to commercial borrowers, $122 thousand and $141 thousand in 
     consumer credits and $280 thousand (recoveries) and $141 thousand 
     (recoveries) 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 $15.0 million and $14.0 million at September 30, 1997 and
     December 31, 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 September 30, 1997 and 1996 did not exceed 1% of its total assets.
     
     LOAN CONCENTRATIONS
          As of September 30, 1997 and December 31, 1996, there were no
     concentrations of loans to individual borrowers that exceed 10% of total
     loans.
     
     
                                       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 September 30, 1997 and December 31,
     1996, the Company and its subsidiaries reported capital ratios in excess of
     these well capitalized standards.
     
     The Company's and the Bank's actual capital amounts and rations are also
     presented in the table.


                                          31
<PAGE>
<TABLE>
<CAPTION>
 
                                                  AMOUNT     RATIO     AMOUNT     RATIO    AMOUNT     RATIO
                                                  ------     ------    -------    -----    ------     ------
     AS OF SEPTEMBER 30, 1997
     <S>                                          <C>        <C>       <C>        <C>      <C>        <C>
     TOTAL CAPITAL (TO RISK WEIGHTED ASSETS):
          Consolidated                            $173,810   14.27%    $97,414    8.00%    $121,767   10.00%
          Pinnacle Bank                            153,624   12.80      96,030    8.00      120,038   10.00
     TIER I CAPITAL (TO RISK WEIGHTED ASSETS):
          Consolidated                             159,396   13.09%     48,707    4.00%      73,061    6.00%
          Pinnacle Bank                            139,209   11.60      48,015    4.00       72,023    6.00
     TIER I CAPITAL (TO AVERAGE ASSETS):
          Consolidated                             159,396    7.31%     87,842    4.00%     109,803    5.00%
          Pinnacle Bank                            139,209    6.41      86,845    4.00      108,556    5.00
</TABLE>

    
         Pinnacle accounts for investment securities in accordance with 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.
    
    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 rate, 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 results 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 increase 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 


                                          32
<PAGE>
    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 and liabilities as of September 30, 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.
    
    
                        INTEREST RATE SENSITIVITY/GAP ANALYSIS

<TABLE>
<CAPTION>
SEPTEMBER 30, 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     $     7,269    $         -    $         -    $         -         $  672    $     7,941
   Securities available for sale          130,604         15,296         13,897          9,111        325,606        494,514
   Loans                                  537,132         97,781         86,801         75,756        736,252      1,533,722
   Nonearning assets                            -              -              -              -              -        150,131
                                     ----------------------------------------------------------------------------------------
      Total Assets                    $   675,005    $   113,077    $   100,698    $    84,867    $ 1,062,530    $ 2,186,308
                                     ----------------------------------------------------------------------------------------
                                     ----------------------------------------------------------------------------------------
FUNDING SOURCES:
   Interest-bearing demand            $     5,549    $    68,825    $     4,174    $     4,174    $    65,410    $   148,132
   Savings and time deposits              468,790        152,243         92,196        101,367        395,714      1,210,310
   Federal Home Loan Bank
      advances                            205,000         33,900         38,600         15,200        135,871        428,571
   Other borrowings                        72,361         11,315              -              -          2,963         86,639
   Noninterest bearing demand                   -              -              -              -              -        113,514
   Noninterest bearing source                   -              -              -              -              -        199,142
                                     ----------------------------------------------------------------------------------------
      Total funding sources           $   751,700    $   266,283    $   134,970    $   120,741    $   599,958    $ 2,186,308
                                     ----------------------------------------------------------------------------------------
                                     ----------------------------------------------------------------------------------------
REPRICING/MATURITY GAP
   Period                             $   (76,695)   $  (153,206)   $   (34,272)   $   (35,874)   $   462,572
   Cumulative                         $   (76,695)   $  (229,901)   $  (264,173)   $  (300,047)   $   162,525
Cumulative rate sensitivity
 assets/Cumulative rate
 sensitivity funding sources                89.80%         77.42%         77.09%         76.44%        108.67%
                                     ----------------------------------------------------------------------------------------
</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


                                          33
<PAGE>

         In February 1997, the Financial Accounting Standards Board issued
    Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
    (SFAS No. 12).  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 of outstanding for the 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 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.
    
         In June 1997, the Financial Accounting Standards Board issued
    Statement of Financial Accounting Standards No. 130, "Reporting
    Comprehensive Income" (SFAS No. 130).  Statement No. 130 establishes
    standards for reporting and display of comprehensive income and its
    components in a full set of general purpose financial statements. 
    Statement No. 130 is effective for both interim and annual periods
    beginning after December 15, 1997 and is not expected to have a material
    impact on the Company.
    
         In June 1997, the Financial Accounting Standards Board issued
    Statement of Financial Accounting Standards No. 131, "Disclosures about
    Segments of an Enterprise and Related Information" (SFAS No. 131). 
    Statement No. 131 establishes standards for the way public business
    enterprises are to report information about operating segments in annual
    financial statements and requires those enterprises to report selected
    information about operating segments in interim financial reports issued to
    shareholders.  Statement No. 131 is effective for financial periods
    beginning after December 15, 1997 and is not expected to have a material
    impact on the Company.


                                          34
<PAGE>
    The Company recognizes the need to ensure its operations will not be
    adversely impacted by Year 2000 software failures.  The Company is
    currently evaluating the risks, solutions, and costs associated with Year
    2000 issues.  Most of the costs incurred in addressing the Year 2000
    problem are expected to be expensed as incurred in compliance with
    generally accepted accounting principles.
    
    In October 1997, the Accounting Standards Executive Committee of the AICPA
    voted to issue a final statement of Position (SOP), "Accounting for the
    Costs of Computer Software Developed or Obtained for Internal Use". 
    However, the issuance of this SOP is subject to approval by the Financial
    Accounting Standards Board (FASB).  The AICPA hopes to issue a final SOP in
    the first quarter of 1998.  The SOP would be effective for financial
    statements for fiscal years beginning after December 15, 1998, with earlier
    application encouraged.
    
    In summary, the SOP states that the following costs incurred in developing
    internal-use software should be capitalized:  direct costs for materials
    and services paid to external parties for developing or obtaining the
    software; payroll and payroll-related costs for employers' time spent
    directly on the project, and interest costs incurred in developing the
    software.
    
    Currently, banks must expense such costs.  The impart of this SOP to the
    Company's results is currently being evaluated.
    
    
    
    
    
    Management's statements of expectations for certain financial results for
    the future, as included in this report, are forward-looking statements. 
    The Company's actual performance and financial results may differ from
    these projections as a result of a variety of factors, including but not
    limited to changes in the economy, assumed rates of revenue growth, expense
    reductions, competition and the implementation of internal business plans.


                                          35
<PAGE>

PART II   OTHER INFORMATION

Item 1.   None
Item 2.   None
Item 3.   None

Item 4.   Submission of Matters to a Vote of Security Holders

            a.  The Annual Meeting of the Security Holders of Pinnacle 
                Financial Services, Inc. common stock was held July 30,
                1997.
            c.  At the meeting, security holders were asked to consider and 
                vote upon
                   1.) a proposal to approve and adopt (i) the Agreement and 
                   Plan of Merger dated as of November 14, 1996, as amended 
                   (the "IFC Merger Agreement"), by and between Pinnacle and 
                   Indiana Federal Corporation ("IFC"), and (ii) all of the 
                   transactions contemplated by the Merger Agreement, with 
                   Pinnacle being the surviving corporation;
                   2.) a proposal to approve and adopt (i) the Agreement and 
                   Plan of Merger dated as of March 1, 1997 (the "CB Merger 
                   Agreement"), by and between Pinnacle and CB Bancorp, Inc. 
                   ("CB"), and (ii) all of the transactions contemplated by 
                   the CB Merger Agreement, with Pinnacle being the surviving 
                   corporation;
                   3.) nominees for the office of director.

Summary of Voting for Issues listed above:

<TABLE>
<CAPTION>
                                                                              Non-         Broker           Non-
                                  For         Against        Withheld        votes        Withheld          votes
                                  ---         -------        --------        -----        --------          -----
<S>                           <C>             <C>            <C>             <C>          <C>              <C>
1.   IFC Merger               4,358,423        38,994         40,098         305,631         3,594         305,631
2.   CB Merger                4,380,268        16,931         40,315         305,631         4,866         305,631
3.   John P. Cunningham       4,721,082          0            22,064            0            6,029            0 
     Charles R. Edinger       4,727,871          0            15,276            0            4,129            0 
     John D. Fetters          4,727,871          0            15,276            0            4,129            0 
     Terrence A. Friedman     4,727,971          0            15,176            0            4,029            0 
     Richard L. Schanze       4,727,971          0            15,176            0            4,029            0 
     Kay F. Varga             4,642,727          0           100,420            0           39,931            0 
     Arnold L. Weaver         4,726,549          0            16,598            0            4,329            0 
     Alton C. Wendzel         4,727,871          0            15,276            0            4,129            0 
</TABLE>

Item 5.   None

Item 6.   Exhibits and Reports on Form 8-K

            (a)  Exhibits
                   (3)(ii) ByLaws as amended and in effect as of July 30, 1997.
                   (27)    Financial Data Schedule

            (b)  Reports on Form 8-K filed
                   1.  Report filed August 4, 1997, reporting on acquisition 
                       of assets in conjunction with mergers of Indiana Federal 
                       Corporation ("IFC") and CB Bancorp, Inc. ("CB"), 
                       effective August 1, 1997. (See Item 4 above)

                                          36
<PAGE>

SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                            PINNACLE FINANCIAL SERVICES, INC.


DATE:  November 14, 1997    By: /s/ David W. Kolhagen
                                ------------------------------------------
                                David W. Kolhagen
                                Senior Vice President & Chief Financial Officer




                            By: /s/ John A. Newcomer
                                ------------------------------------------
                                John A. Newcomer
                                Vice President & Corporate Affairs Officer


                                      37