U. S. SECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549



FORM 10-QSB



QUARTERLY REPORT UNDER
SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

Commission File Number33-67528



PINNACLE FINANCIAL CORPORATION(Exact name of small business issuer as
specified in its charter)

Georgia
      58-1538862(State or other
        jurisdiction of
        incorporation or organization)
      (I.R.S. Employer
        Identification Number)884 Elbert Street,P.O. Box 430, Elberton, Georgia
      30635-0430(Address of
          principal executive offices)
        (Zip Code)Issuers
          telephone number, including area code:
        (706) 283-2854




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

State the number of
shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date:

As of October 31, 2001 there were
768,000 shares of common stock outstanding.



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PINNACLE FINANCIAL
CORPORATION

INDEX

Page No.PART I
    FINANCIAL
      INFORMATIONItem 1.
    Financial StatementsConsolidated
      Statements of Financial Position at September 30, 2001
      and December 31,
      2000
    1Consolidated
      Statements of Income for the Three Months ended
      September 30, 2001 and
      2000
    2Consolidated
      Statements of Income for the Nine Months ended
      September 30, 2001 and 2000
    3Consolidated
      Statements of Cash Flows for the Nine Months Ended
      September 30, 2001 and
      2000
    4Item 2.
    Managements
      Discussion and Analysis or Plan of Operation
    5PART II
    OTHER INFORMATION
    11




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PART I - FINANCIAL
INFORMATION

Item 1. Financial
Statements

PINNACLE FINANCIAL
CORPORATION & SUBSIDIARYCONSOLIDATED BALANCE
SHEETS
SEPTEMBER 30, 2001 AND
DECEMBER 31, 2000
(Unaudited)

September 30,
    
    December 31,2001
    
    2000AssetsCash and due from
        banks
    $
    10,028,564
    $
    11,489,980Federal funds sold
    
    2,345,000
    
    1,030,000Securities
        available for sale
    
    102,683,599
    
    87,175,586Loans, net of
        allowance for loan losses of $1,991,880
               and $2,352,245, respectively
    
    166,454,159
    
    166,790,614Premises and
        equipment
    
    7,858,005
    
    8,173,811Accrued interest
        receivable
    
    2,450,628
    
    2,722,559Other assets
    
    12,367,852
    
    4,396,905Total assets
    $
    304,187,807
    $
    281,779,445LiabilitiesNoninterest-bearing
      deposits
    $
    45,188,470
    $
    43,342,315Interest-bearing
        deposits
    
    194,558,041
    
    178,309,691Total deposits
    
    239,746,511
    
    221,652,006Borrowings
    
    13,239,886
    
    13,100,000Accrued interest
        and other liabilities
    
    4,902,727
    
    4,494,026Total
          liabilities
    
    257,889,124
    
    239,246,032Shareholders
      equityCommon stock, $10
        par value; 5,000,000 shares authorized, 768,000 shares issued and
        outstanding
    
    7,680,000
    
    7,680,000Capital surplus
    
    7,280,000
    
    7,280,000Retained earnings
    
    29,198,514
    
    27,420,450Accumulated other
        comprehensive income
    
    2,140,169
    
    152,973Total
          shareholders equity
    
    46,298,683
    
    42,533,423Total
       liabilities
        and shareholders equity
    $
    304,187,807
    $
    281,779,445


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

1

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PINNACLE FINANCIAL
  CORPORATION & SUBSIDIARY

CONSOLIDATED STATEMENTS
OF INCOME
FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2001 AND 2000
(Unaudited)

Three Months
    
    Three MonthsEnded
    
    EndedSeptember 30,
    
    September 30,2001
    
    2000Interest incomeLoans, including
        fees
    $
    3,854,750
    $
    4,283,749Securities
        available for sale
    
    1,426,809
    
    1,313,093Federal funds sold
        and other
    
    28,113
    
    32,978Total interest
        income
    
    5,309,672
    
    5,629,820Interest expenseDeposits
    
    2,030,245
    
    2,075,653Borrowings
    
    169,422
    
    224,631Total interest
        expense
    
    2,199,667
    
    2,300,284Net interest income
    
    3,110,005
    
    3,329,536Provision for loan
        losses
    
    25,000
    
    90,000Net interest
        income after provision for loan losses
    
    3,085,005
    
    3,239,536Other incomeService charges on
        deposit accounts
    
    519,800
    
    328,042Other service
        charges and fees
    
    224,952
    
    160,322Net realized gains
        on sales of securities available for sale
    
    20,220
    
    0Other income
    
    78,438
    
    63,071Total other income
    
    843,410
    
    551,435Other expensesSalaries and
        employee benefits
    
    1,206,259
    
    1,163,118Occupancy expense
    
    329,431
    
    317,426Net realized
        losses on sales of securities available for sale
    
    0
    
    389,621Other expenses
    
    627,840
    
    493,116Total other
        expenses
    
    2,163,530
    
    2,363,281Income before income
      taxes
    
    1,764,885
    
    1,427,690Income tax expense
    
    502,000
    
    433,500Net income
    $
    1,262,885
    $
    994,190Net income per share
      of common stock
    $
    1.64
    $
    1.29Average shares
      outstanding
    
    768,000
    
    768,000


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

2

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PINNACLE FINANCIAL
CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS
OF INCOME
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2001 AND 2000
(Unaudited)

YTD
    
    YTDSeptember 30,
    
    September 30,2001
    
    2000Interest incomeLoans, including
        fees
    $
    11,918,497
    $
    12,403,644Securities
        available for sale
    
    4,194,057
    
    4,142,563Federal funds sold
        and other
    
    160,625
    
    72,936Total interest
        income
    
    16,273,179
    
    16,619,143Interest expenseDeposits
    
    6,335,233
    
    6,056,634Borrowings
    
    482,866
    
    474,371Total interest
        expense
    
    6,818,099
    
    6,531,005Net interest income
    
    9,455,080
    
    10,088,138Provision for loan
        losses
    
    675,000
    
    270,000Net interest
        income after provision for loan losses
    
    8,780,080
    
    9,818,138Other incomeService charges on
        deposit accounts
    
    1,265,968
    
    993,860Other service
        charges and fees
    
    615,482
    
    472,711Net realized gains
        on sales of securities available for sale
    
    58,815
    
    0Other income
    
    200,950
    
    171,171Total other income
    
    2,141,215
    
    1,637,742Other expensesSalaries and
        employee benefits
    
    3,587,485
    
    3,908,411Occupancy expense
    
    993,726
    
    951,931Net realized
        losses on sales of securities available for sale
    
    0
    
    420,297Other expenses
    
    1,801,120
    
    1,703,522Total other
        expenses
    
    6,382,331
    
    6,984,161Income before income
      taxes
    
    4,538,964
    
    4,471,719Income tax expense
    
    1,378,500
    
    1,431,500Net income
  
    $
  3,160,464
    $
  3,040,219Net income per share
      of common stock
    
    $4.12
    
    $3.96Average shares
      outstanding
    
    768,000
    
    768,000


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

3

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PINNACLE FINANCIAL
CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2001 AND 2000
(Unaudited)

September 30,
    
    September 30,2001
    
    2000Cash flow from
      operating activitiesNet income
    $
    3,160,464
    $
    3,040,219Adjustments to
      reconcile net income to netCash provided by
        operating activities:Depreciation and
        amortization
    
    496,100
    
    455,258Provision for loan
        losses
    
    675,000
    
    
    270,000Net realized
        (gains) losses on securities available for sale
    
    (58,815)
    
    420,297Net change in
        accrued interest and other assets
    
    (7,699,016)
    
    (1,690,559)Net change in
        accrued expenses and other liabilities
    
    408,701
    
    (1,631,582)Total adjustments
    
    (6,178,030)
    
    (2,176,586)Net cash provided by
      operating activities
    
    (3,017,566)
    
    863,633Cash flows from
      investing activitiesPurchase of
      securities available for sale
    
    (34,869,161)
    
    (11,974,541)Proceeds from sales
      of securities available for sale
    
    3,703,308
    
    19,252,275Proceeds from
      maturities, prepayments, and calls of securities
             available for sale
    
    17,703,851
    
    3,850,059Net change in loans
    
    (338,545)
    
    (12,357,382)Purchases of
      premises and equipment
    
    (180,294)
    
    (605,762)Net cash used by
      investing activities
    
    (13,980,841)
    
    (1,835,351)Cash flows from
      financing activitiesNet change in
      deposits
    
    18,094,505
    
    1,576,756Repayment of
      borrowings
    
    (7,500,000)
    
    (28,850,000)Proceeds from
      borrowings
    
    7,639,886
    
    29,050,000Cash dividends paid
    
    (1,382,400)
    
    (1,382,400)Net cash provided by
      financing activities
    
    16,851,991
    
    394,356Net change in cash
      and cash equivalents
    
    (146,416)
    
    (577,362)Cash and cash
      equivalents at January 1
    
    12,519,980
    
    9,848,050Cash and cash
      equivalents at September 30
    $
    12,373,564
    $
    9,392,878Interest paid
    $
    6,837,272
    $
    6,303,441Income taxes paid
    $
    1,135,514
    $
    1,610,492


4

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PINNACLE FINANCIAL
CORPORATION AND SUBSIDIARYNOTESTO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

(1)Basis
of Presentation

> The consolidated financial
> statements include the accounts of Pinnacle Financial Corporation (the Company)
> and its wholly-owned commercial bank subsidiary, Pinnacle Bank, N.A. All
> significant intercompany accounts have been eliminated in consolidation.
> In the opinion of
> management, the accompanying unaudited consolidated financial statements contain
> all adjustments (consisting only of normal recurring adjustments) necessary for
> fair statements of the consolidated financial position and the results of
> operations of the Company for the interim periods. The results of operations for
> the nine-month period ended September 30, 2001 are not necessarily indicative of
> the results which may be expected for the entire year.

(2)Cash and Cash Equivalents

> For the purpose of
> presentation in the consolidated statements of cash flows, cash and cash
> equivalents include cash and due from banks and federal funds sold, all of which
> mature within ninety days.

(3)Income Taxes

> Deferred income taxes
> assets and liabilities are determined using the liability (or balance sheet)
> method. Under this method, the net deferred tax asset or liability is determined
> based on the tax effects of the temporary differences between the book and tax
> bases of the various balance sheet assets and liabilities and gives current
> recognition to changes in tax rates and laws.

(4)
      Accounting for Impaired Loans

> A loan is considered
> impaired when, based on current information and events, it is probable that the
> Company will be unable to collect the scheduled payments of principal or
> interest when due according to the contractual terms of the loan agreement.
> Impairment is measured on a loan by loan basis by either the present value of
> expected future cash flows discounted at the loans effective interest rate,
> the loans obtainable market price, or the fair value of the collateral if the
> loan is collateral dependent. Loans having carrying values of $1,025,000 as of
> September 30, 2001 have been recognized as impaired. The total allowance for
> loan losses related to these impaired loans is $151,000.

ITEM
2.             MANAGEMENTS
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Basis of Presentation

Managements
Discussion and Analysis of Pinnacle Financial Corporation (hereinafter
"Pinnacle" or the "Company") provides information regarding
Pinnacles financial condition as of September 30, 2001 and its results of
operations for the three and nine months ended September 30, 2001 in comparison
with the same periods ended September 30, 2000. The financial condition and
operating results of Pinnacle are primarily determined by its wholly-owned
subsidiary bank, Pinnacle Bank, N.A. (hereinafter the "Bank").

For
a comprehensive presentation of Pinnacles financial condition and results of
operations, the following analysis should be viewed along with other information
contained in this report, including the financial statements and accompanying
disclosures.

Forward-Looking
Statements

This
discussion contains forward-looking statements under the Private Securities
Litigation Reform Act of 1995 that involve risk and uncertainties. Although
Pinnacle believes that the assumptions underlying the forward-looking statements
contained in the discussion are reasonable, any of the assumptions could be
inaccurate, and therefore, no assurance can be made that any of the
forward-looking statements in this discussion will be

5

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accurate. Factors that
could cause actual results to differ from results discussed in forward-looking
statements include, but are not limited to: economic conditions (both generally
and in the markets where the Company operates); competition from other providers
of financial services offered by the Bank; government regulations and
legislation; changes in interest rates and material unforeseen changes in the
financial stability and liquidity of the Banks credit customers; all of which
are difficult to predict and which may be beyond the control of the Company.
Pinnacle undertakes no obligation to revise forward-looking statements to
reflect events or changes after the date of this discussion or to reflect the
occurrence of unanticipated events.

Liquidity And
Capital Resources

The
objective of liquidity management is to maintain cash flows adequate to meet
immediate and ongoing future needs of credit demand, deposit withdrawal,
maturing liabilities and corporate operating expenses. Pinnacle seeks to meet
liquidity requirements primarily through the management of federal funds (both
sold and purchased), Federal Home Loan Bank of Atlanta ("FHLB")
advances, and the investment securities portfolio. At September 30, 2001, 11.5%
of the investment securities portfolio had maturity dates within the next year
and an additional 54.6% matures within the next 5 years. All investment
securities are classified as available for sale and may be sold or used as a
source of collateralized borrowings in the event of a liquidity shortfall. Other
sources of liquidity are payments on commercial and installment loans, monthly
repayments from mortgage-backed securities, and repayment of maturing single
payment loans. The Bank has short term borrowing relationships with two
correspondent banks that could provide up to $27.0 million of federal funds
purchased on short notice. Additionally, the Bank has established membership in
the FHLB and has granted a blanket floating lien on its mortgage portfolio that
collateralizes up to $44 million of borrowings on a short or long term basis.
Pinnacles management intends to continue to closely monitor and maintain
appropriate levels of interest-bearing assets and liabilities in future periods
so that maturities of assets are such that adequate funds are provided to meet
customer withdrawals and loan requests while net interest margins are maximized.

Management
continues to give priority to the importance of maintaining high levels of
assets with interest rate sensitivity. Cash and cash equivalents decreased
during the first nine months of 2001 from December 31, 2000 levels by $146,000
while securities available for sale increased by $15.5 million, or 17.8%, during
the same time period. The average balance in these investment securities
increased by $6.1 million in the current year compared to the nine months ended
September 30, 2000. The average balance of Federal Funds sold during the first
nine months of 2001 and 2000 was $4.4 million and $1.4 million, respectively.
The increase in both investments and Federal Funds sold reflects a substantial
(8%) increase in deposits during the year that greatly exceeded demand for new
loans. Additionally, the September 2000 amounts reflect the impact of a
restructuring transaction involving the investment portfolio; this transaction
involved the sale of $9.8 million of securities at a pretax loss of
approximately $390,000. The proceeds were used to purchase approximately $4.1
million of longer term, higher yielding securities and to repay short term
borrowings of the Bank.

Total
interest-earning assets increased by $16.1 million or 6.3% for the current
period when compared with December 31, 2000. Average net loans increased $1.7
million (1.0%) to $165.0 million in the nine months ended September 30, 2001
from the same 2000 period. The slight increase in outstanding loans reflects an
increase in loan demand that was largely offset by the foreclosure on one large
commercial real estate relationship in the second quarter of 2001.

The
allowance for loan losses is established by management at a level estimated to
be adequate to absorb losses inherent in the loan portfolio. The allowance
decreased to $2.0 million at September 30, 2001 from $2.4 million at December
31, 2000. The Bank experienced loan charge-offs of $1,521,000 in the nine months
ended September 30, 2001 compared to $290,000 in the same period of 2000. Net
charge-offs amounted to $1,035,000 in 2001 compared to $107,000 for the nine
months ended September 30, 2000. The significant increase in charge-offs
primarily reflects activity related to two large commercial borrowers. The bank
foreclosed on one borrowers assets in April and May of 2001 and recorded a
charge-off of $800,000. A second commercial loan in the amount of $400,000 was
charged-off in June 2001. Both loans had been considered impaired at December
31, 2000. Management does not believe these two large charge-offs represent a
trend in the loan portfolio. The allowance for loan losses represents 1.2% of
total loans outstanding at September 30, 2001.



6

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The balance of Other Real
Estate Owned (included in other assets) has increased by $2.8 million to $3.2
million from December 31, 2000 to September 30, 2001 as the result of
foreclosing on seven properties and disposing of eight properties in the period.
As indicated above, the significant increase is due to one large commercial
relationship foreclosed upon in April and May of 2001. The accrual of interest
has been discontinued on loans totaling $533,000 as of September 30, 2001,
representing 0.3% of loans, compared to $151,000 at December 31, 2000.
Unrecorded income on all nonaccrual loans for the nine months ended September
30, 2001 was approximately $130,000. Real estate secures $477,000 of the
nonaccrual loans at September 30, 2001 while $55,000 is secured by other
collateral.

Other
assets increased by $8 million from December 31,2000 to September 30, 2001. As
indicated above, $2.8 million of that increase relates to the increase in Other
Real Estate Owned. The remaining $5.2 million of increase is primarily related
to an investment of $5.0 million in Bank Owned Life Insurance. This investment
reflects the current cash surrender value of life insurance policies; the
investment increases on a monthly basis as the Bank recognizes other income due
to the increase in cash surrender value. This nontaxable income is used to
offset the cost of benefit programs offered to the employees of the Bank.

Pinnacle
continues to maintain a concentration of core deposits from an established
customer base which provides a stable funding source. Deposits increased $18.1
million to $239.8 million at September 30, 2001 from $221.7 million at December
31, 2000, due to normal growth, increased emphasis on marketing of consumer
deposits, and an increase in municipal deposits. Non-interest bearing deposits
increased $1.9 million to $45.2 million from $43.3 million at December 31, 2000
while interest-bearing deposits increased $16.3 million for the nine months
ended September 30, 2001.

As
indicated above, Bank management actively manages its liquidity position and has
obtained several sources of both secured and unsecured borrowed funds. These
sources have allowed the bank to take advantage of opportunities to prudently
invest a higher percentage of its funds in loans and investment securities that
earn a higher yield than overnight investments. The Bank has continued to use
both Federal Funds borrowed and FHLB advances to meet short term liquidity needs
and to leverage its existing capital. The Bank had no federal funds purchased as
of September 30, 2001 and has averaged less than $100,000 borrowed during the
year due to the increase liquidity provided by increased core deposits. The Bank
anticipates continued use of these sources of funds in an attempt to enhance its
earnings while continuing to monitor the maturities and interest rate risk of
interest-bearing assets and liabilities.

Shareholders
equity increased to $46.3 million at September 30, 2001 from $42.5 million at
December 31, 2000. Net earnings retained during the nine months amounted to $1.8
million while equity increased $2.0 million as a result of an increase in net
unrealized gains on securities available for sale. Dividends declared and paid
were unchanged at $1.80 per share.

Pinnacle
continues to maintain adequate capital ratios (see "Risk Based Capital
Ratios" below). Pinnacle maintained a level of capital, as measured by its
average equity to average assets ratio, of 14.9% during the first nine months of
2001, compared to 14.5% for the year which ended December 31, 2000.

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

Results of Operations(for the three month period ended
September 30, 2001)

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



7

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Interest income on
interest bearing assets decreased by $320,000 from the same quarter in 2000 as
average yields decreased from 8.8% to 7.8% as a result of significant reductions
in interest rates during 2001. Additionally, a higher percentage of the Banks
interest bearing assets have been investment securities as a result of changes
in the balance sheet mentioned in "Liquidity and Capital Resources."
These factors combined to more than offset the net increase in interest earning
assets in the period. Interest expense decreased by $100,000 from the same
quarter of 2000 as a result of a decrease in the Banks cost of funds; the
average cost of funds for the third quarters of 2001 and 2000 were 3.5% and
3.9%, respectively. The reduction in cost of funds offset the increased interest
expense related to increased average deposits and borrowings. Net interest
income for the quarter ended September 30, 2001 decreased $220,000, or 6.7%, as
compared to the same period for the previous year. Management continues to
attempt to match rate sensitive assets with rate sensitive liabilities in such a
way that net interest margins remain relatively stable from year to year. The
significant and unprecedented reductions in short term interest rates have
negatively impacted earnings primarily as a result of immediate repricing of the
loan portfolio while the impact on repricing of deposits and borrowings has been
much slower.

The
provision for loan losses is the charge to operating expenses that management
believes is necessary to maintain the allowance for loan losses. The provision
reflects managements estimate of potential loan losses and the creation of an
allowance for loan losses adequate to absorb losses inherent in the portfolio.
Pinnacle provided $25,000 and $90,000 for loan losses in the quarters ended
September 30, 2001 and 2000, respectively. The decreased provision in 2001
reflects the impacts of larger provisions recorded earlier in the year,
resulting in an allowance for loan losses that management believes is adequate.
Management continues to review the provision based on its evaluation of the
adequacy of the allowance for loan losses.

Other
income increased by $292,000 during the three months ended September 30, 2001 as
compared to the same period in 2000. This change is attributable to increased
revenues on the origination of mortgage loans, more aggressive collection of
fees related to transaction accounts, increased income on bank owned life
insurance, and realized gains on the sales of investment securities.

Other
expenses during the three months ended September 30, 2001 decreased $200,000
from the same period in the previous year. Approximately $390,000 of the
decrease resulted from the nonrecurring loss on the sale of securities from the
security restructuring performed in 2000. Excluding this transaction, expenses
increased $190,000 (or 9.6%). This increase is composed of many relatively small
changes in the current year. The bank experienced an increase of $50,000 in
expenses on Other Real Estate Owned related to the maintenance and disposition
of properties. Compensation, professional services, and other operating expenses
increased by individually insignificant amounts due to normal increases.

Pinnacles
income tax expense increased $68,000 for the quarter compared to the same period
in the previous year due primarily to increased taxable income as a result of
the securities restructuring transaction in 2000 and the decreased loan loss
provision in 2001. These items that resulted in increased expense were somewhat
offset by a decrease in the effective income tax rate during the quarter from
30.4% in 2000 to 28.5% in 2001. The decreased effective rate is the result of
reduced state income taxes and a larger proportion of our pretax income relating
to tax exempt securities.

Results
of operations can be measured by various ratio analyses. Two widely recognized
performance indicators are return on average equity and return on average
assets. Net income during the three months ended September 30, 2001 was $1.3
million and represents annualized returns of 11.3% on average shareholders
equity and 1.7% on average assets. Comparable amounts during the same period of
2000 were $1.0 million, 9.9%, and 1.4%, respectively (without the loss on
investment securities, the amounts would have been $1.3 million, 12.6%, and
1.8%, respectively).

Results of Operations(for the nine month period ended
September 30, 2001)

Interest
income on interest bearing assets for the nine months ended September 30, 2001
decreased by $346,000 from the same period in 2000. A decrease in average yield
from 8.6% to 8.1% reflects the general decline in interest rates in 2001, a
higher level of average impaired assets, and a change in asset mix resulting in
a higher percentage of interest bearing assets being lower yielding investment
securities. Interest expense increased by $287,000 from the same period of 2000
as a result of increased deposits and an increase in average borrowings. The
average cost of funds for the nine months ended September 30, 2001 and 2000 were
3.7% and 3.6%, respectively. Net interest income in the nine months ended
September 30, 2001 decreased by $633,000, or 6.3%, as compared to the same
period for the previous year.

8

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The
provision for loan losses and its purpose is explained above. Pinnacle provided
$675,000 for losses in the period ended September 30, 2001 and $270,000 in the
period ended September 30, 2000. The increase is the result of the large
increase in the net charge-offs discussed earlier in this Form 10-QSB. Other
income during the nine months ended September 30, 2001 increased by $503,000
from the same period in 2000. The reasons for this increase are the same as
those listed in the results of operations for the three months ended September
30, 2001.

Other
expenses during the nine months ended September 30, 2001 decreased $602,000 to
$6.4 million from $7.0 million for the same period in the previous year. The
decrease reflects three nonrecurring charges recognized by Pinnacle in 2000. The
first item relates to the retirement of the Banks president, announced in the
first quarter of 2000. The Company recognized the expected payments to be made
under the terms of an employment security agreement between the former president
and the Bank as compensation expense in the amount of $385,000. The second
charge is the result of an unfavorable ruling in a lawsuit. The court granted
Capital Resource Funding a motion for summary judgement on its claim regarding
unlawful conversion of assets. The Bank recognized an expense of $250,000 to
establish the liability that was ultimately paid to settle the claim. Finally,
the Bank restructured its investment portfolio in the third quarter of 2000 to
sell under performing assets, invest in higher yielding investment securities,
and decrease its reliance on short term debt. This transaction resulted in a
loss of approximately $390,000. These three transactions cumulatively increased
other expenses by $1,025,000. Excluding these three nonrecurring items, other
expenses would have increased by $423,000, or 5.3%, of 2000's recurring
expenses. The increase is primarily normal increases in compensation and
benefits and occupancy expenses as well as increases in expenses related to
Other Real Estate Owned ($89,000 increase), professional services ($53,000
increase), and prepayment penalties on early debt repayment ($44,000 increase).

Pinnacles
income tax expense decreased $52,000 for the nine months ended September 30,
2001 compared to the same period in the previous year due to a decline in the
effective income tax rate from 32.0% to 30.4% in 2000. The decline reflects the
impact of a higher percentage of Pinnacles pretax income relating to tax
exempt securities.

Net
income during the nine months ended September 30, 2001 was $3.2 million and
represents annualized returns of 9.7% on average shareholders equity and
1.44% on average assets. Comparable amounts during the same period of 2000 were
$3.0 million, 10.2% and 1.45%, respectively. As indicated above, net income
increased slightly as the result of the nonrecurrence of several 2000
transactions, increased fee income and a lower effective tax rate offset by an
increased loan loss provision and lower net interest income. The operating
ratios reflect the increased earnings compared to a larger asset and equity
base.



9

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The following tables
present Pinnacles Regulatory capital position at September 30, 2001:

(Rounded to the
nearest thousand)

Total Risk
        Adjusted Assets
      $
      206,837Risk Based Capital
        Ratios:TIER 1 CAPITALCommon
        stock
      $
      7,680
      
      3.71%Surplus
      
      7,280
      
      3.52%Retained
        Earnings
      
      29,199
      
      14.12%Total
        Tier 1 capital
      
      44,159
      
      21.35%Tier
        1 minimum requirement
      
      8,273
      
      4.00%Excess
        (shortfall)
      $
      35,886
      
      17.35%TIER 2 CAPITALTier
        1 from above
      $
      44,159
      
      21.35%Allowance
        for loan losses, limited to 1.25% of risk weighted assets
      
      1,992
      
      0.96%Total
        Tier 2 capital
      
      46,151
      
      22.31%Tier
        2 minimum requirement
      
      16,547
      
      8.00%Excess
        (shortfall)
      $
      29,604
      
      14.31%LEVERAGE RATIOTier
        1 capital
      $
      44,159
      
      14.81%Minimum
        requirement
      
      8,945
      
      3.00%Excess
        (shortfall)
      $
      35,214
      
      11.81%Average total
        assets, net of goodwill
      $
      298,154


10

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PINNACLE FINANCIAL
CORPORATION

PART
II   OTHER INFORMATION



|ITEM
      6. | EXHIBITS
      AND REPORTS ON FORM 8-K                             
|------------- | -------------------------------------------------------------------
|A.            | Exhibits                                                           
|              | None.                                                              
|B.            | Reports on Form 8-K                                                
|              | Pinnacle has filed
      no reports on From 8-K during the quarter.







11

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SIGNATURES

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

PINNACLE
FINANCIAL CORPORATION



|Date: November 9,
      2001 | By:/s/
      L. Jackson
      McConnell                                                                                                      
|---------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------
|                             | L.
      Jackson McConnell
                  Chairman
      and Chief Executive Officer
                  (Principal
      Executive Officer)
|                             |                                                                                                                                              
|Date: November 9,
      2001 | By:/s/
      Lint W. Eberhardt                                                                                                               
|                             | Lint
      W. Eberhardt
                 President