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 JUNE 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 July 31, 2001
there were 768,000 shares of common stock outstanding.



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PINNACLE FINANCIAL
CORPORATION



INDEX



Page No.PART I  
        
      FINANCIAL
        INFORMATION
    Item 1.      Financial
        StatementsConsolidated
        Balance Sheets at
        June 30, 2001 and December 31, 2000
      1Consolidated
        Statements of Income for the Three
        Months ended June 30, 2001 and 2000
      2Consolidated
        Statements of Income for the Six
        Months ended June 30, 2001 and 2000
      3Consolidated
        Statements of Cash Flows for the
        Six Months Ended June 30, 2001 and 2000
      4Item
        2.       Managements
        Discussion and Analysis or Plan of
                                  Operation
      6PART II  
        
      OTHER INFORMATION
      12














I

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PINNACLE FINANCIAL
CORPORATION

PART I - FINANCIAL
INFORMATION

Item 1. Financial
Statements

















II

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



June 30,
    December 31,2001
    2000AssetsCash and due from
      banks
    
    $  11,117,519
    
    
    $   11,489,980Federal funds sold
    
    4,307,000
    
    
    1,030,000Securities available
      for sale
    
    99,470,832
    
    
    87,175,586Loans, net of
      allowance for loan losses
             of $1,797,888 and $2,352,245,
      respectively
    
    165,954,241
    
    
    166,790,614Premises and
      equipment
    
    7,994,463
    
    
    8,173,811Accrued interest
      receivable
    
    2,386,893
    
    
    2,722,559Other assets
    
    6,737,823
    
    
    4,396,905Total assets
    
    $297,968,771
    
    
    $281,779,455LiabilitiesNoninterest-bearing
      deposits
    
    $  47,247,683
    
    
    $  43,342,315Interest-bearing
      deposits
    
    190,310,347
    
    
    178,309,691Total
      deposits
    
    237,558,030
    
    
    221,652,006Borrowings
    
    11,720,921
    
    
    13,100,000Accrued interest and
      other liabilities
    
    4,158,380
    
    
    4,494,026Total liabilities
    
    253,437,331
    
    
    239,246,032Shareholders
      equityCommon stock, $10
      par value; 5,000,000 sharesauthorized, 768,000 shares
      issued andoutstanding
    
  
    7,680,000
  
    7,680,000Capital surplus
    
    7,280,000
    
    
    7,280,000Retained earnings
    
    28,396,429
    
    
    27,420,450Accumulated other
      comprehensive income (loss)
    
    1,175,011
    
    
    152,973Total
      shareholders equity
    
    44,531,440
    
    
    42,533,423Total liabilities
      and shareholders equity
    
    $297,968,771
    
    
    $281,779,445




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



-1-

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PINNACLE FINANCIAL
CORPORATION & SUBSIDIARYCONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000
(Unaudited)



|                                                                    | Three Months | Three Months
|------------------------------------------------------------------- | ------------ | ------------
|                                                                    | Ended        | Ended       
|                                                                    | June 30,     | June 30,    
|                                                                    | 2001         | 2000        
|                                                                    |              |             
|Interest income                                                     |              |             
|Loans,
      including fees                                         | $3,964,170   | $4,181,947  
|Securities
      available for sale                                 | 1,422,370    | 1,388,456   
|Federal
      funds sold and other                                  | 63,521       | 19,018      
|                                                                    |              |             
|                                                                    |              |             
|Total
      interest income                                         | 5,450,061    | 5,589,421   
|                                                                    |              |             
|Interest expense                                                    |              |             
|Deposits                                                            | 2,135,833    | 2,142,572   
|Borrowings                                                          | 152,189      | 146,649     
|                                                                    |              |             
|Total
      interest expense                                        | 2,288,022    | 2,189,221   
|                                                                    |              |             
|                                                                    |              |             
|Net interest income                                                 | 3,162,039    | 3,400,200   
|Provision
      for loan losses                                     | 500,000      | 90,000      
|                                                                    |              |             
|                                                                    |              |             
|Net
      interest income after provision for loan losses           | 2,662,039    | 3,310,200   
|                                                                    |              |             
|                                                                    |              |             
|Other income                                                        |              |             
|Service
      charges on deposit accounts                           | 409,323      | 336,114     
|Other
      service charges and fees                                | 205,89       | 153,484     
|Net
      realized gains on sales of securities available for sale  | 34,753       | 5,911       
|Other
      income                                                  | 66,491       | 61,992      
|                                                                    |              |             
|                                                                    |              |             
|Total
      other income                                            | 716,462      | 557,501     
|                                                                    |              |             
|                                                                    |              |             
|Other expenses                                                      |              |             
|Salaries
      and employee benefits                                | 1,209,707    | 1,190,138   
|Occupancy
      expense                                             | 338,750      | 321,534     
|Net realized losses
      on sales of securities available for sale | 0            | 0           
|Other
      expenses                                                | 612,732      | 459,792     
|                                                                    |              |             
|                                                                    |              |             
|Total
      other expenses                                          | 2,161,189    | 1,971,464   
|                                                                    |              |             
|                                                                    |              |             
|Income before income
      taxes                                    | 1,217,312    | 1,896,237   
|Income tax expense                                                  | 371,500      | 618,000     
|                                                                    |              |             
|                                                                    |              |             
|Net income                                                          | $   845,812  | $1,278,237  
|                                                                    |              |             
|                                                                    |              |             
|Net income per share
      of common stock                          | $1.10        | $1.66       
|                                                                    |              |             
|                                                                    |              |             
|Average 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 & SUBSIDIARYCONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(Unaudited)



|                                                                    | YTD          | YTD         
|------------------------------------------------------------------- | ------------ | ------------
|                                                                    | June 30,     | June 30,    
|                                                                    | 2001         | 2000        
|                                                                    |              |             
|Interest income                                                     |              |             
|Loans,
      including fees                                         | $  8,063,747 | $  8,119,895
|Securities available
      for sale                                 | 2,767,248    | 2,829,470   
|Federal
      funds sold and other                                  | 132,512      | 39,958      
|                                                                    |              |             
|                                                                    |              |             
|Total
      interest income                                         | 10,963,507   | 10,989,323  
|                                                                    |              |             
|                                                                    |              |             
|Interest expense                                                    |              |             
|Deposits                                                            | 4,304,988    | 3,980,981   
|Borrowings                                                          | 313,444      | 249,740     
|                                                                    |              |             
|                                                                    |              |             
|Total interest expense                                              | 4,618,432    | 4,230,721   
|                                                                    |              |             
|                                                                    |              |             
|Net interest income                                                 | 6,345,075    | 6,758,602   
|Provision
      for loan losses                                     | 650,000      | 180,000     
|                                                                    |              |             
|                                                                    |              |             
|Net
      interest income after provision for loan losses           | 5,695,075    | 6,578,602   
|                                                                    |              |             
|                                                                    |              |             
|Other income                                                        |              |             
|Service
      charges on deposit accounts                           | 390,530      | 312,389     
|Net
      realized gains on sales of securities available for sale  | 38,595       | 0           
|Other
      income                                                  | 122,512      | 108,100     
|                                                                    |              |             
|                                                                    |              |             
|Total
      other income                                            | 1,297,805    | 1,086,307   
|                                                                    |              |             
|Other expenses                                                      |              |             
|Salaries
      and employee benefits                                | 2,381,226    | 2,745,293   
|Occupancy
      expense                                             | 664,295      | 634,505     
|Net
      realized losses on sales of securities available for sale | 0            | 30,676      
|Other
      expenses                                                | 1,173,280    | 1,210,406   
|                                                                    |              |             
|                                                                    |              |             
|Total
      other expenses                                          | 4,218,801    | 4,620,880   
|                                                                    |              |             
|                                                                    |              |             
|Income before income
      taxes                                    | 2,774,079    | 3,044,029   
|Income tax expense                                                  | 876,500      | 998,000     
|                                                                    |              |             
|                                                                    |              |             
|Net income                                                          | $  1,897,579 | $  2,046,029
|                                                                    |              |             
|                                                                    |              |             
|Net income per share
      of common stock                          | $2.47        | $2.66       
|                                                                    |              |             
|                                                                    |              |             
|Average 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 & SUBSIDIARYCONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 2001 AND 2000
(Unaudited)



|                                                                                                      | June 30,      | June
      30,
|----------------------------------------------------------------------------------------------------- | ------------- | --------------
|                                                                                                      | 2001          | 2000          
|                                                                                                      |               |               
|Cash flow from
      operating activities                                                             |               |               
|Net income                                                                                            | $  1,897,579  | $  2,046,029  
|Adjustments to
      reconcile net Income to net                                                      |               |               
|cash provided by
      operating activities:                                                          |               |               
|Depreciation and
      amortization                                                                   | 341,400       | 300,308       
|Provision for loan
      losses                                                                       | 650,000       | 180,000       
|Net realized (gains)
      losses on securities available for sale                                    | (38,595)      | 30,676        
|Net change in
      accrued interest and other assets                                                 | (2,005,252)   | (2,259,282)   
|Net change in
      accrued expenses and other liabilities                                            | (335,646)     | (1,755,570)   
|                                                                                                      |               |               
|Total adjustments                                                                                     | (1,388,093)   | (3,503,896)   
|                                                                                                      |               |               
|                                                                                                      |               |               
|Net cash provided by
      operating activities                                                       | 509,486       | (1,457,867)   
|                                                                                                      |               |               
|                                                                                                      |               |               
|Cash flows from
      investing activities                                                            |               |               
|Purchase of
      securities available for sale                                                       | (23,813,273)  | (6,907,292)   
|Proceeds from sales
      of securities available for sale                                            | 684,555       | 9,411,466     
|Proceeds from
      maturities, prepayments and calls
               of securities available for sale | 11,894,105    | 2,916,672     
|Net change in loans                                                                                   | 186,373       | (12,547,771)  
|Purchases of
      premises and equipment                                                             | (162,052)     | (415,557)     
|                                                                                                      |               |               
|                                                                                                      |               |               
|Net cash used by
      investing activities                                                           | (11,210,292)  | (7,542,482)   
|                                                                                                      |               |               
|                                                                                                      |               |               
|Cash flows from
      financing activities                                                            |               |               
|Net change in
      deposits                                                                          | 15,906,024    | 7,249,559     
|Repayment of
      borrowings                                                                         | (6,500,000)   | (18,950,000)  
|Proceeds from
      borrowings                                                                        | 5,120,921     | 23,850,000    
|Cash dividends paid                                                                                   | (921,600)     | (921,600)     
|                                                                                                      |               |               
|                                                                                                      |               |               
|Net cash provided by
      financing activities                                                       | 13,605,345    | 11,227,959    
|                                                                                                      |               |               
|                                                                                                      |               |               
|Net change in cash
      and cash equivalents                                                         | 2,904,539     | 2,227,610     
|Cash and cash
      equivalents at January 1                                                          | 12,519,980    | 9,848,050     
|                                                                                                      |               |               
|                                                                                                      |               |               
|Cash and cash
      equivalents at June 30                                                            | $15,424,519   | $12,075,660   
|                                                                                                      |               |               
|                                                                                                      |               |               
|Interest paid                                                                                         | $  4,884,026  | $  4,158,691  
|                                                                                                      |               |               
|                                                                                                      |               |               
|Income taxes paid                                                                                     | $     660,514 | $  1,006,492  
|                                                                                                      |               |               



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



-4-

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PINNACLE FINANCIAL
CORPORATION AND SUBSIDIARYNOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 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. Certain reclassifications
have been made to the prior year presentation to conform to the current year.
The results of operations for the six-month period ended June 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 $1,445,000 as of
June 30, 2001 have been recognized as impaired. The total allowance for loan
losses related to these impaired loans is $263,000.





-5-

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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 June 30, 2001 and its results of operations for the
three and six months ended June 30, 2001 in comparison to the same periods ended
June 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 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 unforseen changes in the
financial stability and liquidity of the Banks credit customers; all of which
are difficult to predict and which may be beyond the control of the Company.
Pinnacle undertakes no obligation to revise forward-looking statements to
reflect events or changes after the date of this discussion or to reflect the
occurrence of unanticipated events.

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
June 30, 2001, 7.5% of the investment securities portfolio had maturity dates
within the next year and an additional 52.5% 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



-6-

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up to $27 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 collaterizes
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 while attempting to minimize the amount of cash and
overnight investments held. Nevertheless, cash and cash equivalents increased
during the first six months of 2001 from December 31, 2000 levels by $2.9
million while securities available for sale increased by $12.3 million during
the same time period. The average balance in these investment securities
increased by $1.5 million in the current year compared to the six months ended
June 30, 2000. The average balance of federal funds sold during the first six
months of 2001 and 2000 was $5.1 million and $1.3 million, respectively. The
general increase in investments and Federal Funds sold during 2001 reflects
declining loan demand and a general increase in deposits. It remains managements
intention to minimize the level of federal funds sold while prudently investing
excess funds as the opportunity to do so arises.

Total interest-earning
assets increased by $14.7 million or 5.8% for the current period when compared
with December 31, 2000. Average net loans increased $3.0 million (1.9%) to
$164.3 million in the six months ended June 30, 2001 from the same 2000 period.
The increase reflects growth in loan demand during the majority of 2000; since
December 31, 2000, loan demand has decreased.

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 $1.8
million from $2.4 million at June 30, 2001 and December 31, 2000, respectively.
The Bank experienced loan charge-offs of $1,298,000 in the six months ended June
30, 2001 compared to $168,000 in the same period of 2000. Net charge-offs
amounted to $1,204,000 in 2001 compared to $71,000 for the six months ended June
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-of 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 1.1% of total loans
outstanding at June 30, 2001.

The balance of Other Real
Estate Owned (included in other assets) increased by $3.0 million to $3.4
million from December 31, 2000 to June 30, 2001 as the result of foreclosing on
six properties and disposing of five 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 $516,000 as of June 30, 2001 representing .3%
of total loans compared to $151,000 at December 31, 2000. Unrecorded income on
all nonaccrual loans for the six months ended June 30, 2001 was approximately
$118,000. Real estate secures $245,000 of the non-accrual loans at June 30, 2001
while $271,000 is secured by other collateral.



-7-

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Pinnacle continues to
maintain a concentration of core deposits from an established customer base
which provides a stable funding source. Deposits increased $15.9 million (7.2%)
to $237.6 million at June 30, 2001 from $221.7 million at December 31, 2000, due
primarily to normal growth and increased emphasis on marketing of consumer
deposits. Non-interest bearing deposits increased $3.9 million to $47.2 million
from December 31, 2000 while interest-bearing deposits increased $12.0 million
for the six months ended June 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 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 purchased and FHLB advances to meet short
term liquidity needs. The Bank has no federal funds purchased as of June 30,
2001 but averaged approximately $70,000 of such borrowings during the first half
of 2001. The Bank anticipates continued use of these sources of funds to enhance
its earnings while continuing to monitor the maturities and interest rate risk
of interest-bearing assets and liabilities.

Shareholders equity
increased $2.0 million to $44.5 million at June 30, 2001 from $42.5 million at
December 31, 2000. Net earnings retained during the six months amounted to
$976,000 while equity increased $1.0 million as a result of an increase in net
unrealized losses on securities available for sale. Dividends declared and paid
were unchanged at $1.20 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 15.0% during the first six months of 2001,
compared to 14.5% for the year which ended December 31, 2000.

Management is not aware of
any known 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 June 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.

Interest income on
interest bearing assets decreased by $139,000 from the same quarter in 2000 as
average yields decreased from 8.6% to 8.1% as a result of significant reductions
in interest rates in the first half of



-8-

---



2001.  Additionally, lower loan demand
resulted in a higher percentage of Pinnacles interest bearing assets being
investment securities that have lower yields than loans. These factors offset
the overall increase in interest earning assets during the quarter. Interest
expense increased by $99,000 from the same quarter of 2000 as a result of
increased deposits and a slight increase in costs of funds. The average cost of
funds for the second quarters of 2001 and 2000 were 3.8% and 3.7%, respectively.
The Banks cost of funds has been decreasing in the last few months as the
decreases in short term interest rates impact our sources of funds, particularly
the repricing of maturing certificates of deposit. Net interest income in the
three months ended June 30, 2001 decreased $238,000, or 7.0% as compared to the
same period for the previous year. Much of the decrease reflects the lag in
repricing of interest-bearing deposits against our loan portfolio in a declining
interest rate environment. 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 the same period in the prior year.

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
$500,000 and $90,000 for loan losses in the quarters ended June 30, 2001 and
2000, repectively. The increased provision in 2001 is the result of the two
significant charge-offs discussed earlier in this 10-QSB. Management continues
to review the provision based on its evaluation of the adequacy of the allowance
for loan losses.

Other income increased by
$158,000 during the three months ended June 30, 2001 as compared to 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 June 30, 2001 increased $190,000 (or 9.6%) from the same
period in the previous year. The change results from normal increases in
operating expenses such as compensation, marketing, and professional services as
well as increases in expenses related to other real estate owned and debt
prepayment penalties. None of the increases is individually significant.

Pinnacles income tax
expense decreased $247,000 for the quarter compared to the same period in the
previous year due to lower taxable income and a decrease in the effective income
tax rate during the quarter from 32.6% in 2000 to 30.5% in 2001. The effective
rate decrease is primarily the result of 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 June 30, 2001 was $845,000 and represents
annualized returns of 7.8% on average shareholders equity and 1.2% on average
assets. Comparable amounts during the same period of 1999 were $1.3 million,
13.1%, and 1.8%, respectively.



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Results of Operations(for the six month period ended
June 30, 2001)

Interest income on
interest bearing assets for the six months ended June 30, 2001 decreased by
$25,000 from the same period in 2000. This minor change in interest income is in
spite of a decrease in average yield from 8.5% to 8.3%, reflecting a general
decrease in interest rates and an increase in average impaired assets.These
reductions in interest income were largely offset by an increase in average
earning assets, resulting in little change in interest income. Interest expense
increased by $387,000 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 six months ended June 30, 2001 and 2000 were 3.8% and 3.6%, respectively.
The increased cost of funds reflects the lagging nature of repricing of
deposits; recent interest rate reductions have not yet resulted in the cost of
funds of the Bank being reduced. Management anticipates that the cost of funds
will decrease in the second half of the year. Net interest income in the six
months ended June 30, 2001 decreased by $413,000, or 6.1%, as compared to the
same period for the previous year.

The provision for loan
losses and its purpose is explained above. Pinnacle provided $650,000 for losses
in the period ended June 30, 2001 and $180,000 in the period ended June 30,
2000. The increase is the result of the large increase in net charge-offs
discussed earlier in the Form 10-QSB.

Other income during the
six months ended June 30, 2001 increased by $212,000 to $1,298,000 from
$1,086,000 from the same period in 2000. This reasons for this increase
correspond to the reasons for the increase in the second quarter of the year.

Other expenses during the
six months ended June 30, 2001 decreased $403,000 to $4.2 million from $4.6
million for the same period in the previous year. The decrease reflects two
nonrecurring charges recognized by Pinnacle in the first quarter of 2000. The
first item related 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 was the result of an unfavorable ruling in a lawsuit disclosed in
previous filings. 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. Excluding these nonrecurring amounts, operating
expenses would have increased $233,000. This change consists of increased
expenditures in a number of operating expenses, including marketing, postage and
supplies, and professional services, as well as expenses related to real estate
owned and debt prepayment penalties. None of the increases are considered
individually significant.

Pinnacles income tax
expense decreased $122,000 for the six months ended June 30, 2001 compared to
the same period in the previous year due primarily to decreased taxable income.
The effective income tax rate during the period of 31.6% is a decrease of 1.2%
from the effective rate of 32.8% in 2000. The decreased effective rate is the
result of a larger percentage of Pinnacles pretax income being from tax
exempt securities.

Net income during the six
months ended June 30, 2001 was $1.9 million and represents annualized returns of
8.7% on average shareholders equity and 1.3% on average assets. Comparable
amounts during the same period of 2000 were $2.0 million, 10.5% and 1.5%,
respectively. As indicated above, net income declined primarily due to increased
loan loss provision and smaller net interest income while the operating ratios
reflect the decreased earnings compared to a slightly larger asset and equity
base.





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

(Rounded to the nearest
thousand)



|Total Risk Adjusted
      Assets                                                             | $200,540 |       
|-------------------------------------------------------------------------------------------- | -------- | ------
|                                                                                             |          |       
|Risk Based Capital
      Ratios:                                                             |          |       
|                                                                                             |          |       
|TIER 1 CAPITAL                                                                               |          |       
|Common stock                                                                                 | $7,680   | 3.83% 
|Surplus                                                                                      | 7,280    | 3.63% 
|Retained earnings                                                                            | 28,396   | 14.16%
|                                                                                             |          |       
|                                                                                             |          |       
|Total Tier 1 capital                                                                         | 43,356   | 21.62%
|Tier 1 minimum
      requirement                                                             | 8,022    | 4.00% 
|                                                                                             |          |       
|                                                                                             |          |       
|Excess
      (shortfall)                                                                     | $35,334  | 17.62%
|                                                                                             |          |       
|                                                                                             |          |       
|TIER 2 CAPITAL                                                                               |          |       
|Tier 1 from above                                                                            | $43,356  | 21.62%
|Allowance for loan
      losses, limited to 1.25%
                   of risk weighted assets | 1,798    | 0.90% 
|                                                                                             |          |       
|                                                                                             |          |       
|Total Tier 2 capital                                                                         | 45,154   | 22.52%
|Tier 2 minimum
      requirement                                                             | 16,044   | 8.00% 
|                                                                                             |          |       
|                                                                                             |          |       
|Excess
      (shortfall)                                                                     | $29,110  | 14.52%
|                                                                                             |          |       
|                                                                                             |          |       
|LEVERAGE RATIO                                                                               |          |       
|Tier 1 capital                                                                               | $43,356  | 14.98%
|Minimum requirement                                                                          | 8,684    | 3.00% 
|                                                                                             |          |       
|                                                                                             |          |       
|Excess
      (shortfall)                                                                     | $34,672  | 11.98%
|                                                                                             |          |       
|                                                                                             |          |       
|Average total
      assets, net of goodwill                                                  | $289,454 |       
|                                                                                             |          |       
|                                                                                             |          |       



-11-

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PINNACLE FINANCIAL
CORPORATION

PART II



ITEM 6.EXHIBITS
AND REPORTS ON FORM 8-K

| | A. | Exhibits                                                     
| | -- | -------------------------------------------------------------
| |    |                                                              
| |    | None.                                                        
| |    |                                                              
| | B. | Reports on Form 8-K                                          
| |    |                                                              
| |    | Pinnacle has filed no
reports on Form 8-K during the quarter.







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SIGNATURES



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



PINNACLE FINANCIAL
CORPORATION



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









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