<PAGE>


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


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


                                      FORM 10-Q

(Mark One)

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934
For the period ENDED SEPTEMBER 30, 1996

                                            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:  0-18283
                        -------

                              PINNACLE BANC GROUP, INC.
                              -------------------------
                (Exact name of registrant as specified in its charter)

         Illinois                                         36-3190818
        --------                                          ----------
(State or other jurisdiction                               (I.R.S. Employer
of incorporation or organization)                     Identification No.)

                 2215 York Road, Suite 208, Oak Brook, Illinois 60521
             ----------------------------------------------------
                       (Address of principal executive offices)

                                    (630) 574-3550
                                    --------------
                 (Registrant's telephone number, including area code)

--------------------------------------------------------------------------------
           (Former name, former address and former fiscal year, if changed
                            since last report.)

    Indicate by check mark whether the Registrant (1) has filed all  reports
required to be filed by Section 13 or 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  [  ]


APPLICABLE ONLY TO CORPORATE ISSUERS:  As of November 4, 1996, the
                                       registrant had 5,159,658 shares
                                       outstanding of common stock,
                                       $4.69 par value.
--------------------------------------------------------------------------------

<PAGE>

PART I - FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS.

    Presented on the following pages are the unaudited consolidated balance
sheets of Pinnacle Banc Group, Inc. and subsidiaries ("Pinnacle") for September
30, 1996 and December 31, 1995, the related consolidated statements of income
for the three and nine month periods ended September 30, 1996 and 1995, and the
related consolidated statements of cash flows for the nine month periods ended
September 30, 1996 and 1995.

    The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X.  Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for a complete
financial statement.  In the opinion of management, all adjustments, such as
estimated provisions for profit sharing and bonus arrangements normally
determined at year end, considered necessary for a fair presentation have been
included.

    Footnote disclosure has been made regarding the acquisition of Financial
Security Corp. ("Financial Security") and its wholly-owned subsidiary, Security
Federal Savings and Loan Association of Chicago, ("Security Federal") which was
completed on September 30, 1996, and the adoption of Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."  The remaining
footnote disclosure has been omitted since it would substantially duplicate the
disclosure contained in the latest audited financial statements of Pinnacle
contained in the 1995 Annual Report to Shareholders.


                                          2

<PAGE>

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES

                                                  SEPTEMBER 30  DECEMBER 31
                                                       1996         1995
                                                 --------------- -------------
ASSETS:
  Cash and due from banks. . . . . . . . . . .   $  25,236,517   $27,272,616
  Federal funds sold . . . . . . . . . . . . .               0    14,100,000
                                                 --------------- -------------
    Total cash and cash equivalents. . . . . .      25,236,517    41,372,616
  Interest-bearing deposits. . . . . . . . . .      34,664,880     2,725,891
  Securities:
    Available for sale . . . . . . . . . . . .     447,780,928   426,928,812
    (amortized cost:  9/30/96 - $439,299,000
                     12/31/95 - $418,637,000)
  Loans. . . . . . . . . . . . . . . . . . . .     522,408,459   309,599,860
  Less:  Allowance for loan losses . . . . . .      (8,893,098)   (6,023,011)
                                                 --------------- -------------
    Net loans. . . . . . . . . . . . . . . . .     513,515,361   303,576,849
  Premises and equipment . . . . . . . . . . .      18,025,149    15,565,402
  Goodwill and other intangibles . . . . . . .      26,298,642    19,177,420
  Other assets . . . . . . . . . . . . . . . .      29,838,033     9,350,293
                                                 --------------- -------------
    Total. . . . . . . . . . . . . . . . . . .  $1,095,359,510  $818,697,283
                                                 --------------- -------------
                                                 --------------- -------------

LIABILITIES:
  Demand deposits:
    Noninterest-bearing. . . . . . . . . . . .   $  96,881,472 $  96,714,490
    Interest-bearing . . . . . . . . . . . . .      89,275,092    89,230,444
  Savings deposits . . . . . . . . . . . . . .     302,412,554   257,793,601
  Other time deposits. . . . . . . . . . . . .     397,611,773   269,066,162
                                                 --------------- -------------
    Total deposits . . . . . . . . . . . . . .     886,180,891   712,804,697
  Short-term borrowings and FHLB advances. . .      45,950,000             0
  Notes payable. . . . . . . . . . . . . . . .      26,050,000    20,600,000
  Other liabilities. . . . . . . . . . . . . .      35,996,821     6,331,771
                                                 --------------- -------------
    Total liabilities. . . . . . . . . . . . .     994,177,712   739,736,468
                                                 --------------- -------------

STOCKHOLDERS' EQUITY:
  Preferred stock
    1,000 shares authorized, none issued . . .               0            0
  Common stock, $4.69 par. . . . . . . . . . .      24,185,897    20,505,323
    20,000,000 shares authorized; shares
    issued and outstanding:
                        9/30/96:   5,159,658
                       12/31/95:   4,374,469
  Additional paid-in capital . . . . . . . . .      37,978,742    17,897,900
  Retained earnings. . . . . . . . . . . . . .      33,499,219    33,505,657
  Unrealized gains in securities available
    for sale, net of tax . . . . . . . . . . .       5,517,940     7,051,935
                                                 --------------- -------------
    Total stockholders' equity . . . . . . . .     101,181,798    78,960,815
                                                 --------------- -------------
    Total. . . . . . . . . . . . . . . . . . .  $1,095,359,510  $818,697,283
                                                 --------------- -------------
                                                 --------------- -------------


                                          3

<PAGE>

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
 
                                                    FOR THE THREE MONTHS          FOR THE NINE MONTHS
                                                     ENDED SEPTEMBER 30            ENDED SEPTEMBER 30
                                                ----------------------------  ----------------------------
                                                    1996           1995           1996           1995
                                                -------------  -------------  -------------   ------------
<S>                                             <C>            <C>            <C>             <C>
INTEREST INCOME:
  Loans. . . . . . . . . . . . . . . . . . .   $  7,065,964   $  6,509,653   $ 20,423,562    $19,796,179
  Securities:
    Taxable. . . . . . . . . . . . . . . . .      5,972,099      5,652,789     17,003,486     17,696,446
    Tax exempt . . . . . . . . . . . . . . .        435,235        592,361      1,314,820      2,114,255
  Interest-bearing deposits, Federal funds
    sold and other . . . . . . . . . . . . .         29,013        217,099        182,123        752,375
                                                -------------  -------------  -------------   ------------
    Interest income. . . . . . . . . . . . .     13,502,311     12,971,902     38,923,991     40,359,255
                                                -------------  -------------  -------------   ------------
INTEREST EXPENSE:
  Deposits:
    Interest-bearing demand. . . . . . . . .        460,118        429,666      1,365,159      1,276,863
    Savings. . . . . . . . . . . . . . . . .      1,952,671      2,087,554      5,790,195      6,293,433
    Other time . . . . . . . . . . . . . . .      3,794,752      3,556,322     11,154,812      9,968,377
  Short-term borrowings. . . . . . . . . . .        266,208          1,624        375,195         38,583
  Notes payable. . . . . . . . . . . . . . .        468,732        399,775      1,250,689      1,527,651
                                                -------------  -------------  -------------   ------------
    Interest expense . . . . . . . . . . . .      6,942,481      6,474,941     19,936,050     19,104,907
                                                -------------  -------------  -------------   ------------
Net Interest Income. . . . . . . . . . . . .      6,559,830      6,496,961     18,987,941     21,254,348
  Provision for loan losses. . . . . . . . .              0         75,000              0        225,000
                                                -------------  -------------  -------------   ------------
    Net interest income after provision
      for loan losses. . . . . . . . . . . .      6,559,830      6,421,961     18,987,941     21,029,348
                                                -------------  -------------  -------------   ------------
OTHER INCOME:
  Banking services and other . . . . . . . .      1,189,374      1,140,981      3,578,734      3,691,328
  Trust services . . . . . . . . . . . . . .        531,161        544,824      1,649,221      1,569,215
  Net securities gains (losses). . . . . . .         (1,128)       182,733        132,021      4,447,894
                                                -------------  -------------  -------------   ------------
    Other income . . . . . . . . . . . . . .      1,719,407      1,868,538      5,359,976      9,708,437
                                                -------------  -------------  -------------   ------------
OTHER EXPENSE:
  Salaries, profit sharing and other
    employee benefits. . . . . . . . . . . .      3,001,135      2,945,304      9,033,124      8,848,975
  Occupancy. . . . . . . . . . . . . . . . .        712,587        631,660      2,061,420      2,274,254
  Amortization of goodwill and other
    intangibles. . . . . . . . . . . . . . .        471,832        471,832      1,415,496      1,413,307
  Other operating expenses . . . . . . . . .      2,517,187      1,489,995      5,781,059      5,677,934
                                                -------------  -------------  -------------   ------------
    Other expense. . . . . . . . . . . . . .      6,702,741      5,538,791     18,291,099     18,214,470
                                                -------------  -------------  -------------   ------------
Income before income taxes . . . . . . . . .      1,576,496      2,751,708      6,056,818     12,523,315
  Provision for income taxes . . . . . . . .        392,000        729,000      1,078,000      2,438,000
                                                -------------  -------------  -------------   ------------
NET INCOME . . . . . . . . . . . . . . . . .   $  1,184,496   $  2,022,708   $  4,978,818    $10,085,315
                                                -------------  -------------  -------------   ------------
                                                -------------  -------------  -------------   ------------
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING . . . .      4,323,540      4,410,166      4,349,136      4,424,942
EARNINGS PER SHARE . . . . . . . . . . . . .   $       0.27   $       0.46   $       1.14    $      2.28

</TABLE>
 

                                          4

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
 
                                                                           FOR THE NINE MONTHS
                                                                            ENDED SEPTEMBER 30
                                                                    --------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:                                   1996                1995
                                                                        ----                ----
<S>                                                              <C>                  <C>
  Net income . . . . . . . . . . . . . . . . . . . . . . . . . .$     4,978,818      $   10,085,315
  Adjustments to reconcile net income to net cash provided
      by operating activities:
      Depreciation . . . . . . . . . . . . . . . . . . . . . . .      1,066,483             945,289
      Amortization of goodwill and other intangibles . . . . . .      1,415,496           1,413,307
      Amortization of purchase accounting adjustments. . . . . .        132,187              57,696
      Discount accretion . . . . . . . . . . . . . . . . . . . .     (6,573,430)        (17,123,938)
      Premium amortization . . . . . . . . . . . . . . . . . . .        274,374             190,548
      Provision for loan losses. . . . . . . . . . . . . . . . .              0             225,000
      Loss (gain) on sale of securities. . . . . . . . . . . . .       (132,021)         (4,447,894)
      Decrease (increase) in interest receivable . . . . . . . .       (147,353)            481,803
      Increase in interest payable . . . . . . . . . . . . . . .        558,218             106,229
      Decrease in other assets . . . . . . . . . . . . . . . . .        170,463           2,020,255
      Increase in other liabilities. . . . . . . . . . . . . . .     20,740,809             870,934
      Other, net . . . . . . . . . . . . . . . . . . . . . . . .       (488,923)            (74,388)
                                                                 ----------------    ----------------
          Total adjustments. . . . . . . . . . . . . . . . . . .     17,016,303         (15,335,159)
          Net cash provided by (used for) operating activities .     21,995,121          (5,249,844)
CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash portion of acquisition, net of cash acquired (Note) . . .    (19,050,375)        (14,799,803)
  Proceeds from sale of securities available for sale. . . . . .  1,098,133,712       2,735,907,226
  Proceeds from maturities and paydowns of securities
  available for sale . . . . . . . . . . . . . . . . . . . . . .      7,642,505          15,275,651
  Purchase of securities available for sale. . . . . . . . . . . (1,098,155,820)     (2,728,184,187)
  Net decrease in interest-bearing deposits. . . . . . . . . . .        749,157          11,992,879
  Net loan principal (advanced) collected. . . . . . . . . . . .    (36,238,519)         20,197,878
  Premises and equipment expenditures. . . . . . . . . . . . . .     (2,561,899)         (1,502,210)
                                                                 ----------------    ----------------
          Net cash provided by (used for) investing activities .    (49,481,239)         38,887,434
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net decrease in total deposits . . . . . . . . . . . . . . . .     (7,929,737)        (33,816,731)
  Net increase (decrease) in short-term borrowings . . . . . . .     20,250,000          (4,800,000)
  Proceeds from notes payable. . . . . . . . . . . . . . . . . .     12,650,000          33,000,000
  Principal reductions of notes payable. . . . . . . . . . . . .     (7,200,000)        (16,000,000)
  Issuance of common stock . . . . . . . . . . . . . . . . . . .        132,285             417,215
  Purchase and retirement of common stock. . . . . . . . . . . .     (2,513,269)         (1,153,681)
  Dividends paid . . . . . . . . . . . . . . . . . . . . . . . .     (4,039,260)         (3,840,810)
                                                                 ----------------    ----------------
        Net cash provided by (used for) financing activities . .     11,350,019         (26,194,007)
  Net increase (decrease) in cash and cash equivalents . . . . .    (16,136,099)          7,443,583
  Cash and cash equivalents at beginning of period . . . . . . .     41,372,616          20,265,069
                                                                 ----------------    ----------------
  Cash and cash equivalents at end of period . . . . . . . . . .$    25,236,517     $    27,708,652
                                                                 ----------------    ----------------
                                                                 ----------------    ----------------
CASH PAID DURING PERIOD FOR:
  Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .$    19,489,894     $    18,998,678
  Income taxes . . . . . . . . . . . . . . . . . . . . . . . . .        928,000           2,121,000

</TABLE>
 
    NOTE:  On September 30, 1996, Financial Security and its subsidiary,
Security Federal, was purchased for a combination of stock and cash.  The cash
portion of the acquisition price was $20,140,091.  At the date of purchase, the
balance sheet of Financial Security included cash and cash equivalents of
$1,089,716, resulting in a net cash position of $19,050,375.  Shares totalling
856,942 were also issued in the transaction.


                                          5

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES


ACQUISITION:

    Effective September 30, 1996, Pinnacle completed the acquisition of
Financial Security Corp., Chicago, Illinois ("Financial Security"), and its
subsidiary, Security Federal Savings and Loan Association of Chicago, Illinois
("Security Federal").  The total purchase price was $44,755,757, common shares
issued were 856,942 valued at $24,615,666, and the remainder was paid in cash
totalling $20,140,091.  Funds utilized to pay for the cash portion of the
acquisition were obtained from funds on hand at Financial Security, a dividend
from Security Federal, and borrowed from an unaffiliated bank.

    At the date of the purchase, Financial Security was liquidated and Security
Federal remained a separate subsidiary of Pinnacle.  As of the date of the
purchase, Financial Security had total assets of approximately $250 million.
Goodwill, based on management's estimates of fair value of assets acquired and
liabilities assumed, approximates $8.6 million which will be amortized over 15
years.  Fair value appraisals and determination of termination benefits are
being updated and will be adjusted, if necessary, when received.  Management
does not anticipate material changes to the above goodwill amount.

    This transaction is being accounted for using the purchase method of
accounting and, accordingly, the excess of the aggregate purchase price over the
fair value of the net assets acquired consisted of goodwill.  Because the
acquisition occurred at September 30, 1996, no income effect of Security Federal
is included in Pinnacle's results of operations for the first nine months of
1996.

    The following unaudited results of operations reflect the acquisition of
Financial Security as if the acquisition had occurred at the beginning of 1995
(in thousands, except per share amounts):

                                                      FOR THE NINE
                                                      MONTHS ENDED
                                                      ------------
                                                          1996
                                                      ------------
Net interest income                                      $24,117
Provision for loan losses                                  1,350
                                                      ------------
Net interest income after provision for loan losses       22,767
Net income                                                 2,053
Net income per share                                        0.39

LONG-LIVED ASSETS:

    On January 1, 1996, Pinnacle adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of."  The standard requires evaluation
of impairment of long-lived assets  to be reviewed when indicators of impairment
are present.  Indicators of impairment include, but are not limited to, a
significant decrease in the market value of an asset; a significant change in
the manner an asset is used; or a significant adverse change in legal, business
or regulatory factors which affect the ability to use the asset.  The fair value
of the long-lived assets is compared to the carrying value, and any impairment
is recorded in current earnings.  Currently, there are no indicators present to
warrant any evaluation of the impairment of Pinnacle's long-lived assets and,
thus, there is no effect of the adoption of this standard on the financial
position and results of operations of Pinnacle.


                                          6

<PAGE>

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


              NET INCOME - NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

     Consolidated net income was $4,979,000, or $1.14 per share, on a fully
diluted basis for the nine months ended September 30, 1996, compared to the
$10,085,000, or $2.28 per share, earned in the first nine months of 1995.  The
annualized return on average assets was 0.81% for the first nine months of 1996
and 1.66% for the first nine months of 1995.  For each period, the return on
average equity was 9.4% and 19.6%, respectively.  The return on average assets
and equity for the same periods, calculated using the effects of SFAS No. 115
would not be materially different.

    The decrease in earnings for the first nine months of 1996 was due to
$132,000 of net securities gains recorded compared to $4,448,000 recorded in the
first nine months of 1995.  Net interest income also decreased 11%, primarily as
a result of the lower yields earned on taxable securities and higher interest
costs.

NET INTEREST INCOME

    The primary component of Pinnacle's consolidated earnings is net interest
income, or the difference between interest income on earning assets and interest
paid on supporting liabilities.  The net interest margin is net interest income
expressed as a percentage of average earning assets.  Pinnacle's earning assets
consist of loans, securities, interest-bearing deposits at financial
institutions and Federal funds sold.  Supporting liabilities primarily consist
of deposits, Federal funds purchased and Pinnacle's notes payable.  A portion of
Pinnacle's interest income is earned on tax exempt investments such as state and
municipal bonds.  In an effort to state this tax exempt income and its resultant
yields on a basis comparable to all other taxable investments, an adjustment is
made to analyze this income on a taxable equivalent basis.

    During the first nine months of 1996, Pinnacle's average earning assets
were $747,915,000, a 1% increase from the comparable period of the previous
year.  Security Federal's average assets are not included in Pinnacle's balances
since the acquisition closed at the end of quarter and their effect would not be
significant.  The net interest margin for the first nine months of 1996 was
3.52%, down 67 basis points from 4.19% of a year ago.  Net interest income on a
fully taxable equivalent basis was $19,732,000 for the first nine months of
1996, down 12% from the comparable period in 1995.  Actual net interest income
decreased 11% from a year ago.

    The yield earned on total earning assets was 7.07% for the first nine
months of 1996 compared to 7.44% for the same period of 1995.  The decrease
resulted primarily from the lower level of yields earned on taxable securities
as well as interest bearing deposits in the first nine months of 1996 compared
with the first nine months of 1995.  The average rate earned on interest-bearing
deposits and Federal funds sold was 5.14%, down 26 basis points from 5.40% of a
year ago.  This decrease was the result of lower rates earned on overnight
deposits and the maturity of higher-yielding interest-bearing deposits.  The
average rate on taxable securities decreased 55 basis points from 6.28% for the
first nine months of 1995 to 5.73% for the same period in 1996.  The decrease in
yield on taxable securities was primarily the result of the decrease in rates
earned on U. S. Treasury securities whose yield decreased from 6.03% in 1995 to
5.67% in 1996.  Average balances in taxable securities increased $20,388,000;
however, interest income declined as this increase was more than offset by the
decrease in yields on taxable securities.  The yield on nontaxable securities
increased 92 basis points to 12.05% for the first nine months in 1996, compared
to 11.13% earned for the same period in 1995.


                                          7

<PAGE>

This increase was the result of the sale in the first six months of 1995 of
certain tax-exempt securities obtained in the 1995 acquisition of Acorn
Financial Corp ("AFC") and the reduction in the calls and maturities of
high-yielding zero coupon bonds which also occurred in 1995.  The volume in this
category decreased $16,238,000 with the offsetting increase in taxable
securities.  The rate earned on loans decreased 12 basis points due to the
reduction in the prime rate and competitive pressures in both the commercial and
mortgage markets.  Offsetting the slight reduction in the rate earned on loans
was the increase in the average volume by $15,050,000.  Total interest income on
a fully taxable equivalent basis decreased $1,878,000.  This decrease, while
primarily a result of lower yields earned on earning assets, is tempered by the
increase in average earning assets of $5,418,000.  Interest income on a fully
taxable equivalent basis has increased each quarter in 1996, due to the growth
in average earning assets.

    The average cost of interest-bearing liabilities has increased 17 basis
points to 4.12% from 3.95% paid in the first nine months of 1995.  The average
rate paid on interest-bearing demand deposits and savings deposits has decreased
9 basis points.  These deposit categories are considered core deposit categories
and are less susceptible to market and rate changes.  The interest rate paid on
money market deposits increased 52 basis points.  Pinnacle has taken action at
appropriate intervals to adjust the rates paid on all deposits to not only keep
them in line with market rates, but to meet the needs of its particular customer
bases.  For example, two of the subsidiary banks have added a third level of
interest rates for certain of its high balance money market customers, thus the
increase in that rate category.  The average rate paid on other time deposits
has increased 30 basis points.  Rates have remained relatively flat on time
deposits for 1996; however, the effect of management's increases in rates paid
on longer-term time deposits in previous years are continuing to add to the
increased rate paid.  The increase in rates paid on other time deposits in
previous quarters has also caused customers to switch their savings deposits
into other time deposits, as evidenced by the decrease in savings deposits and
the corresponding increase in the average balance of other time deposits.

    The average rate paid on short-term borrowings decreased 23 basis points
due to decreased market rates in this category from a year ago.  The average
balance increased $7,913,000, primarily due to increased loan demand.  The
average rate paid for Pinnacle's notes payable decreased 59 basis points.  The
decrease was due to lower rates in indices (prime or LIBOR) which are the
interest rate bases to which the notes payable are tied. Average notes payable
balances decreased $2,903,000 due to payments on acquisition debt and varying
cash needs of the parent company.

    Interest expense for the first nine months of 1996 has increased $832,000
compared to the same period of 1995.  An increase in the average
interest-bearing liabilities balance of $1,913,000 and the shift of deposits to
higher paying deposit categories has resulted in the increase.

    A detailed Analysis of Net Interest Income for the three and nine month
periods ended September 30, 1996 and 1995 is included on Pages 15 and 16.

PROVISION FOR LOAN LOSSES

    Management records a provision for loan losses in an amount sufficient to
maintain the allowance for loan losses at a level commensurate with the risks in
the loan portfolio.  The allowance for loan losses is adjusted through charges
to current income based on factors such as past loan loss experience,
management's evaluation of potential losses in the loan portfolio, and
prevailing economic conditions.

    There was no provision for loan losses in the first nine months of 1996,
compared to $225,000 for the first nine months of 1995.  In the fourth quarter
of 1995, Pinnacle reversed the provision for


                                          8

<PAGE>

loan losses made in the first nine months due to several factors, including the
level of allowance for possible loan losses to total loans, which has been
steadily increasing for the last five years, management's assessment of the
overall adequacy for allowance for loans losses, as well as the downward trend
of net charge-offs to loans.  Pinnacle had net recoveries of $76,000 for the
first nine months of 1996 compared to net recoveries of $123,000 in 1995.  The
allowance for loan losses was $8,893,000, or 1.70% of total loans, at September
30, 1996, compared to 1.95% at December 31, 1995.

    Total nonperforming assets totalled $13,541,000 at September 30, 1996, an
increase of $5,242,000 over the December 31, 1995 balance of $8,299,000.  The
increase was due to the acquisition of Security Federal whose nonperforming
assets totalled $6,562,000.  At quarter end, Security Federal had loans,
primarily real estate, of $176,402,000 and an allowance for possible loan losses
of $2,794,000, or 1.58% of loans.  A provision for loan losses of $1,350,000 was
made by Security Federal in the first nine months of 1996, not included in
Pinnacle's earnings, to cover problem loans known to Pinnacle's management
through its due diligence process.  Nonperforming assets of Pinnacle consisted
of $9,309,000 in non-accrual loans, $1,073,000 in loans past due greater than 90
days and still accruing, $1,355,000 in restructured loans, and $1,804,000 in
other real estate owned.  Absent the effect of Security Federal, Pinnacle's
nonperforming loans decreased $1,320,000, with the decrease primarily in past
due 90 days or more and still accruing, which decreased $1,220,000.  Investment
in impaired loans, as defined by policy, totalled $8,405,000 at quarter end,
with $4,772,000 in commercial loans and the remaining balance in real estate
loans.  All are included in the above total nonperforming assets amount.

NONINTEREST INCOME AND EXPENSE

    The major components of Pinnacle's noninterest income consist of service
charges on deposit accounts and other banking income, trust fees and net gains
or losses on the sale of securities.  Fees for banking services and other income
were $3,579,000 for the nine months ended September 30, 1996 compared to
$3,691,000 for the same period a year ago.  Income on the sale of non-deposit
type products increased $152,000 from 1995 which included a gain on the sale of
an installment note of approximately $319,000.  Trust fees increased 5% on a
period-to-period basis.  Total trust assets under management amounted to
$266,000,000 at September 30, 1996, or a 15% increase from a year ago.

    Gains on the sale of securities, on a pre-tax basis, were $132,000 for the
first nine months of 1996 compared to $4,448,000 for the same period a year ago.
The net gains in 1996 are primarily related to the sales in Pinnacle's U. S.
Government securities portfolio.  The gains in 1995 are related to the sale of
U. S. Government securities as well as the sale of an equity security and sale
of securities acquired through the purchase of Acorn Financial Corp in 1995.

    Management has always viewed the gains recorded on the U. S. Government
security term portfolio program as closely related to its net interest income as
opposed to one-time security gains or losses.  Accordingly, since implementation
of the program, the yield on Pinnacle's U. S. Government portfolio has
outperformed the U. S. Treasury yield by 31 basis points and, by including the
net gains since inception of the program, the total yield is 135 basis point
higher than the same Index.  For the first nine months of 1996, due to the
relative flatness of the yield curve, the portfolio has only outperformed the
Index by 15 basis points and by including the net gain by 18 basis points.

    Noninterest expense remained flat for the first nine months of 1996,
compared to the same period of a year ago.  Occupancy expense decreased
$213,000, or 9% from a year ago, primarily due to a $434,000 write-off of a
branch building demolished in June 1995.  Offsetting that reduction was the
increase in real estate taxes and depreciation for the new building to replace
the demolished


                                          9

<PAGE>

branch.  Data processing expenses, included in other expense, decreased 16% as
conversion expenses were included in 1995 expenses.  FDIC insurance premiums,
also included in other expense, totalled $976,000 compared to $854,000 of a year
ago.  Included in the first nine months of 1996 was a provision of $750,000, on
a pre-tax basis, for the estimated amount of the special assessment by the FDIC
to recapitalize the Savings Association Insurance Fund ("SAIF") pursuant to
legislation which was signed on September 30.  Pinnacle has SAIF insured
deposits at its thrift subsidiary and from the purchase of failed thrift
deposits from the Resolution Trust Corporation in 1992.  Included in the third
quarter of 1995 was a rebate of approximately $364,000 due to the
recapitalization of the Bank Insurance Fund ("BIF").  Absent the effect of the
SAIF assessment and BIF rebate, noninterest expense decreased 6%.  The SAIF
assessment at Security Federal, not included in Pinnacle's earnings, totalled
$1,342,000.

INCOME TAXES

    Pinnacle's Federal income tax return is prepared on a consolidated basis
including the accounts of its subsidiary banks.  The provision for income taxes
was $1,078,000 for the first nine months of 1996 compared with a provision of
$2,438,000 for the first nine months of 1995.  The lower provision for taxes in
the first nine months of 1996 was primarily the result of lower pre-tax income
in the first nine months of 1996 versus the higher pre-tax income in the same
period of 1995.

             NET INCOME - THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

    Consolidated net income was $1,184,000, or $0.27 per share, on a fully
diluted basis for the three months ended September 30, 1996 (the "third
quarter"), compared to $2,023,000, or $0.46 per share, earned in the third
quarter of 1995.  The annualized return on average assets was 0.57% for the
third quarter of 1996 and 1.01% for the third quarter of 1995.  For each period,
the return on average equity was 6.7% and 11.5%, respectively.

    The decrease in net income was primarily the result of a SAIF provision of
$750,000, on a pre-tax basis, recognized in the third quarter and discussed
previously.  Net interest income increased $63,000, or 1%, due to an increase in
average earning assets.  Other income, exclusive of securities transactions,
increased slightly by $35,000, or 2%, while other operating expense, including
the SAIF provision, increased 21%.

NET INTEREST INCOME

    During the third quarter of 1996, Pinnacle's average earning assets were
$760,702,000, an increase of 3% from the $736,629,000 of a year ago.  The net
interest margin of the third quarter of 1996 was 3.57% compared to 3.72% for
1995.  Net interest on a fully taxable basis was $6,792,000 for the third
quarter of 1996, or a decrease of slightly 1%.  Actual net interest income
increased slightly or $63,000.

    The yield earned on total earning assets was 7.22% for the third quarter of
1996, consistent with the 7.23% yield earned in 1995.  The interest yield earned
on interest-bearing deposits and Federal funds sold decreased 45 basis points,
while average balances decreased 86% as interest-bearing deposits acquired from
AFC matured and the balances in Federal funds sold dropped due to the increase
in the taxable securities and loan categories.  The average balance in taxable
securities increased $17,978,000, while the rate increased slightly to 6.04%
from 5.99%.  The average balance in loans increased $35,169,000, or 12%.  Loans
earn a higher yield than taxable securities, and thus the


                                          10

<PAGE>

increase in average balances in this category added to total interest income
despite the decrease in the yield on loans by 24 basis points.  Total interest
income, on a fully taxable equivalent basis increased $417,000.

    The average cost of interest-bearing liabilities increased 12 basis points
to 4.21% from the 4.09% paid in the third quarter of 1995.  The average rates
paid on interest-bearing demand deposits and savings deposits dropped 13 basis
points, money market deposits increased 54 basis points (primarily as a result
of the new higher-rate money market account), and other time deposits increased
4 basis points.

PROVISION FOR LOAN LOSSES

    There was no provision for loan losses for the third quarter of 1996,
compared to $75,000 for the third quarter of 1995.  As previously mentioned,
this provision was reversed in the fourth quarter of 1995.  Pinnacle had net
recoveries of $38,000 in 1996 compared to net recoveries of $68,000 in the third
quarter of 1995.

NONINTEREST INCOME AND EXPENSE

    Fees on banking services and other income were $1,189,000 for the third
quarter of 1996, compared to $1,141,000 in the same period of 1995, an increase
of 4% primarily due to the sale of non-deposit products.  Trust fees decreased
3%.  Security losses totalled $(1,000), gross and net, for the third quarter of
1996, compared to gains of $183,000 in the same period of 1995.  The net gains
in the third quarter of 1995 consisted of gross gains of $396,000 and gross
losses of $(213,000).

    The loss in the third quarter of 1996 related to the call of a non-taxable
security.  Almost all of the net securities gains recorded in the third quarter
of 1995 related to the U. S. Government securities portfolio.

    Noninterest expense increased 21%, primarily as a result of the $750,000
SAIF provision, offset by the rebate of the 1995 FDIC insurance premium.
Salaries and employee benefits increased only 2%, and occupancy expense
increased 13% due to increased real estate taxes and depreciation associated
with a new branch building opened late in the second quarter of 1995.

INCOME TAXES

    The provision for income taxes was $392,000 for the third quarter of 1996
compared to a provision of $729,000 for the same period a year ago, resulting
from lower pre-tax income.

                                    BALANCE SHEET

    Total consolidated assets were $1,095,360,000 at September 30, 1996, or a
34% increase from December 31, 1995.  The increase in assets resulted primarily
from the acquisition of Financial Security on September 30, 1996.  Absent the
acquisition, total consolidated assets increased 3% from December 31, 1995.

    Pinnacle's securities portfolio accounted for 41% of its consolidated
balance sheet.  Total securities were $447,781,000 at September 30, 1996 and
consisted of U. S. Government securities amounting to $370,990,000, mortgage-
backed securities and CMO's of $21,739,000, state and municipal bonds of
$24,348,000, and corporate and other securities of $30,704,000.  Total
securities increased 5%, with the increase primarily in mortgage-backed
securities, where Security Federal


                                          11

<PAGE>

contributed $15,677,000 and corporate and other, which increased due to
acquisitions by Pinnacle of additional equity securities of $5,371,000 and an
additional $4,995,000 received through the acquisition.  The mix of the
securities portfolio changed slightly due to the acquisition, with the
percentage of U. S. Government securities decreasing to 83% of the portfolio,
and mortgage-backed securities increasing to 5% of the portfolio.

    U. S. Government securities amounted to $370,990,000 or 34% of assets at
September 30, 1996.  The average remaining maturity of these securities was
eighteen months.  U. S. Government securities are part of Pinnacle's term
taxable securities strategy which has been designed to manage Pinnacle's
interest rate risk and to take advantage of the slope in the yield curve.  The
decision to undertake intermittent sales of these securities is based on
management's assessment of economic conditions.  For example, management will
undertake sales of securities based on the slope of the yield curve and its
determination that the reinvestment of the proceeds into a longer- or
shorter-term security is an acceptable alternative given management's assessment
of interest rate risk.  At September 30, 1996, U. S. Government securities had
gross unrealized losses of $(122,000).

    Other securities held by Pinnacle, amounting to $76,791,000 at September
30, 1996, consisted of mortgage-backed, CMO's, state and municipal, and
corporate and equity securities.  At quarter end, these securities had gross
unrealized gains of $8,957,000 and gross unrealized losses of $(353,000) on a
pre-tax basis.  Currently, Pinnacle is not using any derivatives for hedging or
other purposes.

    Total loans amounted to $522,408,000, up 69% from year-end 1995.  The
acquisition accounted for 81% of the increase, while the remaining growth is
part of a strategic effort on management's part to increase the loan portfolio
without sacrificing credit quality of the portfolio.  Real estate loans were the
most affected by the acquisition, with an increase of $182,049,000, of which
loans from Security Federal were 93% of the increase.  Commercial loans
increased $23,581,000 and installment loans increased $7,178,000.  At September
30, 1996, 21% of the loans were commercial, real estate loans amounted to 68%,
and installment loans were 11% of the portfolio.  Pinnacle's loan to asset ratio
was 48% at September 30, 1996.

    Goodwill and other intangibles amounted to $26,299,000, an increase of 37%
over year-end 1995.  The increase was due to the acquisition, in which
approximately $8,600,000 was recorded.  Goodwill and intangibles amount to 26%
of stockholders' equity at September 30, 1996.

    Total deposits were $886,181,000, or 24% higher than year-end 1995.  The
increase related entirely to the acquisition.  Transaction accounts, both
noninterest-bearing and interest-bearing, remained flat.  Absent the
acquisition, these accounts, whose balances fluctuate daily, decreased
$7,666,000.  Savings accounts increased 17% due to the acquisition.  Balances
without Security Federal dropped approximately 3%.  Other time deposits
increased 48%, or $128,546,000, of which $120,639,000 related to Security
Federal.  The remaining increase was the movement of Pinnacle's customers from
savings deposits to time deposits.  Management continues to take an active role
to monitor interest rates on deposits and provide products to reduce the
disintermediation of funds. As evidenced by the shift in deposits to other time
deposits, customers are more willing to commit their funds to defined periods of
time.  At September 30, 1996, the percentage of total deposits for each category
were:  Noninterest-bearing deposits, 11%; Interest-bearing demand deposits, 10%;
Savings accounts (including Money Market accounts), 34%; and Other time
deposits, 45%.

    Pinnacle's notes payable were $26,050,000 at September 30, 1996.
Outstandings consist of acquisition debt of $18,000,000 and $8,050,000 drawn on
the revolving line which is used for purchased equity securities and other
corporate needs.  At year-end 1995, outstandings consisted of $20,000,000 on the
acquisition note and $600,000 drawn on the revolving line.


                                          12

<PAGE>

                                  CAPITAL RESOURCES

    Total stockholders' equity of Pinnacle was $101,182,000 at September 30,
1996 and $78,961,000 at December 31, 1995.  The increase was due primarily to
stock issued for the acquisition of Financial Security.  The ratio of equity to
assets was 9.24% and 9.64% at each period end, respectively.

    The Federal Reserve Board ("Board") regulations prescribe capital
requirements for bank holding companies.  Pinnacle must have a Leverage Capital
Ratio with a minimum level of Tier One capital to total assets of 3.00%.  Tier
One capital consists of common stock, additional paid-in capital and retained
earnings, and is exclusive of Pinnacle's allowance for loan losses, goodwill and
other intangibles, and unrealized gains (losses) on securities available for
sale.  In addition, the Board has issued Risk-Based Capital Guidelines with a
minimum standard of total regulatory capital to risk weighted assets of 8.00%.
The structure of Pinnacle's balance sheet results in a Risk-Based Capital Ratio
significantly in excess of the guidelines.

    The following table provides an analysis of the minimum capital
requirements (as defined), ratios and the excess over the minimum which Pinnacle
holds as capital as of September 30, 1996, in thousands (except percentages).


                             MINIMUM   MINIMUM                       EXCESS
                             REQUIRED  REQUIRED  ACTUAL    ACTUAL     OVER
                              RATIO     AMOUNT    RATIO    AMOUNT    MINIMUM

Leverage Capital . . . . .   3.00%     $31,879    6.44%   $68,455   $36,576
Risk-based Capital:
  Tier One . . . . . . . .   4.00       20,638   13.27     68,455    47,817
  Total (Tier Two) . . . .   8.00       41,276   14.39     74,265    32,989


    At December 31, 1995, Pinnacle's total risk-based capital ratio was 18.09%.
The decrease in this ratio was due to the higher risk weight given to certain
assets acquired from Financial Security and the goodwill attributed to the
acquisition.

    In addition, each of Pinnacle's subsidiary banks must meet similar minimum
capital requirements as prescribed by Federal and state banking regulatory
authorities.  At September 30, 1996, Pinnacle and each of its subsidiary banks
was in compliance with the current capital guidelines and are considered
"well-capitalized" under regulatory standards.

    Book value per share was $19.61 at September 30, 1996 compared to $18.05 at
December 31, 1995.  Dividends amounting to $0.93 per share were paid in the
first nine months of 1996.

                                      LIQUIDITY

    As characteristic of the banking industry, Pinnacle's indicators of
liquidity are principally its deposit base, loan and investment portfolios. On a
short term basis, adjustments are made in these categories based on deposit
fluctuations and loan demand.  Longer term, liquidity is determined by growth
objectives, rate pricing policies and the ability to borrow debt or raise
equity.  In general, Pinnacle is able to meet deposit withdrawals and to fund
loan demand through earnings and the


                                          13

<PAGE>

maturity or sale of securities.  Pinnacle would also be able to respond to short
term cash flow needs through short-term borrowings.  On a longer term basis,
Pinnacle has the ability to incur debt or to raise equity through the sale of
preferred or common stock.

    Pinnacle's cash flows are comprised of three general types.  Cash flows and
uses from operating activities are primarily Pinnacle's net income, adjusted for
non-cash items.  Cash flows from investing activities consist of loans made to
and collected from customers; and purchases, sales and maturities of securities.
Cash flows from financing activities are determined by Pinnacle's deposit base
and from Pinnacle's ability to borrow and repay debt and issue or repurchase
stock.  For the nine months ended September 30, 1996, cash flows were generated
from operations of $22,000,000 (primarily due to cash due Financial Security
shareholders); a $7,643,000 decrease in securities due to maturities and
paydowns; a $20,250,000 increase in short-term borrowings; and a $5,450,000
increase in notes payable.  Cash flow uses and needs included $19,050,000 net
cash outlay for the acquisition of Financial Security; a $36,200,000 increase in
loans; an $8,000,000 decrease in deposits; $2,500,000 to repurchase stock; and
$4,000,000 to pay dividends.  Pinnacle's net cash position decreased $16,000,000
with the decrease primarily in Federal funds sold of $14,100,000.

    Pinnacle's subsidiary banks have a relatively stable base of deposits and
any increased loan demand can be sufficiently funded without a material change
in its balance sheet.  Pinnacle's corporate strategy includes profitable
acquisitions.  These acquisitions would be funded with debt and/or issuance of
stock.  Reductions of debt would be made from Pinnacle's earnings.

    At September 30, 1996, Pinnacle had a line of credit of $10,000,000 from
which $8,050,000 had been drawn.  An $18,000,000 note relating to the AFC
acquisition was outstanding at quarter-end, secured by the stock of Pinnacle's
subsidiary banks.  Subsequent to quarter-end, Pinnacle renewed its notes
payable.  Currently, there is a $15,000,000 demand note related to the
acquisition of AFC in 1995.  Additionally, a $15,000,000 line of credit was
established, secured by certain of Pinnacle's equity portfolio.  A line of
credit of $5,000,000 is also available for working capital needs.  The note and
both lines are also secured by stock of Pinnacle's subsidiary banks.  All notes
float with either prime or LIBOR, at management's discretion.  Both lines of
credit and the note are with the same unaffiliated bank.

    Regulatory requirements exist which influence Pinnacle's liquidity and cash
flow needs.  These requirements include the maintenance of satisfactory capital
ratios on a consolidated and subsidiary bank basis, restrictions on the amount
of dividends which a subsidiary bank may pay and reserve requirements with the
Federal Reserve Bank.  Based on these restrictions, at October 1, 1996, bank
subsidiaries could have declared approximately $1,764,000 in dividends without
requesting approval of the applicable Federal or State regulatory agency.
Savings bank subsidiaries are allowed to pay dividends, after prior notice but
without approval from their regulator, during a calendar year up to the higher
of (i) 100% of its net income to date during the calendar year plus the amount
that would reduce by one-half its surplus capital ratio (the excess of capital
over its regulatory capital requirements) at the beginning of the calendar year,
or (ii) 75% of its net income over the most recent four quarter period.
Currently, regulatory approval is required for dividends from Security Federal.
In addition, Pinnacle has made loan commitments which could result in increased
cash flow requirements for loans.  Management is of the opinion that these
regulatory requirements and loan commitments will not have a significant impact
on the liquidity of Pinnacle.  Management is not aware of any known trends,
events or uncertainties that will have, or that are reasonably likely to have, a
material effect on Pinnacle.  Management is also not aware of any current
recommendations by the regulatory authorities which, if implemented, would have
an adverse material effect on Pinnacle.  Management had no significant
commitments for capital expenditures at September 30, 1996 or December 31, 1995.


                                          14

<PAGE>

ANALYSIS OF NET INTEREST INCOME
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
 
(DOLLARS IN THOUSANDS)
                                                         THREE MONTHS ENDED              NINE MONTHS ENDED
                                                         SEPTEMBER 30, 1996              SEPTEMBER 30, 1996
                                                   -------------------------------  -------------------------------
                                                    AVERAGE                          AVERAGE
                                                    BALANCE   INTEREST     RATE      BALANCE     INTEREST   RATE
                                                    -------   --------     ----      -------     --------   ----
<S>                                                <C>        <C>         <C>       <C>          <C>       <C>
ASSETS:
  Interest-earning assets:
    Interest-bearing deposits and Federal
     funds sold . . . . . . . . . . . . . .        $  2,173    $    28     5.15 %   $  4,725     $   182    5.14 %
    Taxable securities . . . . . . . . . . .        395,658      5,972     6.04      395,347      17,003    5.73
    Nontaxable securities. . . . . . . . . .         21,892        646    11.81       22,039       1,992   12.05
    Loans. . . . . . . . . . . . . . . . . .        340,979      7,088     8.31      325,804      20,491    8.39
                                                   ---------   --------    -----    ---------    --------   -----
      Total interest-earning assets. . . . .        760,702     13,734     7.22      747,915      39,668    7.07
  Noninterest-earning assets:
    Cash and due from banks. . . . . . . . .         24,135                           24,022
    Allowance for loan losses. . . . . . . .         (6,101)                          (6,067)
    Other assets . . . . . . . . . . . . . .         54,671                           48,763
                                                   ---------                        ---------
      Total assets . . . . . . . . . . . . .       $833,407                         $814,633
                                                   ---------                        ---------
                                                   ---------                        ---------

LIABILITIES AND STOCKHOLDERS' EQUITY:
  Interest-bearing liabilities:
    Interest-bearing demand deposits. . . .        $ 88,657    $   460     2.08 %   $ 88,497     $ 1,365    2.06 %
    Savings deposits . . . . . . . . . . . .        203,538      1,519     2.99      205,762       4,589    2.97
    Money market deposits. . . . . . . . . .         48,629        433     3.56       46,762       1,201    3.42
    Other time deposits. . . . . . . . . . .        274,365      3,795     5.53      271,902      11,155    5.47
    Short-term borrowings. . . . . . . . . .         18,438        266     5.77        8,789         375    5.69
    Notes payable. . . . . . . . . . . . . .         25,921        469     7.24       23,017       1,251    7.25
                                                   ---------   --------     ----    ---------    --------   -----
      Total interest-bearing liabilities . .        659,548      6,942     4.21      644,729      19,936    4.12
  Noninterest-bearing liabilities:
    Demand deposits. . . . . . . . . . . . .         94,161                           91,690
    Other liabilities. . . . . . . . . . . .          8,616                            7,417
    Stockholders' equity . . . . . . . . . .         71,082                           70,797
                                                   ---------                        ---------
      Total  liabilities and
        stockholders' equity . . . . . . . .       $833,407                         $814,633
                                                   ---------                        ---------
                                                   ---------                        ---------
Net interest income and margin. . . . . . .                    $ 6,792     3.57 %                $19,732    3.52 %
                                                               --------    -----                 --------   -----
                                                               --------    -----                 --------   -----

</TABLE>
 
Interest income is adjusted to taxable equivalents for the tax-exempt assets
based upon a Federal income tax rate of 34% for 1996.  The fully taxable
equivalent adjustment to interest income for the three and nine months ended
September 30, 1996 was $232 and $744, respectively.  The average balance of
nonaccrual loans is included in the total loans category.  The average balances
do not include the effects of SFAS No. 115.


                                          15

<PAGE>

ANALYSIS OF NET INTEREST INCOME
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
 
(DOLLARS IN THOUSANDS)
                                                         THREE MONTHS ENDED              NINE MONTHS ENDED
                                                         SEPTEMBER 30, 1995              SEPTEMBER 30, 1995
                                                   -------------------------------  -------------------------------
                                                    AVERAGE                          AVERAGE
                                                    BALANCE   INTEREST     RATE      BALANCE     INTEREST   RATE
                                                    -------   --------     ----      -------     --------   ----
<S>                                                <C>        <C>         <C>       <C>          <C>       <C>
ASSETS:
  Interest-earning assets:
   Interest-bearing deposits and Federal
     funds sold . . . . . . . . . . . . . .        $ 15,503    $   217     5.60 %   $ 18,507     $   752   5.40 %
   Taxable securities. . . . . . . . . . . .        377,680      5,652     5.99      374,959      17,696   6.28
   Nontaxable securities . . . . . . . . . .         37,636        912     9.69       38,277       3,203  11.13
   Loans . . . . . . . . . . . . . . . . . .        305,810      6,536     8.55      310,754      19,895   8.51
                                                   ---------    -------     ----    ---------    --------    ----
     Total interest-earning assets . . . . .        736,629     13,317     7.23      742,497      41,546   7.44
 Noninterest-earning assets:
   Cash and due from banks . . . . . . . . .         22,304                           23,795
   Allowance for loan losses . . . . . . . .         (6,463)                          (6,351)
   Other assets. . . . . . . . . . . . . . .         51,451                           50,162
                                                   ---------                        ---------
     Total assets. . . . . . . . . . . . . .       $803,921                         $810,103
                                                   ---------                        ---------
                                                   ---------                        ---------

LIABILITIES AND STOCKHOLDERS' EQUITY:
 Interest-bearing liabilities:
   Interest-bearing demand deposits . . . .        $ 84,564     $  430     2.03 %   $ 86,165     $ 1,277    1.97 %
   Savings deposits. . . . . . . . . . . . .        216,828      1,709     3.15      222,510       5,179    3.10
   Money market deposits . . . . . . . . . .         50,048        378     3.02       51,112       1,113    2.90
   Other time deposits . . . . . . . . . . .        259,200      3,556     5.49      256,233       9,968    5.17
   Short-term borrowings . . . . . . . . . .            -0-        -0-     0.00          876          39    5.92
   Notes payable . . . . . . . . . . . . . .         22,735        400     7.04       25,920       1,528    7.84
                                                   ---------    -------     ----    ---------    --------   ----
     Total interest-bearing liabilities. . .        633,375      6,473     4.09      642,816      19,104    3.95
 Noninterest-bearing liabilities:
   Demand deposits . . . . . . . . . . . . .         91,485                           90,672
   Other liabilities . . . . . . . . . . . .          8,978                            8,071
   Stockholders' equity. . . . . . . . . . .         70,083                           68,544
                                                   ---------                        ---------
     Total liabilities and stockholders'
       equity. . . . . . . . . . . . . . . .       $803,921                         $810,103
                                                   ---------                        ---------
                                                   ---------                        ---------
Net interest income and margin  . . . . . .                     $6,844     3.72 %                $22,442    4.19 %
                                                                -------    ----                  --------   ----
                                                                -------    ----                  --------   ----

</TABLE>
 

Interest income is adjusted to taxable equivalents for the tax-exempt assets
based upon a Federal income tax rate of 34% for  1995.  The fully taxable
equivalent adjustment to interest income for the three and nine months ended
September 30, 1995 was $347 and $1,188, respectively.  The average balance on
nonaccrual loans is included in the total loans category.  The average balances
do not include the effects of SFAS No. 115.


                                          16

<PAGE>

PART II - OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

    (a)  The following exhibit is filed as part of this Form 10-Q.


              DESCRIPTION NO. UNDER
    EXHIBIT       ITEM 601 OF            EXHIBIT
    NUMBER       REGULATIONS-K         DESCRIPTION
    -------      -------------         -----------
      1              (20)         Report furnished to
                                  securities holders.
                                  Third Quarter
                                  Report.

      2              (27)         Financial Data
                                  Schedule.

    (b)  Reports on Form 8-K.

         A Form 8-K, dated September 30, 1996, was filed by Pinnacle on October
15, 1996 to report the acquisition of Financial Security.


                                          17

<PAGE>

                                      SIGNATURE


    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 BANC GROUP, INC.


Dated:  NOVEMBER 6, 1996               By: /s/ John J. Gleason, Jr.
                                     -------------------------------------
                                       John J. Gleason, Jr.
                                       Vice Chairman and Chief Executive
                                       Officer


                                       By: /s/ Sara J. Mikuta
                                     -------------------------------------
                                       Sara J. Mikuta
                                       Chief Financial Officer and Treasurer


                                          18

<PAGE>

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

                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION

                                Washington, D.C. 20549

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

                                       EXHIBITS
                                          TO
                                      FORM 10-Q

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

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


                              PINNACLE BANC GROUP, INC.

                (Exact name of registrant as specified in its charter)



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

<PAGE>

EXHIBIT 1.  REPORT FURNISHED TO SECURITIES HOLDERS.