<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 June 30, 1997
                                        or
[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 For the transition period from _________ to _________ 

Commission File Number:  0-18283

                            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 July 31, 1997, the registrant had
                                        7,517,051 shares outstanding ofcommon 
                                        stock, $3.12 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 June 30,
1997 and December 31, 1996, the related consolidated statements of income for
the three and six month periods ended June 30, 1997 and 1996, and the related
consolidated statements of cash flows for the six month periods ended June 30,
1997 and 1996.

     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 omitted since it would substantially duplicate
the disclosure contained in the latest audited financial statements of Pinnacle
contained in the 1996 Annual Report to Shareholders with the exception of the
pro forma disclosure of the Adoption of Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share" and SFAS No. 130, "Reporting
Comprehensive Income".
                                         2
<PAGE>

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

<TABLE>
<CAPTION>
                                                       JUNE 30    DECEMBER 31
   (IN THOUSANDS; EXCEPT PER SHARE AMOUNTS)             1997         1996 
                                                     ----------  -------------
<S>                                                  <C>         <C>
ASSETS:
  Cash and due from banks. . . . . . . . . . . .     $  28,657   $  21,745
  Federal funds sold . . . . . . . . . . . . . .         1,200       1,350
                                                     ---------   ---------
    Total cash and cash equivalents. . . . . . .        29,857      23,095
  Interest-bearing deposits. . . . . . . . . . .           383       3,424
  Securities:
    Available for sale . . . . . . . . . . . . .       416,695     434,558
    (amortized cost:    6/30/97:    $401,670
                         12/31/96:  $423,857)
  Loans        . . . . . . . . . . . . . . . . .       520,145     525,069
  Less:  Allowance for loan losses . . . . . . .        (7,880)     (8,364)
                                                     ---------  -----------
    Net loans  . . . . . . . . . . . . . . . . .       512,265     516,705
  Premises and equipment . . . . . . . . . . . .        17,606      17,301
  Goodwill and other intangibles . . . . . . . .        24,034      25,366
  Other assets . . . . . . . . . . . . . . . . .        20,801      27,927
                                                    ---------   ----------
    Total      . . . . . . . . . . . . . . . . .    $1,021,641  $1,048,376
                                                    ----------  ----------
                                                    ----------  ----------
LIABILITIES:
  Demand deposits:
    Noninterest-bearing. . . . . . . . . . . . .     $  99,419  $  101,127
    Interest-bearing . . . . . . . . . . . . . .        87,867      88,489
  Savings deposits . . . . . . . . . . . . . . .       292,702     297,399
  Other time deposits. . . . . . . . . . . . . .       376,785     390,537
                                                    ----------  ----------
    Total deposits . . . . . . . . . . . . . . .       856,773     877,552
  Short-term borrowings. . . . . . . . . . . . .        25,781      28,525
  Notes payable. . . . . . . . . . . . . . . . .        28,750      32,800
  Other liabilities. . . . . . . . . . . . . . .         6,247       8,675
                                                    ----------    --------
    Total liabilities. . . . . . . . . . . . . .       917,551     947,552
                                                    ----------    --------
                                             
STOCKHOLDERS' EQUITY:
  Preferred stock
    1,000 shares authorized, none issued . . . .             0           0
  Common stock, $3.125 par . . . . . . . . . . .        23,491      23,811
    20,000,000 shares authorized; shares issued and
    outstanding:      6/30/97:   7,517,051
                     12/31/96:   7,619,487
  Additional paid-in capital . . . . . . . . . .        38,518      37,980
  Retained earnings. . . . . . . . . . . . . . .        32,231      31,985
  Unrealized gains in securities available for sale,
      net of  tax. . . . . . . . . . . . . . . .         9,850       7,048
                                                    ----------  ----------
    Total stockholders' equity . . . . . . . . .       104,090     100,824
                                                    ----------  ----------
    Total      . . . . . . . . . . . . . . . . .    $1,021,641  $1,048,376
                                                    ----------  ----------
                                                    ----------  ----------
</TABLE>

                                         3
<PAGE>

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
                                                          FOR THE THREE MONTHS         FOR THE SIX MONTHS
(IN THOUSANDS; EXCEPT PER SHARE AMOUNTS)                       ENDED JUNE 30              ENDED JUNE 30
                                                          -----------------------      -------------------
                                                               1997       1996           1997        1996
                                                           ---------    --------       -------     -------
<S>                                                        <C>          <C>            <C>          <C>
INTEREST INCOME:
  Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . $10,896    $  6,899        $21,564     $13,358
  Securities:
    Taxable. . . . . . . . . . . . . . . . . . . . . . . . .   5,998       5,730         11,955      11,031   
    Tax exempt . . . . . . . . . . . . . . . . . . . . . . .     394         435            793         880   
  Interest-bearing deposits, Federal funds sold 
    and other. . . . . . . . . . . . . . . . . . . . . . . .      15          52             46         153   
                                                            --------    --------        -------     -------
    Interest income. . . . . . . . . . . . . . . . . . . . .  17,303      13,116         34,358      25,422   
                                                            --------    --------        -------     -------
INTEREST EXPENSE:
  Deposits:
    Interest-bearing demand. . . . . . . . . . . . . . . . .     456         456            910         905   
    Savings. . . . . . . . . . . . . . . . . . . . . . . . .   2,217       1,919          4,397       3,838   
    Other time . . . . . . . . . . . . . . . . . . . . . . .   5,311       3,672         10,695       7,360   
  Short-term borrowings. . . . . . . . . . . . . . . . . . .     406         107            784         109   
  Notes payable. . . . . . . . . . . . . . . . . . . . . . .     539         425          1,105         782   
                                                            --------    --------        -------     -------
    Interest expense . . . . . . . . . . . . . . . . . . . .   8,929       6,579         17,891      12,994   
                                                            --------    --------        -------     -------
Net Interest Income. . . . . . . . . . . . . . . . . . . . .   8,374       6,537         16,467      12,428   
  Provision for loan losses. . . . . . . . . . . . . . . . .       0           0              0           0   
                                                            --------    --------        -------     -------
    Net interest income after provision for loan losses. . .   8,374       6,537         16,467      12,428   
                                                            --------    --------        -------     -------
OTHER INCOME:
  Banking services and other . . . . . . . . . . . . . . . .   1,381       1,176          2,828       2,389   
  Trust services . . . . . . . . . . . . . . . . . . . . . .     631         571          1,165       1,118   
  Net securities gains (losses). . . . . . . . . . . . . . .   1,465        (130)         2,566         133   
                                                            --------    --------        -------     -------
    Other income . . . . . . . . . . . . . . . . . . . . . .   3,477       1,617          6,559       3,640   
                                                            --------    --------        -------     -------
OTHER EXPENSE:
  Salaries, profit sharing and other 
    employee benefits. . . . . . . . . . . . . . . . . . . .   3,435       3,021          6,882       6,032   
  Occupancy. . . . . . . . . . . . . . . . . . . . . . . . .     633         670          1,343       1,349   
  Amortization of goodwill and other intangibles . . . . . .     600         472          1,195         943   
  Other expenses . . . . . . . . . . . . . . . . . . . . . .   1,976       1,761          4,250       3,264   
                                                            --------    --------        -------     -------
    Other expense. . . . . . . . . . . . . . . . . . . . . .   6,644       5,924         13,670      11,588   
                                                            --------    --------        -------     -------
Income before income taxes . . . . . . . . . . . . . . . . .   5,207       2,230          9,356       4,480   
  Provision for income taxes . . . . . . . . . . . . . . . .   1,763          (8)         3,173         686   
                                                            --------    --------        -------     -------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . .$  3,444     $ 2,238       $  6,183    $  3,794   
                                                            --------    --------        -------     -------
                                                            --------    --------        -------     -------
WEIGHTED AVERAGE NUMBER OF COMMON AND
     COMMON EQUIVALENT SHARES OUTSTANDING. . . . . . . . . .   7,541       6,513          7,570       6,549   

EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . $  0.46     $  0.34        $  0.82     $  0.58   

</TABLE>

                                         4
<PAGE>


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

<TABLE>
<CAPTION>

                                                             FOR THE SIX MONTHS
(IN THOUSANDS; EXCEPT PER SHARE AMOUNTS)                        ENDED JUNE 30
                                                            ---------------------
                                                              1997          1996 
                                                            -------       -------
<S>                                                         <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income . . . . . . . . . . . . . . . . . . . . . . . .$  6,183      $  3,794
  Adjustments to reconcile net income to net cash 
    provided by operating activities:
      Depreciation . . . . . . . . . . . . . . . . . . . . .     871          704
      Amortization of goodwill and other intangibles . . . .   1,195          943
      Amortization of purchase accounting adjustments. . . .     (34)         139
      Discount accretion . . . . . . . . . . . . . . . . . .    (747)      (6,255)
      Premium amortization . . . . . . . . . . . . . . . . .     127          244 
      Provision for loan losses. . . . . . . . . . . . . . .       0            0 
      Gain on sale of securities . . . . . . . . . . . . . .  (2,566)        (133)
      Decrease (increase) in interest receivable . . . . . .   3,665       (5,064)
      Increase in interest payable . . . . . . . . . . . . .     327          276 
      Decrease in other assets . . . . . . . . . . . . . . .   1,381          149 
      Decrease in other liabilities. . . . . . . . . . . . .  (1,706)        (760)
      Other, net . . . . . . . . . . . . . . . . . . . . . .    (248)        (122)
                                                            ----------  ----------
          Total adjustments. . . . . . . . . . . . . . . . .   2,265       (9,879)
          Net cash provided by (used for) operating 
            activities. . . . . . . . . . . . . . . . . . . .  8,448       (6,085)
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of securities . . . . . . . . . . . . . 743,627    1,098,134
  Proceeds from maturities and paydowns of securities. . . .   1,249        4,441
  Purchase of securities . . . . . . . . . . . . . . . . . .(719,644)  (1,096,953)
  Net decrease (increase) in interest-bearing deposits . . .   3,042         (714)
  Net loan principal (advanced) collected. . . . . . . . . .   4,495      (21,269)
  Premises and equipment expenditures. . . . . . . . . . . .  (1,142)      (2,047)
                                                            ----------  ----------
          Net cash provided by (used for) investing
            activities. . . . . . . . . . . . . .. . . . . .  31,627      (18,408)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net decrease in total deposits . . . . . . . . . . . . . . (20,779)      (7,792)
  Net increase (decrease) in short-term borrowings . . . . .  (2,744)      17,500 
  Proceeds from notes payable. . . . . . . . . . . . . . . .  10,000       10,250 
  Principal reductions of notes payable. . . . . . . . . . . (14,050)      (4,900)
  Issuance of common stock . . . . . . . . . . . . . . . . .     709          132 
  Purchase and retirement of common stock. . . . . . . . . .  (3,098)      (2,513)
  Dividends paid . . . . . . . . . . . . . . . . . . . . . .  (3,351)      (2,705)
                                                            ----------  ----------
        Net cash provided by (used for) financing 
            activities . . . . . . . . . . . . . . . . . . . (33,313)       9,972
  Net increase (decrease) in cash and cash equivalents . . .   6,762      (14,521)
  Cash and cash equivalents at beginning of period . . . . .  23,095       41,373 
                                                            ----------  ----------
  Cash and cash equivalents at end of period . . . . . . . .$ 29,857       26,853 
                                                            ----------  ----------
                                                            ----------  ----------
CASH PAID DURING PERIOD FOR:
  Interest . . . . . . . . . . . . . . . . . . . . . . . . .$  17,766   $  12,718
  Income taxes . . . . . . . . . . . . . . . . . . . . . . .   2,175          816

</TABLE>

                                         5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES


EARNINGS PER SHARE:

     In February, 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share" which superseded Accounting Principles Board
Opinion 15.  SFAS No. 128 requires disclosure of basic earnings per share
("EPS"), which replaces primary EPS, and diluted EPS, which was formerly called
fully diluted EPS.  Basic EPS does not require dilution for any potentially
dilutive items such as stock options or convertible stock.  SFAS No. 128 is
effective for periods ending after December 15, 1997, and requires, upon
adoption, restatement of all prior period EPS data presented.  The adoption of
SFAS No. 128 would have had no impact on Pinnacle's reported earnings per share
for the six and three months ended June 30, 1997 and 1996.


COMPREHENSIVE INCOME

     In June, 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income". 
The objective of the statements is to report a measure of all changes in equity
of a company that result from transactions and other economic events of the
period other than transactions with owners ("comprehensive income").  Pinnacle's
comprehensive income is the total of net income and the change in unrealized
gains (loss) on securities available for sale, net of tax.  SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997, and all public
companies are required to report a total for comprehensive income in interim
reports.  Total comprehensive income for the six and three months ended June 30,
1997 and 1996 would have been $8,984, $3,178, $6,791 and $2,010, respectively,
had SFAS No. 130 been adopted.

                                         6
<PAGE>

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

                (Dollars in thousands, except per share amounts)

              NET INCOME - SIX MONTHS ENDED JUNE 30, 1997 AND 1996

      Consolidated net income was $6,183, or $0.82 per share, on a fully diluted
basis for the six months ended June 30, 1997, compared to the $3,794, or $0.58
per share, earned in the first six months of 1996.  The annualized return on
average assets was 1.22% for the first six months of 1997 and 0.94% for the
first six months of 1996.  For each period, the return on average equity was
13.4% and 10.7%, respectively.  Return on average assets and equity for the same
periods, calculated using the effects of SFAS No. 115, would not be materially
different.  

     The primary factors for higher earnings were twofold.  Net interest income
increased 32% compared to the same period one year ago, with a corresponding
increase in the net interest margin to 3.60% from 3.49% for the same periods. 
The increase was the result of the 27% rise in average earning assets due to the
acquisition of Financial Security and its wholly-owned subsidiary, Security
Federal Savings and Loan Association of Chicago ("Security").   Net securities
gains were $2,566 compared to $133 in gains during the same period a year ago. 

     Other operating income, excluding net securities gains, increased 14%
compared with the same period of 1996.  Other expenses increased 18%.  The
acquisition contributed to both increases.

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, other short-term borrowings, 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 six months of 1997, Pinnacle's average earning assets were
$939,237, a 27% increase from the comparable period of the previous year.  The
net interest margin for the first six months of 1997 was 3.60%, up from 3.49% of
the same period a year ago.  Net interest income on a fully taxable equivalent
basis was $16,908 for the first six months of 1997, or 31% higher than the
comparable period in 1996.  Actual net interest income increased 32% as the
result of the increase in the net interest margin and the increase in average
earning assets.

     The yield earned on total earning assets was 7.41% for the first six months
of 1997 compared to 7.00% for the same period of 1996.  The increase resulted
primarily from an increase in average loans as a percent of earning assets to
55% from 43%.  The rate earned on interest-bearing deposits and Federal funds
sold decreased 121 basis points.  Pinnacle was primarily in a sold funds
position in the first half of 1996 which was at a higher rate than current
balances in this category.  The remaining balances in  interest-bearing funds
related to funds held in interest-bearing accounts at the Federal Home Loan
Bank.

     The average rate on taxable securities increased 46 basis points to 6.04%
for the first six months of 1997.  The increase in the yield on taxable
securities was primarily a result of the higher level of rates paid on the
securities compared to those carried a year ago.  The average volume of taxable
securities remained relatively flat.  The yield earned on non-taxable securities
decreased 7 basis points while the average balance decreased $2,263.  The rate
earned on loans decreased 14 basis points.  This decrease related primarily to
the acquisition where most of the loans were real estate related which
traditionally carry a lower rate than


                                         7
<PAGE>

commercial or installment type loans. The decrease in the rate earned on 
loans was, however, offset by the increase in average balances of loans of 
$202,877 or 64%.  While the majority of the loan growth in the portfolio 
related to the acquisition, Pinnacle experienced approximately 10% in 
internally generated loan growth on a year to year basis.

     The average cost of interest-bearing liabilities increased 25 basis points
to 4.33% from 4.08% paid in the first six months of 1996.  The average rate paid
on interest-bearing demand deposits remained flat while the rates paid on
savings deposits decreased 9 basis points and the rates paid on money market
deposits increased 10 basis points.  The average rate paid on other time
deposits increased 13 basis points to 5.57% from 5.44% of a year ago.  Pinnacle
has taken action at appropriate intervals to adjust the rates on deposit
accounts to keep them in line with market rates as well as to meet the needs of
its particular customer bases.  Rates paid on time deposits have been relatively
flat since the first quarter of 1996.  The acquisition, however, added a
significant portion of other time deposits at rates higher than those offered by
Pinnacle.  Management anticipates the increase in rates paid on other time
deposits to stabilize or even drop as these higher paying time deposits mature
and renew at lower rates or run off.  Approximately $22,000 in these higher
paying time deposits at Security have matured and have not been renewed.  All
other deposit categories at Security had remained stable.  Average balances in
all deposit categories increased due to the acquisition.

     The average rate paid on short-term borrowings increased 34 basis points,
while the average balance increased $22,617.  Increases or decreases in the
average balance of this category fluctuate due to Pinnacle's subsidiary banks'
daily liquidity needs, such as greater loan growth and the maturity of the
above-mentioned Security's time deposits.  Also contributing the increase was
the assumption of Security's fixed term advances from the Federal Home Loan
Bank.  The average balance in Pinnacle's notes payable increased $10,094 due
primarily to the purchase of Security as well as other corporate needs.  The
rate paid decreased 28 basis points as the indices (Prime or LIBOR), to which
the notes payable are tied, were lower in the first six months of 1997 compared
to a year ago.

     A detailed Analysis of Net Interest Income for the six and three month
periods ended June 30, 1997 and 1996 is included on Pages 14 and 15.

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 six months of 1997, as
well as no provision for the first six months of 1996.  Pinnacle had net charge-
offs of $484 in the first six months of 1997 compared to net recoveries of $38
in 1996.  The increase in net charge-offs relates primarily to loans charged off
from Security. Pinnacle continues not to record a provision for loan losses
due to several factors, including the level of allowance for possible loan
losses to total loans; management's assessment of the overall adequacy for
allowance for loan losses as well as the high level of real estate secured loans
within the portfolio.  Insignificant losses have been recorded on real estate
secured loans in the last three years.

     Total nonperforming assets totalled $9,858 at June 30, 1997, a decrease of
$485, over the $10,343 at December 31, 1996.  Non-performing assets consisted of
$6,574 in non-accrual loans, $1,388 in loans past due greater than 90 days and
still accruing, $1,278 in restructured loans, and $618 in other real estate
owned.  Approximately fifty percent of these nonperforming assets resulted from
the acquisition of Security in 1996.  The investment in impaired loans at
quarter end includes all nonaccrual loans over $100,000 and restructured loans. 
All are included in the above nonperforming asset numbers.

     Pinnacle maintains a system of review of the credit quality of the loan
portfolio, including the use of an independent credit review system as well as
an internal "Watch List" to identify potential problem loans.

                                         8
<PAGE>

Currently, there are approximately $2,111 in potential problem loans which are
identified through that review process that are not considered nonperforming and
are not included in totals above.

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 on banking services and other income
were $2,828 for the six months ended June 30, 1997 compared to $2,389 in the
same period of 1996.  The increase in fees on banking services and other income
primarily relate to the acquisition.   Trust fees increased 4% on a period-to-
period basis.  Total trust assets under management amounted to $292,000 at June
30, 1997, or an 11% increase of a year ago.  

     Gains on the sale of securities, on a pre-tax basis, were $2,566 for the
first six months of 1997 compared to net gains of $133 in the same period of
1996.  The net gains on a year to date basis in 1997 consisted of gains of
$2,842 recorded on the sale of equity securities as part of Pinnacle's equity
investment program in other financial institutions and net losses of $276 from
the sale of U. S. Treasury securities as part of Pinnacle's portfolio funds
management system.  The net gains in 1996 related to the portfolio funds
management system.

     Security sales relating to Pinnacle's U. S. Government securities portfolio
are made as part of Pinnacle's disciplined portfolio funds management system. 
The timing of these sales and the determination of the acceptable maturity for
the reinvestment of the proceeds is made dependent on the slope of the yield
curve and on management's assessment of the acceptable interest rate risk for
Pinnacle.   

     Management has always viewed the gains recorded on the U. S. Government
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 for comparable maturities by 19 basis points and by including the
net gains since inception of the program, the total yield is 124 basis points
higher than the same index.  For the first six months of 1997, due to the
relative flatness of the yield curve, the portfolio has stayed even with the
index and by including the net gain underperformed the index by 18 basis points.
In July 1997, Pinnacle sold a portion of its U. S. Government portfolio at a
gain of $545.  As a result of this sale, the total yield on a year-to-date basis
will remain even with the Index and on a "since implementation" basis the total
yield will outperform the Index by 125 basis points.

     Noninterest expense increased 18% for the first six months of 1997 compared
to the same period last year.  The increase in noninterest expense is due
primarily to the acquisition.  Employee compensation and benefits increased 14%;
excluding the effect of the acquisition, this category would have increased
approximately 3%.   Occupancy expense remained flat while other expense
increased 30%.  Included in these expenses are added data processing costs which
relate to the conversion of Security to Pinnacle's data processing system which
was done at the time of the merger of Security into Pinnacle Bank in the first
quarter of 1997.  In the second quarter of 1997, Pinnacle Bank, F.S.B. was
merged into Pinnacle Bank and incurred certain data processing charges relating
to ATM's.  Consulting expenses increased $161 due to payment of consulting
services to certain of Financial Security's former officers.  Other expenses
such as equipment, advertising, supplies and postage also increased due to the
acquisition.

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 $3,173 for the first six months of 1997 compared with a provision of $686
for the first six months of 1996.  The higher provision for taxes in the first
six months of 1997 was primarily the result of higher pre-tax income in the
first six months of 1997, versus the lower pre-tax income in the same period of
1996.

                                         9
<PAGE>
             NET INCOME - THREE MONTHS ENDED JUNE 30, 1997 AND 1996

     Consolidated net income was $3,444, or $0.46 per share, on a fully 
diluted basis for the three months ended June 30, 1997 (the "second 
quarter"), compared to $2,238, or $0.34 per share, earned in the second 
quarter of 1996.  The annualized return on average assets was 1.36% for the 
second quarter of 1997 and 1.12% for the second quarter of 1996.  For each 
period, the return on average equity was 14.7% and 12.9%, respectively.  

     The primary factors for the increase in net income was the increase in net
interest income and higher net gains recorded on the sale of securities.  Net
interest income increased $1,837, or 28%.  Net securities gains of $1,465 were
recorded versus net losses of $(130) for the same period a year ago.  Other
income, exclusive of securities transactions, increased $265, or 15%.  Other
expense increased $720, or 12%.

NET INTEREST INCOME

     During the second quarter of 1997, Pinnacle's average earning assets were
$932,132 compared to $746,082 with the comparable period of the previous year. 
The increase was due to the acquisition.  The net interest margin of the second
quarter of 1997 was 3.69% compared to 3.64% for 1996.  Net interest income on a
fully taxable equivalent basis was $8,592 for the second quarter of 1997, or 26%
higher than the comparable period in 1996.  Actual net interest income increased
28%.

     The yield earned on total earning assets was 7.52% for the second quarter
of 1997 compared to 7.17% for the same period of 1996.  The increase resulted
primarily from the increase in average earning assets as a result of the
acquisition.  The yield on interest-bearing deposits increased 47 basis points
while average balances decreased $2,757.  While the average balance of taxable
securities decreased slightly, the yield on the portfolio increased 35 basis
points.  The yield earned on loans decreased 16 basis points to 8.39%.  The
lower yield on loans is a result of the significant amount of real estate
related loans which were added to the portfolio from Security.  This decrease
was offset by the increase in the average balance of 61% or $196,285 due to the
acquisition of Security.  Total interest income, on a fully taxable equivalent
basis, increased $4,145.

     The average cost of interest-bearing liabilities increased by 26 basis
points to 4.35% from the 4.09% paid in the second quarter of 1996.  The average
rates paid on interest-bearing demand, savings and money market deposits
remained relatively flat.  The average rate paid on other time deposits
increased 20 basis points as the acquisition added time deposits which were paid
a higher rate.  The rates paid on other short-term borrowings increased 51 basis
points as rates due to higher market rates as well as the addition of the
Federal Home Loan Bank borrowings of Security.

PROVISION FOR LOAN LOSSES

     There was no provision for loan losses for the second quarter of 1997, as
well as no provision for the second quarter of 1996.  Pinnacle had net charge
offs of $84 in 1997 compared to net recoveries of $20 in 1996.

NONINTEREST INCOME AND EXPENSE

     Fees on banking services and other income were $1,381 for the three months
ended June 30, 1997 compared to $1,176 in the same period of 1996, an increase
of 17% due primarily to the acquisition.  Trust fees increased 11% to $631. 

     On a pre-tax basis, net gains on the sale of securities were $1,465 for the
second quarter of 1997 compared to net losses on the sale of securities of
$(130) in the same period of 1996.  The net gains the second quarter of 1997
consisted of gross gains of $2,656 and gross losses of $(1,191).  The net losses
realized in the second quarter of 1996 consisted of gross losses of $(130).

                                         10
<PAGE>

     All of the net securities gains recorded by Pinnacle in the second 
quarter of 1997 related to its equity securities portfolio.  Primarily all of 
the losses in the second quarter of 1996 related to the U. S. Government 
securities portfolio.

     Non-interest expense increased 12% as a result of the acquisition.

INCOME TAXES

     The provision for income taxes was $1,763 for the second quarter of 1997
compared with $(8) benefit for the second quarter of 1996.  The higher provision
for taxes in the second quarter of 1997 was primarily the result of higher pre-
tax income in the second quarter of 1997.  In the second quarter of 1996,
certain adjustments to the tax basis of assets resulted in a tax benefit.


                                  BALANCE SHEET

     Total consolidated assets were $1,021,641 at June 30, 1997, or a 3%
decrease from year-end 1996.  

     Total securities were $416,695 at June 30, 1997 and consisted of U. S.
Government securities amounting to $358,582, mortgage-backed securities and
CMO's of $5,312, state and municipal bonds of $22,618, and corporate and other
securities of $30,183.  The total securities outstanding at June 30, 1997
decreased 4% from year-end 1996 but retained relatively the same mix.

     U. S. Government securities amounted to $358,582, or 35% of assets, at 
June 30, 1997.  The average remaining maturity of these securities was 
approximately thirty 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 June 30, 1997, U. S. 
Government securities had gross unrealized gains of $1,247 and gross 
unrealized losses of $(157) on a pre-tax basis.

     Other securities held by Pinnacle, amounting to $58,113 at June 30, 
1997, consisted of mortgage-backed, CMO's, state and municipal, and corporate 
and equity securities.  At quarter end, these securities had gross unrealized 
gains of $14,162 and gross unrealized losses of $(227) on a pre-tax basis.  
Currently, Pinnacle is not using any derivatives for hedging or other 
purposes.

     Due to the acquisition, loans are now Pinnacle's most significant balance
sheet asset.  Total loans amounted to $520,145 at June 30, 1997, down 1% from
year-end 1996.  The decrease was primarily due to normal pay downs at Security. 
At June 30, 1997, 21% of the loans were commercial, 67% were real estate, and
12% were installment loans.  Pinnacle's loan to asset ratio was 51% at June 30,
1997.

     Goodwill and other intangibles amounted to $24,034, or 23% of stockholders'
equity at June 30, 1997.

     Total deposits were $856,773 at June 30, 1997, or 2% lower than year-end 
1996.  The decrease in deposits was primarily in other time deposits which 
dropped $13,752 from year end.  This decrease was due primarily to the 
run-off of deposits from Security.  These deposits were 5-year or 13-month 
term higher yielding time deposits that were part of advertising promotions 
by Security in previous years.  Certain steps were taken by management to 
maintain "core" customers while other customers were "rate shoppers" and 
moved for special term and rate deposits at other financial institutions.  At 
June 30, 1997, the percentage of total deposits for each category were 
noninterest-bearing deposits, 12%; interest-bearing demand deposits, 10%; 
savings accounts (including money market accounts), 34%; and other time 
deposits, 44%.

                                         11
<PAGE>

     Pinnacle's notes payable were $28,750 at June 30, 1997.  Outstandings 
consist of a $15,000 note used for the acquisition of Acorn Financial Corp in 
January, 1995; and a $13,750 note used partially for the acquisition of 
Financial Security and other equity securities.  At year-end 1996, 
outstandings consisted of $30,000 outstanding on acquisition and equity notes 
and $2,800 drawn on the line of credit.

                                CAPITAL RESOURCES

     Total stockholders' equity of Pinnacle was $104,090 at June 30, 1997 and
$100,824 at December 31, 1996.  The ratio of equity to assets was 10.19% and
9.62% 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 June 30, 1997, in thousands (except 
percentages).

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

 Leverage Capital. . . .       3.00%     $29,928    7.03%    $70,206  $40,278  
 Risk-based Capital:
    Tier One . . . . . .       4.00      19,441    14.44     70,206    50,765  
    Total (Tier Two) . .       8.00      38,882    15.70     76,305    37,423  


     At December 31, 1996, Pinnacle's total risk-based capital ratio was 15.01%.


     In addition, each of Pinnacle's subsidiary banks must meet similar 
minimum capital requirements as prescribed by Federal and state banking 
regulatory authorities.  At June  30, 1997, 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 $13.85 at June 30, 1997 compared to $13.23 at
December 31, 1996.  Dividends amounting to $0.44 per share were paid in the
first six months of 1997.

                                    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 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.

                                         12


<PAGE> 

    Pinnacle's cash flows are comprised of three general types.  Cash flows 
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 available for sale.  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 six months ended June 
30, 1997, cash flows were generated primarily from operations of $8,448, the 
net decrease in securities of $25,232, the decrease in interest-bearing 
deposits of $3,042 and the collection of loan principal of $4,495.  Cash flow 
uses and needs include a $20,779 decrease in deposits, a $4,050 net reduction 
in notes payable, purchases and retirements of common stock of $3,098, and 
$3,351 to pay dividends. Pinnacle's net cash position increased $6,762, with 
the increase primarily in cash and due from banks.

     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  acquisitions of
other financial institutions.  Certain acquisitions could be funded with debt
and/or issuances of stock.  Reductions of debt would be made from Pinnacle's
earnings.

     At June 30, 1997, Pinnacle had lines of credit with an unaffiliated bank
from which $6,250 had not been drawn.  The remaining outstanding balance of
$28,750 is related to the acquisitions and equity purchases and is secured by
the stock of Pinnacle's subsidiary banks as well as certain equity securities of
the holding company.

     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 
July 1, 1997, bank subsidiaries could have declared approximately $2,370 in 
dividends without requesting approval of the applicable Federal or State 
regulatory agency. Pinnacle Bank has received approval from appropriate 
regulatory authorities for the redemption of common stock.  The redemption, 
made in July, 1997, has reduced Pinnacle Bank's capital by $15,737, however, 
it will remain within regulatory guidelines for a well capitalized bank.  The 
money was used to pay down holding company debt and other Corporate needs.  
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, stock redemption, 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.  
Currently, Pinnacle Bank is in the process of building a new branch in the 
far west suburbs of Chicago.  The cost of this branch, including land, is 
estimated to be approximately $2,000.  Pinnacle Bank of the Quad-Cities is 
also constructing a new branch in East Moline, Illinois.  Total cost of this 
project will be approximately $1,000.  Management is also not aware of any 
current recommendations by the regulatory authorities which, if implemented, 
would have an adverse material effect on Pinnacle.

                                         13
<PAGE>

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

<TABLE>
<CAPTION>

                                                        THREE MONTHS ENDED                 SIX MONTHS ENDED
(DOLLARS IN THOUSANDS)                                     JUNE 30, 1997                      JUNE 30, 1997
                                                    --------------------------------      ----------------------------
                                                    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 $  1,239      $     15     4.84%   $     2,354       $     46    3.91%
    Taxable securities.............................   391,176         5,998     6.13        396,023         11,955    6.04  
    Nontaxable securities..........................    19,682           596    12.12         19,850          1,201   12.10  
    Loans..........................................   520,035        10,912     8.39        521,010         21,597    8.29  
                                                    ---------      --------   ------     ----------      ---------   -----
      Total interest-earning assets................   932,132        17,521     7.52        939,237         34,799    7.41  
  Noninterest-earning assets:
    Cash and due from banks........................    25,970                                25,504
    Allowance for loan losses......................    (7,918)                               (8,060)
    Other assets...................................    66,306                                66,371
                                                   ----------                            -----------
      Total assets.................................$1,016,490                            $1,023,052
                                                   ----------                            ----------
                                                   ----------                            ----------
     
LIABILITIES AND STOCKHOLDERS' EQUITY:
  Interest-bearing liabilities:
    Interest-bearing demand deposits............... $  89,366        $  456    2.04%      $  88,885         $  910     2.05%
    Savings deposits...............................   246,747         1,788     2.90        247,139          3,557    2.88  
    Money market deposits..........................    49,114           429     3.49         48,631            840    3.45  
    Other time deposits............................   378,176         5,311     5.62        384,036         10,695    5.57  
    Short-term borrowings..........................    26,749           406     6.07         26,529            784    5.91  
    Notes payable..................................    29,970           539     7.19         31,643          1,105    6.98  
                                                    ---------      --------   ------     ----------      ---------   -----
      Total interest-bearing liabilities...........   820,122         8,929     4.35        826,863         17,891    4.33  
  Noninterest-bearing liabilities:                           
    Demand deposits................................    96,827                               96,539 
    Other liabilities..............................     5,851                                6,262 
    Stockholders' equity...........................    93,690                               93,388 
                                                   ----------                            ----------
      Total  liabilities and stockholders'equity   $1,016,490                           $1,023,052 
                                                   ----------                            ----------
                                                   ----------                            ----------
Net interest income and margin                                     $  8,592    3.69%                       $16,908     3.60%
                                                                   --------    ----                        -------     ----
                                                                   --------    ----                        -------     ----

</TABLE>

      Interest income is adjusted to taxable equivalents for the tax-exempt 
      assets based upon a Federal income tax rate of 34% for 1997. The fully 
      taxable equivalent adjustment to interest income for the three and six 
      months ended June 30, 1997 was $218 and $440, 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.

                                         14
<PAGE>
ANALYSIS OF NET INTEREST INCOME
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>

                                                       THREE MONTHS ENDED                      SIX MONTHS ENDED
(DOLLARS IN THOUSANDS)                                     JUNE 30, 1996                         JUNE 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 $  3,996          $  53    5.31%       $  6,015        $  154    5.12%
    Taxable securities............................    396,480          5,729     5.78        395,190        11,031    5.58  
    Nontaxable securities.........................     21,856            673    12.32         22,113         1,346   12.17  
    Loans.........................................    323,750          6,921     8.55        318,133        13,403    8.43  
                                                     --------         ------    -----        -------        ------   -----        
      Total interest-earning assets...............    746,082         13,376     7.17        741,451        25,934    7.00  
  Noninterest-earning assets:
    Cash and due from banks.......................     24,254                                 23,965
    Allowance for loan losses.....................     (6,069)                                (6,050)
    Other assets..................................     46,449                                 45,777 
                                                     --------                               -------- 
      Total assets................................   $810,716                               $805,143 
                                                     --------                               --------
                                                     --------                               --------

LIABILITIES AND STOCKHOLDERS' EQUITY:
  Interest-bearing liabilities:
    Interest-bearing demand deposits..............  $  88,634         $  456     2.06%      $  88,416        $  905    2.05%
    Savings deposits..............................    205,677          1,514     2.94        206,886         3,070    2.97  
    Money market deposits.........................     47,014            406     3.45         45,818           768    3.35  
    Other time deposits...........................    270,948          3,671     5.42        270,657         7,360    5.44  
    Short-term borrowings.........................      7,700            107     5.56          3,912           109    5.57  
    Notes payable.................................     23,384            425     7.27         21,549           782    7.26  
                                                     --------         ------    -----        -------        ------   -----        
      Total interest-bearing liabilities..........    643,357          6,579     4.09        637,238        12,994    4.08  
  Noninterest-bearing liabilities:
    Demand deposits...............................     90,649                                 90,441 
    Other liabilities.............................      6,812                                  6,811 
    Stockholders' equity..........................     69,898                                 70,653 
                                                     --------                               --------
      Total liabilities and stockholders' equity     $810,716                               $805,143 
                                                     --------                               --------
                                                     --------                               --------

Net interest income and margin....................                  $  6,797    3.64%                      $12,940    3.49%
                                                                    --------    ----                       -------    -----
                                                                    --------    ----                       -------    -----
</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 six 
     months ended June 30, 1996 was $260 and $512, 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.

                                         15
<PAGE>

PART II - OTHER INFORMATION


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

     (a)  The following exhibits are filed as part of this Form 10-Q.

                            Description No. Under    
Exhibit                          Item 601 of           Exhibit
Number                          Regulation S-K       Description
-------                    ----------------------    -----------

1                                   (20)              Report furnished 
                                                      to securities
                                                      holders.  Second
                                                      Quarter Report.
          
27                                  (27)              Financial Data
                                                      Schedule
     
     (b)  Reports on Form 8-K.

          None.

                                         16
<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:  July 31, 1997                  By: /s/  John J. Gleason, Jr.
        -------------                       --------------------------
                                             John J. Gleason, Jr.
                                             Director, Vice Chairman and
                                             Chief Executive Officer


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

                                         17