<PAGE>

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                                  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 March 31, 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 April 30, 1997, the registrant 
                                         had 7,549,551 shares outstanding of 
                                         common 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 March 
31, 1997 and December 31, 1996, the related consolidated statements of income 
and cash flows for the three month periods ended March 31, 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 complete financial statements.  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".  

                                      2

<PAGE>

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

<TABLE>
<CAPTION>

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                  MARCH 31     DECEMBER 31
                                                            1997          1996
                                                       ------------   ------------
<S>                                                    <C>            <C>

ASSETS:
  Cash and due from banks. . . . . . . . . . . . .      $   25,795      $   21,745
  Federal funds sold . . . . . . . . . . . . . . .           1,825           1,350
                                                        ------------   ------------
    Total cash and cash equivalents. . . . . . . .          27,620          23,095
  Interest-bearing deposits. . . . . . . . . . . .           1,873           3,424
  Securities:
    Available for sale . . . . . . . . . . . . . .         429,124         434,558
    (amortized cost:      3/31/97 - $419,271
                         12/31/96 - $423,857)
  Loans, net of unearned discount. . . . . . . . .         521,117         525,069
  Less:  Allowance for loan losses . . . . . . . .          (7,949)         (8,364)
                                                        ------------   ------------
    Net loans. . . . . . . . . . . . . . . . . . .         513,168         516,705
  Premises and equipment . . . . . . . . . . . . .          17,254          17,301
  Goodwill and other intangibles . . . . . . . . .          24,633          25,366
  Other assets . . . . . . . . . . . . . . . . . .          25,399          27,927
                                                        ------------   ------------
    Total. . . . . . . . . . . . . . . . . . . . .       $1,039,071     $1,048,376
                                                        ------------   ------------
                                                        ------------   ------------
LIABILITIES:
  Demand deposits:
    Noninterest-bearing. . . . . . . . . . . . . .      $   96,468      $  101,127
    Interest-bearing . . . . . . . . . . . . . . .          87,001          88,489
  Savings deposits . . . . . . . . . . . . . . . .         297,609         297,399
  Other time deposits. . . . . . . . . . . . . . .         383,047         390,537
                                                        ------------   ------------
    Total deposits . . . . . . . . . . . . . . . .         864,125         877,552
  Short-term borrowings & FHLB advances. . . . . .          34,781          28,525
  Notes payable. . . . . . . . . . . . . . . . . .          33,550          32,800
  Other liabilities. . . . . . . . . . . . . . . .           6,326           8,675
                                                        ------------   ------------
    Total liabilities. . . . . . . . . . . . . . .         938,782         947,552
                                                        ------------   ------------

STOCKHOLDERS' EQUITY:
  Preferred stock. . . . . . . . . . . . . . . . .             -0-            -0-
    1,000 shares authorized, none issued
  Common stock, $3.125 par . . . . . . . . . . . .          23,680          23,811
    20,000,000 shares authorized; shares issued and
    outstanding:        3/31/97:  7,577,420
                       12/31/96:  7,619,487
  Additional paid-in capital . . . . . . . . . . .          38,331          37,980
  Retained earnings. . . . . . . . . . . . . . . .          31,776          31,985
  Unrealized gain on securities available for sale,
    net of tax                                               6,502           7,048
                                                        ------------   ------------
    Total stockholders' equity . . . . . . . . . .         100,289         100,824
                                                        ------------   ------------
    Total. . . . . . . . . . . . . . . . . . . . .      $1,039,071      $1,048,376
                                                        ------------   ------------
                                                        ------------   ------------

</TABLE>

                                      3

<PAGE>

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


(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                 FOR THE THREE MONTHS
                                                            ENDED MARCH 31
                                                        ----------------------
                                                          1997          1996
                                                        ----------------------
INTEREST INCOME:
   Loans . . . . . . . . . . . . . . . . . . . . .       $10,668      $ 6,459
   Securities:
      Taxable. . . . . . . . . . . . . . . . . . .         5,957        5,302
      Tax exempt . . . . . . . . . . . . . . . . .           399          444
   Interest-bearing deposits, Federal funds sold
      and other. . . . . . . . . . . . . . . . . .            31          101
                                                        ----------------------
      Interest income. . . . . . . . . . . . . . .        17,055       12,306
                                                        ----------------------
INTEREST EXPENSE:
   Deposits:
      Interest-bearing demand. . . . . . . . . . .           454          449
      Savings. . . . . . . . . . . . . . . . . . .         2,180        1,918
      Other time . . . . . . . . . . . . . . . . .         5,385        3,689
   Short-term borrowings . . . . . . . . . . . . .           378            2
   Notes payable . . . . . . . . . . . . . . . . .           565          357
                                                        ----------------------
      Interest expense . . . . . . . . . . . . . .         8,962        6,415
                                                        ----------------------
NET INTEREST INCOME. . . . . . . . . . . . . . . .         8,093        5,891
      Provision for loan losses. . . . . . . . . .           -0-          -0-
                                                        ----------------------
         Net interest income after provision for
            loan losses. . . . . . . . . . . . . .         8,093        5,891
                                                        ----------------------
OTHER INCOME:
   Banking services and other. . . . . . . . . . .         1,447        1,214
   Trust services. . . . . . . . . . . . . . . . .           533          547
   Net securities gains. . . . . . . . . . . . . .         1,101          264
                                                        ----------------------
      Other income . . . . . . . . . . . . . . . .         3,081        2,025
                                                        ----------------------
OTHER EXPENSE:
   Salaries, profit sharing and other employee
      benefits . . . . . . . . . . . . . . . . . .         3,447        3,011
   Occupancy . . . . . . . . . . . . . . . . . . .           709          679
   Amortization of goodwill and other intangibles.           595          472
   Other operating expenses. . . . . . . . . . . .         2,274        1,503
                                                        ----------------------
      Other expense. . . . . . . . . . . . . . . .         7,025        5,665
                                                        ----------------------
Income before income taxes . . . . . . . . . . . .         4,149        2,251
   Provision for income taxes. . . . . . . . . . .         1,410          694
                                                        ----------------------
NET INCOME . . . . . . . . . . . . . . . . . . . .       $ 2,739      $ 1,557
                                                        ----------------------
                                                        ----------------------
WEIGHTED AVERAGE NUMBER OF COMMON AND
   COMMON EQUIVALENT SHARES OUTSTANDING. . . . . .     7,605,352    6,572,910

EARNINGS PER SHARE . . . . . . . . . . . . . . . .       $  0.36      $  0.24

                                       4

<PAGE>

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



(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                 FOR THE THREE MONTHS
                                                            ENDED MARCH 31
                                                        ----------------------
    CASH FLOWS FROM OPERATING ACTIVITIES:                  1997         1996
                                                        ----------   ---------
      Net income . . . . . . . . . . . . . . . . .       $   2,739   $   1,557
      Adjustments to reconcile net income to net cash 
       provided by operating activities: 
          Depreciation . . . . . . . . . . . . . .             435         352
          Amortization of goodwill and other 
           intangibles . . . . . . . . . . . . . .             595         472
          Amortization of purchase accounting 
           adjustments . . . . . . . . . . . . . .             (29)         50
          Provision for loan losses. . . . . . . .              -0-        -0-
          Discount accretion . . . . . . . . . . .            (367)     (5,087)
          Premium amortization . . . . . . . . . .              50          49
          Gain on sale of securities . . . . . . .          (1,101)       (264)
          Decrease in interest receivable. . . . .           1,553         143
          Increase in interest payable . . . . . .             420         172
          Decrease (increase) in other assets. . .          (2,733)        753
          Decrease in other liabilities. . . . . .          (1,515)     (1,042)
          Other, net . . . . . . . . . . . . . . .             149         174
                                                        ----------   ---------
              Total adjustments. . . . . . . . . .          (2,543)     (4,228)
              Net cash provided by (used for) 
               operating activities. . . . . . . .             196      (2,671)
    CASH FLOWS FROM INVESTING ACTIVITIES:
         Proceeds from sale of securities. . . . .         367,734     733,653
         Proceeds from maturities and paydowns 
          of securities  . . . . . . . . . . . . .           4,420       2,626
         Purchase of securities available 
          for sale . . . . . . . . . . . . . . . .        (363,774)   (726,861)
         Net decrease (increase) in 
          interest-bearing deposits. . . . . . . .           1,551         (21)
         Net loan principal (advanced) collected .           3,952      (8,441)
         Premises and equipment expenditures . . .            (406)     (1,366)
                                                        ----------   ---------
              Net cash provided by (used for) 
               investing activities. . . . . . . .          13,477        (410)
    CASH FLOWS FROM FINANCING ACTIVITIES:
         Net decrease in total deposits. . . . . .         (13,427)     (9,412)
         Net increase in short-term borrowings . .           6,256          -0-
         Proceeds from notes payable . . . . . . .           3,550       2,900
         Principal reductions of notes payable . .          (2,800)     (2,800)
         Issuance of common stock. . . . . . . . .             465         132
         Purchase and retirement of common stock .          (1,506)       (842)
         Dividends paid. . . . . . . . . . . . . .          (1,686)     (1,357)
                                                        ----------   ---------
              Net cash used for financing activities        (9,148)    (11,379)

    Net increase (decrease) in cash and cash equivalents     4,525     (14,460)

    Cash and cash equivalents at beginning of period        23,095      41,373
                                                        ----------   ---------
    Cash and cash equivalents at end of period . .       $  27,620   $  26,913
                                                        ----------   ---------
                                                        ----------   ---------
    CASH PAID DURING PERIOD FOR:
         Interest. . . . . . . . . . . . . . . . .       $   8,542   $   6,242
         Income taxes. . . . . . . . . . . . . . .             -0-          50

                                       5

<PAGE>

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


EARNINGS PER SHARE:

    In February, 1997, the Financial Accounting Standards Board 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 three months ended March 31, 1997 and 1996.

                                       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 - THREE MONTHS ENDED MARCH 31, 1997 AND 1996

     Consolidated net income was $2,739, or $0.36 per share, on a fully 
diluted basis for the three months ended March 31, 1997 (the "first 
quarter"), a per share increase of 50% from the $1,557, or $0.24 per share, 
earned in the first three months of 1996.  The per share amounts are adjusted 
for the 3-for-2 stock split payable February 10, 1997.  The annualized return 
on average assets was 1.07% for the first three months of 1997 and 0.78% for 
the first three months of 1996.  For each period, the return on average 
equity was 11.8% and 8.7%, 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 factor for the higher earnings was a 37% increase in net 
interest income in the first quarter of 1997 compared with the same period of 
one year ago.  The increase was due to the 28% increase in average earning 
assets due to the acquisition of Financial Security Corp. and its subsidiary, 
Security Federal Savings and Loan Association of Chicago ("Security"). 
Additionally, the net interest margin increased to 3.51% compared to 3.33% 
for the first three months of 1996.  The increase in the net interest margin 
was also due to the acquisition which resulted in a greater portion of loans 
as a percent of earning assets.

    Securities gains were also a significant factor in increased earnings. 
Securities gains totalled $1,101,000 compared to $264,000 of a year ago.  
Other income, excluding securities gains, increased 12% compared with the 
same period of 1996.  Other expenses also increased 24%.  Both increases were 
primarily the result of the acquisition.

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, 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 three months of 1997, Pinnacle's average earning assets 
were $946,421, compared to $736,820 from a year ago.  The increase was due to 
the acquisition.  The net interest margin for the first three months of 1997 
was 3.51%, up from 3.33% of the same period a year ago.  Net interest income 
on a fully taxable equivalent basis was $8,315 for the first three months of 
1997, or 35% higher than the comparable period in 1996.  Actual net interest 
income increased 37% as a result of the increase of both the net interest 
margin and average earning assets.

    The yield earned on total earning assets was 7.30% for the first three 
months of 1997 compared to 6.82% for the same period of 1996.  The increase 
resulted from the increased yield on taxable securities as well as the 
increase in the ratio of average loans to total average earning assets to 55% 
from 42% of a year ago.  The average rate on interest-bearing deposits and 
Federal funds sold decreased 147 basis points, as Pinnacle has been in 
primarily a purchased funds position for all of 1997.  Pinnacle was in a sold 
funds position in the first quarter of 1996 which was at a higher interest

                                       7

<PAGE>

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 56 basis points to 5.94% 
for the first three months of 1997 compared to 5.38% of a year ago.  The 
increase in the yield on taxable securities was primarily a result of the 
higher level of rates paid on these securities compared to those carried a 
year ago. The average volume of taxable securities increased $7,024 in the 
comparable period, with a decrease on nontaxable securities of $2,350.  The 
average rate on non-taxable securities remained flat.  The rate earned on 
loans decreased slightly or 11 basis points.  This decrease related primarily 
to the acquisition of Security, where most of the loans acquired were real 
estate related and are a lower earning type of loan than commercial and 
installment type loans.  The decrease in the rate earned on loans was, 
however, offset by increased volume of loans of $209,480.  While the majority 
of the loan growth was due to the acquisition, Pinnacle experienced 
approximately 14% in internally generated loan growth in the past year, which 
continues into the first quarter of 1997.

    The average cost of interest-bearing liabilities increased 24 basis 
points to 4.30% from 4.06% paid in the first three months of 1996.  The 
average rate paid on interest-bearing demand deposits remained flat while the 
rates paid on savings deposits decreased 13 basis points and the rates paid 
on money market deposits increased 16 basis points.  The average rate paid on 
other time deposits increased 6 basis points to 5.52% from 5.46% of a year 
ago.  Pinnacle has taken action at appropriate intervals to adjust the rates 
on all 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 or decreasing since the first quarter of 1996.  The 
acquisition of Security, however, added a significant portion of other time 
deposits at rates higher than those offered by Pinnacle.  Management 
anticipates a drop in the rates paid on other time deposits as the higher 
paying time deposits mature and renew at lower rates or run off.  This 
decrease was evident as rates paid on these time deposits decreased 16 basis 
points from the rate paid of 5.68% in the fourth quarter of 1996.  Average 
balances in all deposit categories increased due to the acquisition.  Absent 
the effect of the acquisition, Pinnacle continues to see a switch from 
savings deposits into other time deposits.

    The average balance in short-term borrowings increased $26,183 due to 
increased funding needs due to increased loan demand as well as the 
assumption of Security's fixed term advances from the Federal Home Loan Bank. 
 The average rate paid on notes payable decreased 46 basis points as a 
greater portion of the balance of the notes payable is tied to a LIBOR index 
which is an index lower than a prime index.  The average balance in notes 
payable increased approximately $13,620 due to the purchase of equity 
securities, the funding of a portion of the acquisition price of Financial 
Security, as well as general corporate needs.

    A detailed Analysis of Net Interest Income for the three month periods 
ended March 31, 1997 and 1996 is included on Page 13.

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 known potential losses in the loan portfolio, and 
prevailing economic conditions.

    There was no provision for loan losses in the first three months of 1997 
as well as for the first three months of 1996.  Pinnacle had net charge-offs 
of $415 in the first three months of 1997 compared to net recoveries of $17 
in 1996.  The increase in net charge-offs relates primarily to loans charged 
off from Security.  The allowance for loan losses was $7,949, or 1.53% of 
total loans, at March 31, 1997, compared to 1.59% at December 31, 1996.  

                                       8

<PAGE>

    Total nonperforming assets totalled $10,689, up $346 from a total of 
$10,343 at December 31, 1996.  Nonperforming assets consisted of $7,671 in 
nonaccrual loans, $791 in loans past due greater than 90 days and still 
accruing, $1,304 in restructured loans, and $923 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 non-performing 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.  Currently, 
there are approximately $4,295 in potential problem loans which are 
identified through that review process that are not considered nonperforming 
and are not included in totals above.  Approximately half of these loans are 
from Security's portfolio.

NON-INTEREST INCOME AND EXPENSE

    The major components of Pinnacle's non-interest 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 increased $233, primarily due to the acquisition.  Trust fees 
decreased 3% on a period-to-period basis.  Total trust assets under 
management amounted to $274,000, or a 12% increase of a year ago.  

    Net gains on the sale of securities, on a pre-tax basis, were $1,101 in 
the first three months of 1997 compared to net gains of $264, in the same 
period of 1996.  Approximately $915 of the net gains related to the sales of 
Pinnacle's U. S. Government securities portfolio and the remaining net gains 
were related to the sale of equity securities held by the parent company.

    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 management's assessment of the acceptable 
interest rate risk for Pinnacle.

    Management has always viewed the gains recorded on this 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 30 basis points and by including the net gains since inception of 
the program, the total yield is 133 basis points higher than the same Index.

    Non-interest expense increased 24% for the first three months of 1997 
compared to the same period last year.  The increase, in expense categories, 
related to the acquisition.  Employee compensation and benefits increased 14% 
with the majority of the increase, or approximately $353, relating to 
Security. Occupancy expense increased 4%; the increase related totally to the 
acquisition of Security.  Goodwill amortization increased 26% due to the 
acquisition.  Other operating expenses increased 51% to $2,274.  Data 
processing costs, including deconversion costs of Security when converted to 
Pinnacle's data processing system, increased $125.  Consulting fees increased 
$133 due to payment of consulting services to certain of Security's former 
officers.  Expenses related to other real estate owned increased $91 due to 
added properties related to the acquisition.  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 $1,410 for the first three months of 1997 compared with $694 for 
the first three months of 1996.  The higher provision for taxes in the first 
three months of 1997 was primarily the result of higher pre-tax income in the 
first quarter of 1997.

                                       9

<PAGE>

                                  BALANCE SHEET

    Total consolidated assets were $1,039,071 at March 31, 1997, or a 1% drop 
from year-end 1996.

    Total securities were $429,124 at March 31, 1997 and consisted of U. S. 
Government securities amounting to $368,394, mortgage-backed securities and 
CMO's of $5,625, state and municipal bonds of $21,840, and corporate and 
other securities of $33,265.  The total securities outstanding at March 31, 
1997 was down 1% from year-end 1996, however, the portfolio at quarter-end 
retained relatively the same mix.

    U. S. Government securities amounted to $368,394, or 35% of assets at 
March 31, 1997.  The average maturity of these securities was approximately 
one year. Certain 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 March 31, 1997, U. S. Government securities had gross 
unrealized losses of $(2,644) on a pre-tax basis.

    Other securities held by Pinnacle, amounting to $60,730, at March 31, 
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 $13,132 and gross unrealized losses of $(635) on a pre-tax basis.  
At quarter end, the equity portfolio of the parent company had appreciation 
of $10,760.  Currently, Pinnacle is not using derivative products for hedging 
or other purposes.  

    Due to the acquisition of Security, loans are Pinnacle's most significant 
balance sheet asset.  Total loans amounted to $521,117 at March 31, 1997, 
down 1% from year-end 1996.  The decrease was primarily due to normal 
paydowns at Security.  Absent the decrease at Security, loans increased 
approximately $3,515.  At March 31, 1997, 22% of the loans were commercial, 
real estate loans amounted to 67%, and installment loans were 11% of the 
portfolio.  Pinnacle's loan to asset ratio was 50% at March 31, 1997.

    Goodwill and other intangibles amounted to $24,633, or 25% of 
stockholders' equity, at March 31, 1997.  

    Total deposits were $864,125 at March 31, 1997, or 2% lower than year-end 
1996.  The decrease in deposits was primarily in other time deposits of 
$7,490. The drop in other time deposits was due primarily to the runoff of 
deposits from Security of $13,698.  These deposits were 5-year or 13-month 
term higher yielding time deposits that were part of advertising promotions 
by Security in previous years.  While management attempted to keep certain of 
these deposits by offering a higher rate 18-month certificate, certain of 
these customers were "rate shoppers" and left for special term deposits at 
other financial institutions.  Management continues to take an active role to 
maintain interest rates at a level which would discourage the 
disintermediation of funds.  This role has been successful because absent the 
runoff of Security other time deposits, other time deposits increased $6,208. 
 At March 31, 1997, 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 $33,550 at March 31, 1997.  Outstandings 
consist of a $15,000 note used for the acquisition of Acorn Financial Corp in 
January, 1995; a $15,000 note used partially for the acquisition of Financial 
Security and other equity securities; and a revolving line of credit for 
corporate needs, of which $3,550 was drawn.  At year-end 1996, outstandings 
consisted of the same as quarter end, except that $2,800 was drawn on the 
line of credit.

                                      10

<PAGE>

                                CAPITAL RESOURCES

    Total stockholders' equity of Pinnacle was $100,289 at March 31, 1997 and 
$100,824 at December 31, 1996.  The ratio of equity to assets was 9.65% 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, 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 March 31, 1997 (in thousands (except 
percentages).

                        MINIMUM    MINIMUM                           EXCESS
                        REQUIRED   REQUIRED    ACTUAL     ACTUAL      OVER
                         RATIO      AMOUNT     RATIO      AMOUNT     MINIMUM
                       -------------------------------------------------------
   Leverage Capital      3.00%      $30,433    7.46%     $75,656     $45,223
   Risk-based Capital:
     Tier One            4.00        19,334   14.31       69,176      49,842
     Total (Tier Two)    8.00        38,668   15.57       75,241      36,573

    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 March 31, 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 $13.24 at March 31, 1997 compared to $13.23 at 
December 31, 1996.  Dividends amounting to $0.22 per share were paid in the 
first three months of 1997. 

                                    LIQUIDITY

    As is 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.

    Pinnacle's cash flows are comprised of three general types.  Cash flows 
from operating activities are primarily Pinnacle's net income.  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 

                                      11

<PAGE>

borrow and repay debt and issue or repurchase stock.  For the three months 
ended March 31, 1997, cash flows were generated from a $8,380 decrease in 
securities, a $3,952 decrease in loans, and a $6,526 increase in short-term 
borrowings.  Cash flow uses and needs included a $13,427 decrease in 
deposits, $1,507 to purchase common stock, and $1,686 to pay dividends. 
Pinnacle's net cash position increased $4,524 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 
profitable acquisitions.  Certain acquisitions would be primarily funded with 
debt or stock.  Reductions of debt would be made from Pinnacle's earnings.  

    At March 31, 1997, Pinnacle had a line of credit of $5,000 with an 
unaffiliated bank from which $3,550 had been drawn.  The remaining 
outstanding of $30,000 related to 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 
April 1, 1997, bank subsidiaries could have declared approximately $2,627 in 
dividends without requesting approval of the applicable Federal or State 
regulatory agency.  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.  Currently, 
Pinnacle Bank, a subsidiary of Pinnacle, 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.  Management is also 
not aware of any current recommendations by the regulatory authorities which, 
if implemented, would have an adverse material effect on Pinnacle.

                                      12

<PAGE>

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

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED                          THREE MONTHS ENDED
(DOLLARS IN THOUSANDS)                                         MARCH 31, 1997                              MARCH 31, 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. . . . . . . . . . . .    $    3,481     $    31     3.56%           $  8,034       $  101       5.03%
      Taxable securities . . . . . . . . . . . . .       400,924       5,957     5.94             393,900        5,302       5.38
      Nontaxable securities. . . . . . . . . . . .        20,020         605    12.09              22,370          673      12.03
      Loans. . . . . . . . . . . . . . . . . . . .       521,996      10,685     8.19             312,516        6,482       8.30
                                                      --------------------------------           --------------------------------
         Total interest-earning assets . . . . . .       946,421      17,278     7.30             736,820       12,558       6.82
   Noninterest-earning assets:
      Cash and due from banks. . . . . . . . . . .        25,033                                   23,676
      Allowance for loan losses. . . . . . . . . .        (8,204)                                  (6,031)
      Other assets . . . . . . . . . . . . . . . .        66,437                                   45,105
                                                      ------------                              -----------
         Total assets. . . . . . . . . . . . . . .     $1,029,687                                $799,570
                                                      ------------                              -----------
                                                      ------------                              -----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
   Interest-bearing liabilities:
      Interest-bearing demand deposits . . . . . .     $   88,399    $   454     2.05%           $ 88,198     $   449       2.04%
      Savings deposits . . . . . . . . . . . . . .        247,535      1,769     2.86             208,095       1,556       2.99
      Money market deposits. . . . . . . . . . . .         48,143        411     3.41              44,622         362       3.25
      Other time deposits. . . . . . . . . . . . .        389,961      5,385     5.52             270,366       3,689       5.46
      Short-term borrowings. . . . . . . . . . . .         26,307        379     5.76                 124           2       6.45
      Notes payable. . . . . . . . . . . . . . . .         33,334        565     6.78              19,714         357       7.24
                                                      --------------------------------           --------------------------------
         Total interest-bearing liabilities. . . .        833,679      8,963     4.30             631,119       6,415       4.06
   Noninterest-bearing liabilities:
      Demand deposits. . . . . . . . . . . . . . .         96,248                                  90,233
      Other liabilities. . . . . . . . . . . . . .          6,677                                   6,810
      Stockholders' equity . . . . . . . . . . . .         93,083                                  71,408
                                                      ------------                              -----------
         Total liabilities and 
            stockholders' equity . . . . . . . . .     $1,029,687                                $799,570
                                                      ------------                              -----------
                                                      ------------                              -----------
Net interest income and margin . . . . . . . . . .                   $ 8,315     3.51%                        $ 6,143       3.33%
                                                                     ----------------                         ------------------
                                                                     ----------------                         ------------------

</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 months ended 
March 31, 1997 and 1996 was $222 and $252, 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.

                                      13

<PAGE>

PART II - OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    At the Annual Meeting of Pinnacle held on April 15, 1997, all of the 
proposed Directors listed in the Proxy Statement were elected.  Mark P. 
Burns, Samuel M. Gilman, Donald G. King, James A. Maddock, and James J. 
McDonough received votes totalling 5,983,365 shares, or 78.92% of the 
outstanding shares, FOR, 137,429 shares, or 1.81% AGAINST.  Albert Giusfredi, 
John J. Gleason, John J. Gleason, Jr. and John E. O'Neill received votes 
totalling 5,983,230 shares, or 78.91% of the outstanding shares, FOR, 137,564 
shares, or 1.81% AGAINST. William J. Finn, Jr., William P. Gleason, and James 
R. Phillip, Jr. received votes totalling 5,983,095 shares, or 78.91% of the 
outstanding shares, FOR, 137,699 shares, or 1.82% AGAINST.  Richard W. Burke 
and William C. Nickels received votes totalling 5,925,151 shares, or 78.15% 
of the outstanding shares, FOR, 195,643 shares, or 2.58% AGAINST.  James L. 
Greene and Kenneth C. Whitener, Jr. received votes totalling 5,924,881 
shares, or 78.14% of the outstanding shares, FOR, 195,913 shares, or 2.58% 
AGAINST.  Each of the directors was elected for a term of one year.  

    A total of 6,120,794 shares, accounting for 80.7% of the outstanding 
shares, were represented in person or by proxy at the Annual Meeting.

    No other items were voted on at the Annual Meeting.

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

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

                              Description No.
             Exhibit          Under Item 601         Exhibit
             Number          of Regulation S-K     Description
             -------         -----------------     -----------
                1                  (20)            Report furnished to 
                                                   securities holders.
                                                   First Quarter Report.

               10                  (10)            Material Contracts.
                                                   Employment
                                                   Contracts.

               27                  (27)            Financial Data Schedule.

    (b)  Reports on Form 8-K.

        A report on Form 8-K was filed in the first quarter of 1997, dated 
January 21, 1997 to report (1) a 3-for-2 stock split effective February 10, 
1997; (2) an increase in the annual dividend to $0.88 per share from $0.827 
per share on a post-split basis; and (3) authorization to repurchase up to 
450,000 post-split shares.

                                      14

<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: May 7, 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


                                      15

<PAGE>


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


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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

                                    EXHIBITS
                                       TO
                                    FORM 10-Q

              Annual 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)

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