<PAGE>
  _____________________________________________________________________________
  
                                  UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
  
                         
                                    FORM 10-Q
  
  (Mark One)
  
  [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities     
       Exchange Act of 1934
  For the period ended September 30, 1998
                                              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 of                   (I.R.S. Employer
  incorporation or organization)                    Identification No.)
  
  2215 York Road, Suite 306, Oak Brook, Illinois 60523
  -----------------------------------------------------------------
  (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 October 30, 1998, the registrant
                                       had 7,507,523 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 September 
30, 1998 and December 31, 1997, the related consolidated statements of income 
for the three and nine month periods ended September 30, 1998 and 1997, and the
related consolidated statements of cash flows for the nine month periods ended 
September 30, 1998 and 1997.
  
     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 1997 Annual Report to Shareholders with the exception of the 
disclosure of the Adoption of Statement of Financial Accounting Standards 
("SFAS") No. 128, "Earnings Per Share", SFAS No. 130, "Reporting Comprehensive 
Income", and the pro forma impact of the adoption of SFAS No. 133, "Accounting 
for Derivative Instruments and Hedging Activities".
  
  
<PAGE>                    
CONSOLIDATED BALANCE SHEETS (UNAUDITED)                    
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES                    
                 
<TABLE>                    
<CAPTION>                    
                 
(IN THOUSANDS,                           SEPTEMBER 30       DECEMBER 31     
 EXCEPT PER SHARE DATA)                  ------------       -----------     
                                             1998               1997
                                         ------------       -----------     
<S>                                       <C>                <C>     
ASSETS:                    
    Cash and due from banks                    $24,490           $31,103
    Federal funds sold                             900             2,800
                                            ----------        ----------
        Total cash and cash equivalents         25,390            33,903
     Interest-bearing deposits                     143               228
     Securities:                    
        Available for sale                     435,349           434,234
        (amortized cost:
             9/30/98 - $414,150
           12/31/97 - $409,123)                    
     Loans, net of unearned discount           524,666           510,207
        Less:  Allowance for loan losses        (7,193)           (7,520)
                                            ----------        ----------
        Net loans                              517,473           502,687
     Premises and equipment                     20,536            18,451
     Goodwill                                   21,264            23,076
     Other assets                               24,220            22,232
                                            ----------        ----------
        Total                               $1,044,375        $1,034,811
                                            ==========        ==========
LIABILITIES:
     Demand deposits:
        Noninterest-bearing                   $114,061          $104,644
        Interest-bearing                        84,103            96,092
     Savings deposits                          287,817           281,737
     Other time deposits                       384,681           363,996
                                            ----------        ----------
        Total deposits                         870,662           846,469
     Short-term borrowings                      22,425            38,525
     Notes payable                              21,300            20,000
     Other liabilities                          10,754            14,359
                                            ----------        ----------
         Total liabilities                     925,141           919,353

STOCKHOLDERS' EQUITY:                    
     Common stock, $3.125 par                   23,461            23,449
        20,000,000 shares authorized;
        shares issued and outstanding:
          9/30/98 - 7,507,523
         12/31/97 - 7,503,773
     Additional paid-in capital                 38,638            38,578
     Retained earnings                          43,240            36,856
     Unrealized gains in securities 
        available for sale                      13,895            16,575
                                             ---------        ----------
        Total stockholders' equity             119,234           115,458
                                             ---------        ----------
        Total                               $1,044,375        $1,034,811
                                            ==========        ==========
</TABLE>
  
<PAGE>                                        
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)    
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES 
                                     
<TABLE>                                        
<CAPTION>                                        

(IN THOUSANDS,                 FOR THE THREE MONTHS       FOR THE NINE MONTHS
 EXCEPT PER SHARE DATA)         ENDED SEPTEMBER 30         ENDED SEPTEMBER 30
                               --------------------       -------------------
                                1998          1997         1998         1997
                                ----          ----         ----         ----
<S>                             <C>           <C>          <C>          <C>         
INTEREST INCOME:
     Loans                     $10,676      $10,712       $31,473     $32,276
     Securities:                                        
        Taxable                  5,747        6,094        16,945      18,049  
        Tax exempt                 342          396         1,045       1,189
     Interest-bearing 
        deposits, Federal
        funds sold and other        15           11           208          57
                                ------       ------        ------      ------
        Interest income         16,780       17,213        49,671      51,571
INTEREST EXPENSE:                                        
     Deposits:
        Interest-bearing demand    429          449         1,332       1,359
        Savings                  2,195        2,168         6,410       6,566
        Other time               5,502        5,271        16,304      15,966
     Short-term borrowings         148          456           531       1,241
     Notes payable                 356          407         1,042       1,511
                                ------      -------        ------      ------
        Interest expense         8,630        8,751        25,619      26,643
                                ------      -------        ------      ------
     Net Interest Income         8,150        8,462        24,052      24,928
        Provision for 
           loan losses               0            0             0           0
                                ------      -------        ------      ------ 
           Net interest 
              income after 
              provision for 
              loan losses        8,150        8,462        24,052      24,928
OTHER INCOME:                                        
     Banking services and other  1,495        1,491         4,584       4,320
     Trust services                700          738         2,066       1,902
     Net securities gains        3,253        3,187         8,429       5,753
                                ------       ------        ------      ------
        Other income             5,448        5,416        15,079      11,975
OTHER EXPENSE:
     Salaries, profit sharing 
        and other employee 
        benefits                 3,617        3,539        10,814      10,422
     Occupancy                     737          647         2,203       1,990
     Amortization of goodwill 
        and other intangibles      604          600         1,812       1,794
     Other operating expenses    2,320        2,076         7,310       6,326
                                ------       ------        ------      ------
        Other expense            7,278        6,862        22,139      20,532
                                ------       ------        ------      ------
  Income before income taxes     6,320        7,016        16,992      16,371
     Provision for income taxes  1,885        2,353         5,428       5,526
                                ------       ------        ------      ------
  Net Income                    $4,435       $4,663       $11,564     $10,845
                                ======       ======       =======     =======

  Weighted average number of common and
     common equivalent shares outstanding:
     Basic                   7,507,523    7,511,551     7,507,413   7,549,162
     Diluted                 7,528,084    7,520,208     7,536,600   7,553,156

EARNINGS PER SHARE:                                        
     Basic                       $0.59        $0.62         $1.54       $1.44
     Diluted                     $0.58        $0.61         $1.53       $1.43
  Dividends per share            $0.23        $0.22         $0.69       $0.66
</TABLE>
 
<PAGE>                                        
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
                                     
<TABLE>                                        
<CAPTION>                                        
                             FOR THE  THREE MONTHS      FOR THE  NINE MONTHS
(IN THOUSANDS)                ENDED SEPTEMBER 30         ENDED SEPTEMBER 30  
                             ---------------------      -------------------- 
                              1998           1997        1998          1997     
                             ------         ------      ------        ------
<S>                          <C>            <C>         <C>           <C>
  Net income                 $4,435         $4,663     $11,564       $10,845
  Other comprehensive 
     income, net of tax:                                        
     Unrealized gains 
       (losses) on 
       securities             3,577          7,331       4,369        14,142
     Less:  reclassification 
        adjustment for gains
        (losses) included in
         net income          (3,253)        (3,187)     (8,429)       (5,753)
                            -------         ------      ------        ------
     Net unrealized gains 
        (losses) on
        securities              324          4,144      (4,060)        8,389
     Income tax expense 
        (benefit) related to
        unrealized gains (losses) 
        on securities           110          1,409      (1,380)        2,852
                            -------         ------      ------        ------
  Other comprehensive
     income (loss), net
     of tax                     214          2,735      (2,680)        5,537
                            -------         ------      ------        ------
  Comprehensive income       $4,649         $7,398      $8,884       $16,382
                             ======         ======      ======       =======
</TABLE>                                        
  
<PAGE>                    
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)                    
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES                    
                 
<TABLE>                    
<CAPTION>                    
                                                    FOR THE NINE MONTHS
(IN THOUSANDS, EXCEPT PER SHARE DATA)               ENDED SEPTEMBER 30
                                              ------------------------------
                                               1998                    1997
                                              ------                  ------
<S>                                           <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                    
     Net income                              $11,564                 $10,845
     Adjustments to reconcile net income to
     net cash provided by operating activities:                    
        Depreciation                           1,496                   1,328
        Amortization of goodwill and 
           other intangibles                   1,812                   1,794
        Amortization of purchase accounting 
           adjustments                            46                     (51)
        Discount accretion                      (664)                 (1,028)
        Premium amortization                     192                     202
        Provision for loan losses                  0                       0
        Gain on sale of securities            (8,429)                 (5,753)
        Decrease in interest receivable       (5,325)                  4,127
        Increase in interest payable             247                     353
        Decrease in other assets               3,366                     678
        Increase (decrease) in other 
           liabilities                        (2,464)                    920
        Other, net                               (99)                    163
                                              ------                  ------
           Total adjustments                  (9,822)                  2,733
        Net cash provided by operating 
           activities                          1,742                  13,578
CASH FLOWS FROM INVESTING ACTIVITIES:     
     Proceeds from sale of securities        720,110               1,220,055
     Proceeds from maturities and paydowns 
        of securities                          5,676                   2,446
     Purchase of securities                 (722,086)             (1,199,421)
     Net decrease in interest-bearing 
        deposits                                  85                   3,155
     Net loan principal 
        collected (advanced)                 (14,699)                 14,985
     Premises and equipment expenditures      (3,626)                 (1,380)
                                            --------                --------
        Net cash provided by (used for) 
           investing activities              (14,540)                 39,840      
CASH FLOWS FROM FINANCING ACTIVITIES:                    
     Net increase (decrease) in 
        total deposits                        24,193                 (39,846)
     Net increase (decrease) in 
        short-term borrowings                (16,100)                 10,956
     Proceeds from notes payable              19,475                  18,800
     Principal reductions of notes payable   (18,175)                (30,975)
     Issuance of common stock                     72                     709
     Purchase and retirement of common stock       0                  (3,468)
     Dividends paid                           (5,180)                 (5,006)
                                             -------                --------
        Net cash provided by (used for) 
           financing activities                4,285                 (48,830)
     Net increase (decrease) in cash and 
        cash equivalents                      (8,513)                  4,588
     Cash and cash equivalents at beginning 
        of period                             33,903                  23,095
                                             -------                 -------
     Cash and cash equivalents at end 
        of period                            $25,390                 $27,683
                                             =======                 ========
CASH PAID DURING PERIOD FOR:
     Interest                                $25,372                 $26,630
     Income taxes                              3,347                   4,285
</TABLE>                    
<PAGE>
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
  
EARNINGS PER SHARE:
  
     In March, 1997, the FASB issued SFAS No. 128, "Earnings per Share".  The 
new statement was effective for financial statements for periods ending after 
December 15, 1997 and superseded Accounting Principles Board Opinion 15.  SFAS 
No. 128 replaces primary earnings per share ("EPS") with basic EPS.  Basic 
EPS is computed by dividing reported earnings available to common stockholders 
by weighted average shares outstanding.  No dilution for any potentially 
dilutive securities is included.  Diluted EPS replaces fully diluted EPS and 
includes the effects of stock options.  In using the treasury stock method to
compute dilution for options, the average share price for the period is used, 
rather than the more dilutive greater of the average share price or 
end-of-period share price required by the previous standard.  Pinnacle adopted
adopted SFAS No. 128 on December 31, 1997 and, accordingly, all prior EPS data 
presented has been restated.
  
     The following table shows the computation of shares outstanding for 
calculating earnings per share for the three and nine months ended September 
30, 1998 and 1997:
 
<TABLE>
<CAPTION>
  
                            FOR THE THREE MONTHS        FOR THE NINE MONTHS 
                             ENDED SEPTEMBER 30         ENDED SEPTEMBER 30
                            --------------------        -------------------
                             1998          1997          1998         1997
                            ------        ------        ------       ------
<S>                         <C>           <C>           <C>          <C>
BASIC EARNINGS
  PER SHARE:
     Common shares 
        outstanding         7,507,523     7,511,551     7,507,413    7,549,162
                                     
COMMON STOCK EQUIVALENTS:
     Stock options 
        outstanding            82,500        86,250        82,500       86,250
     Treasury stock method    (61,939)      (77,593)      (53,313)     (82,256)
                            ---------    ----------    ----------    ---------
     Net                       20,561         8,657        29,187        3,994
                            ---------    ----------    ----------    ---------
DILUTED EARNINGS
  PER SHARE:                                   
     Common shares outstanding
        plus assumed 
        conversions         7,528,084     7,520,208    7,536,600     7,553,156
                            ---------     ---------    ---------     ---------
                            ---------     ---------    ---------     ---------
</TABLE>
  
<PAGE>
  
COMPREHENSIVE INCOME
 
     In June, 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive 
Income".  This statement is effective for fiscal years beginning after December 
15, 1997 with earlier application permitted.  This statement establishes 
standards for reporting and display of comprehensive income and its components 
in the financial statements.  The object of the statement is to report a measure
of all changes in equity of an enterprise that results from transactions and 
other economic events of the period other than transactions with owners.  Items 
included in comprehensive income include revenues, gains and losses that under
generally accepted accounting principles are directly charged to equity.  
Examples include foreign currency translations, pension liability adjustments
and unrealized gains and losses on securities (SFAS 115 adjustment).  Pinnacle 
adopted this statement in the first quarter of 1998 and has included its 
comprehensive income in a separate financial statement as part of its 
consolidated financial statements.
  
DERIVATIVE INSTRUMENTS
  
     In June, 1998, FASB issued SFAS No. 133, "Accounting for Derivative 
Instruments and Hedging Activities".  This statement establishes accounting and 
reporting standards requiring every derivative instrument be recorded in the 
balance sheet as either an asset or liability measured at its fair value. 
Because Pinnacle does not use derivatives for hedging or other purposes, the 
impact of this standard, effective for fiscal years beginning after June 15, 
1999, will be immaterial.
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
          (Dollars in thousands, except per share amounts)
  
          NET INCOME - NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
  
     Consolidated net income was $11,564, or $1.53 per share, on a diluted 
basis for the nine months ended September 30, 1998, compared to the $10,845,  
or $1.43 per share, earned in the first nine months of 1997.  The annualized 
return on average assets was 1.52% for the first nine months of 1998 and 
1.42% for the first nine months of 1997.  For each period, the return on 
average equity was 15.2% and 15.4%, 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 higher earnings was higher gains recorded on the 
sale of securities.  Net securities gains totalled $8,429 compared to $5,753 in 
gains during the same period a year ago.  Net interest income decreased 4% to 
$24,052 with a corresponding decrease in the net interest margin to 3.54%
from 3.66% for the same periods.  Lower yields on earning assets was the primary
factor in lower net interest income and net interest margin.  Other operating 
income, excluding net securities gains, increased 7% compared with the same 
period of 1997.  Other expenses increased 8%.
  
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 nine months of 1998, Pinnacle's average earning assets 
were $926,642, a 1% decrease from the comparable period of the previous year.  
The net interest margin for the first nine months of 1998 was 3.54%, down from 
3.66% of the same period a year ago.  Net interest income on a fully taxable
equivalent basis was $24,626 for the first nine months of 1998, or 4% lower 
than the comparable period in 1997.  Actual net interest income decreased 4% as 
the result of the decrease in the net interest margin and the decrease in 
average earning assets.
  
     The yield earned on total earning assets was 7.23% for the first nine 
months of 1998 compared to 7.47% for the same period of 1997.  The decrease 
resulted from both a decrease in the rate earned on taxable securities and a 
lower volume of loans.  The rate earned on interest-bearing deposits and 
Federal funds sold increased 165 basis points as the majority of assets in this 
category consisted of higher paying Federal funds than those assets a year ago.
The average rate on taxable securities decreased 41 basis points to 5.72% for 
the first nine months of 1998.  The decrease in the yield on taxable securities 
was primarily due to a drop in the rates earned on these securities than on 
those carried a year ago.  Average volume of taxable securities increased 
slightly or 1%.  The yield earned on nontaxable securities increased 17 basis
points while average balances decreased 13%.  The rate earned on loans 
decreased 8 basis points while the average balance decreased 2%.  Most of the 
decrease in average loans related to the residential mortgage portfolio, 
which decreased over $16 million.  Included in that decrease was the drop in
purchased participation loans acquired in the acquisition of Security Federal 
in 1996 of $10 million and a decrease in multi-family residential of $9 
million, a great portion of which was also related to the Security Federal
acquisition.  Absent these decreases, the residential portfolio increased 
approximately $2 million.  The new residential loans, however, replaced those 
loans that have been paid off or refinanced due to the low mortgage rate 

<PAGE>
environment.  Rates earned specifically on residential mortgage loans have 
decreased 20 basis points in the last twelve months.  Commercial loan growth has
been strong, with an increase of 7%.  Rates earned on commercial loans have 
remained relatively flat, as prime rate has remained flat on a year to year 
basis.  Pinnacle anticipates that the yield on commercial loans will drop in 
the last quarter with the adjustment made to the prime rate early in October, 
1998.  Consumer loans have increased 7%, or approximately $8 million.  The rate
earned on these loans has decreased slightly and will continue to decrease as 
loans in this category which are tied to prime total $28 million.

     The average cost of interest-bearing liabilities decreased 3 basis points 
to 4.31% from 4.34% paid in the first nine months of 1997.  The average rate 
paid on interest-bearing demand deposits decreased 13 basis points while the 
rates paid on savings deposits increased slightly by 3 basis points and the 
rates paid on money market deposits increased 11 basis points.  In the first
part of the fourth quarter, Pinnacle reduced rates on all the above categories 
to keep in line with the decreasing rate environment.  The average rate
paid on other time deposits increased 2 basis points to 5.63% from 5.61% of a 
year ago.  Rates paid on other time deposits have decreased in the third 
quarter of 1998 due to the rate environment.  Rates in the first two quarters 
of 1998 have been relatively flat.  Certain special "high rate" deposits, 
which were in the portfolio at Security Federal, have been maturing in the 
last twelve months.  These have been replaced with a higher than market rate,
14-month time deposit that was implemented in the first quarter of 1998, in
conjunction with the opening of a new Chicago-area branch and marketing 
campaign.  This promotion, which negates the impact of the higher rate 
maturing deposits, brought in approximately $39 million of which two-thirds 
were new deposits.  In June, 1998, this same promotion was implemented in 
conjunction with Pinnacle's new branch which opened in Moline, Illinois.  
By September 30, 1998, this promotion had brought in approximately $7 million 
in deposits of which approximately half were new customers.  The average 
balance in savings deposits also decreased $7,935 on a year to year basis as
customers switched their funds to higher rate time deposits.  Average savings 
deposits have remained constant throughout 1998.  
  
     The average rate paid on short-term borrowings increased 43 basis points, 
while the average balance decreased $17 million.  Increases or decreases in the
average balance of this category fluctuate due to Pinnacle's subsidiary banks' 
daily liquidity needs, such as loan growth and the maturity of the above-
mentioned Security Federal's time deposits.  The average balance in Pinnacle's 
notes payable decreased $8,099 due primarily to a stock redemption by Pinnacle 
Bank in July, 1997, proceeds of which were used to pay down a portion of the 
notes payable.  The rate paid decreased 26 basis points as the indices (Prime
or LIBOR), to which the notes payable are tied, were lower in the first nine 
months of 1998 compared to a year ago.
  
     A detailed Analysis of Net Interest Income for the three and nine month 
periods ended September 30, 1998 and 1997 is included on Pages 16 and 17.
  
PROVISION FOR LOAN LOSSES
  
     Management records a provision for loan losses in an amount sufficient to 
maintain the allowance for loan losses at a level commensurate with the risks in
the loan portfolio.  The allowance for loan losses is adjusted through charges
to current income based on factors such as past loan loss experience, 
management's evaluation of potential losses in the loan portfolio, and 
prevailing economic conditions.
  
     There was no provision for loan losses in the first nine months of 1998, 
as well as no provision for the first nine months of 1997.  Pinnacle had net 
charge-offs of $327 in the first nine months of 1998 compared to net 
charge-offs of $368 in 1997.  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 of the 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 $7,389 at September 30, 1998, an 
increase of $268, over the $7,121 at December 31, 1997.  Non-performing assets 
consisted of $3,858 in non-accrual loans, $1,773 in loans past due greater than 
90 days and still accruing, $1,148 in restructured loans, and $610 in other 
real estate owned.
  
     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, 

<PAGE>
there are approximately $3,734 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 $4,584 for the nine months ended September 30, 1998 compared to $4,320
in the same period of 1997. The increase in fees on banking services and 
other income primarily related to higher business service charges and 
overdraft income of $162 and ATM surcharges of $60.  Trust fees increased 
9% on a period to period basis.  Total trust assets under management amounted 
to $331,000 at September 30, 1998, or a 7% increase of a year ago.  
  
       Gains on the sale of securities, on a pre-tax basis, were $8,429 for 
the first nine months of 1998 compared to net gains of $5,753 in the same 
period of 1997.  The net gains on a year-to-date basis in 1998 consisted 
of $8,497 recorded on the sale of equity securities as part of Pinnacle's 
equity investment program in other financial institutions and net losses of 
$60 recorded on the sale of U. S. Treasury securities as part of Pinnacle's
portfolio funds management system.  The net gains in 1997 consisted of
sales of equity securities of $2,842 and net gains on the portfolio 
funds management system of $2,911.
  
      Security sales were taken in the equity investment portfolio to
reallocate portfolio funds based on management's assessment of the financial 
performance of certain issues as well as market conditions as it
related to those issues.
  
     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 25 basis points and by 
including the net gains since inception of the program, the total yield is 
122 basis points higher than the same index.  For the first nine months of 
1998, due to the relative flatness of the yield curve, the portfolio has 
slightly outperformed the index by 4 basis points but by including the net 
loss on sale, outperformed the index by 2 basis points.
  
     Noninterest expense increased 8% for the first nine months of 1998 
compared to the same period last year.  Employee compensation and benefits 
increased 4% which includes the addition of personnel for the Warrenville 
and Moline banking centers which opened January, 1998, and June, 1998, 
respectively.  Occupancy expense increased 11% which was also affected by 
the opening of the banking centers as well as the Pinnacle Bank Operations 
Center in the second quarter of 1998.  The Operations Center houses all
backroom functions of Pinnacle Bank which were previously housed in separate 
banking centers.  Other operating expense increased 16%, or $984, with 
advertising relating to the two new campaigns (time deposit product and home 
equity loan product), as well as the opening of the new banking centers 
contributing approximately half, or $504, of the increase.  Equipment expense 
increased 7%, or $100, as a result of the new banking centers and Operations 
Center and expenses relating to other real estate owned increased $354 due to 
added market writedowns of distressed properties held in this category.
  
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 $5,428 for the first nine months of 1998 compared with a provision 
of $5,526 for the first nine months of 1997.  The lower provision for taxes 
in the first nine months of 1998 was primarily the result of the realization 
of certain tax credits received on the tax return which had not been 
previously benefited.

<PAGE>
          NET INCOME - THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
  
     Consolidated net income was $4,435, or $0.58 per share, on a diluted 
basis for the three months ended September 30, 1998 (the "third quarter"), 
compared to $4,663, or $0.61 per share, earned in the third quarter of 1997.
The annualized return on average assets was 1.74% for the third quarter of 
1998 and 1.86% for the third quarter of 1997.  For each period, the return on
average equity was 16.7% and 19.6%, respectively.  
  
     The primary factors for the decrease in net income was the decrease in 
net interest income and higher other operating expense.  Net interest income
decreased $312, or 4%.  Net securities gains of $3,253 were recorded 
versus net gains of $3,187 for the same period a year ago.  Other income, 
exclusive of securities transactions, decreased $34, or 2%.  Other expense 
increased $416, or 6%.  
  
NET INTEREST INCOME
  
     During the third quarter of 1998, Pinnacle's average earning assets were 
$933,443 compared to $918,026 with the comparable period of the previous year.
The net interest margin of the third quarter of 1998 was 3.57% compared to 
3.78% for 1997.  Net interest income on a fully taxable equivalent basis was
$8,338 for the third quarter of 1998, or 4% lower than the comparable 
period in 1997.  Actual net interest income decreased 4%.
  
     The yield earned on total earning assets was 7.27% for the third quarter
of 1998 compared to 7.60% for the same period of 1997.  The decrease resulted 
primarily from the decrease in the yield on taxable securities.  The yield on 
interest-bearing deposits increased 161 basis points as the majority of 
balances in that category in 1998 were high-earning Federal funds sold.  
While the average balance of taxable securities increased $13,462, the 
yield earned decreased 56 basis points.  The yield earned on loans 
decreased 11 basis points to 8.30% while the average balance increased 
$5,126 on a quarter-to-quarter basis.  Total interest income, on a fully 
taxable equivalent basis, decreased $465.
  
     The average cost of interest-bearing liabilities decreased by 2 basis 
points to 4.36% from the 4.38% paid in the third quarter of 1997.  The 
average rate paid on interest-bearing demand deposits decreased 9 basis
points while savings deposit rates increased 3 basis points.  The average 
rate paid on money market accounts increased 25 basis points.  The average 
rates paid on other time deposits decreased 2 basis points.  The rates paid 
on short-term borrowings increased 49 basis points as a higher portion of 
that balance consisted of FHLB borrowings with a higher fixed rate.  The 
rates paid on notes payable decreased 44 basis points.
  
PROVISION FOR LOAN LOSSES
  
     There was no provision for loan losses for the third quarter of 1998, 
as well as no provision for the third quarter of 1997.  Pinnacle had net 
recoveries of $2 in 1998 compared to net recoveries of $116 in 1997.
  
NONINTEREST INCOME AND EXPENSE
  
     Fees on banking services and other income were $1,495 for the three 
months ended September 30, 1998 compared to $1,491 in the same period of 1997. 
Trust fees decreased 5% to $700.
  
     On a pre-tax basis, net gains on the sale of securities were $3,253 for 
the third quarter of 1998 compared to net gains on the sale of securities of
$3,187 in the same period of 1997.  The gross and net gains in the third 
quarter of 1998 were $3,253.  The gross and net losses realized in the third 
quarter of 1997 were $3,187.
  
     All of the net securities gain recorded by Pinnacle in the third quarter
of 1998 related to its equity investment portfolio.  The net securities gains 
in the third quarter of 1997 related to its U. S. Government securities 
portfolio.
  
     Non-interest expense increased 6% primarily as a result of increased 
occupancy and equipment expenses which related to the opening of the two new 
branches in Warrenville and Moline, as well as Pinnacle Bank's new Operations 
Center.

<PAGE>
INCOME TAXES
  
     The provision for income taxes was $1,885 for the third quarter of 
1998 compared with $2,353 provision  for the third quarter of 1997.  The 
lower provision for taxes in the third quarter of 1998 was primarily the 
result of lower pre-tax income in the third quarter of 1998 as well as 
realization of certain tax credits.
  
                            CASH EARNINGS PER SHARE
  
     All of Pinnacle's acquisitions have been made with both the issuance 
of stock and cash or cash only and, as a result, the purchase method of 
accounting was utilized.  This method creates goodwill, or the difference 
between the fair value of assets purchased and the historical cost of those 
assets.  Goodwill is being amortized as a noncash reduction of net income 
over time periods from 10 to 20 years.  If pooling of interest method of 
accounting had been used (after meeting stringent accounting rules and no 
cash had been exchanged), no goodwill would have been created and no reduction
in net income would have been made for the amortization.  The following
outlines Pinnacle's cash earnings, earnings per share and related ratios for 
the quarter and nine months ended September 30, 1998 and 1997.

<PAGE>
  
<TABLE>
<CAPTION>
                                 FOR THE  QUARTER        FOR THE NINE MONTHS
                                ENDED SEPTEMBER 30       ENDED  SEPTEMBER 30
                               --------------------      -------------------
(DOLLARS IN THOUSANDS)          1998          1997        1998         1997
                                ----          ----        ----         ----
<S>                             <C>           <C>         <C>          <C>
  Net income                   $4,435       $4,663      $11,564      $10,845
  Goodwill amortization           604          600        1,812        1,794
                               ------       ------      -------      -------
  Cash net income              $5,039       $5,263      $13,376      $12,639
                               ------       ------      -------      -------
                               ------       ------      -------      -------
                                
  EARNINGS PER SHARE,     
     DILUTED                           
     Cash EPS                   $0.66        $0.70        $1.77        $1.67
     As reported                 0.58         0.61         1.53         1.43
  CASH ROA                              
     Average assets        $1,020,236   $1,003,209   $1,012,148   $1,016,365
     Average goodwill          21,618       24,123       22,220       24,272
                           ----------   ----------   ----------   ----------
     Average tangible 
        assets               $998,618     $979,086     $989,928     $992,093
                             --------     --------     --------     --------
                             --------     --------     --------     --------
                           
     Cash ROA                    2.02%        2.15%        1.80%        1.70%
     As reported                 1.74         1.86         1.52         1.42
  CASH ROE                              
     Average equity          $106,275      $95,026     $101,624      $93,940
     Average goodwill          21,618       24,123       22,220       24,272
                             --------      -------     --------      -------
     Average tangible 
        equity                $84,657      $70,903      $79,404      $69,668
                              -------      -------      -------      -------
                              -------      -------      -------      -------
                           
     Cash ROE                    23.8%        29.7%        22.5%        24.2%
     As reported                 16.7         19.6         15.2         15.4
</TABLE>
  
                                        BALANCE SHEET
  
     Total consolidated assets were $1,044,375 at September 30, 1998, or a 1% 
increase from year-end 1997. 
  
     Total securities were $435,349 at September 30, 1998 and consisted of 
U. S. Government securities amounting to $366,302, mortgage-backed securities 
and CMO's of $2,858, state and municipal bonds of $19,788, and corporate and 
other securities of $46,401.  The total securities outstanding at September 30,
1998 was approximately the same as year-end 1997 and retained relatively the 
same mix.
  
     U. S. Government securities amounted to $366,302, or 35% of assets, at 
September 30, 1998.  The average remaining maturity of these securities was
approximately 32 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.

<PAGE>
The decision to undertake intermittent sales of these securities is based 
on management's assessment of economic conditions.  For example, management 
will undertake sales of securities based on the slope of the yield curve and 
its determination that the reinvestment of the proceeds into a longer or 
shorter term security is an acceptable alternative given management's 
assessment of interest rate risk.  At September 30, 1998, U. S. Government 
securities had gross unrealized gains of $11,905 and gross unrealized losses 
of $(49) on a pre-tax basis.
  
     Other securities held by Pinnacle, amounting to $69,047 at September 30,
1998, consisted of mortgage-backed, CMO's, state and municipal, and corporate 
and equity securities.  At quarter end, these securities had gross unrealized 
gains of $12,808 and gross unrealized losses of $(3,465) on a pre-tax basis. 
Currently, Pinnacle is not using any derivatives for hedging or other purposes.
  
     Total loans amounted to $524,666 at September 30, 1998, up 3% from year
end.  The increase in loans is primarily in commercial loans which increased
$19,915 and installment loans which increased $5,511.  This increase is offset
by the decrease in real estate loans which decreased $10,968.  The drop in real
estate loans relates primarily to the planned decrease in out-of-state 
purchased loans and to the decrease in multi-family loans, both relating to 
loans acquired in the Security Federal acquisition in 1996.   At September 30,
1998, 25% of the loans were commercial, 62% were real estate, and 13% were 
installment loans.  Pinnacle's loan to asset ratio was 50% at September 30, 
1998.
  
     Goodwill and other intangibles amounted to $21,264, or 18% of stockholders'
equity at September 30, 1998.
  
     Total deposits were $870,662 at September 30, 1998, or 3% higher 
than year-end 1997.  The increase in deposits was primarily in other time 
deposits which increased $20,685.  As previously mentioned, a promotion 
corresponding with the opening of the two new banking centers in 1998 brought 
in significant new time deposit money.  Noninterest-bearing demand deposits 
increased $9,417, but was offset by the decrease in interest-bearing demand 
deposits of $11,989; savings deposits increased $6,080.  At September 30, 
1998, the percentage of total deposits for each category were 
noninterest-bearing deposits, 13%; interest-bearing demand deposits, 10%; 
savings accounts (including money market accounts), 33%; and other time 
deposits, 44%.
  
     Pinnacle's notes payable were $21,300 at September 30, 1998.  Pinnacle's 
notes payable are borrowings under a $35,000 revolving line of credit.  
Outstandings were used for the acquisition of Acorn Financial Corp in 
January, 1995; for the acquisition of Financial Security; the purchase of 
other equity securities; and other corporate needs.
  
                                     CAPITAL RESOURCES
     Total stockholders' equity of Pinnacle was $119,234 at September 30, 
1998 and $115,458 at December 31, 1997.  The ratio of equity to assets was 
11.42% and 11.16% 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 
4.00%.  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 for a well-capitalized bank), ratios and the 
excess over the minimum which Pinnacle holds as capital as of September
30, 1998, in thousands (except percentages).

<PAGE>
  
<TABLE>
<CAPTION>
  
                        MINIMUM     MINIMUM                        EXCESS
                        REQUIRED    REQUIRED   ACTUAL    ACTUAL     OVER
                         RATIO       AMOUNT    RATIO     AMOUNT    MINIMUM
                        --------    --------   ------    ------    -------
<S>                     <C>         <C>        <C>       <C>        <C>     
  Leverage Capital        4.00%      $40,924     8.22%   $84,075   $43,151
  Risk-based Capital:                              
     Tier One             4.00        20,507    16.40     84,075    63,568
     Total (Tier Two)     8.00        41,014    17.65     90,493    49,479
</TABLE>
  
     At December 31, 1997, Pinnacle's total risk-based capital ratio was 
16.97%.  
  
     In addition, each of Pinnacle's subsidiary banks must meet similar minimum
capital requirements as prescribed by Federal and state banking regulatory 
authorities.  At September  30, 1998, 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 $15.88 at September 30, 1998 compared to $15.39 
at December 31, 1997.  Dividends amounting to $0.69 per share were paid in the 
first nine months of 1998.  Tangible book value (stockholders' equity less 
goodwill) was $13.05 at September 30, 1998 compared to $12.31 at December 31,
1997.
  
                          LIQUIDITY AND MARKET RISK
  
     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.
  
     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 nine months ended
September 30, 1998, cash flows were generated primarily from operations of 
$1,742, the net decrease in securities of $3,700, and the increase in deposits
of $24,193.  Cash flow uses and needs include the advance of net loan principal
of $14,699, a $16,100 reduction in other borrowed funds, and $5,180 to pay
dividends.  Pinnacle's net cash position decreased $8,513, with the decrease 
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 September 30, 1998, Pinnacle had a line of credit of $35,000 with an 
unaffiliated bank from which $21,300 had been drawn.  The outstanding balance 
relates to the acquisitions, equity purchases and other corporate needs, and 
is secured by the stock of Pinnacle's subsidiary banks as well as certain 
equity securities of the holding company.
  
  
<PAGE>
     Market risk at Pinnacle consists primarily of interest rate risk and, to 
some extent, market price risk.  No significant changes have occurred at 
Pinnacle in the interest rate or market price risk since year-end 1997.
  
     Regulatory requirements exist which influence Pinnacle's liquidity and 
cash flow needs.  These requirements include the maintenance of satisfactory 
capital ratios on a consolidated and subsidiary bank basis, restrictions on 
the amount of dividends which a subsidiary bank may pay and reserve 
requirements with the Federal Reserve Bank.  Based on these restrictions, 
at October 1, 1998, bank subsidiaries could have declared approximately 
$2,862 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.  Management is also not aware of any current 
recommendations by the regulatory authorities which, if implemented, 
would have an adverse material effect on Pinnacle.
                              
                                      YEAR 2000
  
     Throughout the first nine months of 1998, Pinnacle's Year 2000 task force
has continued to monitor the readiness of its major data processing provider, 
other critical vendor suppliers, and its large commercial customers.  
Currently, Pinnacle has completed its testing strategies and plans and 
has requested the testing strategies and plans from its critical vendors.  
Pinnacle's main data processing provider began testing in a proxy 
environment during August, 1998.  Year 2000 renovated software from Pinnacle's 
major data processor was implemented by Pinnacle in October, 1998, with no 
current processing issues.  Testing on that software for Year 2000 
compliance will continue through March, 1999.  Contingency planning has begun
for mission critical tasks and will be continually monitored and updated to
ensure uninterrupted customer services and backroom processing.  Pinnacle, 
however, cannot necessarily ensure uninterruption with certain vendors such 
as utility companies and phone companies, but those vendor plans are being
monitored as an ongoing part of the assessment.  Currently, all critical 
dates mandated by the regulators have been met by the data processing vendor
and Pinnacle is also on schedule for its review of any in-house critical 
systems, software, and equipment.  Any costs associated with this issue will
continue to be expensed as incurred or capitalized in the event of equipment 
or software replacement.  The impact is currently estimated to be less than 
$0.01 per share on Pinnacle's diluted earnings per share and not material 
to the financial position of Pinnacle.  Large commercial customers are 
being assessed by management as to Year 2000 readiness and ability to 
manage their relationship with Pinnacle's banking subsidiaries. 
Currently, it is unknown what impact a high risk customer's inability to 
repay its bank obligations will have on the adequacy of Pinnacle's allowance 
for possible loan losses or its financial position.  
  
                            FORWARD-LOOKING INFORMATION
  
     Statements contained in Management's Discussion and Analysis of Financial 
Condition and Results of Operations relate to Pinnacle's expectations as to 
future events relating to such items as the adequacy of the allowance for 
loan losses, changes in economic conditions including interest rates, 
management's ability to manage interest rate, liquidity and credit risks, 
impact on operations and credit losses as it relates to the Year 200 issue.
Such statements are not statements of historical fact and are forward-looking
statements. Pinnacle believes the assumptions of which these statements are 
founded are reasonable, based on management's knowledge of its business and 
operations; however, there is no assurance the assumptions will prove to have 
been correct.

<PAGE>                                             
ANALYSIS OF NET INTEREST INCOME                                             
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES      
                                          
<TABLE>                                             
<CAPTION>                                             
                          THREE MONTHS ENDED           NINE MONTHS ENDED
(DOLLARS IN               SEPTEMBER 30, 1998           SEPTEMBER 30, 1998
 THOUSANDS)           --------------------------    -------------------------
                      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             $1,260        $15   4.76%    $5,150       $208    5.39%
    Taxable 
      securities      399,906      5,747   5.75    394,950     16,945    5.72
    Nontaxable 
      securities       16,907        518  12.25     17,224      1,583   12.25
    Loans             515,370     10,688   8.30    509,318     31,509    8.25
                      -------     ------  -----    -------     ------   -----
      Total 
        interest-earning 
        assets        933,443     16,968   7.27    926,642     50,245    7.23
    Noninterest-earning 
      assets:
      Cash and due 
        from banks     25,792                       26,420
     Allowance for 
        loan losses    (7,195)                      (7,287)
      Other assets     68,196                       66,373
                       ------                       ------
        Total 
          assets   $1,020,236                   $1,012,148
                   ==========                   ==========
LIABILITIES AND                                              
STOCKHOLDERS' EQUITY:                                             
  Interest-bearing 
    liabilities:                                             
    Interest-bearing
      demand deposits $88,520      $429   1.94%    $92,836      $1,332   1.91%
    Savings deposits  238,544     1,766   2.96     237,836       5,206   2.92
    Money market 
      deposits         46,734       429   3.67      45,201       1,204   3.55
    Other time 
      deposits        387,928     5,502   5.67     385,780      16,304   5.63
    Short-term 
      borrowing         8,942       148   6.62      11,023         531   6.42
    Notes payable      20,697       356   6.88      20,380       1,042   6.82
                      -------     -----   ----     -------      ------  -----
      Total interest-
        bearing 
        liabilities   791,365     8,630   4.36     793,056      25,619   4.31
    Noninterest-
      bearing 
      liabilities:
      Demand 
        deposits      112,686                       108,260
      Other 
        liabilities     9,910                         9,208
      Stockholders' 
        equity        106,275                       101,624
                    ---------                     ---------
        Total liabilities 
          and stockholders'
          equity   $1,020,236                    $1,012,148
                   ==========                    ==========
Net interest 
  income and margin               $8,338  3.57%                $24,626   3.54%
                                  ======  ====                 =======   ====
</TABLE>                                             
Interest income is adjusted to taxable equivalents for the tax-exempt assets 
based upon a Federal income tax rate of 34% for 1998.  The fully taxable 
equivalent adjustment to interest income for the three and nine months
ended September 30, 1998 was $188 and $573, respectively.  The average 
balance on nonaccrual loans is included in the total loans category.  
The average balances do not include the effect of SFAS No. 115.
  
<PAGE>                                             
ANALYSIS OF NET INTEREST INCOME                                             
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
                                          
<TABLE>                                             
<CAPTION>                                             
                          THREE MONTHS ENDED           NINE MONTHS ENDED    
(DOLLARS IN               SEPTEMBER 30, 1997           SEPTEMBER 30, 1997
 THOUSANDS)           -------------------------     -------------------------
                      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            $1,399      $ 11    3.15%     $2,032         $57   3.74%
     Taxable 
       securities     386,444     6,094    6.31     392,795      18,049   6.13
     Nontaxable 
       securities      19,939       600   12.04      19,880       1,801  12.08
     Loans            510,244    10,728    8.41     517,382      32,324   8.33
                      -------    ------   -----     -------      ------  -----
       Total
         interest-earning 
         assets       918,026    17,433    7.60     932,089      52,231   7.47
   Noninterest-earning 
     assets:
     Cash and due 
       from banks      26,486                        25,835
    Allowance for 
       loan losses     (7,953)                       (8,024)
     Other assets      66,650                        66,465
                      -------                       -------
       Total 
         assets    $1,003,209                    $1,016,365
                   ==========                    ==========
LIABILITIES AND                                              
STOCKHOLDERS' EQUITY:                                             
  Interest-bearing 
    liabilities:                                             
    Interest-bearing
      demand deposits  $88,315      $449   2.03%     $88,693      $1,359   2.04%
     Savings deposits  243,080     1,779   2.93      245,771       5,337   2.89
     Money market 
       deposits         45,521       389   3.42       47,583       1,229   3.44
     Other time 
       deposits        370,374     5,271   5.69      379,432      15,966   5.61
     Short-term 
       borrowing        29,802       456   6.13       27,632       1,241   5.99
     Notes payable      22,254       407   7.32       28,479       1,511   7.08
                      --------    ------  -----      -------      ------   ----
       Total 
         interest-bearing 
         liabilities   799,346     8,751   4.38      817,590      26,643   4.34
  Noninterest-bearing 
    liabilities:
     Demand deposits    100,495                                   97,872
     Other 
       liabilities        8,342                                    6,963
     Stockholders' 
       equity            95,026                                   93,940
                        -------                                  -------
       Total liabilities 
       and stockholders' 
       equity        $1,003,209                   $1,016,365
                     ==========                   ==========
Net interest income
  and margin                       $8,682  3.78%                 $25,588   3.66%
                                   ======  ====                   ======   ====

 
</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 nine months
ended September 30, 1997 was $220 and $660, respectively.  The average
balance on nonaccrual loans is included in the total loans category.
The average balances do not include the effect of SFAS No. 115.

<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.
  
<TABLE>
<CAPTION>
                                 DESCRIPTION NO.
                    EXHIBIT      UNDER ITEM 601          EXHIBIT 
                    NUMBER      OF REGULATION S-K      DESCRIPTION
<S>                 <C>         <C>                    <C>
                      1               (20)          Report furnished to
                                                    securities holders.
                                                    Third Quarter Report.   
  
  
                     27               (27)          Financial Data Schedule.      
</TABLE>
  
     (b)  Reports on Form 8-K.
  
          None.
<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:  OCTOBER 30, 1998                       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