**FORM        10-K**

**[X]        Annual Report Pursuant to section 13 or 15(d) of the Securities Exchange        Act of        1934**

**[        ] Transition Report Pursuant to section 13 or 15(d) of the Securities Exchange        Act of 1934**

**MERCHANTS        AND MANUFACTURERS BANCORPORATION, INC.**

| Wisconsin                                                                       | 39-1413328                                               |
|---------------------------------------------------------------------------------|----------------------------------------------------------|
| (State                  or other jurisdiction of incorporation or organization) | (I.R.S.                  Employer Identification Number) |

**Common        Stock, par value $1.00 per share**

**DOCUMENTS        INCORPORATED BY REFERENCE**

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**MERCHANTS        AND MANUFACTURERS BANCORPORATION,        INC.**

*********

**ANNUAL        REPORT ON FORM 10-K**

**FOR        THE YEAR ENDED DECEMBER 31, 2006**

**Part        I**
** **

| Item                  1.  | Business                                                                              | 4  |
|---------------------------|---------------------------------------------------------------------------------------|----|
| Item                  1A. | Risk                  Factors                                                         | 9  |
| Item                  1B. | Unresolved                  Staff Comments                                            | 13 |
| Item                  2.  | Properties                                                                            | 13 |
| Item                  3.  | Legal                  Proceedings                                                    | 14 |
| Item                  4.  | Submission                  of Matters to a Vote of Security                  Holders | 14 |

**Part        II**

| Item                  5.  | Market                  for Registrant’s Common Equity, Related Stockholder                  Matters and IssuerPurchases                  of Equity Securities     |  14 |
|---------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| Item                  6.  | Selected                  Financial Data                                                                                                                                 | 15       |
| Item                  7.  | Management's                  Discussion and Analysis of Financial                  Condition and Results ofOperations                                                   |  17 |
| Item                  7A. | Quantitative                  and Qualitative Disclosures About                  Market Risk                                                                             | 30       |
| Item                  8.  | Financial                  Statements and Supplementary                  Data                                                                                            | 31       |
|                      | Report                  of Independent Registered Public                  Accounting Firm on                  Internal Control over Financial                  Reporting |  32 |
|                      | Report                  of Independent Registered Public                  Accounting Firmon                  Consolidated Financial                  Statements          |  34 |
|                      | Consolidated                  Balance Sheets                                                                                                                             | 35       |
|                      | Consolidated                  Statements of Income                                                                                                                       | 36       |
|                      | Consolidated                  Statements of Changes in                  Stockholders’ Equity                                                                       | 37       |
|                      | Consolidated                  Statements of Cash                  Flows                                                                                                  | 38       |
|                      | Notes                  to Consolidated Financial                  Statements                                                                                             | 40       |
| Item                  9.  | Changes                  in and Disagreements with Accountants on Accounting                  and Financial Disclosure                                                   |  68 |
| Item                  9A. | Controls                  and Procedures                                                                                                                                 | 68       |
| Item                  9B. | Other                  Information                                                                                                                                       | 69       |

**Part        III**

| Item                  10. | Directors,                  Executive Officers and Corporate                  Governance                                                          | 69       |
|---------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| Item                  11. | Executive                  Compensation                                                                                                           | 69       |
| Item                  12  | Security                  Ownership of Certain Beneficial Owners and                  Management and Related Stockholder                  Matters |  70 |
| Item                  13. | Certain                  Relationships and Related Transactions, and                  Director Independence                                       | 70       |
| Item                  14. | Principal                  Accountant Fees and Services                                                                                           | 70       |

**Part        IV**

| Item                  15. | Exhibits                  and Financial Statement                  Schedules | 71 |
|---------------------------|------------------------------------------------------------------------------|----|
|                      | Signatures                                                                   | 72 |

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**Special        Note Regarding Forward-Looking Statements**

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**PART        I**

**Item        1. Business**

**General**

**Growth        Strategy**

**Acquisitions.**

**Internal        growth.**

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**Non-interest        income. **

**Our        Bank Subsidiaries**

** **

|    **Bank**                |    **Year                  Organized** |   |    **Year                  Acquired** |                                      |   **Total                  Assets at****December                  31, 2006** |   |    **Communities                  Served**                                                                                                                                                                                             |   |   **Number                  of****Facilities** |
|-------------------------------------------|-------------------------------------------------------|--------|------------------------------------------------------|-------------------------------------------|----------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                      |                                                  |   |                                                 | *(Dollars                  in Thousands)* |                                                                                   |   |                                                                                                                                                                                                                                                  |
| Lincoln                  State Bank       | 1919                                                  |   | 1983                                                 |                                      | $487,318                                                                               |   | Milwaukee,                  WIMuskego,                  WIBrookfield,                  WIGreenfield,                  WIHales                  Corners, WINew                  Berlin, WIPewaukee,                  WIWest                  Allis, WI |   | 82121212                                                 |
|                                      |                                                  |   |                                                 |                                      |                                                                                   |   |                                                                                                                                                                                                                                                  |   |                                                     |
| Grafton                  State Bank       | 1906                                                  |   | 1999                                                 |                                      | $182,651                                                                               |   | Grafton,                  WICedarburg,                  WISaukville,                  WI                                                                                                                                                              |   | 211                                                      |
|                                      |                                                  |   |                                                 |                                      |                                                                                   |   |                                                                                                                                                                                                                                                  |   |                                                     |
| Franklin                  State Bank      | 1982                                                  |   | 1984                                                 |                                      | $92,853                                                                                |   | Franklin,                  WI                                                                                                                                                                                                                         |   | 3                                                        |
|                                      |                                                  |   |                                                 |                                      |                                                                                   |   |                                                                                                                                                                                                                                                  |   |                                                     |
| Community                  Bank Financial | 1989                                                  |   | 2001                                                 |                                      | $99,907                                                                                |   | Oconto                  Falls, WIGillett,                  WILittle                  Suamico, WICecil,                  WIMountain,                  WI                                                                                               |   | 11111                                                    |
|                                      |                                                  |   |                                                 |                                      |                                                                                   |   |                                                                                                                                                                                                                                                  |   |                                                     |
| Fortress                  Bank            | 1905                                             |   | 2002                                                 |                                      | $171,515                                                                               |   | Westby,                  WICoon                  Valley, WIWest                  Salem, WIChaseburg,                  WIPrairie                  du Chien, WILaCrosse,                  WI                                                            |   | 211121                                                   |
|                                      |                                                  |   |                                                 |                                      |                                                                                   |   |                                                                                                                                                                                                                                                  |   |                                                     |
| Fortress                  Bank of Cresco  | 1996                                                  |   | 2002                                                 |                                      | $81,824                                                                                |   | Cresco,                  IA                                                                                                                                                                                                                           |   | 1                                                        |
|                                      |                                                  |   |                                                 |                                      |                                                                                   |   |                                                                                                                                                                                                                                                  |   |                                                     |
| Fortress                  Bank Minnesota  | 1903                                                  |   | 2002                                                 |                                      | $56,526                                                                                |   | Houston,                  MNWinona,                  MN                                                                                                                                                                                               |   | 11                                                       |
|                                      |                                                  |   |                                                 |                                      |                                                                                   |   |                                                                                                                                                                                                                                                  |   |                                                     |
| The                  Reedsburg Bank       | 1867                                                  |   | 2003                                                 |                                      | $218,291                                                                               |   | Reedsburg,                  WINorth                  Freedom, WI                                                                                                                                                                                      |   | 21                                                       |
|                                      |                                                  |   |                                                 |                                      |                                                                                   |   |                                                                                                                                                                                                                                                  |   |                                                     |
| Wisconsin                  State Bank     | 1905                                                  |   | 2004                                                 |                                      | $97,417                                                                                |   | Random                  Lake, WIBelgium,                  WISheboygan                  Falls, WI                                                                                                                                                      |   | 111                                                      |

**Our        Banks**

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*Lincoln        State Bank. *
** **
** **

*Grafton        State Bank. *
** **

*Franklin        State Bank. *

*Community        Bank Financial*

*Fortress        Bank. *

*Fortress        Bank of Cresco. *

*Fortress        Bank Minnesota. *

*The        Reedsburg Bank. *

*Wisconsin        State Bank. *

**Our        Operating Subsidiaries**

*Community        Financial Group Financial Services, Inc.*
* *

*Community        Financial Group Mortgage, Inc.*

*Lincoln        Neighborhood Redevelopment Corporation*
* *

*Merchants        Merger Corp.*

*Merchants        New Merger Corp.*

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**Other        Subsidiaries**

**Competition**

,        types        and quality of services provided and convenience of the locations.

**Employees**

**Supervision        and Regulation**

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**Anti-Money        Laundering Laws**

**Bank        Holding Company Regulation**

*Investments        and Activities*

holding        company; and

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*Source        of Strength*

*Capital        Requirements*

*Dividends*

**Bank        Regulations**

**Available        Information**

**Item        1A. Risk Factors**

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**Risks        Related to Our Business**

**Changes        in interest rates may adversely affect our earnings and cost of        funds.**

**Our        allowance for loan losses may prove to be insufficient to absorb potential        losses in our loan portfolio. **

**Our        internal control over financial reporting may be ineffective.**

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**Because        our business is concentrated in certain local markets, a downturn in the        economy        in such markets may adversely affect our business.**

** **

**We        may be adversely affected by government monetary policy.**

|   | · | engaging                  in open market transactions in United States government                  securities; |
|--------|--------|----------------------------------------------------------------------------------------------------------------|

|   | · | setting                  the discount rate on member bank borrowings, and |
|--------|--------|---------------------------------------------------------------------------|

|   | · | determining                  reserve requirements. |
|--------|--------|----------------------------------------------------|

**Our        business may be adversely affected by the highly regulated environment in        which        we operate.**

**Our        future success will depend on our ability to compete effectively in the highly        competitive banking industry.**

|   | · | other                  commercial banks; |
|--------|--------|------------------------------------------|

|   | · | savings                  banks; |
|--------|--------|---------------------------------|

|   | · | credit                  unions; |
|--------|--------|---------------------------------|

|   | · | mortgage                  brokers; |
|--------|--------|------------------------------------|

|   | · | small-loan                  companies; |
|--------|--------|----------------------------------------|

|   | · | insurance                  companies; |
|--------|--------|---------------------------------------|

|   | · | investment                  banking firms; and |
|--------|--------|------------------------------------------------|

|   | · | large                  retail companies. |
|--------|--------|------------------------------------------|

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**We        may not be able to maintain and increase our deposit base and secure adequate        funding.**

**We        may be exposed to risks associated with our acquisition        strategy.**

|   | · | Our                  regulatory capital ratios may be reduced to the extent we use cash                  or debt                  as part or all of the purchase price of                  acquisitions. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A                  number of potential acquirers exist for most acquisition candidates,                  creating intense competition, particularly with respect to price.                  In many                  cases this competition involves organizations with significantly                  greater                  resources than we have available. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  may be exposed to potential asset quality issues of the banks or                  businesses we acquire. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  may be exposed to unknown or contingent liabilities of the banks                  or                  businesses we acquire. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  may have difficulty in properly estimating the value of the banks                  or                  businesses we acquire. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                  purchase price we pay may dilute our tangible book value or earnings                  per                  share in the short and long term. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  may not be able to identify acquisitions on terms acceptable or                  favorable                  to us or we may be unable to obtain the required regulatory approvals                  for                  any proposed acquisitions. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                  process of integrating the systems and procedures of the acquired                  entity                  may be complicated and time consuming to us, and it can also be                  disruptive                  to the customers and employees of the acquired business and it                  can divert                  the attention of our management away from operating our business.                  If the                  integration process is not conducted successfully and with minimal                  disruption to the business and its customers and employees, we                  may not                  realize the anticipated economic benefits of particular acquisitions                  within the expected time frame, and we may lose customers or employees                  of                  the acquired business. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  may be unable to realize the expected revenue and profitability,                  including                  cost savings, anticipated from the                  acquisition. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**We        may incur significant costs if we foreclose on environmentally contaminated        real        estate. **

**We        rely upon our information systems to successfully operate our        business.**

|   | · | expose                  us to claims from third parties or customers or could cause us                  to expend                  significant resources and time to fix such breaches, which could                  negatively impact our customer                  relationships; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | reduce                  our ability to serve our customers and benefit from the initial                  efficiencies created by the implementation of such systems; or |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**Risks        Related to an Investment in our Common Stock**

**To        the extent we must rely on dividends from our subsidiaries to pay any dividends        on our shares of our common stock, our available cash flow may be restricted        and        ability to pay dividends on our common stock may be        limited.**

|   | · | federal                  and state regulatory limitations, generally based on current and                  retained                  earnings and capital maintenance requirements, imposed by various                  bank                  regulatory agencies; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | profitability,                  financial condition and capital expenditures and other cash flow                  requirements of the subsidiaries;                  and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | prior                  claims of creditors of the                  subsidiaries. |
|--------|--------|----------------------------------------------------------------------------------|

**The        trading price of our common stock has been volatile and investors in our        common        stock may experience substantial losses.**

|   | · | our                  failure to meet the performance estimates of securities analysts,                  changes                  in the financial estimates of our income and operating results                  or buy/sell                  recommendations by securities                  analysts; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                  timing of announcements by us or our competitors concerning significant                  acquisitions, financial performance or the introduction of new                  innovative                  products or services; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | fluctuation                  in our quarterly operating results; |
|--------|--------|------------------------------------------------------------------|

|   | · | substantial                  sales of our common stock; or |
|--------|--------|------------------------------------------------------------|

|   | · | general                  stock market or other economic                  conditions. |
|--------|--------|--------------------------------------------------------------------------------------|

**Various        restrictions in our articles of incorporation, by-laws and banking law could        prevent or delay a change in control of us which is not supported by our        board        of directors.**

**Item        1B. Unresolved Staff Comments**

**Item        2**.        **Properties**

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**Item        3**.**Legal Proceedings**

**Item        4**.**Submission of Matters to a Vote of Security Holders**

**PART        II**

**Item        5. Market for Registrant’s Common Equity, Related Stockholder        Matters and Issuer Purchases of Equity Securities**

|                                    |   | Quotation                  or Price  |
|-----------------------------------------|--------|-------------------------------------------|
| Quarter                  Ended          |   |                                      | Low                  Bid |   |   | High                  Bid |   |
| March                  31, 2005         |   | $                                         | 34.75 |   | $ | 37.80 |   |
| June                  30, 2005          |   |                                      | 35.00 |   |   | 40.00 |   |
| September                  30, 2005     |   |                                      | 36.25 |   |   | 39.25 |   |
| December                  31, 2005      |   |                                      | 36.90 |   |   | 39.00 |   |
|                                    |   |                                      |   |   |   |   |   |
| **March                  31, 2006**     |   | **$**                                     | **34.00** |   | **$** | **38.00** |   |
| **June                  30, 2006**      |   |                                      | **33.00** |   |   | **38.50** |   |
| **September                  30, 2006** |   |                                      | **32.05** |   |   | **35.00** |   |
| **December                  31, 2006**  |   |                                      | **31.05** |   |   | **34.50** |   |

|     Period                                  |   |   | TotalNumberof                  SharesPurchased |   |   | AveragePricePaid                  PerShare |   |   | Total                  Numberof                  Shares PurchasedAs                  Part of PubliclyAnnounced                  Program |   |   | Maximum                  Numberof                  Shares that MayYet                  be PurchasedUnder                  the Program |   |
|-----------------------------------------------------------------|--------|--------|------------------------------------------------|--------|--------|--------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                            |   |   |                                           |   |   |                                       |   |   |                                                                                                                                    |   |   |                                                                                                                                  |   |
| October 1,                  2006 - October 31, 2006   |   |   | -                                              |   | $      | -                                          |   |   | -                                                                                                                                       |   |   | -                                                                                                                                     |   |
| November 1,                  2006 - November 30, 2006 |   |   | -                                              |   |   | -                                          |   |   | -                                                                                                                                       |   |   | -                                                                                                                                     |   |
| December 1,                  2006 - December 31, 2006 |   |   | 10,000                                         |   | $      | 31.60                                      |   |   | -                                                                                                                                       |   |   | -                                                                                                                                     |   |
| Total                                                           |   |   | 10,000                                         |   | $      | 31.60                                      |   |   | -                                                                                                                                       |   |   | -                                                                                                                                     |   |

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** **
**Item        6. Selected Financial        Data**

|                                                                                |   | At                  or for the Year Ended December 31,            |          |   |   |
|--------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|---------------|--------|--------|
|                                                                           |   |                                                                   | **2006**      |   |   | 2005 |   |   | 2004(1) |   |   | 2003(2) |   |   | 2002(3) |   |
|                                                                           |   | *(Dollars                  in Thousands, Except Per Share Data) * |
| **Income                  Statement Data:**                                    |   |                                                                   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Interest income (taxable equivalent) (4)               |   | **$**                                                                  | **92,926**    |   | $      | 78,882 |   | $ | 63,058 |   | $ | 51,871 |   | $ | 40,421 |   |
|                    Interest expense                                       |   |                                                                   | **45,480**    |   |   | 30,268 |   |   | 19,633 |   |   | 15,871 |   |   | 13,106 |    |
|                    Net interest income                                    |   |                                                                   | **47,446**    |   |   | 48,614 |   |   | 43,425 |   |   | 36,000 |   |   | 27,315 |   |
|                    Provision for loan losses                              |   |                                                                   | **3,060**     |   |   | 3,951 |   |   | 1,793 |   |   | 1,311 |   |   | 1,156 |    |
|                    Net interest income after provision for loan losses    |   |                                                                   | **44,386**    |   |   | 44,663 |   |   | 41,632 |   |   | 34,689 |   |   | 26,159 |   |
|                    Noninterest income                                     |   |                                                                   | **14,046**    |   |   | 13,914 |   |   | 11,537 |   |   | 11,163 |   |   | 6,127 |   |
|                    Noninterest expense                                    |   |                                                                   | **51,514**    |   |   | 49,898 |   |   | 45,839 |   |   | 32,736 |   |   | 22,139 |   |
|                    Income before provision for income taxes               |   |                                                                   | **6,918**     |   |   | 8,679 |   |   | 7,330 |   |   | 13,116 |   |   | 10,147 |   |
|                    Provision for income taxes                             |   |                                                                   | **1,611**     |   |   | 2,242 |   |   | 2,258 |   |   | 4,067 |   |   | 3,244 |   |
|                    Less taxable equivalent adjustment                     |   |                                                                   | **1,311**     |   |   | 1,339 |   |   | 1,070 |   |   | 821 |   |   | 518 |   |
|                    Net income                                             |   | **$**                                                                  | **3,996**     |   | $      | 5,098 |   | $ | 4,002 |   | $ | 8,228 |   | $ | 6,385 |   |
| **Dividends:**                                                                 |   |                                                                   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Common stock                                           |   | **$**                                                                  | **2,665**     |   | $      | 2,656 |   | $ | 2,523 |   | $ | 2,213 |   | $ | 1,790 |   |
|                    Dividends per share                                    |   |                                                                   | **0.72**      |   |   | 0.72 |   |   | 0.72 |   |   | 0.68 |   |   | 0.72 |   |
|                    Dividend payout ratio                                  |   |                                                                   | **66.69**     | **%**  |   | 52.10 | % |   | 63.04 | % |   | 26.90 | % |   | 28.03 | % |
| **Per                  Share Data:**(5)                                        |   |                                                                   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **                    **Net                  income-Basic            |   | **$**                                                                  | **1.08**      |   | $      | 1.39 |   | $ | 1.16 |   | $ | 2.58 |   | $ | 2.30 |   |
| **                    **Net                  income-Diluted          |   |                                                                   | **1.08**      |   |   | 1.38 |   |   | 1.15 |   |   | 2.56 |   |   | 2.29 |   |
| **  **Book                  value                                    |   |                                                                   | **25.64**     |   |   | 25.18 |   |   | 24.97 |   |   | 24.04 |   |   | 21.92 |   |
| **Balance                  Sheet Data:**                                       |   |                                                                   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Investment securities                                  |   | **$**                                                                  | **158,253**   |   | $      | 173,639 |   | $ | 172,564 |   | $ | 156,597 |   | $ | 130,125 |   |
|                    Loans, net                                             |   |                                                                   | **1,193,658** |   |   | 1,120,616 |   |   | 1,028,059 |   |   | 847,938 |   |   | 657,775 |   |
|                    Total assets                                           |   |                                                                   | **1,505,940** |   |   | 1,458,948 |   |   | 1,357,065 |   |   | 1,145,607 |   |   | 909,405 |   |
|                    Total deposits                                         |   |                                                                   | **1,165,237** |   |   | 1,160,163 |   |   | 1,033,046 |   |   | 911,948 |   |   | 729,456 |   |
|                    Short-term borrowings                                  |   |                                                                   | **59,710**    |   |   | 44,332 |   |   | 61,322 |   |   | 34,007 |   |   | 18,088 |   |
|                    Long-term borrowings                                   |   |                                                                   | **118,521**   |   |   | 101,107 |   |   | 111,054 |   |   | 59,528 |   |   | 72,322 |   |
|                    Junior subordinated debt owed to unconsolidated trusts |   |                                                                   | **53,611**    |   |   | 46,394 |   |   | 46,394 |   |   | 36,084 |   |   | 10,310 |   |
|                    Total stockholders’ equity                       |   |                                                                   | **94,297**    |   |   | 93,225 |   |   | 91,739 |   |   | 79,974 |   |   | 69,329 |   |
| **Earnings                  Ratios:**                                     |   |                                                                   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Return on average total assets                         |   |                                                                   | **0.27**      | **%**  |   | 0.36 | % |   | 0.33 | % |   | 0.86 | % |   | 0.99 | % |
|                    Return on average total stockholders’ equity     |   |                                                                   | **4.23**      |   |   | 5.41 |   |   | 4.69 |   |   | 11.29 |   |   | 11.55 |   |
|                    Net interest margin (6)                                |   |                                                                   | **3.46**      |   |   | 3.75 |   |   | 3.86 |   |   | 4.03 |   |   | 4.48 |   |
|                    Efficiency ratio (7)                                   |   |                                                                   | **85.60**     |   |   | 81.55 |   |   | 85.06 |   |   | 70.64 |   |   | 67.24 |   |
| **Asset                  Quality Ratios:**                                     |   |                                                                   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Allowance for loan losses to loans                     |   |                                                                   | **1.06**      |   |   | 1.15 |   |   | 1.02 |   |   | 1.07 |   |   | 1.15 |   |
|                    Nonaccrual loans to loans                              |   |                                                                   | **1.22**      |   |   | 0.46 |   |   | 0.85 |   |   | 0.62 |   |   | 0.48 |   |
|                    Allowance for loan losses to nonperforming loans (8)   |   |                                                                   | **86.87**     |   |   | 248.73 |   |   | 119.74 |   |   | 172.96 |   |   | 239.24 |   |
|                    Nonperforming assets to total assets (9)               |   |                                                                   | **1.01**      |   |   | 0.48 |   |   | 0.75 |   |   | 0.63 |   |   | 0.61 |   |
|                    Net loan charge-offs to average loans                  |   |                                                                   | **0.28**      |   |   | 0.14 |   |   | 0.14 |   |   | 0.14 |   |   | 0.21 |   |
| **Capital                  Ratios:**                                           |   |                                                                   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Total stockholders’ equity to total assets       |   |                                                                   | **6.26**      |   |   | 6.39 |   |   | 6.76 |   |   | 6.99 |   |   | 7.63 |   |
|                    Total capital to risk-weighted assets ratio            |   |                                                                   | **10.09**     |   |   | 10.04 |   |   | 10.14 |   |   | 10.23 |   |   | 10.71 |   |
|                    Tier 1 capital to risk-weighted assets ratio           |   |                                                                   | **7.42**      |   |   | 7.77 |   |   | 7.83 |   |   | 8.27 |   |   | 9.63 |   |
|                    Tier 1 capital to average assets ratio                 |   |                                                                   | **6.27**      |   |   | 6.37 |   |   | 6.62 |   |   | 7.19 |   |   | 9.41 |   |

| 1) | Year-end                  data for 2004 includes Random Lake Bancorp Limited and subsidiaries                  acquired by Merchants on August 12,                  2004. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2) | Year-end                  data for 2003 includes Reedsburg Bancorporation, Inc. and subsidiaries                  acquired by Merchants on November 1,                  2003. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3) | Year-end                  data for 2002 includes Fortress Bancshares, Inc. and subsidiaries                  acquired                  by Merchants on November 30, 2002. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4) | Taxable-equivalent                  adjustments to interest income involve the conversion of tax-exempt                  sources of interest income to the equivalent amounts of interest                  income                  that would be necessary to derive the same net return if the investments                  had been subject to income taxes. A 34% incremental income tax                  rate,                  consistent with our historical experience, is used in the conversion                  of                  tax-exempt interest income to a tax-equivalent                  basis. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5) | All                  per share information presented in this report has been retroactively                  restated to give effect to the 10% stock dividend declared in November                  2003, as if it occurred as of January 1,                  2002. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6) | Net                  interest margin is the ratio of net interest income (expressed                  on a                  tax-equivalent basis) to average interest-earning                  assets. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7) | Efficiency                  ratio is the ratio of noninterest expense to the sum of net interest                  income and noninterest income. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------|

| 8) | Nonperforming                  loans consist of nonaccrual loans and certain loans with restructured                  terms. |
|----|------------------------------------------------------------------------------------------------------------------------------|

| 9) | Nonperforming                  assets consist of nonperforming loans and other real                  estate. |
|----|--------------------------------------------------------------------------------------------------------------|

----

Table            of Contents

|                                                              |   | For                  the Year Ended December 31, |       |
|-------------------------------------------------------------------|--------|--------------------------------------------------|------------|
|                                                              |   | **2006**                                         |       | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
|                                                              |   |                                             |       | *(Dollars                  in Thousands)* |   |   |   |
| Net                  interest income                              |   | **$**                                            | **46,135** |   | $ | 47,275 |   | $ | 42,355 |   | $ | 35,179 |   | $ | 26,797 |   |
| Tax-equivalent                  adjustment to net interest income |   |                                             | **1,311**  |   |   | 1,339 |   |   | 1,070 |   |   | 821 |   |   | 518 |   |
| Net                  interest income, fully tax-equivalent basis  |   | **$**                                            | **47,446** |   | $ | 48,614 |   | $ | 43,425 |   | $ | 36,000 |   | $ | 27,315 |   |

**Quarterly        Financial Data**

|                                                                |   |  Three                  Months Ended 2006 |   | Three                  Months Ended 2005 |   |
|---------------------------------------------------------------------|--------|------------------------------------------------|--------|------------------------------------------|--------|
|                                                                |   | ** **December ** **             |   | ** **September                      |   | June |   |  March |   | December                  (1) |   |  September |   |  June |   |  March |   |
|                                                                |   |                                           |   |                                     |   |  *(Dollars                  in Thousands, Except Per Share Data)*    |   |   |   |   |   |
|                                                                |   |                                           |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Interest                income (taxable‑equivalent) (2) |   | $                                              | 24,058 |                                     | $      | $23,909 |   | $ | 23,273 |   | $ | 21.686 |   | $ | 21,237 |   | $ | 20,235 |   | $ | 19,241 |   | $ | 18,079 |   |
|  Interest                expense                               |   |                                           | 12,233 |                                     |   | 11,901 |   |   | 11,328 |   |   | 10,018 |   |   | 8,966 |   |   | 8,006 |   |   | 7,115 |   |   | 6,181 |   |
|                    Net interest income               |   |                                           | 11,825 |                                     |   | 12,008 |   |   | 11,945 |   |   | 11,668 |   |   | 12,271 |   |   | 12,319 |   |   | 12,126 |   |   | 11,898 |   |
|  Provision                for loan losses                      |   |                                           | 1,890  |                                     |   | 390 |   |   | 390 |   |   | 390 |   |   | 2,781 |   |   | 390 |   |   | 390 |   |   | 390 |   |
|  Noninterest                income                             |   |                                           | 3,411  |                                     |   | 3,601 |   |   | 3,267 |   |   | 3,767 |   |   | 3,242 |   |   | 3,147 |   |   | 3,432 |   |   | 4,093 |   |
|  Noninterest                expense                            |   |                                           | 13,222 |                                     |   | 12,541 |   |   | 12,495 |   |   | 13,256 |   |   | 12,713 |   |   | 12,183 |   |   | 12,425 |   |   | 12,577 |   |
|                    Income (loss) before taxes        |   |                                           | 124    |                                     |   | 2,678 |   |   | 2,327 |   |   | 1,789 |   |   | 19 |   |   | 2,893 |   |   | 2,743 |   |   | 3,024 |   |
|  Provision                for income taxes                     |   |                                           | (199   | )                                        |   | 790 |   |   | 609 |   |   | 411 |   |   | (234 | ) |   | 821 |   |   | 794 |   |   | 861 |   |
|  Less                taxable‑equivalent adjustment       |   |                                           | 300    |                                     |   | 310 |   |   | 351 |   |   | 350 |   |   | 327 |   |   | 342 |   |   | 310 |   |   | 360 |   |
|                    Net income (loss)                 |   | $                                              | 23     |                                     | $      | 1,578 |   | $ | 1,367 |   | $ | 1,028 |   | $  | (74 | ) | $ | 1,730 |   | $ | 1,639 |   | $ | 1,803 |   |
|  Basic                earnings (loss) per share                |   | $                                              | 0.01   |                                     | $      | 0.43 |   | $ | 0.37 |   | $ | 0.28 |   | $  | (0.02 | )  | $ | 0.47 |   | $ | 0.45 |   | $ | 0.49 |   |
|  Diluted                earnings (loss) per share              |   | $                                              | 0.01   |                                     | $      | 0.43 |   | $ | 0.37 |   | $ | 0.28 |   | $  | (0.02 | ) | $ | 0.47 |   | $ | 0.44 |   | $ | 0.49 |   |
|  Dividends                per share                            |   | $                                              | 0.18   |                                     | $      | 0.18 |   | $ | 0.18 |   | $ | 0.18 |   | $ | 0.18 |   | $ | 0.18 |   | $ | 0.18 |   | $ | 0.18 |   |

**Fourth        Quarter Results**

----

Table            of Contents

**Item        7. Management's Discussion and Analysis of Financial Condition and Results        of****Operations**

**General**

**Results        of Operations**

**Net        Interest Income**

----

Table            of Contents

|                                                                                                               |   | At                  or for the Year Ended December 31, |          |
|--------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|---------------|
|                                                                                                               |   | **2006**                                               |          | 2005 |   | 2004 |   |
|                                                                                                               |   | **Average                  Balance**                   |          |  **Interest** |   | **Average                  Rate** |   | Average                  Balance |   |  Interest |   | Average                  Rate |   | Average                  Balance |   |  Interest |   | Average                  Rate |   |
|                                                                                                               |   | *(Dollars                  in Thousands)*              |          |
| **Assets**                                                                                                         |   |                                                   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans,                  net (1)(2)                                                                                 |   | **$**                                                  | **1,175,526** |   | **$** | **83,562** |   |   | **7.11** | **%** | $ | 1,090,879 |   | $ | 69,546 |   |   | 6.38 | % | $ | 929,412 |   | $ | 54,908 |   |   | 5.91 | % |
| Loans                  exempt from federal income taxes (3)                                                        |   |                                                   | **3,250**     |   |   | **217** |   |   | **6.67** | **%** |   | 3,616 |   |   | 253 |   |   | 7.00 | % |   | 4,082 |   |   | 306 |   |   | 7.50 | % |
| Taxable                  investment securities (4)                                                                 |   |                                                   | **32,196**    |   |   | **1,131** |   |   | **3.51** | **%** |   | 36,385 |   |   | 1,617 |   |   | 4.44 | % |   | 40,032 |   |   | 1,671 |   |   | 4.17 | % |
| Mortgage-related                  securities (4)                                                                   |   |                                                   | **89,265**    |   |   | **4,056** |   |   | **4.54** | **%** |   | 89,821 |   |   | 3,534 |   |   | 3.93 | % |   | 91,239 |   |   | 3,176 |   |   | 3.48 | % |
| Investment                  securities exempt from federal income taxes (3)(4)                                     |   |                                                   | **64,622**    |   |   | **3,638** |   |   | **5.63** | **%** |   | 66,009 |   |   | 3,686 |   |   | 5.58 | % |   | 48,614 |   |   | 2,842 |   |   | 5.85 | % |
| Other                  securities                                                                                  |   |                                                   | **6,649**     |   |   | **322** |   |   | **4.84** | **%** |   | 8,433 |   |   | 246 |   |   | 2.92 | % |   | 12,181 |   |   | 155 |   |   | 1.27 | % |
| Interest                  earning assets                                                                           |   |                                                   | **1,371,508** |   |   | **92,926** |   |   | **6.78** | **%** |   | 1,295,143 |   |   | 78,882 |   |   | 6.09 | % |   | 1,125,560 |   |   | 63,058 |   |   | 5.60 | % |
| Non                  interest earning assets                                                                       |   |                                                   | **123,110**   |   |   |   |   |   |   |   |   | 125,640 |   |   |   |   |   |   |   |   | 99,916 |   |   |   |   |   |   |   |
| Average                  assets                                                                                    |   | **$**                                                  | **1,494,618** |   |   |   |   |   |   |   | $ | 1,420,783 |   |   |   |   |   |   |   | $ | 1,225,476 |   |   |   |   |   |   |   |
|                                                                                                               |   |                                                   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and Stockholders'****Equity**                                                       |   |                                                   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                  deposits                                                                                      |   | **$**                                                  | **104,024**   |   |   | **820** |   |   | **0.79** | **%** | $ | 98,183 |   |   | 571 |   |   | 0.58 | % | $ | 88,067 |   |   | 420 |   |   | 0.48 | % |
| Money                  market deposits                                                                             |   |                                                   | **238,034**   |   |   | **7,190** |   |   | **3.02** | **%** |   | 237,947 |   |   | 4,016 |   |   | 1.69 | % |   | 260,275 |   |   | 2,889 |   |   | 1.11 | % |
| Savings                  deposits                                                                                  |   |                                                   | **126,942**   |   |   | **1,653** |   |   | **1.30** | **%** |   | 136,581 |   |   | 1,321 |   |   | 0.97 | % |   | 128,954 |   |   | 1,094 |   |   | 0.85 | % |
| Time                  deposits                                                                                     |   |                                                   | **534,757**   |   |   | **22,582** |   |   | **4.22** | **%** |   | 472,621 |   |   | 14,741 |   |   | 3.12 | % |   | 354,332 |   |   | 8,450 |   |   | 2.38 | % |
| Short-term                  borrowings                                                                             |   |                                                   | **77,705**    |   |   | **4,269** |   |   | **5.49** | **%** |   | 59,493 |   |   | 2,171 |   |   | 3.65 | % |   | 40,420 |   |   | 838 |   |   | 2.07 | % |
| Long-term                  borrowings                                                                              |   |                                                   | **120,176**   |   |   | **5,239** |   |   | **4.36** | **%** |   | 112,074 |   |   | 4,294 |   |   | 3.83 | % |   | 96,617 |   |   | 3,546 |   |   | 3.67 | % |
| Junior                  subordinated debt owed to unconsolidated trusts                                            |   |                                                   | **47,422**    |   |   | **3,727** |   |   | **7.86** | **%** |   | 46,394 |   |   | 3,154 |   |   | 6.80 | % |   | 38,690 |   |   | 2,396 |   |   | 6.19 | % |
| Interest                  bearing liabilities                                                                      |   |                                                   | **1,249,060** |   |   | **45,480** |   |   | **3.64** | **%** |   | 1,163,293 |   |   | 30,268 |   |   | 2.60 | % |   | 1,007,355 |   |   | 19,633 |   |   | 1.95 | % |
| Demand                  deposits and other non interest bearing liabilities                                        |   |                                                   | **151,006**   |   |   |   |   |   |   |   |   | 163,313 |   |   |   |   |   |   |   |   | 132,720 |   |   |   |   |   |   |   |
| Stockholders'                  equity                                                                              |   |                                                   | **94,552**    |   |   |   |   |   |   |   |   | 94,177 |   |   |   |   |   |   |   |   | 85,401 |   |   |   |   |   |   |   |
| Average                  liabilities and stockholders' equity                                                      |   | **$**                                                  | **1,494,618** |   |   |   |   |   |   |   | $ | 1,420,783 |   |   |   |   |   |   |   | $ | 1,225,476 |   |   |   |   |   |   |   |
| Net                  interest spread (5)                                                                           |   |                                                   |          |   | **$** | **47,446** |   |   | **3.13** | **%** |   |   |   | $ | 48,614 |   |   | 3.49 | % |   |   |   | $ | 43,425 |   |   | 3.65 | % |
| Net                  interest earning assets                                                                       |   | **$**                                                  | **122,448**   |   |   |   |   |   |   |   | $ | 131,850 |   |   |   |   |   |   |   | $ | 118,205 |   |   |   |   |   |   |   |
| Net                  interest margin on a fully tax equivalent basis (6)                                           |   |                                                   |          |   |   |   |   |   | **3.46** | **%** |   |   |   |   |   |   |   | 3.75 | % |   |   |   |   |   |   |   | 3.86 | % |
| Net                  interest margin (6)                                                                           |   |                                                   |          |   |   |   |   |   | **3.36** | **%** |   |   |   |   |   |   |   | 3.65 | % |   |   |   |   |   |   |   | 3.76 | % |
| Ratio                  of average interest-earning assets to average interest-bearing                  liabilities |   |                                                   |          |   |   |   |   |   | **1.10** |   |   |   |   |   |   |   |   | 1.11 |   |   |   |   |   |   |   |   | 1.12 |   |

        daily        average loan amounts outstanding.

----

Table            of Contents

| VOLUME,                  RATE AND MIX ANALYSIS OF NET INTEREST INCOME       |   |
|-----------------------------------------------------------------------------|--------|
|                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   | For                  the Year Ended December 31, |   |
|                                                                        |   | **2006                  vs. 2005** |   | 2005                  vs. 2004 |   |
|                                                                        |   | **Change                  Due to Volume** |   | **Change                  Due to Rate** |   | **Total                  Change** |   | Change                  Due to Volume |   | Change                  Due to Rate |   | Total                  Change |   |
|                                                                        |   |   |   |   |   | *(Dollars                  in Thousands)* |   |   |   |   |   |
| Interest-Earning                  Assets:                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans,                  net (1)                                             |   | **$** | **5,646** |   | **$** | **8,370** |   | **$** | **14,016** |   | $ | 10,058 |   | $ | 4,580 |   | $ | 14,638 |   |
| Loans                  exempt from federal income taxes (2)                 |   |   | **(25** | **)** |   | **(11** | **)** |   | **(36** | **)** |   | (33 | ) |   | (20 | ) |   | (53 | ) |
| Taxable                  investment securities                              |   |   | **(172** | **)** |   | **(314** | **)** |   | **(486** | **)** |   | (186 | ) |   | 132 |   |   | (54 | ) |
| Mortgage-related                  securities                                |   |   | **(22** | **)** |   | **544** |   |   | **522** |   |   | (48 | ) |   | 406 |   |   | 358 |   |
| Investment                  securities exempt from federal income taxes (2) |   |   | **(78** | **)** |   | **30** |   |   | **(48** | **)** |   | 965 |   |   | (121 | ) |   | 844 |   |
| Other                  securities                                           |   |   | **(36** | **)** |   | **112** |   |   | **76** |   |   | (28 | ) |   | 119 |   |   | 91 |   |
| Total                  interest-earning assets                              |   | **$** | **5,313** |   | **$** | **8,731** |   | **$** | **14,044** |   | $ | 10,728 |   | $ | 5,096 |   | $ | 15,824 |   |
| Interest-Bearing                  Liabilities:                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                  deposits                                               |   | **$** | **36** |   | **$** | **213** |   | **$** | **249** |   | $ | 52 |   | $ | 99 |   | $ | 151 |   |
| Money                  market deposits                                      |   |   | **2** |   |   | **3,172** |   |   | **3,174** |   |   | (222 | ) |   | 1,349 |   |   | 1,127 |   |
| Savings                  deposits                                           |   |   | **(85** | **)** |   | **417** |   |   | **332** |   |   | 67 |   |   | 160 |   |   | 227 |   |
| Time                  deposits                                              |   |   | **2,124** |   |   | **5,717** |   |   | **7,841** |   |   | 3,273 |   |   | 3,018 |   |   | 6,291 |   |
| Short-term                  borrowings                                      |   |   | **791** |   |   | **1,307** |   |   | **2,098** |   |   | 510 |   |   | 823 |   |   | 1,333 |   |
| Long-term                  borrowings                                       |   |   | **323** |   |   | **622** |   |   | **945** |   |   | 587 |   |   | 161 |   |   | 748 |   |
| Junior                  subordinated debt owed to unconsolidated trusts     |   |   | **71** |   |   | **502** |   |   | **573** |   |   | 508 |   |   | 250 |   |   | 758 |   |
| Total                  interest-bearing liabilities                         |   | **$** | **3,262** |   | **$** | **11,950** |   | **$** | **15,212** |   | $ | 4,775 |   | $ | 5,189 |   | $ | 10,635 |   |
| Net                  change in net interest income                          |   |   |   |   |   |   |   | **$** | **(1,168** | **)** |   |   |   |   |   |   | $ | 5,189 |   |

| (1) | Interest                  earned on loans includes loan fees (which are not material in amount)                  and                  interest income which has been received from borrowers whose loans                  were                  removed from nonaccrual during the period                  indicated. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

        all        years presented in calculating interest income and yields.

**Provision        For Loan Losses**

----

Table            of Contents

**Non-Interest        Income**

|                                                           |   | For                  the Year Ended December 31, |       |
|----------------------------------------------------------------|--------|--------------------------------------------------|------------|
|                                                           |   | **2006**                                         |       | 2005 |   | 2004 |   |
|                                                           |   | *(Dollars                  in Thousands)*        |       |
| Service                  charges on deposit accounts           |   | **$**                                            | **4,509**  |   | $ | 4,229 |   | $ | 3,566 |   |
| Service                  charges on loans                      |   |                                             | **3,595**  |   |   | 3,362 |   |   | 2,154 |   |
| Tax                  fees, brokerage and insurance commissions |   |                                             | **2,052**  |   |   | 1,651 |   |   | 1,547 |   |
| Securities                  gains, net                         |   |                                             | **2**      |   |   | - |   |   | 191 |   |
| Gain                  on sale of loans, net                    |   |                                             | **96**     |   |   | 366 |   |   | 494 |   |
| Net                  gain on sale of premises                  |   |                                             | **160**    |   |   | 286 |   |   | 158 |   |
| Other                                                          |   |                                             | **3,632**  |   |   | 4,020 |   |   | 3,427 |   |
| Total                  non-interest income                     |   | **$**                                            | **14,046** |   | $ | 13,914 |   | $ | 11,537 |   |

----

Table            of Contents

**Non-Interest        Expense**

|                                                |   | For                  the Year Ended December 31, |       |
|-----------------------------------------------------|--------|--------------------------------------------------|------------|
|                                                |   | **2006**                                         |       | 2005 |   | 2004 |   |
|                                                |   | *(Dollars                  in Thousands)*        |       |
| Salaries                  and employee benefits     |   | **$**                                            | **29,879** |   | $ | 28,137 |   | $ | 24,646 |   |
| Premises                  and equipment             |   |                                             | **6,942**  |   |   | 7,119 |   |   | 6,387 |   |
| Marketing                  and business development |   |                                             | **1,978**  |   |   | 2,261 |   |   | 2,321 |   |
| Data                  processing fees               |   |                                             | **3,497**  |   |   | 3,464 |   |   | 2,296 |   |
| Data                  processing conversions        |   |                                             | **-**      |   |   | - |   |   | 573 |   |
| System                  installations               |   |                                             | **-**      |   |   | - |   |   | 830 |   |
| Sarbanes-Oxley                  implementation      |   |                                             | **-**      |   |   | - |   |   | 783 |   |
| Other                                               |   |                                             | **9,218**  |   |   | 8,917 |   |   | 8,003 |   |
| Total                  noninterest expense          |   | **$**                                            | **51,514** |   | $ | 49,898 |   | $ | 45,839 |   |

**Income        Taxes**

**Loans        Receivable**

----

Table            of Contents

|                                                           |   | At                  December 31,          |          |
|----------------------------------------------------------------|--------|-------------------------------------------|---------------|
|                                                           |   | **2006**                                  |          | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
|                                                           |   | *(Dollars                  in Thousands)* |          |
| First                  mortgage:                               |   |                                      |          |   |   |   |   |   |   |   |   |
| Conventional                  single-family residential   |   | **$**                                     | **196,223**   |   | $ | 167,745 |   | $ | 142,926 |   | $ | 113,479 |   | $ | 98,075 |   |
| Commercial                  and multi-family residential  |   |                                      | **497,496**   |   |   | 474,840 |   |   | 436,612 |   |   | 283,433 |   |   | 198,250 |   |
| Construction                                              |   |                                      | **102,461**   |   |   | 81,651 |   |   | 76,267 |   |   | 47,894 |   |   | 32,995 |   |
| Farmland                                                  |   |                                      | **65,398**    |   |   | 52,392 |   |   | 55,710 |   |   | 43,676 |   |   | 20,847 |   |
| Total                  first mortgage loans                    |   |                                      | **861,578**   |   |   | 776,628 |   |   | 711,515 |   |   | 488,482 |   |   | 350,167 |   |
|                                                           |   |                                      |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                  business loans                     |   |                                      | **252,897**   |   |   | 270,101 |   |   | 240,575 |   |   | 294,645 |   |   | 246,787 |   |
| Consumer                  and installment loans                |   |                                      | **54,798**    |   |   | 50,663 |   |   | 49,136 |   |   | 51,886 |   |   | 51,883 |   |
| Home                  equity loans                             |   |                                      | **31,321**    |   |   | 28,541 |   |   | 26,592 |   |   | 14,664 |   |   | 9,492 |   |
| Other                                                          |   |                                      | **5,862**     |   |   | 7,734 |   |   | 10,863 |   |   | 7,397 |   |   | 7,109 |   |
|                                                           |   |                                      | **344,878**   |   |   | 357,039 |   |   | 327,166 |   |   | 368,592 |   |   | 315,271 |   |
| Gross                  loans                                   |   |                                      | **1,206,456** |   |   | 1,133,667 |   |   | 1,038,681 |   |   | 857,074 |   |   | 665,438 |   |
| Less:                  Allowance for loan losses               |   |                                      | **(12,798**   | **)** |   | (13,051 | ) |   | (10,622 | ) |   | (9,136 | ) |   | (7,663 | ) |
| Loans,                  net                                    |   | **$**                                     | **1,193,658** |   | $ | 1,120,616 |   | $ | 1,028,059 |   | $ | 847,938 |   | $ | 657,775 |   |
|                                                           |   |                                      |          |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                 |   | Within                  One Year          |    | One                  to Five Years |   | Over                  Five Years |   | Total  |   |
|------------------------------------------------------|--------|-------------------------------------------|---------|------------------------------------|--------|----------------------------------|--------|--------|--------|
|                                                 |   | *(Dollars                  in Thousands)* |    |
|                                                 |   |                                      |    |                               |   |                             |   |   |   |
| Commercial                  business loans           |   | $                                         | 171,865 |                               | $      | 76,587                           |   | $      | 4,445  |   | $ | 252,897 |   |
| First                  mortgage loans                |   |                                      | 415,846 |                               |   | 429,466                          |   |   | 16,266 |   |   | 861,578 |   |
|                                                 |   | $                                         | 587,711 |                               | $      | 506,053                          |   | $      | 20,711 |   | $ | 1,114,475 |   |
|                                                 |   |                                      |    |                               |   |                             |   |   |   |   |   |   |   |
| Loans                  maturing after one year with: |   |                                      |    |                               |   |                             |   |   |   |   |   |   |   |
| Fixed                  interest rates                |   |                                      |    |                               | $      | 452,313                          |   | $      | 20,339 |   |   |   |   |
| Variable                  interest rates             |   |                                      |    |                               |   | 53,740                           |   |   | 372    |   |   |   |   |
|                                                 |   |                                      |    |                               | $      | 506,053                          |   | $      | 20,711 |   |   |   |   |

**Allowance        For Loan Losses**

----

Table            of Contents

|                                                           |   | At                  or for the Year Ended December 31, |       |
|----------------------------------------------------------------|--------|--------------------------------------------------------|------------|
|                                                           |   | **2006**                                               |       | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
|                                                           |   | *(Dollars                  in Thousands)*              |       |
|                                                           |   |                                                   |       |   |   |   |   |   |   |   |   |
| Balance                  at beginning of year                  |   | **$**                                                  | **13,051** |   | $ | 10,622 |   | $ | 9,136 |   | $ | 7,663 |   | $ | 5,563 |   |
| Charge-offs:                                                   |   |                                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Conventional                  single-family residential        |   |                                                   | **(1,022** | **)** |   | (172 | ) |   | (49 | ) |   | (84 | ) |   | (1 | ) |
| Commercial                  and multifamily residential        |   |                                                   | **(118**   | **)** |   | (241 | ) |   | (326 | ) |   | (69 | ) |   | (647 | ) |
| Agricultural                  loans                            |   |                                                   | **-**      |   |   | (17 | ) |   | (104 | ) |   | - |   |   | - |   |
| Commercial                  business loans                     |   |                                                   | **(1,947** | **)** |   | (1,271 | ) |   | (383 | ) |   | (532 | ) |   | (99 | ) |
| Consumer                  and installment loans                |   |                                                   | **(1,088** | **)** |   | (688 | ) |   | (863 | ) |   | (746 | ) |   | (429 | ) |
| Total                  charge-offs                             |   |                                                   | **(4,175** | **)** |   | (2,389 | ) |   | (1,725 | ) |   | (1,431 | ) |   | (1,176 | ) |
| Recoveries                                                     |   |                                                   | **862**    |   |   | 867 |   |   | 419 |   |   | 390 |   |   | 112 |   |
| Net                  charge-offs                               |   |                                                   | **(3,313** | **)** |   | (1,522 | ) |   | (1,306 | ) |   | (1,041 | ) |   | (1,064 | ) |
| Increase                  due to acquisition                   |   |                                                   | **-**      |   |   | - |   |   | 999 |   |   | 1,203 |   |   | 2,008 |   |
| Provisions                  charged to operations              |   |                                                   | **3,060**  |   |   | 3,951 |   |   | 1,793 |   |   | 1,311 |   |   | 1,156 |   |
| Balance                  at end of year                        |   | **$**                                                  | **12,798** |   | $ | 13,051 |   | $ | 10,622 |   | $ | 9,136 |   | $ | 7,663 |   |
|                                                           |   |                                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratios:                                                        |   |                                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  charge-offs to average loans outstanding  |   |                                                   | **0.28**   | **%** |   | 0.14 | % |   | 0.14 | % |   | 0.14 | % |   | 0.21 | % |
| Net                  charge-offs to total allowance            |   |                                                   | **25.89**  | **%** |   | 11.67 | % |   | 12.30 | % |   | 11.39 | % |   | 13.88 | % |
| Allowance                  to year end gross loans outstanding |   |                                                   | **1.06**   | **%** |   | 1.15 | % |   | 1.02 | % |   | 1.07 | % |   | 1.15 | % |

|                                                     |   | At                  December 31,          |       |
|----------------------------------------------------------|--------|-------------------------------------------|------------|
|                                                     |   | **2006**                                  |       | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
|                                                     |   |                                      |       | **%                  of** |   |   |   | %                  of |   |   |   | %                  of |   |   |   | %                  of |   |   |   | %                  of |   |
|                                                     |   |                                      |       | **Total** |   |   |   | Total |   |   |   | Total |   |   |   | Total |   |   |   | Total |   |
|                                                     |   | **Amount**                                |       | **Loans** |   | Amount |   | Loans |   | Amount |   | Loans |   | Amount |   | Loans |   | Amount |   | Loans |   |
|                                                     |   | *(Dollars                  in Thousands)* |       |
| Conventional                  single-family residential  |   | **$**                                     | **811**    |   |   | **16.3** | **%** | $ | 1,255 |   |   | 14.8 | % | $ | 840 |   |   | 13.8 | % | $ | 452 |   |   | 13.2 | % | $ | 391 |   |   | 14.7 | % |
| Commercial                  and multi-family residential |   |                                      | **4,573**  |   |   | **41.2** |   |   | 4,109 |   |   | 41.9 |   |   | 3,996 |   |   | 42.0 |   |   | 3,208 |   |   | 33.1 |   |   | 2,264 |   |   | 29.8 |   |
| Construction                                             |   |                                      | **1,723**  |   |   | **8.5** |   |   | 500 |   |   | 7.2 |   |   | 286 |   |   | 7.3 |   |   | 190 |   |   | 5.6 |   |   | 166 |   |   | 5.0 |   |
| Farmland                                                 |   |                                      | **341**    |   |   | **5.4** |   |   | 565 |   |   | 4.6 |   |   | 801 |   |   | 5.4 |   |   | 255 |   |   | 5.1 |   |   | 188 |   |   | 3.1 |   |
| Commercial                  business loans               |   |                                      | **4,394**  |   |   | **21.0** |   |   | 5,029 |   |   | 23.8 |   |   | 3,702 |   |   | 23.2 |   |   | 4,138 |   |   | 34.4 |   |   | 3,938 |   |   | 37.1 |   |
| Consumer                  loans and other                |   |                                      | **956**    |   |   | **7.6** |   |   | 1,593 |   |   | 7.7 |   |   | 997 |   |   | 8.3 |   |   | 892 |   |   | 8.6 |   |   | 716 |   |   | 10.3 |   |
| Totals                                                   |   | **$**                                     | **12,798** |   |   | **100.0** | **%** | $ | 13,051 |   |   | 100.0 | % | $ | 10,622 |   |   | 100.0 | % | $ | 9,136 |   |   | 100.0 | % | $ | 7,663 |   |   | 100.0 | % |

----

Table            of Contents

**Nonperforming        and Delinquent Loans**

|                                                  |   | At                  or for the Year Ended December 31, |       |
|-------------------------------------------------------|--------|--------------------------------------------------------|------------|
|                                                  |   | **2006**                                               |       | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
|                                                  |   | *(Dollars                  in Thousands)*              |       |
|                                                  |   |                                                   |       |   |   |   |   |   |   |   |   |
| Nonaccrual                  loans                     |   | **$**                                                  | **14,732** |   | $ | 5,247 |   | $ | 8,871 |   | $ | 5,282 |   | $ | 3,203 |   |
| Other                  real estate owned              |   |                                                   | **516**    |   |   | 1,812 |   |   | 1,296 |   |   | 1,945 |   |   | 2,382 |   |
| Total                  nonperforming assets           |   | **$**                                                  | **15,248** |   | $ | 7,059 |   | $ | 10,167 |   | $ | 7,227 |   | $ | 5,585 |   |
|                                                  |   |                                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratios:                                               |   |                                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonaccrual                  loans to total loans      |   |                                                   | **1.22**   | **%** |   | 0.46 | % |   | 0.85 | % |   | 0.62 | % |   | 0.48 | % |
| Allowance                  to nonaccrual loans        |   |                                                   | **86.87**  | **%** |   | 248.73 | % |   | 119.74 | % |   | 172.96 | % |   | 239.24 | % |
| Nonperforming                  assets to total assets |   |                                                   | **1.01**   | **%** |   | 0.48 | % |   | 0.75 | % |   | 0.63 | % |   | 0.61 | % |

**Potential        Problem Loans**

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Table            of Contents

**Investment        Securities**

|                                                        |   |      At                  December 31,      |        |
|-------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|-------------|
|                                                        |   | **2006**                                                                                     |        | 2005 |   | 2004 |   |
|                                                        |   | *(Dollars                  in Thousands)*                                                    |        |
| U.S.                  Treasury securities                   |   | **$**                                                                                        | **497**     |   | $ | 496 |   | $ | 497 |   |
| Government                  sponsored agencies              |   |                                                                                         | **12,802**  |   |   | 11,630 |   |   | 9,677 |   |
| State                  and political subdivision securities |   |                                                                                         | **62,330**  |   |   | 71,732 |   |   | 68,297 |   |
| Corporate                  bonds                            |   |                                                                                         | **25**      |   |   | 50 |   |   | 75 |   |
| Collateralized                  mortgage obligations        |   |                                                                                         | **45,173**  |   |   | 54,154 |   |   | 51,294 |   |
| Mortgage-backed                  securities                 |   |                                                                                         | **37,426**  |   |   | 35,577 |   |   | 42,724 |   |
|                                                        |   | **$**                                                                                        | **158,253** |   | $ | 173,639 |   | $ | 172,564 |   |
|                                                        |   |                                                                                         |        |   |   |   |   |   |   |   |

|                                                        |   | Within                  One Year          |   | One                  to Five Years      |   | Five                  to Ten Years |   | Over                  Ten Years         |   |
|-------------------------------------------------------------|--------|-------------------------------------------|--------|-----------------------------------------|--------|------------------------------------|--------|-----------------------------------------|--------|
|                                                        |   |  Amount                              |   | Weighted                  Average Yield |   |  Amount                       |   | Weighted                  Average Yield |   |  Amount |   | Weighted                  Average Yield |   |  Amount |   | Weighted                  Average Yield |   |
|                                                        |   | *(Dollars                  in Thousands)* |   |
| U.S.                  Treasury securities                   |   | $                                         | 497    |                                    |   | 4.04                               | %      | $                                       | -      |   |   | - | % | $ | - |   |   | - | % | $ | - |   |   | - | % |
| Government                  sponsored agencies              |   |                                      | 4,483  |                                    |   | 4.65                               |   |                                    | 7,830  |   |   | 4.01 |   |   | 489 |   |   | 5.03 |   |   | - |   |   | - |   |
| State                  and political subdivision securities |   |                                      | 2,302  |                                    |   | 5.46                               |   |                                    | 17,571 |   |   | 5.34 |   |   | 29,015 |   |   | 5.64 |   |   | 13,442 |   |   | 6.03 |   |
| Corporate                  bonds                            |   |                                      | -      |                                    |   | -                                  |   |                                    | 25     |   |   | 2.25 |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Collateralized                  mortgage obligations        |   |                                      | 5,708  |                                    |   | 3.67                               |   |                                    | 39,465 |   |   | 4.36 |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Mortgage-backed                  securities                 |   |                                      | 182    |                                    |   | 5.03                               |   |                                    | 27,554 |   |   | 5.02 |   |   | 9,609 |   |   | 5.38 |   |   | 81 |   |   | 6.51 |   |
|                                                        |   | $                                         | 13,172 |                                    |   | 4.35                               | %      | $                                       | 92,445 |   |   | 4.71 | % | $ | 39,113 |   |   | 5.57 | % | $ | 13,523 |   |   | 6.03 | % |

----

Table            of Contents

**Total        Deposits**

|                                                       |   |                                 |          |                              |   | At                  December 31,          |   |                          |      |                             |   |
|------------------------------------------------------------|--------|--------------------------------------|---------------|-----------------------------------|--------|-------------------------------------------|--------|-------------------------------|-----------|----------------------------------|--------|
|                                                       |   | **2006**                             |          | 2005                              |   | 2004                                      |   |
|                                                       |   | **Average                  Balance** |          | **Average                  Rate** |   | Average                  Balance          |   | Average                  Rate |      | Average                  Balance |   | Average                  Rate |   |
|                                                       |   |                                 |          |                              |   | *(Dollars                  in Thousands)* |   |                          |      |                             |   |
|                                                       |   |                                 |          |                              |   |                                      |   |                          |      |                             |   |   |   |
| Non-interest-bearing                  demand deposits |   | **$**                                | **127,954**   |                              |   | **0.00**                                  | **%**  | $                             | 136,190   |                             |   | 0.00 | % | $ | 119,839 |   |   | 0.00 | % |
| NOW                  and money market deposits        |   |                                 | **342,058**   |                              |   | **2.34**                                  |   |                          | 336,130   |                             |   | 1.37 |   |   | 348,342 |   |   | 0.95 |   |
| Savings                  deposits                          |   |                                 | **126,942**   |                              |   | **1.30**                                  |   |                          | 136,581   |                             |   | 0.97 |   |   | 128,954 |   |   | 0.85 |   |
| Time                  deposits                             |   |                                 | **534,757**   |                              |   | **4.22**                                  |   |                          | 472,621   |                             |   | 3.12 |   |   | 354,332 |   |   | 2.38 |   |
| Total                                                      |   | **$**                                | **1,131,711** |                              |   | **2.85**                                  | **%**  | $                             | 1,081,522 |                             |   | 1.91 | % | $ | 951,467 |   |   | 1.35 | % |
|                                                       |   |                                 |          |                              |   |                                      |   |                          |      |                             |   |   |   |   |   |   |   |   |   |

|                                                   |   | Amount                  atDecember                  31, 2006 |    |
|--------------------------------------------------------|--------|--------------------------------------------------------------|---------|
|                                                   |   | *(Dollars                  in Thousands)*                    |    |
|                                                   |   |                                                         |    |
| Three                  months or less                  |   | $                                                            | 40,596  |   |
| Over                  three months through six months  |   |                                                         | 50,209  |   |
| Over                  six months through twelve months |   |                                                         | 43,536  |   |
| Over                  twelve months                    |   |                                                         | 123,398 |   |
| Total                                                  |   | $                                                            | 257,739 |   |

**Borrowings**

|                                                                    |   | At                  December 31, |        |
|-------------------------------------------------------------------------|--------|----------------------------------|-------------|
|                                                                    |   | **2006**                         |        | 2005 |   | 2004 |   |
|                                                                    |   | **Balance**                      |        | **Rate** |   | Balance |   | Rate |   | Balance |   | Rate |   |
|                                                                    |   |                             |        |   |   | *(Dollars                  in Thousands)* |   |   |   |   |   |
| Federal                  Funds purchased                                |   | **$**                            | **47,679**  |   |   | **4.47** | **%** | $ | 27,297 |   |   | 3.97 | % | $ | 51,142 |   |   | 2.59 | % |
| Securities                  sold under agreements to repurchase         |   |                             | **245**     |   |   | **0.73** |   |   | 247 |   |   | 0.86 |   |   | 19 |   |   | 0.85 |   |
| Other                  short-term borrowings                            |   |                             | **11,786**  |   |   | **6.41** |   |   | 16,788 |   |   | 4.96 |   |   | 10,161 |   |   | 3.92 |   |
| Long-term                  borrowings                                   |   |                             | **118,521** |   |   | **4.61** |   |   | 101,107 |   |   | 3.84 |   |   | 111,054 |   |   | 3.55 |   |
| Junior                  subordinated debt owed to unconsolidated trusts |   |                             | **53,611**  |   |   | **8.04** |   |   | 46,394 |   |   | 7.37 |   |   | 46,394 |   |   | 6.16 |   |
|                                                                    |   | **$**                            | **231,842** |   |   | **5.46** | **%** | $ | 191,833 |   |   | 4.93 | % | $ | 218,770 |   |   | 3.90 | % |

----

Table            of Contents

|                                                                    |   | For                  the year ended December 31, |        |
|-------------------------------------------------------------------------|--------|--------------------------------------------------|-------------|
|                                                                    |   | **2006**                                         |        | 2005 |   | 2004 |   |
|                                                                    |   | *(Dollars                  in Thousands)*        |        |
| Federal                  Funds purchased                                |   | **$**                                            | **100,243** |   | $ | 71,210 |   | $ | 51,142 |   |
| Securities                  sold under agreements to repurchase         |   |                                             | **344**     |   |   | 247 |   |   | 2,424 |   |
| Other                  short-term borrowings                            |   |                                             | **22,234**  |   |   | 18,416 |   |   | 13,770 |   |
| Long-term                  borrowings                                   |   |                                             | **137,138** |   |   | 123,893 |   |   | 112,467 |   |
| Junior                  subordinated debt owed to unconsolidated trusts |   |                                             | **53,611**  |   |   | 46,394 |   |   | 46,394 |   |
|                                                                    |   | **$**                                            | **313,570** |   | $ | 260,160 |   | $ | 226,197 |   |

|                                                                    |   | For                  the year ended December 31, |        |
|-------------------------------------------------------------------------|--------|--------------------------------------------------|-------------|
|                                                                    |   | **2006**                                         |        | 2005 |   | 2004 |   |
|                                                                    |   | **Balance**                                      |        | **Rate** |   | Balance |   | Rate |   | Balance |   | Rate |   |
|                                                                    |   |                                             |        |   |   | *(Dollars                  in Thousands)* |   |   |   |   |   |
| Federal                  Funds purchased                                |   | **$**                                            | **60,193**  |   |   | **5.16** | **%** | $ | 46,975 |   |   | 3.24 | % | $ | 29,757 |   |   | 1.72 | % |
| Securities                  sold under agreements to repurchase         |   |                                             | **258**     |   |   | **1.00** |   |   | 127 |   |   | 0.86 |   |   | 804 |   |   | 1.25 |   |
| Other                  short-term borrowings                            |   |                                             | **17,254**  |   |   | **6.72** |   |   | 12,391 |   |   | 4.96 |   |   | 9,859 |   |   | 3.23 |   |
| Long-term                  borrowings                                   |   |                                             | **120,176** |   |   | **4.36** |   |   | 112,074 |   |   | 3.83 |   |   | 96,617 |   |   | 3.67 |   |
| Junior                  subordinated debt owed to unconsolidated trusts |   |                                             | **47,422**  |   |   | **7.86** |   |   | 46,394 |   |   | 6.80 |   |   | 38,690 |   |   | 6.19 |   |
|                                                                    |   | **$**                                            | **245,303** |   |   | **5.40** | **%** | $ | 217,961 |   |   | 4.41 | % | $ | 175,727 |   |   | 3.86 | % |

**Capital        Resources and Adequacy**

----

Table            of Contents

**Liquidity        and Capital Resources **

|                                                                                                                    |   | For                  the year ended December 31, |
|--------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|
|                                                                                                               |   |                                             | **2006** |   |   | 2005 |   |   | 2004 |   |
|                                                                                                                    |   |                                             | *(Dollars                  in Thousands)* |   |
| Cash                  and cash equivalents at beginning of period                                                  |   | **$**                                            | **46,778** |   | $ | 44,270 |   | $ | 47,655 |   |
| Operating                  activities:                                                                             |   |                                             |   |   |   |   |   |   |   |   |
| Net                  income                                                                                        |   |                                             | **3,996** |   |   | 5,098 |   |   | 4,002 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities |   |                                             | **6,560** |   |   | 9,479 |   |   | 4,511 |   |
| Net                  cash provided by operating activities                                                         |   |                                             | **10,556** |   |   | 14,577 |   |   | 8,513 |   |
| Net                  cash used in investing activities                                                             |   |                                             | **(55,311** | **)** |   | (109,783 | ) |   | (118,676 | ) |
| Net                  cash provided by financing activities                                                         |   |                                             | **41,536** |   |   | 97,714 |   |   | 106,778 |   |
| Increase                  (decrease) in cash and cash equivalents                                                  |   |                                             | **(3,219** | **)** |   | 2,508 |   |   | (3,385 | ) |
| Cash                  and cash equivalents at end of period                                                        |   | **$**                                            | **43,559** |   | $ | 46,778 |   | $ | 44,270 |   |

|                                                   |   | Time                  deposits            |    | Long-term                  debt (1) |   | Operating                  leases |   | Total  |   |
|--------------------------------------------------------|--------|-------------------------------------------|---------|-------------------------------------|--------|-----------------------------------|--------|--------|--------|
|                                                   |   | *(Dollars                  in Thousands)* |    |
| 2006                                                   |   | $                                         | 333,066 |                                | $      | 28,275                            |   | $      | 1,101  |   | $ | 362,442 |   |
| 2007                                                   |   |                                      | 102,282 |                                |   | 42,641                            |   |   | 1,076  |   |   | 145,999 |   |
| 2008                                                   |   |                                      | 46,702  |                                |   | 20,011                            |   |   | 1,045  |   |   | 67,758 |   |
| 2009                                                   |   |                                      | 44,335  |                                |   | 11,000                            |   |   | 902    |   |   | 56,237 |   |
| 2010                                                   |   |                                      | 31,337  |                                |   | 15,000                            |   |   | 902    |   |   | 47,239 |   |
| Thereafter                                             |   |                                      | -       |                                |   | 1,594                             |   |   | -      |   |   | 1,594 |   |
| Total                                                  |   | $                                         | 557,722 |                                | $      | 118,521                           |   | $      | 5,026  |   | $ | 681,269 |   |
|                                                   |   |                                      |    |                                |   |                              |   |   |   |   |   |   |   |
| Commitments                to originate mortgage loans |   |                                      |    |                                |   |                              |   |   |   |   | $  | 23,984 |   |
| Unused                lines of credit                  |   |                                      |    |                                |   |                              |   |   |   |   | $ | 269,495 |   |
| Standby                  letters of credit             |   |                                      |    |                                |   |                              |   |   |   |   | $ | 4,870  |   |

----

Table            of Contents

**Asset/Liability        Management**

|                                                                          |   | Amounts                  Maturing or Repricing as of December 31, 2006 |    |
|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|---------|
|                                                                          |   | Within                                                                 |    | Six                  to Twelve |   | One                  to Five |   | Over |   |   |   |
|                                                                          |   | Six                  months                                            |    | Months |   | Years |   | Five                  Years |   | Total |   |
|                                                                          |   |                                                                   |    | *(Dollars                  in Thousands)* |   |   |   |
| Interest-earning                  assets:                                     |   |                                                                   |    |   |   |   |   |   |   |   |   |
| Fixed-rate                  mortgage loans                                    |   | $                                                                      | 138,339 |   | $ | 91,468 |   | $ | 375,726 |   | $ | 15,894 |   | $ | 621,427 |   |
| Adjustable-rate                  mortgage loans                               |   |                                                                   | 172,512 |   |   | 13,527 |   |   | 53,740 |   |   | 372 |   |   | 240,151 |   |
|                     Total mortgage loans                            |   |                                                                   | 310,851 |   |   | 104,995 |   |   | 429,466 |   |   | 16,266 |   |   | 861,578 |   |
| Commercial                  business loans                                    |   |                                                                   | 140,289 |   |   | 31,576 |   |   | 76,587 |   |   | 4,445 |   |   | 252,897 |   |
| Consumer                  loans                                               |   |                                                                   | 20,917  |   |   | 7,606 |   |   | 24,708 |   |   | 1,567 |   |   | 54,798 |   |
| Home                  equity loans                                            |   |                                                                   | 27,399  |   |   | 25 |   |   | 3,886 |   |   | 11 |   |   | 31,321 |   |
| Other                  loans                                                  |   |                                                                   | 3,231   |   |   | 118 |   |   | 1,703 |   |   | 810 |   |   | 5,862 |   |
| Mortgage-related                  securities                                  |   |                                                                   | 5,108   |   |   | 5,124 |   |   | 45,487 |   |   | 26,780 |   |   | 82,499 |   |
| Fixed                  rate investment securities and other                   |   |                                                                   | 4,313   |   |   | 3,093 |   |   | 25,402 |   |   | 42,946 |   |   | 75,754 |   |
| Variable                  rate investment securities and other                |   |                                                                   | 20,129  |   |   | - |   |   | - |   |   | - |   |   | 20,129 |   |
|                     Total interest-earning assets                   |   | $                                                                      | 532,237 |   | $ | 152,537 |   | $ | 607,239 |   | $ | 92,825 |   | $ | 1,384,838 |   |
|                                                                          |   |                                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                                |   |                                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                      |   |                                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Time deposits                                         |   | $                                                                      | 193,092 |   | $ | 139,974 |   | $ | 222,180 |   | $ | 2,476 |   | $ | 557,722 |   |
|                    NOW accounts                                          |   |                                                                   | 6,729   |   |   | 6,729 |   |   | 67,291 |   |   | 31,402 |   |   | 112,151 |   |
|                    Savings accounts                                      |   |                                                                   | 7,263   |   |   | 7,263 |   |   | 72,626 |   |   | 33,892 |   |   | 121,044 |   |
|                    Money market accounts                                 |   |                                                                   | 17,115  |   |   | 14,074 |   |   | 140,742 |   |   | 65,680 |   |   | 237,611 |   |
| Short-term                  borrowings                                        |   |                                                                   | 57,146  |   |   | 2,564 |   |   | - |   |   | - |   |   | 59,710 |   |
| Long-term                  borrowings                                         |   |                                                                   | 18,264  |   |   | 10,011 |   |   | 88,652 |   |   | 1,594 |   |   | 118,521 |   |
| Junior                  subordinated debt owed to unconsolidated trusts  |   |                                                                   | 28,352  |   |   | - |   |   | - |   |   | 25,259 |   |   | 53,611 |   |
|                     Total interest-bearing liabilities              |   | $                                                                      | 327,961 |   | $ | 180,615 |   | $ | 591,491 |   | $ | 160,303 |   | $ | 1,260,370 |   |
|                                                                          |   |                                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                  assets less interest-bearing liabilities    |   | $                                                                      | 204,276 |   | $ | (28,078 | ) | $ | 15,748 |   | $ | (67,478 | ) | $ | 124,468 |   |
| Cumulative                  interest rate sensitivity gap                     |   | $                                                                      | 204,276 |   | $ | 176,198 |   | $ | 191,946 |   | $ | 124,468 |   |   |   |   |
| Cumulative                  interest rate sensitivity gap as a                |   |                                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   percentage                  of total assets                       |   |                                                                   | 13.56   | % |   | 11.70 | % |   | 12.75 | % |   | 8.27 | % |   |   |   |

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Table            of Contents

**Item        7A. Quantitative and Qualitative Disclosures About        Market Risk**

|                                          |   | ** Percent                  Change in Net Interest Income** |   |
|-----------------------------------------------|--------|------------------------------------------------------------------|--------|
| **Change                  in Interest Rates** |   | **2006**                                                         |   | **2005** |   |
| +                  200 basis points           |   |                                                             | 10.71  | % |   | 10.70 | % |
| +                  150 basis points           |   |                                                             | 8.15   | % |   | 8.15 | % |
| +                  100 basis points           |   |                                                             | 5.59   | % |   | 5.60 | % |
| +                  50 basis points            |   |                                                             | 3.03   | % |   | 3.05 | % |
|  Base                  Scenario          |   |                                                             | 0.00   | % |   | 0.00 | % |
| -                  50 basis points            |   |                                                             | (2.08  | )% |   | (2.06 | )% |
| -                  100 basis points           |   |                                                             | (3.82  | )% |   | (3.89 | )% |
| -                  150 basis points           |   |                                                             | (6.92  | )% |   | (6.92 | )% |
| -                  200 basis points           |   |                                                             | (8.84  | )% |   | (8.91 | )% |

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Table            of Contents

**Item        8. Financial Statements and Supplementary        Data**

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Table            of            Contents

**Report      of Independent Registered Public Accounting      Firm**

**on      Internal Control over Financial      Reporting**

*Internal      Control—Integrated Framework*

----

Table          of Contents

*Internal      Control—Integrated Framework*
*Internal      Control—Integrated Framework*

----

Table          of Contents

**Report      of Independent Registered Public Accounting      Firm**

**on      Consolidated Financial      Statements**

*Internal      Control - Integrated Framework*

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Table          of Contents

| **Merchants                and Manufacturers Bancorporation, Inc. and                Subsidiaries**                                        |   |                                                 |          |   |   |      |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|---------------|--------|--------|-----------|--------|
|                                                                                                                                       |   |                                                 |          |   |   |      |   |
| **Consolidated                Balance Sheets**                                                                                             |   |                                                 |          |   |   |      |   |
| **December                31, 2006 and 2005**                                                                                              |   |                                                 |          |   |   |      |   |
|                                                                                                                                       |   |                                                 |          |   |   |      |   |
|                                                                                                                                       |   |                                                 |          |   |   |      |   |
| **Assets**                                                                                                                                 |   |                                                 | **2006**      |   |   | 2005      |   |
|                                                                                                                                       |   | *(Dollars                in Thousands, Except * |
|                                                                                                                                            |   | *Share                and Per Share Amounts) *  |
|                                                                                                                                       |   |                                                 |          |   |   |      |   |
| Cash                and Due From Banks (Note 3)                                                                                            |   | **$**                                                | **36,500**    |   | $      | 39,551    |   |
| Interest                Bearing Deposits in Banks                                                                                          |   |                                                 | **1,024**     |   |   | 863       |   |
| Federal                Funds Sold                                                                                                          |   |                                                 | **6,035**     |   |   | 6,364     |   |
|    **Cash                and cash equivalents**                                                                             |   |                                                 | **43,559**    |   |   | 46,778    |   |
|                                                                                                                                       |   |                                                 |          |   |   |      |   |
| Available-for-Sale                Securities (Note 4)                                                                                      |   |                                                 | **158,253**   |   |   | 173,639   |   |
| Loans,                less allowance for loan losses of $12,798 and $13,051                                                                |   |                                                 |          |   |   |      |   |
|                   at December 31, 2006 and 2005, respectively (Note 5)                                                           |   |                                                 | **1,193,658** |   |   | 1,120,616 |   |
| FHLB                Stock                                                                                                                  |   |                                                 | **11,963**    |   |   | 20,416    |   |
| Premises                and Equipment (Note 6)                                                                                             |   |                                                 | **35,197**    |   |   | 33,565    |   |
| Goodwill                (Note 7)                                                                                                           |   |                                                 | **32,081**    |   |   | 31,983    |   |
| Intangible                Assets (Note 7)                                                                                                  |   |                                                 | **2,794**     |   |   | 3,268     |   |
| Accrued                Interest Receivable                                                                                                 |   |                                                 | **7,667**     |   |   | 6,875     |   |
| Other                Assets                                                                                                                |   |                                                 | **20,768**    |   |   | 21,808    |   |
|                                                                                                                                       |   |                                                 |          |   |   |      |   |
| **  Total                assets**                                                                                                |   | **$**                                                | **1,505,940** |   | $      | 1,458,948 |   |
|                                                                                                                                       |   |                                                 |          |   |   |      |   |
| **Liabilities                and Stockholders' Equity**                                                                                    |   |                                                 |          |   |   |      |   |
|                                                                                                                                       |   |                                                 |          |   |   |      |   |
| Liabilities                                                                                                                                |   |                                                 |          |   |   |      |   |
|                  Deposits:                                                                                                            |   |                                                 |          |   |   |      |   |
|                    Non-interest bearing                                                                                     |   | **$**                                                | **136,709**   |   | $      | 159,591   |   |
|                    Interest bearing                                                                                         |   |                                                 | **1,028,528** |   |   | 1,000,572 |   |
|   Total                deposits                (Note 8)                                                                          |   |                                                 | **1,165,237** |   |   | 1,160,163 |   |
|                  Short-term borrowings (Note 9)                                                                                       |   |                                                 | **59,710**    |   |   | 46,896    |   |
|                  Long-term borrowings (Note 9)                                                                                        |   |                                                 | **118,521**   |   |   | 98,543    |   |
|                  Junior subordinated debt owed to unconsolidated trusts (Note                10)                                      |   |                                                 | **53,611**    |   |   | 46,394    |   |
|                  Accrued interest payable                                                                                             |   |                                                 | **4,465**     |   |   | 3,631     |   |
|                  Other liabilities                                                                                                    |   |                                                 | **10,099**    |   |   | 10,096    |   |
| **  Total                liabilities**                                                                                           |   |                                                 | **1,411,643** |   |   | 1,365,723 |   |
|                                                                                                                                       |   |                                                 |          |   |   |      |   |
| Commitments                and Contingent Liabilities (Note 15)                                                                            |   |                                                 |          |   |   |      |   |
|                                                                                                                                       |   |                                                 |          |   |   |      |   |
| Stockholders’                Equity (Note 17)                                                                                        |   |                                                 |          |   |   |      |   |
|                  Preferred stock, $1.00 par value; 250,000 shares authorized,                shares                                   |   |                                                 |          |   |   |      |   |
|   issued                and shares                outstanding - none                                                             |   |                                                 | **-**         |   |   | -         |   |
| Common                stock $1.00 par value; 25,000,000 shares authorized; shares                issued:                                   |   |                                                 |          |   |   |      |   |
|   3,770,251                - 2006                and 2005; shares outstanding: 3,677,180 - 2006; 3,701,621 -                2005 |   |                                                 | **3,770**     |   |   | 3,770     |   |
| Additional                paid-in capital                                                                                                  |   |                                                 | **53,684**    |   |   | 53,614    |   |
| Retained                earnings                                                                                                           |   |                                                 | **40,259**    |   |   | 38,928    |   |
| Accumulated                other comprehensive loss                                                                                        |   |                                                 | **(881**      | **)**  |   | (1,369    | )      |
| Treasury                stock, at cost (93,071 shares - 2006; 68,630 shares - 2005)                                                        |   |                                                 | **(2,535**    | **)**  |   | (1,718    | )      |
|                                                                                                                                       |   |                                                 |          |   |   |      |   |
| **  Total                stockholders’                equity**                                                             |   |                                                 | **94,297**    |   |   | 93,225    |   |
|                                                                                                                                       |   |                                                 |          |   |   |      |   |
| **  Total                liabilities                and stockholders’ equity**                                             |   | **$**                                                | **1,505,940** |   | $      | 1,458,948 |   |
|                                                                                                                                       |   |                                                 |          |   |   |      |   |
| See                Notes to Consolidated Financial Statements.                                                                             |   |                                                 |          |   |   |      |   |

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Table          of Contents

| **Merchants                and Manufacturers Bancorporation, Inc. and Subsidiaries**                    |   |                                                              |       |   |   |
|---------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|------------|--------|--------|
|                                                                                                    |   |                                                              |       |   |   |   |   |
| **Consolidated                Statements of Income**                                                    |   |                                                              |       |   |   |   |   |
| **Years                Ended December 31, 2006, 2005, and 2004**                                        |   |                                                              |       |   |   |   |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |
|                                                                                                    |   | **2006**                                                          |       | 2005   |   | 2004 |   |
|                                                                                                    |   | *(Dollars                In Thousands, Except Per Share Amounts)* |       |
| Interest                and dividend income:                                                            |   |                                                              |       |   |   |   |   |
|                  Interest and fees on loans                                                        |   | **$**                                                             | **83,705** |   | $      | 69,713 |   | $ | 55,110 |   |
|                  Interest and dividends on securities:                                             |   |                                                              |       |   |   |   |   |   |   |   |
|   Taxable                                                                                     |   |                                                              | **1,131**  |   |   | 1,617 |   |   | 1,671 |   |
|   Tax-exempt                                                                                  |   |                                                              | **2,401**  |   |   | 2,433 |   |   | 1,876 |   |
|                  Interest on mortgage-backed securities                                            |   |                                                              | **4,056**  |   |   | 3,534 |   |   | 3,176 |   |
|                  Interest on interest bearing deposits in banks and                                |   |                                                              |       |   |   |   |   |   |   |   |
|   federal                funds sold                                                           |   |                                                              | **322**    |   |   | 246 |   |   | 155 |   |
| **   Total                interest and                dividend income**                  |   |                                                              | **91,615** |   |   | 77,543 |   |   | 61,988 |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |   |   |   |
| Interest                expense:                                                                        |   |                                                              |       |   |   |   |   |   |   |   |
|                  Interest on deposits                                                              |   |                                                              | **32,245** |   |   | 20,649 |   |   | 12,853 |   |
|                  Interest on short-term borrowings                                                 |   |                                                              | **4,269**  |   |   | 2,171 |   |   | 838 |   |
|                  Interest on long-term borrowings                                                  |   |                                                              | **5,239**  |   |   | 4,294 |   |   | 3,546 |   |
|                  Interest on junior subordinated debt owed to unconsolidated                trusts |   |                                                              | **3,727**  |   |   | 3,154 |   |   | 2,396 |   |
| **   Total                interest                expense**                              |   |                                                              | **45,480** |   |   | 30,268 |   |   | 19,633 |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |   |   |   |
| **    Net                interest income**                                          |   |                                                              | 46,135     |   |   | 47,275 |   |   | 42,355 |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |   |   |   |
| Provision                for loan losses (Note 5)                                                       |   |                                                              | **3,060**  |   |   | 3,951 |   |   | 1,793 |   |
| **    Net                interest income after provision for loan losses**          |   |                                                              | **43,075** |   |   | 43,324 |   |   | 40,562 |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |   |   |   |
| Noninterest                income:                                                                      |   |                                                              |       |   |   |   |   |   |   |   |
|                  Service charges on deposit accounts                                               |   |                                                              | **4,509**  |   |   | 4,229 |   |   | 3,566 |   |
|                  Service charges on loans                                                          |   |                                                              | **3,595**  |   |   | 3,362 |   |   | 2,154 |   |
|                  Securities gains, net                                                             |   |                                                              | **2**      |   |   | - |   |   | 191 |   |
|                  Gain on sale of loans, net                                                        |   |                                                              | **96**     |   |   | 366 |   |   | 494 |   |
|                  Net gain on sale of premises and equipment                                        |   |                                                              | **160**    |   |   | 286 |   |   | 158 |   |
|                  Tax fees, brokerage and insurance commissions                                     |   |                                                              | **2,052**  |   |   | 1,651 |   |   | 1,547 |   |
|                  Other                                                                             |   |                                                              | **3,632**  |   |   | 4,020 |   |   | 3,427 |   |
| **    Total                noninterest income**                                     |   |                                                              | **14,046** |   |   | 13,914 |   |   | 11,537 |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |   |   |   |
| Noninterest                expenses:                                                                    |   |                                                              |       |   |   |   |   |   |   |   |
|                  Salaries and employee benefits                                                    |   |                                                              | **29,879** |   |   | 28,137 |   |   | 24,646 |   |
|                  Premises and equipment                                                            |   |                                                              | **6,942**  |   |   | 7,119 |   |   | 6,387 |   |
|                  Data processing fees                                                              |   |                                                              | **3,497**  |   |   | 3,464 |   |   | 2,296 |   |
|                  Data processing conversions                                                       |   |                                                              | **-**      |   |   | - |   |   | 573 |   |
|                  Marketing and business development                                                |   |                                                              | **1,978**  |   |   | 2,261 |   |   | 2,321 |   |
|                  System installations                                                              |   |                                                              | **-**      |   |   | - |   |   | 830 |   |
|                  Sarbanes-Oxley implementation                                                     |   |                                                              | **-**      |   |   | - |   |   | 783 |   |
|                  Other                                                                             |   |                                                              | **9,218**  |   |   | 8,917 |   |   | 8,003 |   |
| **    Total                noninterest expenses**                                   |   |                                                              | **51,514** |   |   | 49,898 |   |   | 45,839 |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |   |   |   |
| **    Income                before income taxes**                                   |   |                                                              | **5,607**  |   |   | 7,340 |   |   | 6,260 |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |   |   |   |
| Income                taxes (Note 14)                                                                   |   |                                                              | **1,611**  |   |   | 2,242 |   |   | 2,258 |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |   |   |   |
| **    Net                income**                                                   |   | **$**                                                             | **3,996**  |   | $      | 5,098 |   | $ | 4,002 |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |   |   |   |
| Basic                earnings per share                                                                 |   | **$**                                                             | **1.08**   |   | $      | 1.39 |   | $ | 1.16 |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |   |   |   |
| Diluted                earnings per share                                                               |   | **$**                                                             | **1.08**   |   | $      | 1.38 |   | $ | 1.15 |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |   |   |   |
| See                Notes to Consolidated Financial Statements.                                          |   |                                                              |       |   |   |   |   |   |   |   |
|                                                                                                    |   |                                                              |       |   |   |   |   |   |   |   |

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Table          of Contents

| **Merchants                  and Manufacturers Bancorporation, Inc. and Subsidiaries**           |   |                                                                          |      |   |   |       |   |     |   |                           |   |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|-----------|--------|--------|------------|--------|----------|--------|--------------------------------|--------|
|                                                                                             |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |
| **Consolidated                  Statements of Changes in                  Stockholders' Equity** |   |                                                                          |      |   |   |       |   |     |   |                           |   |
| **Years                  Ended December 31, 2006, 2005, and 2004**                               |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |
|                                                                                             |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |
|                                                                                             |   | Shares                  of                                                    |      |   |   |       |   |     |   | Accumulated                    |   |   |   |   |   |
|                                                                                             |   | Common                                                                        |      |   |   | Additional |   |     |   | Other                          |   |   |   |   |   |
|                                                                                             |   | Stock                                                                         |      | Common |   | Paid-in    |   | Retained |   | Comprehensive                  |   | Treasury |   |   |   |
|                                                                                             |   | Outstanding                                                                   |      | Stock  |   | Capital    |   | Earnings |   | Income                  (Loss) |   | Stock |   | Total |   |
|                                                                                             |   | *(Dollars                  In Thousands, Except Share and Per Share Amounts)* |      |
|                                                                                             |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |
| Balance                  at December 31, 2003                                                    |   |                                                                          | 3,326,089 |   | $      | 3,436      |   | $        | 43,691 |                           | $      | 35,007 |   | $ | 663 |   | $ | (2,823 | ) | $ | 79,974 |   |
| Comprehensive                  income:                                                           |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Net income                                                               |   |                                                                          |      |   |   | -          |   |     | -      |                           |   | 4,002 |   |   | - |   |   | - |   |   | 4,002 |   |
|                    Change in net unrealized gains on                                        |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                      available-for-sale securities                                |   |                                                                          |      |   |   | -          |   |     | -      |                           |   | - |   |   | (80 | ) |   | - |   |   | (80 | ) |
|                    Reclassification adjustment for gains                                    |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                      included in net income                                       |   |                                                                          |      |   |   | -          |   |     | -      |                           |   | - |   |   | (191 | ) |   | - |   |   | (191 | ) |
|                    Income tax effect                                                        |   |                                                                          |      |   |   | -          |   |     | -      |                           |   | - |   |   | 113 |   |   | - |   |   | 113 |   |
| **  Total                  comprehensive                  income**                     |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   | 3,844 |   |
|                    Issuance of 334,230 shares of stock                                      |   |                                                                          | 334,230   |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                      for acquisition                                              |   |                                                                          |      |   |   | 334        |   |     | 9,854  |                           |   | - |   |   | - |   |   | - |   |   | 10,188 |   |
|                    Cash dividends paid - $0.72 per share                                    |   |                                                                          |      |   |   | -          |   |     | -      |                           |   | (2,523 | ) |   | - |   |   | - |   |   | (2,523 | ) |
|                    Exercise of stock options                                                |   |                                                                          | 13,735    |   |   | -          |   |     | (124   | )                              |   | - |   |   | - |   |   | 380 |   |   | 256 |   |
|                                                                                             |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2004                                                    |   |                                                                          | 3,674,054 |   |   | 3,770      |   |     | 53,421 |                           |   | 36,486 |   |   | 505 |   |   | (2,443 | ) |   | 91,739 |   |
| Comprehensive                  income:                                                           |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Net income                                                               |   |                                                                          |      |   |   | -          |   |     | -      |                           |   | 5,098 |   |   | - |   |   | - |   |   | 5,098 |   |
|                    Change in net unrealized gains on                                        |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                      available-for-sale securities                                |   |                                                                          |      |   |   | -          |   |     | -      |                           |   | - |   |   | (2,880 | ) |   | - |   |   | (2,880 | ) |
|                    Income tax effect                                                        |   |                                                                          |      |   |   | -          |   |     | -      |                           |   | - |   |   | 1,006 |   |   | - |   |   | 1,006 |   |
| **  Total                  comprehensive                  income**                     |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   | 3,224 |   |
|                    Cash dividends paid - $0.72 per share                                    |   |                                                                          |      |   |   | -          |   |     | -      |                           |   | (2,656 | ) |   | - |   |   | - |   |   | (2,656 | ) |
|                    Sale of 20,206 shares of treasury stock                                  |   |                                                                          | 20,206    |   |   | -          |   |     | 255    |                           |   | - |   |   | - |   |   | 528 |   |   | 783 |   |
|                    Exercise of stock options                                                |   |                                                                          | 7,361     |   |   | -          |   |     | (62    | )                              |   | - |   |   | - |   |   | 197 |   |   | 135 |   |
|                                                                                             |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2005                                                    |   |                                                                          | 3,701,621 |   |   | 3,770      |   |     | 53,614 |                           |   | 38,928 |   |   | (1,369 | ) |   | (1,718 | ) |   | 93,225 |   |
| Comprehensive                  income:                                                           |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Net income                                                               |   |                                                                          |      |   |   | -          |   |     | -      |                           |   | 3,996 |   |   | - |   |   | - |   |   | 3,996 |   |
|                    Change in net unrealized gains on                                        |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                      available-for-sale securities                                |   |                                                                          |      |   |   | -          |   |     | -      |                           |   | - |   |   | 747 |   |   | - |   |   | 747 |   |
|                    Reclassification adjustment for gains                                    |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                      realized in net income                                       |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   | 2 |   |   |   |   |   | 2 |   |
|                    Income tax effect                                                        |   |                                                                          |      |   |   | -          |   |     | -      |                           |   | - |   |   | (261 | ) |   | - |   |   | (261 | ) |
| **  Total                  comprehensive                  income**                     |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   | 4,484 |   |
|                    Stock-based compensation                                                 |   |                                                                          |      |   |   |       |   |     | 76     |                           |   |   |   |   |   |   |   |   |   |   | 76 |   |
|                    Cash dividends paid - $0.72 per share                                    |   |                                                                          |      |   |   | -          |   |     | -      |                           |   | (2,665 | ) |   | - |   |   | - |   |   | (2,665 | ) |
|                    Purchase of 25,000 shares of treasury stock                              |   |                                                                          | (25,000   | )      |   | -          |   |     |   |                           |   | - |   |   | - |   |   | (831 | ) |   | (831 | ) |
|                    Exercise of stock options                                                |   |                                                                          | 559       |   |   | -          |   |     | (6     | )                              |   | - |   |   | - |   |   | 14 |   |   | 8 |   |
|                                                                                             |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance                  at December 31, 2006**                                                |   |                                                                          | 3,677,180 |   | $      | 3,770      |   | $        | 53,684 |                           | $      | 40,259 |   | $ | (881 | ) | $ | (2,535 | ) | $ | 94,297 |   |
|                                                                                             |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
| See                  Notes to Consolidated Financial Statements.                                 |   |                                                                          |      |   |   |       |   |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |

----

Table            of            Contents

| **Merchants                and Manufacturers Bancorporation, Inc. and Subsidiaries**                               |   |                                    |        |   |   |     |   |
|--------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|-------------|--------|--------|----------|--------|
|                                                                                                               |   |                                    |        |   |   |     |   |
| **Consolidated                Statements of Cash Flows**                                                           |   |                                    |        |   |   |     |   |
| **Years                Ended December 31, 2006, 2005, and 2004**                                                   |   |                                    |        |   |   |     |   |
|                                                                                                               |   |                                    |        |   |   |     |   |
|                                                                                                               |   |                                    |        |   |   |     |   |
|                                                                                                               |   | **2006**                                |        | 2005   |   | 2004     |   |
|                                                                                                               |   | *(Dollars                In Thousands)* |        |
| Cash                Flows From Operating Activities                                                                |   |                                    |        |   |   |     |   |
|                  Net income                                                                                   |   | **$**                                   | **3,996**   |   | $      | 5,098    |   | $ | 4,002 |   |
|                  Adjustments to reconcile net income to cash provided by operating                activities: |   |                                    |        |   |   |     |   |   |   |   |
|                    Provision for loan                losses                                    |   |                                    | **3,060**   |   |   | 3,951    |   |   | 1,793 |   |
|                    Depreciation                                                                     |   |                                    | **2,750**   |   |   | 2,800    |   |   | 2,246 |   |
|                    Amortization and accretion of premiums and discounts, net                        |   |                                    | **356**     |   |   | 673      |   |   | 998 |   |
|                    Amortization of intangibles                                                      |   |                                    | **474**     |   |   | 561      |   |   | 588 |   |
|                    Deferred income taxes                                                            |   |                                    | **(918**    | **)**  |   | (995     | )      |   | 648 |   |
|                    Securities gains, net                                                            |   |                                    | **(2**      | **)**  |   | -        |   |   | (191 | ) |
|                    Gain on sale of loans, net                                                       |   |                                    | **(96**     | **)**  |   | (366     | )      |   | (494 | ) |
|                    Loans originated for sale                                                        |   |                                    | **(38,073** | **)**  |   | (41,934  | )      |   | (63,742 | ) |
|                    Proceeds from sales of loans                                                     |   |                                    | **38,683**  |   |   | 44,041   |   |   | 61,930 |   |
|                    Net gain on sale of premises and equipment                                       |   |                                    | **(160**    | **)**  |   | (286     | )      |   | (158 | ) |
|                    FHLB stock dividend                                                              |   |                                    | **-**       |   |   | (876     | )      |   | - |   |
|                    Decrease (increase) in cash surrender value                                      |   |                                    | **(293**    | **)**  |   | (295     | )      |   | 960 |   |
|                    Decrease (increase) in accrued interest receivable                               |   |                                    | **(792**    | **)**  |   | (1,456   | )      |   | (570 | ) |
|                    (Decrease) increase in accrued interest payable                                  |   |                                    | **834**     |   |   | 1,687    |   |   | 255 |   |
|                    Stock-based compensation expense                                                 |   |                                    | **76**      |   |   | -        |   |   | - |   |
|                    Other, net                                                                       |   |                                    | **661**     |   |   | 1,974    |   |   | 248 |   |
| **    Net                cash provided by operating activities**                               |   |                                    | **10,556**  |   |   | 14,577   |   |   | 8,513 |   |
|                                                                                                               |   |                                    |        |   |   |     |   |   |   |   |
| Cash                Flows From Investing Activities                                                                |   |                                    |        |   |   |     |   |   |   |   |
|                  Purchase of available-for-sale securities                                                    |   |                                    | **(36,502** | **)**  |   | (50,486  | )      |   | (102,371 | ) |
|                  Proceeds from sales of available-for-sale securities                                         |   |                                    | **13,654**  |   |   | 26       |   |   | 14,085 |   |
|                  Proceeds from redemptions and maturities of available-for-sale                securities     |   |                                    | **38,626**  |   |   | 45,057   |   |   | 82,745 |   |
|                  Net increase in loans                                                                        |   |                                    | **(77,547** | **)**  |   | (99,038  | )      |   | (109,343 | ) |
|                  Purchases of premises and equipment, net                                                     |   |                                    | **(4,462**  | **)**  |   | (7,241   | )      |   | (9,751 | ) |
|                  Proceeds from sales of premises and equipment                                                |   |                                    | **99**      |   |   | 1,517    |   |   | - |   |
|                  Proceeds from sales of other real estate                                                     |   |                                    | **2,368**   |   |   | 273      |   |   | 2,261 |   |
|                  Cash received (paid) in acquisition                                                          |   |                                    | **-**       |   |   | -        |   |   | 4,837 |   |
|                  (Purchases) redemption of FHLB stock                                                         |   |                                    | **8,453**   |   |   | 109      |   |   | (1,139 | ) |
| **    Net                cash (used in) investing activities**                                 |   |                                    | **(55,311** | **)**  |   | (109,783 | )      |   | (118,676 | ) |
|                                                                                                               |   |                                    |        |   |   |     |   |   |   |   |
| Cash                Flows From Financing Activities                                                                |   |                                    |        |   |   |     |   |   |   |   |
|                  Net increase in deposits                                                                     |   |                                    | **5,074**   |   |   | 127,117  |   |   | 41,066 |   |
|                  Net increase (decrease) in short-term borrowings                                             |   |                                    | **12,814**  |   |   | (16,990  | )      |   | 27,315 |    |
|                  Dividends paid                                                                               |   |                                    | **(2,665**  | **)**  |   | (2,656   | )      |   | (2,523 | ) |
|                  Proceeds from long-term borrowings                                                           |   |                                    | **75,772**  |   |   | 49,418   |   |   | 55,354 |   |
|                  Repayment of long-term borrowings                                                            |   |                                    | **(53,230** | **)**  |   | (56,802  | )      |   | (25,381 | ) |
|                  Issuance of junior subordinated debt owed to unconsolidated                trusts            |   |                                    | **7,217**   |   |   | -        |   |   | 10,310 |   |
|                  Repayment of acquisition note                                                                |   |                                    | **(2,564**  | **)**  |   | (2,563   | )      |   | - |   |
|                  Increase (decrease) in advance payments by borrowers for taxes and                insurance  |   |                                    | **(59**     | **)**  |   | (728     | )      |   | 381 |   |
|                  Common stock transactions, net                                                               |   |                                    | **(823**    | **)**  |   | 918      |   |   | 256 |   |
| **    Net                cash provided by financing activities**                               |   |                                    | **41,536**  |   |   | 97,714   |   |   | 106,778 |   |
|                                                                                                               |   |                                    |        |   |   |     |   |   |   |   |
| **    Increase                (decrease) in cash and cash equivalents**                        |   |                                    | **(3,219**  | **)**  |   | 2,508    |   |   | (3,385 | ) |
|                                                                                                               |   |                                    |        |   |   |     |   |   |   |   |
| Cash                and cash equivalents at beginning of year                                                      |   |                                    | **46,778**  |   |   | 44,270   |   |   | 47,655 |   |
|                                                                                                               |   |                                    |        |   |   |     |   |   |   |   |
| Cash                and cash equivalents at end of year                                                            |   | **$**                                   | **43,559**  |   | $      | 46,778   |   | $ | 44,270 |   |
|                                                                                                               |   |                                    |        |   |   |     |   |   |   |   |
| (Continued)                                                                                                        |   |                                    |        |   |   |     |   |   |   |   |

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Table          of Contents

| **Merchants                  and Manufacturers Bancorporation, Inc. and                  Subsidiaries** |   |                                      |       |   |   |   |   |
|---------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|------------|--------|--------|--------|--------|
|                                                                                                    |   |                                      |       |   |   |   |   |
| **Consolidated                  Statements of Cash Flows (Continued)**                                  |   |                                      |       |   |   |   |   |
| **Years                  Ended December 31, 2006, 2005, and 2004**                                      |   |                                      |       |   |   |   |   |
|                                                                                                    |   |                                      |       |   |   |   |   |
|                                                                                                    |   |                                      |       |   |   |   |   |
|                                                                                                    |   | **2006**                                  |       | 2005   |   | 2004   |   |
|                                                                                                    |   | *(Dollars                  In Thousands)* |       |
| Supplemental                  Cash Flow Information and Noncash Transactions:                           |   |                                      |       |   |   |   |   |
|                    Interest paid                                                                   |   | **$**                                     | **44,646** |   | $      | 28,581 |   | $ | 19,106 |   |
|                    Income taxes paid                                                               |   |                                      | **2,529**  |   |   | 1,530  |   |   | 3,581 |   |
|                    Loans transferred to other real estate owned                                    |   |                                      | **932**    |   |   | 789    |   |   | 1,612 |   |
|                                                                                                    |   |                                      |       |   |   |   |   |   |   |   |
| Supplemental                  Schedules of Noncash Investing Activities:                                |   |                                      |       |   |   |   |   |   |   |   |
|                    Change in accumulated other comprehensive income,                  unrealized   |   |                                      |       |   |   |   |   |   |   |   |
|                      gains (losses) on available-for-sale securities, net                |   | **$**                                     | **488**    |   | $      | (1,874 | )      | $ | (158 | ) |
|                                                                                                    |   |                                      |       |   |   |   |   |   |   |   |
| Acquisitions                  (Note 2)                                                                  |   |                                      |       |   |   |   |   |   |   |   |
|                    Assets acquired:                                                                |   |                                      |       |   |   |   |   |   |   |   |
|                      Cash and cash equivalents                                           |   | **$**                                     | **-**      |   | $      | -      |   | $ | 6,137 |   |
|                      Available-for-sale securities                                       |   |                                      | **-**      |   |   | -      |   |   | 11,507 |   |
|                      Accrued interest receivable                                         |   |                                      | **-**      |   |   | -      |   |   | 428 |   |
|                      Loans, net                                                          |   |                                      | **-**      |   |   | -      |   |   | 71,878 |   |
|                      FHLB stock                                                          |   |                                      | **-**      |   |   | -      |   |   | 2,265 |   |
|                      Premises and equipment, net                                         |   |                                      | **-**      |   |   | -      |   |   | 2,101 |   |
|                      Other                                                               |   |                                      | **-**      |   |   | -      |   |   | 1,628 |   |
|                      Core deposit and other intangibles                                  |   |                                      | **-**      |   |   | -      |   |   | 858 |   |
|                      Excess of cost over fair value of net assets acquired               |   |                                      | **-**      |   |   | -      |   |   | 5,203 |   |
|                                                                                                    |   |                                      | -          |   |   | -      |   |   | 102,005 |   |
| Liabilities                  assumed:                                                                   |   |                                      |       |   |   |   |   |   |   |   |
|                    Deposits                                                                        |   |                                      | **-**      |   |   | -      |   |   | 80,032 |   |
|                    Accrued interest payable                                                        |   |                                      | **-**      |   |   | -      |   |   | 272 |   |
|                    Short-term borrowings                                                           |   |                                      | **-**      |   |   | -      |   |   | 6,725 |   |
|                    Long-term borrowings                                                            |   |                                      | **-**      |   |   | -      |   |   | 2,010 |   |
|                    Other liabilities                                                               |   |                                      | **-**      |   |   | -      |   |   | 1,478 |   |
| **   **                                                                                  |   |                                      | -          |   |   | -      |   |   | 90,517 |   |
|                                                                                                    |   |                                      |            |   |   |        |   |   |  |   |
|     Net                  assets acquired                                            |   | **$**                                     | **-**      |   | $      | -      |   | $ | 11,488 |   |
|                                                                                                    |   |                                      |       |   |   |   |   |   |   |   |
| Cash                  paid                                                                              |   | **$**                                     | **-**      |   | $      | -      |   | $ | 1,300 |   |
| Note                  issued                                                                            |   |                                      | **-**      |   |   | -      |   |   | - |   |
| Stock                  issued                                                                           |   |                                      | **-**      |   |   | -      |   |   | 10,188 |   |
|                                                                                                    |   |                                      |       |   |   |   |   |   |   |   |
|     Total                  price paid                                               |   | **$**                                     | **-**      |   | $      | -      |   | $ | 11,488 |   |
|                                                                                                    |   |                                      |       |   |   |   |   |   |   |   |
| See                  Notes to Consolidated Financial Statements.                                        |   |                                      |       |   |   |   |   |   |   |   |

----

Table          of Contents

**Merchants          and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes          to Consolidated Financial Statements**

**Note      1. Summary of Significant Accounting      Policies**

** **

** **

** **

** **

----

Table          of Contents

**Merchants          and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes          to Consolidated Financial Statements**

**Note      1. Summary of Significant Accounting Policies (Continued)**

** **

----

Table          of Contents

**Merchants          and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes          to Consolidated Financial Statements**

**Note      1. Summary of Significant Accounting Policies (Continued)**

----

Table          of Contents

**Merchants          and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes          to Consolidated Financial Statements**

**Note      1. Summary of Significant Accounting Policies (Continued)**

|                                                                |   | Years                  Ended December 31,                        |   |
|---------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|
|                                                                |   | 2005                                                             |   | 2004 |   |
|                                                                |   | *(Dollars                  In Thousands, Except Per Share Data)* |   |
|                                                                |   |                                                             |   |   |   |
| Net                  income, as reported                            |   | $                                                                | 5,098  |   | $ | 4,002 |   |
| Deduct                  total stock-based employee                  |   |                                                             |   |   |   |   |   |
|                     compensation expense determined       |   |                                                             |   |   |   |   |   |
|                     under fair value based method for all |   |                                                             |   |   |   |   |   |
|                     awards, net of related tax effects    |   |                                                             | 6      |   |   | 301 |   |
|                                                                |   |                                                             |   |   |   |   |   |
| **Pro                  forma net income**                           |   | $                                                                | 5,092  |   | $ | 3,701 |   |
|                                                                |   |                                                             |   |   |   |   |   |
| Earnings                  per share:                                |   |                                                             |   |   |   |   |   |
|                    Basic:                                      |   |                                                             |   |   |   |   |   |
|                      As reported                     |   | $                                                                | 1.39   |   | $ | 1.16 |   |
|                      Pro forma                       |   |                                                             | 1.38   |   |   | 1.07 |   |
|                    Diluted:                                    |   |                                                             |   |   |   |   |   |
|                      As reported                     |   |                                                             | 1.38   |   |   | 1.15 |   |
|                      Pro forma                       |   |                                                             | 1.38   |   |   | 1.06 |   |
|                                                                |   |                                                             |   |   |   |   |   |

----

Table            of Contents

**Merchants            and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes            to Consolidated Financial Statements**

**Note        1. Summary of Significant Accounting Policies (Continued)**

|                                                                                                                                                               |   | 2006                                                              |      | 2005   |   | 2004      |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|-----------|--------|--------|-----------|--------|
|                                                                                                                                                               |   | *(Dollars                    In Thousands, Except Share Amounts)* |      |
|                                                                                                                                                               |   |                                                              |      |   |   |      |   |
| Net                    income                                                                                                                                      |   | $                                                                 | 3,996     |   | $      | 5,098     |   | $ | 4,002 |   |
|                                                                                                                                                               |   |                                                              |      |   |   |      |   |   |   |   |
| Weighted                      average common shares outstanding                                                                                               |   |                                                              | 3,692,477 |   |   | 3,688,248 |   |   | 3,464,766 |   |
| Effect                    of dilutive options                                                                                                                      |   |                                                              | 13,472    |   |   | 11,827    |   |   | 13,011 |   |
|                                                                                                                                                               |   |                                                              |      |   |   |      |   |   |   |   |
| Weighted                      average common shares outstanding                      used to calculate diluted earnings                      per common share |   |                                                              | 3,705,949 |   |   | 3,700,075 |   |   | 3,477,777 |   |
|                                                                                                                                                               |   |                                                              |      |   |   |      |   |   |   |   |

----

Table            of Contents

**Merchants            and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes            to Consolidated Financial Statements**

**Note        1. Summary of Significant Accounting Policies (Continued)**

**Note        2. Business Combinations**

**Note        3. Cash and Due From Banks **

----

Table            of Contents

**Merchants            and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes            to Consolidated Financial Statements**

**Note        4. Available-for-Sale Securities**

|                                                   |   | December                    31, 2006              |      |
|--------------------------------------------------------|--------|---------------------------------------------------|-----------|
|                                                   |   |                                              |      | Gross |   | Gross |   |   |   |
|                                                   |   | Amortized                                         |      | Unrealized |   | Unrealized |   | Fair |   |
|                                                   |   | Cost                                              |      | Gains |   | (Losses) |   | Value |   |
|                                                   |   | *(Dollars                    In Thousands)*       |      |
| U.S.                    Treasury securities            |   | $                                                 | 500       |   | $ | - |   | $ | (3 | ) | $ | 497 |   |
| Government                    sponsored agencies       |   |                                              | 12,960    |   |   | - |   |   | (158 | ) |   | 12,802 |   |
| State                    and political subdivisions    |   |                                              | 62,500    |   |   | 242 |   |   | (412 | ) |   | 62,330 |   |
| Corporate                    bonds                     |   |                                              | 25        |   |   | - |   |   | - |   |   | 25 |   |
| Collateralized                    mortgage obligations |   |                                              | 46,107    |   |   | - |   |   | (934 | ) |   | 45,173 |   |
| Mortgage-backed                    securities          |   |                                              | 37,520    |   |   | 128 |   |   | (222 | ) |   | 37,426 |   |
|                                                   |   |                                              |      |   |   |   |   |   |   |   |   |   |   |
|                                                   |   | $                                                 | 159,612   |   | $ | 370 |   | $ | (1,729 | ) | $ | 158,253 |   |
|                                                   |   |                                              |      |   |   |   |   |   |   |   |   |   |   |
|                                                        |   | December                    31, 2005         |
|                                                   |   |                                              |      |   |   | Gross |   |   | Gross |   |   |   |   |
|                                                        |   |                                              | Amortized |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                                                        |   |                                              | Cost      |   |   | Gains |   |   | (Losses) |   |   | Value |   |
|                                                        |   | *(Dollars                    In Thousands)*  |
| U.S.                    Treasury securities            |   | $                                                 | 499       |   | $ | - |   | $ | (3 | ) | $ | 496 |   |
| Government                    sponsored agencies       |   |                                              | 11,867    |   |   | - |   |   | (237 | ) |   | 11,630 |   |
| State                    and political subdivisions    |   |                                              | 72,143    |   |   | 397 |   |   | (808 | ) |   | 71,732 |   |
| Corporate                    bonds                     |   |                                              | 50        |   |   | - |   |   | - |   |   | 50 |   |
| Collateralized                    mortgage obligations |   |                                              | 55,402    |   |   | 17 |   |   | (1,265 | ) |   | 54,154 |   |
| Mortgage-backed                    securities          |   |                                              | 35,784    |   |   | 82 |   |   | (289 | ) |   | 35,577 |   |
|                                                   |   |                                              |      |   |   |   |   |   |   |   |   |   |   |
|                                                   |   | $                                                 | 175,745   |   | $ | 496 |   | $ | (2,602 | ) | $ | 173,639 |   |
|                                                   |   |                                              |      |   |   |   |   |   |   |   |   |   |   |

----

Table          of Contents

**Merchants          and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes          to Consolidated Financial Statements**

**Note      4. Available-for-Sale Securities (Continued)**

|                                                   |   | Less                  than 12 months      |   | 12                  Months or More |   | Total  |   |
|--------------------------------------------------------|--------|-------------------------------------------|--------|------------------------------------|--------|--------|--------|
|                                                   |   | Fair                                      |   | Unrealized                         |   | Fair   |   | Unrealized |   | Fair |   | Unrealized |   |
|                                                   |   | Value                                     |   | Losses                             |   | Value  |   | Losses |   | Value |   | Losses |   |
| **December                  31, 2006**                 |   | *(Dollars                  In Thousands)* |   |
| U.S.                  Treasury securities              |   | $                                         | -      |                               | $      | -      |   | $ | 500 |   | $ | (3 | ) | $ | 500 |   | $ | (3 | ) |
| Government                  sponsored agencies         |   |                                      | -      |                               |   | -      |   |   | 9,159 |   |   | (158 | ) |   | 9,159 |   |   | (158 | ) |
| State                  and political subdivisions      |   |                                      | 5,393  |                               |   | (52    | )      |   | 32,555 |   |   | (360 | ) |   | 37,948 |   |   | (412 | ) |
| Collateralized                  mortgage obligations   |   |                                      | 1,639  |                               |   | (4     | )      |   | 43,347 |   |   | (930 | ) |   | 44,986 |   |   | (934 | ) |
| Mortgage-backed                  securities            |   |                                      | 5,387  |                               |   | (15    | )      |   | 12,784 |   |   | (207 | ) |   | 18,171 |   |   | (222 | ) |
|                                                   |   |                                      |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  temporarily impaired securities |   | $                                         | 12,419 |                               | $      | (71    | )      | $ | 98,345 |   | $ | (1,658 | ) | $ | 110,764 |   | $ | (1,729 | ) |
|                                                   |   |                                      |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                   |   | Less                  than 12 months      |   | 12                  Months or More |   | Total  |   |
|--------------------------------------------------------|--------|-------------------------------------------|--------|------------------------------------|--------|--------|--------|
|                                                   |   | Fair                                      |   | Unrealized                         |   | Fair   |   | Unrealized |   | Fair |   | Unrealized |   |
|                                                   |   | Value                                     |   | Losses                             |   | Value  |   | Losses |   | Value |   | Losses |   |
| **December                  31, 2005**                 |   | *(Dollars                  In Thousands)* |   |
| U.S.                  Treasury securities              |   | $                                         | 496    |                               | $      | (3     | )      | $ | - |   | $ | - |   | $ | 496 |   | $ | (3 | ) |
| Government                  sponsored agencies         |   |                                      | 7,460  |                               |   | (176   | )      |   | 3,665 |   |   | (61 | ) |   | 11,125 |   |   | (237 | ) |
| State                  and political subdivisions      |   |                                      | 34,480 |                               |   | (656   | )      |   | 11,757 |   |   | (152 | ) |   | 46,237 |   |   | (808 | ) |
| Collateralized                  mortgage obligations   |   |                                      | 22,042 |                               |   | (887   | )      |   | 29,617 |   |   | (378 | ) |   | 51,659 |   |   | (1,265 | ) |
| Mortgage-backed                  securities            |   |                                      | 8,628  |                               |   | (248   | )      |   | 10,655 |   |   | (41 | ) |   | 19,283 |   |   | (289 | ) |
|                                                   |   |                                      |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  temporarily impaired securities |   | $                                         | 73,106 |                               | $      | (1,970 | )      | $ | 55,694 |   | $ | (632 | ) | $ | 128,800 |   | $ | (2,602 | ) |
|                                                   |   |                                      |   |                               |   |   |   |   |   |   |   |  |   |   |   |   |   |   |   |

----

Table              of Contents

**Merchants              and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes              to Consolidated Financial Statements**

**Note          4. Available-for-Sale Securities (Continued)**

| Available                      for Sale, At Fair Value:  |   |                                          |   |                              |   |                               |   |                          |   |   |   |
|----------------------------------------------------------|--------|-----------------------------------------------|--------|-----------------------------------|--------|------------------------------------|--------|-------------------------------|--------|--------|--------|
|                                                     |   |                                          |   | After                      1 year |   | After                      5 years |   |                          |   |   |   |
|                                                     |   | Within                                        |   | through                           |   | through                            |   | Over                          |   |   |   |
|                                                     |   | 1                      year                   |   | 5                      years      |   | 10                      years      |   | 10                      years |   | Total  |   |
|                                                     |   | *(Dollars                      in Thousands)* |   |
| U.S.                      Treasury securities            |   | $                                             | 497    |                              | $      | -                                  |   | $                             | -      |   | $      | - |   | $ | 497 |   |
| Government                      sponsored agencies       |   |                                          | 4,483  |                              |   | 7,830                              |   |                          | 489    |   |   | - |   |   | 12,802 |   |
| State                      and political subdivisions    |   |                                          | 2,302  |                              |   | 17,571                             |   |                          | 29,015 |   |   | 13,442 |   |   | 62,330 |   |
| Corporate                      bonds                     |   |                                          | -      |                              |   | 25                                 |   |                          | -      |   |   | - |   |   | 25 |   |
| Collateralized                      mortgage obligations |   |                                          | 5,708  |                              |   | 39,465                             |   |                          | -      |   |   | - |   |   | 45,173 |   |
| Mortgage-backed                      securities          |   |                                          | 182    |                              |   | 27,554                             |   |                          | 9,609  |   |   | 81 |   |   | 37,426 |   |
|                                                     |   | $                                             | 13,172 |                              | $      | 92,445                             |   | $                             | 39,113 |   | $      | 13,523 |   | $ | 158,253 |   |
|                                                     |   |                                          |   |                              |   |                               |   |                          |   |   |   |   |   |   |   |   |

**Note              5. Loans **

|                                                           |   | December                        31,             |      |
|----------------------------------------------------------------|--------|-------------------------------------------------|-----------|
|                                                           |   | 2006                                            |      | 2005 |   |
|                                                           |   | *(Dollars                        In Thousands)* |      |
| First                        mortgage:                         |   |                                            |      |   |   |
| Conventional                        single-family residential  |   | $                                               | 196,223   |   | $ | 167,745 |   |
| Commercial                        and multi-family residential |   |                                            | 497,496   |   |   | 474,840 |   |
| Construction                                                   |   |                                            | 102,461   |   |   | 81,651 |   |
| Farmland                                                       |   |                                            | 65,398    |   |   | 52,392 |   |
| Total                        first mortgage loans              |   |                                            | 861,578   |   |   | 776,628 |   |
|                                                           |   |                                            |      |   |   |   |   |
| Commercial                        business loans               |   |                                            | 252,897   |   |   | 270,101 |   |
| Consumer                        and installment loans          |   |                                            | 54,798    |   |   | 50,663 |   |
| Home                        equity loans                       |   |                                            | 31,321    |   |   | 28,541 |   |
| Other                                                          |   |                                            | 5,862     |   |   | 7,734 |   |
|                                                           |   |                                            | 344,878   |   |   | 357,039 |   |
|                                                           |   |                                            |      |   |   |   |   |
| Gross                        loans                             |   |                                            | 1,206,456 |   |   | 1,133,667 |   |
| Less:                        Allowance for loan losses         |   |                                            | (12,798   | ) |   | (13,051 | ) |
|                                                           |   |                                            |      |   |   |   |   |
| Loans,                        net                              |   | $                                               | 1,193,658 |   | $ | 1,120,616 |   |
|                                                           |   |                                            |      |   |   |   |   |

----

Table          of Contents

**Merchants          and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes          to Consolidated Financial Statements**

**Note      5. Loans (Continued)**

|                                           |   | December                  31,             |   |
|------------------------------------------------|--------|-------------------------------------------|--------|
|                                           |   | 2006                                      |   | 2005 |   | 2004 |   |
|                                           |   | *(Dollars                  In Thousands)* |   |
|                                           |   |                                      |   |   |   |   |   |
| Balance                  at beginning of year  |   | $                                         | 13,051 |   | $ | 10,622 |   | $ | 9,136 |   |
| Increase                  due to acquisition   |   |                                      | -      |   |   | - |   |   | 999 |   |
| Provisions                  charged to expense |   |                                      | 3,060  |   |   | 3,951 |   |   | 1,793 |   |
| Recoveries                                     |   |                                      | 862    |   |   | 867 |   |   | 419 |   |
| Charge-offs                                    |   |                                      | (4,175 | ) |   | (2,389 | ) |   | (1,725 | ) |
|                                           |   |                                      |   |   |   |   |   |   |   |   |
| Balance                  at end of year        |   | $                                         | 12,798 |   | $ | 13,051 |   | $ | 10,622 |   |

|                                                                                                                   |   | December                  31,             |   |
|------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                                                                   |   | 2006                                      |   | 2005 |   |
|                                                                                                                   |   | *(Dollars                  In Thousands)* |   |
|                                                                                                                   |   |                                      |   |   |   |
| Impaired                    loans for which an allowance has                    been provided                     |   | $                                         | 23,230 |   | $ | 13,543 |   |
| Impaired                    loans for which no allowance has                    been provided                          |   |                                      | -      |   |   | - |   |
|                                                                                                                   |   |                                      |   |   |   |   |   |
| Total                  loans determined to be impaired                                                                 |   | $                                         | 23,230 |   | $ | 13,543 |   |
|                                                                                                                   |   |                                      |   |   |   |   |   |
| Allowance                    provided for impaired loans, included                    in the allowance for loan losses |   | $                                         | 4,322  |   | $ | 3,662 |   |

|                                                  |   | Years                  Ended December 31, |   |
|-------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                  |   | 2006                                      |   | 2005 |   | 2004 |   |
|                                                  |   | *(Dollars                  In Thousands)* |   |
|                                                  |   |                                      |   |   |   |   |   |
| Average                  investment in impaired loans |   | $                                         | 17,345 |   | $ | 7,003 |   | $ | 5,842 |   |
|                                                  |   |                                      |   |   |   |   |   |   |   |   |

----

Table              of Contents

**Merchants              and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes              to Consolidated Financial Statements**

**Note          5. Loans (Continued)**

|                                                       |   | Years                      Ended December 31, |   |
|------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                       |   | 2006                                          |   | 2005 |   | 2004 |   |
|                                                       |   | *(Dollars                      In Thousands)* |   |
|                                                       |   |                                          |   |   |   |   |   |
| Balance                      at beginning of year          |   | $                                             | 1,928  |   | $ | 1,991 |   | $ | 1,712 |   |
| Mortgage                      servicing rights capitalized |   |                                          | 858    |   |   | 798 |   |   | 1,064 |   |
| Mortgage                      servicing rights amortized   |   |                                          | (869   | ) |   | (861 | ) |   | (785 | ) |
|                                                       |   |                                          |   |   |   |   |   |   |   |   |
| Balance                      at end of year                |   | $                                             | 1,917  |   | $ | 1,928 |   | $ | 1,991 |   |

**Note              6. Premises and Equipment**

|                                                   |   | December                      31,             |    |
|--------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                   |   | 2006                                          |    | 2005 |   |
|                                                   |   | *(Dollars                      In Thousands)* |    |
|                                                   |   |                                          |    |   |   |
| Land                                                   |   | $                                             | 5,346   |   | $ | 4,740 |   |
| Office                      buildings and improvements |   |                                          | 31,288  |   |   | 30,151 |   |
| Furniture                      and equipment           |   |                                          | 16,466  |   |   | 19,792 |   |
|                                                   |   |                                          | 53,100  |   |   | 54,683 |   |
| Less:                      accumulated depreciation    |   |                                          | (17,903 | ) |   | (21,118 | ) |
|                                                   |   |                                          |    |   |   |   |   |
|                                                   |   | $                                             | 35,197  |   | $ | 33,565 |   |

----

Table                of Contents

**Merchants                and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes                to Consolidated Financial Statements**

**Note            7. Goodwill and Intangible Assets**

|                                               |   | 2006                                          |   | 2005   |   |
|----------------------------------------------------|--------|-----------------------------------------------|--------|--------|--------|
|                                               |   | *(Dollars                      In Thousands)* |   |
|                                               |   |                                          |   |   |   |
| Balance                      at beginning of year  |   | $                                             | 31,983 |   | $      | 31,885 |   |
| Goodwill                      acquired during year |   |                                          | 98     |   |   | 98 |   |
|                                               |   |                                          |   |   |   |   |   |
| Balance                      at end of year        |   | $                                             | 32,081 |   | $      | 31,983 |   |

|                                                  |   | 2006                                            |   | 2005   |   |
|-------------------------------------------------------|--------|-------------------------------------------------|--------|--------|--------|
|                                                  |   | *(Dollars                        In Thousands)* |   |
|                                                  |   |                                            |   |   |   |
| Core                        deposit intangibles       |   | $                                               | 4,301  |   | $      | 4,301 |   |
| Other                        intangibles              |   |                                            | 563    |   |   | 563 |   |
|                                                  |   |                                            | 4,864  |   |   | 4,864 |   |
| Less:                        accumulated amortization |   |                                            | (2,070 | )      |   | (1,596 | ) |
|                                                  |   |                                            |   |   |   |   |   |
| Intangible                        assets, net         |   | $                                               | 2,794  |   | $      | 3,268 |   |

| Years                            Ending December 31, |   |                                                      |   |
|------------------------------------------------------|--------|-----------------------------------------------------------|--------|
|                                                      |   |  *(Dollars                            in Thousands)* |   |
|                                                 |   |                                                      |   |
| 2007                                                 |   | $                                                         | 407    |   |
| 2008                                                 |   |                                                      | 395    |   |
| 2009                                                 |   |                                                      | 395    |   |
| 2010                                                 |   |                                                      | 395    |   |
| 2011                                                 |   |                                                      | 395    |   |

----

Table                      of Contents

**Merchants                      and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes                      to Consolidated Financial Statements**

**Note                8. Deposits**

|                                                                    |   | 2006                                              |      | 2005   |   |
|-------------------------------------------------------------------------|--------|---------------------------------------------------|-----------|--------|--------|
|                                                                    |   | *(Dollars                          In Thousands)* |      |
| Negotiable                          Order of Withdrawal (NOW) accounts: |   |                                              |      |   |   |
|   Non-interest                          bearing               |   | $                                                 | 136,709   |   | $      | 159,591 |   |
|   Interest-bearing                                            |   |                                              | 112,151   |   |   | 109,359 |   |
| Savings                          deposits                               |   |                                              | 121,044   |   |   | 134,103 |   |
| Money                          market investment accounts               |   |                                              | 237,611   |   |   | 253,921 |   |
| Time                          deposits and certificate accounts         |   |                                              | 557,722   |   |   | 503,189 |   |
|                                                                    |   |                                              |      |   |   |   |   |
|                                                                    |   | $                                                 | 1,165,237 |   | $      | 1,160,163 |   |

| Years                            Ending December 31, |   |                                                      |    |
|------------------------------------------------------|--------|-----------------------------------------------------------|---------|
|                                                      |   |  *(Dollars                            in Thousands)* |    |
|                                                 |   |                                                      |    |
| 2007                                                 |   | $                                                         | 333,066 |   |
| 2008                                                 |   |                                                      | 102,282 |   |
| 2009                                                 |   |                                                      | 46,702  |   |
| 2010                                                 |   |                                                      | 44,335  |   |
| 2011                                                 |   |                                                      | 31,337  |   |
|                                                 |   |                                                      |    |   |
|                                                 |   | $                                                         | 557,722 |   |

----

Table                      of Contents

**Merchants                      and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes                      to Consolidated Financial Statements**

**Note                9. Borrowings**

|                                                             |   | Weighted                          Average |   |                                        |   |                                  |   |                                              |                                     |
|------------------------------------------------------------------|--------|-------------------------------------------|--------|--------------------------------------------------|--------|---------------------------------------|--------|---------------------------------------------------|------------------------------------------|
|                                                             |   | Interest                          Rate    |   |                                        |   |                                  |   |                                              |                                     |
|                                                             |   | December                          31,     |   |  Matures                          in fiscal |   | December                          31, |   |
| Description                                                      |   | 2006                                      |   | 2005                                             |   | year                          ended   |   | 2006                                              |                                     | 2005 |   |
|                                                             |   |                                      |   |                                             |   |                             |   | *(Dollars                          In Thousands)* |                                     |
| **Short-term                          borrowings:**              |   |                                      |   |                                             |   |                             |   |                                              |                                     |   |   |
| Federal                          funds purchased                 |   |                                      | 4.47   | %                                                |   | 3.97                                  | %      |                                              | Daily                          overnight |   | $ | 47,679 |   | $ | 27,297 |   |
|                                                             |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| Federal                          Reserve Bank Treasury,          |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| tax                          & loan advances                 |   |                                      | -      |                                             |   | -                                     |   |                                              | Daily                          overnight |   |   | 501 |   |   | 569 |   |
|                                                             |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| Securities                          sold under agreements        |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| to                          repurchase                           |   |                                      | -      |                                             |   | 0.86                                  |   |                                              | 2006                                     |   |   | - |   |   | 247 |   |
|                                                             |   |                                      | 0.73   |                                             |   | -                                     |   |                                              | 2007                                     |   |   | 245 |   |   | - |   |
|                                                             |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| Lines                          of credit with unaffiliated banks |   |                                      | -      |                                             |   | 4.96                                  |   |                                              | 2006                                     |   |   | - |   |   | 16,219 |   |
|                                                             |   |                                      | 6.72   |                                             |   | -                                     |   |                                              | 2007                                     |   |   | 8,721 |   |   | - |   |
|                                                             |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| Acquisition                          notes payable               |   |                                      | -      |                                             |   | 5.35                                  |   |                                              | 2006                                     |   |   | - |   |   | 2,564 |   |
|                                                             |   |                                      | 5.35   |                                             |   | -                                     |   |                                              | 2007                                     |   |   | 2,564 |   |   | - |   |
|                                                             |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| Total                          short-term borrowings             |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   | $ | 59,710 |   | $ | 46,896 |   |
|                                                             |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| **Long-term                          borrowings:**               |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| Acquisition                          notes payable               |   |                                      | 5.35   |                                             |   | 5.35                                  |   |                                              | 2008                                     |   |   | 2,563 |   |   | 5,127 |   |
|                                                             |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| Financing                          obligation                    |   |                                      | 5.00   |                                             |   | -                                     |   |                                              | 2008                                     |   |   | 5,267 |   |   | - |   |
|                                                             |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| Advances                          from Federal Home              |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| Loan                          Bank of Chicago                    |   |                                      | -      |                                             |   | 3.29                                  |   |                                              | 2006                                     |   |   | - |   |   | 25,281 |   |
|                                                             |   |                                      | 3.43   |                                             |   | 3.31                                  |   |                                              | 2007                                     |   |   | 28,275 |   |   | 26,750 |   |
|                                                             |   |                                      | 4.62   |                                             |   | 4.20                                  |   |                                              | 2008                                     |   |   | 34,811 |   |   | 23,750 |   |
|                                                             |   |                                      | 4.47   |                                             |   | 3.90                                  |   |                                              | 2009                                     |   |   | 20,011 |   |   | 11,500 |   |
|                                                             |   |                                      | 5.29   |                                             |   | 5.61                                  |   |                                              | 2010                                     |   |   | 11,000 |   |   | 2,500 |   |
|                                                             |   |                                      | 5.09   |                                             |   | 4.61                                  |   |                                              | 2011                          and after  |   |   | 16,594 |   |   | 3,635 |   |
|                                                             |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| Total                          long-term borrowings              |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   | $ | 118,521 |   | $ | 98,543 |   |
|                                                             |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   |   |   |   |   |   |   |
| Total                          borrowings                        |   |                                      |   |                                             |   |                                  |   |                                              |                                     |   | $ | 178,231 |   | $ | 145,439 |   |

|                                                                   |   |                                                |    |   |   |
|------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|--------|--------|
|                                                                   |   | 2006                                                |    | 2005   |   |
|                                                                   |   | *(Dollars                            In Thousands)* |    |
|                                                                   |   |                                                |    |   |   |
| Average                            daily balance during the year       |   | $                                                   | 60,193  |   | $      | 46,930 |   |
| Average                            daily interest rate during the year |   |                                                | 5.16    | %      |   | 3.24 | % |
| Maximum                            month-end balance during the year   |   | $                                                   | 100,243 |   | $      | 71,210 |   |
| Weighted                            average rate as of December 31     |   |                                                | 4.47    | %      |   | 3.97 | % |

----

Table                      of Contents

**Merchants                      and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes                      to Consolidated Financial Statements**

**Note                9. Borrowings (Continued)**

** **

** **

**Note                10. Junior Subordinated Debt Owed to Unconsolidated Trusts**

|                                              | Trust                            I                  | Trust                            II     | Trust                            III        | Trust                            IV         | Trust                            V           | Trust                            VI          |
|---------------------------------------------------|-----------------------------------------------------|-----------------------------------------|---------------------------------------------|---------------------------------------------|----------------------------------------------|----------------------------------------------|
|                                              | *(Dollars                            in Thousands)* |
|                                              |                                                |                                    |                                        |                                        |                                         |                                         |
| Date                            of issuance       | November                            2002            | May                            2003     | October                            2003     | October                            2003     | September                            2004    | November                            2006     |
|                                              |                                                |                                    |                                        |                                        |                                         |                                         |
| Amount                            issued          | $10,000                                             | $10,000                                 | $7,500                                      | $7,500                                      | $10,000                                      | $7,000                                       |
|                                              |                                                |                                    |                                        |                                        |                                         |                                         |
| Rate                            of interest       | 3-month                            LIBOR            | 8.25%                                   | 8.25%                                       | 3-month                            LIBOR    | 3-month                            LIBOR     | 3-month                            LIBOR     |
|                                              | plus                            3.35%               |                                    |                                        | plus                            2.95%       | plus                            2.05%        | plus                            1.85%        |
|                                              |                                                |                                    |                                        |                                        |                                         |                                         |
| Fixed/Variable                                    | Variable                                            | Fixed                                   | Fixed                                       | Variable                                    | Variable                                     | Variable                                     |
|                                              |                                                |                                    |                                        |                                        |                                         |                                         |
| Rate                            of interest as of |                                                |                                    |                                        |                                        |                                         |                                         |
| December                            31, 2006      | 8.71%                                               | 8.25%                                   | 8.25%                                       | 8.31%                                       | 7.41%                                        | 7.21%                                        |
|                                              |                                                |                                    |                                        |                                        |                                         |                                         |
| Date                            of maturity       | November                            11, 2032        | May                            30, 2033 | October                            15, 2033 | October                            15, 2033 | December                            31, 2034 | December                            30, 2036 |
|                                              |                                                |                                    |                                        |                                        |                                         |                                         |
| Common                            equity          |                                                |                                    |                                        |                                        |                                         |                                         |
| securities                                        | $310                                                | $310                                    | $232                                        | $232                                        | $310                                         | $217                                         |
|                                              |                                                |                                    |                                        |                                        |                                         |                                         |
| Debentures                            issued      | $10,310                                             | $10,310                                 | $7,732                                      | $7,732                                      | $10,310                                      | $7,217                                       |
|                                              |                                                |                                    |                                        |                                        |                                         |                                         |
| Debt                            issuance costs    | $44                                                 | $210                                    | $9                                          | $9                                          | -                                            | -                                            |
|                                              |                                                |                                    |                                        |                                        |                                         |                                         |
| Underwriting                            fees      | $300                                                | $300                                    | $169                                        | $169                                        | -                                            | -                                            |

----

Table                      of Contents

**Merchants                      and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes                      to Consolidated Financial Statements**

**Note                  10. Junior Subordinated Debt Owed to Unconsolidated Trusts**
**                  (Continued)**

**Note                  11. Stock Based Compensation**

|                                                                |   |                                   |    | Weighted-                                   |   | Weighted-                                     |   |        |   |
|---------------------------------------------------------------------|--------|----------------------------------------|---------|---------------------------------------------|--------|-----------------------------------------------|--------|-------------|--------|
|                                                                |   |                                   |    | Average                                     |   | Average                                       |   |        |   |
|                                                                |   | Number                                 |    | Exercise                              Price |   | Remaining                                     |   |        |   |
|                                                                |   | of                              Shares |    | Per                              Share      |   | Contractual                              Life |   | Exercisable |   |
|                                                                |   |                                   |    |                                        |   |                                          |   |        |   |
| Total                              outstanding at December 31, 2003 |   |                                   | 73,256  |                                        | $      | 24.15                                         |   |        | 4.82   |   |   | 73,256 |   |
|                                Granted                         |   |                                   | 58,922  |                                        | $      | 40.19                                         |   |        |   |   |   |   |   |
|                                Exercised                       |   |                                   | (13,735 | )                                           | $      | 18.60                                         |   |        |   |   |   |   |   |
|                                Forfeited                       |   |                                   | -       |                                        |   | -                                             |   |        |   |   |   |   |   |
| Total                              outstanding at December 31, 2004 |   |                                   | 118,443 |                                        | $      | 32.75                                         |   |        | 5.20   |   |   | 101,721 |   |
|                                Granted                         |   |                                   | 700     |                                        | $      | 35.00                                         |   |        |   |   |   |   |   |
|                                Exercised                       |   |                                   | (7,361  | )                                           | $      | 18.29                                         |   |        |   |   |   |   |   |
|                                Forfeited                       |   |                                   | -       |                                        |   | -                                             |   |        |   |   |   |   |   |
| Total                              outstanding at December 31, 2005 |   |                                   | 111,782 |                                        | $      | 33.72                                         |   |        | 6.24   |   |   | 101,782 |   |
|                                Granted                         |   |                                   | -       |                                        |   | -                                             |   |        |   |   |   |   |   |
|                                Exercised                       |   |                                   | (559    | )                                           | $      | 15.11                                         |   |        |   |   |   |   |   |
|                                Forfeited                       |   |                                   | (1,000  | )                                           | $      | 45.00                                         |   |        |   |   |   |   |   |
| Total                              outstanding at December 31, 2006 |   |                                   | 110,223 |                                        | $      | 33.71                                         |   |        | 4.72   |   |   | 106,945 |   |

----

Table                        of Contents

**Merchants                        and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes                        to Consolidated Financial Statements**

**Note                    11. Stock Based Compensation (Continued)**

|                                          |   |        |    | Weighted-                                     |   |      |   |        |   |      |   |
|-----------------------------------------------|--------|-------------|---------|-----------------------------------------------|--------|-----------|--------|-------------|--------|-----------|--------|
|                                          |   |        |    | Average                                       |   | Weighted- |   |        |   | Weighted- |   |
|                                          |   |        |    | Remaining                                     |   | Average   |   |        |   | Average   |   |
| Range                              of         |   | Number      |    | Contractual                              Life |   | Exercise  |   | Number      |   | Exercise  |   |
| Exercise                              Price   |   | Outstanding |    | (In                              Years)       |   | Price     |   | Exercisable |   | Price     |   |
|                                          |   |        |    |                                          |   |      |   |        |   |      |   |
| $15.11                                        |   |        | 5,584   |                                          |   | 1.3       |   | $           | 15.11  |      |   | 5,584 |   | $ | 15.11 |   |
| $25.45                              to $28.31 |   |        | 46,017  |                                          |   | 2.2       |   | $           | 27.95  |      |   | 46,017 |   | $ | 27.95 |   |
| $30.50                              to $35.00 |   |        | 20,700  |                                          |   | 7.8       |   | $           | 30.65  |      |   | 17,422 |   | $ | 30.68 |   |
| $45.00                              to $46.00 |   |        | 37,922  |                                          |   | 7.1       |   | $           | 45.11  |      |   | 37,922 |   | $ | 45.11 |   |
|                                          |   |        |    |                                          |   |      |   |        |   |      |   |   |   |   |   |   |
|                                          |   |        | 110,223 |                                          |   |      |   |        |   |      |   | 106,945 |   |   |   |   |

|                                                                  |   |    |   | Weighted                                  |   |
|-----------------------------------------------------------------------|--------|---------|--------|-------------------------------------------|--------|
|                                                                  |   |    |   | Average                                   |   |
|                                                                  |   |    |   | Grant                                Date |   |
|                                                                  |   | Options |   | Fair                                Value |   |
|                                                                  |   |    |   |                                      |   |
| Nonvested                                at beginning of period  |   |    | 10,000 |                                      | $      | 30.50 |   |
| Granted                                                          |   |    | -      |                                      |   | - |   |
| Vested                                                           |   |    | (6,722 | )                                         |   | 30.50 |   |
| Canceled                                                         |   |    | -      |                                      |   | - |   |
| Nonvested                                at end of period        |   |    | 3,278  |                                      | $      | 30.50 |   |

----

Table                      of Contents

**Merchants                      and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes                      to Consolidated Financial                      Statements**

**Note            12. Profit-Sharing and Pension Plan**

*Profit-Sharing            Plan:*

*Pension            Plan:*

**Note            13. Salary Continuation Agreement**

----

Table                of Contents

**Merchants                and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes                to Consolidated Financial Statements**

**Note            14. Income Taxes**

|     |   | December                      31,             |   |
|----------|--------|-----------------------------------------------|--------|
|     |   | 2006                                          |   | 2005 |   | 2004 |   |
|     |   | *(Dollars                      In Thousands)* |   |
|     |   |                                          |   |   |   |   |   |
| Current  |   | $                                             | 2,529  |   | $ | 3,237 |   | $ | 1,610 |   |
| Deferred |   |                                          | (918   | ) |   | (995 | ) |   | 648 |   |
|     |   |                                          |   |   |   |   |   |   |   |   |
|     |   | $                                             | 1,611  |   | $ | 2,242 |   | $ | 2,258 |   |

|                                                             |   | 2006                                          |   | 2005                      |   | 2004   |   |
|------------------------------------------------------------------|--------|-----------------------------------------------|--------|---------------------------|--------|--------|--------|
|                                                             |   |                                          |   | %                      of |   |   |   | %                      of |   |   |   | %                      of |   |
|                                                             |   |                                          |   | Pretax                    |   |   |   | Pretax |   |   |   | Pretax |   |
|                                                             |   | Amount                                        |   | Income                    |   | Amount |   | Income |   | Amount |   | Income |   |
|                                                             |   | *(Dollars                      In Thousands)* |   |
|                                                             |   |                                          |   |                      |   |   |   |   |   |   |   |   |   |
| Computed                      “expected” tax expense |   | $                                             | 1,963  |                      |   | 35.0   | %      | $ | 2,569 |   |   | 35.0 | % | $ | 2,191 |   |   | 35.0 | % |
| Effect                      of graduated tax rates               |   |                                          | (56    | )                         |   | (1.0   | )      |   | (73 | ) |   | (1.0 | ) |   | (63 | ) |   | (1.0 | ) |
| State                      income taxes, net                     |   |                                          |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of                      federal benefit                          |   |                                          | 576    |                      |   | 10.3   |   |   | 679 |   |   | 9.3 |   |   | 1,050 |   |   | 16.8 |   |
| Tax-exempt                      income, net                      |   |                                          | (760   | )                         |   | (13.6  | )      |   | (810 | ) |   | (11.0 | ) |   | (851 | ) |   | (13.6 | ) |
| Other,                      net                                  |   |                                          | (112   | )                         |   | (2.0   | )      |   | (123 | ) |   | (1.7 | ) |   | (69 | ) |   | (1.1 | ) |
|                                                             |   |                                          |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   | $                                             | 1,611  |                      |   | 28.7   | %      | $ | 2,242 |   |   | 30.5 | % | $ | 2,258 |   |   | 36.1 | % |

|                                                                      |   | December                          31,             |   |
|---------------------------------------------------------------------------|--------|---------------------------------------------------|--------|
|                                                                      |   | 2006                                              |   | 2005 |   |
|                                                                      |   | *(Dollars                          In Thousands)* |   |
| Deferred                          tax assets:                             |   |                                              |   |   |   |
| Allowance                          for loan losses                        |   | $                                                 | 4,998  |   | $ | 5,022 |   |
| Net                          operating loss carryforwards                 |   |                                              | 3,272  |   |   | 2,608 |   |
| Deferred                          compensation                            |   |                                              | 1,738  |   |   | 1,637 |   |
| Unrealized                          loss on available-for-sale securities |   |                                              | 477    |   |   | 735 |   |
| Other                          assets                                     |   |                                              | 951    |   |   | 852 |   |
| Total                          deferred tax assets                        |   |                                              | 11,436 |   |   | 10,854 |   |
| Valuation                          allowance                              |   |                                              | (3,272 | ) |   | (2,608 | ) |
|                                                                      |   |                                              | 8,164  |   |   | 8,246 |   |
| Deferred                          tax liabilities:                        |   |                                              |   |   |   |   |   |
| Depreciation                                                              |   |                                              | (1,633 | ) |   | (1,385 | ) |
| Purchase                          accounting                              |   |                                              | (1,580 | ) |   | (1,871 | ) |
| Other                          liabilities                                |   |                                              | (2,676 | ) |   | (3,375 | ) |
| Total                          deferred tax liabilities                   |   |                                              | (5,889 | ) |   | (6,631 | ) |
|                                                                      |   |                                              |   |   |   |   |   |
| Net                          deferred tax asset                           |   | $                                                 | 2,275  |   | $ | 1,615 |   |

----

Table                of Contents

**Merchants                and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes                to Consolidated Financial Statements**

**Note            14. Income Taxes (Continued)**

**Note            15. Commitments and Contingent Liabilities**

|                                                         |   | December                      31,             |    |
|--------------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                         |   | 2006                                          |    | 2005 |   |
|                                                         |   | *(Dollars                      In Thousands)* |    |
|                                                         |   |                                          |    |   |   |
| Commitments                      to originate mortgage loans |   | $                                             | 23,984  |   | $ | 37,426 |   |
|                                                         |   |                                          |    |   |   |   |   |
| Unused                      lines of credit:                 |   |                                          |    |   |   |   |   |
| Commercial                      business                     |   |                                          | 209,211 |   |   | 193,581 |   |
| Home                      equity                             |   |                                          | 41,676  |   |   | 31,582 |   |
| Credit                      cards                            |   |                                          | 18,608  |   |   | 21,031 |   |
|                                                         |   |                                          |    |   |   |   |   |
| Standby                      letters of credit               |   |                                          | 4,870   |   |   | 12,362 |   |

----

Table                of Contents

**Merchants                and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes                to Consolidated Financial Statements**

**Note            15. Commitments and Contingent Liabilities (Continued)**

| Years                      Ending December 31, |   |                                          |   |
|------------------------------------------------|--------|-----------------------------------------------|--------|
|                                           |   | *(Dollars                      in Thousands)* |   |
|                                           |   |                                          |   |
| 2007                                           |   | $                                             | 1,101  |   |
| 2008                                           |   |                                          | 1,076  |   |
| 2009                                           |   |                                          | 1,045  |   |
| 2010                                           |   |                                          | 902    |   |
| 2011                                           |   |                                          | 902    |   |
|                                           |   |                                          |   |   |
|                                           |   | $                                             | 5,026  |   |

**Note              16. Concentration of Credit Risk**

**Note              17. Regulatory Capital Requirements and Restrictions of              Dividends**

----

Table                  of Contents

**Merchants                  and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes                  to Consolidated Financial Statements**

**Note              17. Regulatory Capital Requirements and Restrictions of Dividends              (Continued)**

|                                                              |   |                                            |    |                                     |   |                                     |   |                                           |   | To                        Be Well Capitalized |   |
|-------------------------------------------------------------------|--------|-------------------------------------------------|---------|------------------------------------------|--------|------------------------------------------|--------|------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                              |   |                                            |    |                                     |   | For                        Capital       |   | Under                        Prompt Corrective |   |
|                                                              |   | Actual                                          |    | Adequacy                        Purposes |   | Action                        Provisions |   |
|                                                              |   | Amount                                          |    | Ratio                                    |   | Amount                                   |   | Ratio                                          |   | Amount                                        |   | Ratio |   |
|                                                              |   | *(Dollars                        In Thousands)* |    |
| **As                        of December 31, 2006**                |   |                                            |    |                                     |   |                                     |   |                                           |   |                                          |   |   |   |
| Total                          capital (to risk-weighted assets): |   |                                            |    |                                     |   |                                     |   |                                           |   |                                          |   |   |   |
| Consolidated                                                      |   | $                                               | 124,909 |                                     |   | 10.09                                    | %      | $                                              | 99,045 |                                          |   | 8.00 | % | $ | 123,807 |   |   | N/A |   |
| Lincoln                        State Bank                         |   |                                            | 45,173  |                                     |   | 10.42                                    |   |                                           | 34,681 |                                          |   | 8.00 |   |   | 43,351 |   |   | 10.00 | % |
| Franklin                        State Bank                        |   |                                            | 9,494   |                                     |   | 11.32                                    |   |                                           | 6,707  |                                          |   | 8.00 |   |   | 8,384 |   |   | 10.00 |   |
| Grafton                        State Bank                         |   |                                            | 16,235  |                                     |   | 11.04                                    |   |                                           | 11,769 |                                          |   | 8.00 |   |   | 14,711 |   |   | 10.00 |   |
| Community                        Bank Financial                   |   |                                            | 8,336   |                                     |   | 10.29                                    |   |                                           | 6,482  |                                          |   | 8.00 |   |   | 8,103 |   |   | 10.00 |   |
| Fortress                        Bank                              |   |                                            | 14,540  |                                     |   | 10.72                                    |   |                                           | 10,853 |                                          |   | 8.00 |   |   | 13,566 |   |   | 10.00 |   |
| Fortress                        Bank of Cresco                    |   |                                            | 6,634   |                                     |   | 10.64                                    |   |                                           | 4,988  |                                          |   | 8.00 |   |   | 6,235 |   |   | 10.00 |   |
| Fortress                        Bank Minnesota                    |   |                                            | 5,567   |                                     |   | 12.88                                    |   |                                           | 3,457  |                                          |   | 8.00 |   |   | 4,322 |   |   | 10.00 |   |
| The                        Reedsburg Bank                         |   |                                            | 17,269  |                                     |   | 10.78                                    |   |                                           | 12,810 |                                          |   | 8.00 |   |   | 16,013 |   |   | 10.00 |   |
| Wisconsin                        State Bank                       |   |                                            | 10,181  |                                     |   | 13.62                                    |   |                                           | 5,981  |                                          |   | 8.00 |   |   | 7,477 |   |   | 10.00 |   |
|                                                              |   |                                            |    |                                     |   |                                     |   |                                           |   |                                          |   |   |   |   |   |   |   |   |   |
| Tier                        1 capital (to risk-weighted assets):  |   |                                            |    |                                     |   |                                     |   |                                           |   |                                          |   |   |   |   |   |   |   |   |   |
| Consolidated                                                      |   | $                                               | 91,835  |                                     |   | 7.42                                     | %      | $                                              | 49,523 |                                          |   | 4.00 | % | $ | 74,284 |   |   | N/A |   |
| Lincoln                        State Bank                         |   |                                            | 41,004  |                                     |   | 9.46                                     |   |                                           | 17,340 |                                          |   | 4.00 |   |   | 26,011 |   |   | 6.00 | % |
| Franklin                        State Bank                        |   |                                            | 8,491   |                                     |   | 10.13                                    |   |                                           | 3,353  |                                          |   | 4.00 |   |   | 5,030 |   |   | 6.00 |   |
| Grafton                        State Bank                         |   |                                            | 14,395  |                                     |   | 9.79                                     |   |                                           | 5,884  |                                          |   | 4.00 |   |   | 8,826 |   |   | 6.00 |   |
| Community                        Bank Financial                   |   |                                            | 7,798   |                                     |   | 9.62                                     |   |                                           | 3,241  |                                          |   | 4.00 |   |   | 4,862 |   |   | 6.00 |   |
| Fortress                        Bank                              |   |                                            | 12,839  |                                     |   | 9.46                                     |   |                                           | 5,427  |                                          |   | 4.00 |   |   | 8,140 |   |   | 6.00 |   |
| Fortress                        Bank of Cresco                    |   |                                            | 6,147   |                                     |   | 9.86                                     |   |                                           | 2,494  |                                          |   | 4.00 |   |   | 3,741 |   |   | 6.00 |   |
| Fortress                        Bank Minnesota                    |   |                                            | 5,092   |                                     |   | 11.78                                    |   |                                           | 1,729  |                                          |   | 4.00 |   |   | 2,593 |   |   | 6.00 |   |
| The                        Reedsburg Bank                         |   |                                            | 15,902  |                                     |   | 9.93                                     |   |                                           | 6,405  |                                          |   | 4.00 |   |   | 9,608 |   |   | 6.00 |   |
| Wisconsin                        State Bank                       |   |                                            | 9,493   |                                     |   | 12.70                                    |   |                                           | 2,991  |                                          |   | 4.00 |   |   | 4,486 |   |   | 6.00 |   |
|                                                              |   |                                            |    |                                     |   |                                     |   |                                           |   |                                          |   |   |   |   |   |   |   |   |   |
| Tier                        1 capital (to average assets):        |   |                                            |    |                                     |   |                                     |   |                                           |   |                                          |   |   |   |   |   |   |   |   |   |
| Consolidated                                                      |   | $                                               | 91,835  |                                     |   | 6.27                                     | %      | $                                              | 58,562 |                                          |   | 4.00 | % | $ | 73,203 |   |   | N/A |   |
| Lincoln                        State Bank                         |   |                                            | 41,004  |                                     |   | 8.49                                     |   |                                           | 19,318 |                                          |   | 4.00 |   |   | 24,148 |   |   | 5.00 | % |
| Franklin                        State Bank                        |   |                                            | 8,491   |                                     |   | 9.25                                     |   |                                           | 3,670  |                                          |   | 4.00 |   |   | 4,588 |   |   | 5.00 |   |
| Grafton                        State Bank                         |   |                                            | 14,395  |                                     |   | 7.77                                     |   |                                           | 7,413  |                                          |   | 4.00 |   |   | 9,267 |   |   | 5.00 |   |
| Community                        Bank Financial                   |   |                                            | 7,798   |                                     |   | 8.12                                     |   |                                           | 3,839  |                                          |   | 4.00 |   |   | 4,799 |   |   | 5.00 |   |
| Fortress                        Bank                              |   |                                            | 12,839  |                                     |   | 7.72                                     |   |                                           | 6,653  |                                          |   | 4.00 |   |   | 8,316 |   |   | 5.00 |   |
| Fortress                        Bank of Cresco                    |   |                                            | 6,147   |                                     |   | 7.94                                     |   |                                           | 3,096  |                                          |   | 4.00 |   |   | 3,870 |   |   | 5.00 |   |
| Fortress                        Bank Minnesota                    |   |                                            | 5,092   |                                     |   | 9.19                                     |   |                                           | 2,215  |                                          |   | 4.00 |   |   | 2,769 |   |   | 5.00 |   |
| The                        Reedsburg Bank                         |   |                                            | 15,902  |                                     |   | 7.96                                     |   |                                           | 7,992  |                                          |   | 4.00 |   |   | 9,990 |   |   | 5.00 |   |
| Wisconsin                        State Bank                       |   |                                            | 9,493   |                                     |   | 10.35                                    |   |                                           | 3,668  |                                          |   | 4.00 |   |   | 4,585 |   |   | 5.00 |   |

----

Table              of Contents

**Merchants              and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes              to Consolidated Financial              Statements**

**Note      17. Regulatory Capital Requirements and Restrictions of Dividends      (Continued)**

|                                                         |   |                                      |    |                               |   |                               |   |                                     |   | To                  Be Well Capitalized |   |
|--------------------------------------------------------------|--------|-------------------------------------------|---------|------------------------------------|--------|------------------------------------|--------|------------------------------------------|--------|-----------------------------------------|--------|
|                                                         |   |                                      |    |                               |   | For                  Capital       |   | Under                  Prompt Corrective |   |
|                                                         |   | Actual                                    |    | Adequacy                  Purposes |   | Action                  Provisions |   |
|                                                         |   | Amount                                    |    | Ratio                              |   | Amount                             |   | Ratio                                    |   | Amount                                  |   | Ratio |   |
|                                                         |   | *(Dollars                  In Thousands)* |    |
| **As                  of December 31, 2005**                 |   |                                      |    |                               |   |                               |   |                                     |   |                                    |   |   |   |
| Total                    capital (to risk-weighted assets):  |   |                                      |    |                               |   |                               |   |                                     |   |                                    |   |   |   |
| Consolidated                                                 |   | $                                         | 117,201 |                               |   | 10.04                              | %      | $                                        | 93,351 |                                    |   | 8.00 | % | $ | 116,689 |   |   | N/A |   |
| Lincoln                  State Bank                          |   |                                      | 42,588  |                               |   | 10.61                              |   |                                     | 32,119 |                                    |   | 8.00 |   |   | 40,149 |   |   | 10.00 | % |
| Franklin                  State Bank                         |   |                                      | 9,351   |                               |   | 11.72                              |   |                                     | 6,385  |                                    |   | 8.00 |   |   | 7,981 |   |   | 10.00 |   |
| Grafton                  State Bank                          |   |                                      | 16,127  |                               |   | 10.75                              |   |                                     | 11,998 |                                    |   | 8.00 |   |   | 14,998 |   |   | 10.00 |   |
| Community                  Bank Financial                    |   |                                      | 7,908   |                               |   | 10.32                              |   |                                     | 6,130  |                                    |   | 8.00 |   |   | 7,662 |   |   | 10.00 |   |
| Fortress                  Bank                               |   |                                      | 13,630  |                               |   | 10.50                              |   |                                     | 10,384 |                                    |   | 8.00 |   |   | 12,980 |   |   | 10.00 |   |
| Fortress                  Bank of Cresco                     |   |                                      | 6,468   |                               |   | 11.49                              |   |                                     | 4,505  |                                    |   | 8.00 |   |   | 5,631 |   |   | 10.00 |   |
| Fortress                  Bank Minnesota                     |   |                                      | 5,463   |                               |   | 13.57                              |   |                                     | 3,220  |                                    |   | 8.00 |   |   | 4,025 |   |   | 10.00 |   |
| The                  Reedsburg Bank                          |   |                                      | 15,968  |                               |   | 10.65                              |   |                                     | 12,000 |                                    |   | 8.00 |   |   | 15,000 |   |   | 10.00 |   |
| Wisconsin                  State Bank                        |   |                                      | 10,197  |                               |   | 15.30                              |   |                                     | 5,330  |                                    |   | 8.00 |   |   | 6,663 |   |   | 10.00 |   |
|                                                         |   |                                      |    |                               |   |                               |   |                                     |   |                                    |   |   |   |   |   |   |   |   |   |
| Tier                    1 capital (to risk-weighted assets): |   |                                      |    |                               |   |                               |   |                                     |   |                                    |   |   |   |   |   |   |   |   |   |
| Consolidated                                                 |   | $                                         | 90,681  |                               |   | 7.77                               | %      | $                                        | 46,676 |                                    |   | 4.00 | % | $ | 70,014 |   |   | N/A |   |
| Lincoln                  State Bank                          |   |                                      | 39,306  |                               |   | 9.79                               |   |                                     | 16,060 |                                    |   | 4.00 |   |   | 24,089 |   |   | 6.00 | % |
| Franklin                  State Bank                         |   |                                      | 8,352   |                               |   | 10.46                              |   |                                     | 3,192  |                                    |   | 4.00 |   |   | 4,789 |   |   | 6.00 |   |
| Grafton                  State Bank                          |   |                                      | 14,932  |                               |   | 9.96                               |   |                                     | 5,999  |                                    |   | 4.00 |   |   | 8,999 |   |   | 6.00 |   |
| Community                  Bank Financial                    |   |                                      | 7,273   |                               |   | 9.49                               |   |                                     | 3,065  |                                    |   | 4.00 |   |   | 4,597 |   |   | 6.00 |   |
| Fortress                  Bank                               |   |                                      | 11,981  |                               |   | 9.23                               |   |                                     | 5,192  |                                    |   | 4.00 |   |   | 7,788 |   |   | 6.00 |   |
| Fortress                  Bank of Cresco                     |   |                                      | 5,942   |                               |   | 10.55                              |   |                                     | 2,252  |                                    |   | 4.00 |   |   | 3,378 |   |   | 6.00 |   |
| Fortress                  Bank Minnesota                     |   |                                      | 4,976   |                               |   | 12.36                              |   |                                     | 1,610  |                                    |   | 4.00 |   |   | 2,415 |   |   | 6.00 |   |
| The                  Reedsburg Bank                          |   |                                      | 14,719  |                               |   | 9.81                               |   |                                     | 6,000  |                                    |   | 4.00 |   |   | 9,000 |   |   | 6.00 |   |
| Wisconsin                  State Bank                        |   |                                      | 9,393   |                               |   | 14.10                              |   |                                     | 2,665  |                                    |   | 4.00 |   |   | 3,998 |   |   | 6.00 |   |
|                                                         |   |                                      |    |                               |   |                               |   |                                     |   |                                    |   |   |   |   |   |   |   |   |   |
| Tier                  1 capital (to average assets):         |   |                                      |    |                               |   |                               |   |                                     |   |                                    |   |   |   |   |   |   |   |   |   |
| Consolidated                                                 |   | $                                         | 90,681  |                               |   | 6.37                               | %      | $                                        | 56,932 |                                    |   | 4.00 | % | $ | 71,165 |   |   | N/A |   |
| Lincoln                  State Bank                          |   |                                      | 39,306  |                               |   | 8.38                               |   |                                     | 18,771 |                                    |   | 4.00 |   |   | 23,463 |   |   | 5.00 | % |
| Franklin                  State Bank                         |   |                                      | 8,352   |                               |   | 9.46                               |   |                                     | 3,532  |                                    |   | 4.00 |   |   | 4,415 |   |   | 5.00 |   |
| Grafton                  State Bank                          |   |                                      | 14,932  |                               |   | 7.95                               |   |                                     | 7,517  |                                    |   | 4.00 |   |   | 9,396 |   |   | 5.00 |   |
| Community                  Bank Financial                    |   |                                      | 7,273   |                               |   | 8.01                               |   |                                     | 3,631  |                                    |   | 4.00 |   |   | 4,538 |   |   | 5.00 |   |
| Fortress                  Bank                               |   |                                      | 11,981  |                               |   | 7.09                               |   |                                     | 6,755  |                                    |   | 4.00 |   |   | 8,444 |   |   | 5.00 |   |
| Fortress                  Bank of Cresco                     |   |                                      | 5,942   |                               |   | 8.14                               |   |                                     | 2,920  |                                    |   | 4.00 |   |   | 3,650 |   |   | 5.00 |   |
| Fortress                  Bank Minnesota                     |   |                                      | 4,976   |                               |   | 9.30                               |   |                                     | 2,139  |                                    |   | 4.00 |   |   | 2,674 |   |   | 5.00 |   |
| The                  Reedsburg Bank                          |   |                                      | 14,719  |                               |   | 7.99                               |   |                                     | 7,372  |                                    |   | 4.00 |   |   | 9,215 |   |   | 5.00 |   |
| Wisconsin                  State Bank                        |   |                                      | 9,393   |                               |   | 11.03                              |   |                                     | 3,405  |                                    |   | 4.00 |   |   | 4,256 |   |   | 5.00 |   |

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Table            of Contents

**Merchants            and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes            to Consolidated Financial Statements**

**Note      17. Regulatory Capital Requirements and Restrictions of Dividends      (Continued)**

**Note      18. Fair Values of Financial Instruments**

*Disclosures      About Fair Value of Financial Instruments*

*Cash      and due from banks*

*Interest      bearing deposits in banks*

*Federal      funds sold*

*Available-for-sale      securities*

*Loans*

*FHLB      stock*

*Accrued      interest receivable and payable*
* *

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Table          of Contents

**Merchants          and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes          to Consolidated Financial Statements**

**Note      18. Fair Values of Financial Instruments (Continued)**

*Deposits*

*Short-term      borrowings*

*Long-term      borrowings*

*Junior      subordinated debt owed to unconsolidated trusts*

*Off-balance-sheet      instruments*

|                                                  |   | 2006                                            |      |  2005                          |
|-------------------------------------------------------|--------|-------------------------------------------------|-----------|-------------------------------------|
|                                                  |   | Carrying                                   |      | Estimated                      |   | Carrying  |   | Estimated |   |
|                                                  |   | Amount                                     |      |  Fair                    Value |   |  Amount |   |  Fair                    Value |   |
|                                                  |   |  (Dollars                    in Thousands) |      |
| Financial                  assets:               |   |                                            |      |                                |   |   |   |   |   |   |   |   |   |
| Cash                    and due from banks            |   | $                                               | 36,500    |                                | $ | 36,500 |   | $ | 39,551 |   | $ | 39,551 |   |
| Interest                    bearing deposits in banks |   |                                            | 1,024     |                                |   | 1,024 |   |   | 863 |   |   | 863 |   |
| Federal                    funds sold                 |   |                                            | 6,035     |                                |   | 6,035 |   |   | 6,364 |   |   | 6,364 |   |
| Available-for-sale                    securities      |   |                                            | 158,253   |                                |   | 158,253 |   |   | 173,639 |   |   | 173,639 |   |
| Loans,                    net                         |   |                                            | 1,193,658 |                                |   | 1,200,499 |   |   | 1,120,616 |   |   | 1,128,574 |   |
| Accrued                    interest receivable        |   |                                            | 7,667     |                                |   | 7,667 |   |   | 6,875 |   |   | 6,875 |   |
| FHLB                    stock                         |   |                                            | 11,963    |                                |   | 11,963 |   |   | 20,416 |   |   | 20,416 |   |
|                                                  |   |                                            |      |                                |   |   |   |   |   |   |   |   |   |
| Financial                    liabilities:             |   |                                            |      |                                |   |   |   |   |   |   |   |   |   |
| Deposits                                              |   |                                            | 1,165,237 |                                |   | 1,166,116 |   |   | 1,160,163 |   |   | 1,161,451 |   |
| Short-term                    borrowings              |   |                                            | 59,710    |                                |   | 59,710 |   |   | 44,332 |   |   | 44,332 |   |
| Long-term                    borrowings               |   |                                            | 118,521   |                                |   | 118,618 |   |   | 101,107 |   |   | 101,191 |   |
| Junior                    subordinated debt owed to   |   |                                            |      |                                |   |   |   |   |   |   |   |   |   |
| unconsolidated                    trusts              |   |                                            | 53,611    |                                |   | 61,347 |   |   | 46,394 |   |   | 53,771 |   |
| Accrued                    interest payable           |   |                                            | 4,465     |                                |   | 4,465 |   |   | 3,631 |   |   | 3,631 |   |

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Table          of Contents

**Merchants          and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes          to Consolidated Financial Statements**

**Note**
**19.      Parent Company Only Condensed Financial Information**

**Condensed      Balance Sheets**

**(Parent      Company Only)**

|                                                                                               |   | December                  31,             |    |
|----------------------------------------------------------------------------------------------------|--------|-------------------------------------------|---------|
|                                                                                               |   | 2006                                      |    | 2005 |   |
|                                                                                               |   | *(Dollars                  In Thousands)* |    |
| **Assets**                                                                                         |   |                                      |    |   |   |
| Cash                  and cash equivalents                                                         |   | $                                         | 13      |   | $ | 20 |   |
| Loans                  receivable                                                                  |   |                                      | 700     |   |   | - |   |
| Investment                  in subsidiaries                                                        |   |                                      | 157,593 |   |   | 154,098 |   |
| Premises                  and equipment                                                            |   |                                      | 7,277   |   |   | 7,662 |   |
| Other                  assets                                                                      |   |                                      | 3,435   |   |   | 3,733 |   |
|                                                                                               |   |                                      |    |   |   |   |   |
| **  Total                  assets**                                                      |   | $                                         | 169,018 |   | $ | 165,513 |   |
|                                                                                               |   |                                      |    |   |   |   |   |
| **Liabilities**                                                                                    |   |                                      |    |   |   |   |   |
| Short-term                  borrowings                                                             |   | $                                         | 10,571  |   | $ | 17,539 |   |
| Long-term                  borrowings                                                              |   |                                      | 7,830   |   |   | 5,127 |   |
| Junior                  subordinated debt owed to unconsolidated trusts                            |   |                                      | 53,611  |   |   | 46,394 |   |
| Other                  liabilities                                                                 |   |                                      | 2,709   |   |   | 3,228 |   |
|   Total                  liabilities                                                     |   |                                      | 74,721  |   |   | 72,288 |   |
|                                                                                               |   |                                      |    |   |   |   |   |
| **Stockholders’                  equity**                                                    |   |                                      |    |   |   |   |   |
| Common                  stock                                                                      |   |                                      | 3,770   |   |   | 3,770 |   |
| Additional                  paid-in capital                                                        |   |                                      | 53,684  |   |   | 53,614 |   |
| Retained                  earnings                                                                 |   |                                      | 40,259  |   |   | 38,928 |   |
| Accumulated                  other comprehensive loss                                              |   |                                      | (881    | ) |   | (1,369 | ) |
| Treasury                  stock                                                                    |   |                                      | (2,535  | ) |   | (1,718 | ) |
| **  Total                  stockholders’                  equity**                 |   |                                      | 94,297  |   |   | 93,225 |   |
|                                                                                               |   |                                      |    |   |   |   |   |
| **  Total                  liabilities                  and stockholders’ equity** |   | $                                         | 169,018 |   | $ | 165,513 |   |
|                                                                                               |   |                                      |    |   |   |   |   |

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Table          of Contents

**Merchants          and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes          to Consolidated Financial Statements**

**Note      19. Parent Company Only Condensed Financial Information      (Continued)**

**Condensed      Statements of Income**

**(Parent      Company Only)**

|                                                                                                   |   | Years                  Ended December 31, |   |
|--------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                                                   |   | 2006                                      |   | 2005 |   | 2004 |   |
|                                                                                                   |   | *(Dollars                  In Thousands)* |   |
| Income:                                                                                                |   |                                      |   |   |   |   |   |
|                     Interest on loans, including fees                                        |   | $                                         | 24     |   | $ | - |   | $ | 3 |   |
|                     Dividends from subsidiaries                                              |   |                                      | 7,544  |   |   | 10,862 |   |   | 8,314 |   |
|                     Other                                                                    |   |                                      | 11,669 |   |   | 9,635 |   |   | 7,728 |   |
|                                                                                                   |   |                                      | 19,237 |   |   | 20,497 |   |   | 16,045 |   |
| Expenses:                                                                                              |   |                                      |   |   |   |   |   |   |   |   |
|                     Salaries and employee benefits                                           |   |                                      | 10,955 |   |   | 9,007 |   |   | 7,378 |   |
|                     Occupancy                                                                |   |                                      | 1,881  |   |   | 2,120 |   |   | 1,816 |   |
|                     Interest                                                                 |   |                                      | 5,133  |   |   | 4,171 |   |   | 3,310 |   |
|                     Other                                                                    |   |                                      | 3,367  |   |   | 3,085 |   |   | 5,204 |   |
|                                                                                                   |   |                                      | 21,336 |   |   | 18,383 |   |   | 17,708 |   |
| Income                  (loss) before income tax benefit and equity                                    |   |                                      |   |   |   |   |   |   |   |   |
| in                  undistributed net income of subsidiaries                                           |   |                                      | (2,099 | ) |   | 2,114 |   |   | (1,663 | ) |
|                                                                                                   |   |                                      |   |   |   |   |   |   |   |   |
| Income                  tax benefit                                                                    |   |                                      | 3,305  |   |   | 3,014 |   |   | 3,404 |   |
|                                                                                                   |   |                                      |   |   |   |   |   |   |   |   |
| Income                    before equity in undistributed net income of                    subsidiaries |   |                                      | 1,206  |   |   | 5,128 |   |   | 1,741 |   |
|                                                                                                   |   |                                      |   |   |   |   |   |   |   |   |
| Equity                  in undistributed net income (loss) of subsidiaries                             |   |                                      | 2,790  |   |   | (30 | ) |   | 2,261 |   |
|                                                                                                   |   |                                      |   |   |   |   |   |   |   |   |
| **Net                  income**                                                                        |   | $                                         | 3,996  |   | $ | 5,098 |   | $ | 4,002 |   |

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Table          of Contents

**Merchants          and Manufacturers Bancorporation, Inc. and Subsidiaries**

**Notes          to Consolidated Financial Statements**

**Note      19. Parent Company Only Condensed Financial Information      (Continued)**

**Condensed      Statements of Cash Flows**

**(Parent      Company Only)**

|                                                                                                    |   | Years                Ended December 31, |     |
|---------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|----------|
|                                                                                                    |   | 2006                                    |     | 2005 |   | 2004 |   |
|                                                                                                    |   | *(Dollars                In Thousands)* |     |
| Cash                Flows From Operating Activities                                                     |   |                                    |     |   |   |   |   |
|                  Net income                                                                        |   | $                                       | 3,996    |   | $ | 5,098 |   | $ | 4,002 |   |
|                  Adjustments to reconcile net income to net cash                                   |   |                                    |     |   |   |   |   |   |   |   |
|     provided                by (used in) operating activities:                      |   |                                    |     |   |   |   |   |   |   |   |
|                      Equity in undistributed net (income) loss of subsidiaries |   |                                    | (2,790   | ) |   | 30 |   |   | (2,261 | ) |
|                      Depreciation                                              |   |                                    | 755      |   |   | 717 |   |   | 530 |   |
|                      Gain on sale of premises and equipment                    |   |                                    | (10      | ) |   | (263 | ) |   | - |   |
|     Stock-based              compensation              expense                      |   |                                    | 76  |   |   | - |   |   |  - |   |
|                      Other, net                                                |   |                                    | (221     | ) |   | 925 |   |   | 1,537 |   |
| **   Net                cash provided                by operating activities**      |   |                                    | 1,806    |   |   | 6,507 |   |   | 3,808 |   |
|                                                                                                    |   |                                    |     |   |   |   |   |   |   |   |
| Cash                Flows From Investing Activities                                                     |   |                                    |     |   |   |   |   |   |   |   |
|                  Payment for acquisition                                                           |   |                                    | -        |   |   | - |   |   | (1,300 | ) |
|                  Net (increase) decrease in loans                                                  |   |                                    | (700     | ) |   | 85 |   |   | (85 | ) |
|                  Capital infusion, subsidiaries                                                    |   |                                    | -        |   |   | (10,170 | ) |   | (125 | ) |
|   Investment                in Merchants and Manufacturers Statutory Trusts                   |   |                                    | (217     | ) |   | - |   |   | (310 | ) |
|                  Purchases of premises and equipment, net                                          |   |                                    | (370     | ) |   | (1,380 | ) |   | (7,092 | ) |
|                  Proceeds from sales of premises and equipment                                     |   |                                    | 10       |   |   | 1,304 |   |   | - |   |
| **   Net                cash (used in)                investing activities**             |   |                                    | (1,277   | ) |   | (10,161 | ) |   | (8,912 | ) |
|                                                                                                    |   |                                    |     |   |   |   |   |   |   |   |
| Cash                Flows From Financing Activities                                                     |   |                                    |     |   |   |   |   |   |   |   |
| Net                increase (decrease) in short-term borrowings                                         |   |                                    | (6,968   | ) |   | 7,975 |   |   | (375 | ) |
| Proceeds                from long-term borrowings                                                       |   |                                    | 5,267    |   |   | - |   |   | - |   |
| Repayments                of long-term borrowings                                                       |   |                                    | (2,564   | ) |   | (2,563 | ) |   | (2,564 | ) |
| Dividends                paid                                                                           |   |                                    | (2,665   | ) |   | (2,656 | ) |   | (2,523 | ) |
| Issuance                of junior subordianted debt owed to unconsolidated trusts                       |   |                                    | 7,217    |   |   | - |   |   | 10,310 |   |
| Common                stock transactions, net                                                           |   |                                    | (823     | ) |   | 918 |   |   | 256 |   |
| **Net                cash provided by (used in) financing activities**                                  |   |                                    | (460     | ) |   | 3,674 |   |   | 5,104 |   |
|                                                                                                    |   |                                    |     |   |   |   |   |   |   |   |
| **Increase                (decrease) in cash and cash equivalents**                                     |   |                                    | (7       | ) |   | 20 |   |   | - |   |
|                                                                                                    |   |                                    |     |   |   |   |   |   |   |   |
| Cash                and cash equivalents at beginning of year                                           |   |                                    | 20       |   |   | - |   |   | - |   |
|                                                                                                    |   |                                    |     |   |   |   |   |   |   |   |
| Cash                and cash equivalents at end of year                                                 |   | $                                       | 13       |   | $ | 20 |   | $ | - |   |
|                                                                                                    |   |                                    |     |   |   |   |   |   |   |   |

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Table          of Contents

**Item      9. Changes in and Disagreements with Accountants on Accounting      and Financial Disclosure **

**Item      9A. Controls and Procedures**

**Evaluation      of Disclosure Controls and Procedures**

**Remediation      of Previously Reported Material Weakness**

**.      **

|   | • | the                Corporation strengthened the loan review function through an improvement                in policies and procedures; and |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | the                Corporation strengthened the Corporation's internal audit function                through                an enhancement in the audit                program. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Changes      in Internal Control Over Financial Reporting**

**Management's      Report on Internal Control Over Financial Reporting**

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Table          of Contents

*Internal      Control - Integrated Framework.*

**Item      9B. Other Information**

**PART      III**

**Item      10. Directors, Executive Officers and Corporate      Governance**

**Item      11. Executive Compensation**

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Table          of Contents

**Item      12. Security Ownership of Certain Beneficial Owners and      Management and Related Stockholder Matters**

**Equity      Compensation Plan Information**

|    **Plan                Category**                    |   | **Number                of****common                shares to be****issued                upon exercise****of                outstanding options,****warrants,                and rights** |    | **Weighted-average****exercise                price of****outstanding                options,****warrants,                and rights** |   | **Number                of****common                shares****available                for future****issuance                under equity****compensation                plans** |   |
|-----------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|----------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                  |   |                                                                                                                                                                                       |    |                                                                                                                                   |   |                                                                                                                                                                             |   |
| Equity                compensation plans approved by stockholders     |   |                                                                                                                                                                                       | 110,223 |                                                                                                                                   | $      | 33.71                                                                                                                                                                            |   |   | 210,000 |   |
| Equity                compensation plans not approved by stockholders |   |                                                                                                                                                                                       | N/A     |                                                                                                                                   |   | N/A                                                                                                                                                                              |   |   | N/A |   |
| Total                                                                 |   |                                                                                                                                                                                       | 110,223 |                                                                                                                                   | $      | 33.71                                                                                                                                                                            |   |   | 210,000 |   |

**Item      13. Certain Relationships and Related Transactions, and      Director Independence**

**Item      14. Principal Accountant Fees and      Services**

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Table          of Contents

**PART      IV**

**Item      15. Exhibits and Financial Statement      Schedules**

**Documents      Filed:**

*Financial      Statements and Financial Statement Schedules. *

*Exhibits.      *

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Table          of Contents

**SIGNATURES**

**MERCHANTS      AND MANUFACTURERS BANCORPORATION, INC.**

| PRINCIPAL                EXECUTIVE OFFICERS |
|---------------------------------------------|
|                                        |   |   |
| /s/                Michael J. Murry         | Chairman                of the Board of Directors | March                15, 2007 |
| Michael                J. Murry             | &                Chief Executive Officer |   |
|                                        |   |   |
| /s/                Frederick R. Klug        | Executive                Vice President & Chief | March                15, 2007 |
| Frederick                R. Klug            | Financial                Officer |   |
|                                        |   |   |
| DIRECTORS                                   |   |   |
|                                        |   |   |
| /s/                Michael J. Murry         | Chairman                of the Board of Directors | March                15, 2007 |
| Michael                J. Murry             |   |   |
|                                        |   |   |
| /s/                Nicholas S. Logarakis    | Director | March                15, 2007 |
| Nicholas                S. Logarakis        |   |   |
|                                        |   |   |
| /s/                Rodney T. Goodell        | Director | March                15, 2007 |
| Rodney                Goodell               |   |   |
|                                        |   |   |
| /s/                Donald A. Zellmer        | Director | March                15, 2007 |
| Donald                Zellmer               |   |   |
|                                        |   |   |
| /s/                James A. Sass            | Director | March                15, 2007 |
| James                A. Sass                |   |   |
|                                        |   |   |
| /s/                Thomas J. Sheehan        | Director | March                15, 2007 |
| Thomas                J. Sheehan            |   |   |
|                                        |   |   |
| /s/                J. Michael Bartels       | Director | March                15, 2007 |
| J.                Michael Bartels           |   |   |
|                                        |   |   |
| /s/                William L. Adamany       | Director | March                15, 2007 |
| William                L. Adamany           |   |   |
|                                        |   |   |
| /s/                Steven R. Blakeslee      | Director | March                15, 2007 |
| Steven                R. Blakeslee          |   |   |
|                                        |   |   |
| /s/                Sr. Joel Read            | Director | March                15, 2007 |
| Sr.                Joel Read                |   |   |
|                                        |   |   |
| /s/                Richard C. Bemis         | Director | March                15, 2007 |
| Richard                C. Bemis             |   |   |

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Table          of Contents

**10-K      EXHIBIT LIST**

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