<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the fiscal year ended  December 31, 2000
                           -----------------

                                       or
[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from                    to
                                -----------------    ---------------------

Commission file number  0-21292
                        -------

                MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
                ------------------------------------------------
             (Exact name of registrant as specified in its charter)

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


                    14100 West National Avenue, PO Box 511160
                        New Berlin, Wisconsin 53151-1160
                        --------------------------------
                     (Address of principal executive office)

       Registrant's telephone number, including area code: (262) 827-6713

   Securities registered pursuant to Section 12(b) of the Act: Not Applicable
                                                               --------------

           Securities registered pursuant to section 12(g) of the Act:
                     COMMON STOCK, PAR VALUE $1.00 PER SHARE
                     ---------------------------------------
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes    X      No       .
   ---------    -------

Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K [X]

As of March 1, 2001, 2,542,387 shares of Common Stock were outstanding, and the
aggregate market value of the shares (based upon the average bid/ask price) held
by non-affiliates was approximately $49,561,000.


<PAGE>   2


                MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.

                                      *****

                           ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 2000
<TABLE>
<CAPTION>

PART I                                                                                                             Page
                                                                                                                   ----
<S>                     <C>                                                                                        <C>

         Item 1.         Business                                                                                    3
         Item 2.         Properties                                                                                  6
         Item 3.         Legal Proceedings                                                                           7
         Item 4.         Submission of Matters to a Vote of Security Holders                                         7

PART II
         Item 5.         Market for Registrant's Common Equity and Related Stockholder's Matters                     7
         Item 6.         Selected Financial Data                                                                     8
         Item 7.         Management's Discussion and Analysis of Financial Condition and Results of Operations
                                                                                                                     9
         Item 7a.        Quantitative and Qualitative Disclosures About Market Risk                                 20
         Item 8.         Financial Statements and Supplementary Data                                                21
         Item 9.         Changes in and Disagreements with Accountants on Accounting and Financial Disclosure       21

PART III
         Item 10.        Directors and Executive Officers of the Registrant                                         22
         Item 11.        Executive Compensation                                                                     22
         Item 12.        Security Ownership of Certain Beneficial Owners and Management                             22
         Item 13.        Certain Relationships and Related Transactions                                             22

PART IV
         Item 14.        Exhibits, Financial Statements Schedules and Reports on Form 8-K                           22

SIGNATURES                                                                                                          23

</TABLE>

                                       2

<PAGE>   3


                                     PART I
ITEM 1. BUSINESS
GENERAL

         Merchants and Manufacturers Bancorporation, Inc. (the Corporation), is
a registered multi-bank holding company under the Bank Holding Company Act of
1956, as amended. The Corporation was organized in 1982, and in 1983 and 1984
acquired all of the outstanding stock of Lincoln State Bank, Milwaukee,
Wisconsin, and Franklin State Bank, Franklin, Wisconsin, respectively. In 1993,
the Corporation acquired all of the outstanding shares of Lincoln Savings Bank,
S.A., Milwaukee, Wisconsin. Lincoln State Bank and Franklin State Bank were
chartered as commercial banks under the Wisconsin Banking Statutes, while
Lincoln Savings Bank operated as a stock savings bank until 1997. In 1997
Lincoln Savings Bank converted from a Wisconsin stock savings bank to a
Wisconsin commercial bank. Upon conversion Lincoln Savings Bank changed its name
to Lincoln Community Bank. In 1999, the Corporation acquired Pyramid Bancorp
Inc. (Pyramid) and its subsidiary Grafton State Bank, in a pooling of interests
combination. The combined company retains the name of Merchants and
Manufacturers Bancorporation, Inc. The merger was consummated on December 31,
1999, with the Corporation exchanging nine shares of its common stock for each
outstanding share of Pyramid.

         The Corporation operates twenty banking facilities in Milwaukee,
Ozaukee and Waukesha counties. In addition to its subsidiary banks (Lincoln
State Bank, Lincoln Community Bank, Grafton State Bank and Franklin State Bank),
the Corporation owns three non-bank subsidiaries, the Lincoln Neighborhood
Redevelopment Corporation, which was organized for the purpose of redeveloping
and rejuvenating certain areas located primarily on the near south side of
Milwaukee, M&M Services, Inc., which was formed in 1994 to provide operational
services to the Corporation's subsidiary banks and Merchants Merger Corp which
was formed in 1999 to facilitate the acquisition of Pyramid.

         On December 31, 2000 the Corporation had an outstanding agreement to
merge with and acquire CBOC, Inc. (CBOC) and its subsidiary bank Community Bank
of Oconto County with the Corporation exchanging 5.746 shares of its common
stock for each outstanding share of CBOC common stock. The transaction is to be
accounted for as a pooling of interests. The merger became effective on January
16, 2001. The following financial statements have not been restated to reflect
this transaction. At December 31, 2000 CBOC had total assets of $62,612 and
stockholders equity of $5,714. CBOC's net income for 2000 was $528 and earnings
per share were $6.00.

         This report contains various forward-looking statements concerning the
Corporation's prospects that are based on the current expectations and beliefs
of management. Forward-looking statements may also be made by the Corporation
from time to time in other reports and documents as well as oral presentations.
When used in written documents or oral statements, the words anticipate,
believe, estimate, expect, objective and similar expressions are intended to
identify forward-looking statements. The statements contained herein and such
future statements involve or may involve certain assumptions, risks and
uncertainties, many of which are beyond the Corporation's control, that could
cause the Corporation's actual results and performance to differ materially from
what is expected. In addition to the assumptions and other factors referenced
specifically in connection with such statements, the following factors could
impact the business and financial prospects of the Corporation: general economic
conditions; legislative and regulatory initiatives; monetary and fiscal policies
of the federal government; deposit flows; disintermediation; the cost of funds;
general market rates of interest; interest rates or investment returns on
competing investments; demand for loan products; demand for financial services;
changes in accounting policies or guidelines; and changes in the quality or
composition of the Corporation's loan and investment portfolio.

PRODUCTS AND SERVICES

         Through the banking subsidiaries, the Corporation provides a broad
range of services to individual and commercial customers. These services include
accepting demand, savings, and time deposits, including regular checking
accounts, NOW accounts, money market accounts, certificates of deposit,
individual retirement accounts, and club accounts. The subsidiary banks also
make secured and unsecured commercial, mortgage, construction, and consumer term
loans on both a fixed and variable rate basis. Historically, the terms on these
loans range from one month to five years and are retained in the Bank's
portfolios. The subsidiary banks also provide lines of credit to commercial
borrowers and to individuals through home equity loans.

COMPETITION

         As of December 31, 2000 the four subsidiary banks primarily serve the
southern half of Milwaukee County, Ozaukee County and the southeastern portion
of Waukesha County, including suburbs located to the south and west of the City
of Milwaukee. There are presently in excess of one hundred other financial
institutions in the primary service area that directly compete with Lincoln
State Bank, Grafton State Bank, Franklin State Bank and Lincoln Community Bank.
In addition to competing with other commercial banks, the subsidiaries compete
with savings and loan associations, credit unions, mortgage brokers, small-loan
companies, insurance companies, investment banking firms and large retail
companies. The principal methods of competition include interest rates paid on
deposits and charged on loans, personal contacts and efforts to obtain deposits
and loans, types and quality of services provided and convenience of the
locations. Many of the Corporation's competitors are larger and have
significantly greater financial resources than the Corporation and its
subsidiaries.

                                       3
<PAGE>   4



EMPLOYEES

         At December 31, 2000, the Corporation and its subsidiaries employed 173
full-time and 79 part-time employees. The Corporation provides a wide range of
benefits to employees, including educational activities, and considers its
employee relations to be excellent. The Corporation conducts extensive training
programs in order to enhance job-related knowledge and skills of its people and
to train its employees with a sales-oriented approach to customers. Eligible
employees participate in a 401K plan as well as group life and major medical
insurance programs.

                        THE BANKS AND OTHER SUBSIDIARIES

         At or for the year ended December 31, 2000, the subsidiary banks (each
consolidated with its appropriate subsidiaries; see "Other Subsidiaries") had
total assets, total loans, total deposits, stockholder's equity, net income, and
return on assets as follows (dollars in thousands):


<TABLE>
<CAPTION>

                               LINCOLN STATE BANK     LINCOLN COMMUNITY BANK        GRAFTON STATE BANK     FRANKLIN STATE BANK
------------------------------ ---------------------- ----------------------------- ---------------------- -----------------------
  <S>                          <C>                    <C>                           <C>                    <C>
  Total assets                       $ 222,678                 $ 112,963                  $ 129,294               $ 70,970
  Total loans                          195,717                    87,384                     92,447                 62,707
  Total deposits                       163,246                    82,589                    100,283                 56,564
  Stockholders' equity                  18,739                     9,127                     10,145                  5,666
  Net income                             2,905                     1,115                      1,422                    567
  Return on average assets               1.41%                     1.00%                      1.17%                  0.88%

</TABLE>


         The Banks have consistent products, services and delivery systems and
comply with similar regulatory guidance. As such they are not segments as that
term is defined in Financial Accounting Standards Board Statement 131.

LINCOLN STATE BANK

         Lincoln State Bank was organized as a state banking association under
the laws of the State of Wisconsin in 1919. Its main office is located in the
city of Milwaukee while it also operates full service branch offices in the
southeastern Wisconsin communities of Muskego, New Berlin, Brookfield and
Pewaukee. In addition, it operates eight limited-hours facilities in Milwaukee
County. At December 31, 2000, Lincoln State Bank comprised 41.4% of the
consolidated assets of the Corporation.

LINCOLN COMMUNITY BANK

         Lincoln Community Bank was organized as a state chartered mutual
savings and loan association under the laws of the State of Wisconsin in 1910.
It operates two full service branch offices in the city of Milwaukee. In April
1993, it converted from the mutual to stock form of organization, and all of the
shares of stock issued by the converted association were acquired by the
Corporation. In 1997 Lincoln Community Bank converted from a Wisconsin stock
savings bank to a Wisconsin commercial bank. Its principal office and a branch
office are located in Milwaukee, Wisconsin. At December 31, 2000, Lincoln
Community Bank comprised 21.0% of the consolidated assets of the Corporation.

GRAFTON STATE BANK

         Grafton State Bank was organized as a state banking association under
the laws of the State of Wisconsin in 1907. Its principal office and a branch
office are located in Grafton, Wisconsin while it also operates another full
service branch office in the Wisconsin community of Saukville. At December 31,
2000, Grafton State Bank comprised 24.0% of the consolidated assets of the
Corporation.

FRANKLIN STATE BANK

         Franklin State Bank was organized as a state banking association under
the laws of the State of Wisconsin in 1982. Its principal office and a branch
office are located in Franklin, Wisconsin. At December 31, 2000, Franklin State
Bank comprised 13.2% of the consolidated assets of the Corporation.

LINCOLN NEIGHBORHOOD REDEVELOPMENT CORPORATION

         The Lincoln Neighborhood Redevelopment Corporation (the Redevelopment
Corporation) was formed in June of 1988 and is a wholly owned subsidiary of the
Corporation. The Redevelopment Corporation was established to redevelop and
rejuvenate certain areas located on the south-side of Milwaukee by, among other
things, arresting decay and deterioration, working with local businesses to keep
commercial areas strong and attractive, pursuing means to preserve and create
jobs, encouraging appropriate land-use, involving community residents in
economic planning and retaining and attracting businesses. As of December 31,
2000, Lincoln Neighborhood Redevelopment Corporation had assets of $166,000,
$61,000 in liabilities and equity of $105,000.

                                       4
<PAGE>   5



M&M SERVICES, INC.

         M&M Services was formed in January of 1994 and is a wholly owned
subsidiary of the Corporation. M&M Services provides operational activities to
the Corporation's subsidiary banks. These activities include: human resources,
auditing, marketing, financial analysis, loan document preparation, loan credit
analysis and check processing.

MERCHANTS MERGER CORP.

         Merchants Merger Corp. was formed in 1999 to facilitate the merger with
Pyramid Bancorp.

OTHER SUBSIDIARIES

         Lincoln State Bank, Lincoln Community Bank and Grafton State Bank each
have a wholly owned subsidiary. In 1991 an investment subsidiary known as M&M -
Lincoln Investment Corporation was formed to manage the majority of Lincoln
State Bank's investment portfolio and to enhance the overall return of the
portfolio. The subsidiary received a capital contribution of approximately $13
million of mortgage-backed and other investment securities from Lincoln State
Bank in exchange for 100% of the stock of the subsidiary. In 1995 an investment
subsidiary known as Lincoln Investment Management Corporation was formed to
manage the majority of Lincoln Community Bank's investment portfolio and to
enhance the overall return of the portfolio. The subsidiary received a capital
contribution of approximately $21 million of mortgage-backed and other
investment securities from Lincoln Community Bank in exchange for 100% of the
stock of the subsidiary. In 1996 an investment subsidiary known as GSB
Investments, Inc. was formed to manage the majority of Grafton State Bank's
investment portfolio and to enhance the overall return of the portfolio. The
subsidiary received a capital contribution of approximately $10 million of
mortgage-backed and other investment securities from Grafton State Bank in
exchange for 100% of the stock of the subsidiary. These subsidiaries are an
intrinsic component of their respective parent banks and assets thereof are
included in the total assets of the respective Banks above.

SUPERVISION AND REGULATION

         The operations of financial institutions, including bank holding
companies, commercial banks and savings banks, are highly regulated, both at
federal and state levels. Numerous statutes and regulations affect the
businesses of the Corporation and its financial service subsidiaries.

         The Corporation's own activities are regulated by the Federal Bank
Holding Company Act (the "Act"), which requires each holding company to obtain
the prior approval of the Federal Reserve Board (the "Board") before acquiring
direct or indirect ownership or control of more than five percent of the voting
shares of any bank or before engaging, directly or indirectly, in certain
enumerated activities. While the Act, with certain exceptions, previously
prohibited the acquisition of banks located in other states, recently enacted
legislation now generally authorizes such interstate acquisitions, subject to
regulatory approval.

         The Act also prohibits, with certain exceptions acquisition of more
than five percent of the voting shares of any company (directly or indirectly)
doing business other than banking or performing services for its subsidiaries,
without prior approval of the Board. Pursuant to the Act, the Corporation is
supervised and regularly examined by the Board.

         Lincoln State Bank, Lincoln Community Bank, Grafton State Bank and
Franklin State Bank are subject to extensive regulation and supervision by the
Wisconsin Department of Financial Institutions. Because the deposits of all four
banks are insured by the Federal Deposit Insurance Corporation (FDIC), they are
also subject to supervision by the FDIC. In that connection, the banks must
comply with applicable state and federal statutes and a wide range of rules and
regulations promulgated by bank regulatory agencies under such statutes. To
assure compliance with such laws and to ascertain their safety and soundness,
the banks are periodically examined by the FDIC and the Wisconsin Department of
Financial Institutions. In addition, the Corporation itself is periodically
examined by the Federal Reserve Bank of Chicago. Such supervision and regulation
is intended primarily to ensure the safety of deposits accepted by the banks.

                                       5

<PAGE>   6



RECENT LEGISLATION

         On November 12, 1999, President Clinton signed into law legislation
that allows bank holding companies to engage in a wider range of non-banking
activities, including greater authority to engage in securities and insurance
activities. Under the Gramm-Leach-Bliley Act, (the "GLB Act") a bank holding
company that elects to become a "financial holding company" may engage in any
activity that the Federal Reserve Board, in consultation with the Secretary of
the Treasury, determines by regulation or order is (i) financial in nature, (ii)
incidental to any such financial activity, or (iii) complementary to any such
financial activity and does not pose a substantial risk to the safety or
soundness of depository institutions or the financial system generally. The GLB
Act makes significant changes in U.S. banking law, principally by repealing
certain restrictive provisions of the 1933 Glass-Steagall Act. The GLB Act
specifies certain activities that are deemed to be financial in nature,
including lending, exchanging, transferring, investing for others, or
safeguarding money or securities; underwriting and selling insurance; providing
financial, investment, or economic advisory services; underwriting, dealing in
or making a market in, securities; and any activity currently permitted for bank
holding companies by the Federal Reserve Board under Section 4 (c)(8) of the
Holding Company Act. The GLB Act does not authorize banks or their affiliates to
engage in commercial activities that are not financial in nature. A bank holding
company may elect to be treated as a financial holding company only if all
depository institution subsidiaries of the holding company are well-capitalized,
well-managed and have at least a "satisfactory" rating under the Community
Reinvestment Act. In addition, the GLB Act permits certain non-banking financial
and financially-related activities to be conducted by subsidiaries of national
banks.

         The GLB Act also contains a number of other provisions that will affect
the Corporation's operations and the operations of all financial institutions.
One of the new provisions relates to the financial privacy of consumers,
authorizing federal banking regulators to adopt rules that will limit the
ability of banks and other financial entities to disclose non-public information
about consumers to non-affiliated entities. These limitations will likely
require more disclosure to consumers, and in some circumstances, will require
consent by the consumer before information is allowed to be provided to a third
party. On March 13, 2000, the Corporation received written declaration from the
Board of Governors of the Federal Reserve System to become a financial holding
company.

         At this time, no predictions can be made regarding the impact the GLB
Act may have upon the Corporation's future financial condition or results of
operations.

ITEM 2. PROPERTIES

         The Corporation's offices are located in a two-story building at 14100
West National Avenue in New Berlin, Wisconsin. The Corporation leases
approximately 18,000 square feet from the building's owner. The building was
sold in 2000 to a group of investors and subsequently leased back to the
Corporation. At this location, the Corporation maintains its corporate
operations and personnel.

         The main office of Lincoln State Bank is at 2266 South 13th Street,
Milwaukee, Wisconsin. The South 13th Street location consists of a one-story
building containing approximately 11,000 square feet. One branch of Lincoln
State Bank is located in a one-story, 1,700 square foot building at 13500
Janesville Road, Muskego, Wisconsin. Another branch of Lincoln State Bank is
located in a 7,000 square foot building at 14000 West National Avenue, New
Berlin, Wisconsin. During 1995 Lincoln State Bank opened two other full-service
branch locations one located at 17600 West Capitol Drive, Brookfield, Wisconsin
and at 585 Ryan Street, Pewaukee, Wisconsin. Lincoln State Bank owns all of its
facilities except the New Berlin branch which it leases from the building's
owner.

         In addition to its full-service branches, Lincoln State Bank operates
customer facilities at Villa St. Francis located at South 20th and Ohio Streets
in Milwaukee, at Clement Manor located at South 92nd Street and West Howard
Avenue in Milwaukee, at Friendship Village located at North 73rd and West Dean
Road in Milwaukee, at Stoney Creek Adult Community in Muskego, at the Milwaukee
Protestant Home located on North Downer Avenue in Milwaukee, at Forest Ridge
located in Hales Corners, Wisconsin, at the Landmark located in West Allis,
Wisconsin and at Lexington Village located in the City of Greenfield, Wisconsin.
The bank leases office space at each one of these locations.

         Franklin State Bank's main office is located in a three-story building
at 7000 South 76th Street in Franklin, Wisconsin. The bank leases 5,700 square
feet from the building's owner. In 1998 Franklin State Bank opened a branch
facility at 9719 South Franklin Drive in the Franklin Business Park, Franklin,
Wisconsin. Franklin State Bank owns the facility.

         Grafton State Bank's main office is located at 101 Falls Road, Grafton,
Wisconsin in a seven-story building. Portions of the building that are not used
by Grafton State Bank are leased to various tenants. Grafton State Bank owns the
facility. Grafton State Bank also leases space for two other branch offices in
the cities of Grafton and Saukville, Wisconsin.

         Lincoln Community Bank's main office is located at 3131 South 13th
Street, Milwaukee, Wisconsin in a one-story building. Lincoln Community Bank
also operates a branch facility at 5400 West Forest Home Avenue, Milwaukee,
Wisconsin. Lincoln Community Bank owns both facilities. M&M Services, Inc.
leases office space at the Forest Home Avenue location.


                                       6

<PAGE>   7



         M&M Services is located in the New Berlin corporate headquarters. At
that location, M&M Services maintains its subsidiary service support facilities
and personnel.

ITEM 3. LEGAL PROCEEDINGS

         From time to time, the Corporation and its subsidiaries are party to
legal proceedings arising out of their general lending activities and other
operations. However, there are no pending legal proceedings to which the
Corporation or its subsidiaries are a party, or to which their property is
subject, which, if determined adversely to the Corporation, would individually
or in the aggregate have a material adverse effect on its consolidated financial
position.

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

         No matters were submitted to a vote of security holders during the
fourth quarter of 2000.

                                     PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

         The stock of the Corporation is not listed on any stock exchange or
quoted on the National Association of Securities Dealers Quotation Automated
Quotation System. The Corporation's stock has been quoted on "Pink Sheets", an
inter-broker quotation medium, since April 1993, and in the Over The Counter
Bulletin Board, an electronic quotation service. Robert W. Baird & Co.,
Incorporated, a regional securities and investment banking firm headquartered in
Milwaukee, Wisconsin, and Howe Barnes Investments, Incorporated, headquartered
in Chicago, Illinois, act as the market makers for the Corporation's stock. The
Corporation's stock is quoted in the "Other Stocks" section of the Milwaukee
Journal/Sentinel. The Corporation's common stock trading symbol is "MMBI."

         The following table sets forth the quarterly high and low bid prices
for the period indicated.

<TABLE>
<CAPTION>

                                    Quotation or Price
 Quarter Ended                   Low Bid          High Bid
 --------------------------- ---------------- -----------------
<S>                          <C>              <C>
 March 31, 1999                  $ 38.00          $ 43.00
 June 30, 1999                     41.50            43.00
 September 30, 1999                41.00            44.00
 December 31, 1999                 35.50            42.50

 MARCH 31, 2000                  $ 34.00          $ 38.50
 JUNE 30, 2000                     35.00            38.00
 SEPTEMBER 30, 2000                28.38            34.50
 DECEMBER 31, 2000                 23.13            29.75

</TABLE>


         The approximate number of holders of record of the Corporation's common
stock is 698 as of December 31, 2000.

         Holders of the Corporation's stock are entitled to receive such
dividends as may be declared from time to time by the Board of Directors from
funds legally available for such payments. The Corporation's ability to pay cash
dividends is dependent primarily on the ability of its subsidiaries to pay
dividends to the Corporation. The ability of each subsidiary to pay dividends
depends on its earnings and financial condition and on compliance with banking
statutes and regulations.

         Quarterly dividends for the years ended December 31, 2000 and 1999 are
shown in Item 6 "Selected Financial Data."

                                       7


<PAGE>   8


ITEM 6. SELECTED FINANCIAL DATA

         The following table summarizes certain historical financial data
regarding the Corporation. This information is derived in part from, and should
be read in conjunction with, the Consolidated Financial Statements of the
Corporation presented elsewhere herein (dollars in thousands, except per share
data):

<TABLE>
<CAPTION>
                                                                         At or For the Year Ended December 31,
                                                             -------------------------------------------------------------------
                                                                   2000         1999       1998(4)       1997(4)       1996(4)
<S>                                                          <C>            <C>          <C>           <C>            <C>

   SELECTED BALANCE SHEET DATA
   Total assets                                                $  537,908   $  474,383   $   441,486   $  391,685    $  358,694
   Loans receivable, net                                          434,056      363,435       312,761      281,058       241,515
   Investment securities held to maturity                               0            0         5,794        4,591         2,857
   Investment securities available for sale                        28,525       32,787        22,121       20,080        25,218
   Mortgage-related securities held to maturity                         0            0         1,165        2,078         2,417
   Mortgage-related securities available for sale                  33,087       33,342        38,672       40,078        32,956
   Deposits                                                       401,836      377,333       372,118      337,249       302,387
   Borrowings                                                      88,415       53,398        27,333       15,392        21,017
   Stockholders' equity                                            42,776       40,426        39,437       36,772        32,691
   Realized stockholders' equity(2)                                43,090       41,823        39,447       36,723        32,881

   SELECTED INCOME STATEMENT DATA
   Total interest income (taxable-equivalent)(1)               $   38,810   $   32,118   $    30,712   $   27,947    $   25,781
   Total interest expense                                          19,405       13,999        14,117       12,495        11,600
                                                             -------------------------------------------------------------------
         Net interest income                                       19,405       18,119        16,595       15,452        14,181
   Provision for loan losses                                        1,203          956           314          227           605
                                                             -------------------------------------------------------------------
         Net interest income after provision for
           loan losses                                             18,202       17,163        16,281       15,225        13,576

   Net gain on security sales                                           2            9           219           78            70
   Other noninterest income                                         4,029        3,482         3,088        2,429         2,300
                                                             -------------------------------------------------------------------
         Total noninterest income                                   4,031        3,491         3,307        2,507         2,370
   Merger-related expenses                                            170          510             0            0             0
   Other noninterest expense                                       15,370       14,446        13,433       12,270        12,566
                                                             -------------------------------------------------------------------
         Total noninterest expense                                 15,540       14,956        13,433       12,270        12,566
                                                             -------------------------------------------------------------------
         Income before income taxes                                 6,693        5,698         6,155        5,462         3,380
   Income taxes                                                     2,070        1,905         2,042        1,955         1,090
   Less taxable equivalent adjustment                                 383          390           263          127           142
                                                             -------------------------------------------------------------------
         Net income                                            $    4,240   $    3,403   $     3,850   $    3,380    $    2,148
                                                             ===================================================================

   PER SHARE DATA(3)
   Net income - basic                                          $     2.03   $     1.62   $      1.86   $     1.69    $     1.07
   Net income - diluted                                        $     2.01   $     1.58   $      1.80   $     1.64    $     1.05
   Cash dividends declared                                     $     0.65   $     0.57   $      0.49   $     0.38    $     0.35
   Book value                                                  $    20.75   $    19.16   $     19.02   $    17.90    $    16.44
   Average shares outstanding                                   2,093,393    2,106,579     2,071,214    2,004,809     2,001,160

   OTHER DATA
   Net interest margin                                              4.06%        4.36%         4.29%        4.46%         4.36%
   Allowance for loan losses to non-accrual loans                 256.19%      159.08%       200.13%      217.18%       168.50%
   Nonperforming assets to total assets                             0.35%        0.50%         0.34%        0.38%         0.43%
   Stockholders' equity to total assets,                            7.95%        8.52%         8.93%        9.39%         9.11%
   Average stockholders' equity to average assets                   8.16%        8.76%         9.25%        9.17%         9.19%
   Return on assets (ratio of net income to
     average total assets)                                          0.84%        0.76%         0.93%        0.91%         0.61%
   Return on stockholders' equity (ratio of net
     income to average equity)                                     10.24%        8.73%        10.07%        9.91%         6.69%
   Dividend payout ratio                                           32.08%       35.06%        26.39%       22.66%        32.17%
   Facilities:
       Number of full-service offices                                  12           11            11            9             9
       Number of limited services offices                               8            8             8            6             6

</TABLE>

(1) 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 the Corporation's historical experience, is used in
    the conversion of tax-exempt interest income to a tax-equivalent basis.
(2) Excludes SFAS 115 mark-to-market equity adjustment.
(3) All per share information presented in this report has been retroactively
    restated to give effect to the 3 for 2 stock split, declared in April 1998
    and the 10% stock dividend declared in October 1998 and the issuance of
    shares in connection with the merger of Pyramid Bancorp, Inc. in 1999, as if
    each occurred as of January 1, 1996.
(4) Restated to reflect the December 31, 1999 acquisition of Pyramid Bancorp
    which was accounted for as a pooling-of-interests.

                                       8

<PAGE>   9



         The following table sets forth certain unaudited income and expense
data on a quarterly basis for the periods indicated (dollars in thousands,
except per share data):
<TABLE>
<CAPTION>

                                                        2000                                                1999
                                   -------------------------------------------------------------------------------------------------
                                         3/31        6/30        9/30        12/31         3/31       6/30        9/30        12/31
                                   -------------------------------------------------------------------------------------------------
<S>                                <C>              <C>        <C>         <C>          <C>          <C>         <C>         <C>

Interest income
  (taxable-equivalent) (1)              $8,859      $9,541     $10,073     $10,337       $7,670      $7,853      $8,119      $8,476
Interest expense                         4,092       4,694       5,210       5,409        3,434       3,421       3,457       3,687
                                   ------------------------------------------------    ---------------------------------------------
    Net interest income                  4,767       4,847       4,863       4,928        4,236       4,432       4,662       4,789
Provision for loan losses                  166         178         131         728           68          68         660         160
Noninterest income                         759         816         808       1,648          677         757       1,264         792
Noninterest expense                      3,943       3,609       3,604       4,384        4,101       3,267       3,334       4,253
                                   ------------------------------------------------    ---------------------------------------------
    Income before taxes                  1,417       1,876       1,936       1,464          744       1,854       1,932       1,168
Income taxes                               403         576         582         509          184         599         600         522
Less taxable equivalent
    adjustment                             102          94          96          91           97          96          98          99
                                   =================================================================================================
    Net income                            $912      $1,206      $1,258        $864         $463      $1,159      $1,234        $547
                                   =================================================================================================
Basic earnings per share                 $0.43       $0.57       $0.60       $0.43        $0.23       $0.55       $0.58       $0.26
                                   =================================================================================================
Diluted earnings per share               $0.42       $0.57       $0.60       $0.42        $0.22       $0.54       $0.57       $0.25
                                   =================================================================================================
Dividends per share                      $0.15       $0.20       $0.15       $0.15        $0.14       $0.14       $0.14       $0.15
                                   =================================================================================================
</TABLE>

(1)  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 the Corporation's historical experience, is used in
     the conversion of tax-exempt interest income to a tax-equivalent basis.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

GENERAL

         The following discussion is intended as a review of significant factors
affecting the Corporation's financial condition and results of operations, as of
and for the period ended December 31, 2000, as well as providing comparisons
with previous years. This discussion should be read in conjunction with the
Consolidated Financial Statements and accompanying notes and the selected
financial data presented elsewhere in this report.

NET INTEREST INCOME

         Net interest income equals the difference between interest earned on
assets and the interest paid on liabilities and is a measure of how effectively
management has balanced and allocated the Corporation's interest rate sensitive
assets and liabilities. Net interest income is the most significant component of
earnings. 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 on a fully tax equivalent basis. A
34% incremental income tax rate, consistent with the Corporation's historical
experience, is used in the conversion of tax-exempt interest income to a
taxable-equivalent basis.

         Net interest income on a fully tax equivalent basis increased to $19.4
million in 2000, compared with $18.1 million in 1999 and $16.6 million in 1998.
This increase of $1.3 million in net interest income in 2000 was due primarily
to an increase in the volume of earning assets in 2000 (a $5.2 million
increase). This gain was partially offset by an increase in the volume of
interest bearing liabilities (a $2.8 million increase) and the higher interest
rates paid on deposits and borrowings (a $1.8 million increase).

         The total increase in average earning assets was primarily due to an
increase in average loans of $70.5 million. All of the loan growth was
internally generated. Interest bearing liabilities increased $56.4 million in
2000. The Corporation's entrance into new markets, introduction of new products
and its pricing of time deposits were contributing factors to the growth in
deposits.

                                       9
<PAGE>   10


         The following table sets forth, for the periods indicated, information
regarding the average balances of assets and liabilities and the total dollar
amount of interest income from average interest-earning assets and interest
expense on average interest-bearing liabilities, resulting yields, interest rate
spread, ratio of interest-earning assets to interest-bearing liabilities, and
net interest margin. Average balances have been calculated using average daily
balances during such periods (dollars in thousands):

<TABLE>
<CAPTION>
                                                          At or for the Year Ended December 31,
                                ----------------------------------------------------------------------------------------------------
                                              2000                              1999                              1998
                                --------------------------------  --------------------------------   -------------------------------
                                 AVERAGE               AVERAGE     Average               Average      Average              Average
                                 BALANCE    INTEREST    RATE       Balance    Interest    Rate        Balance   Interest     Rate
                                 -------    --------    ----       -------    --------    ----        -------   --------     ----
<S>                             <C>         <C>        <C>        <C>         <C>        <C>        <C>         <C>        <C>

ASSETS
Loans(1),(2)                    $406,542    $34,146     8.40%     $336,079    $27,296     8.12%     $295,157    $25,142      8.52%
Loans exempt from federal
  income taxes(3)                    450         53    11.78%          526         56    10.65%          600         71     11.83%
Taxable investment securities     18,000      1,112     6.18%       16,140      1,019     6.31%       17,825      1,112      6.24%
Mortgage-related securities       32,978      2,149     6.52%       36,688      2,083     5.68%       43,794      2,629      6.00%
Investment securities exempt
  from federal income taxes(3)    15,020      1,074     7.15%       15,483      1,091     7.05%        9,542        703      7.37%
Other securities                   4,767        276     5.79%       11,074        573     5.17%       19,612      1,055      5.38%
                              ----------------------            ----------------------             ---------------------
Interest earning assets          477,757     38,810     8.12%      415,990     32,118     7.72%      386,530     30,712      7.95%
Non interest earning assets       29,741                            28,991                            26,686
                              -----------                       -----------                        ----------
    Average assets              $507,498                          $444,981                          $413,216
                              ===========                       ===========                        ==========

LIABILITIES AND STOCKHOLDERS'
    EQUITY
NOW deposits                     $33,405        684     2.05%      $32,149        546     1.70%      $31,464        740      2.35%
Money market deposits             47,680      2,452     5.14%       31,698      1,159     3.66%       26,888      1,000      3.72%
Savings deposits                  70,411      1,521     2.16%       71,082      1,506     2.12%       70,889      1,641      2.31%
Time deposits                    176,073      9,686     5.50%      185,185      9,306     5.03%      176,039      9,778      5.55%
Borrowings                        76,087      5,062     6.65%       27,177      1,482     5.45%       17,165        958      5.58%
                              ----------------------            ----------------------             ---------------------
Interest bearing liabilities     403,656     19,405     4.81%      347,291     13,999     4.03%      322,445     14,117      4.38%
                                           ---------                       -----------                       -----------
Demand deposits and other non
    interest bearing
    liabilities                   62,454                            57,701                            52,544
Stockholders' equity              41,388                            39,989                            38,227
                              -----------                       -----------                        ----------
    Average liabilities and
      stockholders' equity      $507,498                          $444,981                          $413,216
                              ===========                       ===========                        ==========
Net interest income/spread                  $19,405     3.31%                 $18,119     3.69%                 $16,595      3.57%
                                           ===================             =====================             ======================
Net interest earning assets      $74,101                           $68,699                           $64,085
                              ===========                       ===========                        ==========

Net interest margin                                     4.06%                             4.36%                              4.29%
                                                    ==========                        ==========                        ===========
Ratio of average
interest-earning assets to
  average interest-bearing
  liabilities                       1.18                              1.20                              1.20
                              ===========                       ===========                        ==========

</TABLE>

(1)  For the purpose of these computations, nonaccrual loans are included in the
     daily average loan amounts outstanding.
(2)  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 status during the period indicated.
(3)  Taxable-equivalent adjustments were made using a 34% corporate tax rate for
     all years presented in calculating interest income and yields. The amount
     of taxable-equivalent adjustments were $383 for 2000, $390 for 1999 and
     $263 for 1998.
                                       10

<PAGE>   11


         The following table sets forth the effects of changing interest rates
and volumes of interest earning assets and interest bearing liabilities on net
interest income of the Corporation. Information is provided with respect to (i)
effect on net interest income attributable to changes in volume (changes in
volume multiplied by prior rate), (ii) effects on net interest income
attributable to changes in rate (changes in rate multiplied by prior volume),
(iii) changes in a combination of rate and volume (changes in rate multiplied by
changes in volume), and (iv) net change (in thousands):

<TABLE>
<CAPTION>

                                                                      For the Year Ended December 31,
                                        --------------------------------------------------------------------------------------------
                                                       2000 VS. 1999                                   1999 vs. 1998
                                        ---------------------------------------------  ---------------------------------------------
                                                     INCREASE/(DECREASE)                           Increase/(Decrease)
                                                           DUE TO                                         Due to
                                        ----------------------------------   TOTAL     ---------------------------------   Total
                                                                  VOLUME    INCREASE                           Volume    Increase
                                           VOLUME       RATE      & RATE   (DECREASE)     Volume     Rate      & Rate   (Decrease)
                                           ------       ----      ------   ----------     ------      ----     ------   ----------

<S>                                   <C>             <C>         <C>      <C>           <C>      <C>          <C>      <C>

Interest-Earning Assets:
  Loans receivable(1)                      $5,723       $932       $195     $6,850       $3,486   ($1,170)     ($162)      $2,154
  Loans exempt from federal
    income taxes(2)                           (8)          6        (1)        (3)          (9)        (7)          1        (15)
  Taxable investment securities               118       (22)        (3)         93        (105)         13        (1)        (93)
  Mortgage-related securities               (211)        308       (31)         66        (427)      (143)         24       (546)
  Investment securities exempt
    from federal income taxes(2)             (33)         16          0       (17)          438       (31)       (19)         388
  Other securities                          (326)         68       (39)      (297)        (460)       (40)         18       (482)
                                         ------------------------------------------  ---------------------------------------------
    Total interest-earning assets          $5,262     $1,185       $245      6,692       $2,923   ($1,378)     ($139)       1,406
                                         ===============================-----------  =================================------------

Interest-Bearing Liabilities:
  NOW deposits                                $21       $112         $5       $138          $16     ($206)       ($4)      ($194)
  Money market deposits                       584        471        238      1,293          179       (17)        (3)         159
  Savings deposits                           (14)         29          0         15            4      (139)          0       (135)
  Time deposits                             (458)        881       (43)        380          508      (932)       (48)       (472)
  Other borrowings                          2,667        326        587      3,580          559       (22)       (13)         524
                                         ------------------------------------------  ---------------------------------------------
    Total interest-bearing liabilities     $2,800     $1,819       $787      5,406       $1,266   ($1,316)      ($68)       (118)
                                         =================================---------  ===================================----------
Net change in net interest income                                           $1,286                                         $1,524
                                                                          =========                                     ==========
</TABLE>

(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.
(2) Taxable-equivalent adjustments were made using a 34% corporate tax rate for
    all years presented in calculating interest income and yields. The amount of
    taxable-equivalent adjustments were $383 for 2000, $390 for 1999 and $263
    for 1998.

PROVISION FOR LOAN LOSSES

         During 2000, the Corporation made a provision of $1.2 million to the
allowance for loan losses, as compared to a provision of $956,000 in 1999 and
$314,000 in 1998. The 2000 increase reflected the growth in the overall loan
portfolio especially in higher risk categories of commercial and consumer
(primarily automobile) loans and management's assessment of general economic
conditions. Net loan charge-offs for 2000 decreased by $116,000, over 1999 to
$276,000. This compares to charge-offs of $65,000 in 1998. Although management
considers the allowance for loan losses to be adequate to provide for potential
losses in the loan portfolio, there can be no assurance that losses will not
exceed estimated amounts or that the subsidiary banks will not be required to
make further and possibly larger additions to their allowance in the future.

                                     11

<PAGE>   12



NON-INTEREST INCOME

         Non-interest income increased $540,000 in 2000 and $184,000 in 1998.
The composition of non-interest income is shown in the following table (in
thousands).

<TABLE>
<CAPTION>

                                                                           For the Year Ended December 31,
                                                                      2000              1999              1998
                                                            ----------------------------------------------------
<S>                                                         <C>              <C>               <C>

              Service charges on deposit accounts                    $1,030            $1,009              $982
              Service charges on loans                                  488               419               451
              Net gain on securities sales                                2                 9               219
              Net gain on loan sales                                      0                18               226
              Net gain on sale of premises                            1,053               633                 0
              Other                                                   1,458             1,403             1,429
                                                            ----------------------------------------------------
                  Total noninterest income                           $4,031            $3,491            $3,307
                                                            ====================================================
</TABLE>

         Service charge income on deposit accounts increased $21,000 in 2000 and
$27,000 in 1999. The increases in both years can be attributed to growth in
accounts subject to service charges as well as growth in overdraft fees
collected in those years.

         Service charges on loans increased $69,000 from $419,000 in 1999 to
$488,000 in 2000. The 2000 increase is due directly to the increase in loans
closed during the year. The decrease in loan fees from 1998 to 1999 can be
attributed to the high volume of loan refinancing that occurred in 1998.

         The Corporation recorded a net gain of $2,000 on the sale of $998,000
of securities in 2000, $9,000 on the sale of $2.7 million of securities in 1999
and $219,000 on the sale of $27.8 million of securities in 1998. The proceeds
from the sale of the investments were used to fund loan demand.

         The Corporation did not record any gains on the sale of loans in 2000,
compared to $18,000 in 1999 and $226,000 in 1998. Lower market interest rates
led to higher loan prices in 1998. The Corporation took advantage of the higher
prices and sold a portion of the residential loan portfolio in 1998. Higher
interest rates in 1999 and 2000 resulted in reduced opportunities to sell loans.

         In each of the years 2000 and 1999, the Corporation sold one of its
banking facilities and subsequently leased it backed from the new owners. The
2000 transaction resulted in an immediate gain of $786,000 while the 1999
transaction resulted in an immediate gain of $537,000 at the time of the sale.
The remaining portion of the gains will be recognized monthly over the terms of
the leases. During 1999, $96,000 was accreted into income related to the 1999
transaction. During 2000, $267,000 was accreted into income related to the 1999
transaction No income has yet been accreted on the 2000 transaction.

NON-INTEREST EXPENSE

         Non-interest expense increased $584,000 (3.9%) for the year ended
December 31, 2000, and increased $1.5 million (11.3%) for the year ended
December 31, 1999. The major components of non-interest expense are shown in the
following table (in thousands).

<TABLE>
<CAPTION>

                                                                        For the Year Ended December 31,
                                                                  2000              1999              1998
                                                            ----------------------------------------------------
<S>                                                         <C>              <C>               <C>


              Salaries and employee benefits                         $8,893            $8,406            $7,685
              Premises and equipment                                  2,524             2,231             2,097
              Data processing fees                                      873               921               915
              Federal deposit insurance premiums                         83               116               115
              Merger-related expenses                                   170               510                 0
              Other                                                   2,997             2,772             2,621
                                                            ----------------------------------------------------
                  Total noninterest expense                         $15,540           $14,956           $13,433
                                                            ====================================================
</TABLE>

         Salaries and employee benefits increased $487,000 in 2000, reflecting
additional staff hires particularly in the loan generation and loan services
area, higher benefit costs, changes in personnel and normal pay raises. Salaries
and employee benefits increased $721,000 in 1999. Besides normal pay increases
and staff additions in 1999 the Corporation expensed $290,000 associated with
employee bonuses that were paid in the year 2000 based on 1999 performance. The
1999 increase also reflected the higher cost of employee benefits, particularly
medical insurance which increased $131,000.

         Premises and equipment expense increased $293,000 in 2000 and $134,000
in 1999. The lease payments associated with the facilities sold in 2000 and 1999
and maintenance of the Corporation's facilities contributed to the increase.

         Data processing fees decreased $48,000 in 2000 and increased $6,000 in
1999. The decrease in 2000 was due the negotiating a new contract with the
Corporation's data processing service provider.

                                       12

<PAGE>   13


         Federal deposit insurance fees represent premiums paid for FDIC
insurance on the banks' deposits. The FDIC assesses the banks based on the level
of deposits. In 2000 the premiums paid by the Corporation amounted to $83,000
compared to $116,000 in 1999 and $115,000 in 1998. The decrease in the 2000
insurance premium was due to the reduced charge levied against financial
institutions paying into the Savings Association Insurance Fund.

         In 2000, the Corporation expensed $170,000 of costs associated the
pending acquisition of CBOC, Inc. In 1999 the Corporation incurred $510,000 in
expenses related to the Pyramid Bancorp acquisition. These expenses consisted of
legal fees, accounting fees, printing costs and consulting fees.

         Other expenses increased $225,000 in 2000 compared to 1999. Other
expenses increased $151,000 in 1999. The increases are the result of changes in
operating expenses such as consulting fees, examination costs, accounting fees,
and employee training.

INCOME TAXES

         The Corporation's consolidated income tax rate varies from statutory
rates principally due to interest income from tax-exempt securities and loans
and interest income on assets held in the portfolios of M&M Lincoln Investment
Corporation, Lincoln Investment Management Corporation and GSB Investments for
which state taxes are not imposed. The Corporation recorded provisions for
income taxes totaling $2.1 million in 2000, $1.9 million in 1999 and $2.0
million in 1998. The corresponding effective tax rate for the same years were
32.8%, 35.9% and 34.7%. The increased effective tax rate in 1999 is the result
of merger related expenses of $510,000 which were not tax deductible.

NET INCOME

         For the years ended December 31, 2000, 1999 and 1998, the Corporation
posted net income of $4.2 million, $3.4 million and $3.9 million, respectively.
The 2000 and 1999 earnings were effected by one-time merger-related expenses
associated with the pending acquisition of CBOC, Inc and the completed
acquisition of Pyramid Bancorp offset by the gain on sales of premises in those
years.

LOANS RECEIVABLE

         Net loans receivable increased $70.6 million, or 19.4%, from $363.4
million at December 31, 1999, to $434.1 million at December 31, 2000. Loans
receivable consist mainly of commercial loans secured by business assets, real
estate and guarantees and mortgages secured by residential properties located in
the Corporation's primary market area. The following table shows the composition
of the Corporation's loan portfolio on the dates indicated (in thousands):

<TABLE>
<CAPTION>


                                                                                   At December 31,
                                                     2000              1999             1998              1997             1996
                                              --------------------------------------------------------------------------------------
<S>                                           <C>              <C>               <C>              <C>               <C>

  First Mortgage:
    Conventional single-family residential            $90,244           $70,836          $61,685           $72,538          $73,829
    Commercial and multifamily residential            160,482           145,241          127,034            93,673           75,420
    Construction and land                              47,039            32,618           20,194            22,246           16,635
    Farmland                                              307               296              326               139              252
                                              --------------------------------------------------------------------------------------
                                                      298,072           248,991          209,239           188,596          166,136
  Commercial business loans                           105,367            88,332           80,238            71,262           57,764
  Consumer and installment loans                       28,766            19,729           16,250            14,624           13,493
  Lease financing                                       1,606             2,017            2,599             2,311              599
  Home equity loans                                     4,457             6,960            6,576             6,013            5,325
  Other                                                   321             1,031              930             1,086              838
                                              --------------------------------------------------------------------------------------
                                                      140,517           118,069          106,593            95,296           78,019
  Less:
    Deferred loan fees                                     24                43               53                65               30
    Allowance for loan losses                           4,509             3,582            3,018             2,769            2,610
                                              --------------------------------------------------------------------------------------
                                                     $434,056          $363,435         $312,761          $281,058         $241,515
                                              ======================================================================================

</TABLE>

                                       13
<PAGE>   14



         The following table presents information as of December 31, 2000
regarding first mortgage and commercial business loan maturities and contractual
principal repayments of loans during the periods indicated. Loans with
adjustable interest rates are shown maturing in the year of their contractual
maturity. Also provided are the amounts due after one year classified according
to the sensitivity to changes in interest rates. (dollars in thousands)

<TABLE>
<CAPTION>

                                                                           AFTER ONE BUT
                                                                            WITHIN FIVE
                                                        WITHIN ONE YEAR        YEARS       AFTER FIVE YEARS       TOTAL
                                                        ----------------------------------------------------------------------
<S>                                                     <C>               <C>              <C>               <C>

          COMMERCIAL BUSINESS LOANS                              $55,518          $46,153           $ 3,696         $ 105,367
          FIRST MORTGAGE LOANS                                    69,140          142,302            86,630           298,072
                                                        ----------------------------------------------------------------------
                                                                $124,658         $188,455           $90,326          $403,439
                                                        ======================================================================
          LOANS MATURING AFTER ONE YEAR WITH:
          FIXED INTEREST RATES                                                   $177,529           $35,739
          VARIABLE INTEREST RATES                                                  10,926            54,587
                                                                          ----------------------------------
                                                                                 $188,455           $90,326
                                                                          ==================================
</TABLE>

ALLOWANCE FOR LOAN LOSSES

         The Corporation maintains an allowance for loan losses to absorb
estimated losses in its loan portfolio. Management's determination of the
adequacy of the allowance is based on review of specific loans, past loan loss
experience, general economic conditions and other pertinent factors. If, as a
result of charge-offs or increases in the risk factors of the loan portfolio,
the allowance is below the level considered to be adequate to absorb estimated
losses, the periodic provision to the allowance is increased. Loans deemed
uncollectible are charged off and deducted from the allowance. The allowance for
loan losses increased from $3.6 million at December 31, 1999, to $4.5 million at
December 31, 1999. This increase was primarily due to the growth in loan
portfolio and the general uncertainty regarding economic conditions, and to a
lesser extent the increase in non-performing loans and charge-offs recorded in
2000 and 1999. The ratio of the allowance for loan losses to total loans was
1.04% for 2000 and 0.99% in 1999. Based on the present economic environment and
its present analysis of the financial condition of the borrowers, the
Corporation considers the present allowance to be appropriate and adequate to
cover potential losses inherent in the loan portfolio, however, changes in
future economic conditions and in the financial condition of borrowers cannot be
predicted at this time. Deterioration in such conditions could result in
increases in charge-offs or adversely classified loans and accordingly, in
additional provisions for loan losses.

         The balance of the allowance for loan losses and actual loss experience
for the last five years is summarized in the following table (dollars in
thousands):

<TABLE>
<CAPTION>

                                                                      At or for the Year Ended At December 31,
                                                     2000              1999             1998              1997             1996
                                            --------------------------------------------------------------------------------------
<S>                                         <C>              <C>               <C>              <C>               <C>

  Balance at beginning of year                       $3,582            $3,018           $2,769            $2,610           $2,191
  Charge-offs:
    Conventional single-family mortgage
      Residential                                        89                25                0                 0               70
    Commercial business loans                           107               290               42                25              141
    Consumer and installment loans                       92                94               41                50               10
                                            --------------------------------------------------------------------------------------
  Total charge-offs                                     288               409               83                75              221
  Recoveries                                           (12)              (17)             (18)               (7)             (35)
                                            --------------------------------------------------------------------------------------
  Net charge-offs                                       276               392               65                68              186
  Provisions charged to operations                    1,203               956              314               227              605
                                            --------------------------------------------------------------------------------------
  Balance at end of year                             $4,509            $3,582           $3,018            $2,769           $2,610
                                            ======================================================================================
  Ratios:
   Net charge-offs to average
     loans outstanding                                0.07%             0.12%            0.02%             0.03%            0.08%
   Net charge-offs to total allowance                 6.12%            10.97%            2.15%             2.46%            7.13%
   Allowance to year end gross loans
     outstanding                                      1.04%             0.98%            0.96%             0.98%            1.07%

</TABLE>


                                       14

<PAGE>   15



NON-PERFORMING AND DELINQUENT LOANS

         When in the opinion of management, serious doubt exists as to the
collectibility of a loan, the loan is placed on non-accrual status and interest
previously accrued but unpaid is deducted from interest income. The Corporation
does not recognize income on any loans past due 90 days or more. In 2000,
$42,000 of additional income on nonaccrual loans would have been reported if the
loans had been current in accordance with their original terms and had been
outstanding throughout the year. Additionally, in 2000 the Corporation recorded
$56,000 of interest income on non-accrual loans. The following table summarizes
non-performing assets on the dates indicated (dollars in thousands):

<TABLE>
<CAPTION>

                                                                                   At December 31,
                                                    2000              1999             1998              1997             1996
                                             --------------------------------------------------------------------------------------
<S>                                          <C>              <C>               <C>              <C>               <C>

  Nonaccrual loans                                   $ 1,760           $ 2,251          $ 1,508           $ 1,275          $ 1,549
  Other real estate owned                                117               107                0               228                0
                                             --------------------------------------------------------------------------------------
  Total non-performing assets                        $ 1,877           $ 2,358          $ 1,508           $ 1,275          $ 1,549
                                             ======================================================================================
  Ratios:
   Non-accrual loans to total loans                    0.40%             0.61%            0.48%             0.45%            0.63%
   Allowance to non-accrual loans                    256.19%           159.08%          200.13%           217.18%          168.50%
   Non-performing assets to total assets               0.35%             0.50%            0.34%             0.38%            0.43%

</TABLE>

INVESTMENT AND MORTGAGE RELATED SECURITIES

         The investment portfolio is intended to provide the Corporation with
adequate liquidity, flexibility in asset/liability management and lastly its
earning potential. Investment securities at December 31, 2000 were $61.6 million
compared to $66.1 million on December 31, 1999. The balance of investment
securities decreased primarily as a result of the additional funding needed to
support the loan portfolio growth.

         Management determines the appropriate classification of securities
(including mortgage-related securities) at the time of purchase.
Held-to-maturity securities are stated at amortized cost where as available for
sale securities are stated at fair value with changes in fair value reflected as
a component of equity, net of tax. See notes one and two to Consolidated
Financial Statements for further details.

         The amortized cost of debt securities are adjusted for amortization of
premiums and accretion of discounts to maturity, or in the case of
mortgage-related securities, over the estimated life of the security. Such
amortization is included in interest income from the related security. Interest
and dividends are included in interest income from the related securities.
Realized gains and losses, and declines in value judged to be
other-than-temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method.

         The reason for the decrease in investment securities is the increase in
demand for funds for lending purposes. Funding for additional loans came
primarily from government agency mortgage-backed securities which either matured
or prepaid. The following table sets forth the Corporations estimated fair value
of investment securities available-for-sale at the dates indicated (in
thousands):

<TABLE>
<CAPTION>
                                                                                At December 31,
                                                                       2000            1999             1998
                                                            ---------------------------------------------------
<S>                                                         <C>               <C>              <C>

              Mutual funds                                           $3,044            $3,038           $3,059
              U.S. Treasury and other
                government agency securities                          8,331            11,687            7,765
              Small Business Administration
                certificates                                            393               444              628
              State and political subdivision securities             16,707            17,618           10,668
              Corporate bonds                                            50                --               --
              Collateralized mortgage obligations                    12,458             9,264            8,401
              Government agency mortgage-backed
                securities                                           20,629            24,078           30,272
                                                            ---------------------------------------------------
                                                                    $61,612           $66,129          $60,793
                                                            ===================================================

</TABLE>

                                       15


<PAGE>   16
         The following table sets forth the Corporation's amortized cost of
investment securities held-to-maturity at the dates indicated (in thousands):

<TABLE>
<CAPTION>
                                                                                At December 31,
                                                                     2000              1999             1998
                                                            ---------------------------------------------------
<S>                                                         <C>              <C>               <C>

              State and political subdivision securities               $  0              $  0          $ 5,794
              Government agency mortgage-backed
                securities                                                0                 0            1,165
                                                            ---------------------------------------------------
                                                                         $0                $0          $ 6,959
                                                            ===================================================
</TABLE>

         The maturity distribution (based upon the average life), and weighted
average yield of the securities portfolio of the Corporation as of December 31,
2000 are summarized in the following table (dollars in thousands):

<TABLE>
<CAPTION>
                                          WITHIN ONE YEAR        ONE TO FIVE YEARS        FIVE TO TEN YEARS         OVER TEN YEARS
                                      ----------------------------------------------------------------------------------------------
                                                   WEIGHTED                WEIGHTED                 WEIGHTED                WEIGHTED
                                                    AVERAGE                AVERAGE                  AVERAGE                 AVERAGE
                                        AMOUNT       YIELD       AMOUNT      YIELD       AMOUNT       YIELD       AMOUNT      YIELD
                                      ----------------------------------------------------------------------------------------------
<S>                                   <C>         <C>          <C>         <C>         <C>          <C>         <C>         <C>

MUTUAL FUNDS                              $3,173        6.53%  $    --         -- %    $   --         -- %       $  --         -- %
U.S. TREASURY AND OTHER
  GOVERNMENT AGENCY SECURITIES             2,873        5.21      4,513       5.75       1,008       6.47           --         --
SMALL BUSINESS ADMINISTRATION
  CERTIFICATES                               ---         --         113       7.69          82      11.37           184       8.61
STATE AND POLITICAL SUBDIVISION
  CERTIFICATES                                15        5.60      2,342       5.12      10,435       4.81         4,151       4.45
CORPORATE BONDS                               50        6.33        --         --          --         --            --         --
COLLATERALIZED MORTGAGE OBLIGATIONS          978        6.63      9,325       6.67       1,950       6.41           200       6.44
GOVERNMENT AGENCY MORTGAGE-BACKED
  SECURITIES                                 292        6.49      9,115       6.30       8,125       6.46         3,182       6.34
                                      ---------------------------------------------------------------------------------------------
                                          $7,381        6.66%  $ 25,408       6.23%    $21,600       5.68%       $7,717       5.38%
                                      ============================================================================================
</TABLE>

         Weighted average yield is calculated by dividing income within each
maturity range by the outstanding amount of the related investment based on
amortized costs.

TOTAL DEPOSITS

         The Corporation continues to stress its philosophy of core deposit
accumulation and retention as the fundamental basis for sound growth and
profitability. Core deposits consist of all deposits other than public funds and
certificates of deposit in excess of $100,000.

         Deposits increased $24.5 million to $401.8 million on December 31,
2000, from $377.3 million on December 31, 1999. This compares to a $5.2 million
increase in 1999. The average increase in time deposits occurred via increases
in retail certificates of deposits and retail jumbo certificates of deposits,
while the increase in non-interest bearing demand deposits can be attributed to
the additional commercial account relationships being established by the Banks.
The following table sets forth the average amount of and the average rate paid
by the Banks on deposits by deposit category (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                 At December 31,
                                                          2000                         1999                        1998
                                               ------------------------------------------------------------------------------------
                                                  AVERAGE       AVERAGE        Average       Average       Average       Average
                                                  AMOUNT          RATE         Amount         Rate          Amount        Rate
                                               ------------------------------------------------------------------------------------
<S>                                            <C>           <C>            <C>           <C>           <C>           <C>

  Non-interest-bearing demand deposits             $ 60,004          0.00%      $ 55,933         0.00%      $ 50,518        0.00%
  NOW and money market deposits                      81,085          3.87         63,847         2.67         58,352        2.98
  Savings deposits                                   70,411          2.16         71,082         2.12         70,889        2.31
  Time deposits                                     176,073          5.50        185,185         5.03        176,039        5.55
                                               ------------------------------------------------------------------------------------
                                                  $ 387,573          3.70%     $ 376,047         3.33%     $ 355,798        3.69%
                                               ====================================================================================
</TABLE>

         Maturities of time deposits and certificate accounts with balances of
$100,000 or more, outstanding at December 31, 2000, are summarized as follows
(in thousands):

<TABLE>
                      <S>                                      <C>

                       3 MONTHS OR LESS                               $21,008
                       OVER 3 THROUGH 6 MONTHS                          5,014
                       OVER 6 THROUGH 12 MONTHS                         9,217
                       OVER 12 MONTHS                                   2,705
                                                                -------------
                          TOTAL                                       $37,944
                                                                =============
</TABLE>


                                       16
<PAGE>   17
SHORT-TERM BORROWINGS

         Although deposits are the Corporation's primary source of funds, the
Corporation's policy has been to utilize short-term borrowings as an alternative
for less costly source of funds. The Corporation utilizes short-term borrowings
as a part of its asset/liability management strategy. Borrowings are secured
when management believes it can profitably re-invest those funds for the benefit
of the Corporation. A significant component of the Corporation's short-term
borrowings are federal funds purchased and advances from the Federal Home Loan
Bank (FHLB) of Chicago. The FHLB advances are collateralized by the capital
stock of the FHLB-Chicago held by the Corporation and certain mortgage loans and
mortgage related securities. Such advances are made pursuant to several
different credit programs, each of which has its own interest rate and range of
maturities.

         The following table shows outstanding amounts of short-term borrowings
together with the weighted average interest rates, at December 31, for each of
the past three years (dollars in thousands).

<TABLE>
<CAPTION>
                                                                                 At December 31,
                                                          2000                         1999                        1998
                                               ------------------------------------------------------------------------------------
                                                 BALANCE         RATE         Balance         Rate        Balance         Rate
                                               ------------------------------------------------------------------------------------
<S>                                            <C>           <C>            <C>           <C>           <C>           <C>

  Federal Funds purchased                          $ 33,450        6.92%         $ 7,450        5.74%        $ 9,500        5.24%
  Federal Home Loan Bank borrowings                  39,400        6.80           31,700        5.84           5,900        5.20
                                               ------------------------------------------------------------------------------------
                                                   $ 72,850        6.86%        $ 39,150        5.82%        $15,400        5.22%
                                               ====================================================================================
</TABLE>

         The following table shows the maximum amounts outstanding of short-term
borrowings, together with the weighted average interest rates, at December 31,
for each of the past three years (dollars in thousands).

<TABLE>
<CAPTION>
                                                                                At December 31,
                                                                     2000              1999            1998
                                                            ---------------------------------------------------
<S>                                                         <C>              <C>               <C>

              Federal Funds purchased                              $ 33,450            $7,450           $9,500
              Federal Home Loan Bank borrowings                      43,400            31,700            5,900
                                                            ---------------------------------------------------
                                                                    $76,850           $39,150          $15,400
                                                            ===================================================
</TABLE>

         The following table shows for the periods indicated the daily average
amount outstanding for the categories of short-term borrowings, the interest
paid and the weighted average rates (dollars in thousands).

<TABLE>
<CAPTION>
                                                                                 At December 31,
                                                          2000                         1999                        1998
                                               ------------------------------------------------------------------------------------
                                                 BALANCE         RATE         Balance         Rate        Balance         Rate
                                               ------------------------------------------------------------------------------------
<S>                                            <C>           <C>            <C>           <C>           <C>           <C>

  Federal Funds purchased                          $ 24,519        6.77%         $ 6,172        5.44%       $ 1,919         5.74%
  Federal Home Loan Bank borrowings                  38,302        6.62            7,573        5.82          3,189         5.55
                                               ------------------------------------------------------------------------------------
                                                   $ 62,821        6.68%         $13,745        5.65%       $ 5,108         5.62%
                                               ====================================================================================
</TABLE>

CAPITAL RESOURCES AND ADEQUACY

         Stockholders' equity increased from $40.4 million at December 31, 1999
to $42.8 million at December 31, 2000. The $4.2 million increase from net income
and the $1.1 million decrease in the unrealized loss on securities
available-for-sale was offset by the payment of $1.4 million in cash dividends
to shareholders and the net purchase of treasury shares of $1.5 million.

         Pursuant to regulations promulgated by the Federal Reserve Board, bank
holding companies are required to maintain minimum levels of core capital as a
percent of total assets and total capital as a percent of risk-based assets. The
minimum core capital requirement ranges from 3% to 5% of total assets, depending
upon the Federal Reserve Board's determination of the financial institution's
strength. Similar capital guidelines are also established for the individual
banking subsidiaries of the Corporation. Most financial institutions are
required to meet a minimum core capital requirement of 4% or more of total
assets. The regulations assign risk weightings to assets and off-balance sheet
items and require minimum risk-based capital ratios. Bank holding companies
generally are required to have total capital equal to not less than 8% of risk
weighted assets. Core capital consists principally of stockholders' equity less
intangibles, while qualifying total capital consists of core capital, certain
debt instruments and a portion of the reserve for loan losses. As of December
31, 2000, the Corporation had a core-capital to total assets ratio of 7.95%, and
Lincoln State Bank, Franklin State Bank, Grafton State Bank and Lincoln
Community Bank had risk-based capital ratios of 9.50%, 9.09%, 10.99% and 10.27%,
respectively. These ratios are above the 2000 minimum requirements established
by regulatory agencies.

         For a summary of the Banks' regulatory capital ratios at December 31,
2000, please see Note Seven to the Consolidated Financial Statements.

                                       17

<PAGE>   18

         Management strives to maintain a strong capital position to take
advantage of opportunities for profitable geographic and product expansion and
to maintain depositor and investor confidence. Conversely, management believes
that capital must be maintained at levels that provide adequate returns on the
capital employed. Management actively reviews capital strategies for the
Corporation and for each of its subsidiaries to ensure that capital levels are
appropriate based on perceived business risks, growth and regulatory standards.

LIQUIDITY

         Liquidity is the ability to meet withdrawal requirements on deposit
accounts and satisfy loan demand. The principal sources of liquidity for the
subsidiary banks include additional deposits, repayments on loans and investment
securities, collections of interest, sales of investments, borrowings and the
retention of earnings.

         The Corporation's liquidity, represented by cash and cash equivalents,
is a product of its operating activities, investing activities and financing
activities. These activities are summarized below (dollars in thousands):

<TABLE>
<CAPTION>

                                                                                     Year Ended December 31,
                                                                            2000             1999              1998
                                                                    ----------------------------------------------------
             <S>                                                    <C>               <C>              <C>

              Cash and cash equivalents at beginning of period               $22,791          $40,562           $26,050
              Operating Activities:
                Net income                                                     4,240            3,403             3,850
                Adjustments to reconcile net income to net cash
                    provided by operating activities                           (584)            (427)               552
                                                                    ----------------------------------------------------
                Net cash provided by operating activities                      3,856            3,656             5,020
              Net cash used by investing activities                         (64,439)         (51,765)          (36,180)
              Net cash provided by financing activities                       56,593           30,338            45,672
                                                                    ----------------------------------------------------
              Increase (decrease) in cash and cash equivalents               (3,990)         (17,771)            14,512
                                                                    ----------------------------------------------------
                  Cash and cash equivalents at end of period                 $18,801          $22,791           $40,562
                                                                    ====================================================

</TABLE>

         Net cash was provided by operating activities during the years ended
December 31, 2000, 1999 and 1998 primarily as a result of normal ongoing
business operations. The non-cash items, such as the provisions for loan losses
and depreciation and the net amortization of premiums, also contributed to net
cash provided by operating activities during these periods.

         Liquidity is also necessary at the parent company level. The parent
company's primary source of funds are dividends from subsidiaries, borrowings
and proceeds from issuance of equity. The parent company manages its liquidity
position to provide the funds necessary to pay dividends to shareholders,
service debt, invest in subsidiaries and satisfy other operating requirements.
Dividends received from subsidiaries totaled $2.2 million, $1.7 million and $4.8
million for the years ended December 31, 2000, 1999 and 1998 respectively, and
will continue to be the parent's main source of long-term liquidity. The
dividends from the Banks were sufficient to pay cash dividends to the
Corporation's shareholders of $1.4 million, $1.2 million and $1.0 million for
the years ended December 31, 2000, 1999 and 1998, respectively. At December 31,
2000, the parent company had two $10.0 million lines of credit with unaffiliated
banks, with an outstanding balance of $2.7 million.

                                       18


<PAGE>   19



INTEREST RATE SENSITIVITY MANAGEMENT

         Financial institutions are subject to interest rate risk to the extent
their interest-bearing liabilities (primarily deposits) mature or reprice at
different times and on a different basis than their interest-earning assets
(consisting primarily of loans and securities). Interest rate sensitivity
management seeks to match maturities on assets and liabilities and avoid
fluctuating net interest margins while enhancing net interest income during
periods of changing interest rates. The difference between the amount of
interest-earning assets maturing or repricing within a specific time period and
the amount of interest-bearing liabilities maturing or repricing within the same
time period is referred to as an interest rate gap. A gap is considered positive
when the amount of interest rate sensitive assets exceeds the amount of interest
rate sensitive liabilities. A gap is considered negative when the amount of
interest rate sensitive liabilities exceeds the amount of interest rate
sensitive assets. During periods of rising interest rates, a negative gap tends
to adversely affect net interest income while a positive gap tends to result in
an increase in net interest income. During a period of falling interest rates, a
negative gap tends to result in an increase in net interest income while a
positive gap tends to adversely affect net interest income.

         The following table shows the interest rate sensitivity gap for four
different time intervals as of December 31, 2000. Assumptions regarding
prepayment and withdrawal rates are based upon the Corporation's historical
experience, and management believes such assumptions are reasonable.

<TABLE>
<CAPTION>

                                                                       AMOUNT MATURING OR REPRICING
                                                ---------------------------------------------------------------------------
                                                    WITHIN     SIX TO TWELVE   ONE TO FIVE        OVER
                                                  SIX MONTHS       MONTHS         YEARS        FIVE YEARS       TOTAL
                                                --------------------------------------------------------------------------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                             <C>            <C>            <C>            <C>               <C>

   INTEREST-EARNING ASSETS:
   FIXED-RATE MORTGAGE LOANS                           $28,948        $17,957       $129,004        $30,890      $206,799
   ADJUSTABLE-RATE MORTGAGE LOANS                       28,628         13,169         39,278            121        81,196
                                                --------------------------------------------------------------------------
         TOTAL MORTGAGE LOANS                           57,576         31,126        168,282         31,011       287,995
   COMMERCIAL BUSINESS LOANS                            52,871          8,616         46,815          3,740       112,042
   CONSUMER LOANS                                        7,464          3,239         18,691          2,619        32,013
   LEASE FINANCING                                           0              0          1,606              0         1,606
   HOME EQUITY LOANS                                     4,356              6             97              0         4,459
   TAX-EXEMPT LOANS                                        450              0              0              0           450
   MORTGAGE-RELATED SECURITIES                          15,957            974          9,370          6,786        33,087
   FIXED RATE INVESTMENT SECURITIES AND OTHER            3,476          3,492          3,777         14,293        25,038
   VARIABLE RATE INVESTMENT SECURITIES AND  OTHER        5,511          3,022             25             25         8,583
                                                --------------------------------------------------------------------------
         TOTAL INTEREST-EARNING ASSETS                $147,661        $50,475       $248,663        $58,474      $505,273
                                                ==========================================================================

   INTEREST-BEARING LIABILITIES:
   DEPOSITS
     TIME DEPOSITS                                     $76,187        $50,588        $45,916             $0      $172,691
     NOW ACCOUNTS                                        1,767          1,767         17,669          8,245        29,448
     SAVINGS ACCOUNTS                                    3,895          4,598         38,947         17,471        64,911
     MONEY MARKET ACCOUNTS                              26,261          2,293         22,929         10,840        62,323
     ADVANCE PAYMENTS FOR TAXES AND INSURANCE                0            346              0              0           346
     BORROWINGS                                         77,715          6,400          4,300              0        88,415
                                                --------------------------------------------------------------------------
       TOTAL INTEREST-BEARING LIABILITIES             $185,825        $65,992       $129,761        $36,556      $418,134
                                                ==========================================================================
   INTEREST-EARNING ASSETS LESS
   INTEREST-BEARING
     LIABILITIES                                     ($38,164)      ($15,517)       $118,902        $21,918       $87,139
                                                ==========================================================================
   CUMULATIVE INTEREST RATE SENSITIVITY GAP          ($38,164)      ($53,681)        $65,221        $87,139
                                                ============================================================
   CUMULATIVE INTEREST RATE SENSITIVITY GAP AS
   A PERCENTAGE OF TOTAL ASSETS                        (7.09%)        (9.98%)         12.12%         16.20%
                                                ============================================================

</TABLE>

         At December 31, 2000, the Corporation's cumulative ratio of
interest-rate sensitive assets to interest-rate sensitive liabilities was a
negative 7.1% for six months and a negative 10.0% for one year maturities.
Therefore the Corporation is negatively gapped and may benefit from falling
interest rates.


                                       19
<PAGE>   20



         Certain shortcomings are inherent in the method of analysis presented
in the table above. For example, although certain assets and liabilities have
similar maturities or periods of repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets, such as adjustable rate mortgage loans,
have features that restrict changes in interest rates on a short term basis over
the life of the asset. Further, in the event of a change in interest rates,
prepayment and early withdrawal levels would likely deviate significantly from
those assumed in calculating the schedule. Finally, the ability of many
borrowers to service their debt may decrease in the event of an interest rate
increase.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Corporation's financial performance is impacted by, among other
factors, interest rate risk and credit risk. The Corporation utilizes no
derivatives to mitigate its interest rate risk. To control credit risk, the
Corporation relies instead on loan review and an adequate loan loss reserve (see
Management's Discussion and Analysis of Financial Condition and Results of
Operation).

         Interest rate risk is the risk of loss of net interest income due to
changes in interest rates. This risk is addressed by the Corporation's Asset
Liability Management Committee ("ALCO"), which includes senior management
representatives. The ALCO monitors and considers methods of managing interest
rate risk by monitoring changes in net interest income under various interest
rate scenarios. The ALCO attempts to manage various components of the
Corporation's balance sheet to minimize the impact of sudden and sustained
changes in interest rate on net interest income.

         The Corporation's exposure to interest rate risk is reviewed on at
least a quarterly basis by the ALCO. Interest rate risk exposure is measured
using interest rate sensitivity analysis to determine the Corporation's change
in net interest income in the event of hypothetical changes in interest rates
and interest liabilities. If potential changes to net interest income resulting
from hypothetical interest rate swings are not within the limits established by
the ALCO, the asset and liability mix may be adjusted to bring interest rate
risk within approved limits.

         In order to reduce the exposure to interest rate fluctuations, the
Corporation has developed strategies to manage its liquidity, shorten the
effective maturities of certain interest-earning assets, and increase the
effective maturities of certain interest-bearing liabilities. One strategy used
is focusing its residential lending on adjustable rate mortgages, which
generally reprice within one to three years. Another strategy used is
concentrating its non-residential lending on adjustable or floating rate and/or
short-term loans. The Corporation has also focused its investment activities on
short and medium-term securities, while attempting to maintain and increase its
savings account and transaction deposit accounts, which are considered to be
relatively resistant to changes in interest rates.

                                       20


<PAGE>   21



         Along with the analysis of the interest rate sensitivity gap,
determining the sensitivity of future earnings to a hypothetical +/- 200 basis
parallel rate shock can be accomplished through the use of simulation modeling.
In addition to the assumptions used to measure the interest rate sensitivity
gap, simulation of earnings includes the modeling of the balance sheet as an
ongoing entity. Future business assumptions involving administered rate
products, prepayments for future rate sensitive balances, and the reinvestment
of maturing assets and liabilities are included. These items are then modeled to
project income based on a hypothetical change in interest rates. The resulting
pretax income for the next 12 month period is compared to the pretax income
calculated using flat rates. This difference represents the Corporation's
earning sensitivity to a +/- 200 basis point parallel rate shock. The table
below illustrates these amounts as of December 31, 2000.

<TABLE>
<CAPTION>

                                                 ESTIMATED
                                          2001 PRETAX NET INTEREST
                                                   INCOME                                        PERCENT CHANGE IN NET
          CHANGE IN INTEREST RATES         (DOLLARS IN THOUSANDS)          ACTUAL CHANGE            INTEREST INCOME
          ------------------------------ --------------------------- -------------------------- -------------------------
          <S>                            <C>                         <C>                        <C>
          200 BASIS POINT RISE                    $19,049                    $(1,152)                   (5.70%)
          150 BASIS POINT RISE                     19,351                       (850)                   (4.21%)
          100 BASIS POINT RISE                     19,622                       (579)                   (2.87%)
          50 BASIS POINT RISE                      19,919                       (282)                   (1.40%)
          BASE SCENARIO                            20,201                          0                     0.00%
          50 BASIS POINT DECLINE                   20,491                        290                     1.44%
          100 BASIS POINT DECLINE                  20,787                        586                     2.90%
          150 BASIS POINT DECLINE                  21,088                        887                     4.39%
          200 BASIS POINT DECLINE                  21,380                      1,179                     5.84%

</TABLE>

         These results are based solely on immediate and sustained parallel
changes in market rates and do not reflect the earnings sensitivity that may
arise from other factors such as changes in the shape of the yield curve and the
change in spread between key market rates. The above results are also considered
to be conservative estimates due to the fact that no management action to
mitigate potential income variances are included within the simulation process.
This action would include, but would not be limited to, adjustments to the
repricing characteristics of any on or off balance sheet item with regard to
short-term rate projections and current market value assessments.

         Another component of interest rate risk, fair value at risk, is
determined by the Corporation through the technique of simulating the fair value
of equity in changing rate environment. This technique involves determining the
present value of all contractual asset/liability cash flows (adjusted for
prepayments) based on predetermined discount rate. The net result of all these
balance sheet items determine the fair value of equity. The fair value of equity
resulting from the current flat rate scenario is compared to the fair value of
equity calculated using discount rates +/- 200 basis points from flat rates to
determine the fair value of equity at risk. Currently, fair value of equity at
risk is less than 1.0% of the market value of the Corporation as of December 31,
2000.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
         The consolidated statements of financial condition of the Corporation
and its subsidiaries as of December 31, 2000 and 1999 and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the years in period ended December 31, 2000, along with the related notes to
the consolidated financial statements and the report of Ernst & Young LLP,
independent auditors are attached.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
         None.

                                       21


<PAGE>   22


                                    PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information in response to this item is incorporated herein by
reference to the Corporation's proxy statement, which shall be filed with the
Securities and Exchange Commission no later than 120 days after the
Corporation's fiscal year end covered by this report.

ITEM 11. EXECUTIVE COMPENSATION

         The information in response to this item is incorporated herein by
reference to the Corporation's proxy statement, which shall be filed with the
Securities and Exchange Commission no later than 120 days after the
Corporation's fiscal year end covered by this report.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information in response to this item is incorporated herein by
reference to the Corporation's proxy statement, which shall be filed with the
Securities and Exchange Commission no later than 120 days after the
Corporation's fiscal year end covered by this report.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information in response to this item is incorporated herein by
reference to the Corporation's proxy statement, which shall be filed with the
Securities and Exchange Commission no later than 120 days after the
Corporation's fiscal year end covered by this report.

                                     PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         (A) DOCUMENTS FILED:

         1 and 2. Financial Statements and Financial Statement Schedules. The
                  following financial statements of Merchants and Manufacturers
                  Bancorporation, Inc. and subsidiaries are filed as a part of
                  this report under Item 8. "Financial Statements and
                  Supplementary Data":

                     Report of Independent Auditors

                     Consolidated Statements of Financial Condition as of
                     December 31, 2000 and 1999

                     Consolidated Statements of Income for the years ended
                     December 31, 2000, 1999, and 1998

                     Consolidated Statements of Stockholders' Equity for the
                     years ended December 31, 2000, 1999, and 1998

                     Consolidated Statements of Cash Flows for the years ended
                     December 31, 2000, 1999 and 1998

                     Notes to Consolidated Financial Statements

                  All financial statement schedules have been omitted as they
                  are not applicable or because the information is included in
                  the financial statements or notes thereto.

         3.          Exhibits.  All required exhibits have been furnished in
                                connection with and are incorporated by
                                reference to previous filings.

         (B) REPORTS ON FORM 8-K:
                  No reports on Form 8-K were filed in the last quarter of 2000.
                  The Corporation filed on a report Form 8-K on January 29, 2001
                  and Amendment No. 1 thereto on March 28, 2001 in regards to
                  its acquisition of CBOC., Inc.

                                       22
<PAGE>   23
                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                             MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.


                             By:   /s/ James F. Bomberg
                                -------------------------------------------
                                     James F. Bomberg
                                     President & Chief Executive Officer
                                     Director

                             Date:  March 29, 2001


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated. The Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

<TABLE>
<CAPTION>

     PRINCIPAL EXECUTIVE OFFICERS
<S>                                       <C>                                          <C>


     /s/ James F. Bomberg                 President & Chief Executive Officer          March 29, 2001
     ------------------------------------
     James F. Bomberg

     /s/ James C. Mroczkowski             Vice President & Chief Financial Officer     March 29, 2001
     ------------------------------------
     James C. Mroczkowski

     DIRECTORS

     /s/ Michael J. Murry                 Chairman of the Board of Directors           March 29, 2001
     ------------------------------------
     Michael J. Murry

     /s/ James F. Bomberg                 Director                                     March 29, 2001
     ------------------------------------
     James F. Bomberg

     /s/ Thomas F. Gapinski               Director                                     March 29, 2001
     ------------------------------------
     Thomas F. Gapinski

     /s/ Nicholas S. Logarakis            Director                                     March 29, 2001
     ------------------------------------
     Nicholas S. Logarakis

     /s/ Conrad C. Kaminski               Director                                     March 29, 2001
     ------------------------------------
     Conrad C. Kaminski

     /s/ David A. Kaczynski               Director                                     March 29, 2001
     ------------------------------------
     David A. Kaczynski

     /s/ Keith C. Winters                 Director                                     March 29, 2001
     ------------------------------------
     Keith C. Winters

     /s/ Duane P. Cherek                  Director                                     March 29, 2001
     ------------------------------------
     Duane P. Cherek

                                          Director                                     March 29, 2001
     ------------------------------------
     James A. Sass

</TABLE>

                                       23


<PAGE>   24


<TABLE>

<S>                                       <C>                                          <C>


     /s/ Thomas J. Sheehan                Director                                     March 29, 2001
     ------------------------------------
     Thomas Sheehan

     /s/ Jerome T. Sarnowski              Director                                     March 29, 2001
     ------------------------------------
     Jerome Sarnowski

     /s/ James F. Kacmarcik               Director                                     March 29, 2001
     ------------------------------------
     James Kacmarcik

                                          Director                                     March 29, 2001
     ------------------------------------
     Gervase Rose

     /s/ J. Michael Bartels               Director                                     March 29, 2001
     ------------------------------------
     J. Michael Bartels

     /s/ Casimir S. Janiszewski           Director                                     March 29, 2001
     ------------------------------------
     Casimir S. Janiszewski

</TABLE>

                                       24

<PAGE>   25


                           Merchants and Manufacturers
                      Bancorporation, Inc. and Subsidiaries

                        Consolidated Financial Statements

                     Years ended December 31, 2000 and 1999




                                    CONTENTS

<TABLE>

<S>                                                                                                     <C>
Report of Independent Auditors ..........................................................................1

Consolidated Financial Statements

Consolidated Statements of Financial Condition ..........................................................2
Consolidated Statements of Income .......................................................................3
Consolidated Statements of Stockholders' Equity .........................................................4
Consolidated Statements of Cash Flows ...................................................................5
Notes to Consolidated Financial Statements ..............................................................7

</TABLE>




<PAGE>   26



                         Report of Independent Auditors

The Board of Directors and Stockholders
Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

We have audited the accompanying consolidated statements of financial condition
of Merchants and Manufacturers Bancorporation, Inc. and subsidiaries (the
Corporation) as of December 31, 2000 and 1999, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 2000. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Merchants and
Manufacturers Bancorporation, Inc. and subsidiaries at December 31, 2000 and
1999, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United States.



/s/Ernst & Young LLP
--------------------
Ernst & Young LLP

Milwaukee, Wisconsin
March 2, 2001


<PAGE>   27


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

                 Consolidated Statements of Financial Condition

<TABLE>
<CAPTION>


                                                                                   DECEMBER 31
                                                                              2000              1999
                                                                         -------------------------------
                                                                             (Dollars In Thousands)

<S>                                                                      <C>               <C>
ASSETS
Cash and due from banks                                                    $   16,727        $  15,674
Interest-bearing deposits at other banks                                          996            4,907
Federal funds sold                                                              1,078            2,210
                                                                           ---------------------------
Cash and cash equivalents                                                      18,801           22,791
Securities available-for-sale at fair value:
   Investment securities                                                       28,525           32,787
   Mortgage-related securities                                                 33,087           33,342
Loans receivable, net                                                         434,056          363,435
Accrued interest receivable                                                     3,209            2,426
Federal Home Loan Bank stock                                                    3,002            2,511
Premises and equipment                                                          8,283            9,613
Other assets                                                                    8,945            7,478
                                                                           ---------------------------
Total assets                                                               $  537,908        $ 474,383
                                                                           ===========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Deposits                                                                $  401,836        $ 377,333
   Borrowings                                                                  88,415           53,398
   Accrued interest payable                                                     1,016              777
   Advance payments by borrowers for taxes and insurance                          346              300
   Other liabilities                                                            3,519            2,149
                                                                           ---------------------------
Total liabilities                                                             495,132          433,957

Stockholders' equity:
   Common stock $1.00 par value; 6,000,000 shares authorized;
     shares issued: 2,127,888--2000 and 1999; shares outstanding:
     2,061,316--2000; 2,109,773--1999                                           2,128            2,128
   Additional paid-in capital                                                  13,857           13,945
   Net unrealized loss on securities available-for-sale                          (314)          (1,397)
   Retained earnings                                                           29,314           26,434
   Treasury stock, at cost (66,572 shares--2000; 18,115
     shares--1999)                                                             (2,209)            (684)
                                                                           ---------------------------
Total stockholders' equity                                                     42,776           40,426
                                                                           ---------------------------
Total liabilities and stockholders' equity                                 $  537,908        $ 474,383
                                                                           ===========================

</TABLE>





See accompanying notes.                                                        2

<PAGE>   28


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

                        Consolidated Statements of Income


<TABLE>
<CAPTION>


                                                                      YEAR ENDED DECEMBER 31
                                                              2000             1999             1998
                                                         ----------------------------------------------
                                                             (In Thousands, Except Per Share Amounts)

<S>                                                       <C>              <C>              <C>
Interest income:
   Loans, including fees                                  $  34,181        $   27,333       $   25,189
   Investment securities:
     Taxable                                                  1,112             1,019            1,112
     Exempt from federal income taxes                           709               720              464
   Mortgage-related securities                                2,149             2,083            2,629
   Other                                                        276               573            1,055
                                                          --------------------------------------------
Total interest income                                        38,427            31,728           30,449

Interest expense:
   Deposits                                                  14,343            12,517           13,159
   Borrowings                                                 5,062             1,482              958
                                                          --------------------------------------------
Total interest expense                                       19,405            13,999           14,117
                                                          --------------------------------------------
Net interest income                                          19,022            17,729           16,332
Provision for loan losses                                     1,203               956              314
                                                          --------------------------------------------
Net interest income after provision for loan                 17,819            16,773           16,018
   losses

Noninterest income:
   Service charges on deposits                                1,030             1,009              982
   Service charges on loans                                     488               419              451
   Net gain on securities sales                                   2                 9              219
   Net gain on loan sales                                         -                18              226
   Net gain on sale of premises                               1,053               633                -
   Other                                                      1,458             1,403            1,429
                                                          --------------------------------------------
Total noninterest income                                      4,031             3,491            3,307

Noninterest expenses:
   Salaries and employee benefits                             8,893             8,406            7,685
   Premises and equipment                                     2,524             2,231            2,097
   Data processing fees                                         873               921              915
   Federal deposit insurance premiums                            83               116              115
   Merger-related expenses                                      170               510                -
   Other                                                      2,997             2,772            2,621
                                                          --------------------------------------------
Total noninterest expenses                                   15,540            14,956           13,433
                                                          --------------------------------------------
Income before income taxes                                    6,310             5,308            5,892
Income taxes                                                  2,070             1,905            2,042
                                                          --------------------------------------------
Net income                                                $   4,240        $    3,403       $    3,850
                                                          ============================================
Basic earnings per share                                  $    2.03        $     1.62       $     1.86
                                                          ============================================
Diluted earnings per share                                $    2.01        $     1.58       $     1.80
                                                          ============================================
Dividends per share                                       $    0.65        $     0.57       $     0.49
                                                          ============================================

</TABLE>


See accompanying notes.                                                        3





<PAGE>   29


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

                 Consolidated Statements of Stockholders' Equity


<TABLE>
<CAPTION>
                                                           Common Stock   Unrealized
                                                               and        Gain (Loss)
                                                            Additional   on Securities
                                                             Paid-in      Available-    Retained   Treasury
                                                             Capital      for-Sale      Earnings    Stock    Total
                                                          ----------------------------------------------------------
                                                                              (Dollars In Thousands)

<S>                 <C> <C>                               <C>            <C>          <C>        <C>       <C>
Balance at December 31, 1997                                 $15,315      $     77     $21,389    $    (9)  $36,772
   Comprehensive income:
     Net income                                                    -             -       3,850          -     3,850
     Other comprehensive income -
       Change in unrealized loss on securities available-for-
         sale, net of deferred income taxes                        -           (87)          -          -       (87)
                                                                                                            -------
   Total comprehensive income                                                                                 3,763
   Issuance of new shares                                        349             -           -        (12)      337
   Fractional shares issued due to stock split and               (10)            -           -          -       (10)
     stock dividend
   Sale of common stock in connection with dividend
     reinvestment program                                        132             -           -          -       132
   Sale of treasury stock                                          6             -           -        104       110
   Purchase of treasury stock                                      -             -           -       (845)     (845)
   Cash dividends declared                                         -             -      (1,016)         -    (1,016)
   Exercise of stock options                                      67             -           -        128       195
                                                             ------------------------------------------------------
Balance at December 31, 1998                                  15,859           (10)     24,223       (634)   39,438
   Comprehensive income:
     Net income                                                    -             -       3,403          -     3,403
     Other comprehensive income -
       Change in unrealized loss on securities available-for-
         sale, net of deferred income taxes                        -        (1,387)          -          -    (1,387)
                                                                                                            -------
   Total comprehensive income                                                                                 2,016
   Sale of common stock in connection with dividend
     reinvestment program                                          4             -           -         67        71
   Purchase of treasury stock                                      -             -           -       (181)     (181)
   Cash dividends declared                                         -             -      (1,192)         -    (1,192)
   Exercise of Stock Options                                     210             -           -         64       274
                                                             ------------------------------------------------------
Balance at December 31, 1999                                  16,073        (1,397)     26,434       (684)   40,426
   Comprehensive income:
     Net income                                                    -             -       4,240          -     4,240
     Other comprehensive income -
       Change in unrealized loss on securities available-for-
         sale, net of deferred income taxes                        -         1,083           -          -     1,083
                                                                                                            -------
   Total comprehensive income                                                                                 5,323
   Sale of common stock in connection with dividend
     reinvestment program                                         (3)            -           -         65        62
   Purchase of treasury stock                                      -             -           -     (1,715)   (1,715)
   Cash dividends declared                                         -             -      (1,360)         -    (1,360)
     Exercise of Stock Options                                   (85)            -           -        125        40
                                                             ------------------------------------------------------
Balance at December 31, 2000                                 $15,985      $   (314)    $29,314    $(2,209)  $42,776
                                                             ======================================================

</TABLE>






See accompanying notes.                                                       4

<PAGE>   30


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>


                                                                            YEAR ENDED DECEMBER 31
                                                                        2000         1999         1998
                                                                    --------------------------------------
                                                                                (In Thousands)

<S>                                                                 <C>           <C>          <C>
OPERATING ACTIVITIES
Net income                                                           $   4,240     $   3,403    $   3,850
Adjustments to reconcile net income to cash
   provided by operating activities:
     Provision for loan losses                                           1,203           956          314
     Provision for depreciation                                            842           872          803
     Net amortization of investment securities premiums
       and discounts                                                        50           164          153
     Net realized gains on investment securities                            (2)           (9)        (219)
     Proceeds from sale of loans                                           200           680          680
     Net (gain) on sale of loans                                             -           (18)        (226)
     Net (gain) on sale of premises                                     (1,053)         (633)           -
     Net decrease in mortgage loans held for sale                            -             -          152
     Increase in accrued interest receivable                              (783)         (131)        (137)
     Increase (decrease) in accrued interest payable                       239          (138)         131
     Other                                                              (1,080)       (1,490)        (419)
                                                                     ------------------------------------
Net cash provided by operating activities                                3,856         3,656        5,020

INVESTING ACTIVITIES
Purchases of securities available-for-sale                              (6,696)      (17,995)     (46,311)
Proceeds from sales of securities available-for-sale                       998         2,704       27,791
Proceeds from redemption and maturities of securities
   available-for-sale                                                   11,798        14,637       16,896
Net increase in loans                                                  (72,921)      (52,293)     (32,511)
Purchases of premises and equipment                                     (1,609)         (634)      (2,038)
Proceeds from sale of premises                                           3,595         2,839            -
Proceeds from sales of real estate                                         887             -            -
Purchases of Federal Home Loan Bank stock                                 (491)       (1,023)          (7)
                                                                     ------------------------------------
Net cash used in investing activities                                  (64,439)      (51,765)     (36,180)

</TABLE>




                                                                               5

<PAGE>   31


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

                Consolidated Statements of Cash Flows (continued)

<TABLE>
<CAPTION>

                                                                            YEAR ENDED DECEMBER 31
                                                                        2000         1999         1998
                                                                     --------------------------------------
                                                                                 (In Thousands)
FINANCING ACTIVITIES
<S>                                                                     <C>        <C>            <C>
Net increase in deposits                                                $24,503     $  5,215      $34,955
Net increase (decrease) in short-term borrowings                         33,917      (25,065)       7,191
Increase (decrease) in advance payments by borrowers for taxes
   and insurance                                                             46           87         (127)
Payments of cash dividends to stockholders                               (1,360)      (1,192)      (1,016)
Proceeds from long-term Federal Home Loan Bank advances
                                                                          1,500        5,500        5,000
Repayment of long-term Federal Home Loan Bank advances
                                                                           (400)      (4,500)        (250)
Purchase of treasury stock                                               (1,715)        (181)        (845)
Proceeds from sale of treasury stock                                        125          131          110
Proceeds from issuance of common stock                                      (23)         213          654
                                                                        ---------------------------------
Net cash provided by financing activities                                56,593       30,338       45,672
                                                                        ---------------------------------
Increase (decrease) in cash and cash equivalents                         (3,990)     (17,771)      14,512
Cash and cash equivalents at beginning of year                           22,791       40,562       26,050
                                                                        ---------------------------------
Cash and cash equivalents at end of year                                $18,801     $ 22,791      $40,562
                                                                        =================================
Supplemental cash flow information and noncash transactions:
     Interest paid                                                      $19,160     $ 13,378      $10,566
     Income taxes paid                                                    2,153        2,004        1,273
     Loans transferred to other real estate owned                           897          107            -

</TABLE>







See accompanying notes.                                                        6



<PAGE>   32


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2000
                  (Dollars in Thousands, Except Share Amounts)



1. ACCOUNTING POLICIES

BUSINESS

Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries (the
Corporation) provides a full range of personal and commercial financial services
to customers through its subsidiaries. The Corporation and its subsidiaries are
subject to competition from other financial institutions. They are also subject
to the regulations of certain federal and state agencies and undergo periodic
examinations by those regulatory agencies.

BASIS OF FINANCIAL STATEMENT PRESENTATION

The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and include the accounts of the
Corporation, its wholly owned subsidiaries, Lincoln State Bank (Lincoln),
Franklin State Bank (Franklin), Lincoln Community Bank (Lincoln Community) and
Grafton State Bank (Grafton)--collectively, "the Banks," M&M Services, which
provides management services for the Banks, and Lincoln's wholly owned
subsidiary, Lincoln Investment Corp., Lincoln Community's wholly owned
subsidiary, Lincoln Investment Management Corporation and Grafton's wholly owned
subsidiary, GSB Investments Inc., which manage an investment portfolio for the
Banks. All significant intercompany accounts and transactions have been
eliminated.

In preparing the consolidated financial statements in conformity with accounting
principles generally accepted in the United States, management is required to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include amounts due from banks (both interest-bearing
and non-interest-bearing) and federal funds sold.






                                                                               7


<PAGE>   33


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)

1. ACCOUNTING POLICIES (CONTINUED)

INVESTMENT AND MORTGAGE-RELATED SECURITIES

All of the Corporation's investment and mortgage-related securities are
classified as available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of tax, reported as a separate component of
stockholders' equity.

The amortized cost of debt securities is adjusted for amortization of premiums
and accretion of discounts to maturity, or in the case of mortgage-related
securities, over the estimated life of the security. Such amortization is
included in interest income from the related security.

Interest and dividends are included in interest income from the related
securities. Realized gains and losses and declines in value judged to be
other-than-temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method.

INTEREST AND FEES ON LOANS

Interest on loans is recorded as income when earned. Loans are placed on
nonaccrual status, generally recognizing interest as income when received, when
in the opinion of management, the collectibility of principal or interest
becomes doubtful.

Loan origination and commitment fees and certain direct loan origination costs
are being deferred and the net amount amortized as an adjustment of the related
loans' yields. The Corporation is amortizing these amounts, using the
level-yield method, adjusted for prepayments, over the contractual life of the
related loans.

ALLOWANCE FOR LOAN LOSSES

A provision for loan losses is made when a loss is probable and can be
reasonably estimated. The provision is based on past experience and on
prevailing market conditions. Management's evaluation of loss considers various
factors including, but not limited to, general economic conditions, loan
portfolio composition, and prior loss experience.






                                                                               8



<PAGE>   34


       Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)


1. ACCOUNTING POLICIES (CONTINUED)

The Corporation had no impaired loans in 2000, 1999 or 1998.

A substantial portion of the Banks' loans are collateralized by real estate in
metropolitan Milwaukee, Wisconsin. Accordingly, the ultimate collectibility of a
substantial portion of the Banks' loan portfolio and the recovery of a
substantial portion of the carrying amount of real estate owned are susceptible
to changes in market conditions in metropolitan Milwaukee.

Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses, future additions to
the allowance may be necessary based on changes in economic conditions.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost, less accumulated depreciation.
Expenditures for normal repairs and maintenance are charged to operations as
incurred. The cost of premises and equipment is depreciated, using the
straight-line or double-declining-balance methods, over the estimated useful
lives of the assets (five to thirty-two years).

STOCK SPLITS

Share data and equity amounts have been adjusted to recognize a three-for-two
stock split on April 10, 1998, and a 10% stock dividend on October 15, 1998.

EARNINGS PER SHARE INFORMATION

Earnings per share of common stock have been computed based on the
weighted-average number of common stock and common stock equivalents, if
dilutive, outstanding during each year. The resulting number of shares used in
computing basic earnings per share is 2,093,393, 2,106,579 and 2,071,214, for
the years ended December 31, 2000, 1999 and 1998, respectively. The number of
shares used in computing diluted earnings per share is 2,110,036, 2,153,310 and
2,134,012, for the years ended December 31, 2000, 1999 and 1998, respectively.

RECLASSIFICATION
Certain 1998 and 1999 amounts have been reclassified to conform to the 2000
presentation.





                                                                               9


<PAGE>   35


       Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)



1. ACCOUNTING POLICIES (CONTINUED)

ACCOUNTING CHANGES

Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended, provides a
comprehensive and consistent standard for the recognition of derivatives and
hedging activities. SFAS 133 requires all derivatives to be recorded on the
balance sheet at fair value. However, special accounting is provided for certain
derivatives that meet the definition of hedges. Changes in the fair value of
derivatives that do not meet the definition of hedges are required to be
reported in earnings in the period of change. The Company and Banks do not use
derivative financial instruments such as futures, swaps, caps, floors, options
or interest or principal-only strips of similar instruments. Therefore, SFAS No.
133 is not expected to have a significant impact on the Company. The Company
will implement this statement on January 1, 2001.

In September 2000, the Financial Accounting Standards Board (FASB) issued
Statement 140, "Accounting for Transfers and Servicing Financial Assets and
Extinguishments of Liabilities - a replacement of FASB Statement 125." Statement
140 revised Statement 125 by requiring separate presentation in the statement of
financial condition of assets pledged as collateral. Statement 140 further
revises and clarifies rules regarding recognition and measurement for security
transactions. The rules for recognition and measurement of security transactions
are not effective until April 1, 2001. In contrast, separate presentation of
assets pledged as collateral in the statement of financial condition and
additional disclosures were effective for the Company's fiscal year ended
December 31, 2000. Management does not anticipate the full adoption of this
statement to have a material effect on the Company's financial statements.
Additionally, SFAS No. 140, requires changes in accounting principles for
mortgage banking activities, such as those of the Company. Because mortgage
servicing assets of the Company are not significant, this statement is not
expected to noticeably impact the Company.







                                                                              10



<PAGE>   36
       Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)



2. INVESTMENT AND MORTGAGE-BACKED SECURITIES

The following is a summary of securities:

<TABLE>
<CAPTION>
                                                                   Gross         Gross
                                                    Amortized    Unrealized    Unrealized
                                                      Cost         Gains         Losses      Fair Value
                                                  ------------------------------------------------------

<S>                                               <C>           <C>           <C>         <C>
At December 31, 2000:
   Mutual funds                                      $  3,173      $   -          $  129      $  3,044
   U.S. treasury and other U.S. government
     agency securities                                  8,394          -              63         8,331
   Small Business Administration certificates             379         14               -           393
   State and political subdivision securities          16,943         71             307        16,707
   Corporate bonds                                         50          -               -            50
                                                  ----------------------------------------------------
   Investment securities                               28,939         85             499        28,525
   Collateralized mortgage obligations                 12,453        108             103        12,458
   Government agency mortgage-backed securities
                                                       20,714        128             213        20,629
                                                  ----------------------------------------------------
   Mortgage-related securities                         33,167        236             316        33,087
                                                  ----------------------------------------------------
                                                     $ 62,106       $321            $815       $61,612
                                                  ====================================================

<CAPTION>
                                                                    Gross         Gross
                                                     Amortized    Unrealized    Unrealized
                                                       Cost         Gains         Losses     Fair Value
                                                   -----------------------------------------------------
<S>                                               <C>           <C>           <C>         <C>
At December 31, 1999:
   Mutual funds                                      $  3,173      $   -          $  135      $  3,038
   U.S. treasury and other U.S. government agency
     securities                                        12,078          -             391        11,687
   Small Business Administration certificates             430         14               -           444
   State and political subdivision securities          18,557         34             973        17,618
                                                   ---------------------------------------------------
   Investment securities                               34,238         48           1,499        32,787
   Collateralized mortgage obligations                  9,481          5             222         9,264
   Government agency mortgage-backed securities
                                                       24,536         69             527        24,078
                                                   ---------------------------------------------------
   Mortgage-related securities                         34,017         74             749        33,342
                                                   ===================================================
                                                     $ 68,255      $ 122          $2,248      $ 66,129
                                                   ===================================================

</TABLE>




                                                                              11


<PAGE>   37


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)


2. INVESTMENT AND MORTGAGE-BACKED SECURITIES (CONTINUED)

Securities with a fair value of $21,769 at December 31, 2000 were pledged
principally to secure borrowings.

The amortized cost and market value of securities at December 31, 2000, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations.

<TABLE>
<CAPTION>
                                                                        Amortized              Fair
                                                                          Cost                 Value
                                                                     ---------------------------------

<S>                                                                  <C>                   <C>
Due in one year or less                                                $  2,892             $  2,886
Due after one year through five years                                     6,129                6,065
Due after five years through ten years                                    9,331                9,411
Due after ten years                                                       7,414                7,119
Mutual funds                                                              3,173                3,044
Collateralized mortgage obligations                                      12,453               12,458
Government agency mortgage-related securities                            20,714               20,629
                                                                       -----------------------------
                                                                       $ 62,106             $ 61,612
                                                                       =============================

</TABLE>

Proceeds from sales of securities available-for-sale during the years ended
December 31, 2000, 1999 and 1998, were $998, $2,704 and $27,791, respectively.
Gross gains of $8, $9 and $219 were recorded on those sales for the years ended
December 31, 2000, 1999 and 1998, respectively. Gross losses of $6, $0 and $0
were also recorded in the years ended December 31, 2000, 1999 and 1998,
respectively.








                                                                              12


<PAGE>   38


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)





3. LOANS RECEIVABLE

Loans receivable consist of the following:

<TABLE>
<CAPTION>

                                                                                    DECEMBER 31
                                                                                2000           1999
                                                                           ----------------------------

<S>                                                                        <C>              <C>
First mortgage:
   Conventional single-family residential                                   $  90,244        $  70,836
   Commercial and multifamily residential                                     160,482          145,241
   Construction                                                                47,039           32,618
   Farmland                                                                       307              296
                                                                            --------------------------
                                                                              298,072          248,991

Commercial business loans                                                     105,367           88,332
Consumer and installment loans                                                 28,766           19,729
Lease financing                                                                 1,606            2,017
Home equity loans                                                               4,457            6,960
Other                                                                             321            1,031
                                                                            --------------------------
                                                                              140,517          118,069
Less:
   Deferred loan fees                                                             (24)             (43)
   Allowance for loan losses                                                   (4,509)          (3,582)
                                                                            --------------------------
                                                                            $ 434,056        $ 363,435
                                                                            ==========================
</TABLE>

Transactions in the allowance for loan losses are summarized as follows:

<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31
                                                                     2000       1999       1998
                                                                  -------------------------------

<S>                                                               <C>        <C>        <C>
Balance at beginning of year                                       $ 3,582    $ 3,018    $ 2,769
   Provisions charged to operations                                  1,203        956        314
   Recoveries                                                           12         17         18
   Charge-offs                                                        (288)      (409)       (83)
                                                                   -----------------------------
Balance at end of year                                             $ 4,509    $ 3,582    $ 3,018
                                                                   =============================

</TABLE>

Total nonaccrual loans were $1,760 and $2,252 at December 31, 2000 and 1999,
respectively.

At December 31, 2000, loans with an outstanding balance of $82,199 were pledged
to secure borrowings from the Federal Home Loan Bank.






                                                                              13



<PAGE>   39


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)


4. PREMISES AND EQUIPMENT

Premises and equipment consist of the following:

<TABLE>
<CAPTION>
                                                                                      DECEMBER 31
                                                                                  2000           1999
                                                                              --------------------------

<S>                                                                           <C>             <C>
Land                                                                            $  1,880       $  2,183
Office buildings and improvements                                                  8,140          9,571
Furniture and equipment                                                            7,287          7,008
                                                                                -----------------------
                                                                                  17,307         18,762
Less accumulated depreciation                                                     (9,024)        (9,149)
                                                                                -----------------------
                                                                                $  8,283       $  9,613
                                                                                =======================
</TABLE>

During the years ended December 31, 2000 and 1999, the Corporation sold certain
land and buildings and, subsequently, leased a portion of the buildings back
from the new owners. The total gains on the sales were $1,498 and $1,103, of
which $786 and $633 was recognized in income, respectively, during the year of
the transaction. The remaining gain is being accreted into income over the
remaining lease term.

5. DEPOSITS

Deposits consist of the following:

<TABLE>
<CAPTION>

                                                                                      DECEMBER 31
                                                                                  2000           1999
                                                                              --------------------------

<S>                                                                           <C>            <C>
Negotiable Order of Withdrawal accounts:
   Non-interest-bearing                                                         $ 72,457      $  67,646
   Interest-bearing                                                               29,448         31,335
Savings deposits                                                                  64,911         65,755
Money market investment accounts                                                  62,323         33,431
Time deposits and certificate accounts                                           172,697        179,166
                                                                                -----------------------
                                                                                $401,836       $377,333
                                                                                =======================

</TABLE>




                                                                              14

<PAGE>   40


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)



5. DEPOSITS (CONTINUED)

The scheduled maturities of time deposits and certificate accounts at December
31, 2000 are as follows:

<TABLE>
<CAPTION>


         Maturities during the year ending December 31:
         -----------------------------------------------------------

         <S>                                                                        <C>
                                  2001                                                $146,771
                                  2002                                                  19,605
                                  2003                                                   2,653
                                  2004                                                   2,407
                                  Thereafter                                             1,261
                                                                                      --------
                                                                                      $172,697
                                                                                      ========

At December 31, 2000 and 1999, time deposits and certificate accounts with
balances greater than $100 amounted to $37,944 and $33,604, respectively.

6. BORROWINGS

Borrowings, with interest rates as of December 31, 2000, consists of the
following at December 31:

<CAPTION>
                                                                                   2000           1999
                                                                               ------------   ------------

<S>                                                                             <C>            <C>
Federal funds purchased, 6.92%                                                    $33,450        $  7,450
Notes payable to FHLB, maturing 2010, 5.87%                                           500               -
Notes payable to FHLB, maturing 2008, 4.92%                                         4,500           4,500
Notes payable to FHLB, maturing 2003, 6.08%                                           400             400
Notes payable to FHLB, maturing 2002, 6.51%                                         2,900           1,900
Notes payable to FHLB, maturing 2001, 6.77%                                        36,400             400
Notes payable to FHLB, maturing 2000                                                    -          31,700
Line of credit with FHLB, 6.24%                                                     3,000               -
Repurchase agreements with four counterparties, 5.74%, due January 2001
                                                                                    3,975           6,054
Line of credit with unaffiliated banks, 8.35%                                       2,712             300
Treasury, tax and loan accounts with the Federal Home Loan bank of
   Chicago                                                                            578             694
                                                                                  -----------------------
                                                                                  $88,415        $ 53,398
                                                                                  =======================

</TABLE>




                                                                              15

<PAGE>   41


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)



6. BORROWINGS (CONTINUED)

FHLB borrowings are collateralized by securities with a fair value of $16,308
and loans receivable with an outstanding balance of $82,199. Repurchase
agreements are collateralized by $5,461 of securities.

7. STOCKHOLDERS' EQUITY

The Banks are subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory--and possibly additional discretionary--actions by
regulators that, if undertaken, could have a direct material effect on the
Banks' financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Banks must meet specific
capital guidelines that involve quantitative measures of the Banks' assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Banks' capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Banks to maintain minimum amounts and ratios (set forth in the table
that follows) of total and Tier I capital, as defined in the regulations, to
risk-weighted assets, as defined, and of Tier 1 capital, as defined, to average
assets, as defined. Management believes, as of December 31, 2000 and 1999, that
the Banks meet all capital adequacy requirements to which they are subject.








                                                                              16


<PAGE>   42


      Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)



7. STOCKHOLDERS' EQUITY (CONTINUED)

As of December 31, 2000, the most recent notification from the Federal Deposit
Insurance Corporation categorized all the Banks as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Banks must maintain minimum total risk-based, Tier I
risk-based, Tier I leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the Banks' classifications as of December 31, 2000.

<TABLE>
<CAPTION>
                                                                                  To Be Well Capitalized
                                                              For Capital         Under Prompt Corrective
                                       Actual              Adequacy Purposes        Action Provisions
                               ----------------------------------------------------------------------------
                                  Amount      Ratio        Amount       Ratio      Amount       Ratio
                               ----------------------------------------------------------------------------

<S>                            <C>           <C>          <C>          <C>        <C>          <C>
AS OF DECEMBER 31, 2000
Total Capital (to Risk-
   Weighted Assets):
     Lincoln State Bank           $20,978      10.55%      $15,907       >8.00%     $19,884     >10.00%
     Lincoln Community Bank        10,023      11.24%        7,136       >8.00%       8,920     >10.00%
     Franklin State Bank            6,386      10.18%        5,018       >8.00%       6,273     >10.00%
     Grafton State Bank            10,984      11.93%        7,367       >8.00%       9,208     >10.00%

Tier 1 Capital (to Risk-
   Weighted Assets):
     Lincoln State Bank            18,882       9.50%        7,953       >4.00%      11,930      >6.00%
     Lincoln Community Bank         9,161      10.27%        3,568       >4.00%       5,352      >6.00%
     Franklin State Bank            5,700       9.09%        2,509       >4.00%       3,764      >6.00%
     Grafton State Bank            10,119      10.99%        3,683       >4.00%       5,525      >6.00%

Tier 1 Capital (to Average
   Assets):
     Lincoln State Bank            18,882       8.63%        8,751       >4.00%      10,939      >5.00%
     Lincoln Community Bank         9,161       8.15%        4,497       >4.00%       5,622      >5.00%
     Franklin State Bank            5,700       8.32%        2,742       >4.00%       3,427      >5.00%
     Grafton State Bank            10,119       7.98%        5,069       >4.00%       6,337      >5.00%

</TABLE>









                                                                              17



<PAGE>   43


      Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)



7. STOCKHOLDERS' EQUITY (CONTINUED)

<TABLE>
<CAPTION>


                                                                                  To Be Well Capitalized
                                                              For Capital         Under Prompt Corrective
                                       Actual              Adequacy Purposes        Action Provisions
                               ----------------------------------------------------------------------------
                                  Amount      Ratio        Amount       Ratio      Amount       Ratio
                               ----------------------------------------------------------------------------

<S>                            <C>           <C>          <C>         <C>         <C>        <C>
AS OF DECEMBER 31, 1999
Total Capital (to Risk-
   Weighted Assets):
     Lincoln State Bank           $17,256      10.34%      $13,350      > 8.00%     $16,688    > 10.00%
     Lincoln Community Bank         9,668      11.79%        6,562      > 8.00%       8,203    > 10.00%
     Franklin State Bank            5,394      10.58%        4,079      > 8.00%       5,099    > 10.00%
     Grafton State Bank            10,138      13.91%        5,831      > 8.00%       7,289    > 10.00%

Tier 1 Capital (to Risk-
   Weighted Assets):
     Lincoln State Bank            15,765       9.45%        6,675      > 4.00%      10,013     > 6.00%
     Lincoln Community Bank         8,841      10.78%        3,281      > 4.00%       4,922     > 6.00%
     Franklin State Bank            4,872       9.56%        2,039      > 4.00%       3,059     > 6.00%
     Grafton State Bank             9,397      12.89%        2,916      > 4.00%       4,374     > 6.00%

Tier 1 Capital (to Average
   Assets):
     Lincoln State Bank            15,765       8.51%        7,412      > 4.00%       9,266     > 5.00%
     Lincoln Community Bank         8,841       8.60%        4,110      > 4.00%       5,137     > 5.00%
     Franklin State Bank            4,872       8.16%        2,387      > 4.00%       2,984     > 5.00%
     Grafton State Bank             9,397       8.39%        4,481      > 4.00%       5,601     > 5.00%

</TABLE>


8. RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS OR ADVANCES

Dividends are paid by the Corporation from funds which are mainly provided by
dividends from the Banks. However, certain restrictions exist regarding the
ability of the Banks to transfer funds to the Corporation in the form of cash
dividends, loans or advances. Approval of the regulatory authorities is required
to pay dividends in excess of certain levels of the Banks' retained earnings.

As of December 31, 2000, the subsidiary banks collectively had equity of $43,678
of which $6,009 was available for distribution to the Corporation as dividends
without prior regulatory approval.










                                                                              18



<PAGE>   44


      Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)



8. RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS OR ADVANCES (CONTINUED)

Under Federal Reserve Board regulations, the Banks are limited as to the amount
they may loan to their affiliates, including the Corporation, unless such loans
are collateralized by specific obligations. At December 31, 2000, the maximum
amount available for transfer from any one of these Banks to the Corporation in
the form of loans approximates 10.28% of consolidated stockholders' equity.

9. EMPLOYEE BENEFIT PLANS

The Corporation has an Incentive Stock Option Plan under which 66,000 shares of
common stock are reserved for the grant of options to officers and key employees
at a price not less than the fair market value of the stock on the date of the
grant. The plan limits the options that may be granted to each employee to $100
(based on aggregate fair market value at the date of the grant) per calendar
year, on a cumulative basis. Options must be exercised within ten years of the
date of grant and can be regranted if forfeited.

A summary of stock option transactions follows:

<TABLE>
<CAPTION>

                                                                    Weighted-Average    Weighted-Average
                                                   Exercise          Exercise Price         Remaining
                                 Number              Price             Per Share        Contractual Life
                               of Shares           Per Share
                              --------------  --------------------- ------------------  -------------------

<S>                           <C>              <C>                  <C>                 <C>
Total outstanding at
   December 31, 1998             110,735         $6.67 - 31.14           $18.48             5.0 years
Exercised                        (39,170)         6.67 - 31.14             6.97                 -
                              ----------
Total outstanding at
   December 31, 1999              71,565          6.67 - 31.14            25.56                6.42

Exercised                         (3,300)            12.18                12.18                 -
                              ----------
Total outstanding at
   December 31, 2000              68,265         12.12 - 31.14            25.11                6.04
                              ==========

</TABLE>


At December 31, 2000, all outstanding options are exercisable.






                                                                              19

<PAGE>   45


      Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)



9. EMPLOYEE BENEFIT PLANS (CONTINUED)

The Corporation has a 401(k) Profit Sharing Plan and Trust which covers
substantially all employees with at least six months of service who have
attained age twenty and one-half. Participating employees may annually
contribute up to 12% of their pretax compensation. The Corporation's annual
contribution consists of a discretionary matching percentage, limited to 1% of
employee compensation, and an additional discretionary amount, which is
determined annually by the Board of Directors. The Corporation's contributions
for 2000, 1999 and 1998, were $241, $234 and $216, respectively.

10. COMPREHENSIVE INCOME

The related income tax effect and reclassification adjustments to the components
of other comprehensive income for the years ended December 31, 2000, 1999 and
1998, is as follows:

<TABLE>
<CAPTION>

                                                                 2000              1999            1998
                                                              -------------------------------------------
<S>                                                           <C>              <C>               <C>
Unrealized holding gains (losses) arising during the
   period                                                       $1,632           $(2,086)          $  75
Related tax (expense) benefit                                     (547)              705             (17)
                                                                ----------------------------------------
Net                                                              1,085            (1,381)             58

Less reclassification adjustment for net gains
   realized during the period                                        2                 9             219
Related tax expense                                                  -                (3)            (74)
                                                                ----------------------------------------
Net                                                                  2                 6             145
                                                                ----------------------------------------
Total other comprehensive income                                $1,083           $(1,387)          $ (87)
                                                                ========================================

</TABLE>




                                                                              20

<PAGE>   46


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)


11. INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31
                                                             2000              1999             1998
                                                          --------------------------------------------

<S>                                                       <C>                <C>              <C>
Current:
   Federal                                                  $2,555            $2,269           $1,865
   State                                                       441               424              359
                                                            -----------------------------------------
                                                             2,996             2,693            2,224
                                                            -----------------------------------------
Deferred (benefit):
   Federal                                                    (680)             (649)            (120)
   State                                                      (246)             (139)             (62)
                                                            -----------------------------------------
                                                              (926)             (788)            (182)
                                                            -----------------------------------------
                                                            $2,070            $1,905           $2,042
                                                            =========================================
</TABLE>

The  provision  for income  taxes  differs  from that  computed  at the  federal
statutory corporate tax rate as follows:

<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31
                                                                       2000         1999         1998
                                                                    -------------------------------------

<S>                                                                   <C>           <C>          <C>
Income tax at statutory rate                                          $2,145        $2,223       $2,003
Increase (reduction) resulting from:
   Tax-exempt interest income                                           (224)         (265)        (164)
   State income taxes, net of federal tax benefit                        129           124          195
   Other                                                                  20          (177)           8
                                                                      ---------------------------------
                                                                      $2,070        $1,905       $2,042
                                                                      =================================

</TABLE>







                                                                              21
<PAGE>   47


      Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)




11. INCOME TAXES (CONTINUED)

The components of deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>

                                                                                        DECEMBER 31
                                                                                     2000         1999
                                                                                  ----------------------

<S>                                                                               <C>         <C>
Deferred tax assets:
   Allowance for loan losses                                                       $ 1,508     $    975
   Unrealized loss on securities                                                       180          727
   Net operating loss carryforwards                                                    773          657
   Deferred Compensation                                                               150          336
   Other assets                                                                        429          229
                                                                                   --------------------
Total deferred tax assets                                                            3,040        2,924
Valuation allowance                                                                   (952)      (1,121)
                                                                                   --------------------
                                                                                     2,088        1,803
Deferred tax liabilities:
   Depreciation                                                                         49          130
   Other liabilities                                                                    22           35
                                                                                   --------------------
Total deferred tax liabilities                                                          71          165
                                                                                   --------------------
Net deferred tax asset                                                             $ 2,017      $ 1,638
                                                                                   ====================

</TABLE>

At December 31, 2000, the Corporation and its subsidiaries, which file separate
state income tax returns, have state net operating loss carryforwards of
approximately $14,821 which expire at various dates through 2014. Due to the
uncertainty of realizing these benefits, a valuation allowance has been
established to offset the deferred tax assets relating to these carryforwards.

Lincoln Community qualified under provisions of the Internal Revenue Code, which
previously permitted it to deduct from taxable income an allowance for bad debts
that differs from the provision for such losses charged to income for financial
reporting purposes. At December 31, 2000, retained earnings included
approximately $3,606 for which no provision for income taxes has been made.
Income taxes of approximately $1,414 would be imposed if Lincoln Community Bank
were to use these retained earnings for any other purpose other than to absorb
bad debt losses.












                                                                              22


<PAGE>   48
    Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)


12. LOANS TO RELATED PARTIES

In the ordinary course of business, loans are granted to related parties, which
include management personnel, directors and entities in which such persons are
principal stockholders. Activity in loans to related parties is as follows:

<TABLE>

<S>                                                                               <C>
          Balance at December 31, 1998                                              $23,732
             Loans originated                                                         6,472
             Repayments                                                              (4,119)
                                                                                    -------
          Balance at December 31, 1999                                               26,085
             Loans originated                                                        10,958
             Repayments                                                              (7,259)
                                                                                    -------
          Balance at December 31, 2000                                              $29,784
                                                                                    =======
</TABLE>

13. COMMITMENTS AND CONTINGENT LIABILITIES

Off-balance-sheet financial instruments whose contracts represent credit and/or
interest rate risk at December 31, 2000 and 1999, are as follows:

<TABLE>
<CAPTION>
                                                                                   DECEMBER 31
                                                                              2000             1999
                                                                         ----------------------------

<S>                                                                       <C>              <C>
Commitments to originate mortgage loans (expiring within three months):
     Fixed rates (8.13% to 10.00% - 2000; 7.50% to 9.00% -
       1999)                                                               $    125         $    147
     Adjustable rates                                                           372              222
Construction loan commitments                                                22,890           21,697

Unused lines of credit:
   Commercial business                                                       44,160           34,441
   Home equity (adjustable rate)                                              4,504            4,339
   Credit cards (fixed rate)                                                  5,939            4,808

Standby letters of credit                                                     6,948            4,065

</TABLE>


Loan commitments and line-of-credit loans are made to accommodate the financial
needs of the Banks' customers. Standby letters of credit commit the Banks to
make payments on behalf of customers when certain specified future events occur.
These arrangements have credit risk essentially the same as that involved in
extending loans to customers and are subject to the Banks' normal credit
policies. Collateral is obtained based on management's credit assessment of the
customer.









                                                                              23


<PAGE>   49


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)



13. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

Except for the above-noted commitments to originate loans in the normal course
of business, the Corporation and the Banks have not undertaken the use of
off-balance-sheet derivative financial instruments for any purpose.

Various subsidiary banks of the Corporation have entered into noncancelable
leases for certain branch facilities. The following is a schedule of future
minimum rental payments required under the noncancelable lease agreements:

<TABLE>
<CAPTION>


                         Year                                              Amount
                     -----------                                        ------------

                     <S>                                                <C>
                         2001                                               $  690
                         2002                                                  397
                         2003                                                    5
                                                                            ------
                        Total                                               $1,092
                                                                            ======

</TABLE>


14. FAIR VALUES OF FINANCIAL INSTRUMENTS

Disclosure of fair value information about financial instruments, whether or not
recognized in the statement of financial condition, for which it is practicable
to estimate that value follows. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Certain financial instruments and all
nonfinancial instruments are excluded from this disclosure. Accordingly, the
aggregate fair value amounts presented do not necessarily represent the
underlying value of the Corporation. The Corporation does not routinely measure
the market value of financial instruments because such measurements represent
point-in-time estimates of value. It is generally not the intent of the
Corporation to liquidate and therefore realize the difference between market
value and carrying value and even if it were, there is no assurance that the
estimated market values could be realized. Thus, the information presented is
not particularly relevant to predicting the Corporation's future earnings or
cash flows.







                                                                              24


<PAGE>   50


      Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)


14. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

The following methods and assumptions were used by the Corporation in estimating
its fair value disclosures for financial instruments:

CASH AND CASH EQUIVALENTS

The carrying amounts for cash and cash equivalents approximate those assets'
fair values.

INVESTMENT AND MORTGAGE-RELATED SECURITIES

Fair values for investment and mortgage-related securities are based on quoted
market prices where available. If quoted market prices are not available, fair
values are based on quoted market prices of comparable instruments.

LOANS RECEIVABLE

For variable-rate loans that reprice frequently and with no significant change
in credit risk, fair values are based on carrying values. The fair values for
residential mortgage loans are based on quoted market prices of similar loans
sold in conjunction with securitization transactions, adjusted for differences
in loan characteristics. The fair values for commercial real estate loans,
rental property mortgage loans, commercial business loans and consumer and other
loans are estimated using discounted cash flow analyses, using interest rates
currently being offered for loans with similar terms to borrowers of similar
credit quality.

ACCRUED INTEREST INCOME AND EXPENSE

The fair value of accrued interest income and expense approximates the
respective book value.

FEDERAL HOME LOAN BANK STOCK

FHLB stock is carried at cost which is its redeemable value since the market for
this stock is restricted.

DEPOSITS

The fair values disclosed for non-interest-bearing checking accounts, negotiable
order of withdrawal accounts, passbook accounts and savings deposits and money
market







                                                                              25

<PAGE>   51


    Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)



14. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

investment accounts are, by definition, equal to the amount payable on demand at
the reporting date (i.e., their carrying amounts). The carrying amounts for
variable-rate, fixed term certificate accounts approximate their fair values at
the reporting date. The fair values of fixed-rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of aggregated expected
monthly maturities on time deposits.

BORROWINGS

The fair values of the Corporation's borrowings are estimated using discounted
cash flow analyses based on the Corporation's current incremental borrowing
rates for similar types of borrowing arrangements.

OFF-BALANCE-SHEET INSTRUMENTS

Fair values for the Corporation's off-balance-sheet instruments (lending
commitments and standby letters of credit) are based on fees currently charged
to enter into similar agreements, taking into account the remaining terms of the
agreements, the counterparties' credit standing and discounted cash flow
analyses. The fair value of these off-balance-sheet items approximates the
recorded amounts of the related fees and is not material at December 31, 2000 or
1999.

The carrying amounts and fair values of the Corporation's  financial instruments
consist of the following:

<TABLE>
<CAPTION>

                                                   DECEMBER 31, 2000                DECEMBER 31, 1999
                                             ---------------------------      ---------------------------
                                               Carrying                          Carrying
                                                Amount       Fair Value           Amount      Fair Value
                                             ---------------------------      ---------------------------

<S>                                           <C>            <C>                <C>           <C>
Cash and cash equivalents                     $  18,801      $  18,801          $  22,791     $  22,791
Securities available-for-sale:
   Investment securities                         28,525         28,525             32,787        32,787
   Mortgage-related securities                   33,087         33,087             33,342        33,342
Loans receivable                                434,056        433,813            363,435       365,206
Accrued interest receivable                       3,065          3,065              2,426         2,426
Federal Home Loan Bank stock                      3,002          3,002              2,511         2,511
Deposits                                        401,836        402,259            377,333       377,039
Accrued interest payable                            872            872                777           777
Borrowings                                       88,415         88,194             53,398        53,337

</TABLE>







                                                                              26


<PAGE>   52


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)



15. SUBSEQUENT EVENT

On December 31,  2000,  the Company had an  outstanding  agreement to merge with
CBOC,  Inc.  (CBOC).  The  transaction  is to be  accounted  for as a pooling of
interests. The merger became effective on January 16, 2001.

At December 31, 2000, CBOC had total assets of $62,612 and stockholder's equity
of $5,714. CBOC's net income for 2000 was $528 and earnings per share was $6.60.

16. MERCHANTS AND MANUFACTURERS BANCORPORATION, INC. AND SUBSIDIARIES PARENT
    COMPANY ONLY FINANCIAL INFORMATION

<TABLE>
<CAPTION>

                                                                                     DECEMBER 31
STATEMENTS OF FINANCIAL CONDITION                                               2000            1999
                                                                            ---------------------------

<S>                                                                         <C>              <C>
ASSETS
Cash and cash equivalents                                                    $    346         $    736
Loans receivable                                                                  311              406
Investment in subsidiaries                                                     44,521           38,340
Premises and equipment                                                            352            1,473
Other assets                                                                    1,492            1,148
                                                                             -------------------------
Total assets                                                                 $ 47,022         $ 42,103
                                                                             =========================

LIABILITIES
Other liabilities                                                            $  1,534         $  1,677
Borrowings                                                                      2,712                -
                                                                             -------------------------
Total liabilities                                                               4,246            1,677

STOCKHOLDERS' EQUITY
Common stock                                                                    2,128            2,128
Additional paid-in capital                                                     13,857           13,945
Unrealized gain (loss) on available for sale securities                          (314)          (1,397)
Retained earnings                                                              29,314           26,434
Treasury stock                                                                 (2,209)            (684)
                                                                             -------------------------
Total stockholders' equity                                                     42,776           40,426
                                                                             -------------------------
Total liabilities and stockholders' equity                                   $ 47,022         $ 42,103
                                                                             =========================

</TABLE>



                                                                              27


<PAGE>   53


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)



16. MERCHANTS AND MANUFACTURERS  BANCORPORATION,  INC. AND SUBSIDIARIES  PARENT
    COMPANY ONLY FINANCIAL  INFORMATION (CONTINUED)

<TABLE>
<CAPTION>

                                                                              YEAR ENDED DECEMBER 31
                                                                           2000       1999        1998
                                                                        --------------------------------
<S>                                                                     <C>        <C>         <C>

STATEMENTS OF INCOME

Income:
   Interest on loans, including fees                                     $    28    $    30     $     -
   Dividends from subsidiaries                                             2,227      1,708       4,783
   Other                                                                   1,954      1,733       1,227
                                                                         ------------------------------
                                                                           4,209      3,471       6,010
Expenses:
   Salaries and employee benefits                                          2,696      2,004       1,511
   Occupancy                                                                 771        564         476
   Interest                                                                  220         65          12
   Other                                                                     882      1,089         517
                                                                         ------------------------------
                                                                           4,569      3,722       2,516
                                                                         ------------------------------
Income (loss) before income tax benefit and equity in
   undistributed net income of subsidiaries                                 (360)      (251)      3,494
Income tax benefit                                                           831        534         448
                                                                         ------------------------------
Income before equity in undistributed net income of
   subsidiaries                                                              471        283       3,942
Equity in undistributed net income of subsidiaries                         3,769      3,120         (92)
                                                                         ------------------------------
Net income                                                               $ 4,240    $ 3,403     $ 3,850
                                                                         ==============================

</TABLE>





                                                                              28


<PAGE>   54


        Merchants and Manufacturers Bancorporation, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                  (Dollars in Thousands, Except Share Amounts)



16. MERCHANTS AND MANUFACTURERS  BANCORPORATION,  INC. AND SUBSIDIARIES  PARENT
    COMPANY ONLY FINANCIAL  INFORMATION (CONTINUED)

<TABLE>
<CAPTION>


                                                                             YEAR ENDED DECEMBER 31
                                                                          2000        1999        1998
                                                                      -------------------------------------

<S>                                                                   <C>          <C>         <C>
CONDENSED STATEMENTS OF CASH FLOWS

OPERATING ACTIVITIES
Net income                                                               $ 4,240    $  3,403   $   3,850
Adjustments to reconcile net income to net cash
   provided (used) by operating activities:
     Equity in undistributed net income of subsidiaries                   (3,769)     (3,120)         92
     Provision for depreciation                                               94         143         153
     Gain on sale of premises                                               (153)
     Other                                                                (1,954)        676          17
                                                                         -------------------------------
Net cash provided (used) by operating activities                          (1,542)      1,102       4,112

INVESTING ACTIVITIES
Net change in loans                                                           95        (406)          -
Proceeds from sales of premises                                            1,610       1,349           -
Purchases of equipment                                                      (292)        (50)        (79)
                                                                         -------------------------------
Net cash provided (used) by investing activities                           1,413         893         (79)

FINANCING ACTIVITIES
Net increase (decrease) in notes payable                                   2,712        (260)        260
Capital contribution to subsidiary                                                         -      (3,250)
Payment of cash dividends                                                 (1,360)     (1,192)     (1,016)
Purchase of treasury stock                                                (1,715)       (181)       (845)
Proceeds from the sale of treasury stock                                     125         131         110
Proceeds from issuance of common stock                                       (23)        213         526
                                                                         -------------------------------
Net cash used by financing activities                                       (261)     (1,289)     (4,215)
                                                                         -------------------------------
Increase (decrease) in cash and cash equivalents                            (390)        706        (182)
Cash and cash equivalents at beginning of year                               736          30         212
                                                                         -------------------------------
Cash and cash equivalents at end of year                                 $   346    $    736   $      30
                                                                         ===============================

</TABLE>








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