**FORM        10-Q**

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

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

**MERCHANTS        AND MANUFACTURERS BANCORPORATION, INC.**

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

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**MERCHANTS        AND MANUFACTURERS BANCORPORATION, INC.**

**FORM        10-Q**

**INDEX**

**                                       **
**Page        Number**

**Part        I. Financial Information**

| Item                  1. Financial Statements                                                                                                                                                                                                          |     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                                                                                                                                   |     |
| Unaudited                  Consolidated Statements of Financial Condition as of September                  30, 2006,                  December 31, 2005, and September 30, 2005                                                                        | 3        |
|                                                                                                                                                                                                                                                   |     |
| Unaudited                  Consolidated Statements of Income for the Three and Nine Months                  ended                  September 30, 2006 and September 30, 2005                                                                           | 4        |
|                                                                                                                                                                                                                                                   |     |
| Unaudited                  Consolidated Statements of Changes in Stockholders' Equity and                  Comprehensive                  Income                  for the Nine Months Ended September 30, 2006 and                  September 30, 2005 | 5        |
|                                                                                                                                                                                                                                                   |     |
| Unaudited                  Consolidated Statements of Cash Flows for the Nine Months ended                  September                  30, 2006 and                  September 30, 2005                                                                |  6  |
|                                                                                                                                                                                                                                                   |     |
| Notes                  to Unaudited Consolidated Financial Statements                                                                                                                                                                                  | 7        |
|                                                                                                                                                                                                                                                   |     |
|                                                                                                                                                                                                                                                   |     |
| Item                  2. Management's Discussion and Analysis of Financial Condition                  andResults                  of Operations                                                                                                        |  12 |
|                                                                                                                                                                                                                                                   |     |
| Item                  3. Quantitative and Qualitative Disclosures About Market                  Risk                                                                                                                                                   | 24       |
|                                                                                                                                                                                                                                                   |     |
| Item                  4. Controls and Procedures                                                                                                                                                                                                       | 24       |
|                                                                                                                                                                                                                                                   |     |

**Part        II. Other Information**

|                       |   |
|----------------------------|--------|
| Items                  1-6 | 26     |
|                       |   |
| Signatures                 | 27     |

----

| **Part                  I. Financial Information**                                       |   |                                                                          |      |                              |   |                               |   |
|------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|-----------|-----------------------------------|--------|------------------------------------|--------|
| **Merchants                  and Manufacturers Bancorporation, Inc.**                    |   |                                                                          |      |                              |   |
| **Unaudited                  Consolidated Statements of Financial Condition**            |   |                                                                          |      |                              |   |
|                                                                                     |   |                                                                          |      |                              |   |                               |   |
|                                                                                     |   | **September                  30,**                                            |      | **December                  31,** |   | **September                  30,** |   |
|                                                                                     |   | **2006**                                                                      |      | **2005**                          |   | **2005**                           |   |
|                                                                                     |   | *(Dollars                  in Thousands, Except Share and Per Share Amounts)* |      |
| **ASSETS**                                                                               |   |                                                                          |      |                              |   |                               |   |
| Cash                  and due from banks                                                 |   | $                                                                             | 31,601    |                              | $      | 39,551                             |   | $ | 34,371 |   |
| Interest                  bearing deposits in banks                                      |   |                                                                          | 2,711     |                              |   | 863                                |   |   | 1,051 |   |
| Federal                  funds sold                                                      |   |                                                                          | 2,729     |                              |   | 6,364                              |   |   | 4,061 |   |
| Cash                  and cash equivalents                                               |   |                                                                          | 37,041    |                              |   | 46,778                             |   |   | 39,483 |   |
|                                                                                     |   |                                                                          |      |                              |   |                               |   |   |   |   |
| Available-for-sale                  securities                                           |   |                                                                          | 160,852   |                              |   | 173,639                            |   |   | 174,027 |   |
| Loans,                  less allowance for loan losses of $11,550 at September 30, 2006, |   |                                                                          |      |                              |   |                               |   |   |   |   |
| $13,051                  at December 31, 2005 and $10,482 at September 30, 2005          |   |                                                                          | 1,172,800 |                              |   | 1,120,616                          |   |   | 1,107,907 |   |
| Accrued                  interest receivable                                             |   |                                                                          | 7,077     |                              |   | 6,875                              |   |   | 6,795 |   |
| FHLB                  stock                                                              |   |                                                                          | 14,821    |                              |   | 20,416                             |   |   | 20,234 |   |
| Premises                  and equipment                                                  |   |                                                                          | 35,332    |                              |   | 33,565                             |   |   | 32,380 |   |
| Goodwill                  and intangible assets                                          |   |                                                                          | 34,993    |                              |   | 35,251                             |   |   | 35,390 |   |
| Other                  assets                                                            |   |                                                                          | 21,719    |                              |   | 21,808                             |   |   | 22,127 |   |
| **Total                  assets**                                                        |   | $                                                                             | 1,484,635 |                              | $      | 1,458,948                          |   | $ | 1,438,343 |   |
|                                                                                     |   |                                                                          |      |                              |   |                               |   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**                                |   |                                                                          |      |                              |   |                               |   |   |   |   |
| Liabilities                                                                              |   |                                                                          |      |                              |   |                               |   |   |   |   |
| Deposits:                                                                                |   |                                                                          |      |                              |   |                               |   |   |   |   |
| Non-interest                  bearing                                                    |   | $                                                                             | 121,275   |                              | $      | 159,591                            |   | $ | 133,154 |   |
| Interest                  bearing                                                        |   |                                                                          | 1,016,866 |                              |   | 1,000,572                          |   |   | 993,134 |   |
| Total                  deposits                                                          |   |                                                                          | 1,138,141 |                              |   | 1,160,163                          |   |   | 1,126,288 |   |
| Short-term                  borrowings                                                   |   |                                                                          | 63,205    |                              |   | 44,332                             |   |   | 46,332 |   |
| Long-term                  borrowings                                                    |   |                                                                          | 122,289   |                              |   | 101,107                            |   |   | 105,912 |   |
| Junior                  subordinated debt owed to unconsolidated trusts                  |   |                                                                          | 46,394    |                              |   | 46,394                             |   |   | 46,394 |   |
| Accrued                  interest payable                                                |   |                                                                          | 4,686     |                              |   | 3,631                              |   |   | 3,347 |   |
| Other                  liabilities                                                       |   |                                                                          | 14,965    |                              |   | 10,096                             |   |   | 14,891 |   |
| **Total                  liabilities**                                                   |   |                                                                          | 1,389,680 |                              |   | 1,365,723                          |   |   | 1,343,164 |   |
|                                                                                     |   |                                                                          |      |                              |   |                               |   |   |   |   |
| Stockholders'                  equity                                                    |   |                                                                          |      |                              |   |                               |   |   |   |   |
| Preferred                  stock, $1.00 par value; 250,000 shares authorized,            |   |                                                                          |      |                              |   |                               |   |   |   |   |
| shares                  issued and shares outstanding - none                             |   |                                                                          | -         |                              |   | -                                  |   |   | - |   |
| Common                  stock $1.00 par value; 25,000,000 shares authorized;             |   |                                                                          |      |                              |   |                               |   |   |   |   |
| shares                  issued: 3,770,251 at September 30, 2006, December 31, 2005       |   |                                                                          |      |                              |   |                               |   |   |   |   |
| and                  September 30, 2005; shares outstanding: 3,687,180 at                |   |                                                                          |      |                              |   |                               |   |   |   |   |
| September                  30, 2006 and 3,701,621 at December 31, 2005 and          |   |                                                                          |      |                              |   |                               |   |   |   |   |
| September                  30, 2005                                                      |   |                                                                          | 3,770     |                              |   | 3,770                              |   |   | 3,770 |   |
| Additional                  paid-in capital                                         |   |                                                                          | 53,678    |                              |   | 53,614                             |   |   | 53,614 |   |
| Retained                  earnings                                                       |   |                                                                          | 40,903    |                              |   | 38,928                             |   |   | 39,669 |   |
| Accumulated                  other comprehensive loss                                    |   |                                                                          | (1,177    | )                                 |   | (1,369                             | )      |   | (156 | ) |
| Treasury                  stock, at cost (83,071 shares at September 30, 2006, 68,630    |   |                                                                          |      |                              |   |                               |   |   |   |   |
| shares                  at December 31, 2005 and September 30, 2005)                     |   |                                                                          | (2,219    | )                                 |   | (1,718                             | )      |   | (1,718 | ) |
| **Total                  stockholders' equity**                                          |   |                                                                          | 94,955    |                              |   | 93,225                             |   |   | 95,179 |   |
| **Total                  liabilities and stockholders' equity**                          |   | $                                                                             | 1,484,635 |                              | $      | 1,458,948                          |   | $ | 1,438,343 |   |
|                                                                                     |   |                                                                          |      |                              |   |                               |   |   |   |   |
|                                                                                     |   |                                                                          |      |                              |   |                               |   |   |   |   |
| *See                  notes to unaudited consolidated financial statements.*             |   |                                                                          |      |                              |   |                               |   |   |   |   |

----

| **Merchants                  and Manufacturers Bancorporation, Inc.**                         |   |                                                                |   |                                   |   |     |   |
|-----------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|----------------------------------------|--------|----------|--------|
| **Unaudited                  Consolidated Statements of Income**                              |   |                                                                |   |                                   |   |
|                                                                                          |   |                                                                |   |                                   |   |     |   |   |   |
|                                                                                          |   | **Three                  Months Ended**                             |   | **Nine                  Months Ended** |   |
|                                                                                          |   | **September                  30,**                                  |   | **September                  30,**     |   |
|                                                                                          |   | **2006**                                                            |   | **2005**                               |   | **2006** |   | **2005** |   |
|                                                                                          |   | *(Dollars                  In Thousands, Except Per Share Amounts)* |   |
| Interest                  income:                                                             |   |                                                                |   |                                   |   |     |   |   |   |
| Interest                  and fees on loans                                                   |   | $                                                                   | 21,606 |                                   | $      | 18,019   |   | $ | 61,816 |   | $ | 50,831 |   |
| Interest                  and dividends on securities:                                        |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| Taxable                                                                                       |   |                                                                | 273    |                                   |   | 422      |   |   | 919 |   |   | 1,247 |   |
| Tax-exempt                                                                                    |   |                                                                | 566    |                                   |   | 621      |   |   | 1,853 |   |   | 1,794 |   |
| Interest                  on mortgage-backed securities                                       |   |                                                                | 1,052  |                                   |   | 872      |   |   | 3,053 |   |   | 2,638 |   |
| Interest                  on interest bearing deposits in                                     |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| banks                  and federal funds sold                                                 |   |                                                                | 102    |                                   |   | 49       |   |   | 216 |   |   | 123 |   |
| Total                  interest income                                                        |   |                                                                | 23,599 |                                   |   | 19,983   |   |   | 67,857 |   |   | 56,633 |   |
|                                                                                          |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| Interest                  expense:                                                            |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| Interest                  on deposits                                                    |   |                                                                | 8,555  |                                   |   | 5,486    |   |   | 23,215 |   |   | 14,008 |   |
| Interest                  on short-term borrowings                                            |   |                                                                | 964    |                                   |   | 636      |   |   | 3,428 |   |   | 1,665 |   |
| Interest                  on long-term borrowings                                             |   |                                                                | 1,432  |                                   |   | 1,076    |   |   | 3,888 |   |   | 3,321 |   |
| Interest                  on junior subordinated debt owed to                                 |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| unconsolidated                  trusts                                                        |   |                                                                | 950    |                                   |   | 808      |   |   | 2,716 |   |   | 2,308 |   |
| Total                  interest expense                                                       |   |                                                                | 11,901 |                                   |   | 8,006    |   |   | 33,247 |   |   | 21,302 |   |
|                                                                                          |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| Net                  interest income                                                          |   |                                                                | 11,698 |                                   |   | 11,977   |   |   | 34,610 |   |   | 35,331 |   |
| Provision                  for loan losses                                                    |   |                                                                | 390    |                                   |   | 390      |   |   | 1,170 |   |   | 1,170 |   |
| Net                  interest income after provision for                                      |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| loan                  losses                                                                  |   |                                                                | 11,308 |                                   |   | 11,587   |   |   | 33,440 |   |   | 34,161 |   |
|                                                                                          |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| Non-interest                  income:                                                         |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| Service                  charges on deposit accounts                                          |   |                                                                | 1,243  |                                   |   | 1,173    |   |   | 3,399 |   |   | 3,162 |   |
| Service                  charges on loans                                                     |   |                                                                | 1,015  |                                   |   | 861      |   |   | 2,611 |   |   | 2,535 |   |
| Securities                  gains, net                                                        |   |                                                                | 2      |                                   |   | -        |   |   | 2 |   |   | - |   |
| Gain                  on sale of loans, net                                                   |   |                                                                | 29     |                                   |   | 102      |   |   | 83 |   |   | 301 |   |
| Gain                  (loss) on sale of fixed assets, net                                     |   |                                                                | (3     | )                                      |   | (102     | )      |   | 187 |   |   | 293 |   |
| Tax                  fees, brokerage and insurance commissions                                |   |                                                                | 397    |                                   |   | 290      |   |   | 1,662 |   |   | 1,330 |   |
| Other                                                                                         |   |                                                                | 918    |                                   |   | 823      |   |   | 2,691 |   |   | 3,051 |   |
| Total                  noninterest income                                                     |   |                                                                | 3,601  |                                   |   | 3,147    |   |   | 10,635 |   |   | 10,672 |   |
|                                                                                          |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| Noninterest                  expenses:                                                        |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| Salaries                  and employee benefits                                               |   |                                                                | 7,347  |                                   |   | 6,990    |   |   | 22,403 |   |   | 21,208 |   |
| Premises                  and equipment                                                       |   |                                                                | 1,680  |                                   |   | 1,695    |   |   | 5,181 |   |   | 5,372 |   |
| Data                  processing fees                                                         |   |                                                                | 847    |                                   |   | 845      |   |   | 2,617 |   |   | 2,576 |   |
| Marketing                  and business development                                           |   |                                                                | 442    |                                   |   | 517      |   |   | 1,444 |   |   | 1,568 |   |
| Other                                                                                         |   |                                                                | 2,225  |                                   |   | 2,136    |   |   | 6,647 |   |   | 6,461 |   |
| Total                  noninterest expense                                                    |   |                                                                | 12,541 |                                   |   | 12,183   |   |   | 38,292 |   |   | 37,185 |   |
|                                                                                          |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| Income                  before income taxes                                                   |   |                                                                | 2,368  |                                   |   | 2,551    |   |   | 5,783 |   |   | 7,648 |   |
| Income                  taxes                                                                 |   |                                                                | 790    |                                   |   | 821      |   |   | 1,810 |   |   | 2,476 |   |
| Net                  income                                                                   |   | $                                                                   | 1,578  |                                   | $      | 1,730    |   | $ | 3,973 |   | $ | 5,172 |   |
|                                                                                          |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| Basic                  earnings per share                                                     |   | $                                                                   | 0.43   |                                   | $      | 0.47     |   | $ | 1.08 |   | $ | 1.41 |   |
|                                                                                          |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| Diluted                  earnings per share                                                   |   | $                                                                   | 0.43   |                                   | $      | 0.47     |   | $ | 1.07 |   | $ | 1.40 |   |
|                                                                                          |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| Dividends                  per share                                                          |   | $                                                                   | 0.18   |                                   | $      | 0.18     |   | $ | 0.54 |   | $ | 0.54 |   |
|                                                                                          |   |                                                                |   |                                   |   |     |   |   |   |   |   |   |   |
| *See                  notes to unaudited consolidated financial                  statements.* |

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|  **Merchants                and Manufacturers Bancorporation, Inc.**                                                             |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|----------|--------|---------------|----------------------------------|--------|--------|--------|--------|
|  **Unaudited                Consolidated Statements of Changes in Stockholders' Equity and                Comprehensive Income** |   |                       |                                                                                                                   |   |   |       |   |     |
|                                                                                                                                  |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |
|                                                                                                                                  |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |
|                                                                                                                                  |   | Shares                  of |                                                                                                                   |   |   |       |   |     |   | Accumulated   |                                  |   |   |   |
|                                                                                                                                  |   | Common                     |                                                                                                                   |   |   | Additional |   |     |   | Other         |                                  |   |   |   |
|                                                                                                                                  |   | Stock                      |                                                                                                                   | Common |   | Paid-In    |   | Retained |   | Comprehensive |                    Treasury |   |        |   |
|                                                                                                                                  |   | Outstanding                |                                                                                                                   | Stock  |   | Capital    |   | Earnings |   |  Income  |                             | Stock  |   | Total  |   |
|                                                                                                                                  |   |                       | *(In                  thousands, except Shares of Common Stock Outstanding and per share                  data) * |   |   |       |
| Nine                Months Ended September 30, 2005                                                                                   |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2004                                                                                         |   |                       | 3,674,054                                                                                                              |   | $      | 3,770      |   | $        | 53,421 |          | $                                | 36,486 |   | $      | 505    |   | $ | (2,443 | ) | $ | 91,739 |   |
| Comprehensive                  income:                                                                                                |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income                                                                                                           |   |                       | -                                                                                                                      |   |   | -          |   |     | -      |          |                             | 5,172  |   |   | -      |   |   | - |   |   | 5,172 |   |
| Change                  in net unrealized losses on                                                                                   |   |                       |                                                                                                                        |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |   |   |   |   |
| available-for-sale                  securities                                                                                        |   |                       | -                                                                                                                      |   |   | -          |   |     | -      |          |                             | -      |   |   | (1,127 | ) |   | - |   |   | (1,127 | ) |
| Income                  tax effect                                                                                                    |   |                       | -                                                                                                                      |   |   | -          |   |     | -      |          |                             | -      |   |   | 466    |   |   | - |   |   | 466 |   |
| Total                  comprehensive income                                                                                           |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |   |   | 4,511 |   |
|                                                                                                                                  |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  dividend - $0.54 per share                                                                                      |   |                       | -                                                                                                                      |   |   | -          |   |     | -      |          |                             | (1,989 | )      |   | -      |   |   | - |   |   | (1,989 | ) |
| Sale                  of 20,206 shares of treasury stock                                                                              |   |                       | 20,206                                                                                                                 |   |   | -          |   |     | 255    |          |                             | -      |   |   |   |   |   | 528 |   |   | 783 |   |
| Exercise                  of stock options                                                                                            |   |                       | 7,361                                                                                                                  |   |   | -          |   |     | (62    | )             |                             | -      |   |   |   |   |   | 197 |   |   | 135 |   |
| Balance                  at September 30, 2005                                                                                        |   |                       | 3,701,621                                                                                                              |   | $      | 3,770      |   | $        | 53,614 |          | $                                | 39,669 |   | $      | (156   | ) | $ | (1,718 | ) | $ | 95,179 |   |
|                                                                                                                                  |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |   |   |   |   |
| Nine                  Months Ended September 30, 2006                                                                                 |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |
| Balance                  at December 31, 2005                                                                                         |   |                       | 3,701,621                                                                                                              |   | $      | 3,770      |   | $        | 53,614 |          | $                                | 38,928 |   | $      | (1,369 | ) | $ | (1,718 | ) | $ | 93,225 |   |
| Comprehensive                  income:                                                                                                |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income                                                                                                           |   |                       | -                                                                                                                      |   |   | -          |   |     | -      |          |                             | 3,973  |   |   | -      |   |   | - |   |   | 3,973 |   |
| Change                  in net unrealized gains on                                                                                    |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |   |   |   |   |
| available-for-sale                  securities                                                                                        |   |                       | -                                                                                                                      |   |   | -          |   |     | -      |          |                             | -      |   |   | 292    |   |   | - |   |   | 292 |   |
| Reclassification                  adjustment for gains                                                                                |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |   |   |   |   |
| realized                  in net income                                                                                               |   |                       | -                                                                                                                      |   |   | -          |   |     | -      |          |                             | -      |   |   | 2      |   |   | - |   |   | 2 |   |
| Income                  tax effect                                                                                                    |   |                       | -                                                                                                                      |   |   | -          |   |     | -      |          |                             | -      |   |   | (102   | ) |   | - |   |   | (102 | ) |
| Total                  comprehensive income                                                                                           |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |   |   | 4,165 |   |
|                                                                                                                                  |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |   |   |   |   |
| Stock-based                  compensation                                                                                             |   |                       | -                                                                                                                      |   |   | -          |   |     | 70     |          |                             | -      |   |   | -      |   |   | - |   |   | 70 |   |
| Cash                  dividend - $0.54 per share                                                                                      |   |                       | -                                                                                                                      |   |   | -          |   |     | -      |          |                             | (1,998 | )      |   | -      |   |   | - |   |   | (1,998 | ) |
| Purchase                  of 15,000 shares of treasury                                                                                |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |   |   |   |   |
|   stock                                                                                                                     |   |                       | (15,000                                                                                                                | )      |   |       |   |     |   |          |                             |   |   |   |   |   |   | (515 | ) |   | (515 | ) |
| Exercise                  of stock options                                                                                            |   |                       | 559                                                                                                                    |   |   | -          |   |     | (6     | )             |                             | -      |   |   | -      |   |   | 14 |   |   | 8 |   |
| Balance                  at September 30, 2006                                                                                        |   |                       | 3,687,180                                                                                                              |   | $      | 3,770      |   | $        | 53,678 |          | $                                | 40,903 |   | $      | (1,177 | ) | $ | (2,219 | ) | $ | 94,955 |   |
|                                                                                                                                  |   |                       |                                                                                                                   |   |   |       |   |     |   |          |                             |   |   |   |   |   |   |   |   |   |   |   |
| *See                  notes to unaudited consolidated financial                  statements.*                                         |

----

| **Merchants                  and Manufacturers Bancorporation, Inc. and                  Subsidiaries**         |   |                                                 |    |     |   |
|-----------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|---------|----------|--------|
| **Unaudited                  Consolidated Statements of Cash Flows**                                            |   |                                                 |    |     |   |
|                                                                                                            |   |                                                 |    |     |   |
|                                                                                                            |   | **Nine                  Months Ended September 30,** |    |
|                                                                                                            |   | **2006**                                             |    | **2005** |   |
|                                                                                                            |   | *(Dollars                  in Thousands)*            |    |
| Cash                  Flows From Operating Activities                                                           |   |                                                 |    |     |   |   |   |
| Net                  income                                                                                     |   | $                                                    | 3,973   |     | $      | 5,172 |   |
| Adjustments                  to reconcile net income to cash provided by operating                  activities: |   |                                                 |    |     |   |   |   |
| Provision                  for loan losses                                                                      |   |                                                 | 1,170   |     |   | 1,170 |   |
| Depreciation                                                                                                    |   |                                                 | 2,043   |     |   | 2,068 |   |
| Amortization                  and accretion of premiums and discounts, net                                      |   |                                                 | 294     |     |   | 529 |   |
| Securities                  gains, net                                                                          |   |                                                 | (2      | )        |   | - |   |
| Gain                  on sale of loans, net                                                                     |   |                                                 | (83     | )        |   | (301 | ) |
| Loans                  originated for sale                                                                      |   |                                                 | (27,561 | )        |   | (34,802 | ) |
| Proceeds                  from sales of loans                                                                   |   |                                                 | 27,031  |     |   | 35,735 |   |
| Gain                  on sale of fixed assets, net                                                              |   |                                                 | (187    | )        |   | (293 | ) |
| Increase                  in accrued interest receivable                                                        |   |                                                 | (202    | )        |   | (1,376 | ) |
| Increase                  in accrued interest payable                                                           |   |                                                 | 1,055   |     |   | 1,403 |   |
| FHLB                  stock dividend                                                                            |   |                                                 | -       |     |   | (693 | ) |
| Other                                                                                                           |   |                                                 | 830     |     |   | 3,873 |   |
| **Net                  cash provided by operating activities**                                                  |   |                                                 | 8,361   |     |   | 12,485 |   |
|                                                                                                            |   |                                                 |    |     |   |   |   |
| Cash                  Flows From Investing Activities                                                           |   |                                                 |    |     |   |   |   |
| Purchase                  of available-for-sale securities                                                      |   |                                                 | (27,850 | )        |   | (38,974 | ) |
| Proceeds                  from sales of available-for-sale securities                                           |   |                                                 | 13,500  |     |   | 26 |   |
| Proceeds                  from redemptions and maturities of available-for-sale                  securities     |   |                                                 | 28,810  |     |   | 34,934 |   |
| Net                  increase in loans                                                                          |   |                                                 | (53,340 | )        |   | (82,200 | ) |
| Purchase                  of premises and equipment                                                             |   |                                                 | (3,798  | )        |   | (5,317 | ) |
| Proceeds                  from sale of other real estate owned                                                  |   |                                                 | 2,195   |     |   | 1,517 |   |
| Redemption                  of Federal Home Loan Bank stock                                                     |   |                                                 | 5,595   |     |   | 108 |   |
| **Net                  cash used in investing activities**                                                      |   |                                                 | (34,888 | )        |   | (89,906 | ) |
|                                                                                                            |   |                                                 |    |     |   |   |   |
| Cash                  Flows From Financing Activities                                                           |   |                                                 |    |     |   |   |   |
| Net                  increase (decrease) in deposits                                                            |   |                                                 | (22,022 | )        |   | 93,242 |   |
| Dividends                  paid                                                                                 |   |                                                 | (1,998  | )        |   | (1,989 | ) |
| Net                  increase (decrease) in short-term borrowings                                               |   |                                                 | 18,873  |     |   | (14,990 | ) |
| Proceeds                  from long-term borrowings                                                             |   |                                                 | 70,505  |     |   | 48,395 |   |
| Repayment                  of long-term borrowings                                                              |   |                                                 | (49,323 | )        |   | (53,537 | ) |
| Increase                  in advance payments by borrowers for taxes and insurance                              |   |                                                 | 1,192   |     |   | 595 |   |
| (Purchase)                  sale of treasury stock                                                              |   |                                                 | (515    | )        |   | 783 |   |
| Common                  stock transactions, net                                                                 |   |                                                 | 8       |     |   | 135 |   |
| Stock-based                  compensation expense                                                               |   |                                                 | 70      |     |   | - |   |
| **Net                  cash provided by financing activities**                                                  |   |                                                 | 16,790  |     |   | 72,634 |   |
|                                                                                                            |   |                                                 |    |     |   |   |   |
| **Decrease                  in cash and cash equivalents**                                                      |   |                                                 | (9,737  | )        |   | (4,787 | ) |
| Cash                  and cash equivalents at beginning of period                                               |   |                                                 | 46,778  |     |   | 44,270 |   |
| Cash                  and cash equivalents at end of period                                                     |   | $                                                    | 37,041  |     | $      | 39,483 |   |
|                                                                                                            |   |                                                 |    |     |   |   |   |
| Supplemental                  Cash Flow Information and Noncash Transactions:                                   |   |                                                 |    |     |   |   |   |
| Interest                  paid                                                                                  |   | $                                                    | 32,192  |     | $      | 19,899 |   |
| Income                  taxes paid                                                                              |   |                                                 | 1,273   |     |   | 721 |   |
| Loans                  transferred to other real estate owned                                                   |   |                                                 | 600     |     |   | 550 |   |
|                                                                                                            |   |                                                 |    |     |   |   |   |
| Supplemental                  Schedules of Noncash Investing Activities:                                        |   |                                                 |    |     |   |   |   |
| Change                  in accumulated other comprehensive income, unrealized                                   |   |                                                 |    |     |   |   |   |
| gains                  (losses) on available-for-sale securities, net                                           |   | $                                                    | 192     |     | $      | (661 | ) |
|                                                                                                            |   |                                                 |    |     |   |   |   |
| *See                  notes to unaudited consolidated financial statements*                                     |   |                                                 |    |     |   |   |   |

----

**Merchants        and Manufacturers Bancorporation, Inc.**

**NOTE        A -- Basis of Presentation**

**NOTE        B -- Earnings Per Share **

|                                                                   |   | Three                      Months Ended  | Nine                      Months Ended |
|-------------------------------------------------------------------|--------|-----------------------------------------------|----------------------------------------|
|                                                                   |   | September                      30,       | September                      30,     |
| Basic:                                                            |   |                                          | 2006                                   |   |   | 2005 |   |   | 2006 |   |   | 2005 |   |
|                                                                   |   |                                          |                                   |   | *(Dollars                      in Thousands, Except Per Share Data)*  |   |   |   |
| Net                      income                                   |   | $                                             | 1,578                                  |   | $ | 1,730 |   | $ | 3,973 |   | $ | 5,172 |   |
| Weighted                      average shares outstanding          |   |                                          | 3,687                                  |   |   | 3,700 |   |   | 3,965 |   |   | 3,684 |   |
| Basic                      earnings per share                     |   | $                                             | 0.43                                   |   | $ | 0.47 |   | $ | 1.08 |   | $ | 1.41 |   |
|                                                              |   |                                          |                                   |   |   |   |   |   |   |   |   |   |   |
| Diluted:                                                          |   |                                          |                                   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                                          |                                   |   | *(Dollars                      in Thousands, Except Per Share Data)*  |   |   |   |
| Net                      income                                   |   | $                                             | 1,578                                  |   | $ | 1,730 |   | $ | 3,973 |   | $ | 5,172 |   |
| Weighted                      average shares outstanding          |   |                                          | 3,687                                  |   |   | 3,700 |   |   | 3,965 |   |   | 3,684 |   |
| Effect                      of dilutive stock options outstanding |   |                                          | 12                                     |   |   | 14 |   |   | 15 |   |   | 11 |   |
| Diluted                      weighted average shares outstanding  |   |                                          | 3,699                                  |   |   | 3,714 |   |   | 3,710 |   |   | 3,695 |   |
| Diluted                      earnings per share                   |   | $                                             | 0.43                                   |   | $ | 0.47 |   | $ | 1.07 |   | $ | 1.40 |   |

----

**NOTE        C -- Comprehensive Income **

|                                                            |   | Three                  Months Ended |   | Nine                  Months Ended        |   |
|-----------------------------------------------------------------|--------|-------------------------------------|--------|-------------------------------------------|--------|
|                                                            |   | September                  30,      |   | September                  30,            |   |
|                                                            |   | 2006                                |   | 2005                                      |   | 2006 |   | 2005 |   |
|                                                            |   |                                |   | *(Dollars                  in Thousands)* |   |   |   |
| Net                  income                                     |   | $                                   | 1,578  |                                      | $      | 1,730 |   | $ | 3,973 |   | $ | 5,172 |   |
| Other                  comprehensive income                     |   |                                |   |                                      |   |   |   |   |   |   |   |   |   |
| Change                  in unrealized securities gains (losses) |   |                                | 2,464  |                                      |   | (592 | ) |   | 292 |   |   | (1,127 | ) |
| Reclassification                  adjustment for gains          |   |                                |   |                                      |   |   |   |   |   |   |   |   |   |
| included                  in net income                         |   |                                | 2      |                                      |   | - |   |   | 2 |   |   | - |   |
| Income                  tax effect                              |   |                                | (863   | )                                         |   | 278 |   |   | (102 | ) |   | 466 |   |
| Total                  comprehensive income                     |   | $                                   | 3,181  |                                      | $      | 1,416 |   | $ | 4,165 |   | $ | 4,511 |   |

**NOTE        D -- Loans Receivable**

|                                                    |   | September                  30,2006 |      | December                  31, 2005        |   | September                  30,2005 |   |
|---------------------------------------------------------|--------|------------------------------------|-----------|-------------------------------------------|--------|------------------------------------|--------|
|                                                    |   |                               |      | *(Dollars                  in Thousands)* |   |                               |   |
| First                  Mortgage:                        |   |                               |      |                                      |   |                               |   |
| Conventional                  single-family residential |   | $                                  | 190,471   |                                      | $      | 167,745                            |   | $ | 163,291 |   |
| Commercial                  and multifamily residential |   |                               | 490,861   |                                      |   | 474,840                            |   |   | 471,289 |   |
| Construction                                            |   |                               | 91,331    |                                      |   | 81,651                             |   |   | 77,827 |   |
| Farmland                                                |   |                               | 62,959    |                                      |   | 52,392                             |   |   | 55,553 |   |
|                                                    |   |                               | 835,622   |                                      |   | 776,628                            |   |   | 767,960 |   |
|                                                    |   |                               |      |                                      |   |                               |   |   |   |   |
| Commercial                  business loans              |   |                               | 259,116   |                                      |   | 270,101                            |   |   | 266,769 |   |
| Consumer                  and installment loans         |   |                               | 53,003    |                                      |   | 50,663                             |   |   | 48,213 |   |
| Home                  equity loans                      |   |                               | 30,197    |                                      |   | 28,541                             |   |   | 28,465 |   |
| Other                                                   |   |                               | 6,412     |                                      |   | 7,734                              |   |   | 6,982 |   |
|                                                    |   |                               | 348,728   |                                      |   | 357,039                            |   |   | 350,429 |   |
| Total                  loans                            |   |                               | 1,184,350 |                                      |   | 1,133,667                          |   |   | 1,118,389 |   |
|                                                    |   |                               |      |                                      |   |                               |   |   |   |   |
| Less:                  Allowance for loan losses        |   |                               | (11,550   | )                                         |   | (13,051                            | )      |   | (10,482 | ) |
| Loans,                  net                             |   | $                                  | 1,172,800 |                                      | $      | 1,120,616                          |   | $ | 1,107,907 |   |

**NOTE        E - Stock-Based Compensation Plans**

----

|                                                |   | Nine                  Months Ended September 30, 2006 |    |
|-----------------------------------------------------|--------|-------------------------------------------------------|---------|
|                                                |   |                                                  |    |   |   | Weighted |   |   |   |
|                                                |   |                                                  |    |   |   | Average |   |  |   |
|                                                |   |                                                  |    | WeightedAverage |   | Remaining                  Contractual |   | AggregateIntrinsic |   |
|                                                |   | Options                                               |    | Exercise                  Price |   | Life* |   | Value |   |
|                                                |   |                                                  |    |   |   |   |   |   |   |
| Outstanding                  at beginning of period |   |                                                  | 112,282 |   | $ | 33.77 |   |   |   |   |   |   |   |
| Granted                                             |   |                                                  | -       |   |   | - |   |   |   |   |   |   |   |
| Canceled                                            |   |                                                  | -       |   |   | - |   |   |   |   |   |   |   |
| Exercised                                           |   |                                                  | (559    | ) |   | 15.11 |   |   |   |   |   |   |   |
| Outstanding                  at end of period       |   |                                                  | 111,723 |   | $ | 33.86 |   |   | 5.0 |   | $ | 490,000 |   |
|                                                |   |                                                  |    |   |   |   |   |   |   |   |   |   |   |
| Options                  exercisable                |   |                                                  | 108,445 |   | $ | 33.97 |   |   | 5.0 |   | $ | 476                  ,000 |   |
|                                                |   |                                                  |    |   |   |   |   |   |   |   |   |   |   |

|                         |   | Options                  Outstanding |                            | Options                  Exercisable |
|------------------------------|--------|--------------------------------------|---------------------------------|--------------------------------------|
|                         |   |                                 | Weighted                        | Weighted                             |   |   | Weighted |
| Exercise                     |   | Number                               | Average                         | Average                              |   | Number | Average |
| Price                  Range |   | Outstanding                          | Exercise                  Price | Life*                                |   | Outstanding | Exercise                  Price |
|                         |   |                                 |                            |                                 |   |   |   |
| $                  15.11     |   | 5,584                                | $                  15.11        | 1.5                                  |   | 5,584 | $                  15.11 |
| 25.45-28.31                  |   | 46,017                               | 27.95                           | 2.5                                  |   | 46,017 | 27.95 |
| 30.50-35.00                  |   | 20,700                               | 30.65                           | 8.1                                  |   | 17,422 | 30.68 |
| 45.00-46.00                  |   | 39,422                               | 45.11                           | 7.3                                  |   | 39,422 | 45.11 |
|                         |   | 111,723                              | $                  33.86        |                                 |   | 108,445 | $                  33.97 |
|                         |   |                                 |                            |                                 |   |   |   |

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

----

|                                                              |   | Three                  Months                                    |   | Nine                  Months        |   |
|-------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                              |   | Ended                                                            |   | Ended                               |   |
|                                                              |   | September                  30, 2005                              |   | September                  30, 2005 |   |
|                                                              |   | *(Dollars                  in Thousands, Except Per Share Data)* |   |
|                                                              |   |                                                             |   |                                |   |
| Net                  income, as reported                          |   | $                                                                | 1,730  |                                | $      | 5,172 |   |
| Deduct                  total stock-based employee compensation   |   |                                                             |   |                                |   |   |   |
| expense                  determined under fair value based method |   |                                                             |   |                                |   |   |   |
| for                  all awards, net of related tax effects       |   |                                                             | -      |                                |   | 6 |   |
| **Pro                  forma net income**                         |   | $                                                                | 1,730  |                                | $      | 5,166 |   |
|                                                              |   |                                                             |   |                                |   |   |   |
| Earnings                  per share:                              |   |                                                             |   |                                |   |   |   |
| Basic:                                                            |   |                                                             |   |                                |   |   |   |
| As                  reported                                      |   | $                                                                | 0.47   |                                | $      | 1.41 |   |
| Pro                  forma                                        |   | $                                                                | 0.47   |                                | $      | 1.40 |   |
| Diluted:                                                          |   |                                                             |   |                                |   |   |   |
| As                  reported                                      |   | $                                                                | 0.47   |                                | $      | 1.40 |   |
| Pro                  forma                                        |   | $                                                                | 0.47   |                                | $      | 1.40 |   |

----

**NOTE        F - Recent Accounting Pronouncements**

**NOTE        G - Commitments and Contingent Liabilities**

----

|                                                     | September                  30, 2006 |                                      | December                  31, 2005    |   | September                  30, 2005   |
|----------------------------------------------------------|------------------------------------------|-------------------------------------------|---------------------------------------|--------|---------------------------------------|
|                                                     |                                     | *(Dollars                  in Thousands)* |                                  |
|                                                     |                                     |                                      |                                  |   |                                  |
| Commitments                  to originate mortgage loans | $                    25,816    |                                      | $                    37,426 |   | $                    26,788 |
|                                                     |                                     |                                      |                                  |   |                                  |
| Unused                  lines of credit:                 |                                     |                                      |                                  |   |                                  |
| Commercial                  business                     | 245,854                                  |                                      | 193,581                               |   | 193,766                               |
| Home                  equity                             | 40,223                                   |                                      | 31,582                                |   | 29,242                                |
| Credit                  cards                            | 18,109                                   |                                      | 21,031                                |   | 20,455                                |
|                                                     |                                     |                                      |                                  |   |                                  |
| Standby                  letters of credit               | 6,754                                    |                                      | 12,362                                |   | 15,677                                |

**Item        2. Management's Discussion and Analysis of Financial Condition and Results        of        Operations**

*Overview*

----

*Financial        Condition*

**Total        Assets**

**Investment        Securities**

**Federal        Home Loan Bank Stock**

**Loans        Receivable**

**Total        Deposits and Borrowings**

----

**Capital        Resources**

**Nonperforming        Assets and Allowance for Losses**

|                                                      |   | September                  30, 2006 |   | December                  31, 2005         |   | September                  30, 2005 |   |
|-----------------------------------------------------------|--------|-------------------------------------|--------|-------------------------------------------------|--------|-------------------------------------|--------|
|                                                      |   |                                |   |  *(Dollars                  in Thousands)* |   |                                |   |
|                                                      |   |                                |   |                                            |   |                                |   |
| Non-accrual                  loans:                       |   |                                |   |                                            |   |                                |   |
| Conventional                  single-family residential   |   | $                                   | 4,496  |                                            | $      | 2,555                               |   | $ | 2,063 |   |
| Commercial                  and multifamily residential   |   |                                | 3,114  |                                            |   | 508                                 |   |   | 1,880 |   |
| Commercial                  business loans                |   |                                | 2,248  |                                            |   | 1,358                               |   |   | 1,126 |   |
| Consumer                  and installment loans           |   |                                | 967    |                                            |   | 826                                 |   |   | 908 |   |
| Total                  non-accrual loans                  |   |                                | 10,825 |                                            |   | 5,247                               |   |   | 5,977 |   |
|                                                      |   |                                |   |                                            |   |                                |   |   |   |   |
| Other                  real estate owned                  |   |                                | 349    |                                            |   | 1,812                               |   |   | 1,846 |   |
| Total                  nonperforming assets               |   | $                                   | 11,174 |                                            | $      | 7,059                               |   | $ | 7,823 |   |
|                                                      |   |                                |   |                                            |   |                                |   |   |   |   |
| **Ratios:**                                               |   |                                |   |                                            |   |                                |   |   |   |   |
| Non-accrual                  loans to total loans         |   |                                | 0.91   | %                                               |   | 0.46                                | %      |   | 0.53 | % |
| Nonperforming                  assets to total assets     |   |                                | 0.75   | %                                               |   | 0.48                                | %      |   | 0.54 | % |
| Loan                  loss allowance to non-accrual loans |   |                                | 106.70 | %                                               |   | 248.73                              | %      |   | 175.37 | % |
| Loan                  loss allowance to total loans  |   |                                | 0.98   | %                                               |   | 1.15                                | %      |   | 0.94 | % |

----

|                                                          |   | Three                  Months Ended |   | Nine                  Months Ended              |   |
|---------------------------------------------------------------|--------|-------------------------------------|--------|-------------------------------------------------|--------|
|                                                          |   | September                  30,      |   | September                  30,                  |   |
|                                                          |   | 2006                                |   | 2005                                            |   | 2006 |   | 2005 |   |
|                                                          |   |                                |   | *(Dollars                  in Thousands)*  |   |   |   |
|                                                          |   |                                |   |                                            |   |   |   |   |   |
| Balance                  at beginning of period               |   | $                                   | 11,876 |                                            | $      | 10,381 |   | $ | 13,051 |   | $ | 10,623 |   |
| Provision                  for loan losses                    |   |                                | 390    |                                            |   | 390 |   |   | 1,170 |   |   | 1,170 |   |
| Charge-offs:                                                  |   |                                |   |                                            |   |   |   |   |   |   |   |   |   |
| Commercial                  and multifamily residential  |   |                                | (263   | )                                               |   | (34 | ) |   | (517 | ) |   | (61 | ) |
| Commercial                  business loans                    |   |                                | (258   | )                                               |   | (268 | ) |   | (1,668 | ) |   | (1,075 | ) |
| Consumer                  and installment loans               |   |                                | (285   | )                                               |   | (89 | ) |   | (777 | ) |   | (436 | ) |
| Total                  charge-offs                            |   |                                | (806   | )                                               |   | (391 | ) |   | (2,962 | ) |   | (1,572 | ) |
|                                                          |   |                                |   |                                            |   |   |   |   |   |   |   |   |   |
| Recoveries:                                                   |   |                                |   |                                            |   |   |   |   |   |   |   |   |   |
| Commercial                  and multifamily residential  |   |                                | 7      |                                            |   | 4 |   |   | 18 |   |   | 19 |   |
| Commercial                  business loans                    |   |                                | 12     |                                            |   | 28 |   |   | 127 |   |   | 75 |   |
| Consumer                  and installment loans               |   |                                | 71     |                                            |   | 70 |   |   | 146 |   |   | 167 |   |
| Total                  recoveries                             |   |                                | 90     |                                            |   | 102 |   |   | 291 |   |   | 261 |   |
|                                                          |   |                                |   |                                            |   |   |   |   |   |   |   |   |   |
| Net                  charge-offs                              |   |                                | (716   | )                                               |   | (289 | ) |   | (2,671 | ) |   | (1,311 | ) |
|                                                          |   |                                |   |                                            |   |   |   |   |   |   |   |   |   |
| Balance                  at end of period                     |   | $                                   | 11,550 |                                            | $      | 10,482 |   | $ | 11,550 |   | $ | 10,482 |   |

**Potential        Problem Loans**

----

*Comparison        of Three and Nine months ended September 30, 2006 and 2005*

**Net        Income**

**Net        Interest Income**

----

| **AVERAGE                  BALANCES, INTEREST RATES AND YIELDS** |
|------------------------------------------------------------------|
|                                                             |   |   |   |   |   |   |   |   |   |   |   |
|                                                             | **For                  the Three Months Ended September 30,** |
|                                                             |   |   | **2006** |   |   |   |   |   | **2005** |   |   |
|                                                             | **  Average                  Balance** |   | **Interest** |   | **Average                  Rate** |   | **Average                  Balance** |   | **Interest** |   | **Average                  Rate** |

|                                                                                                               |   |   |      |   |   |  *(Dollars                  in Thousands)* |   |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|-------------------------------------------------|--------|--------|--------|--------|--------|
| **Assets**                                                                                                         |   |   |      |   |   |                                            |   |   |   |   |   |   |   |
| Loans,                  net (1)(2)                                                                                 |   | $      | 1,183,315 |   | $      | 21,570                                          |   |   | 7.23   | %      | $      | 1,105,990 |   | $ | 17,976 |   |   | 6.45 | % |
| Loans                  exempt from federal income taxes (3)                                                        |   |   | 3,229     |   |   | 55                                              |   |   | 6.70   | %      |   | 3,846 |   |   | 65 |   |   | 6.72 | % |
| Taxable                  investment securities (4)                                                                 |   |   | 29,087    |   |   | 273                                             |   |   | 3.72   | %      |   | 38,309 |   |   | 422 |   |   | 4.37 | % |
| Mortgage-related                  securities (4)                                                                   |   |   | 90,664    |   |   | 1,052                                           |   |   | 4.60   | %      |   | 87,808 |   |   | 872 |   |   | 3.94 | % |
| Investment                  securities exempt from federal income taxes (3)(4)                                     |   |   | 60,907    |   |   | 858                                             |   |   | 5.59   | %      |   | 67,526 |   |   | 941 |   |   | 5.53 | % |
| Other                  securities                                                                                  |   |   | 8,168     |   |   | 102                                             |   |   | 4.95   | %      |   | 4,535 |   |   | 49 |   |   | 4.29 | % |
| Interest                  earning assets                                                                           |   |   | 1,375,370 |   |   | 23,909                                          |   |   | 6.90   | %      |   | 1,308,014 |   |   | 20,325 |   |   | 6.16 | % |
| Non                  interest earning assets                                                                       |   |   | 120,377   |   |   |                                            |   |   |   |   |   | 129,124 |   |   |   |   |   |   |   |
| Average                  assets                                                                                    |   | $      | 1,495,747 |   |   |                                            |   |   |   |   | $      | 1,437,138 |   |   |   |   |   |   |   |
|                                                                                                               |   |   |      |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and Stockholders' Equity**                                                          |   |   |      |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                  deposits                                                                                      |   | $      | 99,776    |   |   | 175                                             |   |   | 0.70   | %      | $      | 97,526 |   |   | 126 |   |   | 0.51 | % |
| Money                  market deposits                                                                             |   |   | 236,167   |   |   | 1,867                                           |   |   | 3.14   | %      |   | 233,005 |   |   | 1,058 |   |   | 1.80 | % |
| Savings                  deposits                                                                                  |   |   | 125,711   |   |   | 419                                             |   |   | 1.32   | %      |   | 136,719 |   |   | 331 |   |   | 0.96 | % |
| Time                  deposits                                                                                     |   |   | 554,814   |   |   | 6,094                                           |   |   | 4.36   | %      |   | 491,147 |   |   | 3,971 |   |   | 3.21 | % |
| Short-term                  borrowings                                                                             |   |   | 64,486    |   |   | 964                                             |   |   | 5.93   | %      |   | 63,944 |   |   | 636 |   |   | 3.95 | % |
| Long-term                  borrowings                                                                              |   |   | 125,857   |   |   | 1,432                                           |   |   | 4.51   | %      |   | 110,187 |   |   | 1,076 |   |   | 3.87 | % |
| Junior                  subordinated debt owed to unconsolidated trusts                                            |   |   | 46,394    |   |   | 950                                             |   |   | 8.12   | %      |   | 46,394 |   |   | 808 |   |   | 6.91 | % |
| Interest                  bearing liabilities                                                                      |   |   | 1,253,205 |   |   | 11,901                                          |   |   | 3.77   | %      |   | 1,178,922 |   |   | 8,006 |   |   | 2.69 | % |
| Demand                  deposits and other non interest bearing liabilities                                        |   |   | 148,291   |   |   |                                            |   |   |   |   |   | 163,013 |   |   |   |   |   |   |   |
| Stockholders'                  equity                                                                              |   |   | 94,251    |   |   |                                            |   |   |   |   |   | 95,203 |   |   |   |   |   |   |   |
| Average                  liabilities and stockholders' equity                                                      |   | $      | 1,495,747 |   |   |                                            |   |   |   |   | $      | 1,437,138 |   |   |   |   |   |   |   |
| Net                  interest spread (5)                                                                           |   |   |      |   | $      | 12,008                                          |   |   | 3.13   | %      |   |   |   | $ | 12,319 |   |   | 3.47 | % |
| Net                  interest earning assets                                                                       |   | $      | 122,165   |   |   |                                            |   |   |   |   | $      | 129,092 |   |   |   |   |   |   |   |
| Net                  interest margin on a fully tax equivalent basis (6)                                           |   |   |      |   |   |                                            |   |   | 3.46   | %      |   |   |   |   |   |   |   | 3.74 | % |
| Net                  interest margin (6)                                                                           |   |   |      |   |   |                                            |   |   | 3.37   | %      |   |   |   |   |   |   |   | 3.63 | % |
| Ratio                  of average interest-earning assets to average interest-bearing                  liabilities |   |   |      |   |   |                                            |   |   | 1.10   |   |   |   |   |   |   |   |   | 1.11 |   |

----

| **AVERAGE                  BALANCES, INTEREST RATES AND YIELDS** |
|------------------------------------------------------------------|
|                                                             |   |   |   |   |   |   |   |   |   |   |   |
|                                                             | **For                  the Nine Months Ended September 30,** |
|                                                             |   |   | **2006** |   |   |   |   |   | **2005** |   |   |
|                                                             | **Average                  Balance** |   | **Interest** |   | **Average                  Rate** |   | **Average                  Balance** |   | **Interest** |   | **Average                  Rate** |

|                                                                                                               |   |   |      |   |   |  *(Dollars                  in Thousands)* |   |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|-------------------------------------------------|--------|--------|--------|--------|--------|
| **Assets**                                                                                                         |   |   |      |   |   |                                            |   |   |   |   |   |   |   |
| Loans,                  net (1)(2)                                                                                 |   | $      | 1,170,050 |   | $      | 61,707                                          |   |   | 7.05   | %      | $      | 1,080,469 |   | $ | 50,703 |   |   | 6.27 | % |
| Loans                  exempt from federal income taxes (3)                                                        |   |   | 3,298     |   |   | 165                                             |   |   | 6.70   | %      |   | 3,640 |   |   | 194 |   |   | 7.12 | % |
| Taxable                  investment securities (4)                                                                 |   |   | 33,851    |   |   | 919                                             |   |   | 3.63   | %      |   | 35,908 |   |   | 1,247 |   |   | 4.64 | % |
| Mortgage-related                  securities (4)                                                                   |   |   | 90,485    |   |   | 3,053                                           |   |   | 4.51   | %      |   | 90,754 |   |   | 2,638 |   |   | 3.89 | % |
| Investment                  securities exempt from federal income taxes (3)(4)                                     |   |   | 66,389    |   |   | 2,808                                           |   |   | 5.65   | %      |   | 64,995 |   |   | 2,718 |   |   | 5.59 | % |
| Other                  securities                                                                                  |   |   | 6,059     |   |   | 216                                             |   |   | 4.77   | %      |   | 7,005 |   |   | 123 |   |   | 2.35 | % |
| Interest                  earning assets                                                                           |   |   | 1,370,132 |   |   | 68,868                                          |   |   | 6.72   | %      |   | 1,282,771 |   |   | 57,623 |   |   | 6.01 | % |
| Non                  interest earning assets                                                                       |   |   | 122,995   |   |   |                                            |   |   |   |   |   | 125,356 |   |   |   |   |   |   |   |
| Average                  assets                                                                                    |   | $      | 1,493,127 |   |   |                                            |   |   |   |   | $      | 1,408,127 |   |   |   |   |   |   |   |
|                                                                                                               |   |   |      |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and Stockholders' Equity**                                                          |   |   |      |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                  deposits                                                                                      |   | $      | 103,574   |   |   | 592                                             |   |   | 0.76   | %      | $      | 96,080 |   |   | 400 |   |   | 0.56 | % |
| Money                  market deposits                                                                             |   |   | 238,959   |   |   | 5,215                                           |   |   | 2.92   | %      |   | 234,183 |   |   | 2,682 |   |   | 1.53 | % |
| Savings                  deposits                                                                                  |   |   | 127,947   |   |   | 1,215                                           |   |   | 1.27   | %      |   | 136,022 |   |   | 920 |   |   | 0.90 | % |
| Time                  deposits                                                                                     |   |   | 527,287   |   |   | 16,193                                          |   |   | 4.11   | %      |   | 459,436 |   |   | 10,006 |   |   | 2.91 | % |
| Short-term                  borrowings                                                                             |   |   | 84,636    |   |   | 3,428                                           |   |   | 5.42   | %      |   | 66,254 |   |   | 1,665 |   |   | 3.36 | % |
| Long-term                  borrowings                                                                              |   |   | 120,773   |   |   | 3,888                                           |   |   | 4.30   | %      |   | 115,307 |   |   | 3,321 |   |   | 3.85 | % |
| Junior                  subordinated debt owed to unconsolidated trusts                                            |   |   | 46,394    |   |   | 2,716                                           |   |   | 7.83   | %      |   | 46,394 |   |   | 2,308 |   |   | 6.65 | % |
| Interest                  bearing liabilities                                                                      |   |   | 1,249,570 |   |   | 33,247                                          |   |   | 3.56   | %      |   | 1,153,676 |   |   | 21,302 |   |   | 2.47 | % |
| Demand                  deposits and other non interest bearing liabilities                                        |   |   | 149,483   |   |   |                                            |   |   |   |   |   | 160,583 |   |   |   |   |   |   |   |
| Stockholders'                  equity                                                                              |   |   | 94,074    |   |   |                                            |   |   |   |   |   | 93,868 |   |   |   |   |   |   |   |
| Average                  liabilities and stockholders' equity                                                      |   | $      | 1,473,127 |   |   |                                            |   |   |   |   | $      | 1,408,127 |   |   |   |   |   |   |   |
| Net                  interest spread (5)                                                                           |   |   |      |   | $      | 35,621                                          |   |   | 3.16   | %      |   |   |   | $ | 36,321 |   |   | 3.54 | % |
| Net                  interest earning assets                                                                       |   | $      | 120,562   |   |   |                                            |   |   |   |   | $      | 129,095 |   |   |   |   |   |   |   |
| Net                  interest margin on a fully tax equivalent basis (6)                                           |   |   |      |   |   |                                            |   |   | 3.48   | %      |   |   |   |   |   |   |   | 3.79 | % |
| Net                  interest margin (6)                                                                           |   |   |      |   |   |                                            |   |   | 3.38   | %      |   |   |   |   |   |   |   | 3.68 | % |
| Ratio                  of average interest-earning assets to average interest-bearing                  liabilities |   |   |      |   |   |                                            |   |   | 1.10   |   |   |   |   |   |   |   |   | 1.11 |   |

----

| **VOLUME,                  RATE AND MIX ANALYSIS OF NET INTEREST INCOME**   |   |
|-----------------------------------------------------------------------------|--------|
|                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   | **Three                  Months Ended September 30, 2006** |   | **Nine                  Months Ended September 30, 2006** |   |
|                                                                        |   | **Compared                  to September 30, 2005** |   | **Compared                  to September 30, 2005** |   |
|                                                                        |   | **Change                  Due to Volume** |   | **Change                  Due to Rate** |   | **Total                  Change** |   | **Change                  Due to Volume** |   | **Change                  Due to Rate** |   | **Total                  Change** |   |
|                                                                        |   |   |   |   |   | *(Dollars                  in Thousands)* |   |   |   |   |   |
| Interest-Earning                  Assets:                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans,                  net (1)                                             |   | $ | 1,313 |   | $ | 2,281 |   | $ | 3,594 |   | $ | 4,413 |   | $ | 6,591 |   | $ | 11,004 |   |
| Loans                  exempt from federal income taxes (2)                 |   |   | (11 | ) |   | - |   |   | (11 | ) |   | (18 | ) |   | (11 | ) |   | (29 | ) |
| Taxable                  investment securities                         |   |   | (92 | ) |   | (57 | ) |   | (149 | ) |   | (68 | ) |   | (260 | ) |   | (328 | ) |
| Mortgage-related                  securities                                |   |   | 29 |   |   | 151 |   |   | 180 |   |   | (8 | ) |   | 423 |   |   | 415 |   |
| Investment                  securities exempt from federal income taxes (2) |   |   | (93 | ) |   | 10 |   |   | (83 | ) |   | 59 |   |   | 31 |   |   | 90 |   |
| Other                  securities                                           |   |   | 44 |   |   | 9 |   |   | 53 |   |   | (14 | ) |   | 107 |   |   | 93 |   |
| Total                  interest-earning assets                              |   | $ | 1,190 |   | $ | 2,394 |   | $ | 3,584 |   | $ | 4,364 |   | $ | 6,881 |   | $ | 11,245 |   |
| Interest-Bearing                  Liabilities:                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                  deposits                                               |   | $ | 3 |   | $ | 46 |   | $ | 49 |   | $ | 33 |   | $ | 159 |   | $ | 192 |   |
| Money                  market deposits                                      |   |   | 15 |   |   | 794 |   |   | 809 |   |   | 56 |   |   | 2,477 |   |   | 2,533 |   |
| Savings                  deposits                                           |   |   | (24 | ) |   | 112 |   |   | 88 |   |   | (51 | ) |   | 346 |   |   | 295 |   |
| Time                  deposits                                              |   |   | 564 |   |   | 1,559 |   |   | 2,123 |   |   | 1,638 |   |   | 4,549 |   |   | 6,187 |   |
| Short-term                  borrowings                                      |   |   | 5 |   |   | 323 |   |   | 328 |   |   | 550 |   |   | 1,213 |   |   | 1,763 |   |
| Long-term                  borrowings                                       |   |   | 165 |   |   | 191 |   |   | 356 |   |   | 163 |   |   | 404 |   |   | 567 |   |
| Junior                  subordinated debt owed to unconsolidated trusts     |   |   | - |   |   | 142 |   |   | 142 |   |   | - |   |   | 408 |   |   | 408 |   |
| Total                  interest-bearing liabilities                         |   | $ | 728 |   | $ | 3,167 |   | $ | 3,895 |   | $ | 2,389 |   | $ | 9,556 |   | $ | 11,945 |   |
| Net                  change in net interest income                          |   |   |   |   |   |   |   | $ | (311 | ) |   |   |   |   |   |   | $ | (700 | ) |

| (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 non-accrual 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. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Provision        for Loan Losses**

**Non-Interest        Income**

|                                                           |   | Three                  Months Ended September 30, |   | Nine                  Months Ended September 30, |   |
|----------------------------------------------------------------|--------|---------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                           |   | 2006                                              |   | 2005                                             |   | 2006 |   | 2005 |   |
|                                                           |   |                                              |   | *(Dollars                  in Thousands)*        |   |   |   |
|                                                           |   |                                              |   |                                             |   |   |   |   |   |
| Service                  charges on deposit accounts           |   | $                                                 | 1,243  |                                             | $      | 1,173 |   | $ | 3,399 |   | $ | 3,162 |   |
| Service                  charges on loans                      |   |                                              | 1,015  |                                             |   | 861 |   |   | 2,611 |   |   | 2,535 |   |
| Securities                  gains, net                         |   |                                              | 2      |                                             |   | - |   |   | 2 |   |   | - |   |
| Gain                  on sale of loans, net                    |   |                                              | 29     |                                             |   | 102 |   |   | 83 |   |   | 301 |   |
| Gain                  on sale of fixed assets, net             |   |                                              | (3     | )                                                |   | (102 | ) |   | 187 |   |   | 293 |   |
| Tax                  fees, brokerage and insurance commissions |   |                                              | 397    |                                             |   | 290 |   |   | 1,662 |   |   | 1,330 |   |
| Other                                                          |   |                                              | 918    |                                             |   | 823 |   |   | 2,691 |   |   | 3,051 |   |
| Total                  non-interest income                     |   | $                                                 | 3,601  |                                             | $      | 3,147 |   | $ | 10,635 |   | $ | 10,672 |   |

** **

----

**Non-Interest        Expense**

|                                                |   | Three                  Months Ended September 30, |   | Nine                  Months Ended September 30, |   |
|-----------------------------------------------------|--------|---------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                |   | 2006                                              |   | 2005                                             |   | 2006 |   | 2005 |   |
|                                                |   |                                              |   | *(Dollars                  in Thousands)*        |   |   |   |
| Salaries                  and employee benefits     |   | $                                                 | 7,347  |                                             | $      | 6,990 |   | $ | 22,403 |   | $ | 21,208 |   |
| Premises                  and equipment             |   |                                              | 1,680  |                                             |   | 1,695 |   |   | 5,181 |   |   | 5,372 |   |
| Data                  processing fees               |   |                                              | 847    |                                             |   | 845 |   |   | 2,617 |   |   | 2,576 |   |
| Marketing                  and business development |   |                                              | 442    |                                             |   | 517 |   |   | 1,444 |   |   | 1,568 |   |
| Other                                               |   |                                              | 2,225  |                                             |   | 2,136 |   |   | 6,647 |   |   | 6,461 |   |
| Total                  noninterest expense          |   | $                                                 | 12,541 |                                             | $      | 12,183 |   | $ | 38,292 |   | $ | 37,185 |   |

**Income        Taxes**

**Liquidity**

----

** **

**Asset/Liability        Management**

----

|                                                                       |   | **Amounts                  Maturing or Repricing as of September 30, 2006** |    |
|----------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|---------|
|                                                                       |   | **Within**                                                                  |    | **Six                  to Twelve** |   | **One                  to Five** |   | **Over** |   |   |   |
|                                                                       |   | **Six                  months**                                             |    | **Months** |   | **Years** |   | **Five                  Years** |   | **Total** |   |
|                                                                       |   |                                                                        |    | *(Dollars                  in Thousands)* |   |   |   |
| Interest-earning                  assets:                                  |   |                                                                        |    |   |   |   |   |   |   |   |   |
| Fixed-rate                  mortgage loans                                 |   | $                                                                           | 129,852 |   | $ | 92,475 |   | $ | 360,750 |   | $ | 16,408 |   | $ | 599,485 |   |
| Adjustable-rate                  mortgage loans                            |   |                                                                        | 178,827 |   |   | 12,291 |   |   | 44,624 |   |   | 395 |   |   | 236,137 |   |
| Total                  mortgage loans                                      |   |                                                                        | 308,679 |   |   | 104,766 |   |   | 405,374 |   |   | 16,803 |   |   | 835,622 |   |
| Commercial                  business loans                                 |   |                                                                        | 137,227 |   |   | 36,381 |   |   | 81,881 |   |   | 3,627 |   |   | 259,116 |   |
| Consumer                  loans                                            |   |                                                                        | 16,736  |   |   | 8,287 |   |   | 25,932 |   |   | 2,048 |   |   | 53,003 |   |
| Home                  equity loans                                         |   |                                                                        | 24,740  |   |   | 11 |   |   | 5,296 |   |   | 150 |   |   | 30,197 |   |
| Other                  loans                                               |   |                                                                        | 3,705   |   |   | 131 |   |   | 1,709 |   |   | 867 |   |   | 6,412 |   |
| Mortgage-related                  securities                               |   |                                                                        | 6,438   |   |   | 4,956 |   |   | 46,874 |   |   | 27,778 |   |   | 86,046 |   |
| Fixed                  rate investment securities and other                |   |                                                                        | 6,078   |   |   | 2,877 |   |   | 24,514 |   |   | 41,337 |   |   | 74,806 |   |
| Variable                  rate investment securities and other             |   |                                                                        | 21,364  |   |   | - |   |   | - |   |   | - |   |   | 21,364 |   |
| Total                  interest-earning assets                             |   | $                                                                           | 524,967 |   | $ | 157,409 |   | $ | 591,580 |   | $ | 92,610 |   | $ | 1,366,566 |   |
|                                                                       |   |                                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                             |   |                                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                   |   |                                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Time                  deposits                                             |   | $                                                                           | 168,233 |   | $ | 152,313 |   | $ | 231,896 |   | $ | 108 |   | $ | 552,550 |   |
| NOW                  accounts                                              |   |                                                                        | 6,184   |   |   | 6,184 |   |   | 61,843 |   |   | 28,860 |   |   | 103,071 |   |
| Savings                  accounts                                          |   |                                                                        | 7,558   |   |   | 7,665 |   |   | 75,577 |   |   | 35,268 |   |   | 126,068 |   |
| Money                  market accounts                                     |   |                                                                        | 23,860  |   |   | 13,488 |   |   | 134,882 |   |   | 62,947 |   |   | 235,177 |   |
| Short-term                  borrowings                                     |   |                                                                        | 63,205  |   |   | - |   |   | - |   |   | - |   |   | 63,205 |   |
| Long-term                  borrowings                                      |   |                                                                        | 18,672  |   |   | 10,507 |   |   | 91,012 |   |   | 2,098 |   |   | 122,289 |   |
| Junior                  subordinated debt owed to unconsolidated trusts    |   |                                                                        | 28,352  |   |   | - |   |   | - |   |   | 18,042 |   |   | 46,394 |   |
| Total                  interest-bearing liabilities                        |   | $                                                                           | 316,064 |   | $ | 190,157 |   | $ | 595,210 |   | $ | 147,323 |   | $ | 1,248,754 |   |
|                                                                       |   |                                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                  assets less interest-bearing liabilities |   | $                                                                           | 208,903 |   | $ | (                  32,748 | ) | $  | (                  3,630 | ) | $ | (                  54,713 | ) | $ | 117,812 |   |
| Cumulative                  interest rate sensitivity gap                  |   | $                                                                           | 208,903 |   | $ | 176,155 |   | $ | 172,525 |   | $ | 117,812 |   |   |   |   |
| Cumulative                  interest rate sensitivity gap as a             |   |                                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| percentage                  of total assets                                |   |                                                                        | 14.07   | % |   | 11.87 | % |   | 11.62 | % |   | 7.94 | % |   |   |   |

----

**Forward-Looking        Statements**

**Item        3. Quantitative and Qualitative Disclosures About Market        Risk**

**Item        4. Controls and Procedures **

----

**.        **

|   | · | Remediate                  the material weakness through changes in the Corporation's internal                  control over financial reporting at all of the Corporation's subsidiary                  banks, including increasing centralized loan documentation, review                  and                  oversight at the holding company level to reduce the ability of                  individual                  bank loan officers to operate outside of bank lending policies                  and                  procedures. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Strengthen                  the Corporation's Whistleblower Policy and related                  training. |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | · | Strengthen                  the loan review function through an improvement in policies and                  procedures. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | · | Strengthen                  the Corporation's internal audit function through an enhancement                  in the                  audit program. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Part        II. Other Information**

| Item                      1.  | Legal                      Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                      |
|-------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                          | As                      of September 30, 2006 there were no material pending legal                      proceedings,                      other than ordinary routine litigation incidental to the business                      of the                      Corporation, to which the Corporation or any of its subsidiaries                      was a                      party or to which any of their property was subject.                          |
| Item                      1A. | Risk                      Factors There                      have been no material changes from the risk factors previously                      disclosed                      in Part I, Item 1A, "Risk Factors," of our Form 10-K for the                      year ended                      December 31, 2005. Please refer to that section for disclosures                      regarding the risks and uncertainties relating to our business. |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Item                      2.  | Unregistered                      Sales of Equity Securities and Use of Proceeds (a) NONE (b) NONE (c) NONE                                                                                                                                                                                                                                                                                                                   |
| Item                      3.  | Defaults                      upon Senior Securities - NONE                                                                                                                                                                                                                                                                                                                                                                                                      |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Item                      4.  | Submission                      of Matters to Vote of Security Holders - NONE                                                                                                                                                                                                                                                                                                                                                                                    |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Item                      5.  | Other                      Information - NONE                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Item                      6.  | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

| EXHIBIT                      31.1                                                                                                                                                                                                                                                                                                                                                                                                                             | Certification                      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by                      the Chief                      Executive Officer |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                  |
| EXHIBIT                      31.2                                                                                                                                                                                                                                                                                                                                                                                                                             | Certification                      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by                      the Chief                      Financial Officer |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                  |
| EXHIBIT                      32.1*                                                                                                                                                                                                                                                                                                                                                                                                                            | Certification                      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by                      the Chief                      Executive Officer |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                  |
| EXHIBIT                      32.2*                                                                                                                                                                                                                                                                                                                                                                                                                            | Certification                      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by                      the Chief                      Financial Officer |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                  |
| * These                      certifications are not "filed" for purposes of Section 18 of                      the                      Securities Exchange Act of 1934, as  amended,                      or incorporated by reference into any filing under the Securities                      Act of                      1933, as amended, or the  Securities                      Exchange Act of 1934, as                      amended. |

----

**SIGNATURES**

**MERCHANTS        AND MANUFACTURERS BANCORPORATION, INC.**

| Date                  November                  8, 2006 . | /s/                  Michael J. Murry                                                   |
|-----------------------------------------------------------|-----------------------------------------------------------------------------------------|
|                                                      | Michael                  J. Murry                                                       |
|                                                      | Chairman                  of the Board of Directors                                     |
|                                                      | and                  Chief Executive Officer                                            |
|                                                      | Principal                  Executive Officer                                            |
|                                                      |                                                                                    |
| Date                  November                  8, 2006 . | /s/                  Frederick R. Klug                                                  |
|                                                      | Frederick                  R. Klug                                                      |
|                                                      | Executive                  Vice President & ChiefFinancial                  Officer |
|                                                      | Principal                  Financial Officer                                            |

----

**10-Q        EXHIBIT LIST**

| EXHIBIT                    NO.                                                                                                                                                                                                                                                                                                                                                                                                                | DESCRIPTION                                                                                                                                                     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                            |
| EXHIBIT                    31.1                                                                                                                                                                                                                                                                                                                                                                                                               | Certification                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by                    the Chief                    Executive Officer |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                            |
| EXHIBIT                    31.2                                                                                                                                                                                                                                                                                                                                                                                                               | Certification                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by                    the Chief                    Financial Officer |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                            |
| EXHIBIT                    32.1*                                                                                                                                                                                                                                                                                                                                                                                                              | Certification                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by                    the Chief                    Executive Officer |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                            |
| EXHIBIT                    32.2*                                                                                                                                                                                                                                                                                                                                                                                                              | Certification                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by                    the Chief                    Financial Officer |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                            |
| * These                    certifications are not "filed" for purposes of Section 18 of                    the                    Securities Exchange Act of 1934, as  amended,                    or incorporated by reference into any filing under the Securities                    Act of                    1933, as amended, or the  Securities                    Exchange Act of 1934, as                    amended. |