**FORM      10-Q**

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

|   | For                the quarterly period ended September 30,                2007 |
|--------|---------------------------------------------------------------------------------|

|   | or |
|--------|----|

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

|   | For                the transition period from  _________________ to                _____________________ |
|--------|--------------------------------------------------------------------------------------------------------------------|

|   | Commission                file                Number  0-21292 |
|--------|-------------------------------------------------------------------------|

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

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

| 5445                S. Westridge DriveNew                Berlin, Wisconsin  5315 |
|--------------------------------------------------------------------------------------------|
| (Address                of principal executive office)                                     |

| (262)                827-6700                                                    |
|----------------------------------------------------------------------------------|
| Registrant's                telephone number, including area                code |

----

|   | **MERCHANTS                AND MANUFACTURERS BANCORPORATION,                INC.** |
|--------|------------------------------------------------------------------------------------|

|   | **FORM                10-Q** |
|--------|------------------------------|

|   | **INDEX** |
|--------|-----------|

|   | **Part                I.  Financial                Information** |
|--------|----------------------------------------------------------------------------|

|                                                                                                                                                                               | **Page                Number**                                                                                                                                                                                                      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Item                1.     Financial Statements                                                                                                           |                                                                                                                                                                                                                                |
|                                                                                                                                                                               | Unaudited                Consolidated Statements of Financial Condition as ofSeptember                30, 2007, December 31, 2006, and September 30, 2006                                                                      |  3 |
|                                                                                                                                                                               | Unaudited                Consolidated Statements of Operations for the Three and Nine                Monthsended                September 30, 2007 and September 30, 2006                                                      |  4 |
|                                                                                                                                                                               | Unaudited                Consolidated Statements of Changes in Shareholders' Equity and                Comprehensive Income                for the Nine Months ended September 30, 2007 and September 30,                2006  |  6 |
|                                                                                                                                                                               | Unaudited                Consolidated Statements of Cash Flows for the Nine Monthsended                September 30, 2007 and September 30, 2006                                                                               |  7 |
|                                                                                                                                                                               | Notes                to Unaudited Consolidated Financial Statements                                                                                                                                                            | 9 |
| Item                2.     Management's Discussion and Analysis of                Financial Condition and Results                of Operations  |  16                                                                                                                                                                                                                            |
| Item                3.     Quantitative and Qualitative Disclosures About                Market Risk                                                      | 28                                                                                                                                                                                                                                  |
| Item                4.     Controls and Procedures                                                                                                             | 28                                                                                                                                                                                                                                  |

|   | **Part                II.  Other                Information** |
|--------|-------------------------------------------------------------------------|

| Items                1-6  | 29 |
|--------------------------------|----|
| Signatures                     | 31 |

----

|  **Part                I. Financial Information**                      |   |   |   |   |   |
|-----------------------------------------------------------------------------|--------|--------|--------|--------|--------|
| **Merchants                and Manufacturers Bancorporation, Inc.**         |   |   |   |   |
| **Unaudited                Consolidated Statements of Financial Condition** |   |   |   |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **September                30,**                                            |      |   | **December                31,** |   |      | **September                30,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|-----------|--------|---------------------------------|--------|-----------|----------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **2007**                                                                    |      |   | **2006**                        |   |      | **2006**                         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | *(Dollars                in Thousands, Except Share and Per Share Amounts)* |      |
| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                        |      |   |                            |   |      |                             |   |
| Cash                and due from                banks                                                                                                        |   | $                                                                           | 30,756    |   |                            | $      | 31,601    |                             |   | $ | 28,555 |   |
| Interest                bearing deposits in banks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                        | 4,759     |   |                            |   | 738       |                             |   |   | 2,486 |   |
| Federal                funds sold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                        | 9,687     |   |                            |   | 5,524     |                             |   |   | 2,729 |   |
| Cash                and cash                equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                                        | 45,202    |   |                            |   | 37,863    |                             |   |   | 33,770 |   |
| Available-for-sale                securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                        | 127,923   |   |                            |   | 134,917   |                             |   |   | 137,224 |   |
| Loans,                less allowance for loan losses of $12,993 at September 30,                2007,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                                        |      |   |                            |   |      |                             |   |   |   |   |
| $11,835                at December 31, 2006 and                $10,593 at September 30, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                        | 1,117,162 |   |                            |   | 1,098,377 |                             |   |   | 1,076,075 |   |
| Assets                held for                sale                                                                                                           |   |                                                                        | 81,721    |   |                            |   | 137,923   |                             |   |   | 138,004 |   |
| Accrued                interest receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                        | 7,103     |   |                            |   | 6,519     |                             |   |   | 6,572 |   |
| FHLB                stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                        | 11,351    |   |                            |   | 11,182    |                             |   |   | 13,997 |   |
| Premises                and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                        | 28,809    |   |                            |   | 29,349    |                             |   |   | 29,402 |   |
| Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                        | 27,320    |   |                            |   | 27,222    |                             |   |   | 27,222 |   |
| Intangible                assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                        | 1,888     |   |                            |   | 2,104     |                             |   |   | 2,189 |   |
| Other                assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                        | 27,079    |   |                            |   | 20,484    |                             |   |   | 20,180 |   |
| **Total                assets    **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $                                                                           | 1,475,558 |   |                            | $      | 1,505,940 |                             |   | $ | 1,484,635 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                        |      |   |                            |   |      |                             |   |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                        |      |   |                            |   |      |                             |   |   |   |   |
| Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                        |      |   |                            |   |      |                             |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                        |      |   |                            |   |      |                             |   |   |   |   |
| Non-interest                bearing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $                                                                           | 114,402   |   |                            | $      | 127,033   |                             |   | $ | 111,590 |   |
| Interest                bearing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                                        | 932,680   |   |                            |   | 933,372   |                             |   |   | 923,456 |   |
| Total                deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                        | 1,047,082 |   |                            |   | 1,060,405 |                             |   |   | 1,035,546 |   |
| Short-term                borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                        | 83,626    |   |                            |   | 55,383    |                             |   |   | 60,116 |   |
| Long-term                borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                        | 107,152   |   |                            |   | 106,831   |                             |   |   | 106,627 |   |
| Junior                subordinated debt owed to                unconsolidated trusts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                        | 53,611    |   |                            |   | 53,611    |                             |   |   | 46,394 |   |
|   Liabilities                held for                sale                                                                                          |   |                                                                        | 71,978    |   |                            |   | 121,720   |                             |   |   | 122,162 |   |
| Accrued                interest                payable                                                                                                            |   |                                                                        | 4,188     |   |                            |   | 4,034     |                             |   |   | 4,290 |   |
| Other                liabilities                                                                                                                                  |   |                                                                        | 14,456    |   |                            |   | 9,659     |                             |   |   | 14,545 |   |
| **Total                liabilities                                                                                   **                                                                    |   |                                                                        | 1,382,093 |   |                            |   | 1,411,643 |                             |   |   | 1,389,680 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                        |      |   |                            |   |      |                             |   |   |   |   |
| 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, 2007, December 31, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                        |      |   |                            |   |      |                             |   |   |   |   |
| and                September 30, 2006; shares                outstanding: 3,662,416 at                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                        |      |   |                            |   |      |                             |   |   |   |   |
| September                30, 2007, 3,677,180                at December 31, 2006 and 3,687,180                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                        |      |   |                            |   |      |                             |   |   |   |   |
| at                September 30,                2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                                        | 3,770     |   |                            |   | 3,770     |                             |   |   | 3,770 |   |
| Additional                paid-in                capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                        | 53,666    |   |                            |   | 53,684    |                             |   |   | 53,678 |   |
| Retained                earnings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                        | 39,505    |   |                            |   | 40,259    |                             |   |   | 40,903 |   |
| Accumulated                other comprehensive                loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                        | (473      | )      |                            |   | (881      | )                                |   |   | (1,177 | ) |
| Treasury                stock, at cost (107,835                shares at September 30, 2007, 93,071                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                                        |      |   |                            |   |      |                             |   |   |   |   |
| shares                at December 31, 2006 and                83,071 shares at September 30, 2006)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                        | (3,003    | )      |                            |   | (2,535    | )                                |   |   | (2,219 | ) |
| **Total                stockholders'                equity **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                        | 93,465    |   |                            |   | 94,297    |                             |   |   | 94,955 |   |
| **Total                liabilities and                stockholders' equity**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                                                                           | 1,475,558 |   |                            | $      | 1,505,940 |                             |   | $ | 1,484,635 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                        |      |   |                            |   |      |                             |   |   |   |   |
| *See                notes to unaudited consolidated financial statements.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                        |      |   |                            |   |      |                             |   |   |   |   |

----

| **Merchants                and Manufacturers Bancorporation, Inc.** |   |   |   |   |   |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| **Unaudited                Consolidated Statements of Operations**  |   |   |   |   |

|                                                                                                                                                                                |   | **Three                Months Ended**                             |   |   | **Nine                Months Ended** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|--------|--------------------------------------|--------|
|                                                                                                                                                                                |   | **September                30,**                                  |   |   | **September                30,**     |   |
|                                                                                                                                                                                |   | **2007**                                                          |   |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
|                                                                                                                                                                                |   | *(Dollars                In Thousands, Except Per Share Amounts)* |   |
| Interest                income:                                                                                                                                                     |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |
|   Interest                and fees on loans                                                                                                                          |   | $                                                                 | 20,530 |   |                                 | $      | 19,786 |   |   | $ | 60,451 |   |   | $ | 56,772 |   |
|   Interest                and dividends on securities:                                                                                                                    |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
|     Taxable                                                                                                                                                     |   |                                                              | 185    |   |                                 |   | 225 |   |   |   | 597 |   |   |   | 760 |   |
|     Tax-exempt                                                                                                                                             |   |                                                              | 542    |   |                                 |   | 511 |   |   |   | 1,574 |   |   |   | 1,681 |   |
|   Interest                on mortgage-backed securities                                                                                                                   |   |                                                              | 769    |   |                                 |   | 875 |   |   |   | 2,348 |   |   |   | 2,529 |   |
|   Interest                on interest bearing deposits in    banks                and federal funds sold                                    |   |                                                              | 136    |   |                                 |   | 94 |   |   |   | 631 |   |   |   | 192 |   |
|       Total                interest income                                                                                                       |   |                                                              | 22,162 |   |                                 |   | 21,491 |   |   |   | 65,601 |   |   |   | 61,934 |   |
|                                                                                                                                                                                |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Interest                expense:                                                                                                                                                    |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
|   Interest                on deposits                                                                                                                                |   |                                                              | 9,041  |   |                                 |   | 7,823 |   |   |   | 26,420 |   |   |   | 21,234 |   |
|   Interest                on short-term borrowings                                                                                                                   |   |                                                              | 905    |   |                                 |   | 888 |   |   |   | 2,236 |   |   |   | 3,226 |   |
|   Interest                on long-term borrowings                                                                                                               |   |                                                              | 1,326  |   |                                 |   | 1,261 |   |   |   | 3,876 |   |   |   | 3,451 |   |
|   Interest                on junior subordinated debt owed to                                                                                                             |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
|     unconsolidated                trusts                                                                                                                        |   |                                                              | 1,069  |   |                                 |   | 950 |   |   |   | 3,173 |   |   |   | 2,716 |   |
|       Total                interest expense                                                                                            |   |                                                              | 12,341 |   |                                 |   | 10,922 |   |   |   | 35,705 |   |   |   | 30,627 |   |
|                                                                                                                                                                                |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                                                                                                                                        |   |                                                              | 9,821  |   |                                 |   | 10,569 |   |   |   | 29,896 |   |   |   | 31,307 |   |
| Provision                for loan losses                                                                                                                                  |   |                                                              | 1,905  |   |                                 |   | 390 |   |   |   | 2,805 |   |   |   | 1,170 |   |
| Net                interest income after provision for                                                                                                                              |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
|   loan                losses                                                                                                                                         |   |                                                              | 7,916  |   |                                 |   | 10,179 |   |   |   | 27,091 |   |   |   | 30,137 |   |
|                                                                                                                                                                                |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest                income:                                                                                                                                                 |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
|   Service                charges on deposit accounts                                                                                                       |   |                                                              | 967    |   |                                 |   | 1,097 |   |   |   | 2,831 |   |   |   | 2,989 |   |
|   Service                charges on loans                                                                                                                       |   |                                                              | 675    |   |                                 |   | 953 |   |   |   | 2,141 |   |   |   | 2,472 |   |
|   Securities                gains, net                                                                                                                          |   |                                                              | -      |   |                                 |   | 2 |   |   |   | - |   |   |   | 2 |   |
|   Gain                on sale of loans, net                                                                                                                          |   |                                                              | 40     |   |                                 |   | 29 |   |   |   | 73 |   |   |   | 83 |   |
|   Gain                on sale (loss) of fixed assets, net                                                                                                                 |   |                                                              | (6     | )      |                                 |   | (3 | ) |   |   | 155 |   |   |   | 172 |   |
|   Tax                fees, brokerage and insurance commissions                                                                                                            |   |                                                              | 365    |   |                                 |   | 397 |   |   |   | 1,777 |   |   |   | 1,662 |   |
|   Other                                                                                                                                                    |   |                                                              | 635    |   |                                 |   | 859 |   |   |   | 1,915 |   |   |   | 2,562 |   |
|       Total                noninterest income                                                                                               |   |                                                              | 2,676  |   |                                 |   | 3,334 |   |   |   | 8,892 |   |   |   | 9,942 |   |
|                                                                                                                                                                                |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest                expenses:                                                                                                                                                |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
|   Salaries                and employee benefits                                                                                                                 |   |                                                              | 6,992  |   |                                 |   | 6,873 |   |   |   | 20,186 |   |   |   | 20,954 |   |
|   Premises                and equipment                                                                                                                              |   |                                                              | 1,604  |   |                                 |   | 1,550 |   |   |   | 5,295 |   |   |   | 4,850 |   |
|   Data                processing fees                                                                                                                                |   |                                                              | 853    |   |                                 |   | 760 |   |   |   | 2,506 |   |   |   | 2,342 |   |
|   Marketing                and business development                                                                                                                       |   |                                                              | 415    |   |                                 |   | 393 |   |   |   | 1,282 |   |   |   | 1,258 |   |
|   Other                                                                                                                                                              |   |                                                              | 2,635  |   |                                 |   | 1,927 |   |   |   | 6,128 |   |   |   | 5,759 |   |
|       Total                noninterest expense                                                                                                   |   |                                                              | 12,499 |   |                                 |   | 11,503 |   |   |   | 35,397 |   |   |   | 35,163 |   |
|                                                                                                                                                                                |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
|       Income                (loss) from continuing operations before        income                taxes  |   |                                                              | (1,907 | )      |                                 |   | 2,010 |   |   |   | 586 |   |   |   | 4,916 |   |
| Income                taxes                                                                                                                                                    |   |                                                              | (781   | )      |                                 |   | 669 |   |   |   | 22 |   |   |   | 1,530 |   |
|       Income                (loss) from continuing operations                                                                                         |   |                                                              | (1,126 | )      |                                 |   | 1,341 |   |   |   | 564 |   |   |   | 3,386 |   |
|                                                                                                                                                                                |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Discontinued                operations                                                                                                                                              |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
|       Income                from discontinued operations before        income                tax expense |   |                                                              | 214    |   |                                 |   | 358 |   |   |   | 2,207 |   |   |   | 867 |   |
|       Income                tax expense                                                                                                          |   |                                                              | 71     |   |                                 |   | 121 |   |   |   | 1,556 |   |   |   | 280 |   |
|       Income                from discontinued operations                                                                                              |   |                                                              | 143    |   |                                 |   | 237 |   |   |   | 651 |   |   |   | 587 |   |
|       Net                income (loss)                                                                                                      |   | $                                                                 | (983   | )      |                                 | $      | 1,578 |   |   | $ | 1,215 |   |   | $ | 3,973 |   |
|                                                                                                                                                                                |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |

----

| **Merchants                and Manufacturers Bancorporation, Inc.**           |   |   |   |   |   |   |
|-------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| **Unaudited                Consolidated Statements of Operations, continued** |   |   |   |   |   |   |
|                                                                          |   |   |   |   |   |   |   |

|                                                                                                                |   | **Three                Months Ended**                             |   |   | **Nine                Months Ended** |   |
|---------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|--------|--------------------------------------|--------|
|                                                                                                                |   | **September                30,**                                  |   |   | **September                30,**     |   |
|                                                                                                                |   | **2007**                                                          |   |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
|                                                                                                                |   | *(Dollars                In Thousands, Except Per Share Amounts)* |   |
|                                                                                                                |   |                                                              |   |
| Basic                earnings (loss) per share from continuing operations                                           |   | $                                                                 | (0.31  | )      |                                 | $      | 0.36 |   |   | $ | 0.15 |   |   | $ | 0.91 |   |
| Basic                earnings per share from discontinued operations                                                |   | $                                                                 | 0.04   |   |                                 | $      | 0.06 |   |   | $ | 0.18 |   |   | $ | 0.16 |   |
| Basic                earnings (loss) per                share          |   | $                                                                 | (0.27  | )      |                                 | $      | 0.42 |   |   | $ | 0.33 |   |   | $ | 1.07 |   |
|                                                                                                                |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                earnings (loss) per share from continuing operations                                         |   | $                                                                 | (0.31  | )      |                                 | $      | 0.36 |   |   | $ | 0.15 |   |   | $ | 0.91 |   |
| Diluted                earnings per share from discontinued operations                                              |   | $                                                                 | 0.04   |   |                                 | $      | 0.06 |   |   | $ | 0.18 |   |   | $ | 0.16 |   |
| Diluted                earnings (loss) per share                                                     |   | $                                                                 | (0.27  | )      |                                 | $      | 0.42 |   |   | $ | 0.33 |   |   | $ | 1.07 |   |
|                                                                                                                |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Dividends                per share                                                                        |   | $                                                                 | 0.18   |   |                                 | $      | 0.18 |   |   | $ | 0.54 |   |   | $ | 0.54 |   |
|                                                                                                                |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| *See                notes to unaudited consolidated financial statements.*                                          |   |                                                              |   |   |                                 |   |   |   |   |   |   |   |   |

----

| **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, 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 losses                on                                                                                                                                                                                                                                                    |   |                                                                                                       |      |         |   |   |   |       |   |   |     |                       |         |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| available-for-sale                securities                                                                                                                                                                                                                                                                        |   |                                                                                                       | -         |         |   |   | -      |       |   |   | -        |                       |         |          | -      |   |     |   | 296    |   |   |   | - |   |   |   | 296 |   |
| 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 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 |   |
|                                                                                                                                                                                                                                                                                                                |   |                                                                                                       |      |         |   |   |   |       |   |   |     |                       |         |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Nine                Months Ended September 30, 2007                                                                                                                                                                                                                                                                 |   |                                                                                                       |      |         |   |   |   |       |   |   |     |                       |         |          |   |   |     |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2006                                                                                                                                                                                                                                                                         |   |                                                                                                       | 3,677,180 |         |   | $      | 3,770  |       |   | $      | 53,684   |                       |         | $             | 40,259 |   |     | $      | (881   | )      |   | $ | (2,535 | ) |   | $ | 94,297 |   |
| Comprehensive                income:                                                                                                                                                                                                                                                                                |   |                                                                                                       |      |         |   |   |   |       |   |   |     |                       |         |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                |   |                                                                                                       | -         |         |   |   | -      |       |   |   | -        |                       |         |          | 1,215  |   |     |   | -      |   |   |   | - |   |   |   | 1,215 |   |
| Change                in net unrealized gains                on                                                                                                                                                                                                                                                     |   |                                                                                                       |      |         |   |   |   |       |   |   |     |                       |         |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| available-for-sale                securities                                                                                                                                                                                                                                                                        |   |                                                                                                       | -         |         |   |   | -      |       |   |   | -        |                       |         |          | -      |   |     |   | 633    |   |   |   | - |   |   |   | 633 |   |
| Reclassification                adjustment for                gains                                                                                                                                                                                                                                                 |   |                                                                                                       |      |         |   |   |   |       |   |   |     |                       |         |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| realized                in net                income                                                                                                                                                                                                                                                                |   |                                                                                                       | -         |         |   |   | -      |       |   |   | -        |                       |         |          | -      |   |     |   | -      |   |   |   | - |   |   |   | - |   |
| Income                tax                effect                                                                  |   |                                                                                                       | -         |         |   |   | -      |       |   |   | -        |                       |         |          | -      |   |     |   | (225   | )      |   |   | - |   |   |   | (225 | ) |
| Total                comprehensive income                                                                                                                                                                                                                                                                           |   |                                                                                                       |      |         |   |   |   |       |   |   |     |                       |         |          |   |   |     |   |   |   |   |   |   |   |   |   | 1,623 |   |
|                                                                                                                                                                                                                                                                                                                |   |                                                                                                       |      |         |   |   |   |       |   |   |     |                       |         |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Stock-based                compensation                                                                                                                                                                                                                                                                             |   |                                                                                                       | -         |         |   |   | -      |       |   |   | 5        |                       |         |          | -      |   |     |   | -      |   |   |   | - |   |   |   | 5 |   |
| Cash                dividend - $0.54 per share                                                                                                                                                                                                                                                                      |   |                                                                                                       | -         |         |   |   | -      |       |   |   | -        |                       |         |          | (1,969 | )      |     |   | -      |   |   |   | - |   |   |   | (1,969 | ) |
| Purchase                of treasury stock                                                                                                                                                                                                                                                                           |   |                                                                                                       | (17,000   | )            |   |   |   |       |   |   |     |                       |         |          |   |   |     |   |   |   |   |   | (524 | ) |   |   | (524 | ) |
| Exercise                of stock                options                                                                                                                                                                                            |   |                                                                                                       | 2,236     |         |   |   | -      |       |   |   | (23      | )                          |         |          | -      |   |     |   | -      |   |   |   | 56 |   |   |   | 33 |   |
| Balance                at September 30, 2007                                                                                                                                                                                                                                                                        |   |                                                                                                       | 3,662,416 |         |   | $      | 3,770  |       |   | $      | 53,666   |                  |         | $             | 39,505 |   |     | $      | (473   | )      |   | $ | (3,003 | ) |   | $ | 93,465 |   |
|                                                                                                                                                                                                                                                                                                                |   |                                                                                                       |      |         |   |   |   |       |   |   |     |                       |         |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| *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,** |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|---------|
|                                                                                                                                                                                    |   | **2007**                                           |    |   | **2006** |   |
|                                                                                                                                                                                    |   | *(Dollars                in Thousands)*            |    |
| Cash                Flows From Operating Activities                                                                                                                                     |   |                                               |    |   |   |   |
|   Net                income                                                              |   | $                                                  | 1,215   |   |   | $ | 3,973 |   |
|   Net                income from discontinued                operations                                                                                   |   |                                               | (651    | ) |   |   | (587 | ) |
|   Adjustments                to reconcile net income to cash provided by operating                activities:                                                                 |   |                                               |    |   |   |   |   |   |
|        Provision                for loan losses                                                                                       |   |                                               | 2,805   |   |   |   | 1,170 |   |
|        Depreciation                                                                                                              |   |                                               | 1,850   |   |   |   | 1,858 |   |
|        Amortization                and accretion of premiums and discounts, net                                                                      |   |                                               | 149     |   |   |   | 243 |   |
|        Amortization                of intangibles                                                                      |   |                                               | 223     |   |   |   | 253 |   |
|        Gain                on sale of  investment securities,                net                                       |   |                                               | -       |   |   |   | (2 | ) |
|        Gain                on sale of loans,                net                                                   |   |                                               | (73     | ) |   |   | (83 | ) |
|        Loans                originated for                sale                                          |   |                                               | (30,873 | ) |   |   | (27,561 | ) |
|        Proceeds                from sales of loans                                                                               |   |                                               | 30,766  |   |   |   | 27,031 |   |
|        Gain                on sale of fixed assets, net                                                                     |   |                                               | (155    | ) |   |   | (187 | ) |
|        Increase                in accrued interest                receivable                                                |   |                                               | (223    | ) |   |   | (826 | ) |
|        Increase                (decrease) in accrued interest payable                                                                      |   |                                               | (25     | ) |   |   | 959 |   |
|        Stock-based                compensation expense                                                                                |   |                                               | 5       |   |   |   | 70 |   |
|        FHLB                Stock dividend                                                                                        |   |                                               | (9      | ) |   |   | - |   |
|        Other                                                                                                                          |   |                                               | 3,249   |   |   |   | 2,027 |   |
| **           Net                cash provided by operating                activities       ** |   |                                               | 8,253   |   |   |   | 8,338 |   |
|                                                                                                                                                                                    |   |                                               |    |   |   |   |   |   |
| Cash                Flows From Investing Activities                                                                                                                                     |   |                                               |    |   |   |   |   |   |
|   Purchase                of available-for-sale                securities                                                             |   |                                               | (5,373  | ) |   |   | (26,178 | ) |
|   Proceeds                from sale of available-for-sale                securities                                                                  |   |                                               | 5,489   |   |   |   | 12,656 |   |
|   Proceeds                from redemptions and maturities of available-for-sale                securities                                                                     |   |                                               | 16,855  |   |   |   | 25,407 |   |
|   Increase                in cash surrender value of life                insurance                                                                             |   |                                               | (298    | ) |   |   | (319 | ) |
|   Net                (increase) decrease in loans                                                                                                         |   |                                               | 12,969  |   |   |   | (43,069 | ) |
|   Purchase                of premises and equipment, net                                                                                                  |   |                                               | (958    | ) |   |   | (3,707 | ) |
|   Proceeds                from sale of premises and                equipment                                                                    |   |                                               | 1,054   |   |   |   | - |   |
|   Proceeds                from sale of other real estate                owned                                                                             |   |                                               | 1,254   |   |   |   | 2,195 |   |
|   Redemption                of Federal Home Loan Bank                stock                                                                      |   |                                               | 95      |   |   |   | 5,627 |   |
| **          Net                cash provided by (used in) investing                activities    **               |   |                                               | 31,087  |   |   |   | (27,388 | ) |
|                                                                                                                                                                                    |   |                                               |    |   |   |   |   |   |
| Cash                Flows From Financing Activities                                                                                                                                     |   |                                               |    |   |   |   |   |   |
|   Net                decrease in                deposits                                                                              |   |                                               | (59,199 | ) |   |   | (25,397 | ) |
|   Dividends                paid                                                                                             |   |                                               | (1,894  | ) |   |   | (1,523 | ) |
|   Net                increase in short-term                borrowings                                                                                |   |                                               | 28,238  |   |   |   | 15,988 |   |
|   Proceeds                from long-term borrowings                                                                                                  |   |                                               | 20,500  |   |   |   | 54,555 |   |
|   Repayment                of long-term borrowings                                                                                                   |   |                                               | (23,254 | ) |   |   | (34,303 | ) |
|   Purchase                of treasury                stock                                                                                 |   |                                               | (524    | ) |   |   | (507 | ) |
|   Increase                in advance payments by borrowers for taxes and insurance                                                                                            |   |                                               | 1,181   |   |   |   | 1,206 |   |
|   Common                stock transactions, net                                                                                                                     |   |                                               | 33      |   |   |   | - |   |
| **          Net                cash provided by (used in) financing                activities     **         |   |                                               | (34,919 | ) |   |   | 10,019 |   |
|                                                                                                                                                                                    |   |                                               |    |   |   |   |   |   |
| Cash                Flows From Discontinued Operations                                                                                                                                  |   |                                               |    |   |   |   |   |   |
|   Operating                cash flows, net                                                                                                      |   |                                               | 555     |   |   |   | 412 |   |
|   Investing                cash flows, net                                                                                                           |   |                                               | 82      |   |   |   | (7,819 | ) |
|   Financing                cash flows, net                                                                                                           |   |                                               | (633    | ) |   |   | 6,701 |   |
|   Cash                and cash equivalents                                                                                                                          |   |                                               | 2,778   |   |   |   | 3,977 |   |
| **          Net                cash provided by discontinued                operations    **                      |   |                                               | 2,782   |   |   |   | 3,271 |   |
|                                                                                                                                                                                    |   |                                               |    |   |   |   |   |   |
| **          Increase                (decrease) in cash and cash                equivalents      **      |   |                                               | 4,421   |   |   |   | (9,031 | ) |
| Cash                and cash equivalents at beginning of                period                                                                            |   |                                               | 40,781  |   |   |   | 42,801 |   |
| Cash                and cash equivalents at end of                period                                                                                  |   | $                                                  | 45,202  |   |   | $ | 33,770 |   |

----

| **Merchants                and Manufacturers Bancorporation, Inc. and                Subsidiaries** | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|------------|------------|
| **Unaudited                Consolidated Statements of Cash Flows, continued**                       |       |       |       |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | **Nine                Months Ended September 30,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | **2007**                                           |   |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | *(Dollars                in Thousands)*            |   |
| Supplemental                Cash Flow Information and Noncash Transactions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                               |   |   |   |   |
|   Interest                paid                                                                                                                                                 |   | $                                                  | 38,306 |   |   | $ | 32,192 |   |
|   Income                taxes                paid                                                                                                                              |   |                                               | 1,888  |   |   |   | 1,273 |   |
|   Loans                transferred to other real estate                owned                                                                                                   |   |                                               | 5,197  |   |   |   | 600 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                               |   |   |   |   |   |   |
| Supplemental                Schedules of Noncash Investing Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                               |   |   |   |   |   |   |
|   Change                in accumulated other comprehensive income, unrealized                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                               |   |   |   |   |   |   |
|   losses                on available-for-sale securities,                net                                                                                                   |   | $                                                  | 408    |   |   | $ | 192 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                               |   |   |   |   |   |   |
| *See                notes to unaudited consolidated financial statements*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                               |   |   |   |   |   |   |

----

**Merchants      and Manufacturers Bancorporation, Inc.**

**NOTE      A -- Basis of Presentation**

**NOTE      B -- Subsequent Events**

*Pending      Merger*

----

*Sale      of Fortress Bank of Cresco*

| **(Unaudited)**                                                                     |   | **September                30,****2007**                                    |   |   | **December                31,****2006** |   |   | **September                30,****2006** |               |
|-------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|--------|-----------------------------------------|--------|--------|------------------------------------------|--------------------|
|                                                                                |   |    *(Dollars                in Thousands)*    |   |
| **ASSETS**                                                                          |   |                                                                        |   |   |                                    |   |   |                                     |               |
| Cash                and cash equivalents                                            |   | $                                                                           | 2,782  |   |                                    | $      | 2,778  |                                     |               | $ | 1,156 |   |
| Available-for-sale                securities                                        |   |                                                                        | 13,427 |   |                                    |   | 13,672 |                                     |               |   | 13,969 |   |
| Loans,                less allowance for loan losses of $311 at September 30, 2007, |   |                                                                        |   |   |                                    |   |   |                                     |               |   |   |   |
|   $487                at December 31, 2006 and $487 at September 30, 2006 |   |                                                                        | 56,039 |   |                                    |   | 55,704 |                                     |               |   | 56,883 |   |
| FHLB                stock                                                           |   |                                                                        | 487    |   |                                    |   | 526    |                                     |               |   | 538 |   |
| Premises                and equipment                                               |   |                                                                        | 4,416  |   |                                    |   | 4,597  |                                     |               |   | 4,648 |   |
| Goodwill                                                                            |   |                                                                        | 3,283  |   |                                    |   | 3,283  |                                     |               |   | 3,283 |   |
| Intangible                assets                                                    |   |                                                                        | 280    |   |                                    |   | 321    |                                     |               |   | 336 |   |
| Other                assets                                                         |   |                                                                        | 1,007  |   |                          |   | 822    |                                     |     |   | 1,020 |   |
| **Total                assets**                                                     |   | $                                                                           | 81,721 |   |                               | $      | 81,703 |                                     |          | $ | 81,836 |   |
|                                                                                |   |                                                                        |   |   |                                    |   |   |                                     |               |   |   |   |
| **LIABILITIES**                                                                     |   |                                                                        |   |   |                                    |   |   |                                     |               |   |   |   |
|  Total                deposits                                                 |   | $                                                                           | 63,317 |   |                                    | $      | 58,761 |                                     |               | $ | 59,305 |   |
| Short-term                borrowings                                                |   |                                                                        | 434    |   |                                    |   | 4,323  |                                     |               |   | 3,572 |   |
| Long-term                borrowings                                                 |   |                                                                        | 7,602  |   |                                    |   | 8,615  |                                     |               |   | 9,320 |   |
| Other                liabilities                                                    |   |                                                                        | 625    |   |                               |   | 464    |                                     |          |   | 492 |   |
| **Total                liabilities**                                                |   | $                                                                           | 71,978 |   |                               | $      | 72,163 |                                     |          | $ | 72,689 |   |

| **(Unaudited)**                                                          |   | **Three                Months Ended** |   |   | **Nine                Months Ended**    |         |
|--------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|-----------------------------------------|--------------|
|                                                                     |   | **September                30,**      |   |   | **September                30,**        |         |
|                                                                     |   | **2007**                              |   |   | **2006**                                |    |    | **2007** |   |   | **2006** |   |
|                                                                     |   |                                  |   |   | *(Dollars                in Thousands)* |         |   |   |   |
| Interest                income        |   | $                                     | 1,297  |   |                                    | $            | 1,255 |   |   | $ | 3,808 |   |   | $ | 3,478 |   |
| Interest                expense                 |   |                                  | 692    |   |                                    |         | 638 |   |   |   | 1,998 |   |   |   | 1,704 |   |
|   Net                interest income       |   |                                  | 605    |   |                                    |         | 617 |   |   |   | 1,810 |   |   |   | 1,774 |   |
| Provision                for loan losses                  |   |                                  | -      |   |                                    |         | - |   |   |   | - |   |   |   | - |   |
| Noninterest                income                    |   |                                  | 177    |   |                                    |         | 154 |   |   |   | 476 |   |   |   | 419 |   |
| Noninterest                expenses                            |   |                                  | 561    |   |                                    |         | 546 |   |   |   | 1,664 |   |   |   | 1,651 |   |
| Income                before income taxes            |   |                                  | 222    |   |                                    |         | 225 |   |   |   | 622 |   |   |   | 642 |   |
| Income                taxes                          |   |                                  | 74     |   |                                    |         | 75 |   |   |   | 205 |   |   |   | 174 |   |
|   Net                income                |   | $                                     | 148    |   |                                    | $            | 150 |   |   | $ | 417 |   |   | $ | 368 |   |

----

**NOTE      C **
** Discontinued Operations**

| **(Unaudited)**                                                                     |   | **December                31, 2006**    |   |                       | **September                30, 2006** |   |
|-------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|----------------------------|---------------------------------------|--------|
|                                                                                |   | *(Dollars                in Thousands)* |   |
| **ASSETS**                                                                          |   |                                    |   |                       |                                  |   |
| Cash                and cash equivalents                                            |   | $                                       | 2,918  |                       |                                  | $      | 2,112 |   |
| Available-for-sale                securities                                        |   |                                    | 9,664  |                       |                                  |   | 9,659 |   |
| Loans,                less allowance for loan losses of                             |   |                                    |   |                       |                                  |   |   |   |
|   $475                at December 31, 2006 and $470 at September 30, 2006 |   |                                    | 39,577 |                       |                                  |   | 39,841 |   |
| FHLB                stock                                                           |   |                                    | 255    |                       |                                  |   | 286 |   |
| Premises                and equipment                                               |   |                                    | 1,251  |                       |                                  |   | 1,282 |   |
| Goodwill                                                                            |   |                                    | 1,576  |                       |                                  |   | 1,576 |   |
| Intangible                assets                                                    |   |                                    | 369    |                       |                                  |   | 388 |   |
| Other                assets                                                         |   |                                    | 610    |                       |                             |   | 1,025 |   |
| **Total                assets**                                                     |   | $                                       | 56,220 |                       |                             | $      | 56,168 |   |
|                                                                                |   |                                    |   |                       |                                  |   |   |   |
| **LIABILITIES**                                                                     |   |                                    |   |                       |                                  |   |   |   |
|  Total                deposits                                                 |   | $                                       | 46,072 |                       |                                  | $      | 43,290 |   |
| Short-term                borrowings                                                |   |                                    | 4      |                       |                                  |   | 2,080 |   |
| Long-term                borrowings                                                 |   |                                    | 3,076  |                       |                                  |   | 3,778 |   |
| Other                liabilities                                                    |   |                                    | 406    |                       |                             |   | 325 |   |
| **Total                liabilities**                                                |   | $                                       | 49,557 |                  |                             | $      | 49,473 |   |

| **(Unaudited)**                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | **Three                Months Ended** |   |   | **Nine                Months Ended**    |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|-----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **September                30,**      |   |   | **September                30,**        |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **2007**                              |   |   | **2006**                                |   |   | **2007** |   |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                  |   |   | *(Dollars                in Thousands)* |   |   |   |   |
| Interest                income                                                                                               |   | $                                     | 10     |   |                                    | $      | 853 |   |   | $ | 1,459 |   |   | $ | 2,446 |   |
| Interest                expense                                                                                              |   |                                  | 0      |   |                                    |   | 341 |   |   |   | 615 |   |   |   | 917 |   |
|   Net                interest                income                                                                |   |                                  | 10     |   |                                    |   | 512 |   |   |   | 844 |   |   |   | 1,529 |   |
| Provision                for loan                losses                                                                      |   |                                  | -      |   |                                    |   | - |   |   |   | (250 | ) |   |   | - |   |
| Noninterest                income                                                                                            |   |                                  | -      |   |                                    |   | 110 |   |   |   | 1,366 |   |   |   | 288 |   |
| Noninterest                expenses                                                                                          |   |                                  | 18     |   |                                    |   | 489 |   |   |   | 875 |   |   |   | 1,492 |   |
| Income                before income                taxes                                                                     |   |                                  | (8     | )      |                                    |   | 133 |   |   |   | 1,585 |   |   |   | 325 |   |
| Income                taxes                                                                                                  |   |                                  | (3     | )      |                                    |   | 46 |   |   |   | 1,351 |   |   |   | 106 |   |
|   Net                income                                                                                                                                                                                                                                                        |   | $                                     | (5     | )      |                                    | $      | 87 |   |   | $ | 234 |   |   | $ | 219 |   |

----

**NOTE      D -- Earnings (Loss) Per Share**

|                                                                        |   | Three                Months Ended |   |                                                           | Nine                Months Ended                               |   |
|-----------------------------------------------------------------------------|--------|-----------------------------------|--------|----------------------------------------------------------------|----------------------------------------------------------------|--------|
|                                                                        |   | September                30,      |   |                                                           | September                30,                                   |   |
| Basic:                                                                      |   | 2007                              |   |                                                           | 2006                                                           |   |   | 2007 |   |   | 2006 |   |
|                                                                        |   |                              |   | *(Dollars                in Thousands, Except Per Share Data)* |                                                           |   |   |
| Net                income (loss) from continuing operations                 |   | $                                 | (1,126 | )                                                              |                                                           | $      | 1,341 |   |   | $ | 564 |   |   | $ | 3,386 |   |
| Net                income from discontinued operations                      |   |                              | 143    |                                                           |                                                           |   | 237 |   |   |   | 651 |   |   |   | 587 |   |
| Net                income (loss)                   |   | $                                 | (983   | )                                                              |                                                           | $      | 1,578 |   |   | $ | 1,215 |   |   | $ | 3,973 |   |
| Weighted                average shares outstanding                          |   |                              | 3,662  |                                                           |                                                           |   | 3,687 |   |   |   | 3,664 |   |   |   | 3,695 |   |
| Basic                earnings (loss) per share from continuing operations   |   | $                                 | (0.31  | )                                                              |                                                           | $      | 0.36 |    |   | $ | 0.15 |   |   | $ | 0.91 |   |
| Basic                earnings per share from discontinued operations        |   | $                                 | 0.04   |                                                           |                                                           | $      | 0.06 |   |   | $ | 0.18 |   |   | $ | 0.16 |   |
| Basic                earnings (loss) per share          |   | $                                 | (0.27  | )                                                              |                                                           | $      | 0.42 |   |   | $ | 0.33 |   |   | $ | 1.07 |   |
|                                                                        |   |                              |   |                                                           |                                                           |   |   |   |   |   |   |   |   |   |   |   |
| Diluted:                                                                    |   |                              |   |                                                           |                                                           |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                              |   |                                                           | *(Dollars                in Thousands, Except Per Share Data)* |   |   |   |   |
| Net                income (loss) from continuing operations                 |   | $                                 | (1,126 | )                                                              |                                                           | $      | 1,341 |   |   | $ | 564 |   |   | $ | 3,386 |   |
| Net                income from discontinued operations                      |   |                              | 143    |                                                           |                                                           |   | 237 |                  |   |   | 651 |   |   |   | 587 |   |
| Net                income (loss)                        |   | $                                 | (983   | )                                                              |                                                           | $      | 1,578 |   |   | $ | 1,215 |   |   | $ | 3,973 |   |
| Weighted                average shares outstanding                          |   |                              | 3,662  |                                                           |                                                           |   | 3,687 |   |   |   | 3,664 |   |   |   | 3,695 |   |
| Effect                of dilutive stock options outstanding                 |   |                              | 14     |                                                           |                                                           |   | 12 |   |   |   | 5 |   |   |   | 15 |   |
| Diluted                weighted average shares outstanding                  |   |                              | 3,676  |                                                           |                                                           |   | 3,699 |   |   |   | 3,669 |   |   |   | 3,710 |   |
| Diluted                earnings (loss) per share from continuing operations |   | $                                 | (0.31  | )                                                              |                                                           | $      | 0.36 |   |   | $ | 0.15 |   |   | $ | 0.91 |   |
| Diluted                earnings per share from discontinued operations      |   | $                                 | 0.04   |                                                           |                                                           | $      | 0.06 |   |   | $ | 0.18 |   |   | $ | 0.16 |   |
| Diluted                earnings (loss) per share             |   | $                                 | (0.27  | )                                                              |                                                           | $      | 0.42 |   |   | $ | 0.33 |   |   | $ | 1.07 |   |

**NOTE      E -- Loans Receivable**

|                                                                                                                                                                                                                                                                                                                                                                                                                            |   | September                30,2007                                            |      |   | December                31, 2006 |   |      | September                30,2006 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|-----------|--------|----------------------------------|--------|-----------|----------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |    *(Dollars                in Thousands)*    |      |
| First                Mortgage:                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                                        |      |   |                             |   |      |                             |   |
|   Conventional                single-family residential                                                                                                                                                                                                                                                                                                                                                               |   | $                                                                           | 192,722   |   |                             | $      | 181,396   |                             |   | $ | 175,921 |   |
|   Commercial                and multifamily residential                                                                                                                                                                                                                                                                                                                                                               |   |                                                                        | 472,977   |   |                             |   | 471,139   |                             |   |   | 463,564 |   |
|   Construction                                                                                                 |   |                                                                        | 97,516    |   |                             |   | 99,890    |                             |   |   | 89,041 |   |
|   Farmland                                                                                                     |   |                                                                        | 51,572    |   |                             |   | 50,210    |                             |   |   | 49,149 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                        | 814,787   |   |                             |   | 802,635   |                             |   |   | 777,675 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                        |      |   |                             |   |      |                             |   |   |   |   |
| Commercial                business                loans                                                                  |   |                                                                        | 233,315   |   |                             |   | 225,792   |                             |   |   | 229,303 |   |
| Consumer                and installment                loans                                                             |   |                                                                        | 47,390    |   |                             |   | 48,201    |                             |   |   | 46,787 |   |
| Home                equity                loans                                                                          |   |                                                                        | 28,360    |   |                             |   | 28,041    |                             |   |   | 26,899 |   |
| Other                                                                                                                    |   |                                                                        | 6,302     |   |                             |   | 5,543     |                             |   |   | 6,004 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                        | 315,367   |   |                             |   | 307,577   |                             |   |   | 308,993 |   |
| Total                loans                                                                                               |   |                                                                        | 1,130,154 |   |                             |   | 1,110,212 |                             |   |   | 1,086,668 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                        |      |   |                             |   |      |                             |   |   |   |   |
| Less:                Allowance for loan                losses                                                            |   |                                                                        | (12,992   | )      |                             |   | (11,835   | )                                |   |   | (10,593 | ) |
| Loans,                net                                                                                                |   | $                                                                           | 1,117,162 |   |                             | $      | 1,098,377 |                             |   | $ | 1,076,075 |   |

----

**NOTE      F – Stock-Based Compensation Plan**

|                                                                                  |   | Nine                months ended September 30, 2007 |    |
|---------------------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|
|                                                                                  |   |                                                |    |   |   |   |   | Weighted |   |   |   |   |
|                                                                                  |   |                                                |    |   |   |   |   | Average |   |   |   |   |
|                                                                                  |   |                                                |    |   | Weighted |   |   | Remaining |   |   | Aggregate |   |
|                                                                                  |   |                                                |    |   | Average |   |   | Contractual |   |   | Intrinsic |   |
|                                                                                  |   | Options                                             |    |   | Exercise                Price |   |   | Term |   |   | Value |   |
|                                                                                  |   |                                                |    |   |   |   |   |   |   |   |   |   |
|  Outstanding                at beginning of period                               |   |                                                | 102,344 |   |   | $ | 34.37 |   |   |   |   |   |   |   |
|  Granted                                                          |   |                                                | -       |   |   |   | - |   |   |   |   |   |   |   |
|  Canceled                                               |   |                                                | -       |   |   |   | - |   |   |   |   |   |   |   |
|  Exercised                                              |   |                                                | (2,236  | ) |   |   | 15.11 |   |   |   |   |   |   |   |
|  Outstanding                at end of period       |   |                                                | 100,108 |   |   | $ | 34.80 |   |   |   | 4.0 |   |   | $ | 501,153 |   |
|                                                                                  |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Options                exercisable                                    |   |                                                | 100,108 |   |   | $ | 34.80 |   |   |   | 4.0 |   |   | $ | 501,153 |   |

|                       |        |   | Options                Outstanding |   |    | Options                Exercisable |   |
|----------------------------|-------------|--------|------------------------------------|--------|---------|------------------------------------|--------|
|                       |        |   |                               |   |    | Weighted                           |   |   | Weighted |   |   |   |   |   | Weighted |   |
| Exercise                   |        |   | Number                             |   |    | Average                            |   |   | Average |   |   | Number |   |   | Average |   |
| Price                Range |        |   | Outstanding                        |   |    | Exercise                Price      |   |   | Life* |   |   | Outstanding |    |   | Exercise                Price |   |
|                       |        |   |                               |   |    |                               |   |   |   |   |   |   |   |   |   |   |
| $                          | 15.11       |   |                               |   | 2,230   |                               |   | $ | 15.11 |   |   |   | 0.5 |   |   |   | 2,230 |   |   | $ | 15.11 |   |
|                       | 25.45-28.31 |   |                               |   | 38,756  |                               |   |   | 27.93 |   |   |   | 1.5 |   |   |   | 38,756 |   |   |   | 27.93 |   |
|                       | 30.50-35.00 |   |                               |   | 20,700  |                               |   |   | 30.65 |   |   |   | 7.1 |   |   |   | 20,700 |   |   |   | 30.65 |   |
|                       | 45.00-46.00 |   |                               |   | 38,422  |                          |   |   | 45.11 |    |   |   | 6.3 |   |   |   | 38,422 |   |   |   | 45.11 |   |
|                       |        |   |                               |   | 100,108 |                               |   | $ | 34.80 |    |   |   |   |   |   |   | 100,108 |   |   | $ | 34.80 |   |
|                       |        |   |                               |   |    |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

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

*Shared-Based Payment*

**NOTE      G – Recent Accounting Pronouncements**

*Accounting for Deferred Compensation and Postretirement Benefit Aspects      of      Endorsement Split-Dollar Life Insurance Arrangements*

*Fair Value      Measurements*

*The Fair Value Option      for Financial Assets and Financial Liabilities – Including an amendment of FASB      Statement No. 115, *
*Fair      Value Measurements*

----

**NOTE      H – Commitments and Contingent Liabilities**

|                                                                  |   | September                30,2007                                            |    |   | December                31,2006 |   |    | September                30,2006 |   |
|-----------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|---------|--------|---------------------------------|--------|---------|----------------------------------|--------|
|                                                                  |   |    *(Dollars                in Thousands)*    |    |
|                                                                  |   |                                                                        |    |   |                            |   |    |                             |   |
| Commitments                to originate mortgage loans                |   | $                                                                           | 10,807  |   |                            | $      | 23,780  |                             |   | $ | 25,529 |   |
|                                                                  |   |                                                                        |    |   |                            |   |    |                             |   |   |   |   |
| Unused                lines of credit:                                |   |                                                                        |    |   |                            |   |    |                             |   |   |   |   |
| Commercial                business           |   |                                                                        | 172,971 |   |                            |   | 192,582 |                             |   |   | 231,008 |   |
| Home                equity                   |   |                                                                        | 40,226  |   |                            |   | 36,046  |                             |   |   | 34,987 |   |
| Credit                cards        |   |                                                                        | 19,216  |   |                            |   | 16,852  |                             |   |   | 16,524 |   |
|                                                                  |   |                                                                        |    |   |                            |   |    |                             |   |   |   |   |
| Standby                letters of credit               |   |                                                                        | 8,030   |   |                            |   | 4,762   |                             |   |   | 6,589 |   |

----

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

*Overview*

*Financial      Condition*

**Total      Assets**

**Investment      Securities**

**Loans      Receivable**

----

**Total      Deposits and Borrowings**

**Capital      Resources**

**Nonperforming      Assets and Allowance for Losses**

----

|                                                                          |   | September                30,2007                                            |   |   | December                31, 2006 |   |   | September                30,2006 |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|--------|----------------------------------|--------|--------|----------------------------------|--------|
|                                                                          |   |    *(Dollars                in Thousands)*    |   |
|                                                                          |   |                                                                        |   |   |                             |   |   |                             |   |
| Non-accrual                loans:                                             |   |                                                                        |   |   |                             |   |   |                             |   |
|     Conventional                single-family residential |   | $                                                                           | 8,148  |   |                             | $      | 7,527  |                             |   | $ | 4,337 |   |
|     Commercial                and multifamily residential |   |                                                                        | 7,463  |   |                             |   | 2,720  |                             |   |   | 2,452 |   |
|     Commercial                business loans    |   |                                                                        | 9,944  |   |                             |   | 3,427  |                             |   |   | 2,248 |   |
|     Consumer                and installment loans         |   |                                                                        | 1,395  |   |                             |   | 763    |                             |   |   | 958 |   |
| Total                non-accrual loans                         |   |                                                                        | 26,950 |   |                             |   | 14,437 |                             |   |   | 9,995 |   |
|                                                                          |   |                                                                        |   |   |                             |   |   |                             |   |   |   |   |
| Other                real estate owned                    |   |                                                                        | 4,459  |   |                             |   | 516    |                             |   |   | 299 |    |
| Total                nonperforming assets                                |   | $                                                                           | 31,409 |   |                             | $      | 14,953 |                             |   | $ | 10,294 |   |
|                                                                          |   |                                                                        |   |   |                             |   |   |                             |   |   |   |   |
| Ratios:                                                                       |   |                                                                        |   |   |                             |   |   |                             |   |   |   |   |
| Non-accrual                loans to total loans                     |   |                                                                        | 2.38   | %      |                             |   | 1.30   | %                                |   |   | 0.92 | % |
| Nonperforming                assets to total assets                           |   |                                                                        | 2.13   | %      |                             |   | 0.99   | %                                |   |   | 0.69 | % |
| Loan                loss allowance to non-accrual loans                       |   |                                                                        | 48.21  | %      |                             |   | 81.98  | %                                |   |   | 105.98 | % |
| Loan                loss allowance to total loans                        |   |                                                                        | 1.15   | %      |                             |   | 1.07   | %                                |   |   | 0.97 | % |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | Three                Months Ended |   |   | Nine                Months Ended        |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|--------|-----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | September                30,      |   |   | September                30,            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | 2007                              |   |   | 2006                                    |   |   | 2007 |   |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                              |   |   | *(Dollars                in Thousands)* |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                              |   |   |                                    |   |   |   |   |   |   |   |
| Balance                at beginning of                period                                                                                     |   | $                                 | 11,515 |   |                                    | $      | 10,863 |   |   | $ | 1,836 |   |   | $ | 12,038 |   |
|   Provision                for loan                losses                                                                              |   |                              | 1,905  |   |                                    |   | 390 |   |   |   | 2,805 |   |   |   | 1,170 |   |
|   Transfer from discontinued                operations     to continuing                operations                                                                                                                                                                                                                                                                                                                                  |   |                              | -      |   |                                    |   | - |   |   |   | 189 |   |   |   | - |   |
|   Charge-offs:                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                              |   |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
|     Commercial                and multifamily residential                                                                                                                                                                                                                                                                                                                                                                                |   |                              | (319   | )      |                                    |   | (213 | ) |   |   | (136 | ) |   |   | (467 | ) |
|     Commercial                business                loans                                                                  |   |                              | (88    | )      |                                    |   | (258 | ) |   |   | (339 | ) |   |   | (1,668 | ) |
|     Consumer                and installment                loans                                                             |   |                              | (132   | )      |                                    |   | (253 | ) |   |   | (555 | ) |   |   | (745 | ) |
|       Total                charge-offs                                                                             |   |                              | (539   | )      |                                    |   | (724 | ) |   |   | (2,210 | ) |   |   | (2,880 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                              |   |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
|   Recoveries:                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                              |   |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
|     Commercial                and multifamily residential                                                                                                                                                                                                                                                                                                                                                                                |   |                              | 40     |   |                                    |   | (2 | ) |   |   | 171 |   |   |   | 9 |   |
|     Commercial                business                loans                                                                  |   |                              | 22     |   |                                    |   | 2 |   |   |   | 59 |   |   |   | 117 |   |
|     Consumer                and installment                loans                                                             |   |                              | 49     |   |                                    |   | 64 |   |   |   | 142 |   |   |   | 139 |   |
|       Total                recoveries                                                                              |   |                              | 111    |   |                                    |   | 64 |   |   |   | 372 |   |   |   | 265 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                              |   |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net                charge-offs                                                                                                                   |   |                              | (428   | )      |                                    |   | (660 | ) |   |   | (1,838 | ) |   |   | (2,615 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                              |   |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at end of                period                                                                                           |   | $                                 | 12,992 |   |                                    | $      | 10,593 |   |   | $ | 12,992 |   |   | $ | 10,593 |   |

----

**Potential      Problem Loans**

**.  **

*Comparison      of Three and Nine Months Ended September 30, 2007 and 2006*

**Net      Income**

**Net      Interest Income**

----

| **AVERAGE                BALANCES, INTEREST RATES AND                YIELDS** |
|-------------------------------------------------------------------------------|

|                                                                                                           |   | **For                the Three Months Ended September 30,**           |      |
|----------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|-----------|
|                                                                                                           |   | ** 2007 **                                                                                                    |      |   | **  2006 ** |   |
|                                                                                                           |   | **Average****Balance**                                                                                                  |      |   | **Interest** |   |   | **Average****Rate** |   |   | **Average****Balance** |   |   | **Interest** |   |   | **Average****Rate** |   |
|                                                                                                           |   |     (Dollars                in thousands)                                  |      |
| **Assets**                                                                                                     |   |                                                                                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans,                net (1)(2)                                                      |   | $                                                                                                                       | 1,120,178 |   |   | $ | 20,478 |   |   |   | 7.25 | % |   | $ | 1,086.299 |   |   | $ | 19,753 |   |   |   | 7.21 | % |
| Loans                exempt from federal income taxes (3)                                                      |   |                                                                                                                    | 3,980     |   |   |   | 79 |   |   |   | 7.85 | % |   |   | 2,957 |   |   |   | 50 |   |   |   | 6.71 | % |
| Taxable                investment securities (4)                                                               |   |                                                                                                                    | 19,391    |   |   |   | 185 |   |   |   | 3.79 | % |   |   | 24,890 |   |   |   | 225 |   |   |   | 3.59 | % |
| Mortgage-related                securities (4)                                                       |   |                                                                                                                    | 64,726    |   |   |   | 769 |   |   |   | 4.71 | % |   |   | 75,431 |   |   |   | 875 |   |   |   | 4.60 | % |
| Investment                securities exempt from federal income taxes (3)(4)                                   |   |                                                                                                                    | 57,940    |   |   |   | 821 |   |   |   | 5.62 | % |   |   | 54,898 |   |   |   | 774 |   |   |   | 5.60 | % |
| Other                securities                                                                      |   |                                                                                                                    | 13,837    |   |   |   | 136 |   |   |   | 3.90 | % |   |   | 7,618 |   |   |   | 94 |   |   |   | 4.90 | % |
| Interest                earning assets                                                                         |   |                                                                                                                    | 1,280,052 |   |   |   | 22,468 |   |   |   | 6.96 | % |   |   | 1,252,093 |   |   |   | 21,771 |   |   |   | 6.90 | % |
| Non                interest earning assets                                                                     |   |                                                                                                                    | 113,048   |   |   |   |   |   |   |   |   |   |   |   | 121,611 |   |   |   |   |   |   |   |   |   |
| Average                assets                                                                             |   | $                                                                                                                       | 1,393,100 |   |   |   |   |   |   |   |   |   |   | $ | 1,373,704 |   |   |   |   |   |   |   |   |   |
|                                                                                                           |   |                                                                                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                and Stockholders' Equity**                                                        |   |                                                                                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                deposits                                                           |   | $                                                                                                                       | 88,091    |   |   |   | 159 |   |   |   | 0.72 | % |   | $ | 87,626 |   |   |   | 161 |   |   |   | 0.73 | % |
| Money                market deposits                                                                 |   |                                                                                                                    | 220,705   |   |   |   | 2,063 |   |   |   | 3.71 | % |   |   | 224,506 |   |   |   | 1,833 |   |   |   | 3.24 | % |
| Savings                deposits                                                                 |   |                                                                                                                    | 114,458   |   |   |   | 438 |   |   |   | 1.52 | % |   |   | 120,211 |   |   |   | 472 |   |   |   | 1.56 | % |
| Time                deposits                                                                         |   |                                                                                                                    | 517,793   |   |   |   | 6,381 |   |   |   | 4.89 | % |   |   | 490,821 |   |   |   | 5,357 |   |   |   | 4.33 | % |
| Short-term                borrowings                                                  |   |                                                                                                                    | 66,545    |   |   |   | 905 |   |   |   | 5.40 | % |   |   | 59,360 |   |   |   | 888 |   |   |   | 5.94 | % |
| Long-term                borrowings                                                   |   |                                                                                                                    | 107,511   |   |   |   | 1,326 |   |   |   | 4.89 | % |   |   | 111,935 |   |   |   | 1,261 |   |   |   | 4.47 | % |
| Junior                subordinated debt owed to unconsolidated trusts                                          |   |                                                                                                                    | 53,611    |   |   |   | 1,069 |   |   |   | 7.91 | % |   |   | 46,394 |   |   |   | 950 |   |   |   | 8.12 | % |
| Interest                bearing liabilities                                                |   |                                                                                                                    | 1,168,714 |   |   |   | 12,341 |   |   |   | 4.19 | % |   |   | 1,140,853 |   |   |   | 10,922 |   |   |   | 3.80 | % |
| Demand                deposits and other non interest bearing liabilities                                      |   |                                                                                                                    | 130,183   |   |   |   |   |   |   |   |   |   |   |   | 138,600 |   |   |   |   |   |   |   |   |   |
| Stockholders'                equity                                                        |   |                                                                                                                    | 94,203    |   |   |   |   |   |   |   |   |   |   |   | 94,251 |   |   |   |   |   |   |   |   |   |
| Average                liabilities and stockholders' equity                                                    |   | $                                                                                                                       | 1,393,100 |   |   |   |   |   |   |   |   |   |   | $ | 1,373,704 |   |   |   |   |   |   |   |   |   |
| Net                interest spread (5)                                                     |   |                                                                                                                    |      |   |   | $ | 10,127 |   |   |   | 2.77 | % |   |   |   |   |   | $ | 10,849 |   |   |   | 3.10 | % |
| Net                interest earning assets                                            |   | $                                                                                                                       | 111,338   |   |   |   |   |   |   |   |   |   |   | $ | 111,240 |   |   |   |   |   |   |   |   |   |
| Net                interest margin on a fully tax equivalent basis                (6)                          |   |                                                                                                                    |      |   |   |   |   |   |   |   | 3.14 | % |   |   |   |   |   |   |   |   |   |   | 3.44 | % |
| Net                interest margin (6)                                                     |   |                                                                                                                    |      |   |   |   |   |   |   |   | 3.04 | % |   |   |   |   |   |   |   |   |   |   | 3.35 | % |
| Ratio                of average interest-earning assets to average interest-bearing                liabilities |   |                                                                                                                    |      |   |   |   |   |   |   |   | 1.10 |   |   |   |   |   |   |   |   |   |   |   | 1.10 |   |

| (1) | For                the purpose of these computations, nonaccrual loans are included                in the                daily average loan amounts                outstanding. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Interest                earned on loans includes loan fees (which are not material in amount)                and                interest income which has been received from borrowers whose loans                were                removed from nonaccrual status during the period                indicated. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Taxable-equivalent                adjustments were made using a 34% corporate tax rate for all years                presented in calculating interest income and                yields. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Average                balances of securities available-for-sale are based on amortized                cost. |
|-----|--------------------------------------------------------------------------------------------------------------|

| (5) | Interest                rate spread represents the difference between the average yield on                interest earning assets and the average cost of interest bearing                liabilities and is represented on a fully tax equivalent                basis. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Net                interest margin represents net interest income as a percentage of                average                interest earning assets. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **AVERAGE                BALANCES, INTEREST RATES AND                YIELDS** |
|-------------------------------------------------------------------------------|

|                                                                                                           |   |  **For                the Nine Months Ended September 30,****   **                                                |       |
|----------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                                                                           |   | ** 2007      **                                                                                    | ** ** | ** ** | ** 2006**       |   |
|                                                                                                           |   | **Average****Balance**                                                                                                                |       |   | ** Interest**  |   |   | **Average****Rate** |   |   | **Average****Balance** |   |   | **Interest** |   |   | **Average**** Rate** |   |
|                                                                                                           |   |  (Dollars                in thousands)                |       |
| **Assets**                                                                                                     |   |                                                                                                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans,                net (1)(2)                                                                     |   | $                                                                                                                                     | 1,104,747  |   |   | $ | 60,318 |   |   |   | 7.30 | % |   | $ | 1,077,369 |   |   | $ | 56,674 |   |   |   | 7.03 | % |
| Loans                exempt from federal income taxes (3)                                                      |   |                                                                                                                                  | 3,624      |   |   |   | 202 |   |   |   | 7.43 | % |   |   | 3,020 |   |   |   | 148 |   |   |   | 6.57 | % |
| Taxable                investment securities (4)                                                               |   |                                                                                                                                  | 19,758     |   |   |   | 597 |   |   |   | 4.04 | % |   |   | 29,244 |   |   |   | 760 |   |   |   | 3.47 | % |
| Mortgage-related                securities (4)                                                            |   |                                                                                                                                  | 66,015     |   |   |   | 2,348 |   |   |   | 4.76 | % |   |   | 75,023 |   |   |   | 2,529 |   |   |   | 4.51 | % |
| Investment                securities exempt from federal income taxes (3)(4)                                   |   |                                                                                                                                  | 56,241     |   |   |   | 2,385 |   |   |   | 5.67 | % |   |   | 60,102 |   |   |   | 2,547 |   |   |   | 5.67 | % |
| Other                securities                                                                           |   |                                                                                                                                  | 17,443     |   |   |   | 631 |   |   |   | 4.84 | % |   |   | 5,589 |   |   |   | 192 |                  |   |   | 4.59 | % |
| Interest                earning assets                                                                    |   |                                                                                                                                  | 1,267,828  |   |   |   | 66,480 |   |   |   | 7.01 | % |   |   | 1,250,347 |   |   |   | 62,850 |   |   |   | 6.72 | % |
| Non                interest earning assets                                                           |   |                                                                                                                                  | 118,747    |   |   |   |   |   |   |   |   |   |   |   | 123,748 |   |   |   |   |   |   |   |   |   |
| Average                assets                                                                   |   | $                                                                                                                                     | 1,386,575  |   |   |   |   |   |   |   |   |   |   | $ | 1,374,095 |   |   |   |   |   |   |   |   |   |
|                                                                                                           |   |                                                                                                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                and Stockholders' Equity**                                                        |   |                                                                                                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                deposits                                                                |   | $                                                                                                                                     | 90,845     |   |   |   | 598 |   |   |   | 0.88 | % |   | $ | 91,372 |   |   |   | 552 |   |   |   | 0.81 | % |
| Money                market deposits                                                                 |   |                                                                                                                                  | 224,395    |   |   |   | 6,124 |   |   |   | 3.65 | % |   |   | 226,413 |   |   |   | 5,106 |   |   |   | 3.02 | % |
| Savings                deposits                                                                      |   |                                                                                                                                  | 115,801    |   |   |   | 1,343 |   |   |   | 1.55 | % |   |   | 122,670 |   |   |   | 1,233 |   |   |   | 1.34 | % |
| Time                deposits                                                                         |   |                                                                                                                                  | 516,868    |   |   |   | 18,355 |   |   |   | 4.75 | % |   |   | 465,750 |   |   |   | 14,343 |   |   |   | 4.12 | % |
| Short-term                borrowings                                                                           |   |                                                                                                                                  | 52,495     |   |   |   | 2,236 |   |   |   | 5.69 | % |   |   | 79,337 |   |   |   | 3,226 |   |   |   | 5.44 | % |
| Long-term                borrowings                                                             |   |                                                                                                                                  | 109,265    |   |   |   | 3.876 |   |   |   | 4.74 | % |   |   | 107,924 |   |   |   | 3,451 |   |   |   | 4.28 | % |
| Junior                subordinated debt owed to unconsolidated trusts                                          |   |                                                                                                                                  | 53,611     |   |   |   | 3,173 |   |   |   | 7.91 | % |   |   | 46,394 |                  |   |   | 2,716 |   |   |   | 7.83 | % |
| Interest                bearing liabilities                                                          |   |                                                                                                                                  | 1,163,280  |   |   |   | 35,705 |   |   |   | 4.10 | % |   |   | 1,139,760 |   |   |   | 30,627 |   |   |   | 3.59 | % |
| Demand                deposits and other non interest bearing liabilities                                      |   |                                                                                                                                  | 128,465    |   |   |   |   |   |   |   |   |   |   |   | 140,161 |   |   |   |   |   |   |   |   |   |
| Stockholders'                equity                                                                  |   |                                                                                                                                  | 94,830     |   |   |   |   |   |   |   |   |   |   |   | 94,074 |   |   |   |   |   |   |   |   |   |
| Average                liabilities and stockholders' equity                                                    |   | $                                                                                                                                     | 1,386,575  |   |   |   |   |   |   |   |   |   |   | $ | 1,374,095 |   |   |   |   |   |   |   |   |   |
| Net                interest spread (5)                                                                    |   |                                                                                                                                  |       |   |   | $ | 30,775 |   |   |   | 2.91 | % |   |   |   |   |   | $ | 32,223 |   |   |   | 3.13 | % |
| Net                interest earning assets                                                           |   | $                                                                                                                                     | 104,548    |   |   |   |   |   |   |   |   |   |   | $ | 110,487 |   |   |   |   |   |   |   |   |   |
| Net                interest margin on a fully tax equivalent basis (6)                                         |   |                                                                                                                                  |       |   |   |   |   |   |   |   | 3.25 | % |   |   |   |   |   |   |   |   |   |   | 3.45 | % |
| Net                interest margin (6)                                                          |   |                                                                                                                                  |       |   |   |   |   |   |   |   | 3.15 | % |   |   |   |   |   |   |   |   |   |   | 3.35 | % |
| Ratio                of average interest-earning assets to average interest-bearing                liabilities |   |                                                                                                                                  |       |   |   |   |   |   |   |   | 1.09 |   |   |   |   |   |   |   |   |   |   |   | 1.10 |   |

| (1) | For                the purpose of these computations, nonaccrual loans are included                in the                daily average loan amounts                outstanding. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Interest                earned on loans includes loan fees (which are not material in amount)                and                interest income which has been received from borrowers whose loans                were                removed from nonaccrual status during the period                indicated. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Taxable-equivalent                adjustments were made using a 34% corporate tax rate for all years                presented in calculating interest income and                yields. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Average                balances of securities available-for-sale are based on amortized                cost. |
|-----|--------------------------------------------------------------------------------------------------------------|

| (5) | Interest                rate spread represents the difference between the average yield on                interest earning assets and the average cost of interest bearing                liabilities and is represented on a fully tax equivalent                basis. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Net                interest margin represents net interest income as a percentage of                average                interest earning assets. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **VOLUME,                RATE AND MIX ANALYSIS OF NET INTEREST                INCOME** |
|----------------------------------------------------------------------------------------|

|                                                                            |   | **Three                Months Ended September 30, 2007**  |         |         | **Nine                Months Ended September 30, 2007**       |   |
|---------------------------------------------------------------------------------|--------|-----------------------------------------------------------|--------------|--------------|---------------------------------------------------------------|--------|
|                                                                            |   | **Compared                to September 30, 2006**         |    |    | **Compared                to September 30, 2006**             |   |
|                                                                            |   | **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)                                                   |   | $                                                         | 619          |         |                                                          | $      | 106 |   |   | $ | 725 |   |   | $ | 1,462 |   |   | $ | 2,182 |   |   | $ | 3,644 |   |
| Loans                exempt from federal income taxes (2)                       |   |                                                      | 19           |         |                                                          |   | 10 |   |   |   | 29 |   |   |   | 32 |   |   |   | 21 |   |   |   | 53 |   |
| Taxable                investment securities                               |   |                                                      | (53          | )            |                                                          |   | 13 |   |   |   | (40 | ) |   |   | (327 | ) |   |   | 164 |   |   |   | (163 | ) |
| Mortgage-related                securities                                      |   |                                                      | (128         | )            |                                                          |   | 22 |   |   |   | (106 | ) |   |   | (335 | ) |   |   | 154 |   |   |   | (181 | ) |
| Investment                securities exempt from federal income taxes (2)  |   |                                                      | 43           |         |                                                          |   | 4 |   |   |   | 47 |   |   |   | (164 | ) |   |   | 2 |   |   |   | (162 | ) |
| Other                securities                                                 |   |                                                      | 56           |         |                                                          |   | (14 | ) |   |   | 42 |   |   |   | 428 |   |   |   | 11 |   |   |   | 439 |   |
| Total                interest-earning assets                                    |   | $                                                         | 556          |         |                                                          | $      | 141 |   |   | $ | 697 |   |   | $ | 1,096 |   |   | $ | 2,534 |   |   | $ | 3,630 |   |
| Interest-Bearing                Liabilities:                                    |   |                                                      |         |         |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                deposits                                 |   | $                                                         | 1            |         |                                                          | $      | (3 | ) |   | $ | (2 | ) |   | $ | (3 | ) |   | $ | 49 |   |   | $ | 46 |   |
| Money                market deposits                             |   |                                                      | (30          | )            |                                                          |   | 260 |   |   |   | 230 |   |   |   | (46 | ) |   |   | 1,063 |   |   |   | 1,018 |   |
| Savings                deposits                             |   |                                                      | (22          | )            |                                                          |   | (12 | ) |   |   | (34 | ) |   |   | (63 | ) |   |   | 173 |   |   |   | 110 |   |
| Time                deposits                                |   |                                                      | 306          |         |                                                          |   | 718 |   |   |   | 1,024 |   |   |   | 1,675 |   |   |   | 2,337 |   |   |   | 4,012 |   |
| Short-term                borrowings                                  |   |                                                      | 68           |         |                                                          |   | (51 | ) |   |   | 17 |   |   |   | (1,152 | ) |   |   | 162 |   |   |   | (990 | ) |
| Long-term                borrowings                                        |   |                                                      | (47          | )            |                                                          |   | 112 |   |   |   | 65 |   |   |   | 43 |   |   |   | 382 |   |   |   | 425 |   |
| Junior                subordinated debt owed to unconsolidated trusts           |   |                                                      | 143          |         |                                                          |   | (24 | ) |   |   | 119 |   |   |   | 427 |   |   |   | 30 |    |   |   | 457 |   |
| Total                interest-bearing liabilities                               |   | $                                                         | 419          |         |                                                          | $      | 1,000 |   |   | $ | 1,419 |   |   | $ | 882 |   |   | $ | 4,196 |   |   | $ | 5,078 |   |
| Net                change in net interest income                                |   |                                                      |         |         |                                                          |   |   |   |   | $ | (722 | ) |   |   |   |   |   |   |   |   |   | $ | (1,448 | ) |

| (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, |   |
|--------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                                                                                         |   | 2007                                            |   |   | 2006                                           |   |   | 2007 |   |   | 2006 |   |
|                                                                                                         |   |                                            |   |   | *(Dollars                in Thousands)*        |   |   |   |   |
|                                                                                                         |   |                                            |   |   |                                           |   |   |   |   |   |   |   |
| Service                charges on deposit accounts                                                           |   | $                                               | 967    |   |                                           | $      | 1,097 |   |   | $ | 2,831 |   |   | $ | 2,989 |   |
| Service                charges on                loans          |   |                                            | 675    |   |                                           |   | 953 |   |   |   | 2,141 |   |   |   | 2,472 |   |
| Securities                gains, net                                                               |   |                                            | -      |   |                                           |   | 2 |   |   |   | - |   |   |   | 2 |   |
| Gain                on sale of loans, net                                                     |   |                                            | 40     |   |                                           |   | 29 |   |   |   | 73 |   |   |   | 83 |   |
| Gain                (loss) on sale of fixed assets, net                                                      |   |                                            | (6     | )      |                                           |   | (3 | ) |   |   | 155 |   |   |   | 172 |   |
| Tax                fees, brokerage and insurance commissions                                                 |   |                                            | 365    |   |                                           |   | 397 |   |   |   | 1,777 |   |   |   | 1,662 |   |
| Other                                                                                              |   |                                            | 638    |   |                                           |   | 859 |   |   |   | 1,915 |   |   |   | 2,562 |   |
|     Total                non-interest income                              |   | $                                               | 2,676  |   |                                           | $      | 3,334 |   |   | $ | 8,892 |   |   | $ | 9,942 |   |

----

**Non-Interest      Expense**

|                                                                                                                                                                                                                                                                                                                                                                                  |   | Three                Months Ended September 30, |   |   | Nine                Months Ended September 30, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                  |   | 2007                                            |   |   | 2006                                           |   |   | 2007 |   |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                  |   |                                            |   |   | *(Dollars                in Thousands)*        |   |   |   |   |
| Salaries                and employee benefits                                                                                                                                                                                                                                                                                                                                         |   | $                                               | 6,992  |   |                                           | $      | 6,873 |   |   | $ | 20,186 |   |   | $ | 20,954 |   |
| Premises                and equipment                                                                                                                                                                                                                                                                                                                                                 |   |                                            | 1,604  |   |                                           |   | 1,550 |   |   |   | 5,295 |   |   |   | 4,850 |   |
| Data                processing fees                                                                                                                                                                                                                                                                                                                                                   |   |                                            | 853    |   |                                           |   | 760 |   |   |   | 2,506 |   |   |   | 2,342 |   |
| Marketing                and business development                                                                                                                                                                                                                                                                                                                                     |   |                                            | 415    |   |                                           |   | 393 |   |   |   | 1,282 |   |   |   | 1,258 |   |
| Other                                                                                                                                                                                                                                                                                                                                                                                 |   |                                            | 2,635  |   |                                           |   | 1,927 |   |   |   | 6,128 |   |   |   | 5,759 |   |
|     Total                noninterest                expense                                                  |   | $                                               | 12,499 |   |                                           | $      | 11,503 |   |   | $ | 35,397 |   |   | $ | 35,163 |   |

**Income      Taxes**

----

**Liquidity**

** **

**Asset/Liability      Management**

----

**.**

|                                                                                          |   | **Amounts                  Maturing or Repricing as of September 30,                  2007** |    |
|-----------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|---------|
|                                                                                          |   | **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                                          |   | $                                                                                            | 133,858 |   |   | $ | 107,561 |   |   | $ | 331,482 |   |   | $ | 12,657 |   |   | $ | 585,558 |   |
| Adjustable-rate                  mortgage loans                                          |   |                                                                                         | 158,382 |   |   |   | 21,754 |   |   |   | 48,934 |   |   |   | 159 |   |   |   | 229,229 |   |
|       Total                  mortgage loans      |   |                                                                                         | 292,240 |   |   |   | 129,315 |   |   |   | 380,416 |   |   |   | 12,816 |   |   |   | 814,787 |   |
| Commercial                  business loans                                          |   |                                                                                         | 132,362 |   |   |   | 28,625 |   |   |   | 68,816 |   |   |   | 3,512 |   |   |   | 233,315 |   |
| Consumer                  loans                                                     |   |                                                                                         | 19,108  |   |   |   | 6,181 |   |   |   | 21,320 |   |   |   | 1,560 |   |   |   | 48,169 |   |
| Home                  equity loans                                                  |   |                                                                                         | 26,505  |   |   |   | 111 |   |   |   | 1,744 |   |   |   | - |   |   |   | 28,360 |   |
| Other                  loans                                                        |   |                                                                                         | 2,109   |   |   |   | 121 |   |   |   | 2,349 |   |   |   | 944 |   |   |   | 5,523 |   |
| Mortgage-related                  securities                    |   |                                                                                         | 3,864   |   |   |   | 3,155 |   |   |   | 37,979 |   |   |   | 17,741 |   |   |   | 62,739 |   |
| Fixed                  rate investment securities and other                         |   |                                                                                         | 695     |   |   |   | 3,146 |   |   |   | 21,637 |   |   |   | 39,706 |   |   |   | 65,184 |   |
| Variable                  rate investment securities and other                                |   |                                                                                         | 26,936  |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 26,936 |   |
|       Total                  interest-earning assets       |   | $                                                                                            | 503,819 |    |   | $ | 170,654 |   |   | $ | 534,261 |   |   | $ | 76,279 |   |   | $ | 1,285,013 |   |
|                                                                                          |   |                                                                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                                                |   |                                                                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                      |   |                                                                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Time                  deposits                                     |   | $                                                                                            | 222,274 |   |   | $ | 133,271 |   |   | $ | 165,797 |   |   | $ | 22 |   |   | $ | 521,364 |   |
|   NOW                  accounts                                           |   |                                                                                         | 5,480   |   |   |   | 5,480 |   |   |   | 54,803 |   |   |   | 25,575 |   |   |   | 91,338 |   |
|   Savings                  accounts                                  |   |                                                                                         | 6,798   |   |   |   | 6,798 |   |   |   | 67,983 |   |   |   | 31,726 |   |   |   | 113,305 |   |
|   Money                  market accounts                                       |   |                                                                                         | 12,400  |   |   |   | 12,400 |   |   |   | 124,004 |   |   |   | 57,869 |   |   |   | 206,673 |   |
| Short-term                  borrowings                                         |   |                                                                                         | 81,062  |   |   |   | 2,564 |   |   |   | - |   |   |   | - |   |   |   | 83,626 |   |
| Long-term                  borrowings                                          |   |                                                                                         | 21,818  |   |   |   | 13,455 |   |   |   | 70,289 |   |   |   | 1,590 |   |   |   | 107,152 |   |
| Junior                  subordinated debt owed to unconsolidated trusts                       |   |                                                                                         | 28,352  |   |   |   | - |   |   |   | - |   |   |   | 25,259 |   |   |   | 53,611 |   |
|       Total                  interest-bearing liabilities  |   | $                                                                                            | 378,184 |   |   | $ | 173,968 |   |   | $ | 482,876 |   |   | $ | 333,583 |   |   | $ | 1,177,069 |   |
|                                                                                          |   |                                                                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                  assets less interest-bearing liabilities                    |   | $                                                                                            | 125,635 |   |   | $ | (3,314 | ) |   | $ | 51,385 |   |   | $ | (65,762 | ) |   | $ | 107,944 |   |
| Cumulative                  interest rate sensitivity gap                                     |   | $                                                                                            | 125,635 |   |   | $ | 122,321 |   |   | $ | 173,706 |   |   | $ | 107,944 |   |   |   |   |   |
| Cumulative                  interest rate sensitivity gap as a                                |   |                                                                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    percentage                  of total assets                            |   |                                                                                         | 8.51    | % |   |   | 8.29 | % |   |   | 11.77 | % |   |   | 7.31 | % |   |   |   |   |

----

**Forward-Looking      Statements**

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

**Item      4.   Controls and Procedures**

**Evaluation      of Disclosure Controls and Procedures**

**Changes      in Internal Control Over Financial Reporting**

----

**Part      II.      Other Information**

| Item                1.  | Legal                Proceedings                                                                                                                                                                                                                                                                                                                                                                                              |
|-------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                    | As                of September 30, 2007 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, 2006.  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                                                                                                                                                                                                                                                                                                                                                                                      |

----

| 2.1   |   | Agreement                and Plan of Merger, dated as of July 9, 2007, among Merchants and                Manufacturers Bancorporation, Inc., Harris Bankcorp, Inc. and Boundary                Acquisition Corporation (incorporated by reference to Exhibit 2.1                of the                Corporation's Current Report on Form 8-K (File No. 000-21292) filed                by the                Corporation with the Securities and Exchange Commission on July 10,                2007).  |
|-------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1  |   | Certification                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                    |
| 31.2  |   | Certification                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                    |
| 32.1* |   | Certification                of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley                Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                    |
| 32.2* |   | Certification                of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley                Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                         |

----

**SIGNATURES**

**MERCHANTS      AND      MANUFACTURERS**

**BANCORPORATION,      INC.**

| Date       November                9, 2007        . | /s/                Michael J.                Murry                                             |
|--------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                           | Michael                J. Murry                                                                                                                                                                                                                                                                                       |
|                                                                                                                           | Chairman                of the Board of Directors                                                                                                                                                                                                                                                                     |
|                                                                                                                           |      and                Chief Executive Officer                                                                                                                                                                                                                                              |
|                                                                                                                           | Principal                Executive Officer                                                                                                                                                                                                                                                                            |
|                                                                                                                           |                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                           |                                                                                                                                                                                                                                                                                                                  |
| Date       November                9, 2007       .       | /s/                Frederick R.                Klug                                            |
|                                                                                                                           | Frederick                R. Klug                                                                                                                                                                                                                                                                                      |
|                                                                                                                           | Executive                Vice President & Chief     Financial                Officer                                                                                                                                                                                                     |
|                                                                                                                           | Principal                Financial Officer                                                                                                                                                                                                                                                                            |

----

**10-Q      EXHIBIT LIST**

| EXHIBIT                NO.   | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| EXHIBIT                2.1   | Agreement                and Plan of Merger, dated as of July 9, 2007, among Merchants and                Manufacturers Bancorporation, Inc., Harris Bankcorp, Inc. and Boundary                Acquisition Corporation (incorporated by reference to Exhibit 2.1                of the                Corporation's Current Report on Form 8-K (File No. 000-21292) filed                by the                Corporation with the Securities and Exchange Commission on July 10,                2007).  |
| EXHIBIT                31.1  | Certification                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                    |
| EXHIBIT                31.2  | Certification                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                    |
| EXHIBIT                32.1* | Certification                of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley                Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                    |
| EXHIBIT                32.2* | Certification                of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley                Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                    |

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