<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549

                                    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, 2002
                                           ------------------

                                       or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from               to
                                           -------------    ---------------

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

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

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

                       19105 West Capitol Drive, Suite 200
                           Brookfield, Wisconsin 53045
--------------------------------------------------------------------------------
                     (Address of principal executive office)

                                 (262) 790-2127
--------------------------------------------------------------------------------
               Registrant's telephone number, including area code:

                    14100 West National Avenue, PO Box 511160
                        New Berlin, Wisconsin 53151-1160
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.

Yes  X      No    .
    ---        ---

                      Applicable Only to Corporate Issuers

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.

Common Stock, par value $1.00 per share                  2,485,433 Shares
----------------------------------------       ---------------------------------
             Class                              Outstanding at November 1, 2002


<PAGE>
                MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.

                                    FORM 10-Q

                                      INDEX

<TABLE>
<CAPTION>
                                                                                              PAGE NUMBER
<S>                                                                                           <C>
PART I.  FINANCIAL INFORMATION

    Item 1. Financial Statements

         Unaudited Consolidated Statements of Financial Condition as of
         September 30, 2002, December 31, 2001, and September 30, 2001                                  3

         Unaudited Consolidated Statements of Income for the Three Months and the
         Nine Months ended September 30, 2002 and 2001                                                  4

         Unaudited Consolidated Statements of Cash Flows for the Nine Months ended
         September 30, 2002 and 2001                                                                    5

         Notes to Unaudited Consolidated Financial Statements                                           6


    Item 2. Management's Discussion and Analysis of Financial Condition and Results of
    Operations                                                                                         10

    Item 3. Quantitative and Qualitative Disclosure About Market Risk                                  21

    Item 4. Controls and Procedures                                                                    22

    PART II. OTHER INFORMATION

    Items 1-6                                                                                          23

    Signatures                                                                                         24
</TABLE>



                                       2
<PAGE>
PART I. FINANCIAL INFORMATION

MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                                          SEPTEMBER 30,     DECEMBER 31,      SEPTEMBER 30,
                                                                              2002             2001              2001
                                                                          -------------------------------------------------
                                                                                         (Dollars In Thousands)
<S>                                                                       <C>              <C>               <C>
ASSETS
Cash and due from banks                                                       $ 19,479          $ 26,013          $ 16,003
Interest bearing deposits in banks                                               2,905             4,912             6,293
Federal funds sold                                                              18,483             6,543            15,304
                                                                          -------------------------------------------------
      Cash and cash equivalents                                                 40,867            37,468            37,600

Available-for-sale securities                                                   74,161            66,143            67,894
Loans (net of allowance for loan losses of $6,100 at
  September 30, 2002, $5,563 at December 31, 2001
  and $5,612 at September 30, 2001)                                            495,392           474,939           473,035
Loans held for sale                                                              3,043             2,393             1,051
Accrued interest receivable                                                      2,826             2,950             3,397
Federal Home Loan Bank stock                                                     3,715             3,574             3,520
Premises and equipment                                                          10,808            10,278            10,291
Other real estate owned                                                          2,877               139               230
Other assets                                                                    10,704            10,136             9,844
                                                                          -------------------------------------------------
      Total assets                                                            $644,393          $608,020          $606,862
                                                                          =================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Deposits:
    Non-interest bearing                                                      $ 69,670          $ 79,171          $ 71,334
    Interest bearing                                                           448,406           398,614           409,824
                                                                          -------------------------------------------------
      Total deposits                                                           518,076           477,785           481,158
  Short-term borrowings                                                          9,046            17,046            12,589
  Long-term borrowings                                                          53,900            55,800            53,300
  Accrued interest payable                                                         775             1,028             1,309
  Other liabilities                                                              6,769             3,432             5,728
                                                                          -------------------------------------------------
      Total liabilities                                                        588,566           555,091           554,084

Stockholders' equity
  Common stock ($1.00 par value; 6,000,000 shares authorized;
    2,587,509 shares issued; shares outstanding: 2,485,433 at
    September 30, 2002, 2,523,845 at December 31, 2001
    and 2,543,386 at September 30, 2001)                                         2,588             2,588             2,588
  Additional paid-in capital                                                    14,952            14,955            15,013
  Retained earnings                                                             40,216            36,894            35,760
  Accumulated other comprehensive income                                           964               330               772
  Treasury stock, at cost (102,076 shares at September 30, 2002,
    63,664 shares at December 31, 2001 and 44,123 shares
    at September 30, 2001)                                                      (2,893)           (1,838)           (1,355)
                                                                          -------------------------------------------------
Total stockholders' equity                                                      55,827            52,929            52,778
                                                                          -------------------------------------------------
       Total liabilities and stockholders' equity                             $644,393          $608,020          $606,862
                                                                          =================================================
</TABLE>

See notes to unaudited consolidated financial statements.

                                       3
<PAGE>
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED                           NINE MONTHS ENDED
                                                                SEPTEMBER 30,                               SEPTEMBER 30,
                                                         2002                 2001                   2002                 2001
                                                        -------              -------                -------              -------
                                                                         (In Thousands, except per share data)
<S>                                                     <C>                  <C>                   <C>                  <C>
Interest income:
  Interest and fees on loans                            $ 8,799              $ 9,620                $26,059              $29,374
  Interest and dividends on securities:
    Taxable                                                 138                  281                    474                  890
    Tax-exempt                                              210                  231                    671                  723
  Interest on mortgage-backed securities                    484                  476                  1,427                1,517
  Interest on interest bearing deposits in
    banks and federal funds sold                            102                  178                    313                  575
                                                        -------              -------                -------              -------
      Total interest income                               9,733               10,786                 28,944               33,079

Interest expense:
  Interest on deposits                                    2,475                3,874                  7,531               12,514
  Interest on short-term borrowings                          96                  140                    424                1,154
  Interest on long-term borrowings                          523                  696                  1,663                2,176
                                                        -------              -------                -------              -------
      Total interest expense                              3,094                4,710                  9,618               15,844

Net interest income                                       6,639                6,076                 19,326               17,235
Provision for loan losses                                   282                  306                    844                  866
                                                        -------              -------                -------              -------
Net interest income after provision for
  loan losses                                             6,357                5,770                 18,482               16,369

Non-interest income:
  Service charges on deposit accounts                       440                  342                  1,146                  937
  Service charges on loans                                  180                  160                    625                  477
  Securities gains, net                                       0                    0                    210                   88
  Gain on sale of loans, net                                227                   37                    360                   77
  Net gain on sale of premises                               89                  156                    267                  468
  Other                                                     465                  399                  1,427                1,280
                                                        -------              -------                -------              -------
      Total noninterest income                            1,401                1,094                  4,035                3,327

Noninterest expenses:
  Salaries and employee benefits                          2,932                2,563                  8,803                7,717
  Premises and equipment                                    842                  762                  2,465                2,337
  Data processing fees                                      276                  235                    948                  689
  Marketing and business development                        270                  224                    711                  598
  Federal deposit insurance premiums                         24                   25                     75                   73
  Other                                                     813                  725                  2,587                2,188
                                                        -------              -------                -------              -------
      Total noninterest expense                           5,157                4,534                 15,589               13,602

      Income before income taxes                          2,601                2,330                  6,928                6,094
Income taxes                                                863                  773                  2,288                1,948
                                                        -------              -------                -------              -------
      Net income                                        $ 1,738              $ 1,557                $ 4,640              $ 4,146
                                                        =======              =======                =======              =======

Basic earnings per share                                $  0.70              $  0.61                $  1.86              $  1.63
                                                        =======              =======                =======              =======

Diluted earnings per share                              $  0.70              $  0.61                $  1.86              $  1.63
                                                        =======              =======                =======              =======
</TABLE>


See notes to unaudited consolidated financial statements.

                                        4
<PAGE>





MERCHANTS AND MANUFACTURERS BANCORPORATION, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                         NINE MONTHS ENDED SEPTEMBER 30,
                                                                                            2002                  2001
                                                                                            ----                  ----
                                                                                                 (In Thousands)
<S>                                                                                      <C>                 <C>
Cash Flows From Operating Activities
  Net income                                                                              $  4,640             $  4,146
  Adjustments to reconcile net income to cash
    provided by operating activities:
       Provision for loan losses                                                               844                  866
       Depreciation                                                                            736                  664
       Amortization and accretion of premiums and discounts, net                               117                   29
       Security gains, net                                                                    (210)                 (88)
       Gain on sale of loans, net                                                             (360)                 (77)
       Gain on sale of premises and equipment, net                                            (267)                (468)
       Decrease in accrued interest receivable                                                 124                  299
       Increase (decrease) in accrued interest payable                                        (253)                 150
       Other                                                                                 1,595                 (448)
                                                                                          --------             --------
           Net cash provided by operations before loan originations and sales                6,966                5,073
       Loans originated for sale                                                           (58,715)             (40,909)
       Proceeds from sales of loans                                                         58,066               40,077
                                                                                          --------             --------
           NET CASH PROVIDED BY OPERATING ACTIVITIES                                         6,317                4,241

Cash Flows From Investing Activities
  Purchase of available-for-sale securities                                                (30,386)             (44,063)
  Proceeds from sales of available-for-sale securities                                       7,008                4,259
  Proceeds from redemptions and maturities of available-for-sale securities                 16,416               52,488
  Net (increase) decrease in loans                                                         (23,675)                (995)
  Purchase of premises and equipment                                                        (1,266)              (1,703)
  Purchase of Federal Home Loan Bank stock                                                    (141)                (349)
                                                                                          --------             --------
          NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                              (32,044)               9,637

Cash Flows From Financing Activities
  Net increase in deposits                                                                  40,292               23,043
  Net increase (decrease) in short-term borrowings                                          (8,000)             (22,240)
  Dividends paid                                                                            (1,318)              (1,373)
  Proceeds from long-term borrowings                                                         6,500                1,000
  Repayment of long-term borrowings                                                         (8,400)              (1,500)
  Increase in advance payments by borrowers for taxes and insurance                          1,110                1,181
  Purchase of treasury stock                                                                (1,072)                   0
  Proceeds from sale of treasury stock                                                          14                  415
                                                                                          --------             --------
          NET CASH PROVIDED BY FINANCING ACTIVITIES                                         29,126                  526

          INCREASE IN CASH AND CASH EQUIVALENTS                                              3,399               14,404
Cash and cash equivalents at beginning of period                                            37,468               23,196
                                                                                          --------             --------
Cash and cash equivalents at end of period                                                $ 40,867             $ 37,600
                                                                                          ========             ========

Supplemental Cash Flow Information and Noncash Transactions:
  Interest paid                                                                           $  9,882             $ 15,816
  Income taxes paid                                                                          2,358                1,934
  Loans transferred to other real estate owned                                               2,897                  139

Supplemental Schedules of Noncash Investing Activities,
  change in accumulated other comprehensive income, unrealized
  gains on available-for-sale securities, net                                             $    634             $     14
</TABLE>

See notes to unaudited consolidated financial statements

                                       5
<PAGE>




MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2002

NOTE A -- BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include the
accounts of Merchants and Manufacturers Bancorporation, Inc. and its wholly
owned subsidiaries: Lincoln State Bank, Franklin State Bank, Grafton State Bank,
Community Bank of Oconto County (collectively, the Banks), Merchants Merger
Corp., CBG Financial Services, Inc., CBG Services, Inc. and Lincoln Neighborhood
Redevelopment Corporation. CBG Financial Services was formed in January 2002 to
provide non-insured investment and insurance products to the bank's customers.
In March 2002 Lincoln Community Bank and Lincoln State Bank merged, with Lincoln
State Bank remaining as the surviving entity. In 2002 M&M Services changed its
name to CBG Services. Lincoln Neighborhood Redevelopment Corporation was
organized for the purpose of redeveloping and rehabilitating certain areas
located primarily on the near south side of Milwaukee. Lincoln State Bank also
includes the accounts of its wholly owned subsidiary, M&M Lincoln Investment
Corporation. Grafton State Bank also includes the accounts of its wholly owned
subsidiary, GSB Investments, Inc. and CBG Mortgage, Inc. CBG Mortgage was formed
in January 2002 to act as the Corporation's mortgage broker. Community Bank of
Oconto County also includes the accounts of its wholly owned subsidiary, CBOC
Investments, Inc. All significant intercompany balances and transactions have
been eliminated.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine-month periods ended
September 30, 2002 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2002. For further information, refer to
the consolidated financial statements and footnotes thereto included in our Form
10-K for the year ended December 31, 2001.

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions which affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of date of
the financial statements, as well as the reported amounts of income and expenses
during the reported periods. Actual results could differ from those estimates.


                                       6
<PAGE>
NOTE B -- EARNINGS PER SHARE

Presented below are the calculations for basic and diluted earnings per share:
<TABLE>
<CAPTION>

                                                         Three Months Ended                  Nine Months Ended
                                                            September 30,                      September 30,
Basic:                                                 2002              2001              2002             2001
---------------------------------------------------------------------------------------------------------------------
                                                                 (In Thousands, except per share data)
<S>                                             <C>              <C>                   <C>               <C>
Net income                                          $ 1,738           $ 1,557           $ 4,640          $ 4,146

Weighted average shares outstanding                   2,485             2,544             2,491            2,543
Basic earnings per share                            $  0.70           $  0.61           $  1.86          $  1.63
                                                =====================================================================
<CAPTION>
Diluted:
---------------------------------------------------------------------------------------------------------------------
                                                                 (In Thousands, except per share data)
<S>                                             <C>              <C>                   <C>               <C>
Net income                                          $ 1,738           $ 1,557           $ 4,640          $ 4,146

Weighted average shares outstanding                   2,485             2,544             2,491            2,543
Effect of dilutive stock options outstanding              2                 9                 0                8
                                                ---------------------------------------------------------------------
Diluted weighted average shares outstanding           2,487             2,553             2,491            2,551
Diluted earnings per share                          $  0.70           $  0.61           $  1.86          $  1.63
                                                =====================================================================
</TABLE>

NOTE C -- COMPREHENSIVE INCOME

The following table presents our comprehensive income.
<TABLE>
<CAPTION>
                                                          Three Months Ended                 Nine Months Ended
                                                            September 30,                      September 30,
                                                        2002             2001              2002             2001
---------------------------------------------------------------------------------------------------------------------
                                                                             (In Thousands)
<S>                                                 <C>               <C>               <C>              <C>
Net income                                          $  1,738          $ 1,557           $ 4,640          $ 4,146
Other comprehensive income
Net change in unrealized securities gains                498              149               815            1,081
Reclassification adjustment for gains
     included in net income                                0                0               210               88
Income tax effect                                       (169)             (40)             (391)            (430)
                                                ---------------------------------------------------------------------
Total comprehensive income                          $  2,067          $ 1,666           $ 5,274          $ 4,885
                                                =====================================================================
</TABLE>



                                       7
<PAGE>
NOTE D -- LOANS RECEIVABLE

Loans are comprised of the following categories (dollars in thousands):
<TABLE>
<CAPTION>
                                                 September 30,     December 31,    September 30,
                                                     2002             2001             2001
                                                 -----------------------------------------------
<S>                                              <C>                <C>              <C>
First Mortgage:
  Conventional single-family residential          $ 71,084          $ 75,984          $ 85,502
  Commercial and multifamily residential           176,228           180,102           164,635
  Construction                                      35,348            34,744            49,125
  Farmland                                           8,853             7,312             7,395
                                                 -----------------------------------------------
                                                   291,513           298,142           306,657

Commercial business loans                          169,739           140,671           131,191
Consumer and installment loans                      31,183            32,401            31,780
Lease financing                                        123             1,170             1,263
Home equity loans                                    7,445             6,140             5,182
Other                                                1,489             1,978             2,574
                                                 -----------------------------------------------
                                                   209,979           182,360           171,990
                                                 -----------------------------------------------
Total loans                                        501,492           480,502           478,627

Less allowance for loan losses                       6,100             5,563             5,612
                                                 -----------------------------------------------
Loans, net                                        $495,392          $474,939          $473,035
                                                 ===============================================
</TABLE>

NOTE E -- PENDING ACQUISITION

On June 3, 2002, we announced that a Definitive Agreement was signed to acquire
Fortress Bancshares, Inc. ("Fortress") of Westby, WI. Fortress is a multi-bank
holding company that owns three separately chartered community banks located in
Wisconsin, Minnesota and Iowa. All seven of Fortress's branch locations are
located within a fifty-mile radius of La Crosse, Wisconsin. The purchase price
is $30.00 per share and will be payable in a combination of approximately 55% of
Merchants and Manufacturers Bancorporation, Inc. common stock and 45% cash. The
transaction is expected to close in the fourth quarter of 2002. At September 30,
2002, Fortress had total assets and shareholder's equity of $217.0 million and
$16.0 million respectively.

NOTE F -- ADOPTION OF STATEMENT 142

On January 1, 2002, we implemented Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets. Under the provisions of SFAS 142,
goodwill is no longer subject to amortization over its estimated useful life,
but instead will be subject to at least annual assessments for impairment by
applying a fair-value based test. SFAS 142 also requires that an acquired
intangible asset should be separately recognized if the benefit of the
intangible asset is obtained through contractual or other legal rights, or if
the asset can be sold, transferred, licensed, rented or exchanged, regardless of
the acquirer's intent to do so. Implementation of the Statement did not have a
material impact on our consolidated financial statements.



                                       8
<PAGE>
NOTE G -- RECENT ACCOUNTING PRONOUNCEMENTS

SFAS No. 143, Accounting for Asset Retirement Obligations, addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. The
statement requires that the fair value of a liability for an asset retirement
obligation be recognized in the period it is incurred if a reasonable estimate
of fair value can be made. The associated retirement costs are capitalized as a
component of the carrying amount of the long-lived asset and allocated to
expense over the useful life of the asset. The statement is effective for
financial statements issued for fiscal years beginning after June 15, 2002. We
do not believe the adoption of the statement will have a material impact on our
consolidated financial statements.

SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
establishes accounting and reporting standards for the impairment or disposal of
long-lived assets. This statement supercedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed. SFAS
No. 144 provides one accounting model to be used for long-lived assets to be
disposed of by sale, whether previously held for use or newly acquired and
broadens the presentation of discontinued operations to include more disposal
transactions. The provisions of SFAS No. 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001. We adopted
the statement as of January 1, 2002 and the implementation of this standard did
not have a material impact on our consolidated financial statements.

NOTE H -- RECENT REGULATORY DEVELOPMENTS

On July 30, 2002, President Bush signed the Sarbanes-Oxley Act of 2002 (the
"Sarbanes-Oxley Act"). This legislation impacts corporate governance of public
companies, affecting their officers and directors, their audit committees, their
relationships with their accountants and the audit function itself. Certain
provisions of the Act became effective on July 30, 2002. Others will become
effective as the SEC adopts appropriate rules.

The Sarbanes-Oxley Act implements a broad range of corporate governance and
accounting measures for public companies designed to promote honesty and
transparency in corporate America and better protect investors from corporate
wrongdoing. The Sarbanes-Oxley Act's principal legislation includes:

    a)   The creation of an independent accounting oversight board to oversee
         the audit of public companies and auditors who perform such audits;

    b)   Auditor independence provisions which restrict non-audit services that
         independent accountants may provide to their audit clients;

    c)   Additional corporate governance and responsibility measures, including:

         (i)    requiring chief executive officer and chief financial officer to
                certify financial statements;

         (ii)   prohibiting trading of securities by officers and directors
                during periods in which certain employee benefit plans are
                prohibited from trading;

         (iii)  requiring a company's chief executive officer and chief
                financial officer to forfeit salary and bonuses, including
                profits on the sale of company securities, in certain
                situations; and

         (iv)   protecting whistleblowers and informants

    d)   Expansion of power of the audit committee, including the requirements
         that the audit committee:



                                       9
<PAGE>
        (i)     have direct control of the engagement of the outside auditor;

        (ii)    be able to hire and fire the auditor, and

        (iii)   approve all non-audit services

    e)   Expanded disclosure requirements, including accelerated reporting of
         stock transactions by insiders and the prohibition of most loans to
         directors and executive officers of non-financial institutions;
         mandatory disclosure by analysts of potential conflicts of interest;
         and a range of enhanced penalties for fraud and other violations.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Financial Condition

TOTAL ASSETS

At September 30, 2002 our consolidated total assets were $644.4 million as
compared to $608.0 million at December 31, 2001. The growth in loans and
short-term investments caused the majority of the increase.

INVESTMENT SECURITIES

Investment securities available-for-sale increased $8.0 million, or 12.1%, from
$66.1 million at December 31, 2001, to $74.2 million at September 30, 2002.
Purchases of investment securities offset the amounts repaid or maturing during
the period.

LOANS RECEIVABLE

Loans receivable and loans held for sale, net of allowance for loan losses
increased $21.1 million from $477.3 million at December 31, 2001 compared to
$498.4 million at September 30, 2002. The growth in loans can be attributed to
the growth in commercial business loans that were partially offset by the
decrease in single-family residential loans. In a low interest rate environment,
consumers tend to refinance the adjustable rate mortgages that the banks
maintain in their own loan portfolios with lower rate 15 and 30-year mortgages
that are sold on the secondary market. Currently, loans receivable consists
mainly of commercial loans secured by business assets, real estate and
guarantees as well as mortgages secured by residential properties located in our
primary market areas. At September 30, 2002 we designated $3.0 million of loans
as held for sale.



                                       10
<PAGE>
TOTAL DEPOSITS AND BORROWINGS

Total deposits increased $40.3 million, or 8.4%, from $477.8 million on December
31, 2001 to $518.1 million on September 30, 2002. The increase in deposits can
be attributed to the growth in retail money market accounts and savings accounts
currently offered by our subsidiary banks. Uncertainties in the stock market
also contributed to the deposit increase. Short-term borrowings decreased by
$8.0 million, or 46.9% from $17.0 million on December 31, 2001 to $9.0 million
on September 30, 2002. The funds acquired through deposit growth were used to
reduce short-term borrowings. Short-term borrowings consist of federal funds
borrowed from correspondent banks and repurchase agreements. Long-term debt
decreased by $1.9 million, or 3.4%, from $55.8 million on December 31, 2001 to
$53.9 million on September 30, 2002. Long-term debt consists of Federal Home
Loan Bank advances.

CAPITAL RESOURCES

Stockholders' equity at September 30, 2002 was $55.8 million compared to $52.9
million at December 31, 2001, an increase of $2.9 million. The change in
stockholders' equity consists of net income of $4.6 million, less payments of
dividends to shareholders of $1.3 million, the net cost from the purchase of
treasury stock of $1.1 million and a $634,000 net increase in accumulated other
comprehensive income. We and our banks continue to exceed our regulatory capital
requirements.

Under the Federal Reserve Board's risk-based guidelines capital is measured
against our subsidiary bank's risk-weighted assets. Our tier 1 capital (common
stockholders' equity less goodwill) to risk-weighted assets was 10.2% at
September 30, 2002, well above the 4.0% minimum required. Total capital to
risk-adjusted assets was 11.4%; also well above the 8.0% minimum requirement.
The leverage ratio was at 8.7% compared to the 4.0% minimum requirement.
According to FDIC capital guidelines, our subsidiary banks are considered to be
"well capitalized" as well.

In light of our pending acquisition of Fortress, we will be required to add to
our capital via a trust preferred securities offering in order to maintain our
"well capitalized" classification. As our acquisition orientated growth strategy
continues, we may be required to add additional capital to maintain our current
"well capitalized" rating.

ASSET QUALITY

Generally a loan is classified as nonaccrual and the accrual of interest on such
loan is discontinued when the contractual payment of principal or interest has
become 90 days past due or management has serious doubts about further
collectibility of principal or interest. Generally, loans are restored to
accrual status when the obligation is brought current, has performed in
accordance with the contractual terms for a reasonable period of time and the
ultimate collectibility of the total contractual principal and interest is no
longer in doubt.



                                       11
<PAGE>
Nonperforming assets are summarized, for the dates indicated, as follows
(dollars in thousands):

<TABLE>
<CAPTION>
                                                  September 30,    December 31,    September 30,
                                                      2002             2001            2001
                                                 ---------------  --------------   -------------
<S>                                              <C>              <C>              <C>
Non-accrual loans:
    Conventional single-family residential          $  564            $  723           $  893
    Commercial and multifamily residential             858             2,717            1,266
    Commercial business loans                          715               558              591
    Consumer and installment loans                     522               431              405
                                                   -------           -------          -------
        Total non-accrual loans                      2,659             4,429            3,155

Other real estate owned                              2,877               139              230
                                                   -------           -------          -------
        Total nonperforming assets                  $5,536            $4,568           $3,385
                                                   =======           =======          =======
RATIOS:
Non-accrual loans to total loans                      0.54%             0.93%            0.67%
Nonperforming assets to total assets                  0.86              0.75             0.56
Loan loss allowance to non-accrual loans            229.41            125.60           177.88
Loan loss allowance to total loans                    1.22              1.16             1.17
</TABLE>

Nonperforming assets increased by $968,000 from $4.6 million at December 31,
2001 to $5.5 million at September 30, 2002, an increase of 21.2%. The growth in
other real estate owned lead to the increase. Currently there are three
properties that constitute the other real estate owned. We believe that any
losses on current non-accrual loans balances will be negligible, due to the
collateral position in each situation. However, additional charge offs may occur
upon sale of the other real estate.

The following table presents changes in the allowance for loan losses (dollars
in thousands):

<TABLE>
<CAPTION>
                                                         Three Months Ended                      Nine Months Ended
                                                   September 30,     September 30,        September 30,       September 30,
                                                        2002              2001                2002                 2001
                                                  ---------------------------------      -------------------------------------
<S>                                               <C>                <C>                 <C>                  <C>
Balance at beginning of period                         $5,927             $5,350                 $5,563              $5,010
  Provision for loan losses                               282                306                    844                 866
  Charge-offs:
    Commercial and multifamily residential                  0                  0                      0                   0
    Commercial business loans                               1                  1                     90                 104
    Consumer and installment loans                        120                 45                    307                 169
                                                  ---------------------------------      -------------------------------------
      Total charge-offs                                   121                 46                    397                 273
                                                  ---------------------------------      -------------------------------------

  Recoveries:
    Commercial and multifamily residential                  0                  1                     17                   1
    Commercial business loans                               0                  0                      5                   0
    Consumer and installment loans                         12                  1                     68                   8
                                                  ---------------------------------      -------------------------------------
      Total recoveries                                     12                  2                     90                   9
                                                  ---------------------------------      -------------------------------------
Net charge-offs                                           109                 44                    307                 264
                                                  ---------------------------------      -------------------------------------

Balance at September 30,                               $6,100             $5,612                 $6,100              $5,612
                                                  =================================      =====================================
</TABLE>


                                       12
<PAGE>
We believe the allowance for loan losses accounting policy is critical to the
portrayal and understanding of our financial condition and results of
operations. As such, selection and application of this "critical accounting
policy" involves judgements, estimates, and uncertainties that are susceptible
to change. In the event that different assumptions or conditions were to
prevail, and depending upon the severity of such changes, the possibility of
materially different financial condition or results of operations is a
reasonable likelihood.

We maintain our allowance for loan losses at a level that management believes
will be adequate to absorb probable losses on existing loans based on an
evaluation of the collectibility of loans and prior loss experience. We also use
a risk rating system to evaluate the adequacy of the allowance for loan losses.
With this system, each loan is risk rated between one and seven by the
originating loan officer or loan committee, with one being the best case and
seven being a loss or the worst case. Loan loss reserve factors are multiplied
against the balances in each risk-rating category to determine an appropriate
level for the allowance for loan losses. Loans with risk ratings between four
and six are monitored much closer by the officers. Control of our loan quality
is continually monitored by management and is reviewed by the Board of Directors
and our credit quality committee on a quarterly basis. We consistently apply our
methodology for determining the adequacy of the allowance for loan losses, but
may make adjustments to its methodologies and assumptions based on historical
information related to charge-offs and management's evaluation of the current
loan portfolio.

The allowance for loan losses is based on estimates, and ultimate losses will
vary from current estimates. These estimates are reviewed quarterly, and as
adjustments, either positive or negative, become necessary, a corresponding
increase or decrease is made in the provision for loan losses. The methodology
used to determine the adequacy of the allowance for loan losses for the third
quarter 2002 is consistent with prior periods.

POTENTIAL PROBLEM LOANS

We utilize an internal asset classification system as a means of reporting
problem and potential problem assets. At each scheduled bank Board of Directors
meeting, a watch list is presented, showing all loans listed as "Management
Attention," "Substandard," "Doubtful" and "Loss." An asset is classified
Substandard if it is inadequately protected by the current net worth and paying
capacity of the obligor or of the collateral pledged, if any. Substandard assets
include those characterized by the distinct possibility that we will sustain
some loss if the deficiencies are not corrected. Assets classified as Doubtful
have all the weaknesses inherent in those classified Substandard with the added
characteristic that the weaknesses present make collection or liquidation in
full, on the basis of currently existing facts, conditions and values, highly
questionable and improbable. Assets classified as Loss are those considered
uncollectible and viewed as non-bankable assets, worthy of charge-off. Assets
that do not currently expose us to sufficient risk to warrant classification in
one of the aforementioned categories, but possess weaknesses that may or may not
be within the control of the customer are deemed to be Management Attention. As
of September 30, 2002 the loans classified as Management Attention were $21.5
million compared to $14.6 million as of December 31, 2001, an increase of $6.9
million or 47.3%. The increase can be attributed to the economic downturn
currently being experienced by our commercial loan customers.




                                       13
<PAGE>



Our determination as to the classification of our assets and the amount of our
valuation allowances is subject to review by the Banks' primary regulators,
which can order the establishment of additional general or specific loss
allowances. The FDIC, in conjunction with the other federal banking agencies,
has adopted an interagency policy statement on the allowance for loan losses.
The policy statement provides guidance for financial institutions on both the
responsibilities of management for the assessment and establishment of adequate
allowances and guidance for banking agency examiners to use in determining the
adequacy of general valuation guidelines. Generally, the policy statement
recommends that (i) institutions have effective systems and controls to
identify, monitor and address asset quality problems; (ii) management has
analyzed all significant factors that affect the collectibility of the portfolio
in a reasonable manner; and (iii) management has established acceptable
allowance evaluation processes that meet the objectives set forth in the policy
statement. We believe we have established an adequate allowance for probable
loan losses. We analyze the process regularly, with modifications made if
needed, and report those results four times per year at Board of Directors
meetings. However, there can be no assurance that regulators, in reviewing our
loan portfolio, will not request us to materially increase our allowance for
loan losses at the time. Although management believes that adequate specific and
general loan loss allowances have been established, actual losses are dependent
upon future events and, as such, further additions to the level of specific and
general loan loss allowances may become necessary.

COMPARISON OF THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

NET INTEREST INCOME

Net interest income equals the difference between interest earned on assets and
the interest paid on liabilities and is a measure of how effectively management
has balanced and allocated our interest rate sensitive assets and liabilities as
well being the most significant component of earnings. Net interest income for
the three months ended September 30, 2002 was $6.6 million, an increase of 9.3%
from the $6.1 million reported for the same period in 2001. An improved net
interest margin was the primary reason for the improvement in the second quarter
net interest income. The reduction in market interest rates during the quarter
caused the average rate paid on deposits and borrowings to decrease from 3.91%
for the three months ended September 30, 2001 to 2.45% for the three month
period ending September 30, 2002. Net interest income for the nine months ended
September 30, 2002 was $19.3 million, an increase of 12.1% from the $17.2
million reported for the same period in 2001. The reduced interest expense on
deposits and borrowings was the primary reason for the improvement in the
year-to-date net interest income.



                                       14
<PAGE>
The following table presents, for the periods indicated, the total dollar amount
of interest income from average interest earning assets and the resultant
yields, as well as the interest expense on average interest bearing liabilities,
and the resultant costs, expressed both in dollars and rates (dollars in
thousands):

                   AVERAGE BALANCES, INTEREST RATES AND YIELDS


<TABLE>
<CAPTION>
                                                              FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                                                              ----------------------------------------
                                                               2002                               2001
                                                               ----                               ----
                                                  AVERAGE               AVERAGE      AVERAGE                AVERAGE
                                                  BALANCE    INTEREST     RATE       BALANCE     INTEREST     RATE
                                                --------------------------------------------------------------------
<S>                                               <C>          <C>         <C>       <C>         <C>        <C>
ASSETS
Loans,net (1)(2)                                  $500,561     $8,783      6.96%     $476,777     $9,596      7.99%
Loans exempt from federal income taxes (3)           1,362         24      6.99%        1,594         36      8.96%
Taxable investment securities (4)                   13,701        138      4.00%       20,849        281      5.35%
Mortgage-related securities (4)                     42,223        484      4.55%       30,156        476      6.26%
Investment securities exempt from federal
     income taxes (3)(4)                            19,295        318      6.54%       20,551        350      6.76%
Other securities                                    18,141        102      2.23%       19,855        178      3.56%
                                                  --------     ------                --------     ------
Interest earning assets                            595,283      9,849      6.56%      569,782     10,917      7.60%
                                                               ------
Non interest earning assets                         35,841                             31,957
                                                  --------                           --------
Average assets                                    $631,124                           $601,739
                                                  ========                           ========

LIABILITIES AND STOCKHOLDERS' EQUITY
NOW deposits                                       $36,150         76      0.83%      $31,126        119      1.52%
Money market deposits                              108,842        470      1.71%       91,067        756      3.29%
Savings deposits                                    79,095        228      1.14%       73,381        291      1.57%
Time deposits                                      206,865      1,701      3.26%      216,233      2,708      4.97%
Short-term borrowings                               15,212         96      2.50%       14,002        140      3.97%
Long-term borrowings                                54,141        523      3.83%       53,549        696      5.16%
                                                  --------     ------                --------     ------
Interest bearing liabilities                       500,305      3,094      2.45%      479,358      4,710      3.90%
                                                  --------     ------                --------     ------
Demand deposits and other non  interest
     bearing liabilities                            75,948                             70,623
Stockholders' equity                                54,871                             51,758
                                                  --------                           --------
Average liabilities and stockholders' equity      $631,124                           $601,739
                                                  ========                           ========
Net interest spread (5)                                        $6,755      4.11%                  $6,207      3.70%
Net interest earning assets                        $94,978                            $90,424
Net interest margin on a fully tax
     equivalent basis (6)                                                  4.50%                              4.32%
Net interest margin (6)                                                    4.42%                              4.23%
Ratio of average interest-earning assets to
     average interest-bearing liabilities                                  1.19                               1.19
</TABLE>
-------------------------

(1)  For the purpose of these computations, nonaccrual loans are included in the
     daily average loan amounts outstanding.
(2)  Interest earned on loans includes loan fees (which are not material in
     amount) and interest income which has been received from borrowers whose
     loans were removed from nonaccrual status during the period indicated.
(3)  Taxable-equivalent adjustments were made using a 34% corporate tax rate for
     all years presented in calculating interest income and yields.
(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.



                                       15
<PAGE>
The following table presents, for the periods indicated, the total dollar amount
of interest income from average interest earning assets and the resultant
yields, as well as the interest expense on average interest bearing liabilities,
and the resultant costs, expressed both in dollars and rates (dollars in
thousands):


                   AVERAGE BALANCES, INTEREST RATES AND YIELDS

<TABLE>
<CAPTION>
                                                             FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                                                             ----------------------------------------
                                                               2002                              2001
                                                               ----                              ----
                                                  AVERAGE               AVERAGE    AVERAGE                AVERAGE
                                                  BALANCE    INTEREST     RATE     BALANCE     INTEREST     RATE
                                                --------------------------------------------------------------------
<S>                                              <C>         <C>         <C>      <C>         <C>        <C>
ASSETS
Loans, net (1)(2)                                $491,233    $26,008      7.08%   $476,881    $29,298     8.21%
Loans exempt from federal income taxes (3)          1,432         79      7.38%      1,709        115     9.00%
Taxable investment securities (4)                  14,859        474      4.26%     22,730        890     5.24%
Mortgage-related securities (4)                    37,553      1,427      5.08%     31,695      1,517     6.40%
Investment securities exempt from
     federal income taxes (3)(4)                   20,272      1,017      6.71%     21,282      1,095     6.88%
Other securities                                   18,524        313      2.26%     14,506        575     5.30%
                                                 --------    -------              --------    -------
Interest earning assets                           583,873     29,318      6.71%    568,803     33,490     7.87%
                                                             -------                          -------
Non interest earning assets                        35,507                           31,661
                                                 --------                         --------
Average assets                                   $619,380                         $600,464
                                                 ========                         ========

LIABILITIES AND STOCKHOLDERS' EQUITY
NOW deposits                                      $35,801        247      0.92%    $32,084        483     2.01%
Money market deposits                              94,689      1,172      1.65%     86,173      2,648     4.11%
Savings deposits                                   77,340        654      1.13%     71,465        981     1.84%
Time deposits                                     206,927      5,458      3.53%    209,465      8,402     5.36%
Short-term borrowings                              24,265        424      2.34%     29,508      1,154     5.23%
Long-term borrowings                               54,439      1,663      4.08%     52,943      2,176     5.50%
                                                 --------    -------              --------    -------
Interest bearing liabilities                      493,461      9,618      2.61%    481,638     15,844     4.40%
                                                 --------    -------              --------    -------
Demand deposits and other non interest
     bearing liabilities                           72,340                           68,191
Stockholders' equity                               53,579                           50,635
                                                 --------                         --------
Average liabilities and stockholders' equity     $619,380                         $600,464
                                                 ========                         ========
Net interest spread (5)                                      $19,700      4.11%               $17,646     3.47%
Net interest earning assets                       $90,412                          $87,165
Net interest margin on a fully tax
     equivalent basis (6)                                                 4.51%                           4.15%
Net interest margin (6)                                                   4.43%                           4.05%
Ratio of average interest-earning assets to
     average interest-bearing liabilities                                 1.18                            1.18
</TABLE>
------------------------------

(1)  For the purpose of these computations, nonaccrual loans are included in the
     daily average loan amounts outstanding.
(2)  Interest earned on loans includes loan fees (which are not material in
     amount) and interest income which has been received from borrowers whose
     loans were removed from nonaccrual status during the period indicated.
(3)  Taxable-equivalent adjustments were made using a 34% corporate tax rate for
     all years presented in calculating interest income and yields.
(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.


                                       16
<PAGE>





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

              VOLUME, RATE AND MIX ANALYSIS OF NET INTEREST INCOME

<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED SEPTEMBER 30, 2002         NINE MONTHS ENDED SEPTEMBER 30, 2002
                                                 COMPARED TO SEPTEMBER 30, 2001                 COMPARED TO SEPTEMBER 30, 2001
                                           -----------------------------------------------------------------------------------------
                                            CHANGE     CHANGE      CHANGE                 CHANGE     CHANGE      CHANGE
                                            DUE TO     DUE TO      DUE TO      TOTAL      DUE TO     DUE TO      DUE TO      TOTAL
                                            VOLUME      RATE        MIX        CHANGE     VOLUME      RATE        MIX        CHANGE
                                           -----------------------------------------------------------------------------------------
<S>                                          <C>     <C>           <C>         <C>         <C>      <C>          <C>       <C>
Interest-Earning Assets:
   Loans, net (1)                           $478     ($1,230)      ($61)        ($813)     $882     ($4,050)      ($122)    ($3,290)
   Loans exempt from federal income
     taxes (2)                                (5)         (8)         1           (12)      (18)        (21)          3         (36)
   Taxable investment securities             (96)        (71)        24          (143)     (308)       (165)         57        (416)
   Mortgage-related securities               190        (130)       (52)            8       280        (312)        (58)        (90)
   Investment securities exempt from
     federal income taxes (2)                (22)        (11)         1           (32)      (52)        (27)          1         (78)
   Other securities                          (16)        (66)         6           (76)      159        (330)        (91)       (262)
                                            ----     -------    -------      --------     -----     -------     -------    --------
     Total interest-earning assets          $529     ($1,516)      ($81)      ($1,068)     $943     ($4,905)      ($210)    ($4,172)
                                            ====     =======    =======      ========     =====     =======     =======    ========
Interest-Bearing Liabilities:
   NOW deposits                             $ 20        ($54)       ($9)         ($43)      $56       ($262)       ($30)      ($236)
   Money market deposits                     148        (363)       (71)         (286)      262      (1,582)       (156)     (1,476)
   Savings deposits                           23         (79)        (7)          (63)       81        (377)        (31)       (327)
   Time deposits                            (117)       (930)        40        (1,007)     (102)     (2,877)         35      (2,944)
   Short-term borrowings                      12         (52)        (4)          (44)     (205)       (638)        113        (730)
   Long-term borrowings                        8        (179)        (2)         (173)       61        (559)        (15)       (513)
                                            ----     -------    -------      --------     -----     -------     -------    --------
     Total interest-bearing liabilities     $ 94     ($1,657)      ($53)      ($1,616)    $ 153     ($6,295)    ($   84)   ($ 6,226)
                                            ====     =======    =======      ========     =====     =======     =======    ========
Net change in net interest income                                                $548                                      $  2,054
                                                                             ========                                      ========
</TABLE>

------------------------------

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

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

PROVISION FOR LOAN LOSSES

For the three months ended September 30, 2002, the provision for loan losses was
$282,000 compared to $306,000 for the same period in 2001. For the nine months
ended September 30, 2002, the provision for loan losses was $844,000 compared to
$866,000 for the same period in 2001. The provision was made to support the
growth in the loan portfolio that began in 1999 as well as the increase in
nonperforming assets in 2001 and 2002. We use a risk-based assessment of our
loan portfolio to determine the level of the loan loss allowance. This procedure
is based on internal reviews intended to determine the adequacy of the loan loss
allowance in view of presently known factors. However, changes in economic
conditions in the future financial conditions of borrowers cannot be predicted
and may result in increased future provisions to the loan loss allowance.


                                       17

<PAGE>





NON-INTEREST INCOME

Non-interest income for the three months ended September 30, 2002 was $1.4
million compared to $1.1 million for the three months ended September 30, 2001,
an increase of $307,000, or 28.1%. Non-interest income for the nine months ended
September 30, 2002 was $4.0 million compared to $3.3 million for the nine months
ended September 30, 2001, an increase of $708,000, or 21.3%. The increase was
due to the increased service charges collected on deposit accounts, gains on the
sales of investment securities and gains on the sale of loans.

NON-INTEREST EXPENSE

Non-interest expense for the three months ended September 30, 2002 was $5.2
million compared to $4.5 million for the three months ended September 30, 2001,
an increase of $623,000, or 13.7%. Non-interest expense for the nine months
ended September 30, 2002 was $15.6 million compared to $13.6 million for the
nine months ended September 30, 2001, an increase of $1.9 million, or 14.6%.
Salaries and employee benefits increased $369,000 or 14.4% from $2.6 million for
the three-month period ended September 30, 2001 to $2.9 million for the 2002
three-month period. Salaries and employee benefits increased $1.1 million or
14.1% from $7.7 million for the nine-month period ended September 30, 2001 to
$8.8 million for the nine-month period ended September 30, 2002. Employee bonus
payments, higher benefit costs and additions of new personnel accounted for the
change. The increased employee bonus payments can be attributed to higher than
anticipated 2001 earnings on which the bonus payment is based. Data processing
fees increased $41,000 or 17.4% from $235,000 for the three months ended
September 30, 2001 to $276,000 for the 2002 three-month period. Data processing
fees increased $259,000 or 37.6% from $689,000 for the nine months ended
September 30, 2001 to $948,000 for the 2002 nine-month period. The merger of
Lincoln State Bank and Lincoln Community Bank and the formation of CBG Mortgage,
Inc. as well as a contractual adjustment to our data processing agreement caused
the change for the nine-month period. Marketing and business development
expenses increased $46,000 or 20.5% from $224,000 for the three months ended
September 30, 2001 to $270,000 for the 2002 three-month period. Marketing and
business development expenses increased $113,000 or 18.9% from $598,000 for the
nine months ended September 30, 2001 to $711,000 for the 2002 nine-month period.
The introduction of our Link Financial Services products caused the increase.

INCOME TAXES

Income before taxes for the three-month period ended September 30, 2002 was $2.6
million compared to $2.3 million for the three months ended September 30, 2001,
an increase of $271,000, or 11.6%. Income before taxes for the nine-month period
ended September 30, 2002 was $6.9 million compared to $6.1 million for the nine
months ended September 30, 2001, an increase of $834,000, or 13.7%. The income
tax expense for the three months ended September 30, 2002 increased $90,000 over
the same period in 2001, while the income tax expense for the nine months ended
September 30, 2002 increased $340,000 over the nine-month period in 2001. The
effective tax rate for the three months ended September 30, 2002 and September
30, 2001 was 33.2%. The effective tax rate for the nine months ended September
30, 2002 was 33.0% compared to 32.0% for the nine months ended September 30,
2001.



                                       18

<PAGE>





NET INCOME

On an after tax basis, for the three month period ended September 30, 2002, we
reported net income of $1.7 million compared to $1.6 million for the same period
in 2001 an increase of 11.6% and for the nine month period ended September 30,
2002, we reported net income of $4.6 million compared to $4.1 million for the
same time period in 2001 an increase of 11.9%.

LIQUIDITY

Our cash flows are composed of three classifications: cash flows from operating
activities, cash flows from investing activities, and cash flows from financing
activities. Net cash provided by operating activities was $6.3 million and $4.2
million for the nine months ended September 30, 2002 and 2001, respectively, an
increase of $2.1 million, due primarily to a larger decrease in other
liabilities in the 2002 period. Net cash used in or provided by investing
activities increased by $41.7 million, to $32.0 million used in for the nine
months ended September 30, 2002 from $9.6 million provided by in the same period
in 2001. Our lending activities for the first nine months of 2002 compared to
2001 used additional cash flows of $23.7 million due primarily to an increase in
loans, net of principal collections in the 2002 period, compared to using
$995,000 in the 2001 period. Net cash provided by financing activities was $29.1
million for the nine months ended September 30, 2002 while $526,000 was used in
the nine month period of 2001. The $28.6 million increase in net cash provided
by financing activities was primarily due to a $40.3 million increase in
deposits in the 2002 period compared to a $23.0 million increase in 2001.

The Company expects to have available cash to meet its liquidity needs.
Liquidity management is monitored by the Asset/Liability committee, which takes
into account the marketability of assets, the sources and stability of funding
and the level of unfunded commitments. In the event that additional short-term
liquidity is needed, the Banks have established relationships with our
correspondent banks to provide short-term borrowings in the form of federal
funds purchased. While there are no firm lending commitments in place, we
believes that Banks could borrow $77.6 million for a short time from these banks
on a collective basis. The Banks are members of the Federal Home Loan Bank
(FHLB) and each has the ability to borrow from the FHLB. As a contingency plan
for significant funding needs, the Asset/Liability Management committee may also
consider the sale of investment securities, selling securities under agreement
to repurchase or the temporary curtailment of lending activities.



                                       19

<PAGE>
ASSET/LIABILITY MANAGEMENT

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

The following table shows the interest rate sensitivity gap for four different
time intervals as of September 30, 2002. Certain assumptions regarding
prepayment and withdrawal rates made are based upon the Corporation's historical
experience and management believes such assumptions are reasonable.


<TABLE>
<CAPTION>
                                                                     AMOUNTS MATURING OR REPRICING AS OF SEPTEMBER 30, 2002
                                                          -----------------------------------------------------------------------
                                                              WITHIN     SIX TO TWELVE   ONE TO FIVE        OVER
                                                            SIX MONTHS       MONTHS         YEARS        FIVE YEARS       TOTAL
                                                          -----------------------------------------------------------------------
                                                                                   (DOLLARS IN THOUSANDS)
<S>                                                           <C>            <C>           <C>             <C>           <C>
Interest-earning assets:
Fixed-rate mortgage loans                                     $32,167        $22,462       $136,656        $17,955       $209,240
Adjustable-rate mortgage loans                                 39,863          8,478         19,747              0         68,088
                                                          -----------------------------------------------------------------------
      Total mortgage loans                                     72,030         30,940        156,403         17,955        277,328
Commercial business loans                                      89,377         17,662         75,396          3,347        185,782
Consumer loans                                                  9,503          3,726         17,685          1,758         32,672
Home equity loans                                               6,748             44            653              0          7,445
Tax-exempt loans                                                  300             13            354            518          1,185
Lease financing                                                     0            123              0              0            123
Mortgage-related securities                                    13,491         13,522              0         16,838         43,851
Fixed rate investment securities and other                      2,127          2,833          8,484         13,596         27,040
Variable rate investment securities and other                  24,608          3,715             50              0         28,373
                                                          -----------------------------------------------------------------------
      Total interest-earning assets                          $218,184        $72,578       $259,025        $54,012       $603,799
                                                          =======================================================================
Interest-bearing liabilities:
Deposits
  Time deposits                                              $118,888        $44,786        $41,892             $0       $205,566
  NOW accounts                                                  2,257          2,257         22,568         10,531         37,613
  Savings accounts                                              5,011          4,541         45,413         21,193         76,158
  Money market accounts                                        23,330          6,749         67,493         31,497        129,069
  Borrowings                                                   25,546          5,400         25,500          6,500         62,946
                                                          -----------------------------------------------------------------------
      Total interest-bearing liabilities                     $175,032        $63,733       $202,866        $69,721       $511,352
                                                          =======================================================================
Interest-earning assets less
  interest-bearing liabilities                                $43,152         $8,845        $56,159       ($15,709)       $92,447
                                                          =======================================================================
Cumulative interest rate sensitivity gap                      $43,152        $51,997       $108,156        $92,447
                                                          ========================================================
Cumulative interest rate sensitivity gap as a
  percentage of total assets                                    6.70%          8.07%         16.78%         14.35%
                                                          ========================================================

</TABLE>












                                       20
<PAGE>


At September 30, 2002, the Corporation's cumulative interest-rate sensitive gap
as a percentage of total assets was a positive 6.70% for six months and a
positive 8.07% for one-year maturities. Therefore, the Corporation is positively
gapped at one year and may benefit from rising interest rates.

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

FORWARD-LOOKING STATEMENTS

When used in this Quarterly Report on Form 10-Q and in other filings with the
Securities and Exchange Commission, in press releases or other public
shareholder communications, or in oral statements made with the approval of an
authorized executive officer, the words or phrases "believe," "will likely
result," "are expected to," "will continue," "is anticipated," "estimate,"
"project," "plans," or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. You are cautioned not to place undue reliance on
any forward-looking statements, which speak only as of the date made. These
statements may relate to our future financial performance, strategic plans or
objectives, revenues or earnings projections, or other financial items. By their
nature, these statements are subject to numerous uncertainties that could cause
actual results to differ materially from those anticipated in the statements.

Important factors that could cause actual results to differ materially from the
results anticipated or projected include, but are not limited to, the following:
(1) the credit risks of lending activities, including changes in the level and
direction of loan delinquencies and write--offs; (2) changes in management's
estimate of the adequacy of the allowance for loan losses; (3) competitive
pressures among depository institutions; (4) interest rate movements and their
impact on customer behavior and our net interest margin; (5) the impact of
repricing and competitors' pricing initiatives on loan and deposit products; (6)
our ability to adapt successfully to technological changes to meet customers'
needs and developments in the market place; (7) our ability to access
cost-effective funding; (8) changes in financial markets and general economic
conditions; (9) new legislation or regulatory changes; and (10) changes in
accounting principles, policies or guidelines.

We do not undertake any obligation to update any forward-looking statement to
reflect circumstances or events that occur after the date on which the
forward-looking statement is made.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Corporation has not experienced any material changes to its market risk
position since December 31, 2001, from that disclosed in the Corporation's 2001
Form 10-K Annual Report.

                                       21
<PAGE>


ITEM 4. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, the Corporation's Chairman
of the Board and Principal Executive Officer and Chief Financial Officer carried
out an evaluation, with the participation of other members of management as they
deemed appropriate, of the effectiveness of the design and operation of the
Corporation's disclosure controls and procedures as contemplated by Exchange Act
Rule 13a-14. Based upon, and as of the date of that evaluation, the Chairman of
the Board and Principal Executive Officer and Chief Financial Officer concluded
that the Corporation's disclosure controls and procedures are effective, in all
material respects, in timely alerting them to material information relating to
the Corporation (and its consolidated subsidiaries) required to be included in
the periodic reports the Corporation is required to file and submit to the SEC
under the Exchange Act.

There have been no significant changes to the Corporation's internal controls or
in other factors that could significantly affect these controls subsequent to
the date that the internal controls were most recently evaluated. There were no
significant deficiencies or material weaknesses identified in that evaluation
and, therefore, no corrective actions were taken.


                                       22
<PAGE>





PART II.  OTHER INFORMATION

Item 1.         Legal Proceedings

                As of September 30, 2002 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 2.         Changes in Securities -- NONE

Item 3          Defaults upon Senior Securities -- NONE

Item 4          Submission of Matters to Vote of Security Holders - NONE

Item 5          Other Information -- NONE

Item 6          Exhibits and Reports on Form 8-K

                (a) Exhibits -- The following exhibits are either filed as part
                of this report:

                   99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
                   adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                   2002 from the Corporation's Chairman of the Board of
                   Directors and Principal Executive Officer.

                   99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
                   adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                   2002 from the Corporation's Chief Financial Officer.


                                       23

<PAGE>






                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                             MERCHANTS AND MANUFACTURERS
                                                 BANCORPORATION, INC.
                                    --------------------------------------------
                                                    (Registrant)




Date   November 13, 2002               /s/ Michael J. Murry
     ----------------------          --------------------------------------
                                       Michael J. Murry
                                       Chairman of the Board of Directors
                                            and Principal Executive Officer

Date   November 13, 2002               /s/ James C. Mroczkowski
     ----------------------          --------------------------------------
                                       James C. Mroczkowski
                                       Executive Vice President & Chief
                                            Financial Officer
                                       Principal Financial Officer



                                       24
<PAGE>


                  CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Michael J. Murry, Chairman of the Board of Directors and Principal Executive
Officer, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Merchant and
Manufacturers Bancorporation, Inc.;

2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly report is being
     prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

5) The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 13, 2002

        /s/ Michael J. Murry
        -------------------------------------
        Michael J. Murry
        Chairman of the Board of Directors and Principal Executive Officer


                                       25
<PAGE>





                  CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, James C. Mroczkowski, Executive Vice President and Chief Financial Officer,
certify that:

1) I have reviewed this quarterly report on Form 10-Q of Merchants and
Manufacturers Bancorporation, Inc.;

2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly report is being
     prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

5) The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 13, 2002

        /s/ James C. Mroczkowski
        -------------------------------------------------
        James C. Mroczkowski
        Executive Vice President and Chief Financial Officer

                                       26