Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements other than historical facts contained or incorporated by reference in this report. These statements speak of the Corporation's plans, goals, beliefs or expectations, refer to estimates or use similar terms. Forward looking statements are identified generally by statements containing words and phrases such as "may," "project," "are confident," "should be," "predict," "believe," "plan," "expect," "estimate," "anticipate" and similar expressions. Future filings by the Corporation with the Securities and Exchange Commission, and statements other than historical facts contained in this Report and in any written material, press releases and oral statements issued by, or on behalf of the Corporation may also constitute forward-looking statements.

Forward-looking statements are subject to significant risks and uncertainties and the Corporation's actual results may differ materially from the results discussed in such forward-looking statements. Factors that might cause actual results to differ from the results discussed in forward-looking statements include, but are not limited to, the factors set forth in Item 1A of the 2008 Form 10-K, which item is incorporated herein by reference, and any other risks identified in this Report.

All forward-looking statements contained in this Report or which may be contained in future statements made for or on behalf of the Corporation are based upon information available at the time the statement is made and the Corporation assumes no obligation to update any forward-looking statement.

Critical Accounting Policies

A number of accounting policies require the use of management's judgment. Management considers the most significant accounting policy to be the determination of the amount of the allowance for loan losses. The Bank evaluates its loan portfolio at least quarterly to determine the adequacy of the allowance for loan losses. Included in the review are three components: 1) historic losses and allowance coverage based on peak and average loss volume; (2) qualitative factors such as portfolio trends in volume and composition with attention to possible concentrations, delinquency trends and loan performance compared to the Corporation's peer group and local and national economic conditions; and
(3) quality review analysis of impaired loans identifying charge-offs, potential loss after collateral liquidation and credit weaknesses requiring above-normal supervision. Since the allowance for loan losses is an estimate, there is a risk that actual results will differ from expectations and that additional losses and a corresponding reduction in earnings could result.

Financial Condition

The Corporation's total assets decreased $2.5 million (0.3%) during the first nine months of 2009. Cash and cash equivalents decreased $18.1 million (34.2%) during that period, associated with activity normally experienced after year end. The Bank typically experiences a short-term increase in deposits at year-end associated with municipal deposits of property taxes and commercial deposits resulting from holiday spending, which typically run off during the first quarter as excess deposits are transferred into alternative investment vehicles.

Investment securities increased $10.9 million (10.2%) during the first three quarters of 2009. Approximately $45.2 million of the Bank's investment portfolio was redeemed through normal maturities or scheduled calls, and $56.3 million of new securities were purchased during the period. Management continues to follow its practice of holding the securities in its investment portfolio to maturity.

Loans increased $1.5 million (0.3%) during the first nine months of 2009. New commercial loan volume reflected the sluggish nature of the economy during the first nine months of the year. New loan originations were only slightly greater than the amortization and prepayment of portfolio loans resulting in the increase in total loans to $601.2 million at September 30, 2009 compared to $599.6 million at December 31, 2008. Management has allowed a portion of the commercial portfolio to refinance elsewhere if it was determined that the credit had the potential to deteriorate significantly in a prolonged recession. Conversely, management continues to emphasize selective marketing and requires extra scrutiny of equity, cash flow and borrower character for loan opportunities created as borrowers refinance their credits out of competitor banks. The Bank does not make "subprime" or so-called "Alt-A" loans (alternative documentation loans with lower approval standards) and does not hold any of such loans in its portfolio.

The allowance for loan losses ("ALL") increased $0.1 million (0.9%) during the first nine months of 2009. A $1.3 million provision for loan loss ("PLL") was recorded in and charged to earnings for the nine months ending September 30, 2009. Recoveries of $0.1 million were received during the same period on loans which had been previously charged off. A total of $1.3 million in loans were charged-off during the first three quarters of 2009. The Bank's charge offs and the corresponding PLL reflect the adverse effects of the recession on the economy. The Bank had 25 borrowers in foreclosure at September 30, 2009 compared to the 32 borrowers in foreclosure at December 31, 2008. As of September 30, 2009 the Bank had a base of over 4,000 collateralized real estate loans in its portfolio. The PLL recorded for the three months ending September 30, 2009 totaled $0.6 million, and included $0.2 million necessary to write down the balance of a commercial loan as a result of fraud and $0.2 million necessary to write down balances of loans to the fair market value of the foreclosed real estate as the properties were placed in Other Real Estate Owned ("OREO"). The market value of OREO was $2.9 million at September 30, 2009 compared to $2.8 million at June 30, 2009 and $0.1 million at September 30, 2008. Although OREO balances remained similar from the second quarter to the third quarter with only $0.1 million variance, ten properties were sold by the Bank during the third quarter. However, several newly completed foreclosures were added to the Bank's OREO replacing the sold properties.

Non-performing loans were $11.7 million at September 30, 2009 compared to $8.9 million at December 31, 2008 and $4.5 million at September 30, 2008. The increase was attributable to changes in the economy and real estate markets in general experienced over the past year. The following table shows the composition of the loan portfolio on those dates. Management does not believe that the change in non-performing loans or the composition of the loan portfolio reflects any significant trends or changes other than changes attributable to the downturn in the economy, and real estate markets in general, experienced over the past year.

                                                         COMPOSITION OF LOAN PORTFOLIO

                                       September 30, 2009                     December 31, 2008                      September 30, 2008
                                                    Percent of                             Percent of                             Percent of
                                    Loan           Loans in each           Loan           Loans in each           Loan           Loans in each
Balance applicable to:            Balance            Category            Balance            Category            Balance            Category
Commercial,
financial,agricultural         $   21,591,997                3.59 %   $   23,551,986                3.93 %   $   24,736,609                4.17 %
Real estate-construction           50,573,328                8.41 %       47,726,345                7.96 %       48,015,923                8.10 %
Real
estate-commercialmortgage         249,947,636               41.58 %      246,660,373               41.13 %      239,291,908               40.35 %
Real
estate-residentialmortgage        265,788,915               44.21 %      267,735,203               44.65 %      266,492,230               44.93 %
Installment loans
toindividuals                      13,258,491                2.21 %       13,972,225                2.33 %       14,525,110                2.45 %
           TOTAL               $  601,160,367              100.00 %   $  599,646,132              100.00 %   $  593,061,780              100.00 %

The ALL represents management's estimate of the amount necessary to provide for probable credit losses inherent in the loan portfolio. To assess the adequacy of the ALL management uses significant judgment focusing on changes in the size and the character of the loan portfolio, changes in levels of nonperforming loans, risks identified within specific credits, existing economic conditions, underlying collateral, historic losses within the loan portfolio, as well as other factors that could affect probable credit losses. Management continues to monitor the quality of new loans that the Bank originates each year as well as to review the Bank's existing loan performance.

Deposits at the Bank increased $0.5 million (0.1%) during the first nine months of 2009. Although the increase is minimal, core deposits remain a strength of the Bank. As noted above, there is typically a short-term increase in commercial and municipal deposits in December of each year. These deposits tend to be transferred to corporate funds management programs or, in the case of municipal deposits, to the State of Wisconsin investment fund after the first of the year. Through the first nine months of 2009 this run-off has been replaced by increased time deposits.

The Corporation's total borrowings decreased $3.4 million (85.9%) during the first nine months of 2009. The Bank adjusts its level of daily borrowing or short-term daily investment depending upon its needs each day. Excess funds or funding requirements are addressed at the close of each business day. Funding needs are met through the Bank's federal funds facility through its primary correspondent bank.

Stockholders' equity increased $0.1 million (0.1%) as the Corporation posted net income of $7.3 million and paid $7.2 million in dividends during the first nine months of 2009.

Liquidity

The ability to provide the necessary funds for the day-to-day operations of the Corporation depends on a sound liquidity position. Management has continued to monitor the Corporation's liquidity by reviewing the maturity distribution between interest-earning assets and interest-bearing liabilities. Fluctuations in interest rates can be the primary cause for the flow of funds into or out of a financial institution. The Bank continues to offer products that are competitive and encourages depositors to invest their funds in the Bank's products. Management believes that these efforts will help the Bank to not only retain these deposits, but also encourage continued growth. The Bank has the ability to borrow up to $70.0 million in federal funds purchased, and has an additional $33.5 million available for short-term liquidity through the Federal Reserve Bank discount window. At September 30, 2009 and December 31, 2008, there were no amounts outstanding under these credit facilities.

Capital Expenditures

The Bank had two capital projects in place for 2009: the relocation of its Good Hope Road in-store banking facility (necessitated by a move of the retailer to a new building) completed in July 2009 and a new in-store facility on Mayfair Road in Wauwatosa, Wisconsin completed in September 2009. Capital expenditures of $0.3 million related to these projects were funded internally.

Results of Operations

The Corporation's net income for the third quarter of 2009 was $2.2 million, a decrease of $0.5 million (17.3%) compared to the third quarter of 2008.

The decrease was the net result of the following:
· a decrease of $0.1 million (1.7%) in net interest income;

· an increase of $0.4 million (176.0%) in the provision for loan losses;

· an increase in other income of $0.3 million (10.8%) primarily resulting from increases to gain on the sale of loans; and

· an increase in other expenses of $0.5 million (6.7%) primarily resulting from increased FDIC premiums, including a $0.3 million special assessment levied by the FDIC as well as an increase in salaries and employee benefits of $0.2 million (4.3%) associated with normal cost of living increases and a decrease in tax provision of $0.2 million (13.7%)

Total interest income on loans decreased $0.5 million (5.2%) during the third quarter of 2009 compared to the third quarter of 2008. The decrease reflected the net effect of declining rates throughout 2008, which more than offset interest income increases due to loan growth from year to year. Average loan yields declined 70 basis points to 6.04% for the third quarter of 2009 compared to 6.74% for the third quarter of 2008, which resulted in a $2.1 million decrease in interest income for the 2009 third quarter compared to the third quarter of 2008. This decline was partially offset by an increase of $1.6 million resulting from increased volume in interest-earning assets for the third quarter of 2009 compared to the third quarter of 2008. In particular, average loans increased $14.0 million from $584.1 million for the quarter ended September 30, 2008 to $598.1 million for the quarter ended September 30, 2009.

Investment security interest income decreased $0.1 million (13.2%) during the third quarter of 2009 compared to the third quarter of 2008. This change is primarily the result of a decrease of 72 basis points in the average tax equivalent quarterly yield derived from all investments to 4.17% as of September 30, 2009 compared to 4.89% as of September 30, 2008.

Despite an increase in average interest bearing deposits from $500.0 million for the quarter ended September 30, 2008 to $553.8 million for the quarter ended September 30, 2009, declining interest rates caused a $0.5 million (22.9%) decrease in interest expense comparing the 2009 and 2008 third quarters. Multiple reductions to the target rate established by the Federal Open Market Committee reduced interest paid in 2008 on the Bank's variable rate deposit products. Annualized yields on interest-bearing deposits declined 52 basis points to 1.21% for the third quarter of 2009 from 1.73% for the third quarter of 2008.

Non-interest income increased $0.3 million (10.8%) during the third quarter of 2009 compared to the same period of 2008. This increase is primarily the result of an increase in net gains from the sale of loans. Increased volumes of mortgage refinancing in the third quarter of 2009 compared to the third quarter of 2008 resulted in additional fees associated with the transaction closing, gains on sale of the loans in the secondary market and increases to Mortgage Servicing Rights ("MSRs") held by the Bank.

A summary of the change in income for the quarters ended September 30, 2009 and 2008 appears below:

Three Months Ended                                      September 30,        September 30,            2009
                                                             2009                 2008            Over (Under)
                                                         (Unaudited)          (Unaudited)             2008
Revenue and Expenses: (000's)
Interest income                                        $         10,014     $         10,678     $         (664 )
Interest expense                                                 (1,687 )             (2,204 )              517
Net interest income before provision for loan losses              8,327                8,474               (147 )
Provision for loan losses                                          (552 )               (200 )             (352 )
Net interest income after provision for loan losses               7,775                8,274               (499 )
Non-interest income                                               3,439                3,104                335
Non-interest expenses                                            (7,803 )             (7,312 )             (491 )
Income from operations                                            3,411                4,066               (655 )
Tax Provision                                                     1,171                1,357               (186 )
Net income                                             $          2,240     $          2,709     $         (469 )

Net income for the nine months ended September 30, 2009 decreased $1.1 million (13.0%) compared to the nine months ended September 30, 2008. The decrease was the net result of the following:

· a decrease of $0.4 million in net interest income;

· an increase of $0.7 million in the provision for loan losses;

· an increase of $1.1 million in non-interest income, which resulted from a $1.5 million increase in mortgage production income for the nine months ended September 30, 2009 compared to the same period in 2008, offset by non-interest income of $0.6 million from the receipt of non-taxable Bank Owned Life Insurance (BOLI) death benefit proceeds realized in 2008 that did not recur in 2009; and

· an increase of $1.1 million in non-interest expense resulting primarily from increased FDIC premiums, including a $0.3 million special assessment levied by the FDIC.

Interest income on loans for the first three quarters of 2009 decreased $2.3 million (7.9%) from the same period of 2008. This decrease was the net result of increases due to volume and decreases due to yield. Average loans increased $16.0 million for the nine-month period ended September 30, 2009 compared to the first nine months of 2008, providing a $0.8 million increase to interest income, which was more than offset by the effect of lower interest rates which caused interest income to decrease by $3.1 million as loan yields declined 70 basis points from 6.74% to 6.04% from the prior year.

Interest income on investment securities decreased $0.3 million (8.2%) during the first nine months of 2009 compared to the same period in 2008. This change is primary the result of a decrease of 32 basis points in the average tax equivalent year-to-date yield derived from all investments to 4.58% as of September 30, 2009 compared to 4.90% as of September 30, 2008.

Interest expense on deposits for the first nine months of 2009 decreased $2.2 million (29.7%) from the first nine months of 2008. This decrease was the net result of decreases due to yield and increases due to volume. A $2.7 million decrease in interest expense caused by a 63 basis point decrease in the yield on interest bearing deposits from 1.92% to 1.29% was offset by a $0.5 million increase due to growth in the average balance of interest-bearing deposits over the first nine months of 2008 versus the first nine months of 2009.

New deposits between September 30, 2008 and September 30, 2009 included short-term, low-yielding liabilities due to the growth in personal checking and municipal deposits, as well as time deposits, at current historically low rates. This trend has helped the Bank maintain a strong net interest margin compared to other banks in its peer group as determined from information published by the Federal Financial Institutions Examination Council ("FFIEC") in its most recently published June 30, 2009 peer analysis, the Uniform Bank Performance Report ("UBPR"). Information in the UBPR is compiled by the FFIEC and while management believes such information to be accurate, the Corporation assumes no responsibility for any inaccuracies in such information.

Non-interest income increased $1.1 million (11.1%) for the first nine months of 2009 versus the comparable period in 2008. This increase is attributable to the increase in mortgage production income for the nine months ending September 30, 2009 compared to non-recurring income realized in the nine months ending September 30, 2008. Mortgage production income increases are the result of record high volumes of refinancing which occurred on residential real estate loans in the first three quarters of 2009 as a result of low rates. The $1.5 million increase in mortgage production income included $0.3 million in closing fees, $0.4 million in mortgage servicing rights and $0.8 million on the gain on the sale of the loans over par. Non-interest income in 2008 included non-recurring income of $0.1 million from VISA stock redeemed in conjunction with that company's initial public offering and a gain of $0.6 million attributable to non-taxable Bank Owned Life Insurance death benefit proceeds of $1.6 million.

Non-interest expense increased $1.1 million (5.2%) during the nine months ended September 30, 2009 compared to the same period in 2008. The largest single component of the increase was FDIC insurance premiums. The increase included a one time assessment of $0.3 million and regular FDIC premium increases of $0.6 million, totaling $0.9 million of the $1.1 million increase to non-interest expense.

Capital Adequacy

Federal banking regulatory agencies have established capital adequacy rules applicable to banks that take into account risk attributable to balance sheet assets and off-balance-sheet activities. The Bank's Tier 1 capital to risk-weighted assets was 17.38% at September 30, 2009, above the 4.0% minimum required. Total capital to risk-adjusted assets was 18.38%, also above the 8.0% minimum requirement. The leverage ratio was at 13.25% compared to the 4.0% minimum requirement.

Subsequent Event

Effective October 23, 2009, the Bank acquired substantially all of the assets and assumed substantially all of the liabilities of the Bank of Elmwood, a Wisconsin state-chartered bank headquartered in Racine, Wisconsin from the FDIC. The opportunity to expand the Bank's presence from two locations in the Racine market to seven in the Racine and Kenosha market will provide significant benefits to the Bank and its customers. The Bank will acquire a large base of new core deposits and loan relationships.

Off-Balance Sheet Arrangements

The Bank's obligations also include off-balance sheet arrangements consisting of loan-related commitments, of which only a portion are expected to be funded. At September 30, 2009, the Bank's loan-related commitments, including standby letters of credit, totaled $74.3 million. The Bank manages its overall liquidity, taking into consideration funded and unfunded commitments as a percentage of its liquidity sources. The Bank's liquidity sources have been and are expected to be sufficient to meet the cash requirements of its lending activities.