Premier Bank Investing in a Volatile Environment

IN TODAY’S VOLATILE MARKETS INVESTORS SEEK CONSISTENCY

We believe that careful portfolio construction around multiple asset classes with varying correlations results in lower volatility and more consistent returns. The end result is a stable and predictable portfolio with low correlations to short term risk factors.

$250,000 $215,892

$200,000

$189,726 +23%

$150,000

+28% +18%

$100,000

$100,000 Initial Investment

+38%

+8%

+0%

-2%

-5%

-8%

-20%

$50,000

Year

0

1

2

3

4

5

6

7

8

9

10

In this hypothetical example, each investment begins with $100,000. The lower volatility portfolio grows 8% per year. The higher volatility portfolio grows on average 8% per year but has a loss in year two that hinders performance for the balance of the years. The example is for illustrative purposes only and does not reflect average annual performance of any Premier Bank portfolio or recommendation. Source: Putnam Research, 2005

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When the forecast calls for rain, our instinct may be to cancel our plans and wait for a sunny day. When it comes to investing, trying to avoid inclement weather could mean missing out on important opportunities in the market. Regardless of the forecast, investors should consider whether they have a disciplined process as they seek to achieve their individual investment objective. Through the good markets and bad markets, Premier Bank focuses on a disciplined investment process.

01 CHOOSE ASSET ALLOCATION UNIVERSE

05

02

MONITOR PORTFOLIO

DEVELOP STRATEGIC/TACTICAL ASSET ALLOCATION TARGETS

Portfolio Management Process 04 BUILD PORTFOLIO

03 IDENTIFY INVESTMENT VEHICLES

A focus solely on returns may lead to underperformance. From the period 1986 through 2005, the S&P 500 Index posted an average annual return of 11.9%. This average is amazingly close to the long-term average that we have come to expect from stocks. Over that same period, the average equity investor earned just 3.9%, according to an annual report issued by DALBAR, Inc. It doesn’t seem possible that the average investor would earn a fraction of the return of the market. Perhaps in the short-term, an investor would experience variances but over a twenty year span?

Investor Behavior Impacts Returns 20 Year Average Annual Returns 1986–2005

11.9%

According to the DALBAR report, investors who focus solely on performance tend to be their own worst enemy. These investors jump in and out of the market, trying to time the market top and market bottom, and end up buying and selling at precisely the wrong times. During periods of market volatility, it’s hard to stand by and watch your portfolio swing violently. Many investors feel the need to take action to preserve their capital. It is this behavior that often hurts an investor’s long-term performance. Attempting to time the market, often leads to an investor sitting on the sidelines and missing an important market upswing. Not having a disciplined process to navigate market volatility can have a significant impact on the long-term performance of a portfolio.

3.9%

S&P 500 Index

Average Equity Fund Investor

Source: DALBAR, Inc. Quantitative Analysis of Investor Behavior - 2006 Returns are compounded annually. Index annual return assumes an initial investment made in 1985. The Average Fund Investor represents the aggregate action of all investors. The return was calculated by treating aggregate industry flows as being representative of the average investor and applying those flows to an appropriate performance index. These returns were not affected by fees and charges inherent with investing in securities. The major determinants of the results of the “average” investor were due to asset allocation and to attempts to time the market. The S&P 500 is an unmanaged ground of securities considered to be representative of the stock market in general. Past performance is no guarantee of future results. Investors cannot invest directly in an index.

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THE IMPORTANCE OF A PROVEN INVESTMENT PROCESS

Most financial experts agree that for an investor to achieve their long-term goals, they should develop a disciplined process and stay the course. A disciplined investment process may help you prevent market timing mistakes that tend to reduce returns.

Institutions have historically outperformed most individual investors because they follow a disciplined process. Having a disciplined process-rather than focusing on performance helps you stay focused on long-term goals, maintain a broadly diversified portfolio, stay invested through volatile markets, and keep emotions from guiding your decisions.

The chart on this page illustrates that returns of institutional investors were, on average, 70% higher than those of individual investors over the 10 year period ending December 31, 2005. Staying invested using a disciplined process through both up and down markets has historically been an important element of investment success. Of course, past performance is not indicative of future results. However, you cannot benefit from the market if you are not in the market. Few investors are able to anticipate and then successfully avoid market downturns.

Institutional and Individual Investor Returns 10 Year Average Gross Returns 1996-2005 9.6%

9.1%

9.0%

8.9%

5.8%

Foundations and Endowments

S&P 500 Index

Corporate Pension Funds

Public Pension Plans

Average Equity Fund Investors

Source: Mellon Analytical Solutions, median returns as cited in Mercer Investment Consulting’s “Summary Performance of US Plan Sponsor Funds,” December 31, 2005, and DALBAR, Inc., “Quantitative Analysis of Investor Behavior (QAIB) – 2006.” Results shown are gross of fees. Fees and expenses related to each group shown will differ depending on the investment objectives and strategy, the size of the account, extent of services rendered, risk, restrictions, tax considerations, etc. This information has been provided by outside sources that we believe are reliable. However, no further verification or adjustments have been made on our part to the data. These returns were no affected by fees and charges inherent with investing in securities. The major determinants of the results of the “average” investor were due to asset allocation and to attempts to time the market. “Foundations and endowments” is a broad foundation/endowment fund universe comprised of 62 plans of various sizes. “Corporate pension plans” is a broad corporate fund universe comprised of 141 corporate pension plans of various sizes. “Public pension plans” is a broad public fund universe comprised of 40 public pension plans of various sizes. The “SUP 500 Index” is a market-value-weighted index that measures the performance of 500 large-capitalization U.S. stocks. “Average equity fund investor” refers to the universe of all domestic equity mutual fund investors whose actions and financial results are restated to represent a single investor. Past performance is no guarantee of future results.

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A focus on performance leads investors to build a portfolio that has similar assets. Constructing a portfolio with assets that have similar correlations leads to a portfolio that offers little or no diversification benefits. Narrowly Diversified Portfolio

20

RETURN

15 10 5

Asset 1 Asset 2 Portfolio: 50% Asset 1 50% Asset 2

0

Investor Mistakes

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Buying High/Selling Low

Rearview Mirror Investing

Investors who don’t have a process often don’t hold their investments long enough to harvest their full potential. Instead, they tend to grow impatient and jump into the market late in a cycle or sell out of an investment too early.

While focusing solely on performance, it’s the equivalent of driving your car in reverse looking out of the rear view mirror. This ride tells you where you have been while ignoring where you could go next.

Most investors wait for markets to rise and then buy into the “best performing” investments. While we aren’t discounting momentum investing, we are recommending a process to prevent buying into overvalued investments while ignoring undervalued investments.

Chasing performance can prevent you from exploring good opportunities in undervalued areas of the market. By limiting the investment universe to only those areas that have performed well recently, a portfolio becomes “priced for perfection”. In other words, owning fully valued investments means that there is little margin for error.

Premier Bank Investing in a Volatile Environment]

Building a broadly diversified portfolio that contains many different types of assets that have a range of correlations results in a portfolio that provides stable returns by minimizing downside risk. By narrowing the range of potential outcomes, an investor increases the chance of achieving their investment goal. The challenge to investors is accepting that not all securities or asset classes will perform well at all times. By accepting this concept, an investor opens the door to a more efficient portfolio. Broadly Diversified Portfolio

20

RETURN

15 10 5

Asset 1 Asset 3

0

Portfolio: 60% Asset 1 40% Asset 3

Investor Mistakes Rainy Day Investing Investing to accomplish long-term goals involves weathering a number of storms. Just as we question the accuracy of the local weather report, it is impossible to predict the day-today movements of the markets. Investors who attempt to sit out the storms of the market inevitably miss out on opportunities. While it is difficult to endure the downside of the market, the ability to predict those downturns is very difficult. Just as challenging is determining when to move back into the market after the storm has passed.

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Our investment process analyzes the efficiency of the portfolio assessing the current mix of assets compared to an optimal portfolio based on the investment objectives. Efficient Frontier

We believe that portfolio management is part art and part science. We use mathematics to calculate the best portfolio given the current market and overlay that with experience and common sense.

We monitor portfolios using custom software that links with several leading trust accounting vendors. We receive daily data feeds that give constant updates on portfolio positions, which are then compared to benchmarks on a regular basis. Client guidelines and objectives are reviewed quarterly and written investment reviews are presented at least that often detailing our opinions about the portfolio and the changing market conditions. We arrange regular visits with clients to ensure effective communication and provide top-level service.

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Premier Bank Investing in a Volatile Environment]

Portfolio C more return RETURN

The process of building efficient portfolios is driven by the attractiveness of assets given today’s prices. The goal is to bring in new asset classes that will shift the opportunity set for each investor. This process has important implications for investors where for a certain level of risk, an investor may earn more return or to earn a certain level of return, an investor may be able to assume less risk.

Portfolio A current portfolio

Portfolio B less risk

RISK

Every investor has unique circumstances that play an important role in the development of a custom tailored portfolio. With Premier Bank you get the tools you need to build the right portfolio. Our Investment Team uses a proven process to identify opportunities, analytical skills to build efficient portfolios, and a rigorous monitoring system to keep portfolios vibrant. With Premier Bank you can expect: • A disciplined process with a long-term focus • Outstanding client service • Sound advice based on proven investment models • A highly motivated and experienced group of trust and investment professionals

Premier Bank 70 North Main St. Fort Atkinson, WI 53538 920.563.6616 The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. This presentation is not intended to be used as a general guide to investing, or as a source of any specific investment recommendations, and makes no implied or express recommendations concerning the manner in which any client’s account should or would be handled, as appropriate investment strategies depend upon the client’s investment objectives. The portfolio risk management process and the process of building efficient portfolios includes an effort to monitor and manage risk, but should not be confused with and does not imply low or no risk. Traditional and Efficient Portfolio Statistics include various indices that are unmanaged and are a common measure of performance of their respective asset classes. The indices are not available for direct investment. Past performance is not indicative of future results, which may vary. The value of investments and the income derived from investments can go down as well as up. Future returns are not guaranteed, and a loss of principal may occur. Investing for short periods may make losses more likely. The opinions expressed are those of MainStreet Advisors. This information is subject to change at any time, based on market and other conditions. The information presented has been obtained with care from sources believed to be reliable, but is not guaranteed. Member and/or officers may have material ownership interest in investment mentioned. Any investments purchased or sold are not deposit accounts and are not endorsed by or insured by the Federal Deposit Insurance Corporation (FDIC), are not obligations of the Bank, are not guaranteed by the Bank or any other entity and involve investment risk, including possible loss of principal. MainStreet Advisors and “Bank” are independently owned and operated.