##### Table of Contents





UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C. 20549
  FORM 10-K
 ANNUAL REPORT PURSUANT
    TO
 SECTION 13 OR 15(d) OF
    THE
 SECURITIES EXCHANGE ACT OF
    1934
 For the fiscal year ended
    December 31, 2008
 Commission file number 0-51028
  FIRST
    BUSINESS FINANCIAL SERVICES, INC.
   WISCONSIN

39-1576570(State or jurisdiction of
    incorporation or organization)

(I.R.S. Employer Identification No.)401 Charmany Drive Madison, WI

53719(Address of Principal Executive
    Offices)

(Zip Code)   (608) 238-8008
  Registrants telephone number,
    including area code
    Common Stock, $0.01 par value

The Nasdaq Global MarketCommon Share Purchase Rights

The Nasdaq Global Market   o þ
  o þ
  þ o
  Regulation S-K 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer o



Accelerated
    filer oNon-accelerated
    filer o

(Do not check if a smaller reporting company)

Smaller Reporting
    Company þ   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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[This page
    intentionally left blank]




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##### 



Table of
    Contents
   
  PagePART I.Item 1.Business


1Item 1A.Risk Factors


11Item 1B.Unresolved Staff Comments


15Item 2.Properties


15Item 3.Legal Proceedings


15Item 4.Submission of Matters to a
    Vote of Security Holders


16PART II.Item 5.Market for Registrants
    Common Equity, Related Stockholder Matters and Issuer Purchases
    of Equity Securities


17Item 6.Selected Financial Data


19Item 7.Managements Discussion
    and Analysis of Financial Condition and Results of Operations


20Item 7a.Quantitative and Qualitative
    Disclosures About Market Risk


47Item 8.Financial Statements and
    Supplementary Data


50Item 9.Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure


87Item 9A(T).Controls and
    Procedures


87Item 9B.Other Information


87PART III.Item 10.Directors, Executive
    Officers and Corporate Governance


88Item 11.Executive Compensation


88Item 12.Security Ownership of
    Certain Beneficial Owners and Management and Related Stockholder
    Matters


88Item 13.Certain Relationships and
    Related Transactions and Director Independence


88Item 14.Principal Accountant Fees
    and Services


88PART IV.Item 15.Exhibits, Financial
    Statement Schedules


88Signatures


89EX-3.1EX-3.2EX-10.9EX-23EX-31.1EX-31.2EX-32




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##### Table of Contents



PART I.  Item 1.
    Business  General
  Item 7, Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Loans and Leases.
           1




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##### Table of Contents



Available
    Information
  www.firstbusiness.com Form 10-K Form 10-K, Form 10-Q, Form 8-K
  Employees
    Supervision
    and Regulation
    General.
     2




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The
    Corporation
        Sarbanes-Oxley Act of 2002.
  Item 9A(T) Controls and Procedures
 3




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Regulation S-K.
  Emergency Economic Stabilization Act of
    2008.
  
    Capital Purchase Program (CPP).  Pursuant to
    this program, the UST, on behalf of the U.S. government,
    will purchase preferred stock, along with warrants to purchase
    common stock, from certain financial institutions, including
    bank holding companies, savings and loan holding companies and
    banks or savings associations not controlled by a holding
    company. The investment will have a dividend rate of 5% per
    year, until the fifth anniversary of the USTs investment
    and a dividend rate of 9% thereafter.  During the time the UST holds securities issued pursuant to this
    program, participating financial institutions will be required
    to comply with certain provisions regarding executive
    compensation and corporate governance. Participation in this
    program also imposes certain restrictions upon an
    institutions dividends to common shareholders and stock
    repurchase activities. We have received preliminary approval
    from the UST to participate in this program and we are in the
    process of determining whether we will participate in the
    program. Refer to Item 7  Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Liquidity and Capital Resources for
    further discussion.  
    Temporary Liquidity Guarantee Program.  This
    program contained both (i) a debt guarantee component,
    whereby FDIC will guarantee until June 30, 2012, the senior
    unsecured debt issued by eligible financial institutions between
    October 14, 2008 and June 30, 2009; and (ii) an
    account transaction guarantee component, whereby the FDIC will
    insure 100% of non-interest bearing deposit transaction accounts
    held at eligible financial institutions through
    December 31, 2009. We elected to participate in this
    program.
    Temporary increase in deposit insurance
    coverage.  Pursuant to EESA, the FDIC temporarily
    raised the basic limit on federal deposit insurance coverage
    from $100,000 to $250,000 per depositor. The EESA provides that
    the basic deposit insurance limit will return to $100,000 after
    December 31, 2009.  The
    Banks
    Insurance of Deposits.
   4




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Regulatory Capital Requirements.
 5




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##### Table of Contents



Minimum Required tobe Well CapitalizedMinimum Required


Under Promptfor Capital Adequacy


Corrective ActionActual


Purposes


RequirementsAmount


Ratio


Amount


Ratio


Amount


Ratio(In thousands)As of December 31, 2008Total capital (to risk-weighted assets)Consolidated

$
109,603



12.00
%

$
73,088



8.00
%


N/A



N/AFirst Business Bank


91,062



11.13



65,448



8.00


$
81,810



10.00
%First Business Bank  Milwaukee


14,590



15.13



7,714



8.00



9,642



10.00Tier 1 capital (to risk-weighted assets)Consolidated

$
59,178



6.48
%

$
36,544



4.00
%


N/A



N/AFirst Business Bank


80,880



9.89



32,724



4.00


$
49,086



6.00
%First Business Bank  Milwaukee


13,375



13.87



3,857



4.00



5,785



6.00Tier 1 capital (to average assets)Consolidated

$
59,178



5.94
%

$
39,819



4.00
%


N/A



N/AFirst Business Bank


80,880



9.23



35,064



4.00


$
43,830



5.00
%First Business Bank  Milwaukee


13,375



10.61



5,042



4.00



6,302



5.00   Minimum Required tobe Well CapitalizedMinimum Required


Under Promptfor Capital Adequacy


Corrective ActionActual


Purposes


RequirementsAmount


Ratio


Amount


Ratio


Amount


Ratio(In thousands)As of December 31, 2007Total capital (to risk-weighted assets)Consolidated

$
87,018



10.22
%

$
68,119



8.00
%


N/A



N/AFirst Business Bank


79,072



10.45



60,528



8.00


$
75,660



10.00
%First Business Bank  Milwaukee


9,847



10.26



7,679



8.00



9,599



10.00Tier 1 capital (to risk-weighted assets)Consolidated

$
46,164



5.42
%

$
34,060



4.00
%


N/A



N/AFirst Business Bank


71,097



9.40



30,264



4.00


$
45,396



6.00
%First Business Bank  Milwaukee


8,639



9.00



3,840



4.00



5,759



6.00Tier 1 capital (to average assets)Consolidated

$
46,164



5.12
%

$
36,065



4.00
%


N/A



N/AFirst Business Bank


71,097



9.04



31,459



4.00


$
39,324



5.00
%First Business Bank  Milwaukee


8,639



7.39



4,678



4.00



5,848



5.00   Prompt Corrective Action.
 6




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##### Table of Contents



Total Capital to Risk


Tier 1 Capital toCategory

Weighted Assets


Risk Weighted Assets


Tier 1 Leverage RatioWell capitalized


3
    10
%


3
    6
%


3
    5
%Adequately capitalized


3
    8
%


3
    4
%


3
    4
%*Undercapitalized


< 8
%


< 4
%


< 4
%*Significantly undercapitalized


< 6
%


< 3
%


< 3
%Critically undercapitalized


Ratio of tangible equity to total assets
    £
    2
%     *
    
    3% if the Banks receive the highest rating under the uniform
    system.  Limitations on Dividends and Other Capital
    Distributions.
  Liquidity. Item 7,
    Managements Discussion and Analysis of Financial Condition
    and Results of Operations  Liquidity and Capital
    Resources
  Federal Reserve System.
  Federal Home Loan Bank System.
   7




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##### Table of Contents



Item 7  Managements Discussion and
    Analysis of Financial Condition and Results of
    Operations  Liquidity and Capital Resources
  Restrictions on Transactions with
    Affiliates.
  Community Reinvestment Act.
  Riegle Community Development and Regulatory Improvement Act
    of 1994.
  USA PATRIOT Act of 2001.
  Commercial Real Estate Guidance.
 8




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##### Table of Contents



Fair and Accurate Transactions Act of 2003.
  Unlawful Internet Gambling Enforcement
    Act. due diligence of
    gambling businesses, not gamblers;
  Processing of Deposit Accounts in the Event of an Insured
    Depository Institution Failure.
  Changing Regulatory Structure.
    Monetary Policy.
 9




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Competition
    Executive
    Officers of the Registrant
               10




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Item 1A.
    Risk
    Factors    Adverse
    changes in economic conditions, particularly a continuing or
    worsening slowdown in Dane, Waukesha and Outagamie counties
    where our business is concentrated, could harm our
    business.
    and/or
    Our
    commercial real estate loans involve larger principal amounts
    than residential mortgage or consumer loans, and repayment of
    these loans may be dependent on factors outside our control or
    the control of our borrowers.
   11




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Our
    loan and lease loss allowance may not be adequate to cover
    actual losses.
    
    current economic conditions and their estimated effects on
    specific borrowers and collateral values;
    an evaluation of the existing relationships among loans and
    leases, probable loan and lease losses and the present level of
    the allowance for loan and lease losses;
    results of examinations of our loan and lease portfolios by
    regulatory agencies; and
    managements internal review of the loan and lease
    portfolios.    Our
    continued pace of growth may require us to raise additional
    capital in the future, but that capital may not be available or
    may not be on terms acceptable to us when it is
    needed.
   12




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We
    rely, in part, on external financing to fund our operations and
    the lack of availability of such funds in the future could
    adversely affect our growth strategy.
    Competition
    from other financial institutions could adversely affect our
    growth or profitability.
      We
    rely on our management, and the loss of one or more of those
    managers may harm our business.
    Variations
    in interest rates may harm our financial results.
    We are
    subject to extensive regulation, and changes in banking laws and
    regulations could adversely affect our business.
   13




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See Item 1, Business -
    Supervision and Regulation.
  Our
    trust operations subject us to financial and reputational
    risks.
  and/or
  If we
    are unable to keep pace with technological advances in our
    industry, our ability to attract and retain clients could be
    adversely affected.
    Our
    business continuity plans or data security systems could prove
    to be inadequate, resulting in a material interruption in, or
    disruption to, our business and a negative impact on the results
    of operations.
    We are
    exposed to risks of environmental liabilities with respect to
    secured properties or properties to which we take
    title.
   14




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Our
    stock is thinly traded.
    
    limited research analysis performed on our Corporation;
    operating results and stock price performance of other companies
    that investors deem comparable to us;
    news reports relating to trends, concerns and other issues in
    the financial services industry;
    perceptions in the marketplace regarding us
    and/or our
    competitors; and
    changes in government regulations.    Item 1b.
    Unresolved
    Staff Comments    Item 2.
    Properties    Location

Function

Expiration Date401 Charmany Drive, Madison, WI

Full service banking location of First Business Bank and office
    of First Business Financial Services, Inc.


201618500 W. Corporate Drive, Brookfield, WI

Full service banking location of First Business Bank - Milwaukee


20103913 West Prospect Avenue, Appleton, WI

Loan production office of First Business Bank


2017230 Ohio Street, Oshkosh, WI

Loan production office of First Business Bank


2017     Item 3.
    Legal
    Proceedings   15




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Item 4.
    Submission
    of Matters to a Vote of Security Holders    Number of SharesFor


Against


Abstained


Withheld


Non-VotesAmendment to our Restated Articles to increase our authorized
    common stock


1,480,608



576,429



8,900







Authorization to issue 2,500,000 shares of one or more new
    series of preferred stock, par value of $0.01 per share, and
    terminate the existing authorization to issue Series A and
    Series B preferred stock


1,556,163



499,438



10,336







  16




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##### Table of Contents



PART II.  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities      DividendHigh


Low


Declared20081st Quarter

$
17.94


$
15.90


$
0.072nd Quarter


19.64



15.53



0.073rd Quarter


17.48



14.01



0.074th Quarter


17.25



13.00



0.0720071st Quarter

$
22.67


$
21.26


$
0.0652nd Quarter


22.50



19.80



0.0653rd Quarter


20.93



17.70



0.0654th Quarter


19.05



17.50



0.065   Refer to Item 1, Business 
    Supervision and Regulation
    Equity Compensation Plan InformationNumber of SecuritiesRemaining Available forFuture Issuance UnderNumber of Securities to

Weighted-Average

Equity Compensationbe Issued Upon Exercise

Exercise Price of

Plans (Excludingof Outstanding Options,

Outstanding Options,

Securities Reflected inPlan Category

Warrants, and Rights.

Warrants, And Rights

Column (a))(a)

(b)

(c)Equity compensation plans approved by security holders


157,290


$
22.01



116,694  17




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##### Table of Contents



Issuer Purchases of SecuritiesApproximateTotal Number of


Dollar Value ofShares Purchased


Shares that Mayas Part of Publicly


Yet Be PurchasedTotal Number of


Average Price Paid


Announced Plans


Under the Plans orPeriod

Shares Purchased


Per Share


or Programs


ProgramsOctober 1  31, 2008


-



-



-


$
177,150November 1  30, 2008


-



-



-



177,150December 1  31, 2008


-



-



-



177,150  18




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##### Table of Contents



Item 6.
    Selected
    Consolidated Financial Data  Three
    Year Comparison of Selected Consolidated Financial
    Data
  As of and For the Year Ended December 31,2008


2007


2006(Dollars In Thousands, Except Share Data)FOR THE YEAR:Interest income

$
59,773


$
59,488


$
47,660Interest expense


33,515



36,280



28,689Net interest income


26,258



23,208



18,971Provision for loan and lease losses


4,299



2,904



1,519Non-interest income


5,137



4,416



3,674Non-interest expense


20,873



19,657



15,698Loss on foreclosed properties


1,043



-



-Income tax expense


2,056



1,807



1,681Net income

$
3,124


$
3,256


$
3,747Yield on earning assets


6.39
%


7.36
%


7.21
%Cost of funds


3.89



4.91



4.77Interest rate spread


2.50



2.45



2.44Net interest margin


2.81



2.87



2.87Return on average assets


0.32



0.39



0.54Return on average equity


6.11



6.86



8.65ENDING BALANCE SHEET:Total Assets

$
1,010,786


$
918,438


$
788,323Securities


109,124



97,378



100,008Loans and leases, net


840,546



771,633



639,867Deposits


838,874



776,060



640,266Borrowed funds


94,526



81,986



92,970Junior subordinated notes


10,315



-



-Stockholders equity


53,006



48,552



45,756FINANCIAL CONDITION ANALYSIS:Allowance for loan losses to year-end loans


1.39
%


1.26
%


1.28
%Allowance to non-accrual loans


72.75



111.17



748.06Net charge-offs to average loans


0.28



0.19



-Non-accrual loans to gross loans


1.91



1.13



0.17Average equity to average assets


5.27



5.64



6.26STOCKHOLDERS DATA:Basic earnings per share

$
1.29


$
1.33


$
1.53Diluted earnings per share


1.28



1.32



1.52Book value per share at end of period


20.82



19.35



18.36Dividend declared per share


0.28



0.26



0.24Dividend payout ratio


21.71
%


19.55
%


15.68
%Shares outstanding


2,545,546



2,509,213



2,493,578  19




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Forward-Looking
    Statements
  Item 1A  Risk Factors Form 10-K
    forward-looking
  Form 10-K.
  Overview
       20




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##### Table of Contents



and/or
          Operational
    highlights
  
    Our total assets increased to $1.0 billion as of
    December 31, 2008, a 10.1% increase as compared to
    $918.4 million at December 31, 2007. The asset growth
    was primarily due to increases in our loan and lease portfolio
    assets.
    Net income for the year was $3.1 million compared to
    $3.3 million in 2007.
    During 2008, our return on average equity was 6.11% compared to
    6.86% in 2007.
    Top line revenue increased 13.7% to $31.4 million compared
    to $27.6 million in 2007.
    Our net interest margin decreased slightly to 2.81% as compared
    to 2.87% in 2007.  Recent
    Developments and Other Income Tax Matters
    
    Many types of corporate entities, including certain activities
    of foreign entities, financial institutions and domestic
    insurance companies, are included in the combined group; 21




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##### Table of Contents




    A greater than fifty percent direct or indirect ownership test
    applies for determining which corporate entities are included in
    the combined group;
    The definition of a unitary business is construed as
    broadly as permitted under the U.S. Constitution and there
    is a presumption that a unitary business exists if certain
    factors  such as centralized management,
    intercorporate debts, or intercorporate services  are
    present;
    Only specified losses (e.g., losses generated when included in a
    combined report) may be shared amongst members of the combined
    group; and
    Members of combined group shall be jointly and severally liable
    for costs, penalties, interest and taxes associated with the
    combined report.        Critical
    Accounting Policies and Estimates
  Note 1
  Allowance for Loan and Lease Losses.
 22




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Note 1
    Income Taxes.
    Note 17
 23




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##### Table of Contents



Lease Residuals. Note 1
  Goodwill and Other Intangible Assets. Note 1 and
    Note 7
   24




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Results
    of Operations Comparison
    of the Years Ended December 31, 2008 and 2007
  Overview.
  Top Line Revenue.
  For the Year EndedDecember 31,2008


2007


Change(In Thousands)Net interest income

$
26,258


$
23,208



13.1
%Non-interest income


5,137



4,416



16.3Total top line revenue

$
31,395


$
27,624



13.7   Adjusted Net Income.
 25




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##### Table of Contents



For the Year EndedDecember 31,2008


2007


ChangeNet income, presented under US GAAP

$
3,124


$
3,256



(4.1
)%Add back:Provision for loan and lease losses, after tax


2,613



1,765



48.0Less:Net charge-offs , net of tax


1,402



818



71.4Adjusted net income

$
4,335


$
4,203



3.1   Return on Equity.
  Net Interest Income.
 26




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##### Table of Contents



Rate/Volume
    Analysis
  Increase (Decrease) For the Year Ended December 31,2008 Compared to 2007Rate/Rate


Volume


Volume


Net(In Thousands)Interest-Earning AssetsCommercial real estate and other mortgage loans

$
(4,767
)

$
4,854


$
(660
)

$
(568
)Commercial and industrial loans


(2,843
)


2,459



(383
)


(772
)Leases


(6
)


258



(1
)


251Consumer loans


(32
)


1,246



(198
)


1,016Total loans and leases receivable


(7,648
)


8,817



(1,242
)


(73
)Mortgage-related securities


80



439



8



527Investment securities


3



(50
)


(3
)


(50
)FHLB Stock


(45
)


3



(3
)


(45
)Fed funds sold and other


(30
)


7



(4
)


(27
)Short-term investments


(62
)


38



(23
)


(47
)Total net change in income on interest-earning assets


(7,702
)


9,254



(1,267
)


285Interest-Bearing LiabilitiesNOW accounts


(1,755
)


(173
)


107



(1,821
)Money market


(4,631
)


(978
)


588



(5,021
)Certificates  regular


(1,183
)


5,175



(316
)


3,676Certificates  large


(701
)


1,161



(321
)


139Total deposits


(8,270
)


5,185



58



(3,027
)Junior subordinated debentures


296



296



(296
)


296FHLB advances


(136
)


295



(32
)


127Other borrowings


(791
)


910



(280
)


(161
)Total net change in expense on interest-bearing liabilities


(8,901
)


6,686



(550
)


(2,765
)Net change in net interest income

$
1,199


$
2,568


$
(717
)

$
3,050      27




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28




---



##### Table of Contents



Net
    Interest Income Information
  Average Interest-Earning Assets, Average Interest-Bearing
    Liabilities, Interest Rate Spread, and Net Interest
    Margin.
  For the Year Ended December 31,2008


2007Average








AverageAverage





Yield/


Average





Yield/Balance


Interest


Cost


Balance


Interest


Cost(Dollars in Thousands)Interest-Earning AssetsCommercial real estate and other mortgage
    loans(1)

$
547,177


$
34,739



6.35
%

$
481,039


$
35,307



7.34
%Commercial and industrial loans


227,795



17,228



7.56



200,414



18,000



8.98Leases


28,398



1,803



6.35



24,346



1,552



6.37Consumer loans


22,648



1,214



5.36



3,106



198



6.37Total loans and leases
    receivable(1)


826,018



54,984



6.66



708,905



55,057



7.77Mortgage-related
    securities(2)


101,787



4,694



4.61



92,094



4,167



4.52Investment
    securities(2)


261



10



3.83



1,640



60



3.66Federal Home Loan Bank stock


2,367



-



-



2,230



45



2.02Fed funds sold and other


1,267



29



2.29



1,118



56



5.01Short-term investments


3,030



56



1.85



2,212



103



4.66Total interest-earning assets


934,730



59,773



6.39



808,199



59,488



7.36Non-interest-earning assets


34,630











32,539Total assets

$
969,360










$
840,738Interest-Bearing LiabilitiesNOW accounts

$
63,089



1,017



1.61


$
67,189



2,838



4.22Money market


149,727



2,678



1.79



171,508



7,699



4.49Certificates-regular


491,540



23,061



4.69



387,974



19,385



5.00Certificates-large


72,924



2,675



3.67



50,025



2,536



5.07Total deposits


777,280



29,431



3.79



676,696



32,458



4.80Junior subordinated notes


2,734



296



10.83



-



-



-FHLB advances


31,840



1,383



4.34



25,776



1,256



4.87Other borrowings


49,585



2,405



4.85



36,605



2,566



7.01Total interest-bearing liabilities


861,439



33,515



3.89



739,077



36,280



4.91Non-interest-bearing liabilities


56,817











54,204Total liabilities


918,256











793,281Stockholders equity


51,104











47,457Total liabilities and stockholders equity

$
969,360










$
840,738Net interest income/interest rate spread





$
26,258



2.50
%





$
23,208



2.45
%Net interest-earning assets

$
73,291










$
69,122Net interest margin










2.81
%










2.87
%Average interest-earning assets to average interest-bearing
    liabilities


108.51
%










109.35
%Return on average assets


0.32











0.39Return on average equity


6.11











6.86Average equity to average assets


5.27











5.64Non-interest expense to average assets


2.26











2.34     (1)

    
    The average balances of loans and leases include non-performing
    loans and leases. Interest income related to non-performing
    loans and leases is recognized when collected.(2)

    
    Includes amortized cost of basis of assets held and available
    for sale. 29




---



##### Table of Contents



Provision for Loan and Lease Losses. charge-offs Allowance for Loan and Lease
    Losses
  Non-Interest Income.
    12b-1
   30




---



##### Table of Contents



Non-Interest Expense.
  Income Taxes.
 31




---



##### Table of Contents



Financial
    Condition December 31,
    2008
  General.
  Securities.
       32




---



##### Table of Contents



As of December 31,2008


2007Amortized





AmortizedCost


Fair Value


Cost


Fair Value(In Thousands)Securities available-for-saleU.S. Government corporations and agencies

$
-


$
-


$
1,500


$
1,497Municipals


-



-



85



85Collateralized mortgage obligations  government
    agencies


81,406



82,859



52,755



52,658Collateralized mortgage obligations  government
    sponsored enterprises


26,090



26,265



43,631



43,138$
107,496


$
109,124


$
97,971


$
97,378     Less than One Year


One to Five Years


Five to Ten Years


Over Ten YearsWeighted





Weighted





Weighted





WeightedAverage





Average





Average





AverageBalance


Yield


Balance


Yield


Balance


Yield


Balance


Yield


Total(In Thousands)Available-for-saleCollateralized mortgage obligations  government
    agencies

$
-



-


$
1,171



5.14
%

$
539



5.26
%

$
81,149



4.93
%

$
82,859Collateralized mortgage obligations  government
    sponsored enterprises


-



-



1,055



3.83



14,138



4.15



11,072



4.33



26,265$
-






$
2,226






$
14,677






$
92,221






$
109,124     Derivative Activities. Note 1
   33




---



##### Table of Contents



Loans and Leases Receivable.
  
    continued growth from our loan production offices as we continue
    to penetrate and expand our market presence in the Northeast
    Region of Wisconsin, approximately $24.6 million;
    continued business development efforts from our existing sales
    force within our Madison, Wisconsin and Milwaukee, Wisconsin
    market areas, approximately $21.6 million; and
    increased commercial and industrial loans originated by our
    asset-based lending subsidiary, approximately $22.6 million.   34




---



##### Table of Contents



Loan Portfolio Composition.
  As of December 31,2008


2007


2006Percent





Percent





PercentAmount


of Total


Amount


of Total


Amount


of Total(In Thousands)Mortgage loans:Commercial real estate

$
390,094



45.74
%

$
336,153



43.01
%

$
274,262



42.30
%Construction and land development


84,778



9.94



90,545



11.58



78,257



12.07Multi-family


42,514



4.99



41,821



5.35



34,635



5.341-4 family


51,542



6.04



48,437



6.20



35,721



5.51Total mortgage loans


568,928



66.71



516,956



66.14



422,875



65.22Commercial loans and leases:Commercial and industrial


151,947



17.82



147,856



18.92



125,256



19.32Asset-based


80,403



9.43



65,930



8.43



51,445



7.93Direct financing leases, net


29,722



3.48



29,383



3.76



23,203



3.58Total commercial loans and leases


262,072



30.73



243,169



31.11



199,904



30.83Consumer loans:Home equity and second mortgage


7,386



0.87



9,784



1.25



8,859



1.37Credit card


855



0.10



854



0.11



785



0.12Personal


1,254



0.15



1,147



0.15



1,248



0.19Other


12,336



1.44



9,724



1.24



14,679



2.27Total consumer loans


21,831



2.56



21,509



2.75



25,571



3.95Gross loans and leases receivable


852,831



100.00
%


781,634



100.00
%


648,350



100.00
%Contras to loans and leases:Allowance for loan and lease losses


(11,846
)






(9,854
)






(8,296
)Deferred loan fees


(439
)






(147
)






(187
)Loans and leases receivable, net

$
840,546






$
771,633






$
639,867     CommercialConstruction,


and IndustrialCommercial


Multi-Family,


and Asset-


Lease


Consumer andReal Estate


1-4 Family


Based


Receivables


other


Total(In Thousands)Amounts due:In one year or less

$
83,867


$
97,148


$
94,001


$
906


$
13,666


$
289,588After one year through five years


244,174



78,859



136,513



23,874



8,165



491,585After five years


62,053



2,827



1,836



4,942



-



71,658$
390,094


$
178,834


$
232,350


$
29,722


$
21,831


$
852,831Interest rate terms on amounts due after one year:Fixed

$
235,928


$
68,311


$
63,437


$
28,816


$
8,081


$
404,573Adjustable

$
70,299


$
13,375


$
74,912


$
-


$
85


$
158,671   Commercial Real Estate
 35




---



##### Table of Contents



Construction, Multi-family Loans and 1-4
    Family.
  Commercial Loans.
    Leases.
    Consumer and other mortgage loans.
 36




---



##### Table of Contents



Net Fee Income from Lending Activities.
  Loan and Lease Delinquencies.
    As of December 31,2008


2007


2006% of





% of





% ofGross





Gross





GrossLoans and





Loans and





Loans andDays Past Due

Balance


Leases


Balance


Leases


Balance


Leases(In Thousands)30 to 59 days

$
2,512



0.29
%

$
621



0.08
%

$
5,860



0.90
%60 to 89 days


175



0.02



85



0.01



-



0.0090 days and
    over(1)


4,316



0.51



2,487



0.32



455



0.07$
7,003



0.82
%

$
3,193



0.41
%

$
6,315



0.97
%     (1)

    
    Includes loans and leases contractually 90 days past due
    and which have been placed on non-accrual status.  Non-performing Assets and Impaired Loans and
    Leases.
 37




---



##### Table of Contents



As of December 31,2008


2007


2006(In Thousands)Non-accrual loans and leasesFirst mortgage loans:Commercial real estate

$
2,979


$
-


$
-Construction and land development


5,279



1,783



-Multi-family


-



4,995



-1-4 family


2,082



424



-Total first mortgage loans


10,340



7,202



-Commercial and industrial


5,412



628



586Direct financing leases, net


24



59



-Consumer


509



975



523Total non-accrual loans and leases


16,285



8,864



1,109Foreclosed properties, net


3,011



660



-Total non-performing assets

$
19,296



9,524


$
1,109Performing troubled debt restructurings

$
-


$
-


$
-Total non-accrual loans and leases to total loans and leases


1.91
%


1.13
%


0.17
%Total non-performing assets to total assets


1.91
%


1.04



0.14Allowance for loan and lease losses to total loans and leases


1.39
%


1.26



1.28Allowance for loan and lease losses to non-accrual loans and
    leases


72.74



111.17



748.06   and/or
   38




---



##### Table of Contents



As of December 31,2008


2007(In Thousands)Impaired loans and leases with no impairment reserves

$
9,986


$
6,500Impaired loans and leases with impairment reserves required


6,299



2,617Total impaired loans and leases


16,285



9,117Less:Impairment reserve (included in allowance for loan and lease
    losses)


1,417



834Net impaired loans and leases

$
14,868


$
8,283Average impaired loans and leases

$
8,375


$
3,439Interest income attributable to impaired loans and leases

$
752


$
365Interest income recognized on impaired loans and leases


(49
)


(41
)Net foregone interest income on impaired loans and leases

$
703


$
324     Allowance for Loan and Lease Losses.
 39




---



##### Table of Contents



and/or
     40




---



##### Table of Contents



Year Ended December 31,2008


2007


2006(In Thousands)Allowance at beginning of period

$
9,854


$
8,296


$
6,773Charge-offs:Commercial real estate and other mortgage


(1,194
)


(571
)


-Commercial and industrial


(1,202
)


(778
)


-Lease


-



(25
)


-Consumer


-



-



-Total charge-offs


(2,396
)


(1,374
)


-Recoveries:Commercial real estate and other mortgage


89



5



4Commercial and industrial


-



23



-Lease


-



-



-Consumer


-



-



-Total recoveries


89



28



4Net (charge-offs) recoveries


(2,307
)


(1,346
)


4Provision for loan and lease loss


4,299



2,904



1,519Allowance at end of period

$
11,846


$
9,854


$
8,296Allowance to gross loans and leases


1.39
%


1.26
%


1.28
%        41




---



##### Table of Contents



As of December 31,2008


2007


2006Allowance


Percent of


Allowance


Percent of


Allowance


Percent offor Loan


Loans in


for Loan


Loans in


for Loan


Loans inand Lease


Each Category


and Lease


Each Category


and Lease


Each CategoryLoss


to Total Loans


Loss


to Total Loans


Loss


to Total Loans(In Thousands)Commercial real estate

$
4,709



45.74
%

$
3,858



43.01
%

$
2,998



42.30
%Construction and land development


1,358



9.94



1,328



11.58



826



12.07Multi-family


513



4.99



423



5.35



340



5.341-4 family


607



6.04



557



6.20



369



5.51Commercial and industrial loans


3,984



27.25



3,042



27.35



3,115



27.25Direct financing leases, net


330



3.48



355



3.76



380



3.58Consumer and other


345



2.56



291



2.75



268



3.95Total

$
11,846



100.00
%

$
9,854



100.00
%

$
8,296



100.00
%     Deposits.
   42




---



##### Table of Contents



Over SixOver Three


MonthsMonths


ThroughThree Months


Through


Twelve


Over TwelveInterest Rate

and Less


Six Months


Months


Months


Total(In Thousands)0.00% to 1.99%

$
2,292


$
574


$
306


$
-


$
3,1722.00% to 2.99%


24,890



12,691



4,545



36



42,1623.00% to 3.99%


59,413



53,708



71,534



35,427



220,0824.00% to 4.99%


266



20,201



36,815



145,416



202,6985.00% and greater


10,615



16,914



5,667



82,263



115,459$
97,476


$
104,088


$
118,867


$
263,142


$
583,573     Borrowings.
    As of December 31,2008


2007Weighted


Weighted





Weighted


WeightedAverage


Average





Average


AverageBalance


Balance


Rate


Balance


Balance


Rate(In Thousands)Fed funds purchased and securities sold under agreements to
    repurchase

$
22,000


$
12,888



2.38
%

$
14,250


$
10,394



5.35
%FHLB advances


33,516



31,840



4.34



34,526



25,776



4.87Junior subordinated notes


10,315



2,734



10.83



-



-



-Line of credit


10



1,461



4.87



2,210



2,556



7.20Subordinated notes payable


39,000



35,570



5.70



31,000



23,630



7.73Other


-



-



-



-



25



7.00$
104,841


$
84,493



4.83


$
81,986


$
62,381



6.13Short-term borrowings

$
37,015










$
32,470Long-term borrowings


67,826











49,516$
104,841










$
81,986    43




---



##### Table of Contents



Note 10
      Consolidation of Variable Interest Entities  An
    Interpretation of ARB No. 51
    Year Ended December 31,2008


2007(In Thousands)Maximum month-end balance:FHLB advances

$
43,519


$
34,529Fed funds purchased and securities sold under agreements to
    repurchase


22,000



30,970   Stockholders Equity.
  Non-bank
    Subsidiaries
  First Madison Investment Corporation.
 44




---



##### Table of Contents



First Business Capital Corp.
  FMCC Nevada Corp.
  First Business Equipment Finance, LLC.
  Liquidity
    and Capital Resources
  Note 11
     45




---



##### Table of Contents



Item 1,
    Business Supervision and Regulation
  Off-balance
    Sheet Arrangements
  Note 18 Note 13
 46




---



##### Table of Contents



Contractual
    Obligations
    Payments Due by PeriodLess Than 1








More ThanTotal


Year


1-3 Years


4-5 Years


5 Years(In Thousands)Operating lease obligations

$
5,236


$
897


$
1,387


$
1,263


$
1,689Fed funds purchased and securities sold under repurchase
    agreements


22,000



22,000



-



-



-Time deposits


583,573



320,431



244,477



18,665



-Line of credit


10



10



-



-



-Junior subordinated notes


10,315



-



-



-



10,315Subordinated debt


39,000



-



-



-



39,000FHLB advances


33,516



15,011



18,023



482



-Uncertain tax positions(1)


-



-



-



-



-Total contractual obligations

$
693,650


$
358,349


$
263,887


$
20,410


$
51,004     (1)

    
    The contractual obligations table excludes the
    Corporations uncertain tax payments of $2.4 million
    due to the fact the we cannot make a reliable estimate of the
    timing of cash payments.  Recently
    Issued Accounting Pronouncements
  Note 1-
    Summary of Significant Accounting Policies and Nature of
    Operations, Recent Accounting Changes
  Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk     47




---



##### Table of Contents



Change in interest rates in basis points−50


0


+50


+100


+200Impact on net interest income


(1.74
)%


-



0.58
%


(0.51
)%


(3.47
)%     and/or
 48




---



##### Table of Contents



Estimated Maturity or Repricing at December 31, 2008Within


3-12


1-5


After 53 Months


Months


Years


Years


Total(In Thousands)Assets:Investment securities

$
7,440


$
32,769


$
66,105


$
2,811


$
109,124Commercial loans


80,097



19,733



64,305



132



164,268Real estate loans


201,219



56,589



243,520



47,450



548,778Asset-based loans


100,443



-



-



-



100,443Lease receivables


1,128



6,021



22,597



-



29,746Consumer loans


1,334



776



100



73



2,283Total earning assets

$
391,661


$
115,888


$
396,627


$
50,466


$
954,642LiabilitiesInterest-bearing checking

$
51,547


$
-


$
-


$
-


$
51,547Money market accounts


148,366



-



-



-



148,366Time deposits under $100,000


55,023



180,258



255,811



-



491,092Time deposits $100,000 and over


16,169



68,981



7,330



-



92,480FHLB advances


-



-



18,516



-



18,516Short-term borrowings


37,010



-



-



-



37,010Long-term debt


39,000



-



-



10,315



49,315Interest rate swaps


(233
)


233



-



-



-Total interest-bearing liabilities

$
346,882


$
249,472


$
281,657


$
10,315


$
888,326Interest rate gap

$
44,779


$
(133,584
)

$
114,970


$
40,151


$
66,316Cumulative interest rate gap

$
44,779


$
(88,805
)

$
26,165


$
66,316Cumulative interest rate gap to total earning assets


4.69
%


(9.30
)%


2.74
%


6.95
%  49




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS OF FIRST BUSINESS FINANCIAL
    SERVICES
  The
    following financial statements are included in this Annual
    Report on Form
    10-K:
   
 Consolidated Financial
    Statements

Page No.Consolidated Balance Sheets as of
    December 31, 2008 and 2007


51Consolidated Statements of Income for the Years
    Ended December 31, 2008 and 2007


52Consolidated Statements of Changes in
    Stockholders Equity and Comprehensive Income for the Years
    Ended December 31, 2008 and 2007


53Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2008 and 2007


54Notes to Consolidated Financial Statements


55Report of Independent Registered Public
    Accounting Firm


86  50




---



##### Table of Contents



First
    Business Financial Services, Inc.
 Consolidated
    Balance Sheets  December 31,2008


2007(In Thousands, Except Share Data)AssetsCash and due from banks

$
19,216


$
17,421Short-term investments


4,468



203Cash and cash equivalents


23,684



17,624Securities available-for-sale, at fair value


109,124



97,378Loans and leases receivable, net of allowance for loan and lease
    losses of $11,846 and $9,854, respectively


840,546



771,633Leasehold improvements and equipment, net


1,529



1,546Foreclosed properties, net


3,011



660Cash surrender value of bank-owned life insurance


15,499



14,757Investment in Federal Home Loan Bank stock, at cost


2,367



2,367Goodwill and other intangibles


2,762



2,787Accrued interest receivable and other assets


12,264



9,686Total assets

$
1,010,786


$
918,438Liabilities and Stockholders EquityDeposits

$
838,874


$
776,060Federal Home Loan Bank and other borrowings


94,526



81,986Junior subordinated notes


10,315



-Accrued interest payable and other liabilities


14,065



11,840Total liabilities


957,780



869,886Commitments and contingenciesStockholders equityPreferred stock, $0.01 par value, 2,500,000 shares
    authorized, none issued or outstanding at December 31, 2008


-



-Preferred stock, $10 par value, 10,000 Series A shares
    and 10,000 Series B shares authorized, none issued or
    outstanding at December 31, 2007Authorization withdrawn effective December 30, 2008


-



-Common stock, $0.01 par value, 25,000,000 and
    8,000,000 shares authorized at December 31, 2008 and
    2007, respectively, 2,616,424 and 2,576,849 shares issued,
    2,545,546 and 2,509,213 outstanding in 2008 and 2007,
    respectively


26



26Additional paid-in capital


24,088



23,462Retained earnings


29,252



26,836Accumulated other comprehensive income (loss)


1,065



(399
)Treasury stock (70,878 and 67,636 shares in 2008 and 2007,
    respectively), at cost


(1,425
)


(1,373
)Total stockholders equity


53,006



48,552Total liabilities and stockholders equity

$
1,010,786


$
918,438    51




---



##### Table of Contents



First
    Business Financial Services, Inc.
 Consolidated
    Statements of Income  For the Years Ended December 31,2008


2007(In Thousands, Except Share Data)Interest income:Loans and leases

$
54,984


$
55,057Securities income, taxable


4,704



4,227Short-term investments


85



204Total interest income


59,773



59,488Interest expense:Deposits


29,431



32,458Notes payable and other borrowings


3,788



3,822Junior subordinated notes


296



-Total interest expense


33,515



36,280Net interest income


26,258



23,208Provision for loan and lease losses


4,299



2,904Net interest income after provision for loan and lease losses


21,959



20,304Non-interest income:Trust and investment services fee income


1,956



1,914Service charges on deposits


1,100



715Increase in cash surrender value of bank-owned life insurance


742



697Loan fees


636



630Credit, merchant and debit card fees


220



210Other


483



250Total non-interest income


5,137



4,416Non-interest expense:Compensation


12,422



12,121Occupancy


1,331



1,040Equipment


648



497Data processing


985



1,054Marketing


970



1,076Professional fees


1,716



1,411Loss on foreclosed properties


1,043



-Other


2,801



2,458Total non-interest expense


21,916



19,657Income before income tax expense


5,180



5,063Income tax expense


2,056



1,807Net income

$
3,124


$
3,256Earnings per share:Basic

$
1.29


$
1.33Diluted


1.28



1.32Dividends declared per share


0.28



0.26    52




---



##### Table of Contents



First
    Business Financial Services, Inc.
 Consolidated
    Statements of Changes in Stockholders Equity and
    Comprehensive Income  Additional





Accumulated OtherCommon


Paid-in


Retained


Comprehensive


TreasuryStock


Capital


Earnings


(Loss) Income


Stock


Total(In Thousands, Except Share Data)Balance at December 31, 2006

$
25


$
23,029


$
24,237


$
(1,005
)

$
(530
)

$
45,756Comprehensive income:Net income


-



-



3,256



-



-



3,256Unrealized securities gains arising during the period


-



-



-



936



-



936Unrealized derivative losses arising during the period


-



-



-



(9
)


-



(9
)Reclassification adjustment for realized losses on derivatives


-



-



-



4



-



4Income tax effect


-



-



-



(325
)


-



(325
)Comprehensive income






















3,862Share-based compensation  restricted shares


1



396



-



-



-



397Cash dividends ($0.26 per share)


-



-



(657
)


-



-



(657
)Treasury stock purchased (45,021) shares)


-



-



-



-



(843
)


(843
)Stock options exercised (3,128 shares)


-



37



-



-



-



37Balance at December 31, 2007

$
26


$
23,462


$
26,836


$
(399
)

$
(1,373
)

$
48,552Comprehensive income:Net income


-



-



3,124



-



-



3,124Unrealized securities gains arising during the period


-



-



-



2,221



-



2,221Unrealized derivative losses arising during the period


-



-



-



(5
)


-



(5
)Reclassification adjustment for realized losses on derivatives


-



-



-



13



-



13Income tax effect


-



-



-



(765
)


-



(765
)Comprehensive income






















4,588Share-based compensation  restricted shares


-



626



-



-



-



626Cash dividends ($0.28 per share)


-



-



(708
)


-



-



(708
)Treasury stock purchased (3,242 shares)


-



-



-



-



(52
)


(52
)Balance at December 31, 2008

$
26


$
24,088


$
29,252


$
1,065


$
(1,425
)

$
53,006    53




---



##### Table of Contents



First
    Business Financial Services, Inc.
 Consolidated
    Statements of Cash Flows  For the Years Ended December 31,2008


2007(In Thousands)Operating activitiesNet income

$
3,124


$
3,256Adjustments to reconcile net income to net cash provided by
    operating activities:Deferred income taxes, net


(446
)


(392
)Provision for loan and lease losses


4,299



2,904Depreciation, amortization and accretion, net


538



475Share-based compensation


626



397Increase in cash surrender value of bank-owned life insurance


(742
)


(697
)Origination of loans held for sale


(586
)


(1,340
)Sale of loans held for sale


588



1,346Gain on sale of loans held for sale


(2
)


(6
)Loss on foreclosed properties


1,043



-Increase in accrued interest receivable and other assets


(2,887
)


(339
)Increase in accrued interest payable and other liabilities


2,214



2,492Net cash provided by operating activities


7,769



8,096Investing activitiesProceeds from maturities of available-for-sale securities


28,280



22,045Purchases of available-for-sale securities


(37,810
)


(18,523
)Purchases of FHLB stock


-



(343
)Net increase in loans and leases


(77,330
)


(135,025
)Proceeds from sale of foreclosed properties


723



Purchases of leasehold improvements and equipment, net


(496
)


(856
)Purchase of bank-owned life insurance


-



(591
)Net cash used in investing activities


(86,633
)


(133,293
)Financing activitiesNet increase in deposits


62,814



135,794Net increase (decrease) in FHLB line of credit


15,000



(17,048
)Repayment of FHLB advances


(66,010
)


(10
)Proceeds from FHLB advances


50,000



15,000Net increase (decrease) in short-term borrowed funds


5,550



(18,926
)Repayment of subordinated notes payable


(31,000
)


-Proceeds from subordinated notes payable


39,000



10,000Proceeds from junior subordinated notes


10,315



-Exercise of stock options


-



37Cash dividends paid


(693
)


(644
)Purchase of treasury stock


(52
)


(843
)Net cash provided by financing activities


84,924



123,360Net increase (decrease) in cash and cash equivalents


6,060



(1,837
)Cash and cash equivalents at the beginning of the period


17,624



19,461Cash and cash equivalents at the end of the period

$
23,684


$
17,624Supplementary cash flow informationInterest paid on deposits and borrowings

$
32,723


$
34,363Income taxes paid


1,928



2,495Transfer of loans to other real estate owned


4,117



660    54




---



##### Table of Contents



First
    Business Financial Services, Inc.
 NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  Note 1 
    Summary
    of Significant Accounting Policies and Nature of
    Operations  Nature of Operations.
  Basis of Financial Statement Presentation. Consolidation of Variable
    Interest Entities  An Interpretation of ARB
    No. 51
    Cash and Cash Equivalents.
  Securities Available-for-Sale.
     55




---



##### Table of Contents



Federal Home Loan Bank Stock.
  Loans and Leases.
  Loans Held for Sale.
  Net Investment in Direct Financing Leases.
  Operating Leases.
  Interest on Loans.
 56




---



##### Table of Contents



Loan and Lease Origination Fees.
  Foreclosed Properties.
  Allowance for Loan and Lease Losses. loan-by-loan
       57




---



##### Table of Contents



Derivative Instruments.
         58




---



##### Table of Contents



Goodwill and Other Intangible Assets.
  Note 7
  Leasehold Improvements and Equipment.
  Other Investments.
  Bank-Owned Life Insurance.
  Income Taxes.
 59




---



##### Table of Contents



Earnings Per Share.
  Segments and Related Information.
  Defined Contribution Plan.
  Stock Options.
  Share-Based Payment
 60




---



##### Table of Contents



Reclassifications.
  Recent
    Accounting Changes.
  Business Combinations. Business Combinations,
  Noncontrolling Interests in Consolidated Financial
    Statements. Noncontrolling Interests in
    Consolidated Financial Statements  an amendment of
    Accounting Research Bulletin No. 51,
  Fair Value Disclosures. No. FAS 157-2 (FAS 157-2) Accounting for the Impairment
    or Disposal of Long-Lived Assets, FAS 157-2
  Note 20  Fair Value Disclosure
    (SFAS 157 Disclosure)
  Fair Value Option for Financial Assets and Financial
    Liabilities. The Fair Value
    Option for Financial Assets and Liabilities 
    Including an Amendment of SFAS No. 115 Accounting for Certain Investments in Debt and Equity
    Securities,
   61




---



##### Table of Contents



Derivative Instruments and Hedging
    Activities. Disclosures about Derivative Instruments and Hedging
    Activities  an Amendment of Statement No. 133
  Instruments Granted in Share-Based Payment Transactions as
    Participating Securities EITF 03-6-1, Determining Whether Instruments Granted in Share-Based
    Payment Transactions are Participating Securities Earnings Per Share. EITF 03-6-1
  Note 2 
    Shareholder
    Rights Plan.    Note 3  Cash and Due From
    Banks.
 62




---



##### Table of Contents



Note 4 
    Securities    As of December 31, 2008Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost


Holding Gains


Holding Losses


Fair Value(In Thousands)Collateralized mortgage obligations  government
    agencies

$
81,406


$
1,485


$
(32
)

$
82,859Collateralized mortgage obligations - government sponsored
    enterprises


26,090



179



(4
)


26,265$
107,496


$
1,664


$
(36
)

$
109,124   As of December 31, 2007Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost


Holding Gains


Holding Losses


Fair Value(In Thousands)U.S. Government corporations and agencies

$
1,500


$
-


$
(3
)

$
1,497Municipals


85



-



-



85Collateralized mortgage obligations  government
    agencies


52,755



282



(379
)


52,658Collateralized mortgage obligations  government
    sponsored enterprises


43,631



2



(495
)


43,138$
97,971


$
284


$
(877
)

$
97,378           Amortized


EstimatedCost


Fair Value(In Thousands)Due in one year or less

$
-


$
-Due in one year through five years


2,180



2,226Due in five through ten years


14,585



14,677Due in over ten years


90,731



92,221$
107,496


$
109,124  63




---



##### Table of Contents



As of December 31, 2008Less Than 12 Months


12 Months or Longer


TotalUnrealized





Unrealized





UnrealizedFair Value


Losses


Fair Value


Losses


Fair Value


Losses(In Thousands)Collateralized mortgage obligations  government
    agencies

$
9,803


$
32


$
-


$
-


$
9,803


$
32Collateralized mortgage obligations  government
    sponsored enterprises


1,394



2



534



2



1,928



4$
11,197


$
34


$
534


$
2


$
11,731


$
36   As of December 31, 2007Less Than 12 Months


12 Months or Longer


TotalUnrealized





Unrealized





UnrealizedFair Value


Losses


Fair Value


Losses


Fair Value


Losses(In Thousands)U.S. Government corporations and agencies

$
-


$
-


$
1,497


$
3


$
1,497


$
3Collateralized mortgage obligations  government
    agencies


13,054



374



579



5



13,633



379Collateralized mortgage obligations  government
    sponsored enterprises


6,463



66



35,317



429



41,780



495$
19,517


$
440


$
37,393


$
437


$
56,910


$
877  64




---



##### Table of Contents



Note 5 
    Loan and
    Lease Receivables and Allowance for Loan and Lease
    Losses    December 31,2008


2007(In Thousands)First mortgage loans:Commercial real estate

$
390,094


$
336,153Construction and land development


84,778



90,545Multi-family


42,514



41,8211-4 family


51,542



48,437568,928



516,956Commercial and industrial loans


232,350



213,786Direct financing leases, net


29,722



29,383Home equity loans and second mortgage loans


7,386



9,784Credit card and other


14,445



11,725852,831



781,634Less:Allowance for loan and lease losses


11,846



9,854Deferred loan fees


439



147Loans and lease receivables, net

$
840,546


$
771,633       Years Ended December 31,2008


2007(In Thousands)Allowance at beginning of period

$
9,854


$
8,296Charge-offs:Commercial real estate and other mortgage


(1,194
)


(571
)Commercial and industrial


(1,202
)


(778
)Lease


-



(25
)Consumer


-



-Total charge-offs


(2,396
)


(1,374
)Recoveries:Commercial real estate and other mortgage


89



5Commercial and industrial


-



23Lease


-



-Consumer


-



-Total recoveries


89



28Net charge-offs


(2,307
)


(1,346
)Provision for loan and lease loss


4,299



2,904Allowance at end of period

$
11,846


$
9,854Allowance to gross loans and leases


1.39
%


1.26
%  65




---



##### Table of Contents



Years Ended December 31,2008


2007(In Thousands)Non-accrual loans

$
16,261


$
8,864Non-accrual leases


24



-Total non-accrual loans and leases


16,285



8,864Foreclosed properties, net


3,011



660Total non-performing assets

$
19,296


$
9,524Performing troubled debt restructurings

$
-


$
-Total non-accrual loans and leases to total loans and leases


1.91
%


1.13
%Total non-performing assets to total assets


1.91



1.04Allowance for loan and lease losses to non-accrual loans and
    leases


72.74



111.17       As of December 31,2008


2007(In Thousands)Impaired loans and leases with no impairment reserves required

$
9,986


$
6,500Impaired loans and leases with impairment reserves required


6,299



2,617Total impaired loans and leases


16,285



9,117Less:Impairment reserve (included in allowance for loan and lease
    loss)


1,417



834Net impaired loans and leases

$
14,868


$
8,283Average impaired loans and leases

$
8,375


$
3,439Foregone interest income attributable to impaired loans and
    leases

$
752


$
365Interest income recognized on impaired loans and leases


(49
)


(41
)Net foregone interest income on impaired loans and leases

$
703


$
324     As of December 31,2008


2007(In Thousands)Minimum lease payments receivable

$
26,740


$
27,572Estimated unguaranteed residual values in leased property


7,293



6,642Initial direct costs


154



236Less unearned lease and residual income


(4,465
)


(5,067
)Investment in commercial direct financing leases

$
29,722


$
29,383    66




---



##### Table of Contents



Maturities
    during year ended December 31,
  2009

$
8,0092010


7,1232011


5,7692012


3,4132013


1,767Thereafter


659$
26,740   Note 6 
    Leasehold
    Improvements and Equipment    As of December 31,2008


2007(In Thousands)Leasehold improvements

$
1,297


$
1,241Furniture and equipment


2,724



2,4474,021



3,688Less: accumulated depreciation


(2,492
)


(2,142
)$
1,529


$
1,546   Note 7 
    Goodwill and Intangible Assets.
     67




---



##### Table of Contents



Year Ended December 31,2008


2007(In Thousands)Core deposit intangibles:Gross carrying amount

$
145


$
145Accumulated amortization


(108
)


(95
)Net book value

$
37


$
50Amortization during the period

$
(13
)

$
(18
)Other intangibles:Gross carrying amount

$
120


$
120Accumulated amortization


(84
)


(72
)Net book value


36


$
48Amortization during the period

$
(12
)

$
(12
)     Estimate
    for the year ended December 31,
  Core Deposit


OtherIntangibles


Intangibles


Total(In Thousands)2009

$
10


$
12


$
222010


7



12



192011


5



12



172012


3



-



32013


2



-



2Thereafter


10



-



10$
37


$
36


$
73   Note 8 
    Other
    Assets     68




---



##### Table of Contents



As of December 31,2008


2007(In Thousands)Accrued interest receivable

$
3,331


$
3,566Deferred tax assets, net


2,433



2,752Investment in limited partnerships


1,033



444Investment in FBFS Statutory Trust II


315



-Fair value of interest rate swaps


1,797



-Other


3,355



2,924Total

$
12,264


$
9,686   Note 9 
    Deposits    December 31, 2008


December 31, 2007Weighted





WeightedAverage





AverageBalance


Rate


Balance


Rate(In Thousands)Transaction accounts:Demand deposits

$
55,388



0.00
%

$
47,124



0.00
%Negotiable order of withdrawal (NOW) accounts


51,547



1.61



65,035



4.22106,935







112,159Money market accounts


148,366



1.79



162,585



4.49Certificates of deposit


583,573



4.56



501,316



5.00$
838,874






$
776,060     Maturities
    during year ended December 31,
  2009

$
320,4312010


123,1712011


121,3062012


17,9842013


681$
583,573    69




---



##### Table of Contents



Note 10 
    Borrowed
    Funds    December 31, 2008


December 31, 2007Weighted


Weighted





Weighted


WeightedAverage


Average





Average


AverageBalance


Balance


Rate


Balance


Balance


Rate(In thousands)Fed funds purchased

$
22,000


$
12,888



2.38
%

$
14,250


$
10,394



5.35
%FHLB advances


33,516



31,840



4.34



34,526



25,776



4.87Junior subordinated notes


10,315



2,734



10.83



-



-



-Line of credit


10



1,461



4.87



2,210



2,556



7.20Subordinated notes payable


39,000



35,570



5.70



31,000



23,630



7.73Other


-



-



-



-



25



7.00$
104,841


$
84,493



4.83


$
81,986


$
62,381



6.13Short-term borrowings

$
37,015










$
32,470Long-term borrowings


67,826











49,516$
104,841










$
81,986           Maturities
    during year ended December 31,
  2009

$
15,0002010


16,0002011


2,0002012


-2013


516Thereafter


-$
33,516      70




---



##### Table of Contents



Note 11 
    Stockholders
    Equity         71




---



##### Table of Contents



MinimumRequired to beWell CapitalizedUnder PromptMinimum


CorrectiveRequired for Capital


ActionActual


Adequacy Purposes


RequirementsAmount


Ratio


Amount


Ratio


Amount


Ratio(In Thousands)As of December 31, 2008Total capital (to risk-weighted assets)Consolidated

$
109,603



12.00
%

$
73,088



8.00
%


N/A



N/AFirst Business Bank


91,062



11.13



65,448



8.00


$
81,810



10.00
%First Business Bank  Milwaukee


14,590



15.13



7,714



8.00



9,642



10.00Tier 1 capital (to risk-weighted assets)Consolidated

$
59,178



6.48


$
36,544



4.00
%


N/A



N/AFirst Business Bank


80,880



9.89



32,724



4.00


$
49,086



6.00
%First Business Bank  Milwaukee


13,375



13.87



3,857



4.00



5,785



6.00Tier 1 capital (to average assets)Consolidated

$
59,178



5.94


$
39,819



4.00
%


N/A



N/AFirst Business Bank


80,880



9.23



35,064



4.00


$
43,830



5.00
%First Business Bank  Milwaukee


13,375



10.61



5,042



4.00



6,302



5.00MinimumRequired to beWell CapitalizedUnder PromptMinimum


CorrectiveRequired for


ActionActual


Capital Adequacy Purposes


RequirementsAmount


Ratio


Amount


Ratio


Amount


Ratio(In Thousands)As of December 31, 2007Total capital (to risk-weighted assets)Consolidated

$
87,018



10.22
%

$
68,119



8.00
%


N/A



N/AFirst Business Bank


79,072



10.45



60,528



8.00


$
75,660



10.00
%First Business Bank  Milwaukee


9,847



10.26



7,679



8.00



9,599



10.00Tier 1 capital (to risk-weighted assets)Consolidated

$
46,164



5.42
%

$
34,060



4.00
%


N/A



N/AFirst Business Bank


71,097



9.40



30,264



4.00


$
45,396



6.00
%First Business Bank  Milwaukee


8,639



9.00



3,840



4.00



5,759



6.00Tier 1 capital (to average assets)Consolidated

$
46,164



5.12
%

$
36,065



4.00
%


N/A



N/AFirst Business Bank


71,097



9.04



31,459



4.00


$
39,324



5.00
%First Business Bank  Milwaukee


8,639



7.39



4,678



4.00



5,848



5.00  72




---



##### Table of Contents



As of December 31,2008


2007(In Thousands)Stockholders equity of the Corporation

$
53,006


$
48,552Unrealized and accumulated gains and losses on specific items
    and disallowed goodwill and intangible assets


(3,828
)


(2,388
)Trust preferred securities


10,000



-Tier 1 capital


59,178



46,164Allowable general valuation allowances and subordinated debt


50,425



40,854Risk-based capital

$
109,603


$
87,018   and/or
  Note 12 
    Earnings
    per Share    2008


2007Income available to common stockholders

$
3,124,381


$
3,256,341Basic average shares


2,431,083



2,453,157Dilutive effect of share-based awards


760



6,079Dilutive average shares


2,431,843



2,459,236Earnings per share:Basic

$
1.29


$
1.33Diluted

$
1.28


$
1.32     Note 13 
    Derivative
    Financial Instruments     73




---



##### Table of Contents



Note 14 
    Equity
    Incentive Plans    Stock
    Options
      For the Years Ended December 31,2008


2007Weighted





WeightedOptions


Average Price


Options


Average PriceOutstanding at beginning of year


159,540


$
22.10



166,168


$
21.97Granted


-



-



-



-Exercised


-



-



(3,128
)


11.91Forfeited


(2,250
)


24.56



(3,500
)


24.71Outstanding at end of year


157,290



22.07



159,540



22.10Options exercisable at end of year


154,290







140,637  74




---



##### Table of Contents



Range of
    exercise prices
  Options Outstanding


ExercisableWeightedAverage


Weighted





WeightedRemaining


Average





AverageContractual


Exercise





ExerciseShares


Life (Years)


Price


Shares


Price$15.00  $17.50


9,984



5.04



15.33



9,984



15.33$17.51  $20.00


18,356



2.54



19.08



18,356



19.08$20.01  $22.50


69,450



4.16



22.00



69,450



22.00$22.51  $25.00


59,500



5.87



24.20



56,500



24.16157,290











154,290   Restricted
    Shares
    2008


2007Weighted





WeightedNumber of


Average


Number of


AverageRestricted


Grant-Date


Restricted


Grant-DateShares


Fair Value


Shares


Fair ValueNonvested balance at beginning of year


91,379



21.16



45,125


$
23.08Granted


40,950



16.00



61,885



20.12Vested


(26,005
)


21.29



(11,274
)


23.08Forfeited


(1,375
)


20.59



(4,357
)


21.37Nonvested balance as of end of year


104,949



19.12



91,379



21.16     Note 15 
    Employee
    Benefit Plans   75




---



##### Table of Contents



Note 16 
    Leases      2009

$
8972010


7472011


6402012


6262013


637Thereafter


1,689$
5,236  76




---



##### Table of Contents



Note 17 
    Income
    Taxes    Year Ended December 31,2008


2007(In Thousands)Current:Federal

$
1,669


$
1,527State


833



6722,502



2,199Deferred:Federal


(199
)


(275
)State


(247
)


(117
)(446
)


(392
)Total income tax expense

$
2,056


$
1,807       At December 31,2008


2007(In Thousands)Deferred tax assets:Allowance for loan and lease losses

$
4,556


$
3,784Deferred compensation


554



641Unrealized loss on securities






200Unrealized loss on interest rate swaps


1



4Federal and state net operating loss carryforwards


2,586



2,387Write-down of foreclosed properties


410



Non-accrual loan interest


304



203Other


1,357



8739,768



8,092Valuation allowance


(1,275
)


(1,074
)Total deferred tax assets


8,493



7,018Deferred tax liabilities:Leasing and fixed asset activities


5,241



4,032Unrealized gain on securities


562



Other


257



234Total deferred tax liabilities


6,060



4,266Net deferred tax asset

$
2,433


$
2,752  77




---



##### Table of Contents



At December 31,2008


2007(In Thousands)Change in net deferred tax assets

$
319


$
(67
)Deferred taxes allocated to OCI


(765
)


(325
)Deferred income tax benefit

$
(446
)

$
(392
)               Year Ended December 31,2008


2007(In Thousands)Income before income tax expense

$
5,180


$
5,063Tax expense at statutory federal rate of 34% applied to income
    before income tax expense

$
1,761


$
1,721State income tax, net of federal effect


271



287Change in valuation allowance


201



217Low income housing tax credits






(48
)Bank-owned life insurance


(252
)


(237
)FIN 48 interest, net of federal effect


116



73Settlement of IRS audit


35



Other


(76
)


(206
)Total income tax expense

$
2,056


$
1,807Effective tax rate


39.69
%


35.69
%    78




---



##### Table of Contents



Year Ended December 31,2008


2007(In Thousands)Unrecognized tax benefits at beginning of year

$
1,812


$
1,397Additions based on tax positions related to current year






Additions for tax positions of prior years


636



649Reductions for tax positions of prior years


(8
)


(234
)Settlements






Unrecognized tax benefits at end of year

$
2,440


$
1,812     Note 18 
    Commitments,
    Contingencies, and Financial Instruments with Off-Balance Sheet
    Risk   79




---



##### Table of Contents



At December 31,2008


2007(In Thousands)Commitments to extend credit, primarily commercial loans

$
236,292


$
172,660Standby letters of credit


9,731



12,174   case-by-case
        Note 19 
    Fair
    Value of Financial Instruments   80




---



##### Table of Contents



Securities:
  Loans and Leases:
  Federal Home Loan Bank stock:
  Cash surrender value of life insurance:
  Deposits:
    Securities sold under agreement to
    repurchase:
  Borrowed funds:
  Financial instruments with off-balance sheet
    risks:
    Interest rate swaps:
  Limitations:
   81




---



##### Table of Contents



December 31, 2008


December 31, 2007Carrying





CarryingAmount


Fair Value


Amount


Fair Value(In Thousands)Financial assets:Cash and cash equivalents

$
23,684


$
23,684


$
17,624


$
17,624Securities available-for-sale


109,124



109,124



97,378



97,378Loans and lease receivables


840,546



892,142



771,633



788,879Federal Home Loan Bank stock


2,367



2,367



2,367



2,367Cash surrender value of life insurance


15,499



15,499



14,757



14,757Accrued interest receivable


3,331



3,331



3,566



3,566Interest rate swaps


1,797



1,797







Financial liabilities:Deposits

$
838,874


$
863,102


$
776,060


$
782,075Federal funds purchased


22,000



22,000



14,250



14,250Federal Home Loan Bank and other borrowings


72,526



73,841



67,736



68,818Junior subordinated notes


10,315



6,925







Interest rate swaps


1,799



1,799



10



10Accrued interest payable


6,911



6,911



5,911



5,911Off balance sheet items:Standby letters of credit


28



28



55



55Commitments to extend credit






*







*     *
    
    Not meaningful  Note 20 
    Fair
    Value Disclosures (SFAS 157 Disclosure)     82




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##### Table of Contents



Quoted Pricesin Active


SignificantMarkets for


Other


SignificantIdentical


Observable


UnobservableAssets


Inputs


Inputs(Level 1)


(Level 2)


(Level 3)


Total(In Thousands)Assets:Securities available for sale

$



$
109,124


$



$
109,124Interest rate swaps






1,797







1,797Liabilities:Interest rate

$



$
1,799


$



$
1,799     Quoted Pricesin Active


SignificantMarkets for


Other


SignificantBalance at


Identical


Observable


Unobservable


TotalDecember 31,


Assets


Inputs


Inputs


Gains2008


(Level 1)


(Level 2)


(Level 3)


(Losses)(In Thousands)Impaired loans

$
6,827


$



$
1,389


$
5,438


$
   and/or
 83




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##### Table of Contents



Note 21 
    Condensed
    Parent Only Financial Information    Condensed
    Balance Sheets
  At December 31,2008


2007(In Thousands)AssetsCash and cash equivalents

$
3,392


$
29Investments in subsidiaries, at equity


98,397



82,124Leasehold improvements and equipment, net


782



724Other


893



449Total assets

$
103,464


$
83,326Liabilities and Stockholders EquityBorrowed funds

$
49,325


$
33,210Other liabilities


1,133



1,564Total liabilities


50,458



34,774Stockholders equity


53,006



48,552Total liabilities and stockholders equity

$
103,464


$
83,326   Condensed
    Statements of Income
  Year Ended December 31,2008


2007(In Thousands)Interest income

$
27


$
17Interest expense


2,393



2,010Net interest expense


(2,366
)


(1,993
)Non-interest incomeConsulting and rental income from consolidated subsidiaries


4,857



3,956Other


51



3Total non-interest income


2,542



3,959Non-interest expense


6,985



6,268Loss before tax benefit and equity in undistributed net income
    of consolidated subsidiaries


(4,443
)


(4,302
)Income tax benefit


(1,486
)


(1,522
)Loss before equity in undistributed net income of consolidated
    subsidiaries


(2,957
)


(2,780
)Equity in undistributed net income of consolidated subsidiaries


6,081



6,036Net income

$
3,124


$
3,256  84




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##### Table of Contents



Condensed
    Statements of Cash Flows
  Year Ended December 31,2008


2007(In Thousands)Operating activitiesNet income

$
3,124


$
3,256Adjustments to reconcile net income to net cash used in
    operating activities:Equity in undistributed earnings of consolidated subsidiaries


(6,081
)


(6,036
)Share-based compensation


212



135(Decrease) increase in liabilities


(494
)


260Other, net


(453
)


(391
)Net cash used in operating activities


(3,692
)


(2,776
)Investing activitiesPayments for investment in and advances to subsidiaries


(8,315
)


(6,500
)Net cash used in investing activities


(8,315
)


(6,500
)Financing activitiesExercise of stock options


-



37Proceeds from advances and other borrowed funds


2,500



7,075Repayment of advances and other borrowed funds


(4,700
)


(6,500
)Proceeds from issuance of long-term debt


39,000



10,000Repayment of long-term debt


(31,000
)


-Proceeds from issuance of junior subordinated notes


10,315



-Purchase of treasury stock


(52
)


(843
)Dividends paid


(693
)


(644
)Net cash provided by financing activities


15,370



9,125Increase (decrease) in cash and cash equivalents


3,363



(151
)Cash and cash equivalents at beginning of year


29



180Cash and cash equivalents at end of year

$
3,392


$
29   Note 22 
    Condensed
    Quarterly Earnings (unaudited)  2008


2007First


Second


Third


Fourth


First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter(Dollars in Thousands, Except per share data)Interest income

$
15,153


$
14,726


$
14,739


$
15,155


$
13,816


$
14,488


$
15,275


$
15,909Interest expense


(9,091
)


(8,074
)


(8,222
)


(8,128
)


(8,435
)


(8,850
)


(9,413
)


(9,582
)Net interest income


6,062



6,652



6,517



7,027



5,381



5,638



5,862



6,327Provision for loan losses


(553
)


(743
)


(17
)


(2,986
)


(576
)


(701
)


(596
)


(1,031
)Non-interest income


1,087



1,267



1,340



1,443



1,002



1,157



1,101



1,156Non-interest expense


(5,341
)


(5,438
)


(5,815
)


(5,322
)


(4,876
)


(4,787
)


(4,944
)


(5,050
)Income before income taxes


1,255



1,738



2,025



162



931



1,307



1,423



1,402Income taxes


(485
)


(670
)


(853
)


(48
)


(332
)


(448
)


(538
)


(489
)Net income

$
770


$
1,068


$
1,172


$
114


$
599


$
859


$
885


$
913Per share data:Basic earnings per share

$
0.32


$
0.44


$
0.48


$
0.05


$
0.24


$
0.35


$
0.36


$
0.38Diluted earnings per share


0.32



0.44



0.48



0.04



0.24



0.35



0.36



0.37Dividends


0.07



0.07



0.07



0.07



0.065



0.065



0.065



0.065  85




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm           
     86




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##### Table of Contents



Item 9.
    Changes in and Disagreements with Accountants on Accounting and
    Financial Disclosure   Item 9A(T).
    Controls and Procedures  Disclosure
    Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Managements
    Annual Report on Internal Control over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f)
      Changes
    in Internal Control over Financial Reporting
  Rules 13a-15(f) 15d-15(f)
 Item 9B.
    Other Information   87




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##### Table of Contents



PART III. Item 10.
    Directors, Executive Officers and Corporate Governance  (a)
    Directors of the Registrant. Information with
    respect to the Directors of the registrant, included in the
    definitive Proxy Statement for the Annual Meeting of the
    Stockholders to be held on May 4, 2009 under the captions
    Board of Directors and Section 16(a)
    Beneficial Ownership Reporting Compliance is incorporated
    herein by reference.(b)
    Executive Officers of the Registrant. The
    information is presented in Item 1of this document.  (c)
    Code of Ethics. The Corporation has adopted a code
    of ethics applicable to all employees, including the principal
    executive and principal accounting officer of the Corporation.
    The FBFS Code of Ethics is posted on the Corporations
    website at www.firstbusiness.com Item 11.
    Executive Compensation   Item 12.
    Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholder Matters   Item 13.
    Certain Relationships and Related Transactions, and Director
    Independence   Item 14.
    Principal Accountant Fees and Services   ITEM IV. Item 15.
    Exhibits, Financial Statements Schedules  Item 8  Financial
    Statements and Supplementary Data Form 10-K.
  Exhibits.
 88




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##### Table of Contents



Signatures    FIRST BUSINESS FINANCIAL SERVICES, INC.
  
      89




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##### Table of Contents



Exhibit No.

Exhibit Name3.1

Amended and Restated Articles of Incorporation of First Business
    Financial Services, Inc., as amended3.2

Amended and Restated Bylaws of First Business Financial
    Services, Inc., as amended4.1

Pursuant to Item 601(b)(4)(iii) of
    Regulation S-K,
    the Registrant agrees to furnish to the Securities and Exchange
    Commission, upon request, any instrument defining the rights of
    holders of long-term debt not being registered that is not filed
    as an exhibit to this Annual Report on
    Form 10-K.
    No such instrument authorizes securities in excess of 10% of the
    total assets of the Registrant.4.2

Rights Agreement, dated as of June 5, 2008, between the
    Registrant and Computershare Investor Servicies, Inc.
    (incorporated by reference to Exhibit 4.1 to the
    Registration Statement on
    Form 8-A
    of the Registrant, dated as of June 6, 2008)10.1

1993 Incentive Stock Option Plan (incorporated by reference to
    the Registration Statement on
    Form S-8
    filed September 28, 2006)10.2

2001 Equity Incentive Plan (incorporated by reference to
    Exhibit 10.1 to the Amended Registration Statement on
    Form 10 filed April 28, 2005)10.3

Form of Stock Option Agreement (incorporated by reference to
    Exhibit 10.2 to the Amended Registration Statement on
    Form 10 filed April 28, 2005)10.4

2006 Equity Incentive Plan (incorporated by reference to
    Appendix B to the Companys Proxy Statement for the
    2006 Annual Meeting of Shareholders filed on March 31, 2006)10.5

Form of Restricted Stock Agreement (incorporated by reference to
    Exhibit 4.4 to the Registration Statement on
    Form S-8
    filed September 28, 2006)10.6

Restated Employment Agreement dated December 14, 2005
    between the Registrant and Jerome J. Smith (incorporated by
    reference to Exhibit 10.1 to the current report on
    Form 8-K
    filed on December 16, 2005)10.7

Employment and Repayment Agreement between First Business
    Capital Corp. and Charles H. Batson, dated December 14,
    2005 (incorporated by reference to Exhibits 10.1 and 10.2
    to the current reports on
    Form 8-K
    filed on December 20, 2005)Form of Executive change-in-control and Severance Agreement
    (incorporated by reference to the current report on Form 8-K
    filed on February 10, 2006)10.8

Restated Employment Agreement dated November 7, 2006
    between the Registrant and Corey A. Chambas (incorporated by
    reference to Exhibit 10.1 to the current report on
    Form 8-K
    filed on November 13, 2006)10.9

Annual Incentive Bonus Program21

Subsidiaries of the Registrant (incorporated by reference to
    Exhibit 21 to the Amended Registration Statement on
    Form 10 filed April 28, 2005)23

Consent of KPMG LLP31.1

Certification of the Chief Executive Officer31.2

Certification of the Senior Vice President and Chief Financial
    Officer32

Certification of the Chief Executive Officer and Senior Vice
    President and Chief Financial Officer pursuant to 18 U.S.C.
    Section 135099

Proxy Statement for the Annual Meeting of the Stockholders (to
    be filed with the SEC under Regulation 14A within
    120 days after December 31, 2008; except to the extent
    specifically incorporated by reference, the Proxy Statement for
    the Annual Meeting of the Stockholders shall not be deemed to be
    filed with the SEC as part of this Annual Report on
    Form 10-K)  90