UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION  Washington, D.C. 20549

FORM 10-Q

|[X] | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT           OF 1934
|--- | -------------------------------------------------------------------------------------------------

| | For
the quarterly period ended September 30, 2005
| | -------------------------------------------------

or

|[_] | TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT           OF 1934
|--- | --------------------------------------------------------------------------------------------------

| | For
the transition period from ________ to ________
| | ---------------------------------------------------

Commission File Number
0-51028

|First Business Financial Services, Inc.               
|------------------------------------------------------
|(Exact name of Registrant as specified in its charter)

|Wisconsin                       | 39-1576570         
|------------------------------- | -------------------
|(State or other jurisdiction of | (I.R.S. Employer   
|incorporation or organization)  | Identification No.)

|401 Charmany Drive, Madison, Wisconsin 53719       
|---------------------------------------------------
|(Address of principal executive offices) (Zip Code)

|(608) 238-8008                                      
|----------------------------------------------------
|(Registrants telephone number, including area code)

Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X   No

Indicate by check mark whether the
 Registrant  is an  accelerated  filer (as defined in Rule 12b-2 of the Exchange  Act).
 Yes      No X

Indicate by check mark whether the
Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes       No
 X

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

Common Stock, par
value $0.01 per share, outstanding as of November 18, 2005: 2,435,008 shares

---

# FIRST BUSINESS
FINANCIAL SERVICES, INC.  INDEX  FORM 10-Q

|                                                                                                            |                                                                                       |   
|----------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | --
|                                                                                                            |                                                                                       |   
|PART I. - FINANCIAL INFORMATION                                                                             |                                                                                      
|Item 1.  Financial Statements (Unaudited)                                                                   | Page                                                                                 
|                                                                                                            | Consolidated Balance Sheets as of September 30, 2005 and                              | 4 
|                                                                                                            | December 31, 2004 (restated)                                                         
|                                                                                                            | Consolidated Statements of Income for the Three and Nine Months Ended                 | 5 
|                                                                                                            | September 30, 2005 and 2004 (restated)                                               
|                                                                                                            | Consolidated Statements of Changes in Shareholders Equity and                        | 6 
|                                                                                                            | Comprehensive Income for the Nine Months Ended September 30, 2005 and 2004 (restated) |   
|                                                                                                            | Consolidated Statements of Cash Flows for the Nine Months Ended                       | 7 
|                                                                                                            | September 30, 2005 and 2004 (restated)                                                |   
|                                                                                                            | Notes to Unaudited Consolidated Financial Statements (restated)                       | 8 
|Item 2.  Managements Discussion and Analysis of Financial Condition              and Results of Operations
|                                                                                                            | Results of Operations                                                                 | 25
|                                                                                                            | Financial Condition                                                                   | 32
|                                                                                                            | Asset Quality                                                                         | 33
|                                                                                                            | Liquidity and Capital Resources                                                       | 35
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                                          | 39                                                                                   
|Item 4. Controls and Procedures                                                                             | 40                                                                                   
|PART II. OTHER INFORMATION                                                                                 
|Item 1.  Legal Proceedings                                                                                  | 41                                                                                   
|Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                                        | 41                                                                                   
|Item 3.  Defaults upon Senior Securities                                                                    | 41                                                                                   
|Item 4.  Submission of Matters to Vote of Security Holders                                                  | 42                                                                                   

1

---

|                           |    | 
|-------------------------- | -- | 
|                           |    | 
|Item 5.  Other Information | 42
|Item 6.  Exhibits          | 42
|SIGNATURES                 | 43

2

---

# PART I. Financial
Information

# Item 1.  Financial
Statements

3

---

# Consolidated Balance
Sheets (unaudited)

|                                                           | September 30,
2005 | December 31,
2004
(as restated)
|---------------------------------------------------------- | ------------------ | -------------------------------
|(In Thousands, Except Share Data)                         
|Assets                                                     |                    |                                
|Cash and due from banks                                    |                    |                                
|Interest-bearing deposits                                  |                    |                                
|                                                           |                    |                                
|Cash and cash equivalents                                  |                    |                                
|Securities available-for-sale, at fair value               |                    |                                
|Loans and leases receivable, net:                          |                    |                                
|Held for sale                                              |                    |                                
|Held for investment                                        |                    |                                
|Leasehold improvements and equipment, net                  |                    |                                
|Foreclosed properties                                      |                    |                                
|Cash surrender value of life insurance                     |                    |                                
|Goodwill and other intangibles                             |                    |                                
|Accrued interest receivable and other assets               |                    |                                
|                                                           |                    |                                
|Total assets                                               |                    |                                
|                                                           |                    |                                
|                                                           |                    |                                
|Liabilities and Stockholders Equity                       |                    |                                
|Deposits                                                   |                    |                                
|Securities sold under agreement to repurchase              |                    |                                
|Federal Home Loan Bank and other borrowings                |                    |                                
|Junior subordinated debentures                             |                    |                                
|Other liabilities                                          |                    |                                
|                                                           |                    |                                
|                                                           |                    |                                
|                                                           |                    |                                
|                                                           |                    |                                
|Commitments and contingencies                              |                    |                                
|Stockholders Equity:                                      |                    |                                
|Preferred stock, $10 par value, 10,000 Series A            |                    |                                
|shares and 10,000 Series B shares authorized, none         |                    |                                
|issued and outstanding                                     |                    |                                
|Common stock, $.01 par value, 8,000,000 shares authorized, |                    |                                
|2,442,890 and 2,429,182 shares issued, 2,425,915           |                    |                                
|and 2,412,409 outstanding in 2005 and 2004, respectively   |                    |                                
|Additional paid-in capital                                 |                    |                                
|Retained earnings                                          |                    |                                
|Accumulated other comprehensive loss                       |                    |                                
|Treasury stock (16,975 and 16,773 shares in 2005 and 2004, |                    |                                
|respectively), at cost                                     |                    |                                
|                                                           |                    |                                
|Total stockholders equity                                 |                    |                                
|                                                           |                    |                                
|Total liabilities and stockholders equity                 |                    |                                
|                                                           |                    |                                

See accompanying Notes to
Consolidated Unaudited Financial Statements.

4

---

# Consolidated Statements
of Income (unaudited)

|                                                                  | Three Months Ended,
September 30, | Nine Months Ended,
September 30,
|----------------------------------------------------------------- | --------------------------------- | --------------------------------
|
|
|(In Thousands, Except Share Data)                                
|Interest income:                                                  |                                   |                                 
|Loans and leases                                                  |                                   |                                 
|Securities income:                                                |                                   |                                 
|Taxable                                                           |                                   |                                 
|Fed funds sold and other                                          |                                   |                                 
|                                                                  |                                   |                                 
|Total interest income                                             |                                   |                                 
|Interest expense:                                                 |                                   |                                 
|Deposits                                                          |                                   |                                 
|Notes payable and other borrowings                                |                                   |                                 
|Junior subordinated debentures                                    |                                   |                                 
|                                                                  |                                   |                                 
|Total interest expense                                            |                                   |                                 
|                                                                  |                                   |                                 
|Net interest income                                               |                                   |                                 
|Provision for loan and lease losses                               |                                   |                                 
|                                                                  |                                   |                                 
|Net interest income after provision for loan and lease losses     |                                   |                                 
|                                                                  |                                   |                                 
|                                                                  |                                   |                                 
|Non-interest income:                                              |                                   |                                 
|Service charges on deposits                                       |                                   |                                 
|Credit, merchant and debit card fees                              |                                   |                                 
|Loan fees                                                         |                                   |                                 
|Gain on sale of 50% owned joint venture                           |                                   |                                 
|Increase in cash surrender value of bank-owned life insurance     |                                   |                                 
|Trust and investment services fee income                          |                                   |                                 
|Change in fair value of interest rate swaps                       |                                   |                                 
|Net cash settlement of interest rate swaps                        |                                   |                                 
|Written option income                                             |                                   |                                 
|Other                                                             |                                   |                                 
|                                                                  |                                   |                                 
|Total non-interest income                                         |                                   |                                 
|                                                                  |                                   |                                 
|Non-interest expense:                                             |                                   |                                 
|Compensation                                                      |                                   |                                 
|Occupancy                                                         |                                   |                                 
|Equipment                                                         |                                   |                                 
|Data processing                                                   |                                   |                                 
|Marketing                                                         |                                   |                                 
|Professional fees                                                 |                                   |                                 
|Other                                                             |                                   |                                 
|                                                                  |                                   |                                 
|Total non-interest expense                                        |                                   |                                 
|                                                                  |                                   |                                 
|Minority interest in net (income) loss of consolidated subsidiary |                                   |                                 
|                                                                  |                                   |                                 
|Income before income tax expense                                  |                                   |                                 
|Income tax expense                                                |                                   |                                 
|                                                                  |                                   |                                 
|Net income                                                        |                                   |                                 
|                                                                  |                                   |                                 
|Earnings per share:                                               |                                   |                                 
|Basic                                                             |                                   |                                 
|Diluted                                                           |                                   |                                 
|Dividends declared per share                                      |                                   |                                 

See accompanying Notes to Unaudited
Consolidated Financial Statements.

5

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# Consolidated Statements
of Changes in Stockholders Equity and Comprehensive Income (unaudited)

|                                                             | Common
stock | Additional
paid-in
capital | Retained
earnings | Accumulated
other
comprehensive
loss | Treasury
stock | Total
|------------------------------------------------------------ | ------------ | -------------------------- | ----------------- | ------------------------------------ | -------------- | -----
|(Dollars in thousands, except share data)                   
|Balance at December 31, 2003, as reported                    |              |                            | $                 | 20                                   |                | $    
|Restatement adjustments                                      |              |                            |                   | --                                   |                |      
|                                                             |              |                            |                   |                                      |                |      
|Balance at December 31, 2003, as restated                    |              |                            | $                 | 20                                   |                | $    
|Comprehensive income:                                        |              |                           
|Net income, as restated                                      |              |                            |                   | --                                   |                |      
|Unrealized securities gains arising during the year          |              |                            |                   | --                                   |                |      
|net of minority interest                                     |              |                            |                   | --                                   |                |      
|Unrealized derivatives losses arising during the yar         |              |                            |                   | --                                   |                |      
|Reclassification adjustment for realized loss on derivatives |              |                            |                   | --                                   |                |      
|Income tax effect                                            |              |                            |                   | --                                   |                |      
|                                                             |              |                            |                   |                                      |                |      
|Comprehensive income (as restated)                           |              |                            |                   |                                      |                |      
|Cash dividends ($0.10 per share)                             |              |                            |                   | --                                   |                |      
|Conversion of BBG shares (336,205 shares)                    |              |                            |                   | 3                                    |                |      
|Treasury stock purchased (14,973 shares)                     |              |                            |                   | --                                   |                |      
|Stock options exercised (62,010 shares)                      |              |                            |                   | 1                                    |                |      
|                                                             |              |                            |                   |                                      |                |      
|Balance at September 30, 2004, as restated                   |              |                            | $                 | 24                                   |                | $    
|                                                             |              |                            |                   |                                      |                |      

|                                                             | Common
stock | Additional
paid-in
capital | Retained
earnings | Accumulated
other
comprehensive
loss | Treasury
stock | Total
|------------------------------------------------------------ | ------------ | -------------------------- | ----------------- | ------------------------------------ | -------------- | -----
|(Dollars in thousands, except share data)                   
|Balance at December 31, 2004, as reported                    |              |                            | $                 | 24                                   |                | $    
|Restatement adjustments                                      |              |                            |                   | --                                   |                |      
|                                                             |              |                            |                   |                                      |                |      
|Balance at December 31, 2004, as restated                    |              |                            | $                 | 24                                   |                | $    
|Comprehensive income:                                        |              |                           
|Net income                                                   |              |                            |                   | --                                   |                |      
|Unrealized securities losses arising during the year         |              |                            |                   | --                                   |                |      
|Unrealized derivatives gains arising during the year         |              |                            |                   | --                                   |                |      
|Reclassification adjustment for realized loss on derivatives |              |                            |                   | --                                   |                |      
|Income tax effect                                            |              |                            |                   | --                                   |                |      
|                                                             |              |                            |                   |                                      |                |      
|Comprehensive income                                         |              |                            |                   |                                      |                |      
|Cash dividends ($0.115 per share)                            |              |                            |                   | --                                   |                |      
|Treasury stock purchased (202 shares)                        |              |                            |                   | --                                   |                |      
|Stock options exercised (13,708 shares)                      |              |                            |                   | --                                   |                |      
|                                                             |              |                            |                   |                                      |                |      
|Balance at September 30, 2005                                |              |                            | $                 | 24                                   |                | $    
|                                                             |              |                            |                   |                                      |                |      

See accompanying Notes to Unaudited
Consolidated Financial Statements.

6

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# Consolidated Statement
of Cash Flows (unaudited)

|                                                                    | Nine Months Ended September 30,
|------------------------------------------------------------------- | -------------------------------
|
|(In Thousands)                                                     
|Operating Activities                                                |                                
|Net income                                                          |                                
|Adjustments to reconcile net income to net cash                     |                                
|provided by operating activities:                                   |                                
|Deferred income taxes                                               |                                
|Provision for loan and lease losses                                 |                                
|Depreciation, amortization and accretion, net                       |                                
|Change in fair value of interest rate swaps                         |                                
|Written option income                                               |                                
|Origination of loans originated for sale                            |                                
|Sale of loans originated for sale                                   |                                
|Increase in cash surrender value of bank-owned life insurance       |                                
|Gain on sale of loans originated for sale                           |                                
|Gain on sale of 50% owned joint venture                             |                                
|Equity in earnings of unconsolidated subsidiary                     |                                
|Minority interest in net income of consolidated subsidiaries        |                                
|(Increase) decrease in accrued interest receivable and other assets |                                
|Increase in accrued expenses and other liabilities                  |                                
|                                                                    |                                
|Net cash provided by operating activities                           |                                
|                                                                    |                                
|Investing activities                                                |                                
|Proceeds from maturities of available-for-sale securities           |                                
|Proceeds from sale of 50% owned joint venture                       |                                
|Purchases of available-for-sale securities                          |                                
|Net increase in loans and leases                                    |                                
|Purchases of leasehold improvements and equipment, net              |                                
|Purchase of cash surrender value of life insurance                  |                                
|                                                                    |                                
|Net cash used in investing activities                               |                                
|                                                                    |                                
|Financing activities                                                |                                
|Net increase in deposits                                            |                                
|Net increase (decrease) in FHLB line of credit                      |                                
|Net increase (decrease) in short-term borrowed funds                |                                
|Minority interest investment in subsidiaries                        |                                
|Exercise of stock options                                           |                                
|Cash dividends                                                      |                                
|Purchase of treasury stock                                          |                                
|                                                                    |                                
|Net cash provided by financing activities                           |                                
|                                                                    |                                
|Net increase in cash and cash equivalents                           |                                
|Cash and cash equivalents at beginning of period                    |                                
|                                                                    |                                
|Cash and cash equivalents at end of period                          |                                
|                                                                    |                                
|Supplementary cash flow information                                 |                                
|Cash paid or credited to accounts:                                  |                                
|Interest on deposits and borrowings                                 |                                
|Income taxes                                                        |                                
|Non-cash transactions:                                              |                                
|Deconsolidation of trust preferred securities                       |                                
|Acquisition of minority shares of BBG:                              |                                
|Increase in common stock and paid-in capital                        |                                
|Elimination of minority interest                                    |                                
|Settlement of written option liability                              |                                
|Increase in goodwill and other intangible assets                    |                                
|Other                                                               |                                

See accompanying Notes to
Consolidated Financial Statements.

7

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# NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

# Note 1  Principles of
Consolidation.

The unaudited consolidated financial
statements include the accounts and results of First Business Financial Services, Inc.
(FBFS or the Corporation), and its wholly-owned subsidiaries,
First Business Bank (FBB), and First Business Bank  Milwaukee (the
Banks). All significant intercompany balances and transactions have been
eliminated in consolidation.

# Note 2  Restatement

On November 8, 2005, FBFS determined
that it must restate its previously issued financial statements for the first two quarters
of 2005 and for the years ended December 31, 2004, 2003, 2002, as a result of accounting
treatment related to its interest rate swaps associated with money market deposit accounts
(MMDAs), variable rate loans (Loans), trust preferred securities
(TPSs) and brokered certificates of deposit (CDs).

Since 2001, FBFS has entered into
various interest rate swaps to hedge the interest rate risk inherent in its MMDAs and
Loans. Since inception of the hedging program, FBFS has applied the short-cut
method of cash flow hedge accounting under Statement of Financial Accounting Standards No.
133 (SFAS 133) to account for the interest rate swaps. Subsequent to June 30,
2005, FBFS determined that these hedging relationships did not qualify for the
short-cut method because the hedged items consisted of a pool of MMDAs and a
pool of Loans that were not the same recognized liabilities and assets over the life of
the respective swaps.

In December 2001, FBFS Statutory
Trust I (the Trust), a business trust wholly owned by FBFS sold preferred
securities and FBFS simultaneously entered into an interest rate swap to hedge the
interest rate risk. Since inception of the swap, FBFS has applied the
short-cut method of cash flow hedge accounting under SFAS 133 to account for
the swap. Effective in the year beginning January 1, 2004, in accordance with the
application of the Financial Accounting Standards Board Interpretation No. 46 (revised)
(FIN 46R) FBFS deconsolidated the Trust. Subsequent to June 30, 2005 FBFS
determined that this hedging relationship no longer qualifies for hedge accounting because
upon adoption of FIN 46R, FBFS did not dedesignate the existing hedge relationship and
redesignate a new hedging relationship.

Additionally, since the third quarter
of 2004, FBFS has entered into various interest rate swaps to hedge the interest rate risk
inherent in certain of its brokered CDs. Since inception of the hedging program, FBFS has
applied the short-cut method of fair value hedge accounting under SFAS 133 to
account for the swaps. Subsequent to June 30, 2005 FBFS determined that these swaps did
not qualify for the short-cut method because the form of payment of the broker
fee incurred to acquire the related CD was determined to have caused the swaps not to have
a zero value at inception.

Although for the MMDA, Loan and CD
swaps the financial statement impact of applying the alternative long-haul
method of documentation using SFAS 133 rather than the short-cut method is
believed to result in no material difference in the hedge effectiveness of the swaps and
management believes these interest rate swaps have been effective as economic hedges,
hedge accounting under SFAS 133 is not allowed for the affected periods because the hedge
documentation required for the long-haul method was not in place at the
inception of the hedge. Similarly the TPS swap remained economically effective but under
SFAS 133 hedge accounting is not allowed for the affected periods because the required
documentation was not in place on the date FIN 46R was adopted.

As a result the financial statements
for all affected periods through June 30, 2005 reflect a cumulative charge of $375
thousand, net of income taxes, to account for the interest rate swaps referred to above as
if hedge accounting was never applied to them. In addition, third quarter 2005 includes a
charge of approximately $135 thousand, net of income taxes, to reflect the same treatment.

8

---

At December 31, 2003 and 2004, the
financial statements reflect an adjustment to decrease Retained Earnings of $861,000 and
$477,000, respectively, and an increase in Accumulated Other Comprehensive Income of
$875,000 and $441,000, respectively.

Cash flow hedge accounting allows a
company to record the net settlement of interest payments related to the swap contracts in
net interest income and the changes in fair value on the related interest rate swaps in
shareholders equity as part of accumulated other comprehensive income. Eliminating
the application of cash flow hedge accounting causes the changes in fair value of the
related interest rate swaps to be included in non-interest income (instead of accumulated
other comprehensive income in shareholders equity). Additionally, the net settlement
of interest payments related to the swap contracts was reclassified from net interest
income to non-interest income.

Fair value hedge accounting allows a
company to record the change in fair value of the hedged item, in this case, brokered CDs,
as an adjustment to income as an offset to the fair value adjustment on the related
interest rate swap. Eliminating the application of fair value hedge accounting reverses
the fair value adjustments that have been made to the brokered CDs. Additionally, the net
cash settlement payments during each of the above periods for these interest rate swaps
were reclassified from net interest income to non-interest income.

FBFS plans to amend its Registration
Statement on Form 10/A including financial statements for the years ended December 31,
2004, 2003 and 2002 and interim financial statements for the quarter ended March 31, 2005
and its Quarterly Report on Form 10Q/A for the quarter ended June 30, 2005 to
reflect the proper accounting treatment. A Form 8K has been filed to reflect a
summary of the changes to the balance sheet and income statement line items for the
periods included in these reports.

Effects of the restatement by line
item follow for the periods presented in this Form 10Q. The tax effect of the
adjustments has been calculated at the Corporations marginal effective rate of
39.2%.

|                                                
|------------------------------------------------
|(In thousands) (Unaudited)                      
|December 31,
2004                               
|As
Previously
Reported                          
|Other liabilities                               
|Total liabilities                               
|Retained earnings                               
|Accumulated other comprehensive loss, net of tax
|Total shareholders equity                      

9

---

|                                                             
|-------------------------------------------------------------
|Nine Months Ended September 30,                              
|2004                                                         
|As
Previously
Reported                                       
|Interest expense on deposits                                 
|Interest expense on junior subordinated debentures           
|Total interest expense                                       
|Net interest income                                          
|Net interest income after provision for loan and lease losses
|Change in fair value of interest rate swaps                  
|Net cash settlement of interest rate swaps                   
|Non interest income                                          
|Income before income tax expense                             
|Income tax expense                                           
|Net income                                                   
|Earnings per share:                                          
|Basic                                                        
|Diluted                                                      

|                                             
|---------------------------------------------
|September 30,
2004                           
|As
Previously
Reported                       
|Total shareholders equity, January 1        
|Net income                                   
|Other comprehensive income (loss), net of tax
|Total shareholders equity, September 30     

There were no adjustments required
to cash flows from operating, investing or financing activities for the nine months ended
Septembere 30, 2004.

10

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# Note 3  Basis of
Presentation.

The accompanying unaudited
consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP) and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the unaudited consolidated financial
statements have been included.

In conformity with GAAP, management
of the Corporation is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements as well as reported amounts of revenues and expenses
during the reporting period. Actual results could differ significantly from those
estimates. Material estimates that could experience significant changes in the near-term
include the allowance for loan and lease losses, the value of foreclosed property, lease
residuals, the value of property under operating leases, derivative financial instruments,
hedging activities and accrued and deferred income taxes. The results of operations for
the three-month and nine-month periods ended September 30, 2005 are not necessarily
indicative of results that may be expected for any other interim period or the entire
fiscal year ending December 31, 2005. The unaudited balance sheet at December 31, 2004
reflects restated balances as a result of the restatement described in Note 2 and,
therefore, the previously issued financial statements for the year ended December 31, 2004
should not be relied upon. The Corporation anticipates filing an amended Form 10 for the
year ended December 31, 2004 and amended Form 10-Q for the second quarter of 2005
subsequent to the filing of this Form 10-Q.

# Recent Accounting
Changes.

Changes in Accounting Principle.On May 5, 2005, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 154 Accounting
Changes and Error Corrections  a replacement of APB Opinion No. 20 and FASB
Statement No. 3.SFAS No. 154, which is effective for accounting changes made in
fiscal years beginning after December 15, 2005, requires retrospective application for
voluntary changes in accounting principle unless it is impracticable to do so. It also
applies to changes required by an accounting pronouncement in the unusual instance that
the pronouncement does not include specific transition provisions. The adoption of SFAS
No. 154 is not expected to impact the Corporations consolidated financial
statements.

Meaning of
OtherThan-Temporary Impairment.In June 2005, the FASB decided not to provide
additional guidance on the meaning of other-than-temporary impairment, and directed the
staff to issue proposed FASB Staff Position (FSP) Emerging Issues Task Force
(EITF) 03-1-a, Implementation Guidance for the Application of Paragraph 16 of
EITF Issue No. 03-1, as final. The final FSP will supercede EITF Issue No. 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, and
EITF Topic No. D-44, Recognition of Other-Than-Temporary Impairment upon the Planned Sale
of a Security Whose Cost Exceeds Fair Value. The final FSP (retitled FSP FAS 115-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments)
will replace the guidance set forth in paragraphs 10-18 of EITF Issue 03-1 with references
to existing other-than-temporary impairment guidance, such as SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, SEC Staff Accounting Bulletin No. 59,
Accounting for Noncurrent Marketable Equity Securities, and APB Opinion No. 18, The Equity
Method of Accounting for Investments in Common Stock. FSP FAS 115-1 will codify the
guidance set forth in EITF Topic D-44 and clarify that an investor should recognize an
impairment loss no later than when the impairment is deemed other than temporary, even if
a decision to sell has not been made. FSP FAS 115-1 will be effective for
other-than-temporary impairment analysis conducted in periods beginning after September
15, 2005. Adoption of this standard is not expected to have a significant impact on the
Corporations shareholders equity or results of operations.

11

---

Stock Options.On December 16,
2004, the FASB issued SFAS No. 123 (revised 2004), which is a revision of the SFAS 123,
Accounting for Stock-based Compensation. SFAS No. 123(R) supersedes APB Opinion No.
25, Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement
of Cash Flows. SFAS No. 123(R), which is effective for FBFS beginning January 1, 2006,
requires a public entity to measure the cost of employee services received in exchange for
an award of equity instruments based on the fair value at the grant date. The cost is then
recognized over the period during which an employee is required to provide service in
exchange for the award  the requisite service period (usually the vesting period).
This statement eliminates the alternative to APB Opinion No. 25s intrinsic value
method of accounting that was provided in Statement 123 as originally issued.

Accordingly, the adoption of SFAS No.
123(R)s fair value method could have an impact on the results of operations,
although it will have no impact on the overall financial position. The future impact of
unvested options issued prior to adoption of SFAS No. 123(R) will approximate the pro
forma calculation below.

Proforma Stock Option
Information. The following table illustrates what the Corporations net income
and earnings per share would have been had compensation cost for the Corporations
stock option plans been determined based on the fair value at the date of grant for awards
under the stock option plans. As allowed under SFAS No. 123, Accounting
for Stock-Based Compensation (SFAS 123) and SFAS No. 148,
Accounting for Stock-Based Compensation Transition and Disclosure an
amendment of SFAS 123, the Corporation accounts for stock-based compensation
cost under the intrinsic value method of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB Opinion 25), and related
Interpretations, under which no compensation cost has been recognized for any periods
presented, except with respect to restricted stock awards. Compensation expense for
employee stock options is not recognized if the exercise price of the option equals or
exceeds the fair value of the stock on the date of grant as such options would have no
intrinsic value at the date of grant.

|                                                 | Nine Months Ended
September 30,
|------------------------------------------------ | -------------------------------
|
|(In Thousands, Except Per Share Data)           
|Net Income                                       |                                
|As reported                                      |                                
|Compensation expense under the fair value method |                                
|Pro forma                                        |                                
|Earnings Per Share - Basic                       |                                
|As reported                                      |                                
|Compensation expense under the fair value method |                                
|Pro forma                                        |                                
|Earnings Per Share - Diluted                     |                                
|As reported                                      |                                
|Compensation expense under the fair value method |                                
|Pro forma                                        |                                

|                                                 | Three Months Ended
September 30,
|------------------------------------------------ | --------------------------------
|
|(In Thousands, Except Per Share Data)           
|Net Income                                       |                                 
|As reported                                      |                                 
|Compensation expense under the fair value method |                                 
|Pro forma                                        |                                 
|Earnings Per Share - Basic                       |                                 
|As reported                                      |                                 
|Compensation expense under the fair value method |                                 
|Pro forma                                        |                                 
|Earnings Per Share - Diluted                     |                                 
|As reported                                      |                                 
|Compensation expense under the fair value method |                                 
|Pro forma                                        |                                 

12

---

The fair value of each option granted
is estimated using the minimum value method on the grant date using the Black-Scholes
option-pricing model which considers the risk free rate of return based upon 10 year
treasury obligations, a 10 year expected life and dividends, if any are declared, but does
not consider expected volatility. Option holders have 10 years in which to exercise their
options and must exercise vested options upon employment termination. Compensation amounts
are amortized over the vesting period of the options in accordance with the vesting terms
of the stock options agreements. The per share weighted average fair value of stock
options granted during 2005 and 2004 was $8.18 and $7.56, respectively.

For purposes of providing the pro
forma disclosures required under SFAS 123, the fair value of stock options granted as
of September 30, 2005 and September 30, 2004 was estimated at the date of grant using a
Black-Scholes option pricing model, which was originally developed for use in estimating
the fair value of traded options that have different characteristics from the
Corporations employee stock options. The model is also sensitive to changes in the
subjective assumptions that can materially affect the fair value estimate. As a result,
management believes the Black-Scholes model may not necessarily provide a reliable single
measure of the fair value of employee stock.

12,000 stock options were granted in
February 2005 and 3,750 stock options were granted in May 2005. No options have been
granted since May 2005. The estimated fair value of any options granted in the future will
be determined pursuant to FAS 123 and will consider expected volatility.

The table below discusses the
weighted average fair values for options granted as of September 30, 2005 and 2004.

|                        | Nine Months Ended
September 30,
|----------------------- | -------------------------------
|
|Expected dividend yield | 0.92%                          
|Risk free interest rate | 4.13-4.21%                     
|Expected lives          | 10 years                       

# Note 4  Sale of
50% Owned Joint Venture

On January 4, 2005, FBB sold its 50%
interest in m2 Lease Funds, LLC (m2), in a cash sale to the owner of the
other 50% interest. In this individually negotiated transaction, cash proceeds from the
sale were $2.1 million and resulted in an approximate before tax gain of $973,000. On
January 18, 2005, all secured loans from FBB to m2 were paid in full. FBB no longer holds
any equity interest in m2 and has no continuing involvement with m2.

# Note 5  Goodwill
and Other Intangible Assets.

Goodwill is not amortized but is
subject to impairment tests on at least an annual basis. No impairment loss was necessary
in 2004 or through September 30, 2005. At September 30, 2005, goodwill was $2,689,000.
There was no change in the carrying amount of goodwill for the three and nine months ended
September 30, 2005, as shown below:

|                             | Nine Months Ended
September 30,
|---------------------------- | -------------------------------
|
|(In Thousands)              
|Balance at beginning of year |                                
|Goodwill acquired            |                                
|                             |                                
|Balance at end of period     |                                
|                             |                                

The Corporation has other intangible
assets that are amortized consisting of core deposit intangibles and other intangibles,
consisting of a purchased client list from a purchased brokerage/investment business.

14

---

Changes in the gross carrying amount,
accumulated amortization and net book value of core deposits and other intangibles were as
follows:

|                               | Nine Months Ended
September 30,
|------------------------------ | -------------------------------
|
|(In Thousands)                
|Core deposit intangibles:      |                                
|Gross carrying amount          |                                
|Accumulated amortization       |                                
|                               |                                
|Net book value                 |                                
|                               |                                
|Additions during the year      |                                
|Amortization during the period |                                
|Other intangibles:             |                                
|Gross carrying amount          |                                
|Accumulated amortization       |                                
|                               |                                
|Net book value                 |                                
|                               |                                
|Additions during the year      |                                
|Amortization during the period |                                

The following table shows the current
period and estimated future amortization expense for amortized intangible assets:

|                                                      | Core
Deposit
Intangibles | Other
Intangibles | Total
|----------------------------------------------------- | ------------------------ | ----------------- | -----
|(In Thousands)                                       
|Nine months ended September 30, 2005                  |                          |                   | $    
|Estimate for the three months ended December 31, 2005 |                          |                   |      
|Estimate for the year ended December 31,              |                          |                  
|2006                                                  |                          |                   |      
|2007                                                  |                          |                   |      
|2008                                                  |                          |                   |      
|2009                                                  |                          |                   |      
|                                                      |                          |                   |      
|                                                      |                          |                   | $    
|                                                      |                          |                   |      

15

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# Note 6  Securities

The amortized cost and estimated fair values
of securities available-for-sale are as follows (in thousands):

|                                    | As of September 30, 2005
|----------------------------------- | ------------------------
|
|(In Thousands)                     
|FHLB stock and other                |                         
|U.S. Government agencies            |                         
|Municipals                          |                         
|Collateralized mortgage obligations |                         
|                                    |                         
|                                    |                         
|                                    |                         

|                                    | As of December 31, 2004
|----------------------------------- | -----------------------
|
|(In Thousands)                     
|FHLB stock and other                |                        
|U.S. Government agencies            |                        
|Collateralized mortgage obligations |                        
|                                    |                        
|                                    |                        
|                                    |                        

The table below shows the
Corporations gross unrealized losses and fair value of investments, aggregated by
investment category and length of time that individual investments have been in a
continuous unrealized loss position at September 30, 2005. Such securities have declined
in value due to current interest rate environments and not credit quality and do not
presently represent realized losses. The Corporation has the ability to and anticipates
that these securities, which have been in a continuous loss position but are not
other-than-temporarily impaired, will be kept in the portfolio until maturity. If held
until maturity, it is anticipated that the investments will be realized with no loss. If
the Corporation determines that any of the above securities are deemed
other-than-temporarily impaired, the impairment loss will be recognized in the income
statement.

16

---

A summary of unrealized loss
information for investment securities, categorized by security type follows (in
thousands):

|                                    | As of September 30, 2005
|----------------------------------- | ------------------------
|
|
|(In Thousands)                     
|U.S. Government agencies            |                         
|Municipals                          |                         
|Collateralized mortgage obligations |                         
|                                    |                         
|                                    |                         
|                                    |                         

The Corporation has not sold any
available-for-sale securities for any of the periods shown and has therefore not realized
any gains or losses on such transactions.

At September 30, 2005 and December
31, 2004, securities with a fair value of approximately $32,184,000 and $39,895,000,
respectively, were pledged to secure public deposits, securities under arrangements to
repurchase, and borrowings.

# Note 7  Loans and
Allowance for Loan and Lease Losses

Loan and lease receivables consist of
the following (in thousands):

|                                    | As of September 30, | As of December 31,
|----------------------------------- | ------------------- | ------------------
|
|(In thousands)                     
|First mortgage loans:               |                     |                   
|Commercial real estate              |                     |                   
|Construction                        |                     |                   
|Multi-family                        |                     |                   
|1-4 family                          |                     |                   
|                                    |                     |                   
|                                    |                     |                   
|Commercial business loans           |                     |                   
|Direct financing leases, net        |                     |                   
|Second mortgage loans               |                     |                   
|Credit card and other               |                     |                   
|                                    |                     |                   
|                                    |                     |                   
|Less:                               |                     |                   
|Allowance for loan and lease losses |                     |                   
|Deferred loan fees                  |                     |                   
|                                    |                     |                   
|                                    |                     |                   
|                                    |                     |                   

17

---

An analysis of the allowance for loan and
lease losses is presented below (in thousands):

|                                    | Three Months Ended September 30 | Nine Months Ended September 30,
|----------------------------------- | ------------------------------- | -------------------------------
|
|(Dollars in Thousands)             
|Allowance at beginning of period    |                                 |                                
|Charge-offs:                        |                                 |                                
|Mortgage                            |                                 |                                
|Commercial                          |                                 |                                
|Lease                               |                                 |                                
|Consumer                            |                                 |                                
|                                    |                                 |                                
|Total charge-offs                   |                                 |                                
|Recoveries:                         |                                 |                                
|Mortgage                            |                                 |                                
|Commercial                          |                                 |                                
|Lease                               |                                 |                                
|Consumer                            |                                 |                                
|                                    |                                 |                                
|Total recoveries                    |                                 |                                
|Net recoveries (charge-offs)        |                                 |                                
|Provision                           |                                 |                                
|                                    |                                 |                                
|Allowance at end of period          |                                 |                                
|                                    |                                 |                                
|Allowance to gross loans and leases |                                 |                                

# Note 8  Deposits

|                                                | As of September 30,
2005 | As of December 31,
2004
(as restated)
|----------------------------------------------- | ------------------------ | -------------------------------------
|
|(Dollars in Thousands)                         
|Transaction accounts:                           |                          |                                      
|Demand deposits                                 |                          |                                      
|Negotiable order of withdrawal ("NOW") accounts |                          |                                      
|                                                |                          |                                      
|                                                |                          |                                      
|Money market accounts                           |                          |                                      
|Certificates of deposit:                        |                          |                                      
|0.00% to 1.99%                                  |                          |                                      
|2.00% to 2.99%                                  |                          |                                      
|3.00% to 3.99%                                  |                          |                                      
|4.00% and greater                               |                          |                                      
|                                                |                          |                                      
|                                                |                          |                                      
|                                                |                          |                                      
|                                                |                          |                                      
|                                                |                          |                                      

18

---

# Note 9  Borrowings

|                                | As of September 30,
|------------------------------- | -------------------
|
|
|(Dollars in Thousands)         
|Fed funds purchased and         |                    
|securities sold under agreement |                    
|to repurchase                   |                    
|FHLB advances                   |                    
|Junior subordinated debentures  |                    
|Line of credit                  |                    
|Subordinated note payable       |                    
|                                |                    
|                                |                    
|                                |                    
|Short-term borrowings           |                    
|Long-term borrowings (due       |                    
|beyond one year)                |                    
|                                |                    
|                                |                    
|                                |                    

|                                | As of December 31,
2004
(as restated)
|------------------------------- | -------------------------------------
|
|(Dollars in Thousands)         
|Fed funds purchased and         |                                      
|securities sold under agreement |                                      
|to repurchase                   |                                      
|FHLB advances                   |                                      
|Junior subordinated debentures  |                                      
|Line of credit                  |                                      
|Subordinated note payable       |                                      
|                                |                                      
|                                |                                      
|                                |                                      
|Short-term borrowings           |                                      
|Long-term borrowings (due       |                                      
|beyond one year)                |                                      
|                                |                                      
|                                |                                      
|                                |                                      

19

---

# Note 10 
Derivatives

FBFS uses derivatives to manage the
risk of earnings fluctuations caused by interest rate volatility. The effect of interest
rate movements on hedged assets or liabilities will generally be offset by the derivative
instrument where hedge accounting is permitted. Derivatives used for interest risk
management include interest rate swaps. FBFS currently uses cash flow hedges to hedge
interest rate risk associated with variable rate deposits.

A list of the outstanding derivatives
is shown in the table below

|                                           | As of September 30,
2005 | As of December 31,
2004
(as restated)
|------------------------------------------ | ------------------------ | -------------------------------------
|(In thousands)                            
|
|Cash Flow Hedge:                           |                          |                                      
|Wells Fargo Pay-fixed interest rate swap   | $     831                | April, 2009                          
|Other Derivatives:                        
|Wells Fargo Pay-fixed interest rate swap   | 10,000                   | October, 2006                        
|M&I Pay-fixed interest rate swap           | 10,000                   | November, 2006                       
|FBFS LaSalle Pay-fixed interest rate swap  | 10,000                   | December, 2006                       
|M&I Callable receive-fixed interest rate s | 10,000                   | January, 2010                        
|M&I Callable receive-fixed interest rate s | 10,000                   | February, 2010                       
|M&I Callable receive-fixed interest rate s | 10,000                   | February, 2010                       
|M&I Callable receive-fixed interest rate s | 10,000                   | November, 2010                       
|US Bank Pay-fixed interest rate swap       | 4,763                    | June, 2011                           
|                                           |                          |                                      
|                                           | $75,594                  |                                      
|                                           |                          |                                      

The fair value of cash flow hedges
represented an unrealized loss of $18,000 at September 30, 2005 and $45,000 at December
31, 2004. The fair value of other derivatives included in other liabilities totaled
$649,000 at September 30, 2005 and $1,102,000 at December 31, 2004.

# Note 11  Earnings
Per Share

Basic earnings per share for the
three and nine months ended September 30, 2005 and 2004 have been determined by dividing
net income for the respective periods by the weighted average number of shares of common
stock outstanding. Diluted earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding plus the effect of dilutive
securities. The effect of dilutive securities is computed using the treasury stock method.

20

---

21

---

22

---

# Item 2.

# Managements
Discussion and Analysis of Financial Condition and Results of Operations

On November 8, 2005, FBFS determined
that it must restate its previously issued financial statements for the first two quarters
of 2005 and for the years ended December 31, 2004, 2003, 2002, as a result of accounting
treatment related to its interest rate swaps associated with money market deposit accounts
(MMDAs), variable rate loans (Loans), trust preferred securities
(TPSs) and brokered certificates of deposit (CDs).

Since 2001, FBFS has entered into
various interest rate swaps to hedge the interest rate risk inherent in its MMDAs and
Loans. Since inception of the hedging program, FBFS has applied the short-cut
method of cash flow hedge accounting under Statement of Financial Accounting Standards No.
133 (SFAS 133) to account for the interest rate swaps. Subsequent to June 30,
2005, FBFS determined that these hedging relationships did not qualify for the
short-cut method because the hedged items consisted of a pool of MMDAs and a
pool of Loans that were not the same recognized liabilities and assets over the life of
the respective swaps.

In December 2001, FBFS Statutory
Trust I (the Trust), a business trust wholly owned by FBFS sold preferred
securities and FBFS simultaneously entered into an interest rate swap to hedge the
interest rate risk. Since inception of the swap, FBFS has applied the
short-cut method of cash flow hedge accounting under SFAS 133 to account for
the swap. Effective in the year beginning January 1, 2004, in accordance with the
application of the Financial Accounting Standards Board Interpretation No. 46 (revised)
(FIN 46R) FBFS deconsolidated the Trust. Subsequent to June 30, 2005 FBFS
determined that this hedging relationship no longer qualifies for hedge accounting because
upon adoption of FIN 46R, FBFS did not dedesignate the existing hedge relationship and
redesignate a new hedging relationship.

Additionally, since the third quarter
of 2004, FBFS has entered into various interest rate swaps to hedge the interest rate risk
inherent in certain of its brokered CDs. Since inception of the hedging program, FBFS has
applied the short-cut method of fair value hedge accounting under SFAS 133 to
account for the swaps. Subsequent to June 30, 2005 FBFS determined that these swaps did
not qualify for the short-cut method because the form of payment of the broker
fee incurred to acquire the related CD was determined to have caused the swaps not to have
a zero value at inception.

Although for the MMDA, Loan and CD
swaps the financial statement impact of applying the alternative long-haul
method of documentation using SFAS 133 rather than the short-cut method is
believed to result in no material difference in the hedge effectiveness of the swaps and
management believes these interest rate swaps have been effective as economic hedges,
hedge accounting under SFAS 133 is not allowed for the affected periods because the hedge
documentation required for the long-haul method was not in place at the
inception of the hedge. Similarly the TPS swap remained economically effective but under
SFAS 133 hedge accounting is not allowed for the affected periods because the required
documentation was not in place on the date FIN 46R was adopted.

As a result the financial statements
for all affected periods through June 30, 2005 reflect a cumulative charge of $375
thousand, net of income taxes, to account for the interest rate swaps referred to above as
if hedge accounting was never applied to them. In addition, third quarter 2005 includes a
charge of approximately $135 thousand, net of income taxes, to reflect the same treatment.

At December 31, 2003 and 2004, the
financial statements reflect an adjustment to decrease Retained Earnings of $861,000 and
$477,000, respectively, and an increase in Accumulated Other Comprehensive Income of
$875,000 and $441,000, respectively.

Cash flow hedge accounting allows a
company to record the net settlement of interest payments related to the swap contracts in
net interest income and the changes in fair value on the related interest rate swaps in
shareholders equity as part of accumulated other comprehensive income. Eliminating
the application of cash flow hedge accounting causes the changes in fair value of the
related interest rate swaps to be included in non-interest income (instead of accumulated
other comprehensive income in shareholders equity). Additionally, the net settlement
of interest payments related to the swap contracts was reclassified from net interest
income to non-interest income.

23

---

Fair value hedge accounting allows a
company to record the change in fair value of the hedged item, in this case, brokered CDs,
as an adjustment to income as an offset to the fair value adjustment on the related
interest rate swap. Eliminating the application of fair value hedge accounting reverses
the fair value adjustments that have been made to the brokered CDs. Additionally, the net
cash settlement payments during each of the above periods for these interest rate swaps
were reclassified from net interest income to non-interest income.

FBFS plans to amend its Registration
Statement on Form 10/A including financial statements for the years ended December 31,
2004, 2003 and 2002 and interim financial statements for the quarter ended March 31, 2005
and its Quarterly Report on Form 10Q/A for the quarter ended June 30, 2005 to
reflect the proper accounting treatment. A Form 8K has been filed to reflect a
summary of the changes to the balance sheet and income statement line items for the
periods included in these reports.

The effect of the restatement to
earnings for affected previously reported periods is shown in the following table. The tax
effect of the adjustments has been calculated using the Corporations marginal
effective rate of 39.2%.

|                                   | Impact of Restatement on Income before Taxes | Impact of Restatement on Net Income
|---------------------------------- | -------------------------------------------- | -----------------------------------
|
|(In thousands)                     | (In thousands)                              
|2001                               |                                              |                                    
|2002                               |                                              |                                    
|2003                               |                                              |                                    
|Q1 - 04                            |                                              |                                    
|Q2 - 04                            |                                              |                                    
|Q3 - 04                            |                                              |                                    
|Q4 - 04                            |                                              |                                    
|                                   |                                              |                                    
|2004                               |                                              |                                    
|                                   |                                              |                                    
|Q1 - 05                            |                                              |                                    
|Q2 - 05                            |                                              |                                    
|                                   |                                              |                                    
|2005                               |                                              |                                    
|                                   |                                              |                                    
|Cumulative Impact to prior periods |                                              |                                    
|                                   |                                              |                                    

FBFS continues to carry several
interest rate swaps without a hedging designation. The change in fair values of those
swaps is reported in non-interest income. In future periods FBFS may elect to redesignate
a portion or all of these interest rate swaps utilizing the long haul method
of documentation. FBFS no longer has any hedged items designated under the short
cut method.

# Cautionary Factors

This
quarterly report (Form 10-Q) contains or incorporates by reference various forward-looking
statements concerning the Corporations prospects that are based on the current
expectations or beliefs of management. Forward-looking statements may also be made by the
Corporation from time to time in other reports and documents as well as oral
presentations. When used in written documents or oral statements, the words
anticipate, believe, estimate, expect,
objective and similar expressions and verbs in the future tense, are intended
to identify forward-looking statements. The statements contained herein and such future
statements involve or may involve certain assumptions, risks, and uncertainties, many of
which are beyond the Corporations control that could cause the Corporations
actual results and performance to differ materially from what is expected. In addition to
the assumptions and other factors referenced specifically in connection with such
statements, the following factors could impact the business and financial prospects of the
Corporation: general economic conditions; legislative and regulatory initiatives;
increased competition and other effects of deregulation and consolidation of the financial
services industry; monetary and fiscal policies of the federal government; deposit flows;
disintermediation; the cost of funds; general market rates of interest; interest rates or
investment returns on competing investments; demand for loan products; demand for
financial services; changes in accounting policies or guidelines; general economic
developments; acts of terrorism and developments in the war on terrorism; and changes in
the quality or composition of loan and investment portfolios. See also the factors
regarding future operations discussed in Managements Discussion and
Analysis of Financial Condition and Results of Operations, below.

24

---

# Overview

The
following discussion and analysis is presented to assist in the understanding and
evaluation of the Corporations financial condition and results of operations. It is
intended to complement the unaudited consolidated financial statements, footnotes, and
supplemental financial data appearing elsewhere in this Form 10-Q and should be read in
conjunction with the Form 10-Q. The presentation focuses on the three and nine months
ended September 30, 2005 and the comparable periods in 2004.

# Results of Operations

Comparison of Three
and Nine Months Ended September 30, 2005 and 2004

General.Net
income for the three months ended September 30, 2005 increased $199,000           and
increased $550,000 for the nine months ended September 30, 2005 from           $717,000
and $3.1 million, respectively, in the same periods in 2004 to $916,000           and
$3.7 million. The three months ended September 30, 2005 included an increase           of
$2.3 million in interest income and a reduction of income tax expense of
          $843,000 which were partially offset by increases of $2.0 million in interest
          expense and $887,000 in provision for loan and lease losses as compared to the
          same period in the prior year. The nine months ended September 30, 2005
included           a gain on the sale of the 50% equity investment in a leasing joint
venture, m2           Lease Funds, LLC (m2), of $973,000. In addition to the
gain on sale           of m2, interest income increased $5.8 million, trust and
investment services fee           income increased $250,000 and income tax expense
decreased by $751,000. These           components that caused an increase in net income
for the nine month period were           partially offset by increases in interest
expense of $5.0 million, an increase           of $952,000 in provision for loan and
lease losses and an increase in           non-interest expense of $1.2 million. Diluted
earnings per share for the three           months ended September 30, 2005 increased to
$0.37 from $0.29 for the same           period in 2004. This was largely attributable to
the increase in net income.           Diluted earnings per share for the nine months
ended September 30, 2005           increased to $1.49 from $1.37 also as a result of an
increase in net income           partially offset by an increase in the calculated
numbers of dilutive shares.           The annualized returns on average assets for the
three and nine months ended           September 30, 2005 were 0.59% and 0.81%,
respectively, as compared to 0.52% and           0.78%, respectively, for the same period
in 2004. The annualized returns on           average stockholders equity for the
three and nine months ended September           30, 2005 were 8.99% and 12.43%
respectively, as compared to 7.84% and 13.13%           respectively, for the same period
in 2004.

Net
Interest Income.Net interest income increased $287,000, or 7.1%, and $817,000, or
6.6% to $4.4 million and $13.2 million for the three and nine months ended September 30,
2005 from $4.1 million and $12.4 million for the same periods in 2004. The improvement in
net interest income for the three months ended September 30, 2005 was due to an increase
in average earning assets partially offset by a decrease in net interest margin as
compared to the same period in 2004. The improvement in net interest income for the nine
months ended September 30, 2005 was due to an increase in average interest earning assets
partially offset by a decrease in net interest margin. The net interest margin decreased
from 3.09% for the three months ended September 30, 2004 to 2.93% for the same period in
2005. The decrease in the net interest margin was the result of the increase in yields
paid on interest-bearing liabilities outpacing the increase in yields earned on
interest-earning assets. This was also reflected in the decrease in the interest rate
spread from 2.78% from the three months ended September 30, 2004 to 2.50% for the same
three month period in 2005. The net interest margin decreased from 3.21% for the nine
months ended September 30, 2004 to 3.03% for the same period in 2005. The interest rate
spread decreased to 2.64% from 2.91% for the nine months ended September 30, 2005 as
compared to the same period in 2004.

25

---

Interest
income on interest-earning assets increased $2.3 million and $5.8 million to $9.4 million
and $26.2 million for the respective three and nine months ended September 30, 2005 from
$7.0 million and $20.4 million for the same periods in 2004. In particular, interest
income on loans and leases increased $2.0 million to $8.6 million and $5.1 million to
$23.8 million for the respective three and nine months ended September 30, 2005 from $6.5
million and $18.8 million for the same periods in 2004. For both three and nine month
periods ended September 30, 2005, this was due to an increase in average loans and leases
outstanding of $41.9 million and $41.3 million, or 9.1% and 9.2%, respectively,
accompanied by an increase in average yields earned on loans and leases to 6.77% and 6.47%
from 5.62% and 5.56%, respectively, primarily caused by a rise in market rates. The
average balance of loans and leases increased in all but the lease and consumer loan
categories as of the three and nine months ended September 30, 2005 and was driven largely
by growth in mortgage loans which includes commercial real estate, construction and
multi-family loans. For the three and nine months ended September 30, 2005, the average
balance of mortgage loans grew $46.9 million, or 16.2%, and $38.0 million, or 13.3%, from
$288.9 million and $286.4 million to $335.7 million and $324.4 million. The growth in
commercial real estate, construction and multi-family loans has largely been the result of
attracting new clients in both of the Banks two principal markets. Annualized total
loan growth is 9.0% through September 30, 2005. Management expects that trend to continue
through the end of 2005.

Also
contributing to the increase in income on interest earning assets was an increase in
income on mortgage related securities of $296,000 and $760,000 from $494,000 and $1.4
million for the respective three and nine months ended September 30, 2004 to $791,000 and
$2.2 million for the same periods in 2005. Purchases of roughly $28 million of such
securities were made as interest rates have become more attractive in those securities as
a result of rising mortgage rates. Average balances of mortgage related securities
increased $27.0 million and $24.2 million from $57.8 million and $56.2 million for the
respective three and nine months ended September 30, 2004 to $84.8 million and $80.6
million for the same periods in 2005. There increases were accompanied by an increase in
average yields on such securities from the same respective periods of 3.42% for both the
three and nine months ended September 30, 2004 to 3.73% and 3.64% in 2005. It is the
Corporations policy to diversify assets and part of that diversification includes an
investment portfolio that is no less than 10.0% of total assets.

Interest
expense increased $2.0 million and $5.0 million to $5.0 million and $13.0 million,
respectively, for the three and nine months ended September 30, 2005 from $3.0 million and
$8.0 million for the same periods in 2004. These increases were primarily due to
respective $1.9 million and $4.8 million increases in interest expense on deposits for the
three and nine months ended September 30, 2005 with the weighted average rate increasing,
respectively, from 2.48% and 2.24% to 3.64% and 3.39% from the same periods in 2004. The
increases in interest expense were largely due to rising rates on deposits accompanied by
increases in average interest-bearing deposits of $71.8 million and $68.3 million for the
three and nine month periods or 17.2% and 16.8% for the respective periods from $416.2
million and $406.5 million for the three and nine months ended September 30, 2004 to
$488.0 million and $474.8 million for the same periods in 2005. These increases were
largely a result of growth in money market accounts acquired primarily within the local
market and growth in average certificates of deposit primarily acquired through deposit
brokers. Average money market deposits increased $42.8 million and $34.7 million or 57.5%
and 48.1% for the respective periods from $74.6 million and $72.3 million for the three
and nine months ended September 30, 2004 to $117.4 million and $107.0 million for the same
periods in 2005. Average certificates of deposit increased $22.9 million and $28.0 million
from $300.0 million and $289.5 million for the three and nine months ended September 30,
2004 to $322.9 million and $317.5 million for the same periods in 2005. These increases
were partially offset by decreases in the average balance of Federal Home Loan Bank
(FHLB) advances, used as another source of funding, of $15.8 million and $12.7
million from $25.6 million and $23.7 million for the respective three and nine months
ended September 30, 2004 to $9.8 million and $11.0 million for the same periods in 2005,
or (58.6)% and (53.4)%, respectively, with the average cost of such advances of 4.40% and
3.27% in 2005 as compared to 1.97% and 1.99% for the same periods in 2004. The overall
weighted average cost of borrowings increased from 3.92% and 3.87% for the three and nine
months ended September 30, 2004 to 5.66% and 5.26% for the same periods in 2005. This was
a result of increases in other categories of funding as well as increases in interest
rates from both periods in 2004.

26

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The
Banks strategies continue to focus on developing deeper relationships through the
sale of products and services that meet clients needs accompanied by incentive
programs that encourage the growth of deposits. Specific deposit initiatives include
service and retention calling programs, increased advertising and identification of high
growth potential individuals and businesses. Additionally, the Banks use of
wholesale funding in the form of deposits generated through distribution channels other
than the Corporations own bank locations allows the Banks to gather funds across a
wider geographic base at pricing levels considered attractive.

Provision
for Loan and Lease Losses.The provision for loan and lease losses was $53,000 and
$118,000 for the three and nine months ended September 30, 2005 compared to a negative
provision of $834,000 for the three and nine months ended September 30, 2004. The primary
reason for the provision in loan and lease losses during the three and nine month period
in 2005 is an increase in non accrual loans and the growth in the loan and lease
portfolio. The primary reason for the negative provision during 2004 was a reduction in
classified loan balances and a reduction in specific reserves for impaired loans and
leases. This reduction was primarily a result of an improvement of $786,000 in the values
of collateral value versus carrying value of a loan to an injection moldings manufacturer
and two leases (one to a tool and die manufacturer and the other to a metal stamping
manufacturer). Also contributing to the decrease in provision were net recoveries of
$121,000. These decreases were partially offset by additional provision due to growth in
the loan and lease portfolio during the nine months ended September 30, 2004. In order to
establish the levels of the allowance for loan and lease losses, management regularly
reviews its historical charge-off migration analysis and an analysis of the current level
and trend of several factors that management believes provides an indication of losses in
the loan and lease portfolio. These factors include delinquencies, volume, average size,
average risk rating, technical defaults, geographic concentrations, industry
concentrations, loans and leases on the management attention list, experience in the
credit granting functions and changes in underwriting standards. The charge-off activity
for these periods is inconsequential.

Non-Interest
Income.Non-interest income, consisting primarily of deposit and loan related fees as
well as fees earned for trust and investment services and interest rate swap changes in
fair value and net cash settlements, increased $192,000 to $591,000 for the three months
ended September 30, 2005 as compared to $399,000 for the same period in 2004 and increased
$1.1 million, or 49.0%, to $3.4 million for the nine months ended September 30, 2005 from
$2.2 million for the same period in 2004. The primary contributors to the increase for the
nine months ended September 30, 2005 were the gain on sale of $973,000 from the
Corporations 50% owned joint venture, m2 and a $250,000 increase in trust and
investment services fee income from FBBs trust and investment services area due to
successful efforts to increase trust assets under management. Money transferred in from
new and existing clients as well as market appreciation contributed to the increase in
trust assets managed. In addition to this, there was an increase of $126,000 in the cash
surrender value of bank-owned life insurance for the nine months ended September 30, 2005
as compared to the same period in 2004 due to the purchase of additional bank-owned life
insurance. These increases were partially offset by decreases in other income of $50,000
which represents income for the nine months ended September 30, 2004 from the equity
earnings of the 50% owned joint venture which was sold January 4, 2005. Also contributing
to the decrease was a decrease in service charges on demand deposit accounts of $105,000.
Non-interest income increased for the three months ended September 30, 2005 as compared to
the same period in the prior year due to increases in cash surrender value of bank-owned
life insurance of $29,000, trust and investment services fee income of $66,000 and a
decrease in the net realized and unrealized loss on interest rate swaps of $118,000. These
increases were offset by a decrease in other non-interest income of $46,000 which was also
attributable to income from m2 which was reported for the same period in the prior year.

27

---

Non-Interest
Expense.Non-interest expense increased $236,000 and $1.2 million, or 7.1% and 12.2%,
to $3.6 million and $10.9 million for the three and nine months ended September 30, 2005
from $3.3 million and $9.7 million in the same periods for 2004. A significant portion of
these increases for the three and nine month periods ended September 30, 2005 as compared
to the same periods in 2004 was due to increases of $172,000 and $593,000 in employee
salaries and benefits reflecting additions to staff. Professional and consulting fees
increased $168,000 for the nine months ended September 30, 2005 due to additional fees
associated with the Corporations process to register its common stock with the
Securities and Exchange Commission. Marketing increased $58,000 and $180,000 for the three
and nine month periods as a result of loan, deposit, and general marketing campaigns. Data
processing increased $45,000 and $116,000 for the three and nine month periods largely to
keep pace with internal growth as well as overall technology in the industry. Occupancy
increased $10,000 and $38,000 for the three and nine months ended September 30, 2005 as
compared to the same periods in 2004. These increases were offset by decreases of $25,000
and $40,000 in equipment for the three and nine month periods as compared to the same
periods in the prior year. Other expenses increased $129,000 for the nine months ended
September 30, 2005 from $1.1 million for the same period in 2004 to $1.2 million largely
due to an impairment of $96,000 in an investment in a community housing project.

Minority
Interest.The consolidated financial statements for the three and nine months ended
September 30, 2004 included the accounts of FBFS, its wholly-owned subsidiaries and its
51% share of BBG prior to the acquisition of all of the minority interests in BBG shares
effective June 1, 2004. Minority interest in net income of consolidated subsidiary
represents the 49% minority ownership interest in BBG. Minority interest in net income for
the respective periods in 2004 was $3,000 and $9,000.

Income
Taxes.Income tax expense was $432,000 and $1.9 million for the three and nine months
ended September 30, 2005, with effective rates of 32.0% and 34.0%, compared to $1.3
million and $2.6 million for the same periods in 2004, with effective rates of 64.0% and
45.9%. The higher than expected effective tax rates for both periods of 2004 are primarily
a result of an accrual made related to tax exposure associated with the Wisconsin
Department of Revenue (the Department) audits of Wisconsin financial
institutions, like First Business Bank, which formed investment subsidiaries located
outside of Wisconsin. The Banks Nevada investment subsidiaries hold and manage
assets. The investment subsidiaries have not filed returns with, or paid income or
franchise taxes to, the State of Wisconsin. The Department implemented a program to audit
Wisconsin financial institutions which formed investment subsidiaries outside of Wisconsin
and the Department has generally indicated that it intends to assess income or franchise
taxes on the income of the out-of-state investment subsidiaries of Wisconsin financial
institutions. During 2004, the Department offered a blanket settlement agreement to most
banks in Wisconsin having Nevada investment subsidiaries. The Department has not issued an
assessment to the bank, but the Department has stated that it intends to do so if the
matter is not settled. The Bank believes it has complied with Wisconsin law and private
letter rulings received from the Department. The Bank intends to defend its position
vigorously however there can be no assurance that the Department will not be successful in
whole or in part in its efforts to tax the income of the Banks Nevada investment
subsidiary. As of the nine months ended September 30, 2004, the Bank accrued $500,000 as a
component of current state tax expense, an estimated liability including interest which is
the most likely amount within a range of probable settlement amounts to cover the years
open to examination. As of the nine months ended September 30, 2005, the Bank accrued an
additional $120,000.

Also contributing to the reduction in
the effective tax rate during the three and nine months ended September 30, 2005 was an
increase in the amount of non-taxable income from bank-owned life insurance in comparison
to the same periods for 2004.

28

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Average
Interest-Earning Assets, Average Interest-Bearing Liabilities and Interest Rate Spread.The tables on the following pages show the Corporations average balances,
interest, average rates, net interest margin and the spread between the combined average
rates earned on interest-earning assets and average cost of interest-bearing liabilities
for the periods indicated. The average balances are derived from average daily balances.

29

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30

---

31

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# Financial Condition

General.The total assets of FBFS increased $65.9 million, or 11.7%, to $628.9
          million at September 30, 2005 from $563.0 million at December 31, 2004. This
          increase was funded primarily by net increases in deposits of $54.1 million.
          This growth is generally invested in securities and loans and leases
receivable.

Securities.Securities available-for-sale increased $29.7 million at September 30, 2005
          from December 31, 2004 as a result of purchases of $50.1 million net of
          maturities of $19.4 million during the year. Mortgage-related securities
          consisted largely of agency-backed mortgage-derivative securities in the form
of           REMICSs.

Loans
and Leases Receivable.Total net loans and leases increased $31.7 million to $501.5
million at September 30, 2005 from $469.8 million at December 31, 2004. The activity in
the loan and lease portfolio consisted of originations of $148.1 million and purchases of
$10.0 million offset by principal repayments of $126.7 million and an increase in the
allowance for loan and lease losses of $118,000. Deferred loan fees declined $109,000 to
$200,000 at September 30, 2005 from $310,000 at December 31, 2004. The primary reason for
this decrease was a decrease in loans originated in the Corporations asset-based
lending subsidiary from the prior year ended December 31, 2004 to the nine months ended
September 30, 2005 accompanied by increased payoff activity in the prior period as
compared to the nine months ended September 30, 2005. The increased payoff activity in the
prior period resulted in accelerated deferred loan fee amortization for those loans that
were paid off.

Deposits.As of September 30, 2005, deposits increased $54.1 million to $528.7 million
          from $474.7 million at December 31, 2004. The increase during the nine months
          ended September 30, 2005 was largely attributable to an increase of $36.6
          million in money market accounts accompanied by an increase in certificates of
          deposit of $11.3 million and an increase of $6.2 million in transaction
          accounts, respectively. The weighted average cost of deposits increased to
3.25%           at September 30, 2005 from 2.33% at December 31, 2004.

Borrowings.The Corporation had borrowings of $38.2 million as of September 30, 2005,
          largely consisting of FHLB advances of $12.6 million which had a weighted
          average rate of 3.27% as well as Fed funds purchased and securities sold under
          agreement to repurchase which totaled $17.6 million and had a weighted average
          rate of 3.26%. The Corporation also had a $3.8 million line of credit with a
          weighted average rate of 5.08%, a $5.0 million subordinated note payable which
          carried a weighted average rate of 5.47% and junior subordinated debentures of
          $10.3 million with a weighted average rate of 9.05%. Borrowings increased $8.9
          million during the nine months ended September 30, 2005. Maturing FHLB advances
          of approximately $11.5 million were replaced with Fed funds of approximately
          $16.9 million along with the availability of deposits for funding. At December
          31, 2004, FHLB advances were $23.8 million with a weighted average rate of
          1.91%. Fed funds purchased and securities sold under agreement to repurchase
          totaled $678,000 and had a weighted average rate of 2.20%. The
          Corporations line of credit of $500,000 had a weighted average rate of
          3.76%, the subordinated note payable carried a weighted average rate of 4.62%
          and junior subordinated debentures of $10.3 million had a weighted average rate
          of 8.66%.

Stockholders
Equity.As of September 30, 2005, stockholders equity was $41.4 million or 6.6%
of total assets. Stockholders equity increased $3.3 million during the nine months
ended September 30, 2005 primarily as a result of comprehensive income of $3.4 million,
which includes net income of $3.7 million. Stock options exercised totaled $166,000. These
increases were partially offset by an increase in accumulated other comprehensive loss of
$253,000, dividends paid of $278,000 and treasury stock purchases of $5,000. As of
December 31, 2004, stockholders equity totaled $38.1 million or 6.8% of total
assets.

During
the nine months ended September 30, 2005, options for 13,708 shares of common stock were
exercised at a weighted-average price of $12.09 per share.

32

---

# Asset Quality

Non-performing
Assets.Non-performing assets consists of non-accrual loans and leases of $2.3 million
as of September 30, 2005, or 0.37% of total assets, as compared to $2.9 million, or 0.52%
of total assets, as of December 31, 2004. This represents a decrease of $611,000 in
non-performing assets due to the receipt of payment in full for a non-accrual lease which
had a carrying value of $1.1 million as of December 31, 2004 and the sale of foreclosed
property that had a carrying value of $665,000. These decreases were partially offset by
an increase in non-accrual loans of $1.4 million as of September 30, 2005. The increase in
non-accrual loans is primarily due to two loans, one to a medical supplies distributor
with a net carrying value totaling $934,000 and the second to a wholesale food broker with
a net carrying value totaling $464,000 as of September 30, 2005. The foreclosed property
with a net carrying value of $665,000 as of December 31, 2004 was subsequently sold in
February, 2005. A foreclosure which was formerly a first and second mortgage secured by a
borrowers residence took place in May, 2005. This foreclosed property was
subsequently sold in August, 2005.

The
Corporations non-accrual loans and leases consist of the following at September 30,
2005 and December 31, 2004, respectively.

The
following represents information regarding the Corporations impaired loans:

33

---

Loan
charge-offs were $0 and $9,000 for the three and nine months ended September 30, 2005 and
were $3,000 and $0 for the same periods in 2004, respectively. Recoveries for the three
and nine months ended September 30, 2005 were $1,000 and $7,000 and were $6,000 and
$124,000 for the same periods in 2004, respectively. The higher level of recoveries in
2004 resulted from a recovery of $113,000 from a lease to a printer of wall boards for
manufactured housing that had been charged off in 2002.

A
summary of the activity in the allowance for loan and lease losses follows:

|                                    | Three Months Ended September 30 | Nine Months Ended September 30,
|----------------------------------- | ------------------------------- | -------------------------------
|
|(Dollars in Thousands)             
|Allowance at beginning of period    |                                 |                                
|Charge-offs:                        |                                 |                                
|Mortgage                            |                                 |                                
|Commercial                          |                                 |                                
|Lease                               |                                 |                                
|Consumer                            |                                 |                                
|                                    |                                 |                                
|Total charge-offs                   |                                 |                                
|Recoveries:                         |                                 |                                
|Mortgage                            |                                 |                                
|Commercial                          |                                 |                                
|Lease                               |                                 |                                
|Consumer                            |                                 |                                
|                                    |                                 |                                
|Total recoveries                    |                                 |                                
|Net recoveries (charge-offs)        |                                 |                                
|Provision                           |                                 |                                
|                                    |                                 |                                
|Allowance at end of period          |                                 |                                
|                                    |                                 |                                
|Allowance to gross loans and leases |                                 |                                

34

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# Liquidity and Capital
Resources

During
the nine months ended September 30, 2005 and the years ended December 31, 2004 and 2003,
the Banks did not make dividend payments to the Corporation. The Banks are subject to
certain regulatory limitations regarding their ability to pay dividends to the
Corporation. Management believes that the Corporation will not be adversely affected by
these dividend limitations and that any future projected dividends from the Banks will be
sufficient to meet the Corporations liquidity needs. The Corporations
principal liquidity requirements at September 30, 2005 are the repayment of a short-term
borrowing of $3.8 million and interest payments due on subordinated debentures and the
junior subordinated debentures during 2005. The Corporation expects to meet its liquidity
needs through existing cash flow sources, its bank line of credit and/ or dividends
received from the Banks. The Corporation and its subsidiaries continue to have a strong
capital base and the Corporations regulatory capital ratios continue to be
significantly above the defined minimum regulatory ratios.

FBFS
manages its liquidity to ensure that funds are available to each of its Banks to satisfy
the cash flow requirements of depositors and borrowers and to ensure the
Corporations own cash requirements are met. The Banks maintain liquidity by
obtaining funds from several sources.

The
Banks primary sources of funds are principal and interest repayments on loans
receivable and mortgage-related securities, deposits and other borrowings such as federal
funds and Federal Home Loan Bank advances. The scheduled repayments of loans and the
repayments of mortgage-related securities are a predictable source of funds. Deposit flows
and loan repayments, however, are greatly influenced by general interest rates, economic
conditions and competition.

Brokered
deposits are used by the Banks, which allows them to gather funds across a larger
geographic base at price levels considered attractive. Access to such deposits allows the
flexibility to not pursue single service deposit relationships in markets that have
experienced some unprofitable pricing levels. Brokered deposits account for $261.6 million
and $246.7 million of deposits as of September 30, 2005 and December 31, 2004,
respectively. Brokered deposits are utilized to support asset growth and are generally a
lower cost source of funds when compared to the interest rates that would need to be
offered in the local markets to generate a sufficient level of funds. In addition, the
administrative costs associated with brokered deposits are considerably less than the
administrative costs that would be incurred to administer a similar level of local
deposits. Although local market deposits are expected to increase as new client
relationships are established and as existing clients increase the balances in their
deposit accounts, the usage of brokered deposits will likely remain. In order to provide
for ongoing liquidity and funding, all of the brokered deposits are certificates of
deposit that do not allow for withdrawal, at the option of the depositor, before the
stated maturity. In the event that there is a disruption in the availability of brokered
deposits at maturity, the Banks have managed the maturity structure so that at least 90
days of maturities would be funded through other means, including but not limited to
advances from the Federal Home Loan Bank, replacement with higher cost local market
deposits or cash flow from borrower repayments and security maturities.

The
Banks are required by federal regulation to maintain sufficient liquidity to ensure safe
and sound operations. Management believes that its Banks have an acceptable liquidity
percentage to match the balance of net withdrawable deposits and short-term borrowings in
light of present economic conditions and deposit flows.

Under
Federal law and regulation, the Banks are required to meet certain tier 1 and risk-based
capital requirements. Tier 1 capital generally consists of stockholders equity plus
certain qualifying debentures and other specified items less intangible assets such as
goodwill. Risk-based capital requirements presently address credit risk related to both
recorded and off-balance sheet commitments and obligations.

As
of September 30, 2005 and 2004, the most recent notification from the Federal Deposit
Insurance Corporation and the State of Wisconsin Department of Financial Institutions
(DFI) categorized the Banks as well capitalized under the regulatory framework for prompt
corrective action. The qualification results in lower assessment of FDIC premiums, among
other benefits.

35

---

In
addition, the Banks exceeded minimum net worth requirement of 6.0% as required by the
State of Wisconsin at December 31, 2004.

The
following table summarizes the Corporation and Banks capital ratios and the ratios
required by its federal regulators at September 30, 2005, December 31, 2004 (as restated)
and September 30, 2004 (as restated), respectively:

|                                | Actual | Minimum Required
for Capital
Adequacy Purposes | Minimum Required
to be Well
Capitalized Under
FDIC Requirements
|------------------------------- | ------ | ---------------------------------------------- | ---------------------------------------------------------------
|
|(Dollars in Thousands)         
|As of September 30, 2005:       |        |                                                |                                                                
|Total capital                   |        |                                               
|(to risk-weighted assets)       |        |                                               
|Consolidated                    |        |                                                | $                                                              
|First Business Bank             |        |                                                |                                                                
|First Business Bank - Milwaukee |        |                                                |                                                                
|Tier 1 capital                  |        |                                               
|(to risk-weighted assets)       |        |                                               
|Consolidated                    |        |                                                | $                                                              
|First Business Bank             |        |                                                |                                                                
|First Business Bank - Milwaukee |        |                                                |                                                                
|Tier 1 capital                  |        |                                               
|(to average assets)             |        |                                               
|Consolidated                    |        |                                                | $                                                              
|First Business Bank             |        |                                                |                                                                
|First Business Bank - Milwaukee |        |                                                |                                                                

36

---

|                                       | Actual | Minimum Required
for Capital
Adequacy Purposes | Minimum Required
to be Well
Capitalized Under
FDIC Requirements
|-------------------------------------- | ------ | ---------------------------------------------- | ---------------------------------------------------------------
|
|(Dollars in Thousands)                
|As of December 31, 2004 (as restated): |        |                                                |                                                                
|Total capital                          |        |                                               
|(to risk-weighted assets)              |        |                                               
|Consolidated                           |        |                                                | $                                                              
|First Business Bank                    |        |                                                |                                                                
|First Business Bank - Milwaukee        |        |                                                |                                                                
|Tier 1 capital                         |        |                                               
|(to risk-weighted assets)              |        |                                               
|Consolidated                           |        |                                                | $                                                              
|First Business Bank                    |        |                                                |                                                                
|First Business Bank - Milwaukee        |        |                                                |                                                                
|Tier 1 capital                         |        |                                               
|(to average assets)                    |        |                                               
|Consolidated                           |        |                                                | $                                                              
|First Business Bank                    |        |                                                |                                                                
|First Business Bank - Milwaukee        |        |                                                |                                                                

37

---

|                                        | Actual | Minimum Required
for Capital
Adequacy Purposes | Minimum Required
to be Well
Capitalized Under
FDIC Requirements
|--------------------------------------- | ------ | ---------------------------------------------- | ---------------------------------------------------------------
|
|(Dollars in Thousands)                 
|As of September 30, 2004 (as restated): |        |                                                |                                                                
|Total capital                           |        |                                               
|(to risk-weighted assets)               |        |                                               
|Consolidated                            |        |                                                | $                                                              
|First Business Bank                     |        |                                                |                                                                
|First Business Bank - Milwaukee         |        |                                                |                                                                
|Tier 1 capital                          |        |                                               
|(to risk-weighted assets)               |        |                                               
|Consolidated                            |        |                                                | $                                                              
|First Business Bank                     |        |                                                |                                                                
|First Business Bank - Milwaukee         |        |                                                |                                                                
|Tier 1 capital                          |        |                                               
|(to average assets)                     |        |                                               
|Consolidated                            |        |                                                | $                                                              
|First Business Bank                     |        |                                                |                                                                
|First Business Bank - Milwaukee         |        |                                                |                                                                

# Contractual Obligations

The
following table summarizes the Corporations contractual cash obligations and other
commitments at September 30, 2005.

|                                   | Payment Due by Period
|---------------------------------- | ---------------------
|
|(Dollars in Thousands)            
|Operating lease obligations        |                      
|Fed funds purchased and securities |                      
|repurchase agreements              |                      
|Time deposits                      |                      
|Line of Credit                     |                      
|Subordinated debt                  |                      
|Junior subordinated debentures     |                      
|FHLB advances                      |                      
|Other long-term liabilities        |                      
|                                   |                      
|Total contractual obligations      |                      
|                                   |                      

38

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# Off-balance Sheet
Arrangements

As
of September 30, 2005 the Corporation had outstanding commitments to originate $156.2
million of loans. Commitments to extend funds to or on behalf of clients pursuant to
standby letters of credit totaled $16.2 million as of September 30, 2005. Commitments to
extend funds typically have a term of less than one year; however the Banks have $40.2
million of commitments which extend beyond one year. No losses are expected as a result of
these funding commitments. The Banks have entered into agreements with certain brokers
that provide blocks of funds at specified interest rates for agreed upon fees. The Banks
also utilize interest rate swaps for the purposes of interest rate risk management. Such
instruments are discussed in Note10 to the Consolidated Financial Statements.
Management believes adequate capital and liquidity are available from various sources to
fund projected commitments.

# Item 3. Quantitative and
Qualitative Disclosures About Market Risk

The
primary function of asset and liability management is to provide liquidity and maintain an
appropriate balance between interest-earning assets and interest-bearing liabilities
within specified maturities and/or repricing dates. Interest rate risk is the imbalance
between interest-earning assets and interest-bearing liabilities at a given maturity or
repricing date, and is commonly referred to as the interest rate gap (the
gap). A positive gap exists when there are more assets than liabilities
maturing or repricing within the same time frame. A negative gap occurs when there are
more liabilities than assets maturing or repricing within the same time frame. During a
period of rising interest rates, a negative gap over a particular period would tend to
adversely affect net interest income over such a period, while a positive gap over a
particular period would tend to result in an increase in net interest income.

The
Corporations strategy for asset and liability management is to maintain an interest
rate gap that minimizes the impact of interest rate movements to the net interest margin
by maintaining a favorable match between the maturities and repricing dates of
interest-earning assets and interest-bearing liabilities. This strategy is monitored by
the respective Banks Asset/Liability Management Committees, in accordance with
policies approved by the respective Banks Boards. These committees meet regularly to
review the sensitivity of the Corporations assets and liabilities to changes in
interest rates, liquidity needs and sources, and pricing and funding strategies.

The
Corporation uses two techniques to measure interest rate risk. The first is simulation of
earnings. The balance sheet is modeled as an ongoing entity whereby future growth,
pricing, and funding assumptions are implemented. These assumptions are modeled under
different rate scenarios that include a simultaneous, instant and sustained change in
interest rates.

The
second measurement technique used is static gap analysis. This technique measures the
difference between the amount of interest-earning assets maturing and/or repricing and the
amount of interest-bearing liabilities and interest rate swaps maturing and/or repricing
in specified time periods. A significant repricing gap could result in a large impact on
net interest margin during periods of changing interest rates.

The
Corporations asset and liability management requires management to make a number of
assumptions as to when an asset or liability will reprice or mature. Management believes
that its assumptions approximate actual experience and considers them reasonable, although
the actual amortization and repayment of assets and liabilities may vary substantially.
The Corporations economic sensitivity to change in rates at September 30, 2005 has
not changed materially since December 31, 2004.

39

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# Item 4  Controls
and Procedures

Evaluation of Disclosure
Controls and Procedures

FBFS
maintains disclosure controls and procedures as required under Rule 13a-15 promulgated
under the Securities Exchange Act of 1934, as amended (the Exchange Act), that
are designed to ensure that information required to be disclosed in our Exchange Act
reports is recorded, processed, summarized and reported within the time periods in the
SECs rules and forms, and that such information is accumulated and communicated to
the Corporations management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosures.

At
December 31, 2004, March 31, 2005 and June 30, 2005 FBFSs management carried out an
evaluation, under the supervision and with the participation of FBFSs Chief
Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure
controls and procedures. Based on those evaluations, FBFSs management initially
concluded that as of December 31, 2004, March 31, 2005 and June 30, 2005 such disclosure
controls and procedures were effective. However, on November 8, 2005, management and the
Audit Committee of the Board of Directors of FBFS concluded that FBFS had a material
weakness in its internal control over financial reporting as described below. Because of
this material weakness in its internal control over financial reporting (described below)
which impacted the financial statements for the first two quarters of 2005 and as of and
for the years ended December 31, 2004, 2003, and 2002, management has, as of the date of
the filing of this Form 10-Q, restated its assessment for those periods, and concluded
that FBFSs disclosure controls and procedures were not effective as of December 31,
2004, March 31, 2005, June 30, 2005 or September 30, 2005. Management identified the
following material weakness in internal control over financial reporting as of December
31, 2004, March 31, 2005, June 30, 2005 and September 30, 2005:

As
of the aforementioned period-ends, FBFS had ineffective policies and procedures relating
to the accounting for certain derivative financial instruments under Statement of
Financial Accounting Standard No. 133, Accounting for Derivative Instruments and
Hedging Activities (SFAS 133). Specifically, FBFSs policies and
procedures did not provide for sufficient testing and verification of the criteria for the
short cut method to ensure proper application of the provisions of SFAS 133 at
inception for certain derivative financial instruments and did not provide for periodic
timely review of the proper accounting for certain derivative financial instruments for
periods subsequent to inception. In addition, FBFS did not have personnel possessing
sufficient technical expertise related to the application of the provisions of SFAS 133,
or with a sufficient understanding of derivative instruments. This material weakness has
resulted in the restatement of the Companys financial statements for the first two
quarters of 2005 and for the years ended December 31, 2004, 2003 and 2002 and the
restatement of financial information for the year ended December 31, 2001 and each of the
quarters in 2004.

Changes in Internal
Control over Financial Reporting

FBFS
continually assesses the adequacy of its internal control over financial reporting and
enhances its controls in response to internal control assessments and internal and
external audit and regulatory recommendations.

There
were no changes in our internal control over financial reporting that were implemented
during the quarter ended September 30, 2005, that materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

Since
November 8, 2005, we have implemented or are in the process of implementing several
important changes in our internal control over financial reporting related to our
accounting for derivatives. These actions include:

| |  | Enhancing
risk management policies and procedures related to reviewing derivative transactions;
| | - | -----------------------------------------------------------------------------------------------

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| |  | Reviewing
policies and procedures related to the initiation and subsequent review of hedge
strategies; and
| | - | ----------------------------------------------------------------------------------------------------------

| |  | Changing
policies and procedures to limit the Corporations use of the short cut method.
| | - | ------------------------------------------------------------------------------------------

While
we believe these actions have significantly improved the internal controls over financial
reporting, we further believe that additional time and testing are necessary before
concluding that the material weakness has been fully remediated. We anticipate that we
will have fully remediated the material weakness by December 31, 2005.

# Part II. Other
Information

# Item 1. Legal Proceedings

From
time to time, the Corporation and its subsidiaries are engaged in legal proceedings in the
ordinary course of their respective businesses. Management believes that any liability
arising from any such proceedings currently existing or threatened will not have a
material adverse effect on the Corporations financial position, results of
operations, and cash flows.

# Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds

| | (a) | The
following transactions occurred during the quarter ended September 30, 2005
               pursuant to the 1993 Equity Incentive Plan. On July 8, 2005, 161 shares of
FBFS                common stock were sold for $1,325.03. On July 15, 2005, 337 shares of
common                stock were sold for $2,773.51. On July 15, 2005, 4,620 shares of
FBFS common                stock were sold for $38,022.60. On August 22, 2005, 2,310
shares of FBFS common                stock were sold for $20,997.90. Those transactions
were entered into pursuant to                the exemption provided in Rule 701.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | None.
| | --- | -----

| | (c) | Issuer
Purchases of Equity Securities
| | --- | -------------------------------------

| | 
| | 

| | The
shares reflected in the above table as repurchased were surrendered by an employee as the
consideration for the exercise of the stock options pursuant to the 1993 Equity Incentive
Plan.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
ability of FBFS to pay dividends on, or repurchase, its common stock is largely dependent
on the ability of FBFSs operating subsidiaries to pay dividends to FBFS. Federal
and state regulations impose various restrictions and requirements on state-charted banks
with respect to their ability to pay dividends or make other distributions of capital.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Item 3. Defaults Upon
Senior Securities

Not
applicable.

41

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

None

# Item 5. Other
Information.

None

# Item 6. Exhibits.

| | (31.1)
Certification of the Chief
Executive Officer.
| | ----------------------------------------------------

| | (31.2) Certification of the Senior
Vice President and Chief Financial Officer.
| | ------------------------------------------------------------------------------

| | (32)               Certification of the Chief
Executive Officer and Senior Vice President and           Chief Financial Officer
pursuant to 18 U.S.C. paragraph 1350.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

42

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# Signatures

Pursuant
to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant
has duly caused this amendment to be signed on its behalf by the undersigned, thereunto
duly authorized.

| | FIRST BUSINESS FINANCIAL SERVICES, INC.
| | ---------------------------------------
| |                                        
| | By:  /s/ Jerome J. Smith               
| | Jerome J. Smith                        
| | Director and Chief Executive Officer   
| | November 21, 2005                      

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