U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934
     For the transition period from ___________________ to __________________

Commission file number:  0-27984

                       Ridgestone Financial Services, Inc.
                 (Name of small business issuer in its charter)

              Wisconsin                                     39-1797151
   (State or other jurisdiction of                       (I.R.S. Employer
   incorporation or organization)                       Identification No.)

13925 West North Avenue, Brookfield, Wisconsin                 53005
   (Address of principal executive offices)                 (Zip Code)

Issuer's telephone number: (262) 789-1011

Securities registered under Section 12(b) of the Act:  None

Securities registered under Section 12(g) of the Exchange Act:
                           Common Stock, no par value
                                (Title of class)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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   .
                                                                      ---   ---
     Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

Issuer's revenues for its most recent fiscal year:  $5,222,741

Aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold on February 28, 2003: $6,443,642

Number of shares of common stock, no par value, outstanding on March 1, 2003:
877,659

                       DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for the 2003 Annual Meeting (incorporated by reference into Part
III to the extent indicated therein)

Transitional Small Business Disclosure Format:  Yes   ; No X
                                                   ---    ---

<PAGE>

                       Ridgestone Financial Services, Inc.
                       -----------------------------------

                      Index to Annual Report on Form 10-KSB
                   For The Fiscal Year Ended December 31, 2002

                                                                            Page
                                                                            ----

Part I.........................................................................1
       Item 1.  Description of Business........................................1
       Item 2.  Description of Property........................................8
       Item 3.  Legal Proceedings..............................................9
       Item 4.  Submission of Matters to a Vote of Security Holders............9

Part II........................................................................9
       Item 5.  Market for Common Equity and Related Stockholder Matters.......9
       Item 6.  Management's Discussion and Analysis..........................10
       Item 7.  Financial Statements..........................................25
       Item 8.  Changes In and Disagreements With Accountants on
                Accounting and Financial Disclosure...........................51

Part III......................................................................51
       Item 9.  Directors, Executive Officers, Promoters and Control Persons;
                Compliance With Section 16(a) of the Exchange Act.............51
       Item 10. Executive Compensation........................................51
       Item 11. Security Ownership of Certain Beneficial Owners and Management
                and Related Stockholder Matters...............................51
       Item 12. Certain Relationships and Related Transactions................52
       Item 13. Exhibits and Reports on Form 8-K..............................52
       Item 14. Controls and Procedures.......................................52


SIGNATURES....................................................................53



                                      -i-

<PAGE>

Part I

Item 1.  Description of Business

General

Ridgestone Financial Services, Inc. (the "Company") was incorporated in
Wisconsin on May 25, 1994. The Company was formed to acquire all of the issued
and outstanding stock of Ridgestone Bank (the "Bank") and to engage in the
business of a bank holding company under the Bank Holding Company Act of 1956,
as amended (the "BHCA").

The Bank provides full-service commercial and consumer banking services in its
primary market areas of Brookfield, Elm Grove and Wauwatosa, Wisconsin. The Bank
competes with other offices of national, regional and local commercial banks,
savings banks, savings and loan institutions, credit unions and other financial
service organizations in the three-city area.

In 1996, the Bank received regulatory approval to open its first branch at 15565
West North Avenue, Brookfield, Wisconsin. The branch opened for business on
January 2, 1997, and houses a drive-thru branch banking facility and banking
operations center. On May 31, 2000, the Company purchased the building it had
previously leased for use as the Bank's main office and the Company's
headquarters at 13925 West North Avenue, Brookfield, Wisconsin.

The Company's principal business is the business of the Bank. The Bank's
principal business consists of attracting deposits from the public and investing
those deposits in loans and securities. The Bank's deposits are insured to the
maximum extent allowable by the Federal Deposit Insurance Corporation ("FDIC").
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the interest earned on its loans and
securities and the interest paid on deposits and borrowings. The Company's
operating results are affected by deposit service charges, secondary market loan
fees, commissions generated by the investment center and other income. The
Company's operating results are also affected by economic and competitive
conditions, particularly changes in interest rates, government policies and
actions of regulatory authorities. Operating expenses of the Company include
employee compensation and benefits, occupancy and equipment expenses,
professional and data processing fees, and other administrative expenses.

Special Note Regarding Forward-Looking Statements

Certain matters discussed in this Annual Report on Form 10-KSB are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes,"
"anticipates," "expects," or other words of similar import. Similarly,
statements that describe the Company's beliefs, future plans, objectives or
goals, or the Company's expectations regarding interest rates or general
economic conditions, are also forward-looking statements. Such forward-looking
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those contemplated in the
forward-looking statements. Such risks include, among others: interest rate
trends, changes in the real estate market or the general economic climate in the
United States and, in particular, in the Company's market area, loan delinquency
rates, changes in demand for loan products, increased competition in the
Company's market area, adverse changes in debt or equity capital markets, and
legislative enactments, regulatory changes or changes in fiscal policies of the
federal government or its agencies which adversely affect the business of the
Company and/or the Bank. Shareholders, potential investors and other readers are
urged to consider these factors in evaluating the forward-looking statements.
The forward-looking statements included herein are only made as of the date of
this Annual Report on Form 10-KSB and the Company undertakes no obligation to
publicly update such forward-looking statements to reflect subsequent events or
circumstances.


                                      -1-
<PAGE>

Business Strategy

The Bank's strategy is to concentrate on the financial service needs of
individuals and small businesses by providing them with quality service,
products and on-site decision-making. The Bank pursues this strategy by
attracting highly-qualified employees and emphasizing the use of technology,
both in its operations and in the services it provides its customers. The Bank
also directs its marketing efforts toward a customer base it identifies as
having the potential to be highly profitable.

Loan Products

The Bank offers a full range of retail and commercial lending services,
including commercial loans and revolving lines of credit, residential and
commercial real estate mortgage loans, a system for purchasing and managing
commercial customers' accounts receivable, consumer loans and equipment
financing. These loan products are discussed below.

Although the Bank's management takes a competitive approach to lending, it
stresses high quality in its loans. To promote such quality lending, the Board
of Directors of the Bank has established a maximum lending authority for each
loan officer. Each loan request exceeding a loan officer's authority must be
approved by one or more senior officers. The Loan Committee of the Bank reviews
loans with aggregate principal amounts between the lending officer's lending
authority and $250,000. The Loan Committee of the Bank is comprised of the
President of the Bank, the Executive Vice President, a Senior Commercial Lender
and a Vice President of Credit Administration. In addition, the Loan Committee
of the Board of Directors of the Bank reviews loans over $250,000 for prior
approval. On a monthly basis, the entire Board of Directors of the Bank reviews
all loans over $25,000 made in the preceding month. Because of the Bank's local
nature, management believes that quality control is achievable while still
providing prompt and personal service.

Management of the Bank has established relationships with a correspondent bank
and other independent financial institutions to provide other services required
by its customers, including loan participations. As of December 31, 2002, the
Bank had a customer lending limit of $1,350,000 and seeks participants for
customers with loan requests exceeding this lending limit. The Bank is able to
attract business loans beyond its lending limit by using bank participations
with other banks in Wisconsin. Likewise, the Bank has purchased participation
loans from other Wisconsin area financial institutions.

Real Estate Loans. The Bank originates residential mortgage loans, which
generally are long-term with either fixed or variable interest rates. The Bank's
policy is to retain all variable interest rate mortgage loans in the Bank's loan
portfolio and to sell all fixed rate loans with their servicing rights in the
secondary market. This policy is subject to periodic review by management as a
result of changing market and economic conditions.

The Bank's residential mortgage loan portfolio totaled $13,783,616 as of
December 31, 2002. During fiscal year 2002, the Bank also originated $21,736,512
in mortgage loans sold in the secondary market compared to $13,229,386 during
fiscal 2001. The 64% increase was primarily a result of the favorable interest
rate environment for long-term mortgage loans.

The retention of variable-rate loans in the Bank's loan portfolio helps to
reduce the Bank's exposure to fluctuations in interest rates. However, such
loans generally pose credit risks different from the risks inherent in fixed
rate loans, primarily because as interest rates rise, the interest payments due
from the borrowers rise, thereby increasing the potential for default.

Regulatory and supervisory loan-to-value ("LTV") limits were established by
Section 304 of the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"). The Bank's internal limitations follow those limits and in certain
cases are more restrictive than those mandated by the regulators. Proof of
insurance is required on all collateral taken as security before loan proceeds
are advanced.

                                      -2-
<PAGE>

The regulatory limits are as follows:

            Loan Category                                         LTV Limit
            ------------------------------------------------    --------------
            Raw Land                                                 65%
            Land Development                                         75%
            Construction:
              Commercial, multi-family and non-residential           80%
              1-4 family residential                                 85%
            Improved  Property                                       85%
            Owner-occupied 1-4 family and home equity                (1)

     (1)  A loan-to-value limit has not been established for permanent mortgage
          or home equity loans on owner-occupied, 1- to 4-family residential
          property. However, residential loans exceeding 90% loan-to-value may
          be excluded from FDICIA required reporting if enhanced by mortgage
          insurance or readily marketable collateral.

Personal Loans. The Bank makes personal loans, lines of credit and credit cards
available to consumers for various purposes, such as the purchase of
automobiles, boats and other recreational vehicles, home improvements, education
and personal investments. The Bank retains substantially all such loans,
totaling $838,788 as of December 31, 2002.

Commercial Loans. Commercial loans are made primarily to small and mid-sized
businesses. These loans may be secured or unsecured, and are available for
general operating purposes, acquisition of real estate, purchases of equipment
and machinery, and financing inventory and accounts receivable. The Bank
generally looks to a borrower's business operations as the principal source of
repayment, but also receives, when appropriate, mortgages on real estate,
security interests in inventory, accounts receivable and other personal property
and/or personal guaranties to secure repayment.

The Bank's commercial loan portfolio totaled $27,145,458 as of December 31,
2002, and consisted primarily of lines of credit and loans to businesses.
Commercial lines of credit are generally used for the purpose of financing
working capital and are generally secured with current assets of the borrower.
Commercial loans may be written for a period of greater than one year, are
amortized over a period of one to seven years and are used principally for
financing fixed asset expenditures. Commercial loans are generally secured with
the fixed assets of the borrower.

The Bank is a licensee of the Business Manager system from Private Business Inc.
(PBI). Business Manager is a complete system for purchasing and managing the
accounts receivable of a commercial customer (a merchant) on a full recourse
basis with a flexible cash collateral reserve. From the Bank's perspective, the
program provides a way to service small businesses more profitably, to offer a
unique combination of funding and receivable management benefits, and to control
the risks associated with the funding of accounts receivable. From the
merchant's perspective, the program unlocks the cash typically frozen in the
accounts receivable, provides ongoing cash flow as the business generates new
sales, and offers the merchant's management team information to make better
business decisions. The Bank typically purchases an insurance policy as
additional collateral on these facilities. The policy protects the Bank in the
event of fraud committed against the Bank by the merchant. The Bank's Business
Manager portfolio totaled $4,259,997 as of December 31, 2002 and consisted
entirely of Business Manager Accounts Receivable Agreements with businesses and
professionals.

Commercial Real Estate Loans. As of December 31, 2002, the Bank had $32,219,081
of commercial real estate loans outstanding. These loans were generally made for
the purpose of purchasing manufacturing facilities, warehouses, office buildings
and multiple family commercial real estate holdings.

Other Products and Services

The Bank offers a broad range of deposit services to both personal and business
customers, including checking, money market, savings, and time deposit accounts.
Additional related services include safe deposit boxes, check services, money
transfer services, debit cards and ATM access cards as well as courier deposit
pick-up and lock

                                      -3-
<PAGE>

box services for business customers. The Bank also offers on-line banking,
called RidgeStone ConnectSM, which enables the Bank's customers to access their
accounts in real time, pay bills, transfer funds, and access lines of credit.

The Bank also employs a licensed investment representative who provides a
variety of investment and insurance products through arrangements with other
service providers. These products include mutual fund products, annuities, and
life insurance products.

Competition

The Company has identified as its primary competitors, offices of commercial
banks, savings banks, savings and loan institutions, and credit unions operating
in Brookfield, Elm Grove and Wauwatosa, Wisconsin.

The Bank also faces competition from finance companies, insurance companies,
mortgage companies, securities brokerage firms, money market funds and other
providers of financial services. Most of the Bank's competitors have been in
business for a number of years, have established customer bases, are larger and
have higher lending limits than the Bank.

The Bank competes for loans principally through its ability to communicate
effectively and professionally with its customers and by understanding and
meeting their needs. The Bank actively solicits retail customers and competes
for deposits by offering customers personal attention, professional service and
competitive interest rates. Management believes that its personal service
philosophy and use of leading-edge technology continues to enhance its ability
to compete favorably in attracting individual and business customers.

Supervision and Regulation

General. The operations of financial institutions, including banks and bank
holding companies, are highly regulated, both at the federal and state levels.
Numerous statutes and regulations affect the business of the Company and the
Bank. To the extent that the information below is a summary of statutory
provisions, such information is qualified in its entirety by reference to the
statutory provisions described. There are additional laws and regulations having
a direct or indirect effect on the business of the Company or the Bank.

In recent years, the banking and financial industry has been the subject of
numerous legislative acts and proposals, administrative rules and regulations at
both federal and state regulatory levels. As a result of many such regulatory
changes, the nature of the banking industry has changed dramatically in recent
years as increasing competition and a trend toward deregulation has caused the
traditional distinctions among different types of financial institutions to be
obscured. Further changes along these lines could permit other
financially-oriented businesses to offer expanded services, thereby creating
greater competition for the Company and the Bank with respect to services
currently offered or which may be offered in the future. Proposals for new
legislation or rule making affecting the financial services industry are
continuously being advanced and considered at both the national and state
levels. Neither the Company nor the Bank can predict the effect that future
legislation or regulation will have on the financial services industry in
general or on their businesses in particular.

The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (the "Act")
made significant changes in the laws governing financial institutions, including
changes which expand the permissible range of activities for bank holding
companies and their affiliates (including non-banking financial activities);
permit affiliations between banks, securities firms and insurance companies;
make substantial changes in the regulatory structure for financial institutions;
prohibit new unitary savings and loan holding companies with commercial
affiliates; make changes to the Community Reinvestment Act of 1977; and enact
substantial new financial privacy rules. These financial privacy rules impose
some additional regulatory burden on the Bank.

                                      -4-
<PAGE>

The performance and earnings of the Bank, like other commercial banks, are
affected not only by general economic conditions but also by the policies of
various governmental regulatory authorities. In particular, the Federal Reserve
System regulates money and credit conditions and interest rates in order to
influence general economic conditions primarily through open-market operations
in U.S. Government securities, varying the discount rate on bank borrowings, and
setting reserve requirements against bank deposits. The policies of the Federal
Reserve System have a significant influence on overall growth and distribution
of bank loans, investments and deposits, and affect interest rates earned on
loans and investments. The general effect, if any, of such policies upon the
future business and earnings of the Bank cannot accurately be predicted.

The Company. As a registered bank holding company, the Company is subject to
regulation by the Federal Reserve under the BHCA. The BHCA requires every bank
holding company to obtain the prior approval of the Board of Governors of the
Federal Reserve System (the "Board") before it may merge with or consolidate
into another bank holding company, acquire substantially all the assets of any
bank, or acquire ownership or control of any voting shares of any bank if after
such acquisition it would own or control, directly or indirectly, more than 5%
of the voting shares of such bank.

As described above, the Act now permits banks and bank holding companies to
engage in non-banking financial activities. In order for a bank or a bank
holding company to engage in such activities, however, the bank holding company
must comply with certain capital and asset requirements and elect to become a
financial holding company with the Federal Reserve Board of Governors. At this
time, the Company has not made such an election, nor does it plan to do so in
the immediate future. Therefore, subject to a future election to financial
holding company status, the Company remains under the rules of the BHCA. Under
the BHCA, the Company is prohibited, with certain exceptions, from acquiring
direct or indirect ownership or control of more than 5% of the voting shares of
any company which is not a bank or a bank holding company, and neither the
Company nor any subsidiary may engage in any business other than banking,
managing or controlling banks or furnishing services to or performing services
for its subsidiaries. After notice to or approval of the Board, the Company may,
however, own more than 5% of the shares of a company the activities of which the
Board has determined to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto, and the bank holding
company itself may engage in such activities. The Company has no pending
acquisition plans.

As a registered bank holding company, the Company is supervised and regularly
examined by the Board. Under the BHCA, the Company is required to file with the
Board an annual report and such additional information as may be required. The
Board can order bank holding companies and their subsidiaries to cease and
desist from any actions which in the opinion of the Board constitute serious
risk to the financial safety, soundness or stability of a subsidiary bank and
are inconsistent with sound banking principles or in violation of law. The Board
has adopted regulations which deal with the measure of capitalization for bank
holding companies. Such regulations are essentially the same as those adopted by
the FDIC, described below. The Board's regulations also provide that its capital
requirements will generally be applied on a bank-only (rather than a
consolidated) basis in the case of a bank holding company with less than $150
million in total consolidated assets. The Board has also issued a policy
statement on the payment of cash dividends by bank holding companies, wherein
the Board has stated that a bank holding company experiencing earnings
weaknesses should not pay cash dividends exceeding its net income or which could
only be funded in ways that weaken the bank holding company's financial health,
such as by borrowing.

Under Wisconsin law, the Company is also subject to supervision and examination
by the Wisconsin Department of Financial Institutions (the "Department"). The
Department is also empowered to issue orders to a bank holding company to remedy
any condition or policy which, in its determination, endangers the safety of
deposits in any subsidiary state bank, or the safety of the bank or its
depositors. In the event of noncompliance with such an order, the Department has
the power to direct the operation of the state bank subsidiary and withhold
dividends from the holding company.

The Company, as the holder of the stock of a Wisconsin state-chartered bank, may
be subject to assessment to restore impaired capital of the Bank to the extent
provided in Section 220.07, Wisconsin Statutes. Any such assessment would apply
only to the Company and not to any shareholder of the Company. The Company has


                                      -5-
<PAGE>

committed to the Department that if the Bank's contingent fund decreases to less
than $250,000, the Company will transfer funds to the Bank's contingent fund
sufficient to restore the contingent fund to at least $500,000.

Federal law prohibits the acquisition of "control" of a bank holding company by
individuals or business entities or groups or combinations of individuals or
entities acting in concert without prior notice to the appropriate federal bank
regulator. For this purpose, "control" is defined in certain instances as the
ownership of or power to vote 10% or more of the outstanding shares of the bank
holding company.

The Bank. As a state-chartered institution, the Bank is subject to regulation
and supervision by the Department and the Wisconsin Banking Review Board and is
periodically examined by the Department's staff. Deposits of the Bank are
insured by the Bank Insurance Fund administered by the FDIC and as a result the
Bank is also subject to regulation by the FDIC and periodically examined by its
staff.

The Federal Deposit Insurance Act requires that the appropriate federal
regulatory authority - the FDIC in the case of the Bank (as an insured state
bank which is not a member of the Federal Reserve System) - approve any
acquisition by it through merger, consolidation, purchase of assets, or
assumption of deposits. The same regulatory authority also supervises compliance
by the Bank with provisions of federal banking laws which, among other things,
prohibit the granting of preferential loans to executive officers, directors,
and principal shareholders of banks which have a correspondent relationship with
one another.

Wisconsin banking laws restrict the payment of cash dividends by state banks by
providing that (i) dividends may be paid only out of a bank's undivided profits,
and (ii) prior consent of the Department is required for the payment of a
dividend which exceeds current year income if dividends declared have exceeded
net profits in either of the two immediately preceding years. The various bank
regulatory agencies have authority to prohibit a bank regulated by them from
engaging in an unsafe or unsound practice; the payment of a dividend by a bank
could, depending upon the circumstances, be considered such an unsafe or unsound
practice. In the event that (i) the FDIC or the Department should increase
minimum required levels of capital; (ii) the total assets of the Bank increase
significantly; (iii) the income of the Bank decreases significantly; or (iv) any
combination of the foregoing occurs, then the Board of Directors of the Bank may
decide or be required by the FDIC or the Department to retain a greater portion
of the Bank's earnings to achieve or maintain the required capital.

Subsidiary banks of a bank holding company are subject to certain restrictions
imposed by the Federal Reserve Act on any extensions of credit to the bank
holding company or any of its subsidiaries, on investments in stock or other
securities of the bank holding company and on the taking of such stock or
securities as collateral for loans to any borrower. Under the BHCA and
regulations of the Board, a bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in connection with any
extension of credit or of any property or service.

The activities and operations of banks are subject to a number of additional
detailed, complex and sometimes overlapping federal and state laws and
regulations. These include, without limitation, state usury and consumer credit
laws, state laws relating to fiduciaries, the Federal Truth-in-Lending Act and
Regulation Z, the Federal Equal Credit Opportunity Act and Regulation B, the
Fair Credit Reporting Act, the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, FDICIA, the Community Reinvestment Act, anti-redlining
legislation and the antitrust laws. The Community Reinvestment Act includes
provisions under which the federal bank regulatory agencies must consider, in
connection with applications for certain required approvals, including
applications to acquire control of a bank or bank holding company or to
establish a branch, the records of regulated financial institutions in
satisfying their continuing and affirmative obligations to help meet the credit
needs of their local communities, including those of low and moderate-income
borrowers.

FDICIA, among other things, establishes five tiers of capital requirements: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. The FDIC has adopted
regulations which define the relevant capital measures for the five capital
categories. An institution is deemed to be "well capitalized" if it has a total
risk-based capital ratio (total capital to risk-weighted assets) of 10% or
greater, a Tier I risk-based capital ratio (Tier I Capital to risk weighted
assets) of 6% or greater, and a Tier I leverage capital ratio (Tier I Capital to
average assets) of 5% or greater, and is not subject to a regulatory

                                      -6-
<PAGE>

order, agreement, or directive to meet and maintain a specific capital level for
any capital measure. An institution is deemed to be "adequately capitalized" if
it has a total risk-based capital ratio of 8% or greater, a Tier I risk-based
capital of 4% or greater, and (generally) a Tier I leverage capital ratio of 4%
or greater, and the institution does not meet the definition of a well
capitalized institution. An institution is deemed to be "undercapitalized" if it
has a total risk-based capital ratio less than 8%, or a Tier I risk-based
capital ratio less than 4%, or (generally) a Tier I leverage ratio of less than
4%. An institution is deemed to be "significantly undercapitalized" if it has a
total risk-based capital ratio less than 6%, or a Tier I risk-based capital
ratio less than 3%, or a Tier I leverage ratio less than 3%. An institution is
deemed to be "critically undercapitalized" if it has a ratio of tangible equity
(as defined in the regulations) to total assets that is equal to or less than
2%. Undercapitalized banks may be subject to growth limitations and are required
to submit a capital restoration plan. If an undercapitalized bank fails to
submit an acceptable plan, it is treated as if it is "significantly
undercapitalized." Significantly undercapitalized banks may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets, and cessation of receipt of deposits from correspondent banks.
"Critically undercapitalized" institutions may not, beginning 60 days after
becoming critically undercapitalized, make any payment of principal or interest
on their subordinated debt. The Bank currently exceeds the regulatory
definitions of a well capitalized financial institution.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Riegle Act"), among other things, permits bank holding companies to acquire
banks in any state effective September 29, 1995. The Riegle Act contains certain
exceptions relative to acquisitions. For example, a bank holding company may not
acquire a bank that has not been in existence for less than a minimum period
established by the home state; however, the minimum period cannot exceed five
years. The Riegle Act makes a distinction between interstate banking and
interstate branching. Under the Riegle Act, banks can merge with banks in
another state beginning June 1, 1997, unless a state has adopted a law
preventing interstate mergers; however, banks may acquire a branch of a bank in
another state only if that state permits out-of-state banks to acquire in-state
branches without acquiring the entire bank. Under terms of the BHCA, an
acquiring bank may not control more than 10 percent of federal or 30 percent of
state total deposits of insured depository institutions. Wisconsin law requires
approval by the Department for all acquisitions of Wisconsin banks, whether by
an in-state or out-of-state purchaser and requires, in an interstate acquisition
by an out-of-state bank holding company, that the acquired bank, or subsidiary
banks if acquiring an in-state bank holding company, must have been in existence
for at least five years.

Employees

As of December 31, 2002, the Company and the Bank together employed 21 full-time
and 8 part-time employees, including 3 personal bankers, an investment officer,
9 operations specialists, 6 customer service representatives, a cashier, a
receptionist, a courier, 3 commercial loan officers, a senior officer in charge
of retail banking, a technology specialist, an administrative assistant and the
Bank president.

                                      -7-
<PAGE>

Directors and Executive Officers

The directors of the Company and the Bank as of March 1, 2003 were as follows:

<TABLE>
<CAPTION>

Name of Director                                             Principal Occupation
---------------------      -------------------------------------------------------------------------------
<S>                        <C>
Paul E. Menzel             Chairman of the Board, President and Chief Executive Officer of the Company and
                           President and Chief Executive Officer of the Bank

Christine V. Lake          Executive Vice President and Secretary of the Company and Executive Vice
                           President and Secretary of the Bank

William R. Hayes           Senior Vice President and Treasurer of the Company and Senior Vice President,
                           Cashier and Controller of the Bank

Bernard E. Adee            Senior Vice President of Marshall Financial Consulting, LLC, a financial
                           consulting firm

John F. Goodnow            Co-founder of COB, LLC, a consulting firm specializing in providing turnaround
                           and crisis management services to financially challenged companies

Gregory J. Hoesly          President of L.L. Richards Machinery Co., Inc., a machine tool dealer, and
                           President of Boschert Precision Machinery, Inc., an importer of fabricating
                           machine tools

John E. Horning            Retired Chairman of the Board and Chief Executive Officer of Shorewest Realtors
                           Inc., Wisconsin Mortgage Corporation, and Heritage Title Service

Charles G. Niebler         President of Eye Care Vision Centers, a multi-location optometry practice

James E. Renner            Owner of Renner Oldsmobile and partial owner of Renner Mitsubishi

Richard A. Streff          Chairman of the Board of Streff Advertising, Inc.

William J. Tetzlaff        President of Tetzlaff Associates, Inc., a consulting services company; Vice
                           President of Around the Globe Travel, a travel agency

</TABLE>

The executive officers of the Company and the Bank as of March 1, 2003 were as
follows:

<TABLE>
<CAPTION>

Name of Executive Officer                                           Position
----------------------------      -----------------------------------------------------------------------------
<S>                               <C>
Paul E. Menzel                    Chairman of the Board, President and Chief Executive Officer of the Company
                                  and President and Chief Executive Officer of the Bank

Christine V. Lake                 Executive Vice President and Secretary of the Company and Executive Vice
                                  President and Secretary of the Bank

William R. Hayes                  Senior Vice President and Treasurer of the Company and Senior Vice
                                  President, Cashier and Controller of the Bank
</TABLE>


Item 2.  Description of Property

On May 31, 2000, the Company purchased the building it had previously leased for
use as the Bank's main office and the Company's headquarters at 13925 West North
Avenue, Brookfield, Wisconsin. The Bank's main office now occupies approximately
8,124 square feet of a larger shopping mall that houses various retail
establishments.

                                      -8-
<PAGE>

The Bank opened its drive-up branch on January 2, 1997. The branch is located in
a turn-of-the-century schoolhouse building which has been renovated to house a
branch banking facility. The Company owns this facility, which is located on
approximately one acre of land at 15565 West North Avenue, Brookfield, Wisconsin
and has approximately 1,057 square feet of space. It provides four drive-up
kiosks and room for one drive-up automated teller machine.

Item 3.  Legal Proceedings

Neither the Company nor the Bank is party to any material legal proceedings.


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

There were no matters submitted to the shareholders of the Company for a vote
during the fourth quarter of the year ended December 31, 2002.


Part II

Item 5.  Market for Common Equity and Related Stockholder Matters

The Company's common stock has traded in the over-the-counter market under the
symbol "RFSV" since the completion of the Company's initial public offering in
November 1995. High and low bid prices, as reported on the OTC Bulletin Board
for each quarter within the last two fiscal years, were as follows:


                           2001             High              Low
                      ---------------    ------------     ------------
                      1st Quarter           $5.73            $5.00
                      2nd Quarter           $5.85            $5.00
                      3rd Quarter           $6.00            $5.55
                      4th Quarter           $7.00            $5.67


                           2002             High              Low
                      ---------------    ------------     ------------
                      1st Quarter           $7.20            $6.10
                      2nd Quarter           $8.50            $6.45
                      3rd Quarter           $8.25            $7.50
                      4th Quarter           $8.40            $8.00


These quotations reflect inter-dealer prices, without retail mark-up, markdown
or commission, and may not represent actual transactions. These quotations do
not include intra-day highs and lows. On December 31, 2002, there were
approximately 33 owners of record and approximately 375 beneficial owners of the
Company's common stock.

No cash dividends have been declared to date on the Company's common stock. The
Company expects that all earnings, if any, will be retained to finance the
growth of the Company and the Bank and that no cash dividends will be paid for
the foreseeable future. If and when cash dividends are declared, the Company
will be dependent upon dividends paid to it by the Bank for funds to pay
dividends on its common stock.

Wisconsin banking laws restrict the payment of cash dividends by state banks by
providing that (i) dividends may be paid only out of a bank's undivided profits,
and (ii) prior consent of the Department is required for the payment of a
dividend which exceeds the current year's income if dividends declared have
exceeded net profits in either of the two immediately preceding years.
Additionally, the various bank regulatory agencies have authority to prohibit a
bank regulated by them from engaging in an unsafe or unsound practice. The
payment of a dividend by a

                                      -9-
<PAGE>

bank could, depending upon the circumstances, be considered such an unsafe or
unsound practice. In the event that (i) the FDIC or the Department should
increase minimum required levels of capital; (ii) the total assets of the Bank
increase significantly; (iii) the income of the Bank decreases significantly; or
(iv) any combination of the foregoing occurs, then the Board of Directors of the
Bank may decide or be required by the FDIC or the Department to retain a greater
portion of the Bank's earnings to achieve or maintain the required capital. In
addition to the foregoing, generally speaking, Wisconsin corporations such as
the Company are prohibited by the Wisconsin Business Corporation Law from paying
dividends while they are insolvent or if the payment of dividends would render
them unable to pay debts as they come due in the usual course of business.


Item 6.  Management's Discussion and Analysis

Critical Accounting Policies

In preparing consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The Company has identified the determination of the
allowance for loan loss reserves and deferred tax assets as critical accounting
policies that require material estimates and that are particularly susceptible
to significant change in the near term.

Allowance for Loan Losses. The allowance for loan losses is determined using a
methodology which reserves currently for those loans in which it is determined
that a loss is probable based on characteristics of the individual loan,
historical loss patterns of similar, "homogeneous" loans and environmental
factors unique to each measurement date. The loan loss reserve is determined in
accordance with FASB Statements 5 and 114 and provides for losses that have been
incurred as of the balance sheet date. The allowance is based on past events and
current economic conditions, and does not include the effects of expected losses
on specific loans or groups of loans that are related to future events or
expected changes in economic conditions. The reserving methodology used by the
Company has the following components:

     Specific reserve. On a monthly basis, management reviews all past due loans
     and loans previously classified in order to classify or reclassify loans
     requiring attention, or those with potential losses. Problem loans include
     credits that have been identified as having underlying problems based on
     assessment of the borrowers' business or collateral. Included in this group
     are those nonaccrual loans that meet the criteria as being "impaired" under
     the definition in FASB Statement 114. A loan is considered impaired when,
     based on current information and events, it is probable that the Bank will
     be unable to collect the scheduled payments of principal and interest when
     due according to the contractual terms of the loan agreement. Factors
     considered by management in determining impairment include payment status,
     collateral value, and the probability of collecting scheduled principal and
     interest payments when due. Impairment is measured on a loan by loan basis
     for commercial and construction loans by either the present value of
     expected future cash flows discounted at the loan's effective interest
     rate, the loan's obtainable market price, or the fair value of the
     collateral if the loan is collateral dependent. Ranges of loss are
     determined based on best- and worst- case scenarios for each loan.

     Reserves for homogeneous loan pools. The Company makes a significant number
     of loans which, due to their underlying similar characteristics, are
     assessed for loss as "homogeneous" pools. The homogeneous pools of loans
     are made up of commercial, commercial real estate, residential mortgages
     and consumer loans. All of the loans included in the homogeneous pools have
     been excluded from the specific reserve allocation previously discussed.
     The Company allocates the allowance for credit losses to each loan category
     based on a defined methodology that has been in use, without material
     change, for several years. The methodology is based on historical loss
     information and regulatory averages.

                                      -10-
<PAGE>

     Actual loss ratios experienced in the future could vary from those
     projected. This uncertainty occurs because other factors affecting the
     determination of probable losses inherent in the loan portfolio may exist
     which are not necessarily captured by the application of historical loss
     ratios. To ensure a higher degree of confidence, an unallocated allowance
     is also maintained. The unallocated portion of the loss reserve reflects
     management's view that the reserve should have a margin that recognizes the
     imprecision underlying the process of estimating expected credit losses.
     Determination of the probable losses inherent in the portfolio, which are
     not necessarily captured by the allocated methodology discussed above,
     involves the exercise of judgment. Factors considered in the evaluation of
     the adequacy of the Company's unallocated reserve include portfolio
     exposure due to concentration in specific industries. While management uses
     the best information available to make its evaluation, future adjustments
     to the allowance may be necessary if there are significant changes in
     economic conditions.


Deferred Taxes. Amounts provided for income tax expense are based on income
reported for financial statement purposes and do not necessarily represent
amounts currently payable under tax laws. Deferred income tax assets and
liabilities are computed annually for differences between the financial
statement and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income.
As changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through the provision for income taxes. The differences relate
principally to the reserve for loan losses, deferred compensation, and net
operating loss carryforwards. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.

Comparison of Operating Results for the Years Ended December 31, 2002 and
December 31, 2001

Net Income. Net income for the fiscal year ended December 31, 2002 increased by
102% to $501,434, or $0.54 per diluted common share, compared with net income of
$247,711 or $0.28 per diluted common share, for fiscal 2001. The increase can be
primarily attributed to increased loan volume and lower interest expense
combined with greater income from gain on sales of loans.

Interest Income. Interest income consists primarily of interest on loans
(including loan fees), securities, federal funds sold, and interest-bearing
deposits at other financial institutions. Although average earning assets grew
by 6% from year-end 2001 to year-end 2002, total interest income decreased
$336,486 or 7% to $4,591,318 for the year ended December 31, 2002 as compared to
$4,927,804 for the year ended December 31, 2001. This decrease was primarily the
result of lower interest rate yields on average earning assets reflective of the
low interest rates that prevailed throughout 2002. The interest yield on average
earning assets decreased from 7.46% in fiscal 2001 to 6.54% in fiscal 2002.

Interest Expense. Interest expense primarily represents interest paid to
depositors and interest on borrowings from the Federal Home Loan Bank and
federal funds purchased. Interest expense decreased to $1,602,972 in fiscal 2002
from $2,580,020 in fiscal 2001, a decrease of $977,048 or 38%, despite an
increase in average interest bearing liabilities of 5% at year-end 2002 from
year-end 2001. Included in interest expense is interest paid on other borrowings
which amounted to $150,757 in fiscal 2002 compared to no borrowings in fiscal
2001. The decrease in interest expense occurred primarily as money market
accounts and higher cost time deposits repriced to lower interest rates due to
the low interest rate environment noted above. Deposit interest rate yields
decreased from 4.60% in fiscal 2001 to 2.72% in fiscal 2002.

                                      -11-
<PAGE>

Set forth below is a summary of the Company's average interest-bearing
liabilities and the interest paid on such liabilities during fiscal 2002 and
fiscal 2001.

<TABLE>
<CAPTION>
                                                                  Average                            Average
                                                 2002            Rate Paid           2001           Rate Paid
                                            ---------------     ------------    ---------------    ------------
<S>                                        <C>                        <C>      <C>                       <C>
Interest-bearing demand                    $     2,191,221            0.53%    $     1,707,705           0.71%
Savings accounts                                 1,765,655            1.00%          1,350,888           1.33%
Money market accounts                           25,185,004            1.33%         26,144,743           3.52%
Time deposits                                   25,677,181            4.24%         26,835,809           6.07%
Federal funds purchased                            462,767            2.09%                  0           0.00%
Federal Home Loan Bank borrowings                3,729,839            3.78%                  0           0.00%
                                            ---------------     ------------    ---------------    ------------
     Total interest-bearing liabilities    $    59,011,667            2.72%    $    56,039,145           4.60%
                                            ===============     ============    ===============    ============
</TABLE>


Net Interest Income. Net interest income represents the difference between
interest income earned on interest-earning assets and interest expense paid on
interest-bearing liabilities. Net interest income before provision for loan
losses was $2,988,346 for the year ended December 31, 2002, an increase of
$640,562 or 27% compared with net interest income of $2,347,784 for the year
ended December 31, 2001. The growth in earning assets, primarily in loans, and
the decline in interest expense led to an improvement in the net interest margin
to 4.26% at December 31, 2002 from 3.56% at December 31, 2001.

The following table sets forth the average balances and an analysis of the
interest rates and interest differential of the Company's earning assets, which
earn interest income, and interest bearing liabilities, which accrue interest
expense, for fiscal 2002 and fiscal 2001.

<TABLE>
<CAPTION>
                                                             Average Balance Sheet and
                                                          Analysis of Net Interest Income
                                                              Year Ended December 31,

                                                        2002                                       2001
                                      --------------------------------------    ---------------------------------------
                                         Average       Related      Yield          Average       Related       Yield
                                         Balance      Interest      Rate           Balance       Interest      Rate
                                      -------------- ------------ ----------    -------------- ------------- ----------
<S>                                  <C>            <C>               <C>      <C>            <C>                <C>
Earning assets:
    Deposits in bank                 $      160,379 $      2,917      1.82%    $      127,795 $       3,476      2.72%
    Investments (taxable)                         0            0      0.00%           915,484        50,529      5.52%
    Federal funds sold                    3,931,384       64,390      1.64%         9,624,468       365,039      3.79%
    Loans (a)                            66,139,286    4,524,011      6.84%        55,361,095     4,508,760      8.14%
                                      -------------- ------------ ----------    -------------- ------------- ----------
        Total earning assets         $   70,231,049 $  4,591,318      6.54%    $   66,028,842 $   4,927,804      7.46%
                                      ============== ============ ==========    ============== ============= ==========

Interest-bearing liabilities:
    Interest-bearing demand          $    2,191,221 $     11,637      0.53%    $    1,707,705 $      12,047      0.71%
    Savings accounts                      1,765,655       17,711      1.00%         1,350,888        18,014      1.33%
    Money market accounts                25,185,004      334,160      1.33%        26,144,743       920,883      3.52%
    Time deposits                        25,677,181    1,088,667      4.24%        26,835,809     1,629,076      6.07%
    Federal funds purchased                 462,767        9,809      2.09%                 0             0      0.00%
    FHLB borrowings                       3,729,839      140,988      3.78%                 0             0      0.00%
                                      -------------- ------------ ----------    -------------- ------------- ----------
      Total interest-bearing liabs   $   59,011,667 $  1,602,972      2.72%    $   56,039,145 $   2,580,020      4.60%
                                      ============== ============ ==========    ============== ============= ==========

Interest spread (b)                                 $  2,988,346      3.82%                   $   2,347,784      2.86%
                                                     ============ ==========                   ============= ==========

Interest margin (c)                                 $  2,988,346      4.26%                   $   2,347,784      3.56%
                                                     ============ ==========                   ============= ==========
__________
(a)  Non-accruing loans are included in the computation of average balances. Loan interest income includes net loan
     fees.
(b)  The interest spread is the difference between the yield on earning assets and the yield on interest-bearing
     liabilities.
(c)  The interest margin is the net interest income divided by total earning assets.
</TABLE>

                                                          -12-
<PAGE>

The following table describes the extent to which changes in interest rates and
changes in the volume of interest-earning assets and interest-bearing
liabilities affected the Company's interest income and interest expense for the
periods indicated. Information is provided in each category with respect to (i)
changes attributable to changes in volume (changes in volume multiplied by prior
rate), (ii) changes attributable to changes in rate (changes in rate multiplied
by prior volume), (iii) changes attributable to changes in rate/volume (changes
in rate multiplied by changes in volume), and (iv) the net change.

The changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to
rate.

<TABLE>
<CAPTION>
                                                          Rate/Volume Analysis of Net Interest Income
                                                                  Year Ended December 31, 2002
                                                                          Compared to
                                                                  Year Ended December 31, 2001
                                             -----------------------------------------------------------------------
                                                                   Increase (Decrease) Due To
                                             -----------------------------------------------------------------------
                                                 Volume             Rate          Rate/Volume            Net
                                             ---------------    --------------   --------------      ---------------
Earning assets:
<S>                                        <C>                <C>              <C>                 <C>
     Deposits in bank                      $            887   $        (1,152)  $          (294)    $         (559)
     Investments (taxable)                          (50,529)          (50,529)           50,529            (50,529)
     Federal funds sold                            (215,929)         (207,405)          122,685           (300,649)
     Loans                                          877,805          (721,991)         (140,563)            15,251
                                             ---------------    --------------   --------------      ---------------
          Total earning assets             $        612,234   $      (981,077)  $        32,357     $     (336,486)
                                             ===============    ==============   ==============      ===============

Interest-bearing liabilities:
     Interest-bearing demand               $          3,411   $        (2,978)  $          (843)    $         (410)
     Savings accounts                                 5,531            (4,463)           (1,370)              (302)
     Money market accounts                          (33,804)         (573,989)           21,070           (586,723)
     Time deposits                                  (70,335)         (491,285)           21,210           (540,410)
     Federal funds purchased                              0                 0             9,809              9,809
     FHLB borrowings                                      0                 0           140,988            140,988
                                             ---------------    --------------   --------------      ---------------
        Total interest-bearing             $        (95,197)  $    (1,072,715)  $       190,864     $     (977,048)
        liabilities
                                             ---------------    --------------   --------------      ---------------
        Net change in net interest income  $        707,431   $        91,638   $      (158,507)    $      640,562
                                             ===============    ==============   ==============      ===============
</TABLE>


Provision for Loan Losses. The allowance for loan losses is established as
losses are estimated to have occurred through a provision for loan losses
charged to earnings. Loan losses are charged against the allowance when
management believes the collectibility of a loan balance is unlikely. Subsequent
recoveries, if any, are credited to the allowance. The allowance for loan losses
is adequate to cover probable credit losses relating to specifically identified
loans, as well as probable credit losses inherent in the balances of the loan
portfolio. In accordance with FASB Statements 5 and 114, the allowance is
provided for losses that have been incurred as of the balance sheet date and is
based on past events and current economic conditions, and does not include the
effects of expected losses on specific loans or groups of loans that are related
to future events or expected changes in economic conditions. See "Critical
Accounting Policies - Allowance for Loan Losses" for additional factors used in
determining the loan loss reserve and provision for loan losses.

During 2002, the Company made a loan loss provision of $260,000 compared to
$133,000 in 2001. The provision was made to bring the reserve to the amount
determined necessary by management based on the analysis performed. The $127,000
increase in loan loss provision in fiscal 2002 compared to fiscal 2001 was
primarily due to economic uncertainty.

As of December 31, 2002, the Company's loan loss reserve was $736,118 or 1.00%
of outstanding loans compared to $544,804 or 0.97% of outstanding loans at
December 31, 2001.

                                      -13-
<PAGE>


Set forth below is an analysis of the Company's provision for loan losses.

                         Summary of Loan Loss Experience
                            And Loan Loss Provisions

<TABLE>
<CAPTION>
                                                                         2002                 2001
                                                                    --------------       --------------
<S>                                                                <C>                   <C>
Beginning loan loss reserve                                        $       544,804       $      696,206
Charge-offs:

     Commercial                                                             70,684              321,082
     Real Estate:
          Construction                                                           0                    0
          Commercial                                                             0                    0
          Other Mortgages                                                        0                    0
     Installment-consumer                                                        0                7,397
Recoveries:
     Commercial                                                                  0               42,860
     Real Estate:
          Construction                                                           0                    0
          Commercial                                                             0                    0
          Other Mortgages                                                        0                    0
     Installment-consumer                                                    1,998                1,217
                                                                   ---------------      ---------------
Net charge-offs (recoveries)                                       $        68,686      $       284,402
Additions charged to operations                                            260,000              133,000
                                                                   ---------------      ---------------
Balance at end of period                                           $       736,118      $       544,804
                                                                   ===============      ===============

Ratio of net charge-offs (recoveries) during the period
to average loans outstanding during the period                                0.10%                0.51%

</TABLE>

Noninterest Income. Total noninterest income consisted of service charges on
deposit accounts, gains on sales of loans, commission income generated by the
investment center and an increase in cash surrender value of life insurance
policies. Total noninterest income was $631,423 for fiscal 2002 compared to
$457,710 for fiscal 2001, an increase of $173,713 or a 38% improvement. Due to a
favorable interest rate environment for long-term mortgages during 2002, gains
on sales of loans related to long-term loans sold in the secondary market
increased by $98,948 in 2002 over the prior year which was the primary factor
for the increase in total noninterest income.

Noninterest Expenses. Total noninterest expenses consisted primarily of salaries
and employee benefits, occupancy and equipment expenses, data processing fees
and professional fees. Total noninterest expenses for fiscal 2002 were
$2,610,467 compared to $2,333,807 for fiscal 2001, an increase of $276,660 or
12%. The majority of the increase in noninterest expenses is attributed to
higher personnel costs due to additional staff, salary merit increases, higher
401(k) expenses and increased insurance costs. A portion of the increase also
results from a gain on the sale of other real estate in 2001, which resulted in
lower expenses that year.

In fiscal 2002, the Bank's FDIC premiums were assessed at $11,271 compared to
$31,354 in fiscal 2001, as required by federal law.

                                      -14-
<PAGE>

Selected Financial Ratios. Set forth below are selected financial ratios of the
Company for fiscal 2002 and fiscal 2001:

                                                   2002              2001
                                                ------------      ------------
     Return on average assets                      0.63%             0.33%
     Return on average equity                      6.81%             3.52%
     Dividend payout ratio on common stock         None              None
     Average equity to average assets              9.32%             9.51%


Provision for Income Taxes. The increase in income before income taxes required
a tax provision of $247,868 in fiscal 2002 as compared to $90,976 in fiscal
2001.

Comparison of Operating Results for the Years Ended December 31, 2001 and
December 31, 2000

Net Income. Net income for the fiscal year ended December 31, 2001 increased by
54% to $247,711, or $0.28 per diluted common share, compared with net income of
$160,661, or $0.18 per diluted common share, for fiscal 2000. Greater fee
income, lower expenses and an increase in gains on sales of loans contributed to
the increase for 2001 over the prior year.

Interest Income. Interest income consists primarily of interest on loans
(including loan fees), securities, federal funds sold, and interest-bearing
deposits at other financial institutions. Total interest income for the year
ended December 31, 2001 was $4,927,804 compared to $5,257,153 for the year ended
December 31, 2000, a decrease of $329,349 or 6%. This decrease was primarily the
result of a decline in the interest yield on average earning assets due to
significant interest rate reductions initiated by the Federal Reserve. The
interest yield on average earning assets decreased from 8.66% in fiscal 2000 to
7.46% in fiscal 2001.

Interest Expense. Interest expense primarily represents interest paid to
depositors. Interest expense decreased to $2,580,020 in fiscal 2001 from
$2,815,791 in fiscal 2000, a decrease of $235,771 or 8%, despite an increase in
average interest bearing deposits. The decrease in interest expense occurred
primarily because interest rate reductions initiated by the Federal Reserve led
to repricing higher-cost deposits at significantly lower interest rates. Deposit
interest rate yields decreased from 5.44% in fiscal 2000 to 4.60% in fiscal
2001.

Set forth below is a summary of the Company's average interest-bearing
liabilities and the interest paid on such liabilities during fiscal 2001 and
fiscal 2000.

<TABLE>
<CAPTION>
                                                                  Average                            Average
                                                 2001            Rate Paid           2000           Rate Paid
                                            ---------------     ------------    ---------------    ------------
<S>                                             <C>                   <C>           <C>                  <C>
Interest-bearing demand                        $ 1,707,705            0.71%        $ 1,795,118           1.03%
Savings accounts                                 1,350,888            1.33%          1,367,929           2.08%
Money market accounts                           26,144,743            3.52%         26,321,412           5.18%
Time deposits                                   26,835,809            6.07%         22,230,805           6.32%
Federal funds purchased                                  0            0.00%              2,262           6.94%
                                            ---------------     ------------    ---------------    ------------
     Total interest-bearing liabilities        $56,039,145            4.60%        $51,717,526           5.44%
                                            ===============     ============    ===============    ============
</TABLE>

Net Interest Income. Net interest income represents the difference between
interest income earned on interest-earning assets and interest expense paid on
interest-bearing liabilities. Net interest income before provision for loan
losses was $2,347,784 for the year ended December 31, 2001, a decrease of
$93,578 or 4% compared with net interest income of $2,441,362 for the year ended
December 31, 2000. The net interest margin decreased to 3.56% at December 31,
2001 from 4.02% at December 31, 2000.

Interest expense substantially increased in the latter portion of the third
quarter and the early part of the fourth quarter of 2000. The Bank implemented
steps to improve net interest margin in the latter half of the fourth quarter of
2000 and throughout 2001. As a result, net interest margin on a quarterly basis
steadily improved during 2001. While the average net interest margin for the
year 2001 compared to 2000 shows a decline, the quarterly net

                                      -15-
<PAGE>

interest margin improvement during the year 2001 reflects management's efforts
to improve net interest margin throughout the year.

The following table sets forth the average balances and an analysis of the
interest rates and interest differential of the Company's earning assets, which
earn interest income, and interest bearing liabilities, which accrue interest
expense, for fiscal 2001 and fiscal 2000.

<TABLE>
<CAPTION>
                                                                   Average Balance Sheet and
                                                                Analysis of Net Interest Income
                                                                    Year Ended December 31,

                                                              2001                                          2000
                                         -------------------------------------------   -------------------------------------------

                                            Average         Related        Yield          Average          Related       Yield
                                            Balance         Interest        Rate          Balance         Interest        Rate
                                         --------------- --------------- -----------   --------------   -------------- -----------
<S>                                     <C>             <C>                   <C>     <C>              <C>                  <C>
Earning assets:
       Deposits in bank                 $       127,795 $         3,476       2.72%   $      136,024   $        7,465       5.49%
       Investments (taxable)                    915,484          50,529       5.52%          639,562           55,449       8.67%
       Funds sold and securities
          purchased under agreements
          to resell                           9,624,468         365,039       3.79%        5,891,847          364,852       6.19%
       Loans (a)                             55,361,095       4,508,760       8.14%       54,018,271        4,829,387       8.94%
                                         --------------- --------------- -----------   --------------   -------------- -----------
           Total earning assets         $    66,028,842 $     4,927,804       7.46%   $   60,685,704   $    5,257,153       8.66%
                                         =============== =============== ===========   ==============   ============== ===========

Interest-bearing liabilities:
       Interest-bearing demand          $     1,707,705 $        12,047       0.71%   $    1,795,118   $       18,520       1.03%
       Savings accounts                       1,350,888          18,014       1.33%        1,367,929           28,423       2.08%
       Money market accounts                 26,144,743         920,883       3.52%       26,321,412        1,364,426       5.18%
       Time deposits                         26,835,809       1,629,076       6.07%       22,230,805        1,404,265       6.32%
       Federal funds purchased                        0               0       0.00%            2,262              157       6.94%
                                         --------------- --------------- -----------   --------------   -------------- -----------
         Total interest-bearing liabs   $    56,039,145 $     2,580,020       4.60%   $   51,717,526   $    2,815,791       5.44%
                                         =============== =============== ===========   ==============   ============== ===========

Interest spread (b)                                     $     2,347,784       2.86%                    $    2,441,362       3.23%
                                                         =============== ===========                    ============== ===========

Interest margin (c)                                     $     2,347,784       3.56%                    $    2,441,362       4.02%
                                                         =============== ===========                    ============== ===========
__________
(a)  Non-accruing loans are included in the computation of average balances. Loan interest income includes net loan fees.
(b)  The interest spread is the difference between the yield on earning assets and the yield on interest-bearing liabilities.
(c)  The interest margin is the net interest income divided by total earning assets.
</TABLE>

The following table describes the extent to which changes in interest rates and
changes in the volume of interest-earning assets and interest-bearing
liabilities affected the Company's interest income and interest expense for the
periods indicated. Information is provided in each category with respect to (i)
changes attributable to changes in volume (changes in volume multiplied by prior
rate), (ii) changes attributable to changes in rate (changes in rate multiplied
by prior volume), (iii) changes attributable to changes in rate/volume (changes
in rate multiplied by changes in volume), and (iv) the net change.


                                      -16-
<PAGE>

The changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to
rate.

<TABLE>
<CAPTION>

                                                              Rate/Volume Analysis of Net Interest Income

                                                                     Year Ended December 31, 2001

                                                                              Compared to

                                                                     Year Ended December 31, 2000
                                                 -----------------------------------------------------------------------
                                                                       Increase (Decrease) Due To
                                                 -----------------------------------------------------------------------
                                                     Volume             Rate          Rate/Volume            Net
                                                 ---------------    --------------   --------------      ---------------
Earning assets:
<S>                                             <C>                <C>              <C>                 <C>
       Deposits in bank                        $           (452)   $       (3,765)  $          228      $        (3,989)
       Investments (taxable)                             23,922           (20,149)          (8,693)              (4,920)


       Funds sold and securities purchased
         under agreements to resell                     231,142          (141,385)         (89,570)                 187
       Loans                                            120,052          (429,990)         (10,689)            (320,627)
                                                 ---------------    --------------   --------------      ---------------
            Total earning assets               $        374,664    $     (595,289)  $    ( 108,724)     $      (329,349)
                                                 ===============    ==============   ==============      ===============



Interest-bearing liabilities:

       Interest-bearing demand                 $           (902)   $       (5,856)   $           285    $        (6,473)


       Savings accounts                                    (354)          (10,182)               127           ( 10,409)

       Money market accounts                             (9,158)         (437,320)             2,935           (443,543)

       Time deposits                                    290,973           (54,608)           (11,554)           224,811

       Federal funds                                       (157)             (157)               157
       purchased                                                                                                   (157)
                                                 ---------------    --------------     --------------    ---------------
            Total interest-bearing             $        280,402   $      (508,123)    $       (8,050)   $      (235,771)
            liabilities
                                                 ---------------    --------------     --------------    ---------------

            Net change in net interest income  $         94,262   $       (87,166)    $     (100,674)   $       (93,578)
                                                 ===============    ==============     ==============    ===============
</TABLE>

Provision for Loan Losses. The allowance for loan losses is established as
losses are estimated to have occurred through a provision for loan losses
charged to earnings. Loan losses are charged against the allowance when
management believes the collectibility of a loan balance is unlikely. Subsequent
recoveries, if any, are credited to the allowance. The allowance for loan losses
is adequate to cover probable credit losses relating to specifically identified
loans, as well as probable credit losses inherent in the balances of the loan
portfolio. In accordance with FASB Statements 5 and 114, the allowance is
provided for losses that have been incurred as of the balance sheet date and is
based on past events and current economic conditions, and does not include the
effects of expected losses on specific loans or groups of loans that are related
to future events or expected changes in economic conditions. See "Critical
Accounting Policies - Allowance for Loan Losses" for additional factors used in
determining the loan loss reserve and provision for loan losses.

During 2001, the Company made a loan loss provision of $133,000 compared to
$42,500 in 2000. The provision was made to bring the reserve to the amount
determined necessary by management based on the analysis performed. During
fiscal 2001, the Bank charged $328,479 against the loan loss reserve, of which
$321,082 related to commercial loans and $7,397 related to consumer loans. A
major portion of the commercial loan charge-offs related to a loan made to a
business owner who became critically ill and was no longer able to manage the
business. The Bank liquidated certain assets and charged off the remaining loan
balance.

As of December 31, 2001, the Company's loan loss reserve was $544,804 or 0.97%
of outstanding loans compared to $696,206 or 1.28% of outstanding loans at
December 31, 2000.

                                      -17-
<PAGE>

Set forth below is an analysis of the Company's provision for loan losses.

<TABLE>
<CAPTION>
                         Summary of Loan Loss Experience
                            And Loan Loss Provisions

                                                                         2001                 2000
                                                                  -----------------     ----------------
<S>                                                              <C>                   <C>
Beginning loan loss reserve                                      $          696,206    $         653,270
Charge-offs:

     Commercial                                                             321,082               12,830
     Real Estate:
          Construction                                                            0                    0
          Commercial                                                              0                    0
          Other Mortgages                                                         0                    0
     Installment-consumer                                                     7,397               11,324
Recoveries:
     Commercial                                                              42,860                    0
     Real Estate:
          Construction                                                            0                    0
          Commercial                                                              0               24,590
          Other Mortgages                                                         0                    0
     Installment-consumer                                                     1,217                    0
                                                                  -----------------     ----------------
Net charge-offs (recoveries)                                     $          284,402    $            (436)
Additions charged to operations                                             133,000               42,500
                                                                  -----------------     ----------------
Balance at end of period                                         $          544,804    $         696,206
                                                                  =================     ================

Ratio of net charge-offs (recoveries) during the period
to average loans outstanding during the period                                 0.51%               0.00%
</TABLE>


Noninterest Income. Total noninterest income consisted of service charges on
deposit accounts, gains on sales of loans, commission income generated by the
investment center and an increase in cash surrender value of life insurance
policies. Total noninterest income was $457,710 for fiscal 2001 compared to
$316,377 for fiscal 2000, an increase of $141,333 or a 45% improvement. Due to a
favorable interest rate environment for long-term mortgages during 2001, gains
on sales of loans related to long-term loans sold in the secondary market
increased by $121,616 in 2001 over the prior year which was the primary factor
for the increase in total noninterest income.

Noninterest Expenses. Total noninterest expenses consisted primarily of salaries
and employee benefits, occupancy and equipment expenses, data processing fees
and professional fees. Total noninterest expenses for fiscal 2001 were
$2,333,807 compared to $2,506,235 for fiscal 2000, a decrease of $172,428 or 7%.
The majority of the decrease in noninterest expenses is attributed to a
reduction in occupancy expenses related to the purchase of the building housing
the Bank's operations and internal cost control measures.

In fiscal 2001, the Bank's FDIC premiums were assessed at $31,354 compared to
$28,887 in fiscal 2000, as required by federal law.

                                      -18-
<PAGE>

Selected Financial Ratios. Set forth below are selected financial ratios of the
Company for fiscal 2001 and fiscal 2000:

                                                   2001              2000
                                                ------------      ------------
    Return on average assets                       0.33%             0.23%
    Return on average equity                       3.52%             2.37%
    Dividend payout ratio on common stock          None              None
    Average equity to average assets               9.51%             9.91%


Provision for Income Taxes. The increase in income before income taxes required
a tax provision of $90,976 in fiscal 2001 as compared to $48,343 in fiscal 2000.


Financial Condition

Total Assets. The Company reported total assets of $85,967,021 at December 31,
2002, an increase of $13,998,914 or 19% from December 31, 2001 with assets of
$71,968,107. Loan growth contributed significantly to the asset increase and
resulted primarily from the favorable interest rate environment and the Bank's
sales efforts to secure new and expand existing banking relationships.

Cash and Cash Equivalents. Cash and due from banks was $4,431,478 at December
31, 2002 compared to $2,630,962 at December 31, 2001 and represents cash
maintained at the Bank and funds that the Bank and the Company have deposited in
other financial institutions. The Bank reported $0 of federal funds sold (which
are inter-bank funds with daily liquidity) on December 31, 2002 and $6,971,000
on December 31, 2001. The $6,971,000 decrease in federal funds sold was
primarily used to fund loan growth.

Investment Securities. The Company's investment portfolio increased $41,360 from
$97,100 as of December 31, 2001 to $138,460 at December 31, 2002 as a result of
an increase in the market value of available for sale securities. The securities
were placed in the available for sale category of the investment portfolio as
the securities may be liquidated to provide cash for operating or financing
purposes.

The following table summarizes the maturity dates of those securities as of
December 31, 2002.

<TABLE>
<CAPTION>
                                                                       Investment Portfolio
                                                                        Repricing Schedule

                                                                    After 1 year
                                              1 year or less      through 5 years      After 5 years            Total
                                              ----------------    -----------------    ---------------      ---------------
<S>                                              <C>                       <C>                  <C>            <C>
    Available for Sale Securities:
        Corporate Securities                     $ 138,460                 $ 0                  $ 0            $ 138,460
          Weighted Average Yield                      2.01%                  0%                   0%                2.01%
</TABLE>

Amortized costs and fair values of available for sale securities are discussed
in Note 3 to the Company's Consolidated Financial Statements.

Loans. Loans prior to the allowance for loan losses increased to $73,986,943 at
December 31, 2002 from $56,004,614 at December 31, 2001, an increase of
$17,982,329 or 32%. Growth in the portfolio resulted from a concentrated sales
effort in securing new banking relationships and in expanding relationships with
existing clients. In addition to the $73,986,943 in loans outstanding that the
Bank reported on December 31, 2002, the Bank had unfunded loan commitments of
$19,400,871. Also, during fiscal year 2002 the Bank originated $21,736,512 in
mortgage loans sold in the secondary market compared to $13,229,386 in secondary
market loans originated in 2001. The favorable interest rate environment for
long-term mortgage loans primarily drove the increase in secondary market loan
volume. There were $2,160,021 and $1,029,200 of mortgage loans held for sale at
December 31, 2002 and December 31, 2001, respectively.

                                      -19-
<PAGE>

The following table summarizes the distribution of the Company's loans at
December 31, 2002 and December 31, 2001.

<TABLE>
<CAPTION>
                                                              Loan Portfolio Composition

                                                                     December 31,
                                                     -----------------------------------------------
                                                            2002                         2001
                                                     -------------------          ------------------

<S>                                                          <C>                         <C>
     Commercial                                              $27,145,458                 $20,032,201
     Real Estate:
        Construction                                           6,387,484                   4,154,112
        Commercial                                            25,831,597                  19,403,802
        Residential                                           13,783,616                  11,159,259
     Installment and Consumer                                    838,788                   1,255,240
                                                             -----------                 -----------
                           Total Loans                       $73,986,943                 $56,004,614
                                                             ===========                 ===========
</TABLE>

The following table summarizes the maturities of the Company's loan portfolio at
December 31, 2002 (excluding residential real estate, installment and consumer).

<TABLE>
<CAPTION>
                                                                         Loan Maturities
                                            --------------------------------------------------------------------------
                                                                     After 1
                                              1 year or less     through 5 years      After 5 years          Total
                                            ----------------     ----------------    ---------------    --------------
<S>                                       <C>                  <C>                 <C>                <C>
  Commercial & Commercial Real Estate     $      23,394,067    $      28,418,466   $      1,164,522   $    52,977,055
  Real estate-construction                        1,257,371            5,130,113                  0         6,387,484
                                            ----------------     ----------------    ---------------    --------------
                  Total                   $      24,651,438    $      33,548,579   $      1,164,522   $    59,364,539
                                            ================     ================    ===============    ==============
</TABLE>

The following table summarizes the sensitivity of Company's loan portfolio to
interest rate changes by fixed and adjustable-rate loans due after one year at
December 31, 2002 (excluding residential real estate, installment and consumer).

<TABLE>
<CAPTION>
                                                                   Loans Due After One Year With:
                                                     -----------------------------------------------------------
                                                                           Floating or
                                                      Predetermined         adjustable
                                                          Rates           interest rates            Total
                                                     -----------------   -----------------    ------------------
<S>                                                <C>                 <C>                  <C>
       Commercial & Commercial Real Estate         $       26,897,668  $        2,685,320   $        29,582,988
       Real estate-construction                             4,732,799             397,314             5,130,113
                                                     -----------------   -----------------    ------------------
            Total                                  $       31,630,467  $        3,082,634   $        34,713,101
                                                     =================   =================    ==================
</TABLE>

Non-Performing Assets. The Bank undertakes a continuous loan review process to
promote early identification of credit quality problems in its loan portfolio
and to ensure compliance with its loan policy and documentation practices. Any
past due loans and identified problem loans are reviewed with the Board of
Directors of the Bank on a monthly basis.

Each of the loans which becomes contractually past due 90 days or more as to
principal or interest payments will be reviewed by management and reported to
the Loan Committee of the Board of Directors of the Bank. These loans would then
be placed on a non-accrual status and all past accrued interest would be
reversed. Cash collections on loans placed on non-accrual status are credited to
the loan receivable balance and no interest income is recognized until the
principal balance is current. Loans are returned to accrual status when
principal and interest amounts contractually due are brought current and future
payments are reasonably assured.

As of December 31, 2002, management was not aware of any significant loans,
group of loans or segments of the loan portfolio not included above, where there
were serious doubts as to the ability of the borrowers to comply with the loan
payment terms.

                                      -20-
<PAGE>

The Company had $59,712 and $0 nonperforming loans, respectively, as of December
31, 2002 and December 31, 2001.

There was $3,026 and $0 in unrecorded interest income related to non-accruing
loans as of December 31, 2002 and December 31, 2001. The amounts of cash-basis
interest income on non-accruing loans that were included in net income for
fiscal 2002 and fiscal 2001 were $6,430 and $6,468, respectively.

Allowance for Loan Losses. Based on the loss estimates described in "Critical
Accounting Policies - Allowance for Loan Losses," management determines its best
estimate of the required loan loss allowance. Management's evaluation of the
factors described above resulted in an allowance for loan losses of $736,118 or
1.00% of loans at December 31, 2002 compared to $544,804 or .97% of loans at
December 31, 2001. Accordingly, the Bank has allocated $547,127 (or 74% of the
allowance for loan losses) to commercial and commercial real estate loans, which
comprise about 80% of the loan portfolio. The Bank has allocated $34,238 (or
approximately 5% of the allowance for loan losses) to residential mortgages,
which comprise about 19% of the loan portfolio. Consumer loans comprise about 1%
of the loan portfolio, and $13,232 (or about 2% of the allowance for loan
losses) is allocated to consumer loans. The Bank has allocated $9,686 of the
allowance for loan losses to unfunded loan commitments, which total
approximately $19,400,871. The balance of the allowance for loan losses of
$131,835 is unallocated.

The resulting provisions for loan losses are the amounts required to maintain
the allowance for loan losses at levels deemed necessary by management after
taking into consideration charge-offs and recoveries. The provisions for loan
losses for the years ended December 31, 2002 and 2001 were $260,000 and
$133,000, respectively. Management recognizes there are significant estimates in
the process and the ultimate losses could be significantly different from those
currently estimated.
During fiscal 2002, the Bank charged $70,684 against the allowance for loan
losses related to a commercial loan and had a recovery of $1,998 related to a
consumer loan.

Other Assets. The Company's office building, leasehold improvements and
equipment less accumulated depreciation and amortization decreased to $2,488,734
at December 31, 2002 from $2,490,941 at December 31, 2001.Accrued interest
receivable on loans and other assets was $3,410,076 at December 31, 2002
compared to $3,204,585 at December 31, 2001.

Deposits. Deposits increased by $7,440,920 from $63,745,020 as of December 31,
2001 to $71,185,940 on December 31, 2002.

As of December 31, 2002, time deposits over $100,000 represented 14% of total
deposits. Set forth below is a schedule of the maturities as of December 31,
2002 for the Company's time deposits of $100,000 or more.

<TABLE>
<CAPTION>
                                                     Time Deposits of $100,000 or more
                                                             Maturity Schedule
                                                             -----------------

                                         3 mos.          Over 3 mos.        Over 6 mos.          Over 12
                                        Or less          Thru 6 mos.        Thru 12 mos.         months
                                     ---------------    --------------     ---------------     ------------
<S>                                 <C>                <C>                <C>                 <C>
   Certificates of Deposit          $     1,634,900    $    1,134,855     $     3,368,599     $  3,872,632

</TABLE>

Other Liabilities. Accrued interest payable and other liabilities of $1,568,170
at December 31, 2002 compared to $1,171,472 at December 31, 2001 were made up of
accrued interest payable on deposit accounts, accounts payable and deferred
employee benefits. The majority of the increase was due to a higher deferred
compensation accrual and greater current taxes payable.

                                      -21-
<PAGE>

Borrowed Funds. In November 2000, the Bank became a member of the Federal Home
Loan Bank (the "FHLB"). As a member, the Bank has the capacity to borrow funds
from the FHLB up to a predetermined amount based on the amount of certain types
of loans carried by the Bank.

The Bank continued to see strong and increasing demand for both commercial loans
and mortgage loans held for sale in the secondary market during fiscal 2002. As
a result of this increasing demand, in order to fund loan growth, the Bank
borrowed $4,500,000 from the FHLB during fiscal 2002, with applicable interest
rates ranging from 3.61% to 3.99% and with varying maturities through May 2004.

As of December 31, 2002, the Bank also borrowed $1,112,000 in federal funds
purchased, which are inter-bank funds with daily maturities.

Liquidity. For banks, liquidity generally represents the ability to meet
withdrawals from deposits and the funding of loans. The assets that provide
liquidity are cash, federal funds sold and short-term loans and securities.
Further, subject to certain limits, the Company has the ability to acquire
additional funds through short-term borrowings from other financial
institutions. Liquidity needs are influenced by economic conditions, interest
rates and competition. The loan-to-deposit ratio prior to loan loss reserve on
December 31, 2002 was 104% compared to 88% on December 31, 2001. The funds
needed to meet the increase in loan growth during fiscal 2002 came from deposit
growth and borrowings. Management continues to place emphasis on generating
deposits in the local community to keep pace with increasing loan demand. As of
December 31, 2002 the Bank had $4,431,478 primarily in cash and due from banks.

Off-Balance Sheet Liabilities. The Company is party to financial instruments
with off-balance sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments include
commitments to extend credit, commitments under credit card arrangements,
commercial letters of credit and standby letters of credit. These financial
instruments are recorded in the financial statements when they are funded or
related fees are incurred or received. See Note 15 to the Company's Consolidated
Financial Statements.

As of December 31, 2002, the Company has $19,400,871 in unfunded loan
commitments. The following table summarizes the Company's exposure to these
off-balance sheet commitments:


     Financial instruments                             2002               2001
                                                       ----               ----
          Commitments to extend credit         $ 18,173,438       $ 17,098,705
          Credit card commitments                 1,139,875          1,074,593
          Standby letters of credit                  87,558             35,600

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.

Standby letters of credit are conditional commitments issued to guarantee the
performance of a customer to a third party. Those guarantees are primarily
issued to support public and private borrowing arrangements. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Company evaluates each customer's
credit worthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Company upon extension of credit, is based on
management's credit evaluation of the counterparty. Collateral held varies but
may include accounts receivable, inventory, property and equipment, and
income-producing commercial properties. Credit card commitments are unsecured.

                                      -22-
<PAGE>

The Company has cash, cash equivalents, federal funds sold, interest-bearing
deposits and available for sale securities of $4,657,365 plus various sources of
credit available to fund these commitments. These credit sources include Federal
Funds lines of credit, loans from the FHLB and loans from the Federal Reserve
Bank. Certain of these lines would be collateralized with other assets of the
Bank.

Capital Resources. As of December 31, 2002, the most recent notification from
the regulatory agencies categorized the Bank as well-capitalized under the
regulatory framework for prompt corrective action. To be categorized as
well-capitalized, the Bank must maintain the minimum total risk-based, Tier I
risk-based, and Tier 1 leverage ratios as set forth in "Description of Business
- Supervision and Regulation." There have been no conditions or events since
these notifications that management believes have changed the Bank's category.
See Note 18 to the Company's Consolidated Financial Statements for actual ratios
for 2002 and 2001.

Asset/Liability Management. Closely related to liquidity management is the
management of interest-earning assets and interest-bearing liabilities. The
Company manages its rate sensitivity position to avoid wide swings in net
interest margins and to minimize risk due to changes in interest rates.

Changes in net interest income, other than volume related changes, arise when
interest rates on assets reprice in a time frame or interest rate environment
that is different from the repricing period for liabilities. Changes in net
interest income also arise from changes in the mix of interest earning assets
and interest-bearing liabilities.

The Company currently does not expect to experience any material fluctuations in
its net interest income in the short term as a consequence of changes in
interest rates.

The Company's strategy with respect to asset/liability management is to maximize
net interest income while limiting exposure to interest rate volatility. This
strategy is implemented by the Bank's management, which takes action based upon
its analysis of the Bank's present positioning, its desired future positioning,
economic forecasts, and its goals. The Company's goal is to maintain a monthly
GAP position within + or - 25% of 1.00.

The following table summarizes the repricing opportunities as of December 31,
2002 for each major category of interest-earning assets and interest-bearing
liabilities:

<TABLE>
<CAPTION>
                                                    Interest-Rate-Sensitive Assets and Liabilities
                                    0-89 days       90-179 days     180-359 days       360+ days           Total
                                  --------------   --------------   -------------   ----------------    -------------
<S>                             <C>                    <C>             <C>               <C>          <C>
                  Investments   $       138,460                0               0                  0   $      138,460
                        Loans   $    26,204,094        3,872,948       6,600,582         37,309,318   $   73,986,942
---------------------------------------------------------------------------------------------------------------------
  Total Rate Sensitive Assets   $    26,342,554        3,872,948       6,600,582         37,309,318   $   74,125,402
  Rate Sensitive Liabilities(a) $    34,334,610 (b)    3,745,313       7,367,301         11,385,212   $   56,832,436
---------------------------------------------------------------------------------------------------------------------
                          GAP   $   (7,992,056)          127,635       (766,719)         25,924,106   $   17,292,966
               Cumulative GAP   $   (7,992,056)      (7,864,421)     (8,631,140)         17,292,966
    GAP/Rate Sensitive Assets          (30.34%)         (26.03%)        (23.44%)             23.33%
         (a)  Savings, NOW, and money market demand deposits are considered immediately repricable.
         (b)  Includes total money market demand account balances.

</TABLE>


Impact of Inflation and Changing Prices

Unlike most industries, essentially all of the assets and liabilities of a bank
are monetary in nature. As such, the level of prices has less effect than
interest rates. Prices and interest rates do not always move in the same
direction. The Company's consolidated financial statements and notes are
generally prepared in terms of historical dollars without considering the
changes in the relative purchasing power of money over time due to inflation.


                                      -23-
<PAGE>

<TABLE>
<CAPTION>
                     DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
                                         Average Balance Sheet
                                                                     2002                   2001
                                                              -------------------    -------------------
<S>                                                          <C>                    <C>
    Cash and due from banks                                  $         3,251,400    $         2,185,594
    Federal funds sold                                                 3,931,384              9.624,468
    Interest-bearing deposits in other banks                             160,379                127,795
    Investment securities:
        U.S. Treasury, agency and other securities                       328,247                915,484
    Loans:
        Real estate mortgages                                         13,116,691             13,051,848
        Consumer-net                                                   1,093,094                101,091
        Commercial and other                                          51,929,501             42,208,156
                                                              -------------------    -------------------
             Total                                                    66,139,286             55,361,095
        Less allowance for loan losses                                 (578,449)              (626,185)
                                                              -------------------    -------------------
             Net loans                                                65,560,837             54,734,910
    Fixed assets                                                       2,498,729              2,544,779
    Other real estate owned                                                    0                447,203
    Cash surrender value of life insurance                             2,197,379              2,080,150
    Other assets                                                       1,105,976              1,389,582
                                                              -------------------    -------------------
             Total assets                                    $        79,034,331    $        74,049,965
                                                              ===================    ===================

    Interest-bearing deposits:
        Interest-bearing demand                              $         2,191,221    $         1,707,705
        Savings accounts                                               1,765,655              1,350,888
        Money market deposit accounts                                 25,185,004             26,144,743
        Time deposits                                                 25,677,181             26,835,809
        Federal funds purchased                                          462,767                      0
        FHLB borrowings                                                3,729,839                      0
                                                              -------------------    -------------------
             Total interest-bearing deposits                          59,011,667             56,039,145
        Demand deposits                                               10,619,471              9,279,686
                                                              -------------------    -------------------
             Total deposits                                           69,631,138             65,318,831
    Other liabilities                                                  2,039,718              1,687,597
                                                              -------------------    -------------------
             Total liabilities                                        71,670,856             67,006,428
    Equity capital                                                     7,363,475              7,043,537
                                                              -------------------    -------------------
             Total liabilities and capital                   $        79,034,331    $        74,049,965
                                                              ===================    ===================
</TABLE>

                                      -24-
<PAGE>

Item 7.  Financial Statements

                                                                            Page

Independent Auditor's Report..................................................26

Consolidated Balance Sheets...................................................27

Consolidated Statements of Income.............................................28

Consolidated Statements of Changes in Stockholders' Equity....................29

Consolidated Statements of Cash Flows.........................................30

Notes to Consolidated Financial Statements....................................31


                                      -25-

<PAGE>

                          INDEPENDENT AUDITOR'S REPORT











Board of Directors
RidgeStone Financial Services, Inc. and Subsidiary
Brookfield, Wisconsin

We have audited the accompanying consolidated balance sheets of RidgeStone
Financial Services, Inc. and Subsidiary as of December 31, 2002 and 2001 and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for the years ended December 31, 2002, 2001 and 2000. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of RidgeStone Financial
Services, Inc. and Subsidiary as of December 31, 2002 and 2001, and the results
of their operations and their cash flows for the years ended December 31, 2002,
2001 and 2000, in conformity with accounting principles generally accepted in
the United States of America.


                                            VIRCHOW, KRAUSE & COMPANY, LLP


                                            /s/ VIRCHOW, KRAUSE & COMPANY, LLP






Milwaukee, Wisconsin
February 14, 2003



                                      -26-
<PAGE>

<TABLE>
<CAPTION>
                         RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                                  CONSOLIDATED BALANCE SHEETS

                                   December 31, 2002 and 2001
________________________________________________________________________________________________

                                             ASSETS

                                                                         2002           2001
                                                                    ------------- --------------
<S>                                                                 <C>           <C>
  Cash and due from banks                                           $   4,431,478 $    2,630,962
  Federal funds sold                                                            -      6,971,000
                                                                    ------------- --------------
    Cash and cash equivalents                                           4,431,478      9,601,962
  Interest bearing deposits in banks                                       87,427         84,509
  Available for sale securities - stated at fair value                    138,460         97,100
  Loans, less allowance for loan losses of $736,118 and
    $544,804 in 2002 and 2001, respectively                            73,250,825     55,459,810
  Loans held for sale                                                   2,160,021      1,029,200
  Premises and equipment, net                                           2,488,734      2,490,941
  Cash surrender value of life insurance                                2,252,516      2,135,105
  Accrued interest receivable and other assets                          1,157,560      1,069,480
                                                                    ------------- --------------

        TOTAL ASSETS                                                $  85,967,021  $  71,968,107
                                                                    ============= ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
  Deposits
    Demand                                                          $  14,352,801  $  10,802,307
    Savings and NOW                                                    29,680,304     27,741,829
    Other time                                                         27,152,835     25,200,884
                                                                    ------------- --------------
      Total Deposits                                                   71,185,940     63,745,020
  Federal funds purchased                                               1,112,000              -
  Other borrowings                                                      4,500,000              -
  Accrued interest payable and other liabilities                        1,568,170      1,171,472
                                                                    ------------- --------------
    Total Liabilities                                                  78,366,110     64,916,492
                                                                    ------------- --------------

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
  Preferred stock, no par value, 2,000,000 shares
    authorized, no shares issued                                                -              -
  Common stock, no par value,
    10,000,000 shares authorized, 877,659 and
    876,492 shares issued and outstanding in 2002 and
    2001, respectively                                                  8,423,619      8,417,117
  Accumulated deficit                                                    (807,465)    (1,308,899)
                                                                    ------------- --------------
                                                                        7,616,154      7,108,218
  Accumulated other comprehensive income (loss)                           (15,243)       (56,603)
                                                                    ------------- --------------
      Total Stockholders' Equity                                        7,600,911      7,051,615
                                                                    ------------- --------------

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $  85,967,021  $  71,968,107
                                                                    ============= ==============


          See accompanying notes to consolidated financial statements.

</TABLE>


                                      -27-
<PAGE>

<TABLE>
<CAPTION>
                                RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                                         CONSOLIDATED BALANCE SHEETS

                                   Years Ended December 31, 2002, 2001, and 2000
_________________________________________________________________________________________________________

                                                                       2002        2001        2000
                                                                    ----------  ----------  ----------
<S>                                                                 <C>         <C>         <C>
INTEREST INCOME
  Interest and fees on loans                                        $4,524,011  $4,508,760  $4,829,321
  Interest on investment securities - taxable                                -      50,529      55,515
  Interest on federal funds sold                                        64,390     365,039     364,852
  Interest on deposits in banks                                          2,917       3,476       7,465
                                                                    ----------  ----------  ----------
    Total Interest Income                                            4,591,318   4,927,804   5,257,153
                                                                    ----------  ----------  ----------

INTEREST EXPENSE
  Interest on deposits                                               1,452,175   2,580,020   2,815,634
  Interest on federal funds purchased                                    9,809           -         157
  Interest on other borrowings                                         140,988           -           -
                                                                    ----------  ----------  ----------
    Total Interest Expense                                           1,602,972   2,580,020   2,815,791
                                                                    ----------  ----------  ----------
Net interest income before provision for loan losses                 2,988,346   2,347,784   2,441,362
  Provision for loan losses                                            260,000     133,000      42,500
                                                                    ----------  ----------  ----------
Net interest income after provision for loan losses                  2,728,346   2,214,784   2,398,862
                                                                    ----------  ----------  ----------

NONINTEREST INCOME
  Service fees                                                         149,241     110,822      94,222
  Gain on loan sales                                                   239,782     140,834      19,218
  Increase in cash surrender value of life insurance                   133,754     111,611     108,206
  Securities gains (losses)                                                  -           -      (9,164)
  Other income                                                         108,646      94,443     103,895
                                                                    ----------  ----------  ----------
    Total Noninterest Income                                           631,423     457,710     316,377
                                                                    ----------  ----------  ----------

NONINTEREST EXPENSES
  Salaries                                                           1,145,898   1,035,256     968,395
  Employee benefits                                                    508,258     429,627     386,755
  Occupancy                                                            159,924     185,448     309,219
  Furniture and equipment expenses                                     108,916     132,348     143,598
  Computer services                                                    125,430     126,988     133,059
  Professional fees                                                    145,325     139,089     237,337
  Other expenses                                                       416,716     285,051     327,872
                                                                    ----------  ----------  ----------
    Total Noninterest Expenses                                       2,610,467   2,333,807   2,506,235
                                                                    ----------  ----------  ----------

Income before income taxes                                             749,302     338,687     209,004
  Less:  Applicable income taxes                                       247,868      90,976      48,343
                                                                    ----------  ----------  ----------

      NET INCOME                                                    $  501,434  $  247,711  $  160,661
                                                                    ==========  ==========  ==========
       Basic earnings per share                                     $     0.57  $     0.28  $     0.18
                                                                    ==========  ==========  ==========
       Diluted earnings per share                                   $     0.54  $     0.28  $     0.18
                                                                    ==========  ==========  ==========
       Weighted average shares outstanding                             876,898     876,492     876,492
                                                                    ==========  ==========  ==========




                        See accompanying notes to consolidated financial statements
</TABLE>

                                      -28-
<PAGE>

<TABLE>
<CAPTION>
                                RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                                         CONSOLIDATED BALANCE SHEETS

                                   Years Ended December 31, 2002, 2001, and 2000
_____________________________________________________________________________________________________________

                                                                                Accumulated
                                                                                   other
                                                      Common     Accumulated   comprehensive
                                                       stock       deficit     income (loss)       Total
                                                    ---------------------------------------------------------
<S>                                                 <C>         <C>           <C>             <C>
BALANCES - December 31, 1999                        $ 8,417,117 $ (1,717,271) $      (38,438) $  6,661,408
                                                                                              ------------

  Comprehensive income
    Net income - 2000                                         -      160,661               -       160,661
    Change in unrealized gains (losses) on
      securities available for sale                           -            -         (24,629)      (24,629)
    Reclassification adjustment for (gains)
      losses realized in net income                           -            -          (9,164)       (9,164)
    Income tax effect                                         -            -          13,179        13,179
                                                                                              ------------
      Total Comprehensive Income                                                                   140,047
                                                    ----------- ------------  --------------  ------------

BALANCES - December 31, 2000                          8,417,117   (1,556,610)        (59,052)    6,801,455
                                                                                              ------------
  Comprehensive income
    Net income - 2001                                         -      247,711               -       247,711
    Change in unrealized gains (losses) on
      securities available for sale                           -            -           4,015         4,015
    Income tax effect                                         -            -          (1,566)       (1,566)
                                                                                              ------------
      Total Comprehensive Income                                                                   250,160
                                                    ----------- ------------  --------------  ------------

BALANCES - December 31, 2001                          8,417,117   (1,308,899)        (56,603)    7,051,615
                                                                                              ------------

  Comprehensive income
    Net income - 2002                                         -      501,434               -       501,434
    Change in unrealized gains (losses) on
      securities available for sale                           -            -          67,803        67,803
    Income tax effect                                         -            -         (26,443)      (26,443)
                                                                                              ------------
      Total Comprehensive Income                                                                   542,794
                                                                                              ------------
  Issuance of 1,167 shares of common stock                6,502            -               -         6,502
                                                    ----------- ------------  --------------  ------------

BALANCES - December 31, 2002                        $ 8,423,619 $   (807,465) $      (15,243) $  7,600,911
                                                    =========== ============  ==============  ============




                       See accompanying notes to consolidated financial statements.

</TABLE>


                                      -29-
<PAGE>


<TABLE>
<CAPTION>
                                RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                                         CONSOLIDATED BALANCE SHEETS

                                   Years Ended December 31, 2002, 2001, and 2000
_____________________________________________________________________________________________________________

                                                                    2002           2001          2000
                                                               -------------  -------------  ------------
<S>                                                            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income                                                   $     501,434  $     247,711  $    160,661
  Adjustments to reconcile net income to
    net cash flows from operating
    activities
      Depreciation                                                   168,986        192,013       190,433
      Amortization and accretion of bond
       premiums and discounts - net                                        -              -         9,240
      Loss on sale of assets                                               -              -         8,410
      Gain on loan sales                                            (239,782)      (140,834)      (19,218)
      Provision for loan losses                                      260,000        133,000        42,500
      Increase in cash surrender value of life insurance            (117,411)       (97,919)      (94,514)
      Provision for deferred taxes                                    58,389         90,976        48,343
      Gain on other real estate owned                                      -        (66,414)      (34,007)
      Net change in
         Loans due to origination and
          sale of loans held for sale                               (891,039)      (333,366)     (399,782)
         Accrued interest receivable and other assets               (146,469)       119,529       (33,983)
         Accrued interest payable and other liabilities              323,996        (53,355)      512,403
                                                               -------------  -------------  ------------
      Net Cash Flows from Operating Activities                       (81,896)        91,341       390,486
                                                               -------------  -------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Net change in interest bearing deposits
    in banks                                                          (2,918)        31,525       147,990
  Activity in available for sale securities
    Maturities, prepayments, sales and calls                               -              -        53,086
    Purchases                                                              -        (37,474)     (172,841)
  Activity in held to maturity securities
    Maturities, prepayments and calls                                      -      1,490,141     1,000,000
    Purchases                                                              -              -    (1,500,000)
  Net increase in loans                                          (17,978,313)    (2,015,196)   (2,580,817)
  Proceeds from sales of premises and equipment                      103,753         15,839        13,600
  Additions to premises and equipment                               (270,532)       (97,540)   (1,451,537)
  Net disbursements on other real estate owned                             -        (41,275)      (22,502)
  Proceeds from sale of other real estate owned                            -        777,274       296,500
                                                               -------------  -------------  ------------
    Net Cash Flows from Investing Activities                     (18,148,010)       123,294    (4,216,521)
                                                               -------------  -------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Net increase (decrease) in deposits                              7,440,920     (1,577,581)    7,858,210
  Net change in federal funds purchased                            1,112,000              -             -
  Proceeds from other borrowings                                   4,500,000              -             -
  Proceeds from issuance of common stock                               6,502              -             -
                                                               -------------  -------------  ------------
    Net Cash Flows from Financing Activities                      13,059,422     (1,577,581)    7,858,210
                                                               -------------  -------------  ------------

        Net Change in Cash and Cash Equivalents                   (5,170,484)    (1,362,946)    4,032,175

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                      9,601,962     10,964,908     6,932,733
                                                               -------------  -------------  ------------

    CASH AND CASH EQUIVALENTS - END OF YEAR                    $   4,431,478  $   9,601,962  $ 10,964,908
                                                               =============  =============  ============
SUPPLEMENTAL CASH FLOW DISCLOSURES
  Cash paid for interest                                       $   1,641,326  $   2,830,257  $  2,415,698
  Cash paid for income taxes                                              25             25             -

</TABLE>

          See accompanying notes to consolidated financial statements.

                                      -30-
<PAGE>


               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
 NOTE 1 - Summary of Significant Accounting Policies
================================================================================

    Consolidation

The consolidated financial statements of RidgeStone Financial Services, Inc. and
Subsidiary (the Company) include the accounts of its wholly owned subsidiary,
RidgeStone Bank. RidgeStone Bank includes the accounts of its wholly owned
subsidiary, RidgeStone Real Estate Divestitures, Inc. In December 2001,
RidgeStone Real Estate Divestitures, Inc. ceased operations. The consolidated
financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America and conform to general
practices within the banking industry. All significant intercompany accounts and
transactions have been eliminated in the consolidated financial statements.

    Nature of Banking Activities

The consolidated income of the Company is principally from the income of the
subsidiary Bank. The subsidiary Bank grants commercial, residential and consumer
loans to and accepts deposits from customers primarily in southeastern
Wisconsin. The subsidiary Bank is subject to competition from other financial
institutions and nonfinancial institutions providing financial products.
Additionally, the Company and the subsidiary Bank are subject to the regulations
of certain regulatory agencies and undergo periodic examination by those
regulatory agencies.

    Use of Estimates

In preparing consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the determination
of the allowance for loan losses, and the valuation of foreclosed real estate
and deferred tax assets.

    Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash and
balances due from banks and federal funds sold, all of which mature within
ninety days.

The subsidiary Bank maintains amounts due from banks which, at times, may exceed
federally insured limits. The subsidiary Bank has not experienced any losses in
such accounts.

    Interest Bearing Deposits in Banks

Interest bearing deposits in banks mature within one year and are carried at
cost.

    Available for Sale Securities

Securities classified as available for sale are those debt securities that the
subsidiary Bank intends to hold for an indefinite period of time, but not
necessarily to maturity. Any decision to sell a security classified as available
for sale would be based on various factors, including significant movements in
interest rates, changes in the maturity mix of the subsidiary Bank's assets and
liabilities, liquidity needs, regulatory capital consideration, and other
similar factors. Securities classified as available for sale are carried at fair
value. Unrealized gains or losses are reported as increases or decreases in
other comprehensive income, net of the related deferred tax effect. Realized
gains or losses, determined on the basis of the cost of specific securities
sold, are included in earnings.

                                      -31-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
 NOTE 1 - Summary of Significant Accounting Policies (cont.)
================================================================================

    Loans

Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or payoff are reported at the amount of unpaid
principal, reduced by the allowance for loan losses and any deferred fees or
costs in originating loans. Interest income is accrued on the unpaid principal
balance. The accrual of interest income on impaired loans is discontinued when,
in the opinion of management, there is reasonable doubt as to the borrower's
ability to meet payment of interest or principal when they become due. When
interest accrual is discontinued, all unpaid accrued interest is reversed. Cash
collections on impaired loans are credited to the loan receivable balance and no
interest income is recognized on those loans until the principal balance is
current. Loans are returned to accrual status when the principal and interest
amounts contractually due are brought current and future payments are reasonably
assured.

    Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at
the lower of cost or estimated market value in the aggregate. Net unrealized
losses are recognized through a valuation allowance by charges to income. All
sales are made without recourse.

    Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to earnings. Loan losses
are charged against the allowance when management believes the uncollectibility
of a loan balance is confirmed. Subsequent recoveries, if any, are credited to
the allowance. The allowance for loan losses is adequate to cover probable
credit losses relating to specifically identified loans, as well as probable
credit losses inherent in the balance of the loan portfolio. The allowance is
provided for losses that have been incurred as of the balance sheet date and is
based on past events and current economic conditions, and does not include the
effects of expected losses on specific loans or groups of loans that are related
to future events or expected changes in economic conditions. While management
uses the best information available to make its evaluation, future adjustments
to the allowance may be necessary if there are significant changes in economic
conditions.

A loan is considered impaired when, based on current information and events, it
is probable that the subsidiary Bank will be unable to collect the scheduled
payments of principal or interest when due according to the contractual terms of
the loan agreement. Factors considered by management in determining impairment
include payment status, collateral value, and the probability of collecting
scheduled principal and interest payments when due. Impairment is measured on a
loan by loan basis for commercial and construction loans by either the present
value of expected future cash flows discounted at the loan's effective interest
rate, the loan's obtainable market price, or the fair value of the collateral if
the loan is collateral dependent.

In addition, various regulatory agencies periodically review the allowance for
loan losses. These agencies may require the subsidiary Bank to make additions to
the allowance for loan losses based on their judgments of collectibility based
on information available to them at the time of their examination.

    Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation. Provisions
for depreciation are computed on straight-line and accelerated methods over the
estimated useful lives of the assets, which range from 15 to 40 years for
buildings and 5 to 10 years for equipment.

                                      -32-
<PAGE>
               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001
--------------------------------------------------------------------------------
 NOTE 1 - Summary of Significant Accounting Policies (cont.)
================================================================================

    Profit-Sharing Plan

The Company has established a trusteed contributory 401(k) profit-sharing plan
for qualified employees. The Company's policy is to fund contributions as
accrued.

    Stock-Based Compensation Plan

At December 31, 2002, the Company has a stock-based employee compensation plan
which is described more fully in Note 10. The Company accounts for this plan
under the recognition and measurement principles of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and related Interpretations. No
stock-based employee compensation cost is reflected in net income (loss), as all
options granted under this plan had an exercise price equal to the approximate
market value of the underlying common stock on the date of grant. The following
table illustrates, in accordance with SFAS No. 148 Accounting for Stock-Based
Compensation - Transition and Disclosure, the effect on net income (loss) and
earnings per share if the Company had applied the fair value recognition
provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to
stock-based employee compensation.
<TABLE>
<CAPTION>

                                                                        2002                2001               2000
                                                                  ----------------    ----------------   ----------------
<S>                                                               <C>                 <C>                <C>
    Net income - as reported                                      $        501,434    $        247,711   $        160,661
    Deduct: Total stock-based employee
      compensation expense determined under a
      fair value based method for all awards
      granted, net of related tax effects                                 (145,978)           (170,418)          (169,787)
                                                                  ----------------    ----------------   ----------------
         Pro forma net income (loss)                              $        355,456    $         77,293   $         (9,126)
                                                                  ================    ================   ================
    Basic earnings per share - as reported                        $           0.57    $           0.28   $           0.18
         Pro forma basic earnings (loss) per share                $           0.41    $           0.09   $          (0.01)
    Diluted earnings per share - as reported                      $           0.54    $           0.28   $           0.18
         Pro forma diluted earnings (loss) per share              $           0.39    $           0.09   $          (0.01)
</TABLE>

    Other Real Estate Owned

Other real estate owned, acquired through partial or total satisfaction of loans
is carried at the lower of cost or fair value less cost to sell. At the date of
acquisition, losses are charged to the allowance for loan losses. Revenue and
expenses from operations and changes in the valuation allowance are included in
loss on foreclosed real estate.

                                      -33-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001
--------------------------------------------------------------------------------
 NOTE 1 - Summary of Significant Accounting Policies (cont.)
================================================================================

    Income Taxes

The Company files a consolidated federal income tax return and separate company
state income tax returns. Accordingly, amounts equal to tax benefits of those
companies having taxable federal losses or credits are reimbursed by the other
companies that incur federal tax liabilities.

Amounts provided for income tax expense are based on income reported for
financial statement purposes and do not necessarily represent amounts currently
payable under tax laws. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes. The differences relate principally to the reserve
for loan losses, deferred compensation, and net operating loss carryforwards.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.

    Off-Balance Sheet Financial Instruments

In the ordinary course of business the subsidiary Bank has entered into
off-balance-sheet financial instruments consisting of commitments to extend
credit, commitments under credit card arrangements, commercial letters of credit
and standby letters of credit. Such financial instruments are recorded in the
financial statements when they are funded or related fees are incurred or
received.

    Earnings Per Share

Earnings per share are computed based upon the weighted average number of common
shares outstanding during each year. In the computation of diluted earnings per
share, all dilutive stock options are assumed to be exercised at the beginning
of each year and the proceeds are used to purchase shares of the Company's
common stock at the average market price during the year.

                                      -34-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001
--------------------------------------------------------------------------------
 NOTE 1 - Summary of Significant Accounting Policies (cont.)
================================================================================

    Fair Value of Financial Instruments

Financial Accounting Standards Board Statement No. 107, "Disclosures About Fair
Value of Financial Instruments", requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet, for
which it is practicable to estimate that value. In cases where quoted market
prices are not available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement No. 107 excludes certain
financial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Company.
The following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments:

     Carrying Amounts Approximate Fair Values for the Following Instruments
          Cash and cash equivalents
          Interest-bearing deposits in banks
          Available for sale securities
          Non marketable equity securities
          Variable rate loans that reprice frequently where no
           significant change in credit risk has occurred
          Loans held for sale
          Cash surrender value of life insurance
          Accrued interest receivable
          Demand deposits Variable rate money market accounts
          Variable rate certificates of deposit
          Accrued interest payable Federal funds purchased

     Discounted Cash Flows

     Using interest rates currently being offered on instruments with similar
      terms and with similar credit quality:

          All loans except variable rate loans described above
          Fixed rate certificates of deposit
          Federal Home Loan Bank advances

     Quoted fees currently being charged for similar instruments

     Taking into account the remaining terms of the agreements and the
      counterparties' credit standing:

         Off-balance-sheet instruments
         -----------------------------

              Commitments to extend credit
              Credit card commitments
              Standby letters of credit

Since the majority of the Company's off-balance-sheet instruments consist of
nonfee-producing, variable rate commitments, the Company had determined these do
not have a distinguishable fair value.

                                      -35-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001
--------------------------------------------------------------------------------
 NOTE 1 - Summary of Significant Accounting Policies (cont.)
================================================================================

    Recent Statement of Financial Accounting Standards (SFAS) Pronouncements

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

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

SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections, rescinds SFAS No. 4, Reporting
Gains and Losses from Extinguishment of Debt, and amends SFAS No. 64,
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. It also
rescinds SFAS No. 44, Accounting for Intangible Assets of Motor Carriers. It
further amends SFAS No. 13, Accounting for Leases, to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions and amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. Most provisions of this
statement are effective for financial statements issued for fiscal years
beginning after May 15, 2002. Adoption of this statement is not expected to have
a material impact on the consolidated financial statements.

SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities,
addresses financial accounting and reporting for costs associated with exit or
disposal activities and requires that a liability for a cost associated with an
exit or disposal activity be recognized when the liability is incurred. The
provisions of this statement are effective for exit or disposal activities that
are initiated after December 31, 2002. Adoption of this statement is not
expected to have a material impact on the consolidated financial statements.

SFAS No. 147, Acquisitions of Certain Financial Institutions, removes
acquisitions of financial institutions from the scope of both SFAS No. 72,
Accounting for Certain Acquisitions of Banking or Thrift Institutions, and
requires that those transactions be accounted for in accordance with SFAS No.
141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. Thus, the requirement under SFAS No. 72 to recognize (and subsequently
amortize) any excess of fair value of liabilities assumed over the fair value of
tangible and identifiable intangible assets acquired as an unidentifiable
intangible asset no longer applies. The provisions of this statement are
effective on October 1, 2002, with earlier application permitted. Adoption of
this statement did not have a material impact on the consolidated financial
statements.

    Reclassification

Certain 2001 and 2000 amounts have been reclassified to conform with the 2002
presentation. The reclassifications have no effect on reported amounts of net
income or equity.

                                      -36-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
NOTE 2 - Cash and Due From Banks
================================================================================

The Company's subsidiary Bank is required to maintain vault cash and reserve
balances with Federal Reserve Banks based upon a percentage of deposits. These
requirements approximated $222,000 and $164,000 at December 31, 2002 and 2001,
respectively.

--------------------------------------------------------------------------------
NOTE 3 - Available for Sale Securities
================================================================================

Amortized costs and fair values of available for sale securities as of December
31, 2002 and 2001 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                  2002
                                               ------------------------------------------------------------------------------
                                                                    Gross Unrealized   Gross Unrealized
                                                 Amortized Cost          Gains              Losses           Fair Value
                                               -----------------  -----------------   -----------------  -----------------
<S>                                            <C>                <C>                 <C>                <C>
Other equity securities                        $        153,703   $         15,471    $         30,714   $        138,460
                                               =================  =================   =================  =================

                                                                                  2001
                                               ------------------------------------------------------------------------------
                                                                    Gross Unrealized   Gross Unrealized
                                                 Amortized Cost          Gains              Losses           Fair Value
                                               -----------------  -----------------   -----------------  -----------------
Other equity securities                        $        153,703   $             76    $         56,679   $         97,100
                                               =================  =================   =================  =================
</TABLE>


Following is a summary of the proceeds from sales of investment securities
available for sale, as well as gross gains and losses for the years ended
December 31:

<TABLE>
<CAPTION>
                                                                        2002                2001               2000
                                                                  -----------------   -----------------  ------------------
<S>                                                               <C>                 <C>                <C>
    Proceeds from sales of available for sale securities          $             -     $             -    $          8,086
                                                                  ================    ================   =================

    Gross loss on sales                                           $             -     $             -    $         (9,164)
                                                                  ----------------    ----------------   -----------------
                                                                  $             -     $             -    $         (9,164)
                                                                  ================    ================   =================

    Related income taxes (benefit)                                $             -     $             -    $         (3,666)
                                                                  ================    ================   =================
</TABLE>

There were no available for sale securities pledged as collateral at December
31, 2002 and 2001, respectively.

                                      -37-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
NOTE 4 - Loans
================================================================================

Major classification of loans are as follows at December 31:

                                                     2002            2001
                                                --------------  --------------
    Commercial                                  $  27,145,458   $  20,032,201
    Real estate
         Construction                               6,387,484       4,154,112
         Commercial                                25,831,597      19,403,802
         Residential                               15,943,637      12,188,459
    Installment and consumer                          838,788       1,255,240
                                                -------------   -------------
                                                   76,146,964      57,033,814
    Less:    Allowance for loan losses               (736,118)       (544,804)
             Loans held for sale                   (2,160,021)     (1,029,200)
                                                -------------   -------------
         Net Loans                              $  73,250,825   $  55,459,810
                                                =============   =============

Impaired loans of $59,712 and $0 at December 31, 2002 and 2001, respectively.
have been recognized in the consolidated financial statements. The average
recorded amount of impaired loans during 2002 and 2001 was $62,400 and $230,538,
respectively. There was no specific allowance for loan losses related to these
loans at December 31, 2002 and 2001, respectively. Interest income on impaired
loans of $6,430, $6,468, and $5,604 was recognized for cash payments received in
2002, 2001, and 2000, respectively.

Certain directors and executive officers of the Company, and their related
interests, had loans outstanding in the aggregate amounts of $2,253,607 and
$1,283,778 at December 31, 2002 and 2001, respectively. During 2002, $3,319,264
of new loans were made and repayments totaled $2,349,435. These loans were made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the same time for comparable transactions with other persons
and did not involve more than normal risks of collectibility or present other
unfavorable features.

--------------------------------------------------------------------------------
NOTE 5 -  Allowance for Loan Losses
================================================================================

The allowance for loan losses reflected in the accompanying consolidated
financial statements represents the allowance available to absorb loan losses.
An analysis of changes in the allowance is presented in the following tabulation
as of December 31:

<TABLE>
<CAPTION>
                                                       2002           2001         2000
                                                    ------------  ------------  ------------
<S>                                                 <C>           <C>           <C>
    BALANCE - Beginning of Year                     $  544,804    $   696,206   $  653,270
       Charge-offs                                     (70,684)      (328,479)     (24,154)
       Recoveries                                        1,998         44,077       24,590
       Provision charged to operations                 260,000        133,000       42,500
                                                    ----------    -----------   ----------
    BALANCE - End of Year                           $  736,118    $   544,804   $  696,206
                                                    ==========    ===========   ==========
</TABLE>

                                      -38-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
NOTE 6 - Premises and Equipment
================================================================================

Premises and equipment are stated at cost less accumulated depreciation at
December 31 and are summarized as follows:

                                                        2002            2001
                                                  -------------   -------------
    Land                                          $     232,200   $     232,200
    Building and leasehold improvements               2,300,964       2,176,944
    Furniture and equipment                           1,121,805       1,172,302
                                                  -------------   -------------
        Total                                         3,654,969       3,581,446
    Less: Accumulated depreciation                   (1,166,235)     (1,090,505)
                                                  -------------   -------------
        Net Premises and Equipment                $   2,488,734   $   2,490,941
                                                  =============   =============

Depreciation expense amounted to $168,986, $192,013, and $190,433 in 2002, 2001,
and 2000, respectively.

--------------------------------------------------------------------------------
NOTE 7 - Accrued Interest Receivable and Other Assets
================================================================================

A summary of accrued interest receivable and other assets at December 31 is as
follows:

                                                         2002          2001
                                                    -----------   -----------
   Accrued interest receivable                      $   321,561   $   336,070
   Federal Home Loan Bank stock                         230,800       161,300
   Deferred tax assets                                  452,066       502,443
   Prepaids expenses and other assets                   153,133        69,667
                                                    -----------   -----------
                                                    $ 1,157,560   $ 1,069,480
                                                    ===========   ===========

--------------------------------------------------------------------------------
NOTE 8 - Deposits
================================================================================

The aggregate amount of time deposits, each with a minimum denomination of
$100,000, was $10,010,986 and $7,953,083 at December 31, 2002 and 2001,
respectively.

At December 31, 2002, the scheduled maturities of time deposits are as follows:

    2003                                            $ 15,767,624
    2004                                               5,770,073
    2005                                               2,253,909
    2006                                                 763,769
    2007                                               2,597,460
                                                    ------------
                                                    $ 27,152,835
                                                    ============

                                      -39-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
NOTE 9 - Other Borrowings
================================================================================

Other borrowings consist of the following at December 31:

                                                           2002        2001
                                                      ------------  ----------
    Federal Home Loan Bank advances                   $ 4,500,000   $       0
                                                      ============  ==========

The subsidiary Bank has a master contract agreement with the Federal Home Loan
Bank (FHLB) which provides for borrowing up to the maximum of 60% of the book
value of the Bank's first lien 1-4 family real estate loans, approximately
$5,089,000, at December 31, 2002. FHLB provides both fixed and floating rate
advances. Floating rates are tied to short-term market rates of interest, such
as LIBOR, Federal funds or Treasury Bill rates. Fixed rate advances are priced
in reference to market rates of interest at the time of the advance, namely the
rates that FHLB pays to borrowers at various maturities. Advances with call
provisions permit the FHLB to request payment beginning on the call date and
quarterly thereafter. Prepayments may be subject to penalties.

Various advances were obtained with total outstanding balances as stated above,
with applicable interest rates ranging from 3.61% to 3.99%. Interest is payable
monthly with principal payment due at maturity. The advances are collateralized
by a security agreement pledging a portion of the subsidiary Bank's real estate
mortgages with a carrying value of approximately $8,481,000 and $0 at December
31, 2002 and 2001, respectively.

At December 31, 2002, the required contractual future principal payments on the
Other Borrowings are due in 2004.

--------------------------------------------------------------------------------
NOTE 10 - Stockholders' Equity
================================================================================

The RidgeStone Financial Services, Inc. 1996 Stock Option Plan as amended (the
"Plan") provides for the granting of options to purchase up to 525,000 shares of
common stock to key officers and employees of the Company. Options granted to
date under the Plan have been granted at the fair market value of the common
stock on the date of the grant. Options granted under the Plan may be exercised
33.33% per year, become fully vested after three years following the date of
grant, and must be exercised within a ten year period.

The fair value of the awards is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions in 2002, 2001, and 2000, respectively: zero percent dividend yield,
expected volatility of 22.0, 22.8, and 24.3 percent, risk-free interest rate of
4.00, 5.56, and 6.13 percent, and expected lives that coincide with the option
vesting period of 10 years.

                                      -40-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001
--------------------------------------------------------------------------------
NOTE 10 - Stockholders' Equity (cont.)
================================================================================

Activity is summarized in the following table:

<TABLE>
<CAPTION>
                                                   2002                        2001                        2000
                                         -----------------------------------------------------------------------------------
                                                          Weighted                    Weighted                     Weighted
                                                           Average                     Average                     Average
                                           Shares           Price        Shares         Price        Shares         Price
                                         -----------------------------------------------------------------------------------
<S>                                            <C>       <C>               <C>       <C>               <C>        <C>
OUTSTANDING - Beginning of Year                370,092   $   10.23         286,475   $   11.77         213,037    $   13.78
    Options
      Granted                                   47,150        7.10          84,500        5.00          74,025         6.00
      Exercised                                 (1,167)       5.57               -           -               -            -
      Cancelled or forfeited                    (3,893)       8.07            (883)       9.20            (587)       13.99
                                         -------------                  ----------                  ----------
         Net Change                             42,090                      83,617                      73,438
OUTSTANDING - End of Year                      412,182        9.91         370,092       10.23         286,475        11.77
                                         =============                  ==========                  ==========

Exercisable at year end                        286,574                     215,600                     153,842

Weighted average fair value of:
    Options granted                         $     3.01                   $    2.44                   $    2.73

Available for future grant at year end         111,214                     154,471                     238,088

The following table summarizes information about Plan awards outstanding at
December 31, 2002:

                                                 Options Outstanding                          Options Exercisable
                                 -------------------------------------------------------  --------------------------------
                                                                             Weighted                           Weighted
                                                   Weighted Average           Average                            Average
                                    Number            Remaining            Exercisable         Number           Exercise
        Exercise Price            Outstanding      Contractual Life           Price         Exercisable          Price
------------------------------   -------------    ------------------      -------------    --------------    -------------
                       $ 11.19         49,640         3.50 years          $     11.19           49,640       $     11.19
                         13.92         49,692         4.33 years                13.92           49,692             13.92
                         18.50         49,175         5.33 years                18.50           49,175             18.50
                         11.00         62,500         6.50 years                11.00           62,500             11.00
                          6.00         72,150         7.33 years                 6.00           48,100              6.00
                          5.00         82,400         8.33 years                 5.00           27,467              5.00
                          7.10         46,625         9.33 years                 7.10                -                 -
                                 -------------                                               ------------
                                      412,182                                                  286,574
                                 =============                                               ============
</TABLE>

                                      -41-
<PAGE>
               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
NOTE 10 - Stockholders' Equity (cont.)
================================================================================

A reconciliation of the numerators and the denominators of earnings per share
and earnings per share assuming dilution are:

<TABLE>
<CAPTION>
                                                                                                   Per Share
                                                                    Income             Shares        Amount
                                                                  ------------     -------------   ---------

    2002
<S>                                                               <C>                    <C>        <C>
         Earnings                                                 $    501,434           876,492    $    0.57
                                                                                                   ==========
         Effect of options                                                                45,611
                                                                                   -------------
         Earnings - assuming dilution                             $    501,434           922,103    $    0.54
                                                                  ============     =============   ==========
    2001
         Earnings                                                 $    247,711           876,492    $    0.28
                                                                                                   ==========
         Effect of options                                                                 3,121
                                                                                   -------------
         Earnings - assuming dilution                             $    247,711           879,613    $    0.28
                                                                  ============     =============   ==========
    2000
         Earnings                                                 $    160,661           876,492    $    0.18
                                                                                                   ==========
         Effect of options                                                                     -
                                                                                   -------------
         Earnings - assuming dilution                             $    160,661           876,492    $    0.18
                                                                  ============     =============   ==========
</TABLE>

--------------------------------------------------------------------------------
NOTE 11 - Income Taxes
================================================================================

The provision for income taxes included in the accompanying consolidated
financial statements consists of the following components at December 31:
<TABLE>
<CAPTION>
                                                   2002            2001           2000
                                               ------------    -----------    -----------
<S>                                            <C>             <C>            <C>
    Current Taxes
         Federal                               $    166,595    $         -    $         -
         State                                       22,884              -              -
                                               ------------    -----------    -----------
                                                    189,479              -              -
                                               ------------    -----------    -----------
    Deferred Income Taxes
         Federal                                     50,450         78,607         41,770
         State                                        7,939         12,369          6,573
                                               ------------    -----------    -----------
                                                     58,389         90,976         48,343
                                               ------------    -----------    -----------
         Total Provision for Income Taxes      $    247,868    $    90,976    $    48,343
                                               ============    ===========    ===========
</TABLE>

                                      -42-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001
--------------------------------------------------------------------------------
NOTE 11 - Income Taxes (cont.)
================================================================================

The net deferred tax assets in the accompanying consolidated balance sheets
include the following amounts of deferred tax assets and liabilities at December
31:

                                                         2002          2001
                                                     -----------   -----------
    Deferred Tax Assets
         Allowance for loan losses                   $   235,732   $   136,194
         Deferred compensation                           255,287       188,808
         Salary continuation                              22,526        16,095
         Net operating loss carryforward                      -        169,920
         Other                                             8,887         6,926
    Deferred Tax Liabilities
         Depreciation                                    (42,299)       (7,488)
         Federal Home Loan Bank Stock dividends           (7,673)            -
         Prepaid expenses                                (20,394)            -
                                                     -----------   -----------
                                                     $   452,066   $   510,455
                                                     ===========   ===========

Management believes it is more likely than not, that the gross deferred tax
assets will be fully realized. Therefore, no valuation allowance has been
recorded as of December 31, 2002 and 2001.

A reconciliation of statutory federal income taxes based upon income before
taxes to the provision for federal and state income taxes for the period, as
summarized previously, is as follows:

<TABLE>
<CAPTION>
                                                  2002                         2001                         2000
                                     -------------------------------------------------------------------------------------
                                                     % of Pretax                  % of Pretax                  % of Pretax
                                         Amount        Income         Amount        Income         Amount        Income
                                     -------------------------------------------------------------------------------------
<S>                                  <C>                 <C>      <C>                 <C>      <C>                 <C>
    Reconciliation of statutory to
      effective rates
      Federal income taxes at
        statutory rate               $      254,763      34.00%   $      115,154      34.00%   $       71,061      34.00%
          Adjustments for
             Increases in taxes
               resulting from state
               income taxes, net of
               federal tax benefit           37,057       4.95                 -         -                  -         -
             Increase in cash
               surrender value of
               life insurance               (45,476)     (6.07)          (37,948)    (11.20)          (36,790)        -
             Other - net                      1,524       0.20            13,770       4.07            14,072         -
                                     --------------  ---------    --------------  ---------    --------------  ---------
    Effective Income Taxes -
      Operations                     $      247,868      33.08%   $       90,976      26.87%   $       48,343      34.00%
                                     ==============  =========    ==============  =========    ==============  =========

</TABLE>

--------------------------------------------------------------------------------
NOTE 12 - Profit-Sharing Plan
================================================================================

The Company has a trusteed 401(k) plan. The Company contributed $45,326,
$24,156, and $8,077 in 2002, 2001, and 2000, respectively.


                                      -43-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
NOTE 13 - Salary Continuation Agreement
================================================================================

The Company has entered into salary continuation agreements with various
executive officers. The agreements provide for the payment of specified amounts
upon the employee's retirement or death which is being accrued over the
anticipated remaining period of employment. Amounts accrued and included within
other liabilities were $648,760 and $479,817 as of December 31, 2002 and 2001,
respectively. Expenses recognized for future benefits under these agreements
totaled $185,287, $167,653, and $155,555 in 2002, 2001, and 2000, respectively.

Although not part of the agreement, the Company purchased paid-up life insurance
on the officers which could provide funding for the payment of benefits.
Included in other assets is $2,252,516 and $2,135,105 of related cash surrender
value as of December 31, 2002 and 2001, respectively.

--------------------------------------------------------------------------------
NOTE 14 - Facilities Lease
================================================================================

On May 31, 2000, the Company exercised the option to purchase the building it
had been leasing and therefore, there was no lease expense in 2002 or 2001.
Lease expense for the year ended December 31, 2000 was $94,956.

--------------------------------------------------------------------------------
NOTE 15 - Commitments and Contingencies
================================================================================

In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the consolidated
financial statements.

The Company is party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit, financial guarantees
and standby letters of credit. They involve, to varying degrees, elements of
credit risk in excess of amounts recognized on the consolidated balance sheets.

The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount of
those instruments. The Company uses the same credit policies in making
commitments and issuing letters of credit as they do for on-balance-sheet
instruments.

A summary of the contract or notional amount of the Company's exposure to
off-balance-sheet risk as of December 31, 2002 and 2001 is as follows:

<TABLE>
<CAPTION>
                                                                                          2002           2001
                                                                                      ------------   ------------
Financial instruments whose contract amounts represent credit risk:
<S>                                                                                   <C>            <C>
         Commitments to extend credit                                                 $ 18,173,438   $ 17,098,705
         Credit card commitments                                                      $  1,139,875   $  1,074,593
         Standby letters of credit                                                    $     87,558   $     35,600
</TABLE>


                                      -44-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
NOTE 15 - Commitments and Contingencies (cont.)
================================================================================

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Standby letters of credit are conditional
commitments issued to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private borrowing
arrangements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
The Company evaluates each customer's credit worthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Company upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts receivable,
inventory, property and equipment, and income-producing commercial properties.
Credit card commitments are unsecured.

As of December 31, 2002, the Company and the subsidiary Bank do not engage in
the use of interest rate swaps, futures or option contracts.

--------------------------------------------------------------------------------
NOTE 16 - Concentration of Credit Risk
================================================================================

Practically all of the subsidiary Bank's loans, commitments, and commercial and
standby letters of credit have been granted to customers in the subsidiary
Bank's market area. Although the subsidiary Bank has a diversified loan
portfolio, the ability of their debtors to honor their contracts is dependent on
the economic conditions of the counties surrounding the subsidiary Bank. The
concentration of credit by type of loan is set forth in Note 4.

--------------------------------------------------------------------------------
NOTE 17 - Retained Earnings
================================================================================

The principal source of income and funds of the Company will be dividends from
the subsidiary Bank. Under Wisconsin law, the subsidiary Bank will be restricted
as to the maximum amount of dividends it may pay on its common stock. A
Wisconsin bank may not pay dividends except out of net earnings. A bank's
ability to pay dividends may also be restricted in the event that losses in
excess of undivided profits have been charged against surplus. Unless exempted
by the Wisconsin Department of Financial Institutions, Division of Banking, a
state bank may not pay or declare dividends on capital stock in excess of 50% of
its net earnings until its surplus fund is fully restored to an amount equal to
100% of the bank's capital stock. Federal regulators have authority to prohibit
a bank from engaging in any action deemed by them to constitute an unsafe or
unsound practice, including payment of dividends.

Federal Reserve Board policy provides that a bank holding company should not pay
dividends unless (i) the dividends can be fully funded out of net income from
the Company's net earnings over the prior year and (ii) the prospective rate of
earnings retention appears consistent with the Company's (and its subsidiary)
capital needs, asset quality and overall financial conditions.

                                      -45-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
NOTE 18 - Regulatory Capital Requirements
================================================================================

The Company (on a consolidated basis) and the subsidiary Bank are subject to
various regulatory capital requirements administered by the federal and state
banking agencies. Failure to meet minimum capital requirements can initiate
certain mandatory, and possibly additional discretionary, actions by regulators
that, if undertaken, could have a direct material effect on the Company's and
the subsidiary Bank's financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Company and the
subsidiary Bank must meet specific capital guidelines that involve quantitative
measures of their assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk-weightings, and other factors. Prompt corrective action
provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy
requires the Company and the subsidiary Bank to maintain minimum amounts and
ratios (set forth in the table that follows) of total and Tier 1 capital (as
defined in the regulations) to risk-weighted assets (as defined) and Tier 1
capital (as defined) to average assets (as defined). Management believes that as
of December 31, 2002 and 2001 the Company and the subsidiary Bank met all
capital adequacy requirements to which they are subject.

As of December 31, 2002, the most recent notification from the regulatory
agencies categorized the subsidiary Bank as well-capitalized under the
regulatory framework for prompt corrective action. To be categorized as
well-capitalized, an institution must maintain minimum total risk-based, Tier 1
risk-based, and Tier 1 leverage ratios as set forth in the following table.
There are no conditions or events since these notifications that management
believes have changed the institution's category.

Listed below is a comparison of the Company's and the subsidiary Bank's actual
capital amounts with the minimum requirements for well capitalized and
adequately capitalized banks, as defined by the federal regulatory agencies'
Prompt Corrective Action Rules, as of December 31, 2002 and 2001.

<TABLE>
<CAPTION>
                                                                                                  To Be Well Capitalized
                                                                      For Capital Adequacy       Under Prompt Corrective
                                                 Actual                     Purposes                Action Provisions
                                       -----------------------------------------------------------------------------------
                                           Amount         Ratio        Amount         Ratio        Amount         Ratio
                                       -----------------------------------------------------------------------------------
<S>                                    <C>                  <C>    <C>                   <C>   <C>                 <C>
As of December 31, 2002
   Total capital (to risk weighted
      assets)
      RidgeStone Financial Services,
        Inc                            $     8,367,515      11.0%  $     6,061,205       8.0%        N/A           N/A
      RidgeStone Bank                  $     7,992,691      10.6%  $     6,044,781       8.0%  $     7,555,976      10.0%
   Tier 1 capital (to risk weighted
      assets)
      RidgeStone Financial Services,
        Inc                            $     7,631,397      10.1%  $     3,030,603       4.0%        N/A           N/A
      RidgeStone Bank                  $     7,256,573       9.6%  $     3,022,390       4.0%  $     4,533,585       6.0%
   Tier 1 capital (to average assets)
      RidgeStone Financial Services,
        Inc                            $     7,631,397       9.2%  $     3,315,520       4.0%        N/A           N/A
      RidgeStone Bank                  $     7,256,573       8.8%  $     3,302,280       4.0%  $     4,127,850       5.0%
As of December 31, 2001
   Total capital (to risk weighted
      assets)
      RidgeStone Financial Services,
        Inc                            $     7,469,625      12.6%  $     4,753,785       8.0%        N/A           N/A
      RidgeStone Bank                  $     7,035,487      11.9%  $     4,741,435       8.0%  $     5,926,723      10.0%
   Tier 1 capital (to risk weighted
      assets)
      RidgeStone Financial Services,
        Inc                            $     6,924,821      11.7%  $     2,376,893       4.0%        N/A           N/A
      RidgeStone Bank                  $     6,490,683      11.0%  $     2,370,717       4.0%  $     3,556,076       6.0%
   Tier 1 capital (to average assets)
      RidgeStone Financial Services,
        Inc                            $     6,924,821       9.2%  $     3,015,600       4.0%        N/A           N/A
      RidgeStone Bank                  $     6,490,683       8.6%  $     3,009,600       4.0%  $     3,762,000       5.0%

                                      -46-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
NOTE 19 - Fair Value of Financial Instruments
================================================================================
</TABLE>

The estimated fair values of financial instruments at December 31, 2002 and 2001
are as follows:
<TABLE>
<CAPTION>
                                                               2002                                   2001
                                               -------------------------------------  -----------------------------------
                                                                     Estimated Fair                       Estimated Fair
                                                Carrying Amount          Value         Carrying Amount         Value
                                               -----------------  -----------------   -----------------  -----------------
<S>                                            <C>                <C>                 <C>                <C>
FINANCIAL ASSETS
    Cash and cash equivalents                  $      4,431,478   $      4,431,478    $      9,601,962   $      9,601,962
                                               =================  =================   =================  =================
    Interest bearing deposits in banks         $         87,427   $         87,427    $         84,509   $         84,509
                                               =================  =================   =================  =================
    Marketable securities                      $        138,460   $        138,460    $         97,100   $         97,100
                                               =================  =================   =================  =================
    Non marketable equity securities           $        230,800   $        230,800    $        161,300   $        161,300
                                               =================  =================   =================  =================
    Loans, net                                 $     73,250,825   $     73,035,436    $     55,459,810   $     56,022,467
                                               =================  =================   =================  =================
    Loans held for sale                        $      2,160,021   $      2,160,021    $      1,029,200   $      1,029,200
                                               =================  =================   =================  =================
    Cash surrender of life insurance policies  $      2,252,516   $      2,252,516    $      2,135,105   $      2,135,105
                                               =================  =================   =================  =================
    Accrued interest receivable                $        321,561   $        321,561    $        336,070   $        336,070
                                               =================  =================   =================  =================
FINANCIAL LIABILITIES

    Deposits                                   $     71,185,940   $     71,439,883    $     63,745,020   $     63,917,373
                                               =================  =================   =================  =================
    Federal funds purchased                    $      1,112,000   $      1,112,000    $             -    $             -
                                               =================  =================   =================  =================
    Other borrowings                           $      4,500,000   $      4,605,852    $             -    $             -
                                               =================  =================   =================  =================
    Accrued interest payable                   $        421,005   $        421,005    $        459,359   $        459,359
                                               =================  =================   =================  =================
</TABLE>

The estimated fair value of fee income on letters of credit at December 31, 2002
and 2001 is insignificant. Loan commitments on which the committed interest rate
is less than the current market rate are also insignificant at December 31, 2002
and 2001.

The subsidiary Bank assumes interest rate risk (the risk that general interest
rate levels will change) as a result of its normal operations. As a result, fair
values of the subsidiary Bank's financial instruments will change when interest
rate levels change and that change may be either favorable or unfavorable to the
subsidiary Bank. Management attempts to match maturities of assets and
liabilities to the extent believed necessary to minimize interest rate risk.
However, borrowers with fixed rate obligations are less likely to prepay in a
rising rate environment and more likely to repay in a falling rate environment.
Conversely, depositors who are receiving fixed rates are more likely to withdraw
funds before maturity in a rising rate environment and less likely to do so in a
falling rate environment. Management monitors rates and maturities of assets and
liabilities and attempts to minimize interest rate risk by adjusting terms of
new loans and deposits and by investing in securities with terms that mitigate
the subsidiary Bank's overall interest rate risk.

                                      -47-
<PAGE>
               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
NOTE 20 - RidgeStone Financial Services, Inc (Parent Company Only) Financial
          Information
================================================================================

<TABLE>
                            CONDENSED BALANCE SHEETS
<CAPTION>
                                                                                            December 31,
                                                                                    --------------------------
                                                                                         2002          2001
                                                                                    --------------------------
<S>                                                                                 <C>         <C>
ASSETS
   Cash and due from banks                                                          $    87,061 $     123,674
   Interest bearing deposits in banks                                                    87,427        84,509
   Available for sale securities - stated at fair value                                 138,460        97,100
   Investment in subsidiary                                                           7,256,573     6,730,683
   Accrued interest receivable and other assets                                          31,949        15,649
                                                                                    ----------- -------------

          TOTAL ASSETS                                                              $ 7,601,470 $   7,051,615
                                                                                    =========== =============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES -
   Accrued interest payable and other liabilities                                   $       559 $          -
                                                                                    ----------- ------------
STOCKHOLDERS' EQUITY
   Preferred stock, no par value, 2,000,000 shares authorized, no
       shares issued                                                                         -             -
   Common stock, no par value,
       10,000,000 shares authorized, 877,659 and
       876,492 shares issued and outstanding in 2002 and 2001,
       respectively                                                                   8,423,619     8,417,117
   Retained earnings                                                                   (807,465)   (1,308,899)
                                                                                    ----------- -------------
                                                                                      7,616,154     7,108,218
   Accumulated other comprehensive income (loss)                                        (15,243)      (56,603)
                                                                                    ----------- -------------
       Total Stockholders' Equity                                                     7,600,911     7,051,615
                                                                                    ----------- -------------

          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $ 7,601,470 $   7,051,615
                                                                                    =========== =============
</TABLE>


                                      -48-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
NOTE 20 - RidgeStone Financial Services, Inc (Parent Company Only) Financial
          Information (cont.)
================================================================================

<TABLE>
<CAPTION>
                                         CONDENSED STATEMENTS OF INCOME

                                                                               Years Ended December 31,
                                                                      ----------------------------------------

                                                                         2002          2001          2000
                                                                      -----------  ------------ ------------
INCOME
<S>                                                                   <C>          <C>          <C>
   Interest on deposits in banks                                      $     2,917  $      3,476 $      7,465
   Securities losses                                                           -             -        (9,164)
   Other income                                                             4,500         9,964        4,500
                                                                      -----------  ------------ ------------
       Total Income                                                         7,417        13,440        2,801
                                                                      -----------  ------------ ------------
EXPENSES
   Salaries                                                                 4,150             -            -
   Professional fees                                                       28,923        23,034       24,517
   Other expenses                                                          15,100           164        5,483
                                                                      -----------  ------------ ------------
       Total Expenses                                                      48,173        23,198       30,000
                                                                      -----------  ------------ ------------
Income before income taxes and equity in
   undistributed earnings of subsidiary                                   (40,756)       (9,758)     (27,199)
   Less:  Applicable income taxes (benefit)                               (16,300)       (3,900)      (9,249)
                                                                      -----------  ------------ ------------
Income before equity in undistributed earnings of
   subsidiary                                                             (24,456)       (5,858)     (17,950)
Equity in undistributed earnings of subsidiaries                          525,890       253,569      178,611
                                                                      -----------  ------------ ------------
       NET INCOME                                                     $   501,434  $    247,711 $    160,661
                                                                      ===========  ============ ============
</TABLE>

                                      -49-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
NOTE 20 - RidgeStone Financial Services, Inc (Parent Company Only) Financial
          Information (cont.)
================================================================================

                       CONDENSED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                       -------------------------------------
                                                                              2002        2001          2000
                                                                       ----------- -----------  ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                    <C>         <C>          <C>
    Net Income                                                         $   501,434 $   247,711  $    160,661
    Adjustments to reconcile net income to net cash
      flows from operating activities
        Loss on sale of investment securities                                    -           -         9,164
        Equity in undistributed income of subsidiary                      (525,890)   (253,569)     (178,611)

        Net change in
           Accrued interest receivable and other assets                    (16,300)     106,100     (109,249)
           Accrued interest payable and other liabilities                      559           -             -
                                                                       -----------  -----------  -----------
        Net Cash Flows from Operating Activities                           (40,197)     100,242     (118,035)
                                                                       -----------  -----------  -----------

CASH FLOWS FROM INVESTING ACTIVITIES
    Net change in interest bearing deposits in banks                        (2,918)      31,525       142,131
    Activity in available for sale securities
        Sales                                                                    -            -         8,086
        Purchases                                                                -      (35,474)      (13,541)
                                                                       -----------  -----------  ------------
        Net Cash Flows from Investing Activities                            (2,918)      (3,949)      136,676
                                                                       -----------  -----------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES -
    Common stock issued                                                      6,502            -             -
                                                                       -----------  -----------  ------------

           Net Change in Cash and Cash Equivalents                         (36,613)      96,293        18,641

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                              123,674       27,381         8,740
                                                                       -----------  -----------  ------------

    CASH AND CASH EQUIVALENTS - END OF YEAR                            $    87,061  $   123,674  $     27,381
                                                                       ===========  ===========  ============

</TABLE>


                                      -50-
<PAGE>

Item 8.  Changes In and Disagreements With Accountants on Accounting and
          Financial Disclosure


Following recent regulatory changes resulting from the Sarbanes-Oxley Act of
2002, the Company and its independent auditors, Virchow, Krause & Company, LLP
("Virchow"), determined that Virchow would not be able to continue to provide
the internal audit outsourcing function previously provided by Virchow while
acting as the Company's independent auditors. As a result, on March 18, 2003,
Virchow informed the Audit Committee of the Board of Directors of the Company
that it would decline to stand for re-appointment as the Company's independent
auditors, and the Company engaged Wipfli Ulrich Bertelson LLP as its new
independent accountants, to act as the principal accountants in auditing the
Company's financial statements for fiscal 2003. The information required by Item
8 is contained in the section entitled "Item 4. Changes in Registrant's
Certifying Accountant" on the Company's Current Report on Form 8-K filed on
March 20, 2003, and is incorporated herein by reference.


Part III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
          Compliance With Section 16(a) of the Exchange Act

The information required by this Item is hereby incorporated by reference to the
information under the captions entitled "Election of Directors," "Executive
Officers" and "Miscellaneous - Section 16(a) Beneficial Ownership Reporting
Compliance" set forth in the Company's definitive Proxy Statement for its 2003
Annual Meeting of Shareholders (the "Proxy Statement").

Item 10. Executive Compensation

The information required by this Item is hereby incorporated by reference to the
information under the captions entitled "Board of Directors - Director
Compensation" and "Executive Compensation" set forth in the Proxy Statement.

Iten 11. Security Ownership of Certain Beneficial Owners and Management and
          Related Stockholder Matters

The information with respect to Item 403 of Regulation S-B is hereby
incorporated by reference to the information under the caption entitled
"Principal Shareholders" set forth in the Proxy Statement.

The information with respect to Item 201(d) of Regulation S-B as of December 31,
2002, is as follows:

<TABLE>
<CAPTION>
                      Equity Compensation Plan Information
                                                                                             Number of securities
                                                                                            remaining available for
                                 Number of securities to be   Weighted-average exercise      future issuance under
                                  issued upon exercise of        price of outstanding      equity compensation plans
                                    outstanding options,        options, warrants and        (excluding securities
Plan category                       warrants and rights                 rights             reflected in column (a))
-------------                       -------------------                 ------             ------------------------
                                            (a)                          (b)                          (c)
<S>                                       <C>                           <C>                         <C>

Equity compensation
     plans approved by
     security holders                     412,182                       $9.91                       111,214
Equity compensation
     plans not approved
     by security holders                    N/A                          N/A                          N/A
Total                                     412,182                       $9.91                       111,214
</TABLE>


                                      -51-
<PAGE>

Item 12. Certain Relationships and Related Transactions

The information required by this Item is hereby incorporated by reference to the
information under the caption entitled "Certain Transactions" set forth in the
Proxy Statement.

Item 13. Exhibits and Reports on Form 8-K

          (a)  Exhibits

          Reference is made to the separate exhibit index contained on page E-1
          hereof.

          (b)  Reports on Form 8-K

          No reports on Form 8-K were filed by the Company during the quarter
          ended December 31, 2002.

Item 14.  Controls and Procedures

(a) Evaluation of disclosure controls and procedures. In accordance with Rule
13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), within 90
days prior to the filing date of this Annual Report on Form 10-KSB, an
evaluation was carried out under the supervision and with the participation of
Company management, including its Chairman of the Board, President and Chief
Executive Officer and its Senior Vice President and Treasurer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act
of 1934). Based upon their evaluation of these disclosure controls and
procedures, the Chairman of the Board, President and Chief Executive Officer and
the Senior Vice President and Treasurer concluded that the disclosure controls
and procedures were effective as of the date of such evaluation to ensure that
material information relating to the Company, including its consolidated
subsidiaries, was made known to them by others within those entities,
particularly during the period in which this Annual Report on Form 10-KSB was
being prepared.

(b) Changes in internal controls. There were not any significant changes in the
Company's internal controls or other factors that could significantly affect
these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

                                      -52-
<PAGE>

                                   SIGNATURES

                  In accordance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 20, 2003.

                                        RIDGESTONE FINANCIAL SERVICES, INC.


                                        By:  /s/ Paul E. Menzel
                                             -----------------------------------
                                             Paul E. Menzel
                                             Chairman of the Board, President
                                             and Chief Executive Officer

     In accordance with the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on March 20, 2003:


              Signatures                             Title
              ----------                             -----
/s/ Paul E. Menzel                       Chairman of the Board, President, Chief
------------------------------           Executive Officer and Director
Paul E. Menzel                           (Principal Executive Officer)

/s/ William R. Hayes                     Sr. Vice President, Treasurer and
------------------------------           Director (Principal Financial and
William R. Hayes                         Accounting Officer)

/s/ Christine V. Lake                    Executive Vice President,
------------------------------           Secretary and Director
Christine V. Lake

/s/ Bernard E. Adee                      Director
------------------------------
Bernard E. Adee

/s/ John F. Goodnow                      Director
------------------------------
John F. Goodnow

/s/ Gregory J. Hoesly                    Director
------------------------------
Gregory J. Hoesly

/s/ John E. Horning                      Director
------------------------------
John E. Horning

/s/ Charles G. Niebler                   Director
------------------------------
Charles G. Niebler

/s/ James E. Renner                      Director
------------------------------
James E. Renner

                                         Director
------------------------------
Richard A. Streff

                                         Director
------------------------------
William J. Tetzlaff

                                      -53-
<PAGE>

                                 CERTIFICATIONS

I, Paul E. Menzel, certify that:

1. I have reviewed this annual report on Form 10-KSB of Ridgestone Financial
Services, Inc.;

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

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

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

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

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

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

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

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

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

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

                                      Date:  March 20, 2003


                                      /s/ Paul E. Menzel
                                      ------------------------------------------
                                      Paul E. Menzel
                                      Chairman of the Board, President and Chief
                                      Executive Officer


                                      -54-
<PAGE>

I, William R. Hayes, certify that:

1. I have reviewed this annual report on Form 10-KSB of Ridgestone Financial
Services, Inc.;

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

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

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

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

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

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

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

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

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

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

                                           Date:  March 20, 2003


                                           /s/ William R. Hayes
                                           -------------------------------------
                                           William R. Hayes
                                           Senior Vice President and Treasurer


                                      -55-
<PAGE>

                                INDEX TO EXHIBITS
                                -----------------

Exhibit No.                                  Exhibit Description
-----------                                  -------------------

  3.1          Articles of Incorporation of Ridgestone Financial Services, Inc.,
               as amended. [Incorporated by reference to Exhibit 4.4 to
               Ridgestone Financial Services, Inc.'s Registration Statement on
               Form S-8 (Registration No. 333-52323)]

  3.2          Amendment to By-Laws of RidgeStone Financial Services, Inc., as
               amended.

  3.3          By-Laws of Ridgestone Financial Services, Inc., as amended.

*10.1          Ridgestone Financial Services, Inc. 1996 Stock Option Plan, as
               amended. [Incorporated by reference to Exhibit 4.1 to Ridgestone
               Financial Services, Inc.'s Registration Statement on Form S-8
               (Registration No. 333-52323)]

*10.2          Form of Stock Option Agreement used in conjunction with the
               Ridgestone Financial Services, Inc. 1996 Stock Option Plan, as
               amended. [Incorporated by reference to Exhibit 4.2 to Ridgestone
               Financial Services, Inc.'s Registration Statement on Form S-8
               (Registration No. 333-52323)]

*10.3          Employment Agreement, dated as of December 31, 1996, between
               Ridgestone Financial Services, Inc. and Paul E. Menzel.
               [Incorporated by reference to Exhibit 10.6 to Ridgestone
               Financial Services, Inc.'s Annual Report on Form 10-KSB for the
               fiscal year ended December 31, 1996 (File No. 0-27984)]

*10.4          First Amendment to Employment Agreement, dated as of December 31,
               1997, between Ridgestone Financial Services, Inc. and Paul E.
               Menzel. [Incorporated by reference to Exhibit 10.8 to Ridgestone
               Financial Services, Inc.'s Annual Report on Form 10-KSB for the
               fiscal year ended December 31, 1997 (File No. 0-27984)]

*10.5          Employment Agreement, dated as of December 31, 1996, between
               Ridgestone Financial Services, Inc. and William R. Hayes.
               [Incorporated by reference to Exhibit 10.7 to Ridgestone
               Financial Services, Inc.'s Annual Report on Form 10-KSB for the
               fiscal year ended December 31, 1996 (File No. 0-27984)]

*10.6          First Amendment to Employment Agreement, dated as of December 31,
               1997, between Ridgestone Financial Services, Inc. and William R.
               Hayes. [Incorporated by reference to Exhibit 10.10 to Ridgestone
               Financial Services, Inc.'s Annual Report on Form 10-KSB for the
               fiscal year ended December 31, 1997 (File No. 0-27984)]

*10.7          Employment Agreement, dated as of December 31, 1996, between
               Ridgestone Financial Services, Inc. and Christine V. Lake.
               [Incorporated by reference to Exhibit 10.8 to Ridgestone
               Financial Services, Inc.'s Annual Report on Form 10-KSB for the
               fiscal year ended December 31, 1996 (File No. 0-27984)]

*10.8          First Amendment to Employment Agreement, dated as of December 31,
               1997, between Ridgestone Financial Services, Inc. and Christine
               V. Lake. [Incorporated by reference to Exhibit 10.12 to
               Ridgestone Financial Services, Inc.'s Annual Report on Form
               10-KSB for the fiscal year ended December 31, 1997 (File No.
               0-27984)]



                                      -56-
<PAGE>

                                INDEX TO EXHIBITS
                                -----------------

Exhibit No.                                  Exhibit Description
-----------                                  -------------------

*10.9          Salary Continuation Agreement, dated October 20, 1998, by and
               between Ridgestone Bank and Paul E. Menzel. [Incorporated by
               reference to Exhibit 10.1 to Ridgestone Financial Services,
               Inc.'s Quarterly Report on Form 10-QSB for the quarter ended
               September 30, 1998 (File No. 0-27984)]

*10.10         Split Dollar Agreement, dated October 20, 1998, by and between
               Ridgestone Bank and Paul E. Menzel. [Incorporated by reference to
               Exhibit 10.2 to Ridgestone Financial Services, Inc.'s Quarterly
               Report on Form 10-QSB for the quarter ended September 30, 1998
               (File No. 0-27984)]

*10.11         Split Dollar Agreement, dated October 20, 1998, by and between
               Ridgestone Bank and Paul E. Menzel. [Incorporated by reference to
               Exhibit 10.3 to Ridgestone Financial Services, Inc.'s Quarterly
               Report on Form 10-QSB for the quarter ended September 30, 1998
               (File No. 0-27984)]

*10.12         Form of Executive Incentive Retirement Agreement, dated October
               20, 1998, by and between Ridgestone Bank and each of Christine V.
               Lake and William R. Hayes. [Incorporated by reference to Exhibit
               10.4 to Ridgestone Financial Services, Inc.'s Quarterly Report on
               Form 10-QSB for the quarter ended September 30, 1998 (File No.
               0-27984)]

*10.13         Form of Split Dollar Agreement, dated October 20, 1998, by and
               between Ridgestone Bank and each of Christine V. Lake and William
               R. Hayes. [Incorporated by reference to Exhibit 10.5 to
               Ridgestone Financial Services, Inc.'s Quarterly Report on Form
               10-QSB for the quarter ended September 30, 1998 (File No.
               0-27984)]

*10.14         First Amendment to Ridgestone Bank Incentive Retirement
               Agreement, dated April 24, 2002, by and between Ridgestone Bank
               and Christine V. Lake. [Incorporated by reference to Exhibit 10
               to Ridgestone Financial Services, Inc.'s Quarterly Report on Form
               10-QSB for the quarter ended June 30, 2002 (File No. 0-27984)]

*10.15         Employment Agreement, dated as of January 1, 2003, by and between
               Ridgestone Bank and William R. Hayes.

21             Subsidiaries of Ridgestone Financial Services, Inc. [Incorporated
               by reference to Exhibit 21 to Ridgestone Financial Services,
               Inc.'s Annual Report on Form 10-KSB for the year ended December
               31, 2001 (File No. 0-27984)]

23             Independent Auditor's Consent

99.1           Written Statement of the Chairman of the Board, President and
               Chief Executive Officer Pursuant to 18 U.S.C. Section 1350

99.2           Written Statement of the Senior Vice President and Treasurer
               Pursuant to 18 U.S.C. Section 1350


                                      -57-
<PAGE>

                                INDEX TO EXHIBITS
                                -----------------

Exhibit No.                                  Exhibit Description
-----------                                  -------------------

99.3           Definitive Proxy Statement for the Company's 2003 annual meeting
               of shareholders scheduled to he held on April 22, 2003
               (previously filed with the Commission under Regulation 14A on
               March 24, 2003 and incorporated by reference herein to extent
               indicated in this Form 10-KSB).


               *This exhibit is a management contract or compensatory plan or
               arrangement required to be filed as an exhibit to this Form
               10-KSB pursuant to Item 13(a) of Form 10-KSB.



                                      -58-