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, 2001

[ ]      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 Identification No.)
  incorporation or organization)

        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:  $5,385,514

Aggregate market value of voting stock held by non-affiliates of the issuer as
of March 1, 2002: $5,220,446

Number of shares of common stock, no par value, outstanding on March 1, 2002:
876,492

                       DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for the 2002 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, 2001

                                                                           Page

Part I ......................................................................2
         Item 1.      Description of Business................................2
         Item 2.      Description of Property................................9
         Item 3.      Legal Proceedings.....................................10
         Item 4.      Submission of Matters to a Vote of Security Holders...10

Part II ....................................................................10
         Item 5.      Market for Common Equity and Related Stockholder
                      Matters...............................................10
         Item 6.      Management's Discussion and Analysis..................11
         Item 7.      Financial Statements..................................26
         Item 8.      Changes In and Disagreements With Accountants on
                      Accounting and Financial Disclosure...................48

Part III ...................................................................48
         Item 9.      Directors, Executive Officers, Promoters and Control
                      Persons; Compliance With Section 16(a) of the
                      Exchange Act..........................................48
         Item 10.     Executive Compensation................................48
         Item 11.     Security Ownership of Certain Beneficial Owners
                      and Management........................................48
         Item 12.     Certain Relationships and Related Transactions........48
         Item 13.     Exhibits and Reports on Form 8-K......................48

SIGNATURES..................................................................49

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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 or 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
W. 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 Bank was the first bank in Wisconsin to introduce full-service PC banking to
consumers. This on-line service, called RidgeStone Connect(sm), enables the
Bank's customers to access their accounts in real time, pay bills, transfer
funds, and access lines of credit. In 2000, the Bank introduced two business
versions of RidgeStone Connect(sm) for its commercial customers and now offers
these PC banking services over the Internet. As of December 31, 2001,
approximately 53% of the Bank's consumer checking account customers and
approximately 23% of the Bank's commercial checking account customers were
enrolled in RidgeStone Connect(sm).

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. 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.

The FDIC and the State of Wisconsin Department of Financial Institutions
released the Memorandum of Understanding (the "Memorandum") the Bank entered
into in fiscal 2000, as previously disclosed. The regulators notified the Bank
in the third quarter of 2001 that the Memorandum was no longer necessary and had
been terminated.

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 future plans, objectives or goals 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, the general economic climate in the
Company's market area, loan delinquency rates, and legislative enactments or
regulatory changes which adversely affect the business

                                      -2-
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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.

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 utilizing state-of-the-art 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 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 and a Senior Commercial
Lender. 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, 2001, 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 area Wisconsin 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 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.

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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.

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 $20,032,201 as of December 31,
2001, 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 from CNA 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 $2,293,603 as of December 31, 2001 and consisted
entirely of Business Manager Accounts Receivable Agreements with businesses and
professionals.

                                      -4-
<PAGE>

Real Estate Commercial Loans. As of December 31, 2001, the Bank had $19,403,802
of real estate commercial 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 box services for business customers.

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

                                       -5-
<PAGE>

and insurance companies; make substantial changes in the regulatory structure
for financial institutions; prohibit new unitary savings and loan holding
companies; 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.

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.

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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
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

                                      -7-
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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 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, 2001, the Company and the Bank together employed 20 full-time
and 6 part-time employees, including 3 personal bankers, an investment officer,
6 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.


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Directors and Executive Officers

The directors of the Company and the Bank as of March 1, 2002 were as follows:


Name of Director                               Principal Occupation

Paul E. Menzel              President and Chief Executive Officer of the
                            Company and the Bank

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

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

Bernard E. Adee             Senior Vice President of Marshall Financial
                            Consulting, LLC

Gregory J. Hoesly           President of L.L. Richards Machinery Co., Inc., a
                            machine tool dealer

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

William F. Krause, Jr.      Retired President of Krause Funeral Home, Inc.

Charles G. Niebler          President of Eye Care Vision Centers

James E. Renner             Owner of Renner Oldsmobile and 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

The executive officers of the Company and the Bank as of March 1, 2002 were as
follows:


Name of Executive Officer                      Position

Paul E. Menzel              President and Chief Executive Officer of the Company
                            and the Bank

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

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

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.


                                      -9-
<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 W. 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, 2001.


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:

                  2000                      High           Low
                  ----                      ----           ---
                 1st Quarter               $8.000        $6.000
                 2nd Quarter               $6.250        $4.500
                 3rd Quarter               $5.500        $5.125
                 4th Quarter               $5.750        $4.875

                  2001                      High           Low
                  ----                      ----           ---
                 1st Quarter               $5.727        $5.000
                 2nd Quarter               $5.850        $5.000
                 3rd Quarter               $6.000        $5.550
                 4th Quarter               $7.000        $5.670

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, 2001, there were
approximately 38 owners of record and approximately 400 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 bank could, depending upon the

                                      -10-
<PAGE>

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

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

Net Income. After-tax 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
after-tax net income of $160,661, or $0.18 per diluted common share, for fiscal
2000. Greater fee income and lower expenses 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 general short-term 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 Rate                   Average Rate
                                                2001             Paid            2000           Paid
---------------------------------------------------------------------------------------------------------
<S>                                          <C>                 <C>         <C>                <C>
Non interest-bearing demand                  $ 9,279,686            --       $ 8,781,695           --
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      $65,318,831         3.95%       $60,499,221        4.65%
                                             ===========         =====       ===========        =====
</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.

                                      -11-
<PAGE>

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 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
                                     ------------- ------------------------   --------------- ------------- ----------
Earning assets:
<S>                                 <C>           <C>                <C>     <C>             <C>                <C>
   Deposits in bank                  $    127,795  $     3,476        2.72%   $   136,024     $     7,465        5.49%
   Investments (taxable)                  915,484       40,670        4.44%       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    4,518,619        8.16%    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.

                                      -12-
<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
                                                   ---------------    --------------   --------------      ---------------
<S>                                              <C>                <C>              <C>                 <C>
Earning assets:

       Deposits in bank                          $           (452)  $       (3,765)  $            228    $        (3,989)

       Investments (taxable)                               23,922          (27,037)           (11,664)           (14,779)

       Funds sold and securities purchased
         under agreements to resell                       231,142         (141,385)           (89,570)               187

       Loans                                              120,052         (420,370)           (10,450)          (310,768)
                                                   --------------     ------------     --------------      -------------
            Total earning assets                 $        374,664   $     (592,557)  $      ( 111,456)   $      (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 purchased                               (157)            (157)               157               (157)
                                                   --------------     ------------     --------------      -------------
            Total interest-bearing liabilities   $        280,402   $     (508,123)  $         (8,050)   $      (235,771)
                                                   --------------     ------------     --------------      -------------
            Net change in net interest income    $         94,262   $      (84,434)  $      ( 103,406)   $       (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 potentially 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
"Financial Condition" - "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.


                                      -13-
<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, secondary market loan fees, commission income generated by the
investment center and employee benefit plan income. 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, secondary mortgage loan originations related to
long-term loans sold in the secondary market increased by $11,655,336 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.


                                      -14-
<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.


Comparison of Operating Results for the Years Ended December 31, 2000 and
December 31, 1999

Net Income. Pretax net income for fiscal 2000 increased by 101% to $209,004 from
pre-tax net income of $104,143 for fiscal 1999. After-tax net income for the
fiscal year ended December 31, 2000 decreased to $160,661 compared with
after-tax net income of $479,178 for fiscal 1999. Earnings per share were $0.18
per diluted common share for fiscal 2000 compared to $0.55 per diluted common
share for fiscal 1999. During the twelve months ended December 31, 1999, the
Company recognized an income tax benefit of $375,035 related to the carryforward
of prior years' losses. As of the end of 1999, all of the Company's loss
carryforward benefits had been recognized. As a result, after-tax earnings for
the twelve months ended December 31, 2000 do not include loss carryforward tax
benefits.

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, 2000 was $5,257,153 compared to $4,831,816 for the year ended
December 31, 1999, an increase of $425,337 or 9%. This increase was primarily
the result of higher yields in the loan portfolio and higher loan demand, which
shifted funds from lower-yielding investments to higher-yielding loans. The
interest yield on average earning assets improved to 8.66% in fiscal 2000 from
7.93% in fiscal 1999.

Interest Expense. Interest expense primarily represents interest paid to
depositors. Interest expense increased to $2,815,791 in fiscal 2000 from
$2,417,939 in fiscal 1999, an increase of $397,852 or 16%. The increase in
interest expense was primarily due to a combination of growth in deposits,
higher interest rates paid on deposits, and a shift in lower-rate money market
balances to higher-rate time deposits. Additionally, deposit interest rate
yields increased from 4.68% in fiscal 1999 to 5.44% in fiscal 2000.

Set forth below is a summary of the Company's average interest-bearing
liabilities and the interest paid on such liabilities during fiscal 2000 and
fiscal 1999.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                Average Rate                         Average Rate
                                                2000                Paid               1999              Paid
-------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                    <C>           <C>                    <C>
Non interest-bearing demand                      $ 8,781,695               --         $ 8,697,185               --
Interest-bearing demand                            1,795,118            1.03%           1,683,475            1.06%
Savings accounts                                   1,367,929            2.08%           1,590,674            2.12%
Money market accounts                             26,321,412            5.18%          30,601,480            4.64%
Time deposits                                     22,230,805            6.32%          17,738,976            5.34%
Federal funds purchased                                2,262            6.94%                   0               0%
                                                 -----------            -----         -----------            -----
     Total interest-bearing liabilities          $60,499,221            4.65%         $60,311,790            4.01%
                                                 ===========            =====         ===========            =====
</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 $2,441,362 for the year ended December 31, 2000, an increase of
$27,485 or 1% compared with net interest income of

                                      -15-
<PAGE>

$2,413,877 for the year ended December 31, 1999. The net interest margin
increased to 4.02% at December 31, 2000 from 3.96% at December 31, 1999.

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 2000 and fiscal 1999.
<TABLE>
<CAPTION>
                                                              Average Balance Sheet and
                                                                Analysis of Net Interest Income
                                                              Year Ended December 31,

                                                       2000                                       1999
                                     ---------------------------------------------------------------------------------

                                       Average       Related      Yield          Average        Related       Yield
                                       Balance       Interest      Rate          Balance        Interest      Rate
                                     ------------- ------------------------   --------------- ------------- ----------
<S>                                 <C>           <C>                <C>     <C>             <C>                <C>
Earning assets:
   Deposits in bank                 $    136,024  $     7,465        5.49%   $    98,958     $     6,025        6.09%
   Investments (taxable)                 639,562       55,449        8.67%     5,274,559         276,087        5.23%
   Funds sold and securities
      purchased under
      agreements to resell             5,891,847      364,852        6.19%     5,488,217         286,165        5.21%
   Loans (a)                          54,018,271    4,829,387        8.94%    50,068,153       4,263,539        8.52%
                                      ----------    ---------                 ----------       ---------
       Total earning assets         $ 60,685,704  $ 5,257,153        8.66%   $60,929,887     $ 4,831,816        7.93%
                                     ===========    =========        ====     ==========       =========        ====

Interest-bearing liabilities:
   Interest-bearing demand          $  1,795,118  $    18,520        1.03%   $ 1,683,475     $    17,908        1.06%
   Savings accounts                    1,367,929       28,423        2.08%     1,590,674          33,694        2.12%
   Money market accounts              26,321,412    1,364,426        5.18%    30,601,480       1,418,807        4.64%
   Time deposits                      22,230,805    1,404,265        6.32%    17,738,976         947,530        5.34%
   Federal funds purchased                 2,262          157        6.94%             0               0        0.00%
                                     -----------   ----------                 ----------      ----------        -----
     Total interest-bearing liabs   $ 51,717,526  $ 2,815,791        5.44%   $51,614,605     $ 2,417,939        4.68%
                                     ===========    =========        ====     ==========       =========        ====

Interest spread (b)                               $ 2,441,362        3.23%                   $ 2,413,877        3.25%
                                                    =========        ====                      =========        ====

Interest margin (c)                               $ 2,441,362        4.02%                   $ 2,413,877        3.96%
                                                    =========        ====                      =========        ====

----------
(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
period 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, 2000

                                                                              Compared to

                                                                      Year Ended December 31, 1999
                                                 -----------------------------------------------------------------------
                                                                       Increase (Decrease) Due To
                                                 -----------------------------------------------------------------------
                                                     Volume             Rate          Rate/Volume            Net
                                                 ---------------    --------------   --------------      ---------------

<S>                                            <C>                <C>               <C>                <C>
Earning assets:
       Deposits in bank                        $          2,257   $         ( 594 ) $         ( 223)   $         1,440

       Investments (taxable)                          ( 242,609 )         181,209         ( 159,235 )        ( 220,635 )

       Funds sold and securities purchased
         under agreements to resell                      21,046            53,692             3,949             78,687
                                                                                                               565,845
       Loans                                            336,371           212,693            16,781
                                                 --------------     -------------    --------------      -------------
            Total earning assets               $        117,065   $       447,000   $     ( 138,728 )  $       425,337
                                                 ==============     =============    ==============      =============

Interest-bearing liabilities:

       Interest-bearing demand                 $          1,188   $         ( 540 ) $          ( 36 )  $           612

       Savings accounts                                 ( 4,718)            ( 643 )              90            ( 5,271 )

       Money market accounts                          ( 198,441)          167,485          ( 23,425 )         ( 54,381 )

       Time deposits                                    239,932           172,997            43,806            456,735

       Federal funds purchased                                0                 0               157                157
                                                 --------------     -------------    --------------      -------------
            Total interest-bearing
            liabilities                        $         37,961   $       339,299   $        20,592    $       397,852
                                                 --------------     -------------    --------------      -------------
            Net change in net interest income  $         79,104   $       107,701   $     ( 159,320)   $        27,485
                                                 ==============     =============    ==============      =============
</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 potentially 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
"Financial Condition" - "Allowance for Loan Losses" for additional factors used
in determining the loan loss reserve and provision for loan losses.

The Company made a loan loss provision of $42,500 in 2000 compared with $282,500
in 1999. The provision was made to bring the reserve to the amount determined
necessary by management based on the analysis performed. During fiscal 2000, the
Bank charged $24,154 against the loan loss reserve, which related primarily to
two consumer loan charge-offs and a business loan related to a customer that
declared bankruptcy. The Company also recovered $24,590 related to a prior loan
charge-off which was added to the loan loss reserve.

As of December 31, 2000, the Company's loan loss reserve was $696,206 or 1.28%
of outstanding loans compared to $653,270 or 1.26% of outstanding loans at
December 31, 1999.

                                      -17-
<PAGE>

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

                         Summary of Loan Loss Experience
                            And Loan Loss Provisions

                                                 2000              1999
                                            --------------    --------------
Beginning loan loss reserve                 $      653,270    $      562,747
Charge-offs:

     Commercial                                     12,830                 0
     Real Estate:
          Construction                                   0                 0
          Commercial                                     0           179,396
          Other Mortgages                                0                 0
     Installment-consumer                           11,324            12,581
Recoveries:
     Commercial                                          0                 0
     Real Estate:
          Construction                                   0                 0
          Commercial                                24,590                 0
          Other Mortgages                                0                 0
     Installment-consumer                                0                 0
                                            --------------    --------------
Net charge-offs (recoveries)                $         (436)   $      191,977
Additions charged to operations                     42,500           282,500
                                            --------------    --------------
Balance at end of period                    $      696,206    $      653,270
                                            ==============    ==============
Ratio of net charge-offs (recoveries)
 during the period to average loans
 outstanding during the period                        0.00%             0.38%

Noninterest Income. Total noninterest income consisted of service charges on
deposit accounts, secondary market loan fees, commission income generated by the
investment center and employee benefit plan income. Total noninterest income
(excluding losses on the sale of securities) was $325,541 for fiscal 2000
compared to $327,598 for fiscal 1999, a decrease of 1% or $2,057. Due to a
higher interest rate environment during 2000, secondary mortgage loan
originations declined, which was the primary cause of a decrease in secondary
market loan fee income of $36,228 as compared to fiscal 1999.

Noninterest Expenses. Total noninterest expenses consisted primarily of salaries
and employee benefits, occupancy and equipment expenses, professional fees, and
data processing fees. Total noninterest expenses for fiscal 2000 (excluding
gains and losses on the sale of assets) were $2,540,242 compared to $2,291,227
for fiscal 1999, an increase of $249,015 or 11%. The majority of the increase in
noninterest expenses is attributed to higher salary expense relating to
increased staffing in the loan area and additional expenses related to
remodeling of the building housing the Bank premises. Also, as the Bank has
continued to grow, the expenses associated with its audit increased, which led
the Bank to begin accruing those expenses throughout the year as opposed to
paying them as incurred. As a result, operating expenses included additional
accrued expenses associated with the 2000 audit as well as certain overlapping
expenses associated with the 1999 audit.

In fiscal 2000, the Bank's FDIC premiums were assessed at $28,887 as required by
federal law.


                                      -18-
<PAGE>

Selected Financial Ratios. Set forth below are selected financial ratios of the
Company for fiscal 2000 and fiscal 1999:

                                                  2000              1999
                                                  ----              ----
    Return on average assets                      0.23%              0.71%
    Return on average equity                      2.37%              7.38%
    Dividend payout ratio on common stock         NONE               NONE
    Average equity to average assets              9.91%              9.61%

Provision for Income Taxes. A tax provision of $48,343 was made in fiscal 2000
as compared to a tax benefit of $375,035 which was recognized in fiscal 1999 as
a result of recognizing previous years' net operating loss carryforwards.

Financial Condition

Total Assets. The Company reported total assets of $71,968,107 at December 31,
2001, a decrease of $1,380,776 or 2% from December 31, 2000 with assets of
$73,348,883. While total assets were lower at year-end 2001 compared to the
prior year, average assets were up 8%. Management chose to focus on controlling
growth in an effort to improve earnings and maintain a well-capitalized Bank.

Cash and Cash Equivalents. Cash and due from banks was $2,715,471 at December
31, 2001 compared to $2,166,942 at December 31, 2000 and represents cash
maintained at the Bank and funds that the Bank and the Company have deposited in
other financial institutions. The Bank reported $6,971,000 of federal funds sold
(which are inter-bank funds with daily liquidity) on December 31, 2001 and
$8,914,000 on December 31, 2000. The $1,943,000 decrease in federal funds sold
was primarily used to fund loan growth. The Bank's loan-to-deposit funds ratio
prior to loan loss reserve on December 31, 2001 was 88% compared to 83% on
December 31, 2000.

Investment Securities. The Company's investment portfolio decreased $1,450,218
from $1,708,618 as of December 31, 2000 to $258,400 at December 31, 2001 as a
result of maturing investments being used to fund loan growth. A portion of the
securities in the Company's investment portfolio was originally purchased with
the intent to hold the securities until they mature. Another portion was placed
in the available for sale category as the securities may be liquidated to
provide cash for operating or financing purposes. The book values of (i) U.S.
Treasuries, (ii) U.S. Government agencies and (iii) other corporate securities
as of December 31, 2001 and December 31, 2000 were $0 and $1,708,618
respectively.

The following table summarizes the maturity dates of those securities as of
December 31, 2001.
<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                      $    258,400          $            0         $             0     $    258,400
          Weighted Average Yield                          1.74%                      0%                      0%            1.74%
</TABLE>

Amortized costs and fair values of available for sale securities are discussed
in Notes 3 and 4 to the Company's Consolidated Financial Statements.

Loans. Loans prior to the allowance for loan losses increased to $56,004,614 at
December 31, 2001 from $54,273,820 at December 31, 2000, an increase of
$1,730,794 or 3%. In addition to the $56,004,614 in loans outstanding that the
Bank reported on December 31, 2001, the Bank had unfunded loan commitments of
$18,208,898. Also, during fiscal year 2001 the Bank originated $13,229,386 in
mortgage loans sold in the secondary market compared to $1,574,050 in secondary
market loans originated in 2000. The favorable interest rate environment for
long-term mortgage loans primarily drove the

                                      -19-
<PAGE>

increase in secondary market loan volume. There were $1,029,200 and $555,000 of
mortgage loans held for sale at December 31, 2001 and December 31, 2000,
respectively.

The following table summarizes the distribution of the Company's loans at
December 31, 2001 and December 31, 2000.
<TABLE>
<CAPTION>
                                                             Loan Portfolio Composition
                                                                    December 31,
                                                    ------------------------------------------------
                                                            2001                         2000
                                                    ---------------------      ---------------------
<S>                                                    <C>                           <C>
     Commercial                                        $20,032,201                   $17,503,514

     Real Estate:

        Construction                                     4,154,112                     3,835,587

        Commercial                                      19,403,802                    15,992,871

        Residential                                     11,159,259                    14,935,218

     Installment and Consumer                            1,255,240                     2,006,630
                                                       -----------                   -----------
                           Total Loans                 $56,004,614                   $54,273,820
                                                       ===========                   ===========
</TABLE>
The following table summarizes the maturities of the Company's loan portfolio at
December 31, 2001 (excluding residential real estate, installment and consumer).
<TABLE>
<CAPTION>
                                                                 Loan Maturities
                                  --------------------------------------------------------------------------------
                                      1 year                After 1              After 5
                                     or less            Through 5 years           Years              Total
                                  --------------------------------------------------------------------------------
<S>                               <C>                  <C>                  <C>                 <C>
  Commercial & Com'l RE           $      19,044,403    $      18,165,272    $       2,226,328   $       39,436,003

  Real estate-construction                2,552,215            1,601,897                    0            4,154,112
                                  -----------------    -----------------   ------------------   ------------------
                Total             $      21,596,618    $      19,767,169   $        2,226,328   $       43,590,115
</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, 2001 (excluding residential real estate, installment and consumer).
<TABLE>
<CAPTION>
                                                        Loans Due After One Year With
                                           ------------------------------------------------------------
                                           Predetermined         Floating or adj.
                                               Rates              interest rates             Total
                                           ------------------   -----------------    ------------------
<S>                                        <C>                  <C>                  <C>
       Commercial & Com'l RE               $       17,683,374   $       2,708,226    $       20,391,600

       Real estate-construction                     1,601,897                   0             1,601,897
                                           ------------------   -----------------    ------------------
                     Total                 $       19,285,271   $       2,708,226    $       21,993,497
                                           ==================   =================    ==================
</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. The Bank's external auditor, Virchow,
Krause & Company, LLP assisted the Bank in its loan review function in fiscal
2001.

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.

                                      -20-
<PAGE>

As of December 31, 2001, 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.

The Company had no nonperforming loans as of December 31, 2001 and December 31,
2000.

Since there were no non-accrual loans as of December 31, 2001 and December 31,
2000, there was no unrecorded interest income related to non-accruing loans. The
amounts of interest income on non-accruing loans that were included in net
income for fiscal 2001 and fiscal 2000 were $6,468 and $5,604, respectively.

Allowance for Loan Losses. The Company has identified the methodology for
determining the loan loss reserve as a critical accounting policy. 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 potentially 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. Management has hired the Company's external auditor,
         Virchow, Krause & Company, LLP, to formally review all loans in excess
         of certain dollar amounts on an annual basis. In addition, 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 SFAS 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. 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. 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.

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.

                                      -21-
<PAGE>

Based on the above loss estimates, management determines its best estimate of
the required reserve. Management's evaluation of the factors described above
resulted in an allowance for loan losses of $544,804 or 0.97% of loans at
December 31, 2001 compared to $696,206 or 1.28% of loans at December 31, 2000.
Accordingly, the Bank has allocated $481,417 (or 88% of the reserve for loan
losses) to commercial and commercial real estate loans, which comprise about 78%
of the loan portfolio. The Bank has allocated $25,979 (or approximately 5% of
the reserve for loan losses) to residential mortgages, which comprise about 20%
of the loan portfolio. Consumer loans comprise about 2% of the loan portfolio,
and $11,855 (or about 2% of the reserve for loan losses) is allocated to
consumer loans. The Bank has allocated $9,104 of the reserve for loan losses to
unfunded loan commitments, which total approximately $18,208,898. The balance of
the reserve for loan losses of $16,449 is unallocated.

The resulting provisions for loan losses are the amounts required to establish
the allowance for loan losses to the required level after taking into
consideration charge-offs and recoveries. The provisions for loan losses for the
years ended December 31, 2001 and 2000 were $133,000 and $42,500, respectively.
Management recognizes there are significant estimates in the process and the
ultimate losses could be significantly different from those currently estimated.

Other Assets. The Company's office building, leasehold improvements and
equipment less accumulated depreciation and amortization decreased to $2,490,941
at December 31, 2001 from $2,601,253 at December 31, 2000.

In fiscal 1997, the Bank purchased real estate assets from the bankruptcy court
after the Bank's borrower filed for bankruptcy. The Bank and its real estate
subsidiary, which was formed to help liquidate the parcel of property, had
assets of $656,947 in Other Real Estate Owned as of December 31, 2000. During
2001, the remainder of the residential lots and a completed model home were
sold, resulting in no assets in Other Real Estate Owned as of December 31, 2001.
The Bank dissolved the real estate subsidiary when the remaining properties were
sold.

Accrued interest receivable on loans and other assets was $3,043,285 at December
31, 2001 compared to $3,168,509 at December 31, 2000.

Deposits. Deposits decreased by $1,577,581 from $65,322,601 as of December 31,
2000 to $63,745,020 on December 31, 2001.

As of December 31, 2001, time deposits over $100,000 represented 12% of total
deposits. Set forth below is a schedule of the maturities as of December 31,
2001 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.
                                   or less            thru 6 mos.          thru 12 mos.        Over 12 mos.
                               ---------------      --------------        --------------     ----------------
<S>                            <C>                  <C>                   <C>                <C>
Certificates of Deposit        $     1,107,671      $      509,871        $    4,666,292     $      1,669,249
</TABLE>

Other Liabilities. Accrued interest payable and other liabilities of $1,171,472
at December 31, 2001 compared to $1,224,827 at December 31, 2000 were made up of
accrued interest payable on deposit accounts, accounts payable and deferred
employee benefits. The majority of the decrease was due to lower rates paid on
time deposits.

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.
Liquidity needs are influenced by economic conditions, interest rates and
competition. Management believes that current liquidity levels are sufficient to
meet future demands. Management believes the current liquidity position of the
Bank allows it opportunity to


                                      -22-
<PAGE>

expand the Bank's loan portfolio and account for any deposit withdrawals which
may occur. As of December 31, 2001 the Bank had $9,944,871, primarily in federal
funds, available to meet future liquidity demands.

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 and
standby letters of credit. These financial instruments are recorded in the
financial statements when funded. See Note 14 to the Company's Consolidated
Financial Statements.

As of December 31, 2001, the Company has $18,208,898 in unfunded loan
commitments. The following table summarizes the Company's exposure to these
off-balance sheet commitments:


   Financial instruments                           2001               2000
                                                   ----               ----
        Commitments to extend credit       $ 17,098,705       $ 13,231,961
        Credit card commitments               1,074,593          1,053,558
        Standby letters of credit                35,600            107,750

The Company has cash, cash equivalents, federal funds sold, interest-bearing
deposits and available for sale securities of $9,944,871 plus various sources of
credit available to fund these commitments. These credit sources include Federal
Funds lines of credit, loans from the Federal Home Loan Bank and loans from the
Federal Reserve Bank. Certain of these lines would be collateralized with other
assets of the Bank.

Capital Resources. The Bank's most recent notification as of July 12, 2001 from
the FDIC 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 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 will change the Bank's classification. See Note 17 to the
Company's Consolidated Financial Statements for actual ratios for 2001 and 2000.

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.

                                      -23-
<PAGE>

The following table summarizes the repricing opportunities as of December 31,
2001 for each major category of interest-earning assets and interest-bearing
liabilities:
<TABLE>
<CAPTION>
                                                     Interest-Rate-Sensitive Assets
                                                            and Liabilities

                                         0-89          90-179        180-359        360+
                                         Days           Days          Days          Days             Total
                                 ----------------    -----------    -----------   -----------   ---------------
<S>                              <C>                 <C>            <C>            <C>          <C>
                  Investments    $      258,400                0              0             0   $       258,400

                        Loans    $   18,460,093        4,653,766      6,756,199    26,134,556   $    56,004,614
---------------------------------------------------------------------------------------------------------------
  Total Rate Sensitive Assets    $   18,718,493        4,653,766      6,756,199    26,134,556   $    56,263,014

Rate Sensitive Liabilities(1)    $   31,016,746(2)     3,960,042     11,060,723     6,905,202   $    52,942,713
---------------------------------------------------------------------------------------------------------------
                          GAP    $  (12,298,253)         693,724     (4,304,524)   19,229,354

               Cumulative GAP    $  (12,298,253)     (11,604,529)   (15,909,053)    3,320,301

  GAP/Rate Sensitive Assets              (65.70%)         (49.65%)       (52.80%)        5.90%

         (1)  Savings, NOW, and money market demand deposits are considered as immediately repricable.
         (2)  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.

                                      -24-
<PAGE>
<TABLE>
<CAPTION>
                     DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY

                                         Average Balance Sheet

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

<S>                                                          <C>                    <C>
    Cash and due from banks                                  $         2,185,594    $         2,322,097

    Federal funds sold and
       securities purchased under agreement to resell                  9.624,468              5,891,847

    Interest-bearing deposits in other banks                             127,795                136,024

    Investment securities:

        U.S. Treasury, agency and other securities                       915,484                639,562

    Loans:

        Real estate mortgages                                         13,051,848             14,411,155

        Consumer-net                                                     101,091              2,619,778

        Commercial and other                                          42,208,156             36,987,338
                                                              ------------------     ------------------
             Total                                                    55,361,095             54,018,271

        Less allowance for loan losses                                  (626,185)              (678,927)
                                                              ------------------     ------------------
             Net loans                                                54,734,910             53,339,344

    Fixed assets                                                       2,544,779              2,119,615

    Other real estate owned                                              447,203                809,412

    Cash surrender value of life insurance                             2,080,150              1,989,417

    Other assets                                                       1,389,582              1,222,291
                                                              ------------------     ------------------
             Total assets                                    $        74,049,965    $        68,469,609
                                                              ==================     ==================
    Interest-bearing deposits:

        Interest-bearing demand                              $         1,707,705    $         1,795,118

        Savings accounts                                               1,350,888              1,367,929

        Money Market deposit accounts                                 26,144,743             26,321,412

        Time deposits                                                 26,835,809             22,230,805

        Federal funds purchased                                                0                  2,262
                                                              ------------------     ------------------
             Total interest-bearing deposits                          56,039,145             51,717,526

        Demand deposits                                                9,279,686              8,781,695
                                                              ------------------     ------------------
              Total deposits                                          65,318,831             60,499,221

    Other liabilities                                                  1,687,597              1,184,193
                                                              ------------------     ------------------
              Total liabilities                                       67,006,428             61,683,414

    Equity capital                                                     7,043,537              6,786,195
                                                              ------------------     ------------------
              Total liabilities and capital                  $        74,049,965    $        68,469,609
                                                              ==================     ==================
</TABLE>

                                      -25-
<PAGE>

Item 7.  Financial Statements

                                                                    Page

Independent Auditor's Report..........................................27

Consolidated Balance Sheets...........................................28

Consolidated Statements of Income.....................................29

Consolidated Statements of Changes in Stockholders' Equity............30

Consolidated Statements of Cash Flows.................................31

Notes to Consolidated Financial Statements............................32






                                      -26-
<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, 2001 and 2000, and
the related consolidated statements of income, changes in stockholders' equity,
and cash flows for the years ended December 31, 2001, 2000 and 1999. 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, 2001 and 2000, and the results
of its operations and its cash flows for the years ended December 31, 2001, 2000
and 1999, 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 7, 2002

                                      -27-
<PAGE>
<TABLE>
               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                           December 31, 2001 and 2000

---------------------------------------------------------------------------------------------------------

                                ASSETS
<CAPTION>
                                                                           2001               2000
                                                                    ------------------ ------------------
<S>                                                                 <C>                <C>
Cash and due from banks                                             $        2,630,962 $        2,050,908
Federal funds sold                                                           6,971,000          8,914,000
                                                                    ------------------ ------------------
    Cash and cash equivalents                                                9,601,962         10,964,908
Interest bearing deposits in banks                                              84,509            116,034
Available for sale securities - stated at fair value                           258,400            218,477
Held to maturity securities, fair value of $0 and
    $1,493,700 in 2001 and 2000, respectively                                        -          1,490,141
Loans, less allowance for loan losses of $544,804 and
    $696,206 in 2001 and 2000, respectively                                 55,459,810         53,577,614
Mortgage loans held for sale                                                 1,029,200            555,000
Premises and equipment, net                                                  2,490,941          2,601,253
Accrued interest receivable and other assets                                 3,043,285          3,825,456
                                                                    ------------------ ------------------
       TOTAL ASSETS                                                 $       71,968,107 $       73,348,883
                                                                    ================== ==================

              LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
   Deposits
       Demand                                                       $       10,802,307 $       10,114,636
       Savings and NOW                                                      27,741,829         27,603,851
       Other Time                                                           25,200,884         27,604,114
                                                                    ------------------ ------------------
          Total Deposits                                                    63,745,020         65,322,601
   Accrued interest payable and other liabilities                            1,171,472          1,224,827
                                                                    ------------------ ------------------
       Total Liabilities                                                    64,916,492         66,547,428
                                                                    ------------------ ------------------

COMMITMENTS AND CONTINGENCIES (See Note 14)

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,
       876,492 shares issued and outstanding                                 8,417,117          8,417,117
   Retained deficit                                                         (1,308,899)        (1,556,610)
                                                                    ------------------ ------------------
                                                                             7,108,218          6,860,507
   Accumulated other comprehensive loss                                        (56,603)           (59,052)
                                                                    ------------------ ------------------
       Total Stockholders' Equity                                            7,051,615          6,801,455
                                                                    ------------------ ------------------

          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $       71,968,107 $       73,348,883
                                                                    ================== ==================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      -28-
<PAGE>
<TABLE>
               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME

                  Years Ended December 31, 2001, 2000 and 1999

--------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                              2001             2000              1999
                                                                      ----------------------------------------------------
<S>                                                                   <C>               <C>              <C>
INTEREST INCOME
   Interest and fees on loans                                         $       4,518,619 $      4,829,387 $       4,263,539
   Interest on investment securities - taxable                                   40,670           55,449           276,087
   Interest on federal funds sold and securities purchased under
       agreements to resell                                                     365,039          364,852           286,165
   Interest on deposits in banks                                                  3,476            7,465             6,025
                                                                      ----------------- ---------------- -----------------
       Total Interest Income                                                  4,927,804        5,257,153         4,831,816
                                                                      ----------------- ---------------- -----------------

INTEREST EXPENSE
   Interest on deposits                                                       2,580,020        2,815,634         2,417,939
   Interest on federal funds purchased                                                -              157                 -
                                                                      ----------------- ---------------- -----------------
       Total Interest Expense                                                 2,580,020        2,815,791         2,417,939
                                                                      ----------------- ---------------- -----------------
Net interest income before provision for loan losses                          2,347,784        2,441,362         2,413,877
   Provision for loan losses                                                    133,000           42,500           282,500
                                                                      ----------------- ---------------- -----------------
Net interest income after provision for loan losses                           2,214,784        2,398,862         2,131,377
                                                                      ----------------- ---------------- -----------------

NONINTEREST INCOME
   Service charges on deposit accounts                                          110,822           94,222            87,322
   Secondary market fees                                                        140,834           19,218            55,446
   Increase in cash surrender value of life insurance                           111,611          108,206           104,832
   Securities gains (losses)                                                          -           (9,164)          (15,402)
   Other income                                                                  94,443          103,895            79,998
                                                                      ----------------- ---------------- -----------------
       Total Noninterest Income                                                 457,710          316,377           312,196
                                                                      ----------------- ---------------- -----------------

NONINTEREST EXPENSES
   Salaries                                                                   1,035,256          968,395           855,383
   Pension, profit sharing and other employee benefits                          429,627          386,755           368,149
   Occupancy                                                                    185,448          309,219           313,395
   Furniture and equipment expenses                                             132,348          143,598           116,550
   Data processing fees                                                         126,988          133,059           136,573
   Professional fees                                                            139,089          237,337           124,078
   Other expenses                                                               285,051          327,872           425,302
                                                                      ----------------- ---------------- -----------------
       Total Noninterest Expenses                                             2,333,807        2,506,235         2,339,430
                                                                      ----------------- ---------------- -----------------

Income before income taxes                                                      338,687          209,004           104,143
   Less:  Applicable income taxes (benefit)                                      90,976           48,343         (375,035)
                                                                      ----------------- ---------------- -----------------

       NET INCOME                                                     $         247,711 $        160,661 $         479,178
                                                                      ================= ================ =================

         Basic earnings per share                                     $            0.28 $           0.18 $            0.55
                                                                      ================= ================ =================
         Diluted earnings per share                                   $            0.28 $           0.18 $            0.55
                                                                      ================= ================ =================
         Weighted average shares outstanding                                    876,492          876,492           876,492
                                                                      ================= ================ =================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      -29-
<PAGE>
<TABLE>
                           RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                       CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                              Years Ended December 31, 2001, 2000 and 1999

---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                              Accumulated
                                                                                                 other
                                                                                 Retained    comprehensive
                                                                  Common stock   deficit         loss            Total
                                                                  ------------ ------------ --------------- ---------------
<S>                                                               <C>          <C>          <C>             <C>
BALANCES - December 31, 1998                                      $  8,417,117 $(2,196,449) $      (22,524) $     6,198,144
                                                                                                            ---------------
   Comprehensive income

       Net income - 1999                                                     -     479,178               -          479,178
       Change in unrealized gains (losses) on
          securities available for sale                                      -           -         (10,687)         (10,687)
       Reclassification adjustment for gains
          (losses) realized in net income                                    -           -         (15,402)         (15,402)

       Income tax effect                                                     -           -          10,175           10,175
                                                                                                            ---------------
          Total Comprehensive Income                                                                                463,264
                                                                  ------------ -----------  --------------  ---------------
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
                                                                  ============ ===========  ==============  ===============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      -30-
<PAGE>
<TABLE>
                           RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                              Years Ended December 31, 2001, 2000 and 1999

--------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                        2001                2000                1999
                                                                ------------------  ------------------  ------------------
<S>                                                             <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net Income                                                  $          247,711  $          160,661  $          479,178
    Adjustments to reconcile net income to
      net cash flows from operating
      activities
        Depreciation                                                       192,013             190,433             152,026
        Amortization and accretion of bond
         premiums and discounts - net                                            -               9,240                 562
        Loss on sale of investment securities                                    -               9,164              15,402
        Gain on disposal of premises and equipment                               -                (754)                  -
        Provision for loan losses                                          133,000              42,500             282,500
        Provision (benefit) for deferred taxes                              90,976              48,343            (375,035)
        (Gain) loss on other real estate owned                             (66,414)            (34,007)             80,986
        Net change in
           Mortgage loans held for sale                                   (474,200)           (419,000)            123,000
           Accrued interest receivable and other assets                     21,610            (128,497)           (243,550)
           Accrued interest payable and other liabilities                  (53,355)            512,403              97,889
                                                                ------------------  ------------------  ------------------
        Net Cash Flows from Operating Activities                            91,341             390,486             612,958
                                                                ------------------  ------------------  ------------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Net change in interest bearing deposits
      in banks                                                              31,525             147,990            (261,375)
    Activity in available for sale securities
        Sales                                                                    -               8,086              55,548
        Maturities, prepayments and calls                                        -              45,000           1,465,000
        Purchases                                                          (37,474)           (172,841)         (1,064,688)
    Activity in held to maturity securities
        Maturities, prepayments and calls                                1,490,141           1,000,000           1,000,000
        Purchases                                                                -          (1,500,000)           (250,000)
    Net increase in loans                                               (2,015,196)         (2,580,817)         (3,015,467)
    Proceeds from sales of premises and equipment                           15,839              13,600                   -
    Additions to premises and equipment                                    (97,540)         (1,451,537)           (128,361)
    Net disbursements on other real estate owned                           (41,275)            (22,502)           (622,589)
    Proceeds from sale of other real estate owned                          777,274             296,500             933,500
                                                                ------------------  ------------------  ------------------
        Net Cash Flows from Investing Activities                           123,294          (4,216,521)         (1,888,432)
                                                                ------------------  ------------------  ------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase (decrease) in deposits                                 (1,577,581)          7,858,210          (7,058,465)
                                                                ------------------  ------------------  ------------------

           Net Change in Cash and Cash Equivalents                      (1,362,946)          4,032,175          (8,333,939)

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                           10,964,908           6,932,733          15,266,672
                                                                ------------------  ------------------  ------------------

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

SUPPLEMENTAL CASH FLOW DISCLOSURES
    Cash paid for interest                                      $        2,830,257  $        2,415,698  $        2,641,890
    Cash paid for income taxes                                                  25                   -                  50

</TABLE>

          See accompanying notes to consolidated financial statements.


                                      -31-
<PAGE>
               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

--------------------------------------------------------------------------------
 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 (the "subsidiary 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, installment and
residential loans 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.


                                      -32-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

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

    Held to Maturity Securities

Securities classified as held to maturity are those debt securities the
subsidiary Bank has both the intent and ability to hold to maturity regardless
of changes in market conditions, liquidity needs or changes in general economic
conditions. These securities are carried at cost, adjusted for amortization of
premium and accretion of discount, computed by the interest method over their
contractual lives. The sale of a security within three months of its maturity
date or after collection of at least 85 percent of the principal outstanding at
the time the security was acquired is considered a maturity for purposes of
classification and disclosure.

    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 potentially 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.


                                      -33-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

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

    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 3 to 10 years for equipment.

    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.

    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.

    Income Taxes

The Company files a consolidated federal income tax return and individual 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, 2001 and 2000

--------------------------------------------------------------------------------
 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
                  Variable rate loans that reprice frequently where no
                     significant change in credit risk has occurred
                  Loans held for sale
                  Accrued interest receivable
                  Cash surrender value of life insurance
                  Demand deposits
                  Variable rate money market accounts
                  Variable rate certificates of deposit
                  Accrued interest payable

         Quoted Market Prices
         Where available, or if not available, based on quoted market prices of
             comparable instruments for the following instrument:
                  Held to maturity securities

         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

         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
                  Letters of credit
                  Lending commitments

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.

    Reclassification

Certain 2000 and 1999 amounts have been reclassified to conform with the 2001
presentation. The reclassifications have no effect on reported amounts of net
income or equity.


                                      -35-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

--------------------------------------------------------------------------------
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 $164,000 and $143,000 at December 31, 2001 and 2000,
respectively.

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

Amortized costs and fair values of available for sale securities as of December
31, 2001 and 2000 are summarized as follows:
<TABLE>
<CAPTION>
                                                                                   2001
                                                ---------------------------------------------------------------------------
                                                                         Gross              Gross
                                                                      Unrealized          Unrealized
                                                 Amortized Cost          Gains              Losses           Fair Value
                                                -----------------  ------------------  -----------------  -----------------
<S>                                             <C>                <C>                 <C>                <C>
Federal Home Loan Bank stock                    $         161,300  $                -  $               -  $         161,300
Other equity securities                                   153,703                  76             56,679             97,100
                                                -----------------  ------------------  -----------------  -----------------
        Totals                                  $         315,003  $               76  $          56,679  $         258,400
                                                ================== ==================  ================== =================
<CAPTION>
                                                                                   2000
                                                ---------------------------------------------------------------------------
                                                                         Gross              Gross
                                                                      Unrealized          Unrealized
                                                 Amortized Cost          Gains              Losses           Fair Value
                                                -----------------  ------------------  -----------------  -----------------
<S>                                             <C>                <C>                 <C>                <C>
Federal Home Loan Bank stock                    $         159,300  $                -  $               -  $         159,300
Other equity securities                                   118,229                   -             59,052             59,177
                                                -----------------  ------------------  -----------------  -----------------
        Totals                                  $         277,529  $                -  $          59,052  $         218,477
                                                ================== ====================================== =================
</TABLE>
Expected maturities will differ from contractual maturities in equity
securities.

Following is a summary of the proceeds from sales of investment securities
available for sale, as well as gross losses for the years ended December 31.
<TABLE>
<CAPTION>
                                                        2001                2000               1999
<S>                                             <C>                 <C>                <C>
    Proceeds from sales of available
      for sale securities                       $                -  $           8,086  $          55,548
                                                ==================  =================  =================

    Gross gains on sales                        $                -  $               -  $               -
    Gross loss on sales                         $                -  $          (9,164) $         (15,402)
                                                ------------------  -----------------  -----------------
                                                $                -  $          (9,164) $         (15,402)
                                                ==================  =================  =================

    Related income taxes (benefit)              $                -  $          (3,666) $          (6,084)
                                                ==================  =================  =================
</TABLE>

There were no available for sale securities pledged as collateral at December
31, 2001 and 2000.


                                      -36-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

--------------------------------------------------------------------------------
NOTE 4 - Held to Maturity Securities
--------------------------------------------------------------------------------

There are no held to maturity securities as of December 31, 2001.

Amortized costs and fair values of held to maturity securities as of December
31, 2000 are summarized as follows:
<TABLE>
<CAPTION>
                                                                                   2000
                                                ---------------------------------------------------------------------------
                                                                         Gross               Gross
                                                                      Unrealized          Unrealized
                                                 Amortized Cost          Gains              Losses           Fair Value
                                                -----------------  ------------------  -----------------  -----------------
<S>                                             <C>                <C>                 <C>                <C>
Obligations of other U.S. government agencies
    and corporations                            $       1,490,141  $            3,609  $              50  $       1,493,700
                                                =================  ==================  ================== =================
</TABLE>

There were no held to maturity securities pledged as collateral at December 31,
2001 and 2000.

--------------------------------------------------------------------------------
NOTE 5 - Loans
--------------------------------------------------------------------------------

Major classification of loans are as follows at December 31:

                                                   2001               2000
                                            ----------------  -----------------
    Commercial                              $     20,032,201  $      17,503,514
    Real estate
         Construction                              4,154,112          3,835,587
         Commercial                               19,403,802         15,992,871
         Residential                              11,159,259         14,935,218
    Installment and consumer                       1,255,240          2,006,630
                                            ----------------  -----------------
                                                  56,004,614         54,273,820
    Less: Allowance for loan losses                 (544,804)          (696,206)
                                            ----------------  -----------------
         Net Loans                          $     55,459,810  $      53,577,614
                                            ================  =================

There were no impaired loans recognized in the consolidated financial statements
at December 31, 2001 and 2000. The average recorded amount of impaired loans
during 2001 and 2000 was $230,538 and $122,160, respectively. There was no
allowance for loan losses related to these loans at December 31, 2001 and 2000.
Interest income on impaired loans of $6,468, $5,604, and $8,499 was recognized
for cash payments received in 2001, 2000 and 1999, respectively.

Certain directors and executive officers of the Company, and their related
interests, had loans outstanding in the aggregate amounts of $1,283,779 and
$1,387,952 at December 31, 2001 and 2000, respectively. During 2001, $1,093,552
of new loans were made and repayments totaled $1,197,725. 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.


                                      -37-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

--------------------------------------------------------------------------------
NOTE 6 -  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>
                                                       2001                2000               1999
                                                ------------------  ------------------ ------------------
<S>                                             <C>                 <C>                <C>
    BALANCE - Beginning of Year                 $          696,206  $          653,270 $          562,747
       Charge-offs                                        (328,479)            (24,154)          (191,977)
       Recoveries                                           44,077              24,590                  -
       Provision charged to operations                     133,000              42,500            282,500
                                                ------------------  ------------------ ------------------
    BALANCE - End of Year                       $          544,804  $          696,206 $          653,270
                                                ==================  ================== ==================
</TABLE>
--------------------------------------------------------------------------------
NOTE 7 - Premises and Equipment
--------------------------------------------------------------------------------

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

                                                    2001             2000
                                               ---------------  ---------------
    Land                                       $       232,200  $       232,200
    Building and leasehold improvements              2,176,944        2,159,316
    Furniture and equipment                          1,172,302        1,121,188
                                               ---------------- ---------------
                                                     3,581,446        3,512,704
    Less: Accumulated depreciation                  (1,090,505)        (911,451)
                                               ---------------- ---------------
        Net Premises and Equipment             $     2,490,941  $     2,601,253
                                               ================ ===============

Depreciation expense amounted to $192,013, $190,433, and $152,026 in 2001, 2000
and 1999, respectively.

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

The aggregate amount of time deposits, each with a minimum denomination of
$100,000, was $7,953,083 and $7,619,472 at December 31, 2001 and 2000,
respectively.

At December 31, 2001, the scheduled maturities of time deposits are as follows:

    2002                                          $      18,295,683
    2003                                                  5,985,705
    2004                                                    431,852
    2005                                                    352,351
    2006                                                    135,293
                                                  -----------------
                                                  $      25,200,884
                                                  =================

                                      -38-
<PAGE>
               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

--------------------------------------------------------------------------------
NOTE 9 - 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 beginning one year after the date of the grant and must be
exercised within a ten year period.

Activity is summarized in the following table:
<TABLE>
<CAPTION>
                                                  2001                        2000                        1999
                                       --------------------------- --------------------------- ----------------------------
                                                        Weighted                    Weighted                     Weighted
                                                         Average                     Average                     Average
                                           Shares         Price        Shares         Price        Shares         Price
                                       --------------- ----------- --------------- ----------- --------------- ------------
<S>                                    <C>             <C>         <C>             <C>         <C>             <C>
OUTSTANDING - Beginning of Year                286,475 $     11.77         213,037 $     13.78         150,412 $      14.96
    Options
      Granted                                   84,500        5.00          74,025        6.00          63,300        11.00
      Cancelled or forfeited                      (883)       9.20            (587)      13.99            (675)       14.37
                                       ---------------             ---------------             ---------------
         Net Change                             83,617                      73,438                      62,625

OUTSTANDING - End of Year                      370,092       10.23         286,475       11.77         213,037        13.78
                                       ===============             ===============             ===============

Exercisable at year end                        215,600                     153,842                      99,823
Weighted average fair value of:
    Options granted                    $          2.44             $          2.73             $          5.48
Available for future grant at
 year end                                      154,471                     238,088                     311,526
</TABLE>

The following table summarizes information about Plan awards outstanding at
December 31, 2001:
<TABLE>
<CAPTION>
                                                  Options Outstanding                           Options Exercisable
                                -------------------------------------------------------  ----------------------------------
                                                        Weighted           Weighted                            Weighted
                                                        Average             Average                            Average
                                     Number            Remaining          Exercisable         Number           Exercise
        Exercise Price            Outstanding       Contractual Life         Price         Exercisable          Price
------------------------------  ------------------  ----------------    ---------------  ----------------  ----------------
<S>                                       <C>           <C>             <C>                        <C>     <C>
                       $ 11.75            49,638        4.5 years       $         11.75            49,638  $          11.75
                         14.63            49,904        5.3 years                 14.63            49,904             14.63
                         18.50            49,525        6.3 years                 18.50            49,525             18.50
                         11.00            63,075        7.5 years                 11.00            42,050             11.00
                          6.00            73,450        8.3 years                  6.00            24,483              6.00
                          5.00            84,500        9.3 years                  5.00                 -                 -
                                ----------------                                         ----------------
                                         370,092                                                  215,600
                                ================                                         ================
</TABLE>
The Company applies APB Opinion 25 and related interpretations in accounting for
its Plan. Accordingly, no compensation cost has been recognized for its stock
options awards.


                                      -39-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

--------------------------------------------------------------------------------
NOTE 9 - Stockholders' Equity (cont.)
--------------------------------------------------------------------------------

FASB Statement 123 encourages a "fair value" based method of accounting for
stock-based compensation plans. Had compensation cost for the Company's plan
been determined based upon the fair value at the grant dates as prescribed by
FASB Statement 123, the Company's net loss and loss per share would be the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
                                                     2001            2000           1999
                                                 -------------  --------------  --------------
<S>                                              <C>            <C>             <C>
 Net income - as reported                        $     247,711  $      160,661  $      479,178
      Pro forma                                  $      77,293  $       (9,126) $      337,753
 Basic earnings per share - as reported          $        0.28  $         0.18  $         0.55
      Pro forma                                  $        0.09  $        (0.01) $         0.38
 Diluted earnings per share - as reported        $        0.28  $         0.18  $         0.55
      Pro forma                                  $        0.09  $        (0.01) $         0.38
</TABLE>

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
                                                                 ------------------  -----------------  -----------------
  2001
<S>                                                              <C>                 <C>                <C>
       Earnings per share                                        $          247,711            876,492  $            0.28
                                                                                                        =================
       Effect of options                                                                         3,121
                                                                                     -----------------
       Earnings per share - assuming dilution                    $          247,711            879,613  $            0.28
                                                                 ==================  =================  =================
  2000
       Earnings per share                                        $          160,661            876,492  $            0.18
                                                                                                        =================
       Effect of options                                                                             -
                                                                                     -----------------
       Earnings per share - assuming dilution                    $          160,661            876,492  $            0.18
                                                                 ==================  =================  =================
  1999
       Earnings per share                                        $          479,178            876,492  $            0.55
                                                                                                        =================
       Effect of options                                                                             -
                                                                                     -----------------
       Earnings per share - assuming dilution                    $          479,178            876,492  $            0.55
                                                                 ==================  =================  =================
</TABLE>
--------------------------------------------------------------------------------
NOTE 10 - Income Taxes
--------------------------------------------------------------------------------

The provision for income taxes included in the accompanying consolidated
financial statements consists of the following components at December 31:
<TABLE>
<CAPTION>
                                                         2001                2000               1999
                                                  ------------------  -----------------  -----------------
  Deferred Income Taxes (Benefit)
<S>                                               <C>                 <C>                <C>
       Federal                                                78,607             41,770          (324,045)
       State                                                  12,369              6,573           (50,990)
                                                  ------------------  ------------------ -----------------
       Total Provision for Income Taxes           $           90,976  $          48,343  $       (375,035)
                                                  ==================  ================== =================
</TABLE>

At December 31, 2001, the Company had a net operating loss carryforward for
income tax purposes of approximately $408,000 which, if not utilized to reduce
taxable income in future periods, will expire as follows:

    2011                                     $         256,000
    2013                                               104,000
    2014                                                48,000
                                             -----------------
                                             $         408,000
                                             =================


                                      -40-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

--------------------------------------------------------------------------------
NOTE 10 - 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:

                                                       2001            2000
    Deferred Tax Assets
         Allowance for loan losses               $     136,194  $     233,521
         Deferred compensation                         188,808        128,155
         Salary continuation                            16,095         10,776
         Net operating loss carryforward               169,920        233,071
         Other                                           6,926          1,847
    Deferred Tax Liabilities
         Depreciation                                   (7,488)        (5,939)
                                                 -------------  -------------
                                                 $     510,455  $     601,431
                                                 =============  =============

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, 2001 and 2000.

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>
                                             2001                         2000                        1999
                                 ---------------------------  ---------------------------  ---------------------------
                                                 % 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               $      115,154      34.00%   $       71,061      34.00%   $      35,409       34.00%
  Adjustments for
    Increase in cash surrender
         value of life insurance        (37,948)    (11.20)          (36,790)    (17.60)         (35,643)     (34.23)
    Reduction of deferred tax
         valuation allowance                  -          -                 -          -         (385,211)    (369.89)
    Other - net                          13,770       4.07            14,072       6.73           10,410       10.00
                                 -------------- ----------    -------------- ----------    -------------- ----------
Effective Income Taxes -
  Operations                     $       90,976      26.87%   $       48,343      23.13%   $    (375,035)    (360.12)%
                                 ============== ==========    ============== ==========    ============== ==========
</TABLE>

--------------------------------------------------------------------------------
NOTE 11 - Profit-Sharing Plan
--------------------------------------------------------------------------------

The Company has a trusteed 401 (k) plan. The Company contributed $24,156,
$8,077, and $32,938 in 2001, 2000 and 1999, respectively.

                                      -41-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

--------------------------------------------------------------------------------
NOTE 12 - 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. The salary continuation liability
balance was $479,817 and $325,681 at December 31, 2001 and 2000, respectively.
Expenses recognized for future benefits under these agreements totaled $167,653,
$155,555, and $141,877 in 2001, 2000 and 1999, 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 $2,135,105 and $2,037,186 of related cash surrender
value as of December 31, 2001 and 2000, respectively.

--------------------------------------------------------------------------------
NOTE 13 - 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 2001. Lease
expense for the years ended December 31, 2000 and 1999 was $94,956 and $113,167,
respectively.

--------------------------------------------------------------------------------
NOTE 14 - 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 Company's
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, commitments under
credit card arrangements 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, 2001 and 2000 is as follows:

                                                   2001              2000
                                              ---------------  ----------------
Financial instruments whose contract
    amounts represent credit risk:
         Commitments to extend credit         $    17,098,705  $     13,231,961
         Credit card commitments              $     1,074,593  $      1,053,558
         Standby letters of credit            $        35,600  $        107,750


                                      -42-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

--------------------------------------------------------------------------------
NOTE 14 - 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, 2001, the Company and the subsidiary Bank do not engage in
the use of interest rate swaps, futures or option contracts.

--------------------------------------------------------------------------------
NOTE 15 - 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 5.

--------------------------------------------------------------------------------
NOTE 16 - 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.

                                      -43-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

--------------------------------------------------------------------------------
NOTE 17 - 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) 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, 2001 and 2000 the Company and the subsidiary Bank met all capital adequacy
requirements to which they were subject.

As of December 31, 2001, 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 I
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, 2001 and 2000.
<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, 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%
As of December 31, 2000
   Total capital (to risk weighted
      assets)
      RidgeStone Financial Services,
        Inc                            $     7,206,713      12.2%  $     4,753,785       8.0%        N/A           N/A
      RidgeStone Bank                  $     6,823,319      11.6%  $     4,741,435       8.0%  $     5,926,723      10.0%
   Tier 1 capital (to risk weighted
      assets)
      RidgeStone Financial Services,
        Inc                            $     6,510,507      11.1%  $     2,376,893       4.0%        N/A           N/A
      RidgeStone Bank                  $     6,127,113      10.4%  $     2,370,717       4.0%  $     3,556,076       6.0%
   Tier 1 capital (to average assets)
      RidgeStone Financial Services,
        Inc                            $     6,510,507       8.7%  $     2,980,999       4.0%        N/A           N/A
      RidgeStone Bank                  $     6,127,113       8.3%  $     2,963,849       4.0%  $     3,704,811       5.0%
</TABLE>


                                      -44-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

--------------------------------------------------------------------------------
NOTE 18 - Fair Value of Financial Instruments
--------------------------------------------------------------------------------

The estimated fair values of financial instruments at December 31, 2001 and 2000
are as follows:
<TABLE>
<CAPTION>
                                                                2001                                 2000
                                               -------------------------------------  ------------------------------------
                                                   Carrying          Estimated Fair      Carrying         Estimated Fair
                                                    Amount               Value            Amount               Value
                                               ------------------ ------------------  ------------------ -----------------
FINANCIAL ASSETS
<S>                                            <C>                <C>                 <C>                <C>
    Cash and cash equivalents                  $        9,601,962 $        9,601,962  $       10,964,908 $      10,964,908
                                               ================== ==================  ================== =================
    Interest bearing deposits in banks         $           84,509 $           84,509  $          116,034 $         116,034
                                               ================== ==================  ================== =================
    Securities                                 $          258,400 $          258,400  $        1,708,618 $       1,712,177
                                               ================== ==================  ================== =================
    Loans, net                                 $       55,459,810 $       56,022,467  $       53,577,614 $      52,800,132
                                               ================== ==================  ================== =================
    Mortgage loans held for sale               $        1,029,200 $        1,029,200  $          555,000 $         555,000
                                               ================== ==================  ================== =================
    Cash surrender value of life insurance
      policies                                 $        2,135,105 $        2,135,105  $        2,037,186 $       2,037,186
                                               ================== ==================  ================== =================
    Accrued interest receivable                $          336,070 $          336,070  $          421,288 $         421,288
                                               ================== ==================  ================== =================
FINANCIAL LIABILITIES
    Deposits                                   $       63,745,020 $       63,917,373  $       65,322,601 $      65,353,717
                                               ================== ==================  ================== =================
    Accrued interest payable                   $          459,359 $          459,359  $          709,596 $         709,596
                                               ================== ==================  ================== =================
</TABLE>

The estimated fair value of fee income on letters of credit at December 31, 2001
and 2000 is insignificant. Loan commitments on which the committed interest rate
is less than the current market rate are also insignificant at December 31, 2001
and 2000.

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 prepay 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.


                                      -45-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

--------------------------------------------------------------------------------
NOTE 19 - RidgeStone Financial Services, Inc (Parent Company Only)
          Financial Information
--------------------------------------------------------------------------------
<TABLE>
                            CONDENSED BALANCE SHEETS
<CAPTION>
                                                                                     December 31,
                                                                        -------------------------------------
                                                                               2001               2000
                                                                        ------------------ ------------------
<S>                                                                     <C>                <C>
ASSETS
   Cash and due from banks                                              $          123,674 $           27,381
   Interest bearing deposits in banks                                               84,509            116,034
   Available for sale securities - stated at fair value                             97,100             59,177
   Investment in subsidiary                                                      6,730,683          6,477,114
   Accrued interest receivable and other assets                                     15,649            121,749
                                                                        ------------------ ------------------
          TOTAL ASSETS                                                  $        7,051,615 $        6,801,455
                                                                        ================== ==================
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,
       876,492 shares issued and outstanding                                     8,417,117          8,417,117
   Retained deficit                                                             (1,308,899)        (1,556,610)
                                                                        ------------------ ------------------
                                                                                 7,108,218          6,860,507
   Accumulated other comprehensive loss                                            (56,603)           (59,052)
                                                                        ------------------ ------------------
       Total Stockholders' Equity                                                7,051,615          6,801,455
                                                                        ------------------ ------------------

          TOTAL STOCKHOLDERS' EQUITY                                    $        7,051,615 $        6,801,455
                                                                        ================== ==================
<CAPTION>
                    CONDENSED STATEMENTS OF INCOME
                                                                                    Years Ended December 31,
                                                                      ----------------------------------------------------
                                                                             2001             2000              1999
                                                                      ----------------------------------------------------
<S>                                                                   <C>               <C>              <C>
INCOME
   Interest on deposits in banks                                      $           3,476 $          7,465 $           6,025
   Securities losses                                                                  -           (9,164)          (15,402)
   Other income                                                                   9,964            4,500             4,765
                                                                      ----------------- ---------------- -----------------
       Total Income                                                              13,440            2,801            (4,612)
                                                                      ----------------- ---------------- -----------------

EXPENSES
   Professional fees                                                             23,034           24,517            30,033
   Other expenses                                                                   164            5,483            65,940
                                                                      ----------------- ---------------- -----------------
       Total Expenses                                                            23,198           30,000            95,973
                                                                      ----------------- ---------------- -----------------

Income before income taxes and equity in
   undistributed earnings of subsidiary                                          (9,758)         (27,199)         (100,585)
   Less:  Applicable income taxes (benefit)                                      (3,900)          (9,249)               25
                                                                      ----------------- ---------------- -----------------

Income before equity in undistributed earnings of
   subsidiary                                                                    (5,858)         (17,950)         (100,610)
Equity in undistributed earnings of subsidiary                                  253,569          178,611           579,788
                                                                      ----------------- ---------------- -----------------

       NET INCOME                                                     $         247,711 $        160,661 $         479,178
                                                                      ================= ================ =================
</TABLE>


                                      -46-
<PAGE>

               RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

--------------------------------------------------------------------------------
NOTE 19 - RidgeStone Financial Services, Inc (Parent Company Only) Financial
          Information (cont.)
--------------------------------------------------------------------------------
<TABLE>
                        CONDENSED STATEMENTS OF CASH FLOW
<CAPTION>
                                                                                     Years Ended December 31,
                                                                       ----------------------------------------------------
                                                                              2001              2000              1999
                                                                       ---------------- ----------------- -----------------
<S>                                                                    <C>              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net Income                                                         $        247,711 $         160,661 $         479,178
    Adjustments to reconcile net income to net cash
      flows from operating activities
        Loss on sale of investment securities                                         -             9,164            15,402
        Loss on disposal of other real estate owned                                   -                 -            54,497
        Equity in undistributed income of subsidiary                           (253,569)         (178,611)         (579,788)
        Net change in
           Accrued interest receivable and other assets                         106,100          (109,249)            1,620
           Accrued interest payable and other liabilities                             -                 -            (9,118)
                                                                       ---------------- ----------------- -----------------
        Net Cash Flows from Operating Activities                                100,242          (118,035)          (38,209)
                                                                       ---------------- ----------------- -----------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Net change in interest bearing deposits in banks                             31,525           142,131          (255,516)
    Activity in available for sale securities
        Sales                                                                         -             8,086            55,548
        Purchases                                                               (35,474)          (13,541)          (54,688)
    Proceeds from sales of other real estate owned                                    -                 -            32,015
    Net disbursement on other real estate owned                                       -                 -            (5,290)
                                                                       ---------------- ----------------- -----------------
        Net Cash Flows from Investing Activities                                 (3,949)          136,676          (227,931)
                                                                       ---------------- ----------------- -----------------

           Net Change in Cash and Cash Equivalents                               96,293            18,641          (266,140)

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                                    27,381             8,740           274,880
                                                                       ----------------------------------------------------

    CASH AND CASH EQUIVALENTS - END OF YEAR                            $        123,674 $          27,381 $           8,740
                                                                       ====================================================
</TABLE>

                                      -47-
<PAGE>

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

There have been no changes in or disagreements with the Company's independent
auditors regarding accounting and financial disclosure required to be reported
pursuant to this Item.


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 2002
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.

Item 11. Security Ownership of Certain Beneficial Owners and Management

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

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, 2001.



                                      -48-
<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, 2002.

                                    RIDGESTONE FINANCIAL SERVICES, INC.


                                    By:   /s/ Paul E. Menzel
                                          --------------------------------------
                                          Paul E. Menzel
                                          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, 2002:


         Signatures                                Title

/s/ Paul E. Menzel                  President, Chief Executive Officer and
------------------------------      Director (Principal Executive Officer)
Paul E. Menzel

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

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

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

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

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

                                    Director
-------------------------------
William F. Krause, Jr.

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

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

/s/ Richard A. Streff               Director
-------------------------------
Richard A. Streff

/s/ William J. Tetzlaff             Director
-------------------------------
William J. Tetzlaff


                                      -49-
<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)]

                                      E-1
<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)]

          21        Subsidiaries of Ridgestone Financial Services, Inc.

          23        Independent Auditor's Consent

          99        Definitive Proxy Statement for the Company's 2002 annual
                    meeting of shareholders scheduled to he held on April 23,
                    2002 (previously filed with the Commission under Regulation
                    14A on March 21, 2002 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.

                                      E-2