# U.S. SECURITIES AND
EXCHANGE COMMISSIONWashington D.C. 20549

# FORM 10-QSB

|[X] | QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 2004
|--- | -----------------------------------------------------------------------------------------------------------------------------------

|[   ] | 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.                   
|------------------------------------------------------
|(Exact name of registrant as specified in
its charter)

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

|13925 West North Avenue
                                            Brookfield, Wisconsin 53005
|-----------------------------------------------------------------------------------------------
|(Address of principal executive offices)                                                       

|262-789-1011                   
|-------------------------------
|(Registrant's telephone number)

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

State the number of shares
outstanding of each of the issuer's classes of common equity as of the latest practicable
date.

|Class | Outstanding
as of October 31, 2004
|----- | ----------------------------------

|Common Stock, no par value | 867,606
|-------------------------- | -------

Transitional Small Business
Disclosure Format:     Yes  
     No  X

---

# RIDGESTONE FINANCIAL
SERVICES, INC. AND SUBSIDIARIES

# INDEX

|            |                       |                                                                 | PageNo.
|----------- | --------------------- | --------------------------------------------------------------- | -------
|            |                       |                                                                 |        
|PART  I    | FINANCIAL INFORMATION |                                                                
|            |                       |                                                                 |        
|            | Item 1.               | Financial Statements                                            | 1      
|            |                       |                                                                 |        
|            |                       | Consolidated Balance Sheets as of                               |        
|            |                       | September 30, 2004 and December 31, 2003                        | 1      
|            |                       |                                                                 |        
|            |                       | Consolidated Statements of Income                              
|            |                       | For the Three and Nine Months Ended September 30, 2004 and 2003 | 2      
|            |                       |                                                                 |        
|            |                       | Consolidated Statements of Cash Flows                           |        
|            |                       | For the Nine Months Ended September 30, 2004 and 2003           | 3      
|            |                       |                                                                 |        
|            |                       | Consolidated Statements of Stockholders' Equity                 |        
|            |                       | For the Nine Months Ended September 30, 2004 and 2003           | 4      
|            |                       |                                                                 |        
|            |                       | Notes to Consolidated Financial Statements                      | 5      
|            |                       |                                                                 |        
|            | Item 2.               | Management's Discussion and Analysis                            | 6      
|            |                       |                                                                 |        
|            | Item 3.               | Controls and Procedures                                         | 12     
|            |                       |                                                                 |        
|PART II    | OTHER INFORMATION     |                                                                
|            |                       |                                                                 |        
|            | Item 6.               | Exhibits                                                        | 13     
|            |                       |                                                                 |        
|SIGNATURES  |                       | 14                                                             

---

# PART I - FINANCIAL
INFORMATION

# Item 1.  Financial
Statements

# RIDGESTONE FINANCIAL
SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSSeptember 30, 2004 and
December 31, 2003

|                                                            | September 30,2004(Unaudited) |  | December 31,2003 |           
|----------------------------------------------------------- | ---------------------------- |  | ---------------- | ----------
|ASSETS                                                      |                              |  |                  |           
|Cash and due from banks                                     |                              |  | $                | 3,845,666 
|Federal funds sold                                          |                              |  |                  | 2,375,000 
|Short-term investments                                      |                              |  |                  | --        
|                                                            |                              |  |                  |           
|Total cash and cash equivalents                             |                              |  |                  | 6,220,666 
|Interest bearing deposits in banks                          |                              |  |                  | --        
|Available for sale securities-stated at fair value          |                              |  |                  | 2,008,881 
|Loans receivable                                            |                              |  |                  | 79,475,494
|Less: Allowance for estimated loan losses                   |                              |  |                  | (700,111  
|                                                            |                              |  |                  |           
|Net loans receivable                                        |                              |  |                  | 78,775,383
|Mortgage loans held for sale                                |                              |  |                  | --        
|Premises and equipment, net                                 |                              |  |                  | 2,530,209 
|Cash surrender value of life insurance                      |                              |  |                  | 2,422,348 
|Accrued interest receivable and other assets                |                              |  |                  | 1,950,323 
|                                                            |                              |  |                  |           
|Total Assets                                                |                              |  | $                | 93,907,810
|                                                            |                              |  |                  |           
|LIABILITIES AND STOCKHOLDERS' EQUITY                        |                              | 
|LIABILITIES                                                 |                              | 
|Deposits:                                                   |                              | 
|Demand                                                      |                              |  | $                | 14,334,618
|Savings and NOW                                             |                              |  |                  | 28,772,428
|Other Time                                                  |                              |  |                  | 33,269,029
|                                                            |                              |  |                  |           
|Total deposits                                              |                              |  |                  | 76,376,076
|FHLB borrowings                                             |                              |  |                  | 6,000,000 
|Accrued interest payable and other liabilities              |                              |  |                  | 1,671,399 
|Guaranteed preferred beneficial interests in the            |                              | 
|corporation's subordinated debentures                       |                              |  |                  | 1,500,000 
|                                                            |                              |  |                  |           
|Total Liabilities                                           |                              |  |                  | 85,547,475
|                                                            |                              |  |                  |           
|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;   |                              | 
|917,606 and 897,241 shares issued, respectively             |                              |  |                  | 8,755,075 
|Retained earnings (Accumulated deficit)                     |                              |  |                  | 89,883    
|Treasury stock, at cost, 50,000 shares                      |                              |  |                  | (493,015  
|Accumulated other comprehensive income                      |                              |  |                  | 8,392     
|                                                            |                              |  |                  |           
|Total Stockholders' Equity                                  |                              |  |                  | 8,360,335 
|                                                            |                              |  |                  |           
|Total Liabilities and Stockholders' Equity                  |                              |  | $                | 93,907,810
|                                                            |                              |  |                  |           

1

---

# RIDGESTONE FINANCIAL
SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEThree and Nine
Months Ended September 30, 2004 and 2003

|                                              | Three Months Ended | Nine Months Ended
|--------------------------------------------- | ------------------ | -----------------
|
|Interest income                               |                    |                  
|Interest and fees on loans                    | $                  | 1,106,605        
|Interest on federal funds sold                |                    | 2,509            
|Interest on securities                        |                    | 27,041           
|Interest on deposits in banks                 |                    | --               
|                                              |                    |                  
|Total interest income                         |                    | 1,136,155        
|                                              |                    |                  
|Interest expense                             
|Interest on deposits                          |                    | 276,087          
|Interest on borrowed funds                    |                    | 31,168           
|Interest on preferred securities              |                    | 26,250           
|                                              |                    |                  
|Total interest expense                        |                    | 333,505          
|                                              |                    |                  
|Net interest income before provision         
|for loan losses                               |                    | 802,650          
|                                              |                    |                  
|Provision for loan losses                     |                    | --               
|                                              |                    |                  
|Net interest income after provision          
|for loan losses                               |                    | 802,650          
|                                              |                    |                  
|Non-interest income                          
|Secondary market loan fees                    |                    | 7,917            
|Gain on sale of other real estate             |                    | --               
|Service charges on deposit accounts           |                    | 52,846           
|Gain on sale of available for sale securities |                    | --               
|Increase in cash surrender value              |                    | 19,155           
|Other income                                  |                    | 48,923           
|                                              |                    |                  
|Total non-interest income                     |                    | 128,841          
|                                              |                    |                  
|Non-interest expense                         
|Salaries and employee benefits                |                    | 446,169          
|Occupancy and equipment expense               |                    | 65,616           
|Other expense                                 |                    | 276,916          
|                                              |                    |                  
|Total non-interest expense                    |                    | 788,701          
|                                              |                    |                  
|Income before income taxes                    |                    | 142,790          
|                                              |                    |                  
|Provision for income taxes                    |                    | 59,757           
|                                              |                    |                  
|                                              |                    |                  
|Net income                                    | $                  | 83,033           
|                                              |                    |                  
|                                              |                    |                  
|Earnings per share                            | - Basic            |                  
|                                              | - Diluted          |                  
|                                              |                    |                  
|Average shares outstanding                    |                    | 867,381          
|                                              |                    |                  

2

---

# RIDGESTONE FINANCIAL
SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSNine Months
Ended September 30, 2004 and 2003(Unaudited)

|                                                     | Nine Months Ended
|---------------------------------------------------- | -----------------
|
|Cash flows from operating activities:                |                  
|Net income                                           |                  
|Adjustments to reconcile net income to net cash      |                  
|used in operating activities:                        |                  
|Depreciation                                         |                  
|Gain on sale of available for sale securities        |                  
|Provision for loan losses                            |                  
|Dividend FHLB                                        |                  
|Net increase in cash surrender value                 |                  
|Net change in:                                       |                  
|Mortgage loans held for sale                         |                  
|Accrued interest receivable and other assets         |                  
|Accrued interest payable and other liabilities       |                  
|                                                     |                  
|Total Adjustments                                    |                  
|                                                     |                  
|Net cash provided by operating activities            |                  
|Cash flows from investing activities:                |                  
|Net (increase) decrease in interest-bearing deposits |                  
|Proceeds from sale of available for sale securities  |                  
|Purchase of available for sale securities            |                  
|Purchase of FHLB stock                               |                  
|Net increase in loans                                |                  
|Additions to premises and equipment                  |                  
|                                                     |                  
|Net cash used in investing activities                |                  
|Cash flows from financing activities:                |                  
|Net increase in deposits                             |                  
|Net change in federal funds purchased                |                  
|Net increase in FHLB borrowings                      |                  
|Purchase of treasury stock                           |                  
|Issuance of subordinated debentures                  |                  
|Issuance of common stock                             |                  
|                                                     |                  
|Net cash provided by financing activities            |                  
|                                                     |                  
|Net change in cash and cash equivalents              |                  
|Cash and cash equivalents, beginning                 |                  
|                                                     |                  
|Cash and cash equivalents, ending                    |                  
|                                                     |                  
|Supplemental cash flow information                   |                  
|Cash paid for interest                               |                  
|Cash paid for income taxes                           |                  
|Tax benefit of nonqualified stock options exercised  |                  

3

---

# RIDGESTONE
FINANCIAL SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERSEQUITY
Nine Months Ended September 30, 2004 and 2003(Unaudited)

|                                          | Common
      Stock | Treasury
      Stock | Retained
     Earnings
 (Accumulated
      Deficit) | Accumulated
       Other
Comprehensive
  Income (Loss) | Total
|----------------------------------------- | ------------------ | -------------------- | --------------------------------------------------- | ------------------------------------------------------ | -----
|Balances                                  |                    |                      |                                                     |                                                        |      
|December 31, 2002                         |                    |                      | $                                                   | 8,423,619                                              |      
|                                          |                    |                      |                                                     |                                                        |      
|Net income                                |                    |                      |                                                     |                                                        |      
|                                          |                    |                      |                                                     |                                                        |      
|Other comprehensive income-change in      |                    |                     
|net unrealized gain on securities         |                    |                     
|available for sale, net of tax            |                    |                      |                                                     |                                                        |      
|                                          |                    |                      |                                                     |                                                        |      
|Total comprehensive income                |                    |                      |                                                     |                                                        |      
|                                          |                    |                      |                                                     |                                                        |      
|Common stock issued                       |                    |                      |                                                     | 10,000                                                 |      
|                                          |                    |                      |                                                     |                                                        |      
|Treasury stock                            |                    |                      |                                                     |                                                        |      
|                                          |                    |                      |                                                     |                                                        |      
|                                          |                    |                      |                                                     |                                                        |      
|Balances                                  |                    |                     
|September 30, 2003                        |                    |                      | $                                                   | 8,433,619                                              |      
|                                          |                    |                      |                                                     |                                                        |      
|                                          |                    |                      |                                                     |                                                        |      
|Balances                                  |                    |                     
|December 31, 2003                         |                    |                      | $                                                   | 8,574,703                                              |      
|                                          |                    |                      |                                                     |                                                        |      
|Net income                                |                    |                      |                                                     |                                                        |      
|                                          |                    |                      |                                                     |                                                        |      
|Other comprehensive income-change in      |                    |                     
|net unrealized gain on securities         |                    |                     
|available for sale, net of tax            |                    |                      |                                                     |                                                        |      
|                                          |                    |                      |                                                     |                                                        |      
|Total comprehensive income                |                    |                      |                                                     |                                                        |      
|                                          |                    |                      |                                                     |                                                        |      
|Tax benefit of nonqualified stock options |                    |                     
|exercised                                 |                    |                      |                                                     | 42,590                                                 |      
|                                          |                    |                      |                                                     |                                                        |      
|                                          |                    |                      |                                                     |                                                        |      
|Issuance of 20,365 shares of common stock |                    |                      |                                                     | 137,782                                                |      
|                                          |                    |                      |                                                     |                                                        |      
|                                          |                    |                      |                                                     |                                                        |      
|Balances                                  |                    |                     
|September 30, 2004                        |                    |                      | $                                                   | 8,755,075                                              |      
|                                          |                    |                      |                                                     |                                                        |      
|                                          |                    |                      |                                                     |                                                        |      

4

---

# RIDGESTONE FINANCIAL
SERVICES, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2004 and 2003(Unaudited)

NOTE 1  BASIS OF
PRESENTATION

The accompanying unaudited
consolidated financial statements of Ridgestone Financial Services, Inc. (the
Company) have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and with the instructions
to Form 10-QSB. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for the fair presentation have been included.
Operating results for the three months and nine months ended September 30, 2004 are not
necessarily indicative of the results that may be expected for the year ended December 31,
2004. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted. The accounting policies followed by the
Company are set forth in Note 1 to the Companys consolidated financial statements
contained in the Companys Annual Report on Form 10-KSB for the year ended December
31, 2003. For further information, refer to the consolidated financial statements and
footnotes thereto included in the Companys Annual Report on Form 10-KSB for the year
ended December 31, 2003.

NOTE 2  PRINCIPLES
OF CONSOLIDATION

The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned subsidiaries,
Ridgestone Bank (the Bank) and Ridgestone Capital Trust I. All significant
intercompany accounts and transactions have been eliminated in the consolidated financial
statements.

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

NOTE 3  STOCK-BASED
COMPENSATION PLAN

At September 30, 2004, the Company
has a stock-based employee compensation plan. The Company accounts for this plan under the
recognition and measurement principles of APB Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations. No stock-based employee compensation
cost is reflected in net income, as all options granted under this plan had an exercise
price equal to the approximate market value of the underlying common stock on the date of
grant. The following table illustrates, in accordance with SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure, the effect on net income
and earnings per share if the Company had applied the fair value recognition provisions of
SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee
compensation.

|                                                   | September 30,          2004 | September 30,          2003
|-------------------------------------------------- | --------------------------- | ---------------------------
|Net income - as reported                           |                             |                            
|Deduct: Total stock-based employee compensation    |                             |                            
|expense determined under a fair value based method |                             |                            
|for all awards granted, net of related tax effects |                             |                            
|                                                   |                             |                            
|Pro forma net income                               |                             |                            
|                                                   |                             |                            
|Basic earnings per share - as reported             |                             |                            
|Pro forma basic earnings per share                 |                             |                            
|Diluted earnings per share - as reported           |                             |                            
|Pro forma diluted earnings per share               |                             |                            

5

---

# Item 2.  
Managements Discussion and Analysis

# General

Ridgestone Financial Services, Inc.
(the Company) was formed in May 1994 under the laws of the State of Wisconsin
for the purpose of becoming the bank holding company of Ridgestone Bank (the
Bank).

The Bank was capitalized on December
6, 1995, and commenced operation on December 7, 1995. The Bank was organized as a
Wisconsin chartered commercial bank with depository accounts insured to the maximum extent
allowable by the Federal Deposit Insurance Corporation. The Bank provides full service
commercial and consumer banking services in Brookfield, Wisconsin, and adjacent
communities.

On June 30, 2003, Ridgestone Capital
Trust I (Capital Trust), a Delaware business trust wholly owned by the
Company, completed the sale of $1.5 million of trust preferred securities (the Trust
Preferred Securities). The Trust Preferred Securities were sold in a private
placement to institutional investors. Capital Trust used the proceeds from the offering to
purchase a like amount of the Companys Junior Subordinated Debentures (the
Debentures).

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

| | Allowance
for Loan Losses. The allowance for loan losses is determined using a
methodology which reserves currently for those loans in which it is determined that a
loss is probable based on characteristics of the individual loan, historical loss
patterns of similar, homogeneous loans and environmental factors unique to
each measurement date. The allowance for loan losses 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 methodology used by the Company has the following components:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | Reserves
for homogeneous loan pools. The Company makes a significant number of loans which,
due to their underlying similar characteristics, are assessed for loss as homogeneous pools.
The homogeneous pools of loans are based on credit risk gradings. 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 loan losses to each loan
pool using a defined methodology. The methodology considers historical loss information
and regulatory averages. Loan types reviewed under this methodology include real estate,
consumer and commercial loans.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

---

| | 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. Because of this uncertainty, an unallocated allowance is also
maintained. The unallocated portion of the allowance reflects managements view that
the allowance 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 allowance include portfolio exposure due to
concentration in specific industries and changes in the economy. While management uses
the best information available to make its evaluation, future adjustments to the
allowance may be necessary if there are significant changes in economic conditions.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Deferred
Taxes. Amounts provided for income tax expense are based on income
reported for financial statement purposes and do not necessarily represent amounts
currently payable under tax laws. Deferred income tax assets and liabilities are computed
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. The differences relate principally to the allowance for loan losses,
deferred compensation, and net operating loss carryforwards. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the provision
for income taxes. Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following is a discussion of the
Companys Financial Condition and Results of Operations as of September 30, 2004 and
for the three months and nine months ended September 30, 2004. The discussion provides
additional analysis of the financial statements and should be read in conjunction with
that information.

# Financial Condition

Total Assets.
Total assets of the Company as of September 30, 2004 were $93,907,810 compared to
$88,322,699 as of December 31, 2003, an increase of $5,585,111 or 6%. Assets increased
primarily in loans and securities.

Cash and Cash Equivalents. Cash and due from banks, which represent cash maintained at the Bank and
funds that the Bank and the Company have deposited in other financial institutions, was
$3,845,666 at September 30, 2004, compared to $2,955,356 as of December 31, 2003. The Bank
reported $2,375,000 of federal funds sold (which are inter-bank funds with daily
liquidity) on September 30, 2004 compared to $2,278,000 in federal funds sold as of
December 31, 2003. Short-term investments in commercial paper decreased to $0 as of
September 30, 2004 from $500,000 as of December 31, 2003, resulting from the liquidation
of commercial paper investments to fund loan commitments during the third quarter of 2004.

Interest Bearing Deposits. Total interest bearing deposits in banks as of September 30, 2004 were $0
compared to $551,079 as of December 31, 2003. The decrease is primarily due to the Company
moving funds from an interest-bearing account at another financial institution to a
regular checking account at the Bank to allow the Bank to employ the funds in
higher-yielding investments.

Available for Sale Securities. The Companys investment portfolio currently consists of securities
placed in the available-for-sale category which may be liquidated to provide cash for
operating or financing purposes. The available-for-sale securities portfolio increased to
$2,008,881 at September 30, 2004 from $750,060 at December 31, 2003, primarily due to the
investment of funds generated from repayment of loans early in the year in securities
issued by U.S. government agencies.

Loans. Loans
prior to the allowance for loan losses increased by $4,348,866, or 6%,           from
$75,126,628 as of December 31, 2003 to $79,475,494 as of September 30,           2004.
This increase resulted primarily from the Banks commercial calling
          efforts throughout the year, which, as of September 30, 2004, generated
          increases in construction and commercial real estate balances. In addition, a
          rise in interest rates offered in the secondary mortgage market caused demand
          for long-term mortgage refinancings to drop during the second and third
          quarters, resulting in a decrease in mortgage loans held for sale, from
$650,000           at December 31, 2003 to $0 at September 30, 2004.

7

---

The Banks loan portfolio mix as
of September 30, 2004 and December 31, 2003 was divided among the following categories.

|                        | September 30, 2004 | December 31, 2003
|----------------------- | ------------------ | -----------------
|
|Construction            |                    |                  
|Commercial Real Estate  |                    |                  
|Residential Real Estate |                    |                  
|Commercial              |                    |                  
|Consumer                |                    |                  
|                        |                    |                  
|Total Loans             |                    |                  

Allowance for Loan Losses. Based on the loss estimates described in General  Critical
Accounting Policies  Allowance for Loan Losses, management determines its best
estimate of the required allowance for loan losses. Managements evaluation of these
factors resulted in an allowance for loan losses of $700,111 or 0.88% of gross loans at
September 30, 2004 compared to $729,643 or 0.97% of gross loans at December 31, 2003.

The resulting provisions for loan
losses are the amounts required to maintain the allowance for loan losses at levels deemed
necessary by management after taking into consideration charge-offs and recoveries. No
provision for loan losses was made for the nine months ended September 30, 2004 and a
$348,000 provision was made for the nine months ended September 30, 2003.

The following table details the
charge-off and recovery activity affecting the allowance for loan losses during the nine
months ended September 30, 2004 and 2003:

|Allowance Change | Nine Months Ended
September 30, 2004 | Nine Months Ended
September 30, 2003
|---------------- | ------------------------------------ | ------------------------------------
|Charge-offs      |                                      |                                     
|Less Recoveries  |                                      |                                     
|                 |                                      |                                     
|Net change       |                                      |                                     

Management recognizes there are
significant estimates in the process of identifying losses and the ultimate losses could
be significantly different from those currently estimated. For additional information
regarding the Companys allowance for loan losses, see Results of Operations
 Provision for Loan Losses below.

Other Assets.
Other assets increased to $1,950,323 at September 30, 2004, from $1,379,232 at December
31, 2003, an increase of $571,091, or 41%. This increase was primarily due to the purchase
of $500,000 of additional stock in the Federal Home Loan Bank of Chicago (the
FHLB).

Deposits.  Deposits
as of September 30, 2004 were $76,376,076 compared to           $72,656,531 as of
December 31, 2003, an increase of $3,719,545 or 5%, due to an           increase in time,
savings and NOW account balances resulting from the           Banks marketing
efforts.

Borrowed Funds.
The Bank is a member of the FHLB and has a master contract with the FHLB which provides
for borrowing up to approximately $6,788,000 at September 30, 2004, collateralized by the
Banks first lien one-to-four-family real estate loans and certain pledged government
securities and commercial loans. In the third quarter, the Bank borrowed an additional
$1,500,000 from the FHLB to fund loan commitments. As of September 30, 2004, the Bank has
borrowed $6,000,000 from the FHLB, with applicable interest rates ranging from 2.03% to
3.32% and with varying maturities through September 2007.

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 securities. Further, subject to certain limits, the
          Company has the ability to acquire additional funds through short-term
          borrowings from other financial institutions. Liquidity needs are influenced by
          economic conditions, interest rates and competition.

8

---

The loan-to-deposit ratio prior to
the allowance for loan losses as of September 30, 2004 was 104% compared to 103% as of
December 31, 2003. To provide funds for loans and loan commitments, as of September 30,
2004, the Company had $3,845,666 in cash and due from banks, $2,375,000 in federal funds
sold, and $2,008,881 in securities available for sale plus various sources of credit
available. These available credit sources include federal funds lines of credit, loans
from the FHLB and loans from the Federal Reserve Bank. Certain of these lines would be
collateralized with other assets of the Bank.

Net cash provided by operating
activities for the nine months ended September 30, 2004 was $853,303 compared to
$2,853,335 used in operations in the prior period. The difference was primarily due to
lower sales of mortgage loans into the secondary market, coupled with lower net income and
no provision for loan losses. The cash provided by operating activities during the first
nine months of 2004 was primarily provided by a decrease in mortgage loans held for sale.

Net cash used in investing activities
for the nine months ended September 30, 2004 was $5,723,320 compared to $3,322,355 in the
prior period. The decrease in cash was primarily due to a $4,378,398 increase in loans,
coupled with the purchase of $1,250,489 of available for sale securities.

Net cash provided by financing
activities for the nine months ended September 30, 2004 was $5,357,327 compared to
$4,732,099 in the prior period. In the first nine months of 2004, the cash provided by
financing activities was primarily from a $3,719,545 increase in deposits, supplemented by
a $1,500,000 increase in FHLB borrowings.

Off-Balance Sheet Liabilities.
In the normal course of business, to meet the financing needs of its
customers, the Company is party to financial instruments with off-balance sheet risk.
These financial instruments include commitments to extend credit through commercial and
personal lines of credit, commitments under credit card arrangements, and commercial
letters of credit. These financial instruments are recorded in the financial statements
when they are funded or related fees are incurred or received.

As of September 30, 2004, the Company
had $24,599,690 in financial instruments with off-balance sheet risk compared to
$21,625,028 as of December 31, 2003. The following table details the unused commitments
made as of September 30, 2004 and December 31, 2003:

|Commitment Type              | September 30, 2004 | December 31, 2003
|---------------------------- | ------------------ | -----------------
|Commitments to extend credit |                    |                  
|Credit card lines            |                    |                  
|Commercial letters of credit |                    |                  
|                             |                    |                  
|Total commitments            |                    |                  

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.

9

---

Capital Resources. Capital ratios applicable to the Bank as of September 30, 2004 and December 31, 2003
were as follows:

|                                         | Actual |  | For Capital
Adequacy Purposes |           | To Be Well Capitalized
UnderPrompt Corrective
Action Provisions
|---------------------------------------- | ------ |  | ----------------------------- | --------- | ---------------------------------------------------------------
|
|As of September 30, 2004                 |        |  |                               |           |                                                                
|Total capital (to risk weighted assets)  |        |  | $                             | 9,607,000 |                                                                
|Tier 1 capital (to risk weighted assets) |        |  | $                             | 8,907,000 |                                                                
|Tier 1 capital (to average assets)       |        |  | $                             | 8,907,000 |                                                                
|As of December 31, 2003                  |        | 
|Total capital (to risk weighted assets)  |        |  | $                             | 9,273,000 |                                                                
|Tier 1 capital (to risk weighted assets) |        |  | $                             | 8,544,000 |                                                                
|Tier 1 capital (to average assets)       |        |  | $                             | 8,544,000 |                                                                

Management intends to maintain
capital levels in excess of minimums established by the regulatory authorities. As of
September 30, 2004, the most recent notification from the regulatory agencies categorized
the Bank as well capitalized under the regulatory framework for prompt corrective action.

# Results of Operations

Net Income. For
the three months ended September 30, 2004, the Company reported net income of $83,034, a
decrease of $75,085 or 47% compared to net income of $158,119 for the three months ended
September 30, 2003. The decrease for the three months ended September 30, 2004 is
primarily due to a reduction in fees from the sale of mortgages into the secondary market.

Net income was $223,547 for the nine
months ended September 30, 2004 compared to net income of $574,667 for the same period in
2003, a decrease of $351,120 or 61%. The decrease for the nine months ended September 30,
2004 is due primarily to reductions in interest income on loans and fees from the sale of
mortgages into the secondary market, offset by the absence of a provision for loan losses
in 2004.

Net Interest
Income. Total interest income decreased by $83,801 to $1,136,155 for the
three months ended September 30, 2004 and decreased by $484,060 to $3,279,345 for the nine
months ended September 30, 2004 compared to the same periods respectively in 2003. Total
interest expense decreased by $28,083 to $333,505 for the three months ended September 30,
2004 and decreased by $105,138 to $986,091 for the nine months ended September 30, 2004
compared to the same periods respectively in 2003.

Net interest income before provision
for loan losses for the three months ended September 30, 2004 was $802,650 compared to
$858,368 for the same period in 2003, a decrease of $55,718 or 6%. For the three months
ended September 30, 2004, the Companys net interest margin was 3.98% compared to
4.16% for the same period in 2003. These differences are primarily due to the prolonged
low interest rate environment which prevented rate reductions on liabilities as
significant as those on assets.

Net interest income before provision
for loan losses for the nine months ended September 30, 2004 was $2,293,254 compared to
$2,672,176 for the same period last year, a decrease of $378,922 or 14%. The decrease is
primarily due to lower average loan balances and interest rates. For the nine months ended
September 30, 2004, the Companys net interest margin declined to 3.86% compared to
4.44% for the same period in 2003, primarily due to the low interest rate environment and
lower loan balances resulting from paydowns earlier in the year.

10

---

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

Based on the analysis performed, the
Company made no provision for loan losses during the first nine months of 2004 and
$348,000 during the same period in 2003. No provision was made for the first nine months
of 2004 primarily because of improved credit quality. During the nine months ended
September 30, 2004, the Bank incurred $29,762 in charge-offs related primarily to one
commercial loan compared to $395,962 in charge-offs during the same period in 2003.

Non-Interest
Income. Total non-interest income consists of fees from the sale of
mortgage loans into the secondary market; maintenance, overdrafts and stop payment charges
on deposit accounts; safe deposit fees; miscellaneous fees such as wire transfers,
interchange fees on debit cards, and merchant credit card income; and increases in cash
surrender value of life insurance policies. Total non-interest income was $128,841 for the
three months ended September 30, 2004 compared to $299,448 for the same period in 2003, a
decrease of $170,607 or 57%. Total non-interest income was $491,364 for the nine months
ended September 30, 2004 compared to $776,437 for the same period in 2003, a decrease of
$285,073 or 37%. The decrease in non-interest income for the three and nine months ended
September 30, 2004 is primarily due to a reduction in fees from the sale of mortgage loans
into the secondary market. The mortgage sales declined because of an increase in the
market rates on long-term fixed-rate mortgages.

Non-Interest Expense. Total non-interest expenses consisted primarily of salaries and employee
benefits, occupancy and equipment expenses, data processing fees and professional fees.
Total non-interest expenses were $788,700 for the three months ended September 30, 2004
compared to $644,896 for the same period in 2003, an increase of $143,804 or 22%. Total
non-interest expenses were $2,451,448 for the nine months ended September 30, 2004
compared to $2,214,122 for the same period in 2003, an increase of $237,326 or 11%. The
increase in non-interest expenses for the three and nine months ended September 30, 2004
is primarily attributed to personnel costs related to enhancing the Banks commercial
lending presence.

# Special Note Regarding
Forward-Looking Statements

Certain matters discussed in this
Quarterly Report on Form 10-QSB 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, the ability to attract new customers, competition and
legislative enactments or regulatory changes which adversely affect the business of the
Company and/or the Bank. Shareholders, potential investors and other readers are urged to
consider these factors in evaluating the forward-looking statements. The forward-looking
statements included herein are only made as of the date of this Form 10-QSB and the
Company undertakes no obligation to publicly update such forward-looking statements to
reflect subsequent events or circumstances.

11

---

# Item 3.  Controls and
Procedures

The Company carried out an
evaluation, under the supervision and with the participation of the Chairman of the Board
and Chief Executive Officer of the Company and the Senior Vice President and Treasurer of
the Company, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and
15d-15(e), as of the end of the period covered by this Quarterly Report on Form 10-QSB.
Based on that evaluation, they concluded that the Companys disclosure controls and
procedures are effective to ensure that information required to be disclosed in the
Companys Exchange Act reports is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commissions rules and
forms, and that such information is accumulated and communicated to them to allow timely
decisions regarding required disclosure.

There have been no changes in the
Companys internal controls over financial reporting that occurred during the
Companys last fiscal quarter that have materially affected, or are reasonably likely
to materially affect, the Companys internal controls over financial reporting.

12

---

# PART II  OTHER
INFORMATION

# Item 6.  Exhibits

|Number | Description
|------ | -----------

|31.1 | Certification
by Paul E. Menzel (Chairman of the Board and Chief Executive Officer)
                            pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31.2 | Certification
by Timothy D. Dondlinger (Senior Vice President and Treasurer) pursuant to
                            Section 302 of the Sarbanes-Oxley Act of 2002.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|32 | Certification
by Paul E. Menzel (Chairman of the Board and Chief Executive Officer) and
                            Timothy D. Dondlinger (Senior Vice President and Treasurer)
pursuant to Section                             906 of the Sarbanes-Oxley Act of 2002.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

---

SIGNATURES

In
accordance with the requirements of the Exchange Act, the registrant caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

|                         | RIDGESTONE FINANCIAL SERVICES, INC.
|------------------------ | -----------------------------------
|Date:  November 10, 2004 | By:                                
|                         |                                    

|                         |    
|------------------------ | ---
|Date:  November 10, 2004 | By:
|                         |    

14