# 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 JUNE 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 small business issuer 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               
|---------------------------
|(Issuer'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 July 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                         |        
|            |                       | June 30, 2004 and December 31, 2003                       | 1      
|            |                       |                                                           |        
|            |                       | Consolidated Statements of Income                        
|            |                       | For the Three and Six Months Ended June 30, 2004 and 2003 | 2      
|            |                       |                                                           |        
|            |                       | Consolidated Statements of Cash Flows                     |        
|            |                       | For the Six Months Ended June 30, 2004 and 2003           | 3      
|            |                       |                                                           |        
|            |                       | Consolidated Statements of Stockholders' Equity           |        
|            |                       | For the Six Months Ended June 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 4.               | Submission of Matters to a Vote of Security Holders       | 13     
|            |                       |                                                           |        
|            | Item 6.               | Exhibits and Reports on Form 8-K                          | 13     
|            |                       |                                                           |        
|SIGNATURES  |                       | 14                                                       

---

# PART I - FINANCIAL
INFORMATION

# Item 1.  Financial
Statements

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

|                                                            | June 30, 2004(Unaudited) |  | December 31, 2003 |           
|----------------------------------------------------------- | ------------------------ |  | ----------------- | ----------
|ASSETS                                                      |                          |  |                   |           
|Cash and due from banks                                     |                          |  | $                 | 3,530,531 
|Federal funds sold                                          |                          |  |                   | 2,343,000 
|Short-term investments                                      |                          |  |                   | 3,000,000 
|                                                            |                          |  |                   |           
|Total cash and cash equivalents                             |                          |  |                   | 8,873,531 
|Interest bearing deposits in banks                          |                          |  |                   | --        
|Available for sale securities-stated at fair value          |                          |  |                   | 2,056,439 
|Loans receivable                                            |                          |  |                   | 72,796,258
|Less: Allowance for estimated loan losses                   |                          |  |                   | (700,111  
|                                                            |                          |  |                   |           
|Net loans receivable                                        |                          |  |                   | 72,096,147
|Mortgage loans held for sale                                |                          |  |                   | --        
|Premises and equipment, net                                 |                          |  |                   | 2,488,177 
|Cash surrender value of life insurance                      |                          |  |                   | 2,398,316 
|Accrued interest receivable and other assets                |                          |  |                   | 2,103,045 
|                                                            |                          |  |                   |           
|Total Assets                                                |                          |  | $                 | 90,015,655
|                                                            |                          |  |                   |           
|LIABILITIES AND STOCKHOLDERS' EQUITY                        |                          | 
|LIABILITIES                                                 |                          | 
|Deposits:                                                   |                          | 
|Demand                                                      |                          |  | $                 | 14,315,562
|Savings and NOW                                             |                          |  |                   | 29,753,819
|Other Time                                                  |                          |  |                   | 30,137,307
|                                                            |                          |  |                   |           
|Total deposits                                              |                          |  |                   | 74,206,688
|Federal funds purchased                                     |                          |  |                   | --        
|Other borrowings                                            |                          |  |                   | 4,500,000 
|Accrued interest payable and other liabilities              |                          |  |                   | 1,569,852 
|Guaranteed preferred beneficial interests in the            |                          | 
|corporation's subordinated debentures                       |                          |  |                   | 1,500,000 
|                                                            |                          |  |                   |           
|Total Liabilities                                           |                          |  |                   | 81,776,540
|                                                            |                          |  |                   |           
|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;   |                          | 
|914,440 and 897,241 shares issued, respectively             |                          |  |                   | 8,719,350 
|Retained earnings (Accumulated deficit)                     |                          |  |                   | 6,850     
|Treasury stock, at cost, 50,000 shares                      |                          |  |                   | (493,015  
|Accumulated other comprehensive income                      |                          |  |                   | 5,930     
|                                                            |                          |  |                   |           
|Total Stockholders' Equity                                  |                          |  |                   | 8,239,115 
|                                                            |                          |  |                   |           
|Total Liabilities and Stockholders' Equity                  |                          |  | $                 | 90,015,655
|                                                            |                          |  |                   |           

1

---

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

|                                     | Three Months Ended |  | Six Months Ended |          
|------------------------------------ | ------------------ |  | ---------------- | ---------
|
|Interest income                      |                    |  |                  |          
|Interest and fees on loans           |                    |  | $                | 997,895  
|Interest on federal funds sold       |                    |  |                  | 9,676    
|Interest on securities               |                    |  |                  | 27,778   
|Interest on deposits in banks        |                    |  |                  | 1        
|                                     |                    |  |                  |          
|Total interest income                |                    |  |                  | 1,035,350
|Interest expense                     |                    | 
|Interest on deposits                 |                    |  |                  | 270,386  
|Interest on borrowed funds           |                    |  |                  | 29,707   
|Interest on preferred securities     |                    |  |                  | 25,375   
|                                     |                    |  |                  |          
|Total interest expense               |                    |  |                  | 325,468  
|Net interest income before provision |                    | 
|for loan losses                      |                    |  |                  | 709,882  
|Provision for loan losses            |                    |  |                  | --       
|                                     |                    |  |                  |          
|Net interest income after provision  |                    | 
|for loan losses                      |                    |  |                  | 709,882  
|Non-interest income                  |                    | 
|Secondary market loan fees           |                    |  |                  | 81,835   
|Gain on sale of other real estate    |                    |  |                  | --       
|Service charges on deposit accounts  |                    |  |                  | 52,929   
|Increase in cash surrender value     |                    |  |                  | 33,000   
|Other income                         |                    |  |                  | 50,173   
|                                     |                    |  |                  |          
|Total non-interest income            |                    |  |                  | 217,937  
|Non-interest expense                 |                    | 
|Salaries and employee benefits       |                    |  |                  | 501,012  
|Occupancy and equipment expense      |                    |  |                  | 68,715   
|Other expense                        |                    |  |                  | 277,058  
|                                     |                    |  |                  |          
|Total non-interest expense           |                    |  |                  | 846,785  
|Income before income taxes           |                    |  |                  | 81,034   
|Provision for income taxes           |                    |  |                  | 19,713   
|                                     |                    |  |                  |          
|Net income                           |                    |  | $                | 61,321   
|                                     |                    |  |                  |          
|Earnings per share                   |                    | 
|- Basic                              |                    |  | $                | 0.07     
|- Diluted                            |                    |  | $                | 0.06     
|                                     |                    |  |                  |          
|Average shares outstanding           |                    |  |                  | 856,957  

2

---

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

|                                                     | Six Months Ended | 
|---------------------------------------------------- | ---------------- | 
|
|Cash flows from operating activities:                |                  | 
|Net income                                           |                  | 
|Adjustments to reconcile net income to net cash      |                  | 
|used in operating activities:                        |                  | 
|Depreciation                                         |                  | 
|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 (used in) operating activities  |                  | 
|Cash flows from investing activities:                |                  | 
|Net (increase) decrease in interest-bearing deposits |                  | 
|Purchase of available for sale securities            |                  | 
|Purchase of FHLB stock                               |                  | 
|Net (increase) decrease in loans                     |                  | 
|Additions to premises and equipment                  |                  | 
|                                                     |                  | 
|Net cash provided by (used in) investing activities  |                  | 
|Cash flows from financing activities:                |                  | 
|Net increase in deposits                             |                  | 
|Net change in federal funds purchased                |                  | 
|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 option exercises   |                  | 

3

---

# RIDGESTONE
FINANCIAL SERVICES, INC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITYSix Months Ended June
30, 2004 and 2003(Unaudited)

|                                                             | Common
Stock | Treasury
Stock | Retained
Earnings | 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                                          |              |                |                   | --                                            |      
|                                                             |              |                |                   |                                               |      
|Balances                                                     |              |               
|June 30, 2003                                                |              |                | $                 | 8,423,619                                     |      
|                                                             |              |                |                   |                                               |      
|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          |              |                |                   | 41,310                                        |      
|Issuance of 20,365 shares of common stock                    |              |                |                   | 103,337                                       |      
|Treasury Stock                                               |              |                |                   |                                               |      
|                                                             |              |                |                   |                                               |      
|Balances                                                     |              |               
|June 30, 2004                                                |              |                | $                 | 8,719,350                                     |      
|                                                             |              |                |                   |                                               |      

4

---

# RIDGESTONE FINANCIAL
SERVICES, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSJune
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 six months ended June 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 June  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.

|                                                | June 30, 2004 |  | June 30, 2003 |        
|----------------------------------------------- | ------------- |  | ------------- | -------
|Net income  as reported                        |               |  | $             | 140,514
|Deduct: Total stock-based employee compensation |               | 
|expense determined under a fair value based     |               | 
|method for all awards granted, net of related   |               | 
|tax effects                                     |               |  |               | 55,797 
|                                                |               |  |               |        
|Pro forma net income                            |               |  | $             | 84,717 
|                                                |               |  |               |        
|Basic earnings per share  as reported          |               |  | $             | 0.16   
|Pro forma basic earnings per share              |               |  | $             | 0.10   
|Diluted earnings per share  as reported        |               |  | $             | 0.14   
|Pro forma diluted earnings per share            |               |  | $             | 0.09   

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). The Debentures are the sole assets of Capital Trust and are
eliminated, along with the related income statement effects, in the consolidated financial
statements.

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 June 30, 2004 and for
the three months and six months ended June 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 June 30, 2004 were $90,015,655 compared to
$88,322,699 as of December 31, 2003, an increase of $1,692,956 or 2%. Assets increased
primarily in short-term investments and securities, offset by a decrease in loans.

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
$3,530,531 at June 30, 2004, compared to $2,955,356 as of December 31, 2003. The Bank
reported $2,343,000 of federal funds sold (which are inter-bank funds with daily
liquidity) on June 30, 2004 compared to $2,278,000 in federal funds sold as of December
31, 2003. Short-term investments in commercial paper increased to $3,000,000 as of June
30, 2004 from $500,000 as of December 31, 2003. As loan paydowns occurred, cash was
invested in commercial paper in an attempt to maximize the return on those funds, while
maintaining liquidity to fund expected future loan growth.

Interest Bearing Deposits. Total interest bearing deposits in banks as of June 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 earning historically low interest rates 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
$2,056,439 at June 30, 2004 from $750,060 at December 31, 2003, primarily due to the
investment of funds generated from repayment of loans in securities issued by U.S.
government agencies.

Loans.  Loans
prior to the allowance for loan losses decreased by $2,330,370, or 3%,           from
$75,126,628 as of December 31, 2003 to $72,796,258 as of June 30, 2004.           This
decrease is primarily due to the rate of commercial loan repayment           exceeding
the rate of new commercial loan origination. 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 quarter, resulting in           a
decrease in mortgage loans held for sale, from $650,000 at December 31, 2003           to
$0 at June 30, 2004. Based on the results of the Banks commercial           calling
efforts in the first and second quarters of 2004, management anticipates
          increasing loan demand in the second half of 2004.

7

---

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

|                        | June 30, 2004 | December 31, 2003
|----------------------- | ------------- | -----------------
|
|Commercial              |               |                  
|Commercial Real Estate  |               |                  
|Residential Real Estate |               |                  
|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 0.96% of gross loans at
June 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 six months ended June 30, 2004 and a $75,000
provision was made for the six months ended June 30, 2003.

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

|Allowance Change | Six Months Ended June 30, 2004 |  | Six Months Ended June 30, 2003 |       
|---------------- | ------------------------------ |  | ------------------------------ | ------
|Charge-offs      |                                |  | $                              | 29,762
|Less Recoveries  |                                |  |                                | 231   
|                 |                                |  |                                |       
|Net change       |                                |  | $                              | 29,531

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 $2,103,045 at June 30, 2004, from $1,379,232 at December 31,
2003, an increase of $723,813, or 52%. 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 June 30, 2004 were $74,206,688 compared to           $72,656,531 as of December 31,
2003, an increase of $1,550,157 or 2%, resulting           from an increase in savings
and NOW account balances.

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 $4,888,000 at June 30, 2004, collateralized by the
Banks first lien one- to four-family real estate loans and certain pledged
government securities. As of June 30, 2004, the Bank has borrowed $4,500,000 from the
FHLB, with applicable interest rates ranging from 2.03% to 2.70% and with varying
maturities through January 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. The loan-to-deposit ratio
          prior to the allowance for loan losses as of June 30, 2004 was 98% compared to
          103% as of December 31, 2003.

8

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To provide funds for loans and loan
commitments, as of June 30, 2004, the Company had $3,530,531 in cash and due from banks,
$2,343,000 in federal funds sold, $3,000,000 in short-term investments, and $2,056,439 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 six months ended June 30, 2004 was $499,828 compared to $1,153,686 used
in operations in the prior period. The cash provided by operating activities during the
first half of 2004 was primarily provided by a decrease in mortgage loans held for sale.

Net cash provided by investing
activities for the six months ended June 30, 2004 was $986,852 compared to $3,902,152 used
in investing activities in the prior period. The increase in cash was primarily due to a
$2,300,838 decrease in loans, partially offset by the purchase of $1,300,509 of available
for sale securities.

Net cash provided by financing
activities for the six months ended June 30, 2004 was $1,653,495 compared to $6,137,541 in
the prior period. In the first half of 2004, the cash provided by financing activities was
primarily provided by a $1,550,157 increase in deposits.

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 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 June 30, 2004, the Company had
$21,940,116 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
June 30, 2004 and December 31, 2003:

|Commitment Type              | June 30, 2004 |  | December 31, 2003 |           
|---------------------------- | ------------- |  | ----------------- | ----------
|Commitments to extend credit |               |  | $                 | 20,448,667
|Credit card lines            |               |  |                   | 1,151,449 
|Commercial letters of credit |               |  |                   | 340,000   
|                             |               |  |                   |           
|Total commitments            |               |  | $                 | 21,940,116

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.

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

|                                         | Actual |  | For Capital Adequacy Purposes |           | To Be Well Capitalized Under Prompt Corrective Action Provisions | 
|---------------------------------------- | ------ |  | ----------------------------- | --------- | ---------------------------------------------------------------- | 
|
|As of June 30, 2004                      |        |  |                               |           |                                                                  | 
|Total capital (to risk weighted assets)  |        |  | $                             | 9,495,000 |                                                                  | 
|Tier 1 capital (to risk weighted assets) |        |  | $                             | 8,795,000 |                                                                  | 
|Tier 1 capital (to average assets)       |        |  | $                             | 8,795,000 |                                                                  | 
|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 June
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 June 30, 2004, the Company reported net income of $61,321, a
decrease of $157,194 or 72% compared to net income of $218,515 for the three months ended
June 30, 2003. The decrease for the three months ended June 30, 2004 is attributed
primarily to reductions in interest income on loans and fees from the sale of mortgages
into the secondary market.

Net income was $140,514 for the six
months ended June 30, 2004 compared to net income of $416,547 for the same period in 2003,
a decrease of $276,033 or 66%. The decrease for the six months ended June 30, 2004 is also
attributed primarily to reductions in interest income on loans and fees from the sale of
mortgages into the secondary market.

Net Interest
Income. Total interest income decreased by $248,878 to $1,035,350 for the
three months ended June 30, 2004 and decreased by $400,258 to $2,143,190 for the six
months ended June 30, 2004 compared to the same periods respectively in 2003. Total
interest expense decreased by $25,194 to $325,468 for the three months ended June 30, 2004
and decreased by $77,055 to $652,586 for the six months ended June 30, 2004 compared to
the same periods respectively in 2003.

Net interest income before provision
for loan losses for the three months ended June 30, 2004 was $709,882 compared to $933,566
for the same period in 2003, a decrease of $223,684 or 24%. The decrease is primarily due
to lower average loan balances and interest rates. For the three months ended June 30,
2004, the Companys net interest margin declined to 3.59% compared to 4.69% for the
same period in 2003. This decline is primarily due to the reinvestment of funds from loan
paydowns in lower-yielding investments and a reduction in the average interest rate of the
loan portfolio.

Net interest income before provision
for loan losses for the six months ended June 30, 2004 was $1,490,604 compared to
$1,813,807 for the same period last year, a decrease of $323,203 or 18%. The decrease is
primarily due to lower average loan balances and interest rates. For the six months ended
June 30, 2004, the Companys net interest margin declined to 3.84% compared to 4.62%
for the same period in 2003, primarily due to a shift in the mix of earning assets from
relatively higher-yielding loans to lower-yielding investments.

10

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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 six months of 2004 and $75,000
during the same period in 2003. No provision was made for the first six months of 2004
primarily as a result of lower loan volume and improved credit quality. During the six
months ended June 30, 2004, the Bank incurred $29,762 in charge-offs related primarily to one
commercial loan compared to $962 in charge-offs during the same period in 2003.

Non-Interest
Income.  Total non-interest income consists of maintenance, overdrafts and
stop payment charges on deposit accounts, safe deposit fees, and miscellaneous fees such
as wire transfers, interchange fees on debit cards, and merchant credit card income, along
with gains on sales of loans, commission income generated by the investment center and an
increase in cash surrender value of life insurance policies. Total non-interest income was
$217,937 for the three months ended June 30, 2004 compared to $258,899 for the same period
in 2003, a decrease of $40,962 or 16%. Total non-interest income was $362,523 for the six
months ended June 30, 2004 compared to $476,989 for the same period in 2003, a decrease of
$114,466 or 24%. The decrease in non-interest income for the three and six months ended
June 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 $846,785 for the three months ended June 30, 2004
compared to $807,615 for the same period in 2003, an increase of $39,170 or 5%.Total
non-interest expenses were $1,662,748 for the six months ended June 30, 2004 compared to
$1,569,226 for the same period in 2003, an increase of $93,522 or 6%. The increase in
non-interest expenses for the three and six months ended June 30, 2004 is primarily
attributed to the increased salaries and employee benefits.

# 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

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# 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

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# PART II  OTHER
INFORMATION

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

At the Companys annual meeting
of shareholders held on April 27, 2004, the following individuals were elected to the
Board of Directors to hold office until the 2007 annual meeting of shareholders and until
their successors are duly elected and qualified.

|Director           | Shares Voted For |  | Authority to
Vote Withheld |        
|------------------ | ---------------- |  | -------------------------- | -------
|Paul E. Menzel     |                  |  |                            | 822,469
|Charles G. Niebler |                  |  |                            | 825,624
|James E. Renner    |                  |  |                            | 825,624

The following table sets forth the
other directors of the Company whose terms of office continued after the 2004 annual
meeting:

|Director          | Year in Which Term Expires
|----------------- | --------------------------
|John F. Goodnow   | 2005                      
|William R. Hayes  | 2005                      
|John E. Horning   | 2005                      
|Bernard E. Adee   | 2006                      
|Gregory J. Hoesly | 2006                      
|Christine V. Lake | 2006                      

# Item 6.  Exhibits
and Reports on Form 8-K

| | a. | Exhibits
| | -- | --------

| | 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.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b. | Reports
on Form 8-K
| | -- | -------------------

| | The
Company did not file a Current Report on Form 8-K during the quarter ended June 30, 2004.
The Company furnished the following Current Reports on Form 8-K during the quarter ended
June 30, 2004:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date of Report | Date Furnished | Items                                                                                                                                                                          
|-------------- | -------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|April 27, 2004 | April 27, 2004 | Item 12, including Consolidated Balance Sheets at March 31, 2004 and December 31, 2003 and Consolidated
Statements of Income for the three months ended March 31, 2004 and 2003

13

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# 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:  August 12, 2004 | By:                                
|                       |                                    

|                       |    
|---------------------- | ---
|Date:  August 12, 2004 | By:
|                       |    

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