UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q


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

For the quarterly period ended September 30, 2004

OR

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

                         Commission File Number 0-11132

                           FIRST BANKING CENTER, INC.
             (Exact name of registrant as specified in its charter)

           Wisconsin                                         39-1391327
    (State or other jurisdiction of                       (I.R.S. Employer
     incorporation or organization)                      Identification No.)



    400 Milwaukee Ave., Burlington, WI                         53105
 (Address of principal executive offices)                   (Zip Code)



                                 (262) 763-3581
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

Yes     [ X ]     No [   ]


Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).

Yes     [   ]     No [ X ]

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of November 8, 2004, Common stock,  $1.00 par value,  1,495,811
shares outstanding.


                                       1
<PAGE>


                    FIRST BANKING CENTER, INC AND SUBSIDIARY
                                TABLE OF CONTENTS
                               September 30, 2004



Part I   Financial Information                                              Page
                                                                            ----

         Item 1  Consolidated Financial Statements

                 Unaudited Consolidated Balance Sheets,
                 September 30, 2004 and December 31, 2003                      3

                 Unaudited Consolidated Statements of Income,
                 For the three and nine month periods ended
                 September 30, 2004 and 2003                                   4

                 Unaudited Consolidated Statements of Cash Flows,
                 For the nine months ended September 30, 2004 and 2003         5

                 Notes to Unaudited Consolidated Financial Statements       6-10

         Item 2  Management's Discussion and Analysis of
                 Financial Condition and Results of Operations             11-21

         Item 3  Quantitative and Qualitative Disclosures about Market Risk   22

         Item 4  Controls and Procedures                                      23

Part II  Other Information

         Item 1  Legal Proceedings                                            23

         Item 2  Unregistered Sales of Equity Securities and Use of Proceeds  23

         Item 3  Defaults upon Senior Securities                              23

         Item 4  Submission of Matters to a Vote of Security Holders          23

         Item 5  Other Information                                            23

         Item 6  Exhibits                                                     24

         Signatures                                                           25


                                       2
<PAGE>

PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>

                    FIRST BANKING CENTER, INC. AND SUBSIDIARY
                      UNAUDITED CONSOLIDATED BALANCE SHEETS
<CAPTION>

                                                                 September 30,     December 31,
ASSETS                                                               2004             2003
                                                                --------------------------------
                                                                     (Dollars in thousands)
 <S>                                                             <C>               <C>
  Cash and due from banks                                         $  13,816         $  19,960
  Federal funds sold                                                  3,927             3,047
  Interest-bearing deposits in banks                                    307               274
  Available for sale securities                                      68,764            82,672
  Loans, less allowance for loan losses of $4,672 and
    $4,617 at 2004 and 2003, respectively                           456,246           403,252
  Office buildings and equipment, net                                12,882            11,818
  Other real estate owned                                             1,750             1,899
  Federal Home Loan Bank stock                                       12,281            11,755
  Other assets                                                        9,446             9,240
                                                                --------------------------------
      TOTAL ASSETS                                                $ 579,419         $ 543,917
                                                                ================================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
  Deposits
    Demand                                                        $  67,527         $  67,961
    Savings and NOW accounts                                        200,478           194,419
    Time                                                            164,253           145,072
                                                                --------------------------------
      Total deposits                                                432,258           407,452
  Short-term borrowings                                              60,289            34,176
  Other borrowings                                                   26,012            44,673
  Other liabilities                                                   4,067             4,076
                                                                --------------------------------
      TOTAL LIABILITIES                                           $ 522,626         $ 490,377
                                                                --------------------------------

STOCKHOLDERS' EQUITY
  Common stock, $1.00 par value 3,000,000 shares authorized;
    1,502,543 and 1,501,277 shares issued as of September 30,
    2004 and December 31, 2003, respectively; 1,494,886 and
    1,500,760 shares outstanding as of September 30, 2004 and
    December 31, 2003, respectively                                   1,503             1,501
  Surplus                                                             4,624             4,612
  Retained earnings                                                  50,133            46,161
  Accumulated other comprehensive income                                912             1,290
  Common stock in treasury, at cost- 7,657 and 517 shares as
   of September 30, 2004 and December 31, 2003, respectively           (379)              (24)
                                                                --------------------------------
      TOTAL STOCKHOLDERS' EQUITY                                  $  56,793         $  53,540
                                                                --------------------------------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $ 579,419         $ 543,917
                                                                ================================



                See accompanying notes to unaudited consolidated financial statements

</TABLE>

                                       3
<PAGE>

<TABLE>

                    FIRST BANKING CENTER, INC. AND SUBSIDIARY
                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

<CAPTION>

                                                                  Three Months Ended            Nine Months Ended
                                                                    September 30,                 September 30,
                                                                  2004           2003          2004           2003
                                                             ----------------------------------------------------------
                                                                (Dollars in thousands,       (Dollars in thousands,
                                                                except per share data)       except per share data)
<S>                                                          <C>            <C>           <C>            <C>
INTEREST AND DIVIDEND INCOME

  Interest and fees on loans                                  $   6,502      $   5,925     $  18,197      $  16,884
  Interest and dividends on securities:
    Taxable                                                         229            275           739            956
    Non-taxable                                                     364            408         1,122          1,242
  Interest on federal funds sold                                      5             13            14             73
  Interest on interest-bearing deposits in banks                      1              1             3             16
  Other interest and dividends                                      159            183           524            582
                                                             ----------------------------------------------------------
      TOTAL INTEREST AND DIVIDEND INCOME                          7,260          6,805        20,599         19,753
                                                             ----------------------------------------------------------

INTEREST EXPENSE
  Interest on deposits                                            1,355          1,243         3,687          4,079
  Interest on short-term borrowings                                 214             44           525            171
  Interest on other borrowings                                      326            442         1,198          1,365
                                                             ----------------------------------------------------------
      TOTAL INTEREST EXPENSE                                      1,895          1,729         5,410          5,615
                                                             ----------------------------------------------------------

      NET INTEREST INCOME                                         5,365          5,076        15,189         14,138

  Provision for loan losses                                          77              0           177             90
                                                             ----------------------------------------------------------
      NET INTEREST INCOME AFTER PROVISION FOR
        LOAN LOSSES                                               5,288          5,076        15,012         14,048
                                                             ----------------------------------------------------------

NON-INTEREST INCOME
  Trust fees                                                        150            119           488            377
  Service charges on deposit accounts                               743            478         1,781          1,423
  Commissions                                                        18             48           101            135
  Automated banking fees                                            132            106           314            284
  Securities gains, net                                               0            107           123            107
  Loan gains, net                                                   161            479           649          1,593
  Other                                                             302            280           790            621
                                                             ----------------------------------------------------------
      TOTAL NON-INTEREST INCOME                                   1,506          1,617         4,246          4,540
                                                             ----------------------------------------------------------

NON-INTEREST EXPENSE
  Salary and employee benefits                                    2,401          2,239         7,104          6,673
  Occupancy                                                         332            262           986            838
  Equipment                                                         362            355         1,066          1,049
  Data processing services                                          295            261           844            763
  Other                                                             975            927         2,698          2,465
                                                             ----------------------------------------------------------
      TOTAL NON-INTEREST EXPENSE                                  4,365          4,044        12,698         11,788
                                                             ----------------------------------------------------------
      INCOME BEFORE INCOME TAXES                                  2,429          2,649         6,560          6,800

  Income taxes                                                      774            796         1,945          1,926
                                                             ----------------------------------------------------------
      NET INCOME                                              $   1,655      $   1,853     $   4,615      $   4,874
                                                             ==========================================================

Basic earnings per share                                      $    1.11      $    1.24     $    3.09      $    3.26
Diluted earnings per share                                    $    1.06      $    1.21     $    2.97      $    3.19


                        See accompanying notes to unaudited consolidated financial statements
</TABLE>

                                       4
<PAGE>

<TABLE>

                              FIRST BANKING CENTER, INC. AND SUBSIDIARY
                           UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>

                                                                                         Nine Months Ended
                                                                                           September 30,
                                                                                        2004          2003
                                                                                    ---------------------------
                                                                                       (Dollars in thousands)
<S>                                                                                  <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                          $  4,615      $  4,874
  Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:
    Depreciation                                                                           789           686
    Provision for loan losses                                                              177            90
    Loan gains, net                                                                       (649)       (1,593)
    Amortization of premiums and accretion of discounts
      on securities, net                                                                   207           384
    Amortization                                                                           135           113
    Securities gains, net                                                                 (123)         (107)
    Tax benefit of nonqualified stock options exercised                                     20            -
    Increase in other assets                                                              (523)       (3,346)
    Decrease in other liabilities                                                           (8)         (349)
                                                                                    ---------------------------
      Net cash provided by operating activities before loan originations and sales       4,640           752
    Loans originated for sale                                                          (39,026)      (57,898)
    Proceeds from sale of loans                                                         39,670        63,605
                                                                                    ---------------------------
        NET CASH PROVIDED BY OPERATING ACTIVITIES                                        5,284         6,459
                                                                                    ---------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Net (increase) decrease in interest-bearing deposits in banks                          (32)          213
    Net (increase) decrease in federal funds sold                                         (880)        3,853
    Proceeds from sales of available-for-sale securities                                 6,297         9,135
    Proceeds from maturities and calls of available-for-sale securities                 71,009        54,808
    Purchase of available-for-sale securities                                          (64,057)      (56,792)
    Net increase in loans                                                              (53,166)      (13,604)
    Purchase of office buildings and equipment, net                                     (1,853)       (1,508)
                                                                                    ---------------------------
        NET CASH USED IN INVESTING ACTIVITIES                                          (42,682)       (3,895)
                                                                                    ---------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net increase (decrease) in deposits                                                 24,806       (15,829)
    Dividends paid                                                                        (643)         (583)
    Proceeds from other borrowings                                                         -           9,084
    Payments on other borrowings                                                       (18,661)       (2,063)
    Net increase (decrease) in short-term borrowings                                    26,113          (246)
    Sale of common stock for the exercise of stock options                                  30            62
    Purchase of treasury stock                                                            (634)          (10)
    Sale of treasury stock for the exercise of stock options                               243            -
                                                                                    ---------------------------
        NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                             31,254        (9,585)
                                                                                    ---------------------------
    NET DECREASE IN CASH AND DUE FROM BANKS                                             (6,144)       (7,021)

CASH AND DUE FROM BANKS:
    Beginning                                                                           19,960        22,203
                                                                                    ---------------------------
    Ending                                                                           $  13,816     $  15,182
                                                                                    ===========================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
    Cash paid during the year for:
      Interest                                                                       $   5,385     $   5,894
      Income taxes                                                                   $   1,557     $   1,058

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
  Change in accumulated other comprehensive income,
    Unrealized gains (losses) on available-for-sale securities, net                  $    (378)    $    (224)
  Other real estate aquired in settlement of loans                                   $      -      $   1,750

                See accompanying notes to unaudited consolidated financial statements
</TABLE>

                                       5
<PAGE>



                    FIRST BANKING CENTER, INC AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2004

NOTE 1 - Basis of Presentation

The unaudited  consolidated  financial  statements include the accounts of First
Banking Center,  Inc. (the "Company") and First Banking Center, its wholly owned
subsidiary.  In the opinion of management,  all adjustments  (consisting only of
normal recurring adjustments) necessary for a fair presentation of the financial
position,  results of operation and cash flows for the interim periods have been
made.  The results of operations  for the three and nine months ended  September
30, 2004 are not  necessarily  indicative  of the results to be expected for the
entire fiscal year.

The unaudited interim financial statements have been prepared in conformity with
accounting  principles  generally  accepted in the United  States of America and
industry practice.  Certain information in footnote disclosure normally included
in  financial  statements  prepared in  accordance  with  accounting  principles
generally  accepted in the United  States of America and  industry  practice has
been  condensed or omitted  pursuant to rules and  regulations of the Securities
and  Exchange   Commission.   These  financial  statements  should  be  read  in
conjunction  with  the  consolidated  financial  statements  and  notes  thereto
included in the Company's December 31, 2003 audited financial statements.

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  which  affect  the  reported  amounts of assets and
liabilities  and disclosure of contingent  assets and liabilities as of the date
of the  financial  statements,  as well as the  reported  amounts  of income and
expenses  during the reported  periods.  Actual  results could differ from those
estimates.

NOTE 2 - Earnings per Share
<TABLE>

The following information  calculates the computation of earnings per share on a
basic and diluted basis:
<CAPTION>

                                                         Three Months Ended    Nine Months Ended
                                                           September 30,         September 30,
                                                          2004       2003       2004       2003
                                                        -------------------------------------------
                                                            (Amounts in           (Amounts in
                                                         thousands, except     thousands, except
                                                          per share data)       per share data)
<S>                                                     <C>        <C>        <C>        <C>
Basic
Net income                                               $ 1,655    $ 1,853    $ 4,615    $ 4,874
Weighted average shares outstanding                        1,496      1,496      1,496      1,496
Basic earnings per share                                 $  1.11    $  1.24    $  3.09    $  3.26

Diluted
Net income                                               $ 1,655    $ 1,853    $ 4,615    $ 4,874
Weighted average shares outstanding                        1,496      1,496      1,496      1,496
Effect of dilutive stock options outstanding                 -            2         59         32
                                                        -------------------------------------------
Diluted weighted average shares outstanding                1,496      1,498      1,555      1,528
Diluted earnings per share                               $  1.06    $  1.21    $  2.97    $  3.19

</TABLE>

NOTE 3 - Comprehensive Income
<TABLE>

The following table presents our comprehensive income:
<CAPTION>

                                                         Three Months Ended    Nine Months Ended
                                                           September 30,         September 30,
                                                          2004       2003       2004       2003
                                                        -------------------------------------------
                                                            (Dollars in           (Dollars in
                                                             thousands)            thousands)
<S>                                                     <C>        <C>        <C>        <C>
Net income                                               $ 1,655    $ 1,853    $ 4,615    $ 4,874
Other comprehensive income
  Net change in unrealized gain (loss) on available
    for sale securities                                      578       (762)      (378)      (224)
                                                        -------------------------------------------
Total comprehensive income                               $ 2,233    $ 1,091    $ 4,237    $ 4,650
                                                        ===========================================
</TABLE>

                                       6
<PAGE>


NOTE 4 - Stock-based Compensation Plan:

For the nine months  ended  September  30, 2004,  and  September  30, 2003,  the
Company had one  stock-based  compensation  plan for officers and key employees.
The  Company  accounts  for this plan  under the  recognitions  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 the income,  as all options  granted under those plans had an exercise  price
equal to the market value of the  underlying  common stock on the date of grant.
The following table  illustrates the effect on net income and earnings per share
if the Company had applied the fair value  recognition  provisions  of Financial
Accounting  Standards Board (FASB) Statement No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation:
<TABLE>
<CAPTION>

                                                         Three Months Ended    Nine Months Ended
                                                           September 30,         September 30,
                                                          2004       2003       2004       2003
                                                        -------------------------------------------
                                                            (Dollars in           (Dollars in
                                                         thousands, except     thousands, except
                                                        for per share data)   for per share data)
<S>                                                     <C>        <C>        <C>        <C>
Net income, as reported                                  $ 1,655    $ 1,853    $ 4,615    $ 4,874
Deduct total stock-based employee compensation
  expense determined under fair value based method
  for all awards, net of related tax effects                 -          -         (160)      (193)
                                                        -------------------------------------------
Pro forma net income                                     $ 1,655    $ 1,853    $ 4,455    $ 4,681
                                                        ===========================================

Earnings per share:
  Basic:
  As reported                                            $  1.11    $  1.24    $  3.09    $  3.26
  Pro forma                                                 1.11       1.24       2.98       3.13
Diluted:
  As reported                                            $  1.06    $  1.21    $  2.97    $  3.19
  Pro forma                                                 1.06       1.21       2.87       3.06
</TABLE>


In  determining  compensation  cost using the fair value  method  prescribed  in
Statement  No. 123,  the value of each grant is estimated at the grant date with
the  following  weighted-average  assumptions  used for grants on September  30,
2004,  and September 30, 2003,  respectively:  dividend yield of 1.7 percent and
1.7 percent;  expected price volatility of 5.3 percent and 5.2 percent,  blended
risk-free interest rates of 4.14 percent and 4.22 percent; and expected lives of
10 years, respectively.

NOTE 5 - Commitments and Contingencies

Information  in the following  table  provides a summary of the Company's  other
contractual  obligations and commercial commitments as of September 30, 2004, as
well as that information for its depository products:

<TABLE>
<CAPTION>
                                                                             Payments Due by Fiscal Period
                                                                                    (in thousands)
                                                            ---------------------------------------------------------------
Contractual Obligations (a)                                               Remaining in     2005-       2007-     2009 and
                                                               Total          2004         2006        2008     thereafter
                                                            ---------------------------------------------------------------
<S>                                                        <C>            <C>          <C>         <C>         <C>
Time deposits, certificates of deposit                      $ 164,253      $  20,518    $ 105,367   $  15,983   $  22,385
  and similar products                       (b)
Short-term obligations                       (c)               60,289         60,289          -           -           -
Other borrowings                             (d)               26,012          3,741       11,060      11,211         -
Operating leases                                                  332             95          174          63         -
Other long-term obligations                  (e)                2,270             66          497         427       1,280
                                                            ---------------------------------------------------------------
    Total contractual cash obligations                      $ 253,156      $  84,709    $ 117,098   $  27,684   $  23,665
                                                            ===============================================================

</TABLE>

                                       7
<PAGE>

Notes

a.   Excluding the "off balance sheet" lending commitments discussed below.

b.   Excludes demand, savings and money market deposits.

c.   See Note 8 in the Notes to Consolidated  Financial  Statements for the year
     ended  December  31,  2003  for a  description  of  the  Company's  various
     short-term  borrowings.  Many  short-term  borrowings such as federal funds
     purchased and security  repurchase  agreements  are expected to be reissued
     and, therefore, do not necessarily represent an immediate need for cash.

d.   See Note 9 in the Notes to Consolidated  Financial  Statements for the year
     ended  December 31, 2003 for a description  of the Company's  various other
     borrowings.

e.   Other  long-term  obligations  consisted  primarily of salary  continuation
     agreements and benefit plans. See Exhibits 10.1, 10.2, 10.3 and 10.4 to the
     Form  10-K as of  December  31,  2003  for a  detailed  description  of the
     Company's salary continuation agreements and benefit plans.

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

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

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

Information  in the  following  table  provides  a summary  of the  contract  or
notional  amount  of the  Company's  exposure  to  off-balance-sheet  risk as of
September 30:

<TABLE>
<CAPTION>
                                                                2004               2003
                                                             -----------------------------
                                                                (Dollars in thousands)
<S>                                                         <C>                <C>
Commitments to extend credit
  Unused revolving home equity, consumer lines of credit     $ 21,867           $ 17,708
  Unused commercial lines of of credit                         74,815             61,172
Standby letters of credit                                       4,392              3,087

</TABLE>


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

Standby  letters of credit  are  conditional  commitments  issued by the Bank to
guarantee the performance of a customer to a third-party.  Those  guarantees are
primarily  issued to support  public and  private  borrowing  arrangements  and,
generally,  have terms of one year or less.  The credit risk involved in issuing
letters of credit is  essentially  the same as that  involved in extending  loan
facilities to customers.  The Bank holds collateral,  which may include accounts

                                       8
<PAGE>

receivable,  inventory,  property,  equipment, and income-producing  properties,
supporting those commitments if deemed necessary. In the event the customer does
not perform in accordance with the terms of the agreement with the  third-party,
the Bank would be required to fund the commitment.  The maximum potential amount
of future  payments  the Bank could be  required to make is  represented  by the
contractual amount shown earlier in the summary. If the commitment is funded the
Bank would be entitled to seek recovery from the customer. At September 30, 2004
and December 31, 2003,  no amounts  have been  recorded as  liabilities  for the
Bank's potential obligations under these guarantees.

NOTE 6 - Derivative Instruments

At  September  30,  2004,  the  Company was  entered in two  interest  rate swap
transactions which, in effect,  resulted in the Company converting $20.0 million
of fixed rate brokered CD's into  variable  rate debt.  These swap  transactions
require  the payment of  interest  by the  Company at a variable  interest  rate
payment based on the one month LIBOR rate adjusted monthly. In turn, the Company
receives fixed rate interest payments equal to 5.0% and 4.0% using an actual/365
day basis.

<TABLE>

Summary information about the interest rate swaps at September 30 is as follows:
<CAPTION>

                                                 2004             2003
                                            -------------------------------
                                                (Dollars in thousands)
<S>                                         <C>                <C>
Notional amount                              $  10,000          $    -
Weighted average fixed rate                       5.00%              -
Weighted average variable rate                    1.53%              -
Weighted average maturity, years                   7.5               -
Fair value                                         (19)              -
</TABLE>

<TABLE>
<CAPTION>
                                                 2004             2003
                                            -------------------------------
                                                (Dollars in thousands)
<S>                                         <C>                <C>
Notional amount                              $  10,000          $    -
Weighted average fixed rate                       4.00%              -
Weighted average variable rate                    1.63%              -
Weighted average maturity, years                   7.0               -
Fair value                                          (1)              -

</TABLE>

In October and November 2004, the Company was entered in three new interest rate
swap  transactions  that  convert  an  additional  $20.0  million  of fixed rate
brokered  CD's into  variable  rate debt.  These  swaps  require  the payment of
interest by the Company at a variable  interest  rate  payment  based on the one
month LIBOR rate adjusted  monthly.  In turn,  the Company  receives  fixed rate
interest payments equal to 5.0% and 3.0% using an actual/365 day basis.


NOTE 7 - Recent Accounting Pronouncements

At the March 17-18, 2004 Emerging Issues Task Force ("EITF")  meeting,  the Task
Force reached a consensus on Issue No. 03-1, The Meaning of Other-Than-Temporary
Impairment  and its  Application  to  Certain  Investments.  EITF 03-1  provides
guidance for  determining the meaning of  "other-than-temporarily  impaired" and
its  application  to  certain  debt and  equity  securities  within the scope of
Statement of Financial  Accounting  Standards  No. 115,  Accounting  for Certain
Investments in Debt and Equity Securities ("SFAS 115") and investments accounted
for  under  the  cost  method.  The  guidance  set  forth in the  Statement  was
originally  effective  for the Company in the  September  30, 2004  consolidated
financial statements. However, in September 2004, the effective dates of certain
parts of the  Statement  were  delayed.  Management  is currently  assessing the
impact of Issue 03-1 on the consolidated financial statements.


                                       9
<PAGE>

In March 2004,  the Financial  Accounting  Standards  Board  ("FASB")  issued an
Exposure Draft,  Share-Base Payment - an amendment of Statements No. 123 and 95.
This  Statement  amends SFAS  Statement  No.  123,  Accounting  for  Stock-Based
Compensation,  SFAS Statement No. 95,  Statement of Cash Flows,  and APB Opinion
No.  125,  Accounting  for  Stock  Issued to  Employees.  The  objective  of the
amendment to SFAS No. 123 is to recognize in the financial  statements  the cost
of employee services received in exchange for equity instruments and liabilities
incurred as the result of such transactions.  The grant-date fair value of stock
options would be determined using an option-pricing  model, and expense would be
recognized  over the vesting  period.  In October 2004,  the FASB  postponed the
effective  date of the  proposed  standard  from fiscal  years  beginning  after
December 15, 2004 to periods beginning after June 15, 2005. The FASB is expected
to issue a final standard by the end of calendar  2004.  Management is reviewing
the proposed standard to determine the impact on the financial statements.

NOTE 8 - Proposed Going Private Transaction

On August 12, 2004 the  company's  board of directors  announced a going private
transaction  by means of a 1-for-2,000  reverse  split of the  company's  common
stock,  followed  immediately by a 2,000-for-1 forward split. The effect of this
transaction  would be to reduce  the number of  shareholders  of record to fewer
than 300, thereby eliminating the company's  obligation to file reports with the
SEC.  Shareholders  with fewer than 2,000 shares of First Banking  Center,  Inc.
common stock,  held of record in their name,  immediately  before the split will
receive a cash payment equal to $60.00 per pre-split  share.  Shareholders  with
2,000 or more shares of record in their name  immediately  before the split will
continue  to hold the same  number  of  shares  after  completion  of the  split
transaction.


                                       10
<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Forward Looking  Statements- Safe Harbor Statement under the Private  Securities
Litigation Reform Act of 1995

This report contains certain  forward-looking  statements  within the meaning of
Section  27A of the  Securities  Act of 1933,  as amended and Section 21E of the
Securities  Exchange  Act of 1934,  as amended.  We intend such  forward-looking
statements  to be  covered by the safe  harbor  provisions  for  forward-looking
statements  contained in the Private  Securities Reform Act of 1995, and include
this  statement  for purposes of these safe harbor  provisions.  Forward-looking
statements,  which are based on  certain  assumptions  and  describe  our future
plans,  strategies and  expectations  are generally  identifiable  by use of the
words "believe,"  "expect,"  "intend,"  "anticipate,"  "estimate,"  "project" or
similar  expressions.  First Banking  Center's ability to predict results or the
actual effect of future plans or strategies  is  inherently  uncertain.  Factors
which  could  have a  material  adverse  affect  on our  operations  and  future
prospects include,  but are not limited to, changes in: interest rates,  general
economic  conditions,   legislative/regulatory   changes,   acts  of  terrorism,
challenges  by tax  authorities,  monetary  and  fiscal  policies  of  the  U.S.
Government,  including  policies of the U.S.  Treasury  and the Federal  Reserve
Board, the quality or composition of the loan or investment  portfolios,  demand
for loan products, deposit flows, competition,  demand for financial services in
our market area, our implementation of new technologies,  our ability to develop
and maintain secure and reliable  electronic systems and accounting  principles,
policies and guidelines.  These risks and uncertainties  should be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements.

                    FIRST BANKING CENTER, INC AND SUBSIDIARY
                       MANAGEMENTS DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                            As of September 30, 2004

The following discussion provides additional analysis of the financial condition
and results of operations of the Company for the three and the nine months ended
September 30, 2004.  This  discussion  focuses on the  significant  factors that
affected the Company's  earnings so far in 2004, with comparisons to 2003. As of
September  30,  2004,  First  Banking  Center  (the  "Bank") was the only direct
subsidiary  of the  Company  and its  operations  contributed  nearly all of the
revenue for the year. The Company  provides  various  support  functions for the
Bank and receives payment from the Bank for these services.  These  intercompany
payments  are  eliminated  for  the  purpose  of  these  consolidated  financial
statements.  The  Bank  has  three  wholly  owned  subsidiaries,  FBC  Financial
Services, Corp., a brokerage and financial services subsidiary,  FBC-Burlington,
Inc., an investment subsidiary located in Nevada and Burco Holdings, LLC, a real
estate  subsidiary for the purpose of holding and liquidating  property acquired
as other real estate.

Overview

As of September 30, 2004,  total Company assets were $579.4 million,  increasing
6.53% from $543.9  million as of December 31,  2003.  Net income for the quarter
ended September 30, 2004 was $1.7 million or $1.06 per diluted share, decreasing
$198,000  or 10.69% from $1.9  million or $1.21 per  diluted  share in the third
quarter of 2003.  Net income for the nine months  ended  September  30, 2004 was
$4.6 million or $2.97 per diluted share,  decreasing $259,000 or 5.31% from $4.9
million  or $3.19 per  diluted  share in the  first  nine  months  of 2003.  The
significant items resulting in these results are discussed below.

Financial Condition

Loans

Loans  outstanding  were $460.9 million and $407.9 million on September 30, 2004
and  December  31,  2003  respectively.  This  represented  an increase of $53.0
million or 13.0%.  The increase  was  primarily  the result of continued  strong
demand for  commercial  loans secured by real estate and  construction  and land
development  loans. The increase in agricultural real estate loans was primarily
the  reclassification of farm residential  property from residential real estate
to agricultural real estate.  Loan demand outpaced the growth in deposits in the
first nine  months of 2004;  therefore,  the Company  also sold some  investment
securities  and borrowed  additional  funds to fund a portion of this  increased
loan demand.

                                       11
<PAGE>

The  following  table   summarizes  the  changes  to  date  in  the  major  loan
classifications:
<TABLE>
<CAPTION>
                                                                                                 As a % of Total Loans
                                           September 30,    December 31,   Change in         September 30,    December 31,
                                               2004             2003         Balance             2004             2003
                                         ----------------------------------------------     -------------------------------
                                                       (Dollars in millions)
<S>                                          <C>              <C>           <C>                 <C>              <C>
Residential Real Estate                       $155.1           $178.5        ($23.4)             33.7%            43.8%
Commercial Real Estate                        $128.0           $101.1         $26.9              27.8%            24.8%
Construction and Land Development              $63.7            $43.0         $20.7              13.8%            10.5%
Commercial                                     $32.6            $27.6          $5.0               7.1%             6.8%
Agricultural Real Estate                       $54.4            $25.9         $28.5              11.8%             6.4%
</TABLE>


Allowance for Loan Losses

One measure of the adequacy of the allowance for loan losses is the ratio of the
allowance for loan losses to total loans. The allowance for loan losses was $4.7
million  or 1.01% of gross  loans on  September  30,  2004,  compared  with $4.6
million or 1.13% of gross loans on  December  31,  2003.  Net  charge-offs  were
$122,000 or .03% of gross loans and $351,000 or .09% of gross loans for the nine
months ended September 30, 2004 and 2003,  respectively.  The allowance for loan
losses was 123.17% of  non-accrual  loans at  September  30, 2004 as compared to
226.1% at December 31, 2003.  See below for further  information  regarding  the
increase in  non-accrual  loans and  "Results of  Operations-Provision  for Loan
Losses" for matters  relating to the  determination  of the  provision  for loan
losses in the first nine months of 2004.

The allowance for loan losses is established through a provision for loan losses
charged to expense. See "Provision for Loan Losses" below for information on the
provision  during the periods.  Loans are charged against the allowance for loan
losses when  management  believes  that the  collectibility  of the principal is
unlikely. Not withstanding the increase in non-accrual loans, it is management's
belief that the allowance for loan losses is adequate to cover  probable  credit
losses  relating to  specifically  identified  loans, as well as probable credit
losses inherent in the balance of the loan portfolio.  However,  there can be no
assurance  that the  allowance  for loan  losses  will be  adequate to cover all
losses that actually  occur.  In accordance  with FASB Statements 5 and 114, the
allowance is provided for losses that have been incurred as of the balance sheet
date. The allowance is based on past events and current economic conditions, and
does not include the effects of expected  losses on specific  loans or groups of
loans  that are  related  to  future  events or  expected  changes  in  economic
conditions. Management reviews a calculation of the allowance for loan losses on
a quarterly basis. 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 or trends,  potential exposure in
the loan  portfolio or other  factors.  Impaired loans are measured based on the
present value of expected future cash flows  discounted at the loan's  effective
interest  rate or, as a practical  expedient,  at the loan's  observable  market
price or the fair value of the collateral if the loan is collateral dependent. A
loan is impaired  when it is probable  the Company will be unable to collect all
contractual  principal and interest payments due in accordance with the terms of
the loan agreement.

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


                                       12
<PAGE>


The  following  table  provides a detailed  analysis of changes in the indicated
periods in the allowance for estimated loan losses:
<TABLE>
<CAPTION>

                                                                          Nine Months Ended
                                                                            September 30,
                                                                       2004                2003
                                                                  ----------------------------------
                                                                        (Dollars in thousands)
<S>                                                                <C>                 <C>
Balance, beginning of fiscal year                                   $   4,617           $   4,988

Charge-offs:
  Commercial                                                               18                   7
  Agricultural production                                                   0                  42
  Real estate:
    Construction                                                            0                   0
    Commercial                                                              0                 257
    Agriculture                                                            93                   0
    Other mortgages                                                        46                  42
  Consumer (including installmment loans)                                   6                  11
                                                                  ----------------------------------
      Total Charge-offs                                                   163                 359
                                                                  ----------------------------------

Recoveries:
  Commercial                                                                0                   2
  Agricultural production                                                   0                   0
  Real estate:
    Construction                                                            0                   0
    Commercial                                                              0                   0
    Agriculture                                                            20                   0
    Other mortgages                                                         8                   0
  Consumer (including installment loans)                                   13                   6
                                                                  ----------------------------------
      Total Recoveries                                                     41                   8
                                                                  ----------------------------------

Net Charge-offs                                                           122                 351

Provision charged to operations                                           177                  90
                                                                  ----------------------------------
Balance, end of period                                              $   4,672           $   4,727
                                                                  ==================================

Average amount of loans outstanding
   before allowance for estimated losses on loans                   $ 437,273           $ 371,448
                                                                  ==================================

Ratio of net charge-offs during the
   period to average loans outstanding
   during the period                                                    0.028%              0.094%
                                                                  ==================================

</TABLE>

                                       13
<PAGE>

Non-accrual, Past Due and Renegotiated Loans
<TABLE>
<CAPTION>

                                                                   September 30,    December 31,
                                                                       2004             2003
                                                                  ---------------- ----------------
                                                                       (Dollars in thousands)
<S>                                                                  <C>              <C>
Non-accrual Loans (a)                                                 $3,793           $2,041
Past Due 90 days + (b)                                                     0                0
Restructured Loans                                                         0                0

</TABLE>

The policy of the Company is to place a loan on non-accrual status if:

(a)  payment in full of interest and principal is not expected, or

(b)  principal  or interest  has been in default for a period of 90 days or more
     unless  the  obligation  is both in the  process  of  collection  and  well
     secured. Well secured is defined as collateral with sufficient market value
     to repay  principal and all accrued  interest.  A debt is in the process of
     collection  if  collection  of the debt is  proceeding in due course either
     through legal action,  including  judgment  enforcement  procedures,  or in
     appropriate  circumstances,  through collection efforts not involving legal
     action which are reasonably  expected to result in repayment of the debt or
     in its restoration to current status.

The non-accrual  loans consisted  primarily of $2.3 million of residential  real
estate loans,  $378,000 of farmland,  $487,000 of agricultural  production loans
and $546,000 of commercial and commercial real estate loans. The increase during
the first nine  months of 2004 was the result of  non-accrual  residential  real
estate  loans  increasing   $838,000,   non-accrual  farmland  loans  increasing
$303,000,  non-accrual  agricultural  production loans  increasing  $484,000 and
non-accrual  commercial and commercial real estate loans of $38,000. The bulk of
the increase  related to factors  involving  specific  loans in the  foreclosure
process.  The legal aspects of the foreclosure  process  increasingly extend the
period of final  collection  of the  loan,  causing  loans to be in  non-accrual
status for longer periods of time.

As of  September  30, 2004,  the Company had loans  totaling  $24.2  million (in
addition to those listed as  non-accrual,  past due or  restructured)  that were
identified by the Bank's  internal asset rating system as classified  assets and
loans which  management  has  determined  require  additional  monitoring.  This
represented  an increase of $5.8 million or 31.2% from  December  31, 2003.  The
increase  was  primarily  the result of the  Company  modifying  its  standards,
beginning  in the first  quarter of 2004,  whereby it now  identifies  potential
problem loans earlier in the process than in the past. By identifying  the loans
earlier,  they can be  monitored  more  closely with the idea that action can be
taken before they become problem loans. A portion of the increase, $1.2 million,
represented a change in the way the Company treats the  guaranteed  portion of a
loan.  Beginning  with the first  quarter  of 2004,  the  Company  included  the
guaranteed  portion of a  classified  loan in the  classified  loan  total.  The
Company  believes it has  adequate  reserves for  anticipated  losses that could
result  from  the  increase  in  classified  assets;  however,  there  can be no
assurance  that the  allowance  for loan  losses  will be  adequate to cover all
losses that actually occur.  Management is not aware of any  significant  loans,
group of loans or segments of the loan portfolio not included above,  where full
collectibility cannot reasonably be expected. Management has committed resources
and is focusing on efforts designed to control the amount of classified  assets.
The Company does not have a substantial portion of its loans concentrated in one
or a few  industries  nor  does it have  any  foreign  loans  outstanding  as of
September 30, 2004. The Company's loans are concentrated  geographically  in the
Wisconsin counties of Racine, Walworth, Kenosha, Lafayette and Green.

Investment Securities - Available for Sale

The fair value of the securities  available-for-sale  portfolio at September 30,
2004,  decreased  $13.9  million or 16.8% from  December  31,  2003.  During the
period, the Company sold securities in the investment  portfolio in part to fund
the increase in loans.

For the purposes of this discussion, changes in investment security balances are
based on amortized  costs.  The decrease came from three areas of the portfolio.
The Company  purchased $60.5 million of U.S.  government  agency  securities and
$3.6  million of  municipal  securities.  The Company  sold $4.6 million of U.S.

                                       14
<PAGE>

government  agency notes and $1.7 million of  municipal  securities.  There were
maturities and calls of $66.1 million of U.S.  government  agency notes and U.S.
government  agency  mortgage-backed  securities  and $4.9  million of  municipal
securities.

Deposits

Total  deposits  were $432.3  million on September  30, 2004  compared to $407.5
million on December 31, 2003. This was an increase of $24.8 million or 6.1%. The
net gain in deposits of $24.8 million was mainly a result of the Company issuing
$20.0  million  in  brokered  time  deposits.  Brokered  deposits  are  deposits
generated  outside of the  Company's  market area.  They are sold by a broker to
individuals who have no other relationships with the Company,  and are therefore
inherently less stable a source of funds than locally  generated  deposits.  The
brokered  deposits have a 7.0 - 7.5 year maturity,  which exposes the Company to
interest rate risk for a period of time longer than the Company is accustomed to
when issuing time deposits in its market.  To offset this risk, the deposits are
callable  every six months and the Company has also  entered  into two  callable
interest  rate  swaps  that  effectively  convert  the 7.0 - 7.5 year fixed rate
liabilities  to one month LIBOR based  variable  rate  liabilities.  See Item 1,
"NOTE 6 - Derivative  Instruments" for more information regarding the swaps. The
Bank's  brokered  deposits  totaled  $40.0  million at September  30, 2004.  The
following table summarizes  changes during 2004 in the major  classifications of
deposits:

<TABLE>
<CAPTION>

                                                          September 30,      December 31,                Change in
                                                               2004              2003                     Balance
                                                        -----------------------------------           --------------
                                                               (Amounts in millions)
<S>                                                        <C>               <C>                         <C>
Money Market and Savings                                    $  154.4          $  149.2                    $   5.2
NOW Accounts                                                    46.1              45.2                        0.9
Demand  Deposits                                                67.5              68.0                       (0.5)
Time Deposits less than $100,000                                91.0              87.1                        3.9
Time Deposits equal or greater than $100,000                    73.3              57.9                       15.4

</TABLE>

Borrowed Funds

Total borrowed funds were $86.3 million on September 30, 2004, compared to $78.8
million on December  31,  2003.  This was an  increase of $7.5  million or 9.5%.
Federal Home Loan  borrowings  decreased  $18.5 million as  maturities  were not
replaced. The Company replaced these funds with brokered time deposits.  Federal
funds  borrowed  increased  by $25.7  million to fund the demand for loans.  The
following table summarizes  changes during 2004 in the major  classifications of
borrowed funds:

<TABLE>
<CAPTION>
                                                          September 30,      December 31,                Change in
                                                               2004              2003                     Balance
                                                        -----------------------------------           --------------
                                                               (Amounts in millions)
<S>                                                        <C>               <C>                         <C>
Securities sold under agreement to repurchase               $   27.9          $   27.4                    $   0.5
Federal Home Loan Borrowings                                    25.7              44.2                      (18.5)
Federal Funds Borrowed                                          32.3               6.7                       25.6

</TABLE>

Further  information  regarding  our FHLB  borrowings as of December 31, 2003 is
included in Note 9 of our Consolidated Financial Statements in our annual report
on Form 10-K for the year ended December 31, 2003.

Capital resources

As of September 30, 2004,  the Company's  stockholders'  equity  increased  $3.3
million or 6.1% from  December  31,  2003.  Net income of $4.6  million  was the
primary reason for the increase.  In addition,  the Company  issued  $243,000 of
common stock  through its  incentive  stock option plan.  These  increases  were
partially  offset by the  Company's  repurchase of $634,000 of common stock into
treasury,  cash  dividends  of $643,000  (or $.43 per share for the period ended
June 30, 2004),  and a decrease in  accumulated  other  comprehensive  income of
$378,000, to $912,000 at September 30, 2004 from $1.3 million at year end.

Under the Federal Reserve  Board's  risk-based  guidelines,  capital is measured
against the Company's subsidiary bank's risk-weighted assets. The Company's tier

                                       15
<PAGE>

1 capital (common  stockholders'  equity less goodwill) to risk-weighted  assets
was 11.4% at  September  30,  2004,  well above the 4% minimum  required.  Total
capital  to  risk-adjusted  assets  was 12.4 %; also well  above the 8%  minimum
requirement.  The  leverage  ratio  was at  9.5%  compared  to  the  4%  minimum
requirement. According to FDIC capital guidelines, the Company and the Bank were
considered to be "well capitalized" at September 30, 2004.

On October 15,  2004,  the  Company  completed  an  offering of $7.5  million of
variable rate  cumulative  trust  preferred  securities  representing  undivided
beneficial  interests in First  Banking  Center  Trust I. The proceeds  from the
offering were used by the trust to purchase junior subordinated  debentures from
the Company. The proceeds will be used for general corporate purposes, including
future  transactions or the retirement of debt. Interest is payable quarterly on
January 7, April 7, July 7 and  October 7 of each  year,  commencing  January 7,
2005 at a variable rate reset  quarterly  equal to three month LIBOR plus 2.50%.
The debentures will mature and the trust  preferred  securities must be redeemed
on January 7, 2035. The Company has the option to shorten the maturity date to a
date not earlier than January 7, 2010.  The Company may not shorten the maturity
date without  prior  approval of the Board of  Governors of the Federal  Reserve
System, if required.  Prior redemption is permitted under certain circumstances,
such as changes in tax or regulatory capital rules.

Asset/liability management

The principal  function of  asset/liability  management is to manage the balance
sheet mix,  maturities,  repricing  characteristics  and pricing  components  to
provide an adequate and stable net interest  margin with an acceptable  level of
risk over time and through interest rate cycles.

Interest-sensitive  assets  and  liabilities  are  those  that  are  subject  to
repricing   within  a  specific   relevant  time  horizon.   The  Bank  measures
interest-sensitive  assets and  liabilities,  and their  relationship  with each
other at terms of immediate, quarterly intervals up to 1 year, and over 1 year.

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

The Bank's  strategy with respect to  asset/liability  management is to maximize
net  interest  income  while  limiting  its  exposure  to a  potential  downward
movement.  This strategy is  implemented by the Bank's  management,  which takes
action  based upon its  analysis  of a number of factors,  including  the Bank's
present positioning, its desired future positioning, economic forecasts, and its
goals.  It is the Bank's  desire to  maintain a  cumulative  gap of  positive or
negative 15% of rate sensitive  assets at the 1-year time frame.  The percentage
at September 30, 2004 was a positive 16%, which compared to a positive 20% as of
December 31, 2003.  Although  these ratios were outside the Bank's target range,
and the Bank would therefore be somewhat exposed to declining rates,  management
felt the ratios  were  appropriate  due to  management's  projection  for future
interest rates.

Liquidity

Liquidity  measures  the  ability  to meet  maturing  obligations  and  existing
commitments,  to withstand  fluctuations in deposit levels,  to fund operations,
and to provide for customers'  credit needs. One source of liquidity is cash and
short-term assets, such as interest-bearing  deposits in other banks and federal
funds sold,  which totaled  $18.1  million at September 30, 2004,  compared with
$23.3  million  at  December  31,  2003.  The Bank has a variety  of  sources of
short-term  liquidity  available to it,  including  federal funds purchased from
correspondent  banks,  sales of securities  available for sale,  FHLB  advances,
lines of credit  and loan  participations  or sales.  As in the second and third
quarters,  the Bank can also use brokered  deposits to raise additional cash. In
addition,  brokered  deposits are inherently less stable than locally  generated
ones  because  they  are  not  generated  from  local  customers   having  other
relationships with the Bank. See "Financial  Condition - Deposits" above. During
the third quarter of 2004, the Bank became increasingly  dependent upon borrowed
funds as its loans outstanding  increased at a higher rate than deposits.  While
management  believes that these types of brokered  deposits and  borrowings  are
available on reasonable  terms,  there can be no assurance they will continue to
be. The Bank also generates  liquidity from the regular  principal  payments and
prepayments made on its portfolio of loans and  mortgage-backed  securities and,
if appropriate,  by selling  available for sale securities.  Although changes in
interest rates could negatively impact liquidity,  management feels the Bank has
adequate  sources to meet its  liquidity  needs.  Any  effects  that  changes in
interest rates have on income should have minimal impact on liquidity.

                                       16
<PAGE>

The cash  position  of the  Bank is  determined  by  activity  in three  primary
classifications: cash flows from operating activities, cash flows from investing
activities,  and cash flows from financing activities.  As a net result of these
activities,  the Bank's cash  decreased  for the nine  months of 2004.  Net cash
provided by operating  activities was $5.3 million.  This was primarily a result
of net income,  normal  increases  and  decreases  in  operations  offset by net
secondary market loan proceeds over originating secondary market loans. Net cash
used in investing activities, consisting primarily of loan funding and purchases
of  securities,  was $42.7 million.  Net cash provided by financing  activities,
consisting  primarily of a $26.1 million  increase in short term  borrowings and
deposit  growth of $24.8  million  offset by $18.7  million in payments on other
borrowings, was $31.3 million for the nine months ended September 30, 2004.

As an additional  source of liquidity,  the Company  received  proceeds from its
trust  preferred  securities  transaction  as  previously  discussed  in Item 2.
Capital Resources. The Company believes that it has sufficient resources to fund
its proposed going private  transaction as discussed in Item 1. Note  8-Proposed
Going Private Transaction.

For the nine months ended  September  30, 2003,  net cash  provided by operating
activities was $6.5 million. This was primarily a result of net secondary market
loan  proceeds over  originating  secondary  market  loans.  Net cash used in by
investing activities,  consisting primarily of loans funding, federal funds sold
and proceeds from  security  transactions,  was $3.9  million.  Net cash used in
financing  activities,  consisting  primarily of decreased deposits and proceeds
from other borrowings, was $9.6 million.


Off-Balance Sheet Liabilities and Contractual Obligations

Because  the  Company  is a holding  company  for a  financial  institution,  it
inherently has lending and other  off-balance  sheet financial  commitments.  It
also has substantial contractual obligations to pay monies deposited with it, in
addition to the types of long-term contractual obligations which other companies
incur.  Information regarding the Company's off-balance sheet arrangements and a
summary of future  contractual  commitments  is included in Note 5 - Commitments
and Contingencies in the interim financial statements included in this report in
Item 1. The information  included in Note 5 is incorporated by reference in this
management's discussion and analysis.

Impact of Inflation and Changing Prices

The  consolidated  financial  statements  and the  accompanying  notes have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America,  which require the  measurement of financial  position
and operating results in terms of historical dollar amounts without  considering
the  changes  in the  relative  purchasing  power  of  money  over  time  due to
inflation.  The impact of inflation is  reflected in the  increased  cost of our
operations.   Unlike  industrial  companies,   nearly  all  of  our  assets  and
liabilities are monetary in nature.  As a result,  interest rates have a greater
impact on our  performance  than do the effects of general  levels of inflation.
Interest  rates do not  necessarily  move in the same  direction  or to the same
extent as the price of goods and services.

Results of operations

Net Interest Income

Net interest income is the difference  between interest income and fees on loans
and interest expense,  and is the largest  contributing factor to net income for
the Company. All discussions of rate are on an annualized  tax-equivalent basis,
which accounts for income earned on nontaxable loans and securities that are not
fully  subject to federal  taxes.  Net  interest  income was $4.6 million in the
third  quarter of 2004,  a decrease  of $259,000  from $4.9  million in the same
period in 2003. For the nine month period ended September 30, 2004, net interest
income was $15.2 million, an increase of $1.1 million from $14.1 million in that
period in 2003.  Net interest  margin as a percentage of average  earning assets
(includes loans placed on nonaccrual status) declined to 4.08% from 4.45% and to
4.01% from 4.12% for the three months and nine months ended  September  30, 2004
and 2003, respectively.

The major component of interest income and fees on loans is the income generated
by loans.  Although average yield declined to 5.72% from 6.32% and to 5.56% from

                                       17
<PAGE>

6.09% for the three  months and nine months ended  September  30, 2004 and 2003,
respectively,  interest  income  and fees on  loans  increased  as a  result  of
increased average loan balances.

The major  components of interest  expense are interest paid on  certificates of
deposit (time deposits) and on money market deposits.  The average interest rate
declined  to 1.67% from  1.79% and to 1.64% from 1.94% for the three  months and
nine months ended September 30, 2004 and 2003,  respectively.  Interest  expense
decreased due to decreased rates paid on increased average balances.

The  following  table  summarizes  the  changes  and  reasons for the changes in
interest  earned and paid during the three and nine months ended  September  30,
2004 and 2003:

                                       18
<PAGE>

<TABLE>
<CAPTION>
                                                                            Three months ended
                                                                              September 30,
                                                                     2004                          2003
                                                       -------------------------------------------------------------
                                                                  Interest    Average              Interest  Average
                                                       Average     Earned      Yield     Average    Earned    Yield
                                                       Balance    or Paid     or Cost    Balance   or Paid   or Cost
                                                       -------------------------------------------------------------
                                                                          (Dollars in thousands)
<S>                                                  <C>         <C>          <C>       <C>       <C>        <C>
Interest Income:
  Interest and fees on loans (a) (b)                  $ 455,383    6,511       5.72%     375,757    5,937     6.32%
  Interest and dividends on securities:
      Taxable                                            47,436      338       2.85%      58,044      458     3.16%
      Nontaxable (a)                                     35,187      552       6.28%      36,392      618     6.79%
  Interest on Fed funds sold                              1,794        1       0.22%       5,987       13     0.87%
  Interest on interest-bearing deposits in banks            294        5       6.80%         382        1     1.05%
                                                       -------------------------------------------------------------
      Total Interest Income                           $ 540,094    7,407       5.49%     476,562    7,027     5.90%
                                                       =============================================================

Interest Expense
  Interest on deposits                                $ 368,184    1,355       1.47%     314,871    1,243     1.58%
  Interest on short-term borrowings                      49,270      216       1.75%      25,413       44     0.69%
  Interest on other borrowings                           37,167      325       3.50%      45,101      442     3.92%
                                                       -------------------------------------------------------------
      Total Interest Expense                          $ 454,621    1,896       1.67%     385,385    1,729     1.79%
                                                       =============================================================
Net interest margin                                             $  5,511       4.08%             $  5,298     4.45%
                                                                ====================             ===================
</TABLE>

<TABLE>
<CAPTION>

                                                                           Nine months ended
                                                                              September 30,
                                                                     2004                          2003
                                                       -------------------------------------------------------------
                                                                  Interest    Average              Interest  Average
                                                       Average     Earned      Yield     Average    Earned    Yield
                                                       Balance    or Paid     or Cost    Balance   or Paid   or Cost
                                                       -------------------------------------------------------------
                                                                          (Dollars in thousands)
<S>                                                  <C>         <C>          <C>       <C>       <C>        <C>
Interest Income:
  Interest and fees on loans (a) (b)                  $ 437,273   18,224       5.56%     370,589   16,916     6.09%
  Interest and dividends on securities:
      Taxable                                            50,105    1,263       3.36%      60,984    1,538     3.36%
      Nontaxable (a)                                     35,896    1,700       6.31%      36,391    1,882     6.90%
  Interest on Fed funds sold                              2,059       14       0.91%       9,530       73     1.02%
  Interest on interest-bearing deposits in banks            284        3       1.41%       1,751       16     1.22%
                                                       -------------------------------------------------------------
      Total Interest Income                           $ 525,617   21,204       5.38%     479,245   20,425     5.68%
                                                       =============================================================

Interest Expense
  Interest on deposits                                $ 348,733    3,687       1.41%     315,984    4,079     1.72%
  Interest on short-term borrowings                      49,634      526       1.41%      24,391      171     0.93%
  Interest on other borrowings                           41,879    1,197       3.81%      45,962    1,365     3.96%
                                                       -------------------------------------------------------------
      Total Interest Expense                          $ 440,246    5,410       1.64%     386,337    5,615     1.94%
                                                       =============================================================
Net interest margin                                             $ 15,794       4.01%             $ 14,810     4.12%
                                                                ====================             ===================
</TABLE>


(a)  The interest and average yield for  nontaxable  loans and  investments  are
     presented on an annualized  federal taxable equivalent basis assuming a 34%
     tax rate.
(b)  Interest and fees on loans  decreased  $479,000 and $1.593  million for the
     three and nine  months  ending  September  30, 2003  respectively  due to a
     reclassification of gains on the sales of loans.

                                       19
<PAGE>


Provision for Loan Losses

For the nine months ended  September  30, 2004,  $177,000 was charged to current
earnings and added to the allowance for loan losses  compared to $90,000  during
the  first  nine  months of 2003.  In the third  quarter  of 2004,  $77,000  was
expensed to the provision,  as compared to no addition in the comparable  period
in 2003. Net charge-offs decreased to $122,000 from $351,000 for the nine months
ended  September  30, 2004 as compared to the nine months  ended  September  30,
2003.  Non-accrual  loans  and  classified  loans  increased  $975,000  and $1.8
million,  respectively,  during the third quarter of 2004, and at the same time,
increased $1.8 million and $5.8 million,  respectively, in the first nine months
of 2004.  As a result of the  increase  in total  loans and  non-performing  and
classified  assets,  charges  to  earnings  rose  during the nine  months  ended
September  30, 2004 versus 2003.  The  majority of existing and new  non-accrual
loans are  secured by real  estate.  These are loans the  Company has had in its
collection process before they became non-accrual loans. The legal aspect of the
collections  process often extends the collection period to the point that these
loans  become  past  due  greater  than  90  days,  thus  causing  them to go to
non-accrual  status.  Management  believes the exposure to loss on the increased
non-performing  and  classified  loans is minimal  and that,  there is  adequate
collateral to cover the loan balances.

See "Allowance  for Loan Losses" above for a description of the processes  which
the Company uses in  determining  the amount of the  provision and the allowance
for loan losses.

Non-interest Income

Non-interest  income  decreased  $111,000  or 6.9% for the  three  months  ended
September  30, 2004 compared to the three months ended  September 30, 2003.  The
decrease  was  primarily  the result of  decreased  gains from the sale of loans
offset by an increase in service charge income on deposit accounts. Non-interest
income  decreased  $294,000 or 6.5% for the nine months ended September 30, 2004
compared to the nine months ended September 30, 2003. The decrease was primarily
the result of $944,000 in  decreased  gains from the sales of loans  offset by a
$358,000  increase in service charge income on deposit  accounts,  $111,000 from
trust fees and  $74,000 of income from other real estate  owned.  The  decreased
income  from the sale of loans was the  result of  increased  interest  rates on
fixed rate residential real estate loans. The increased  interest rates caused a
decline in the volume of fixed rate  residential  real  estate  loans  which the
Company sells to the secondary market.

Non-interest Expense

Non-interest  expense  increased  $321,000 or 7.9% and  $910,000 or 7.7% for the
three and nine months ended  September  30, 2004  compared to the three and nine
months ended  September  30,  2003.  Salaries  and benefit  costs,  which is the
largest component of non-interest  expense,  accounted for $162,000 and $431,000
of the increase for the three and nine months ended  September 30, 2004 compared
to the three and nine months ended  September 30, 2003. The increase in salaries
and costs can be  attributed  primarily to normal wage  increases  and increased
health insurance costs. Occupancy expense increased $70,000 and $148,000 for the
three and nine months ended  September  30, 2004  compared to the three and nine
months  ended  September  30,  2003  due to  increases  in  real  estate  taxes,
depreciation and utilities. Other expense increased $48,000 and $233,000 for the
three and nine months ended  September  30, 2004  compared to the three and nine
months ended  September 30, 2003.  The bulk of the increase in other expense was
twofold.  Professional  service  fees  increased  due to  additional  regulatory
requirements.  Amortization expense increased due to the acquisition of a branch
in the second quarter of 2003.

Income Taxes

Income tax expense for the nine months ending  September 30, 2004 was $1,945,000
compared to  $1,926,000  for the nine months  ending  September  30,  2003.  The
effective tax rate  increased to 29.7% for the nine months ending  September 30,
2004  compared to 28.3% for the nine  months  ending  September  30,  2003.  The
increase was primarily a result of an increase in taxable interest income.

Like  many  Wisconsin  financial  institutions,  the  Bank  has a  non-Wisconsin
subsidiary which holds and manages investments assets, the income from which has
not yet been  subject to  Wisconsin  tax. The  Wisconsin  Department  of Revenue
instituted an audit program,  including an audit of the Bank, specifically aimed
at out of state bank  subsidiaries and indicated that it may withdraw  favorable

                                       20
<PAGE>

rulings previously issued in connection with such  subsidiaries.  As a result of
these developments, the Department may take the position that some or all of the
income of the out of state subsidiary is taxable in Wisconsin, which will likely
be  challenged  by financial  institutions  in the state.  If the  Department is
successful in its efforts,  it could result in a substantial  negative impact on
the earnings of the Bank.

In late July 2004,  the  Department  sent letters to financial  institutions  in
Wisconsin  (whether  or  not  undergoing  an  audit)  reporting  on  settlements
involving 17 banks and their out-of-state  investment  subsidiaries.  The letter
provided  a  summary  of  the  Department's   currently   available   settlement
parameters.  For  prior  periods  they  include:  restrictions  on the  types of
subsidiary income excluded from Wisconsin  taxation;  assessment of certain back
taxes  for  a  limited  period  of  time;  limitations  on  net  operating  loss
carryforwards and interest  deductions related to subsidiary loans; and interest
(but not penalties) on past-due  taxes.  For 2004 and going forward,  the letter
states similar provisions,  including limits on subsidiaries' assets. Settlement
on the terms outlined  would result in the  rescission of prior letter  rulings,
and purport to be binding going forward except for future  legislation or change
by mutual  agreement.  Implicit in the letter appears to be an acceptance of the
general proposition that some out-of-state  investment  subsidiary income is not
subject to Wisconsin taxes.

The Company has advised the  Department  that it wishes to obtain and consider a
settlement proposal from the Department and will provide requested  information.
The Company has not yet received a specific  proposal nor has an assessment been
made  against  the  Company  or its  subsidiaries.  The  Company  will need more
specific detail to quantify in any definitive way the  Department's  view of its
exposure and to evaluate alternatives.  The Company continues to believe that it
has  reported  income and paid  Wisconsin  taxes  correctly in  accordance  with
applicable  tax laws and the  Department's  prior  longstanding  interpretations
thereof.  However,  as a result of the  Department's  changes  in  position  and
aggressive   stance,  any  final  resolution  of  these  matters  could  have  a
substantial  adverse  affect  relating to prior periods and/or  practices  going
forward.

Critical Accounting Policies

Allowance for Loan Losses

Management  believes the allowance for loan losses accounting policy is critical
to the portrayal  and  understanding  of our financial  condition and results of
operations.  As such,  selection and  application of this  "critical  accounting
policy" inherently  involves  judgments,  estimates,  and uncertainties that are
susceptible  to change.  In the event that  different  assumptions or conditions
were  to  prevail,  and  depending  upon  the  severity  of  such  changes,  the
possibility of materially different financial condition or results or operations
is a reasonable  likelihood.  For further  detail,  see the  explanations  under
"Financial Condition-Loans" above.

Income Taxes

See Note 1 of the notes to our audited consolidated financial statements for the
year ended  December 31, 2003 for our income tax accounting  policy.  Income tax
expense recorded in the consolidated  income statement  involves  interpretation
and application of certain  accounting  pronouncements and federal and state tax
codes, and is, therefore,  considered a critical  accounting  policy. We undergo
examinations by various regulatory taxing authorities. Such agencies may require
that changes in the amount of tax expense or valuation  allowance be  recognized
when  their  interpretations  differ  from those of  management,  based on their
judgments about information available to them at the time of their examinations.
In addition,  as noted above,  the Bank is undergoing a state tax audit relating
to  the  activities  and  holdings  of one of its  subsidiaries;  we  must  make
judgments   as  to  the  expected   effect  of  that  audit.   See  "Results  of
Operations-Income  Taxes" and Note 12 of the notes to our  audited  consolidated
financial  statements  for the year ended  December 31, 2003 for more income tax
information.


                                       21
<PAGE>

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

The  Company,  like  other  financial  institutions,  is  subject  to direct and
indirect market risk.  Direct market risk exists from changes in interest rates.
The Company's net income is dependent on its net interest  income.  Net interest
income is susceptible to interest rate risk to the degree that  interest-bearing
liabilities mature or reprice on a different basis than interest-earning assets.
When   interest-bearing   liabilities   mature  or  reprice  more  quickly  than
interest-earning  assets in a given  period,  a  significant  increase in market
rates of interest could adversely affect net interest income.

Similarly,  when  interest-earning  assets  mature or reprice  more quickly than
interest-bearing liabilities,  falling interest rates could result in a decrease
in net income.

In an  attempt to manage  exposure  to changes  in  interest  rates,  management
monitors  interest rate risk. The  Asset/Liability  Committee meets quarterly to
review  the  interest  rate  risk  position  and  profitability,  and to make or
recommend  adjustments.   Management  also  reviews  the  securities  portfolio,
formulates investment strategies,  and oversees the timing and implementation of
transactions  to  assure  attainment  of the  Company's  objectives  in the most
effective manner.  Notwithstanding our interest rate risk management activities,
the potential for changing  interest  rates is an  uncertainty  that can have an
adverse effect on net income.

In  adjusting  the  asset/liability  position,  management  attempts  to  manage
interest  rate risk while  maintaining  or enhancing  net interest  margins.  At
times,  depending  on the level of  general  interest  rates,  the  relationship
between  long-term  and  short-term   interest  rates,   market  conditions  and
competitive  factors,  management  may decide to increase the interest rate risk
position  somewhat in order to increase the net interest  margin.  The Company's
results of operations and net portfolio values remain vulnerable to increases in
interest  rates and to  fluctuations  in the  difference  between  long-term and
short-term interest rates.

One approach  used to quantify  interest  rate risk is the net  portfolio  value
("NPV") analysis.  In essence,  this analysis  calculates the difference between
the present  value of  liabilities  and the present value of expected cash flows
from assets and off-balance-sheet contracts. The most recent NPV analysis, as of
September  30,  2004,  projected  that net  portfolio  value  would  decrease by
approximately  6.64% if  interest  rates  would rise 200 basis  points and would
decrease by  approximately  2.42% if interest  rates would rise 100 basis points
over  the  next  year.  It  projects  an  increase  in net  portfolio  value  of
approximately  4.85% if  interest  rates  would  drop 200  basis  points  and an
increase of  approximately  2.91% if interest rates would drop 100 basis points.
Both simulations are within board-established policy limits. The Company has not
experienced any material  changes to its market risk position since December 31,
2003, as disclosed in the Company's 2003 Form 10-K Annual Report.  The Company's
policy is to limit the  effect of a 200 basis  point rate shock to plus or minus
20% of  projected  net  interest  income and to minus 20% of the market value of
portfolio equity.

The Company does not currently engage in trading  activities to control interest
rates.  Even though such  activities  may be permitted  with the approval of the
Board of Directors,  the Company does not intend to engage in such activities in
the immediate future.  However, the Company has engaged in the use of derivative
instruments  for the period  ended  September  30, 2004 and intends to engage in
such activities going forward.

Interest rate risk is the most  significant  market risk  affecting the Company.
Other types of market  risk,  such as foreign  currency  exchange  rate risk and
commodity  price  risk,  do not  arise in the  normal  course  of the  Company's
business activities.

                                       22
<PAGE>

Item 4.  Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure that
the information the Company must disclose in its filings with the Securities and
Exchange Commission is recorded, processed,  summarized and reported on a timely
basis. The Company's principal executive officer and principal financial officer
have reviewed and evaluated the Company's  disclosure controls and procedures as
defined in Rules  13a-15(e) and 15d-15(e)  under the Securities and Exchange Act
of 1934, as amended (the "Exchange Act"), as of the end of the period covered by
this report (the "Evaluation  Date").  Based on such  evaluation,  such officers
have  concluded  that,  as of the  Evaluation  Date,  the  Company's  disclosure
controls  and  procedures  are  effective in bringing to their  attention,  on a
timely  basis,  material  information  relating  to the  Company  required to be
included in the Company's periodic filings under the Exchange Act.

There have not been any changes in the Company's internal control over financial
reporting  (as defined in  Exchange  Act Rules  13a-15(f)  and  15d-15(f))  that
occurred  during the Company's most recent fiscal  quarter that have  materially
affected,  or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

Part II-OTHER INFORMATION

Item 1.  Legal Proceedings

         None

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

         None

Item 3.  Defaults upon Senior Securities

         None

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

         None

Item 5.  Other Information

          On October 15, 2004, the Company completed an offering of $7.5 million
          of variable rate cumulative trust  preferred  securities  representing
          undivided  beneficial  interests in First Banking  Center Trust I. The
          proceeds from the offering  were used by the trust to purchase  junior
          subordinated  debentures  from the Company.  The proceeds will be used
          for general corporate  purposes,  including future transactions or the
          retirement of debt.  Interest is payable quarterly on January 7, April
          7, July 7 and October 7 of each year,  commencing January 7, 2005 at a
          variable rate reset  quarterly  equal to three month LIBOR plus 2.50%.
          The debentures will mature and the trust preferred  securities must be
          redeemed on January 7, 2035. The Company has the option to shorten the
          maturity date to a date not earlier than January 7, 2010.  The Company
          may not shorten the maturity date without prior  approval of the Board
          of  Governors  of the  Federal  Reserve  System,  if  required.  Prior
          redemption is permitted under certain  circumstances,  such as changes
          in tax or regulatory capital rules.

                                       23
<PAGE>

Item 6.  Exhibits

         10.1  Indenture  dated  as  of  October 15, 2004, between First Banking
               Center,  Inc. and Wells Fargo Bank, National Association.

         31.1  Certification  of  the  Chief  Executive Officer pursuant to Rule
               13a-14(a)/15(d)-14(a)  as  adopted pursuant to Section 302 of the
               Sarbanes-Oxley Act of 2002 (exhibit is being filed herewith).

         31.2  Certification  of  the  Chief  Financial Officer pursuant to Rule
               13a-14(a)/15(d)-14(a) as adopted  pursuant  to Section 302 of the
               Sarbanes-Oxley Act of 2002 (exhibit is being filed herewith).

         32.1  Certification  of  the  Chief  Executive  Officer  pursuant to 18
               U.S.C. Section  1350 as  adopted  pursuant to  Section 906 of the
               Sarbanes-Oxley Act of 2002 (exhibit is being filed herewith).

         32.2  Certification  of  the  Chief  Executive  Officer  pursuant to 18
               U.S.C. Section  1350 as  adopted  pursuant to  Section 906 of the
               Sarbanes-Oxley Act of 2002 (exhibit is being filed herewith).


                                       24
<PAGE>

                   FIRST BANKING CENTER, INC AND SUBSIDIARIES


                                   SIGNATURES





Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1943,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.










                           First Banking Center, Inc.





November  15, 2004                          /s/ Brantly Chappell
Date                                        -----------------------
                                            Brantly Chappell
                                            Chief Executive Officer




November  15, 2004                          /s/ James Schuster
Date                                        -----------------------
                                            James Schuster
                                            Chief Financial Officer


                                       25
[{"type": "10-Q", "sequence": "1", "filename": "sept10q.txt", "description": "FIRST BANKING CENTER, INC SEPT 2004 10-Q", "secsgml_size_bytes": 101986}]
{"company-data": {"conformed-name": "FIRST BANKING CENTER INC", "cik": "0000356858", "assigned-sic": "6022", "irs-number": "391391327", "state-of-incorporation": "WI", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-11132", "film-number": "041146471"}, "business-address": {"street1": "400 MILWAUKEE AVE", "street2": "P O BOX 660", "city": "BURLINGTON", "state": "WI", "zip": "53105", "phone": "4147633581"}, "mail-address": {"street1": "567 BROAD ST", "street2": "PO BOX 970", "city": "LAKE GENEVA", "state": "WI", "zip": "53147"}, "former-company": {"former-conformed-name": "FIRST COMMUNITY BANK GROUP INC", "date-changed": "19850312"}}
UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

For the quarterly period ended September 30, 2004

OR

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

                         Commission File Number 0-11132

                           FIRST BANKING CENTER, INC.
             (Exact name of registrant as specified in its charter)

           Wisconsin                                         39-1391327
    (State or other jurisdiction of                       (I.R.S. Employer
     incorporation or organization)                      Identification No.)

    400 Milwaukee Ave., Burlington, WI                         53105
 (Address of principal executive offices)                   (Zip Code)

                                 (262) 763-3581
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

Yes     [ X ]     No [   ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).

Yes     [   ]     No [ X ]

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of November 8, 2004, Common stock,  $1.00 par value,  1,495,811
shares outstanding.

                                       1
FIRST BANKING CENTER, INC AND SUBSIDIARY
                                TABLE OF CONTENTS
                               September 30, 2004

Part I   Financial Information                                              Page
                                                                            ----

         Item 1  Consolidated Financial Statements

                 Unaudited Consolidated Balance Sheets,
                 September 30, 2004 and December 31, 2003                      3

                 Unaudited Consolidated Statements of Income,
                 For the three and nine month periods ended
                 September 30, 2004 and 2003                                   4

                 Unaudited Consolidated Statements of Cash Flows,
                 For the nine months ended September 30, 2004 and 2003         5

                 Notes to Unaudited Consolidated Financial Statements       6-10

         Item 2  Management's Discussion and Analysis of
                 Financial Condition and Results of Operations             11-21

         Item 3  Quantitative and Qualitative Disclosures about Market Risk   22

         Item 4  Controls and Procedures                                      23

Part II  Other Information

         Item 1  Legal Proceedings                                            23

         Item 2  Unregistered Sales of Equity Securities and Use of Proceeds  23

         Item 3  Defaults upon Senior Securities                              23

         Item 4  Submission of Matters to a Vote of Security Holders          23

         Item 5  Other Information                                            23

         Item 6  Exhibits                                                     24

         Signatures                                                           25

                                       2
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements

                    FIRST BANKING CENTER, INC. AND SUBSIDIARY
                      UNAUDITED CONSOLIDATED BALANCE SHEETS
September 30,     December 31,
ASSETS                                                               2004             2003
                                                                --------------------------------
                                                                     (Dollars in thousands)
Cash and due from banks                                         $  13,816         $  19,960
  Federal funds sold                                                  3,927             3,047
  Interest-bearing deposits in banks                                    307               274
  Available for sale securities                                      68,764            82,672
  Loans, less allowance for loan losses of $4,672 and
    $4,617 at 2004 and 2003, respectively                           456,246           403,252
  Office buildings and equipment, net                                12,882            11,818
  Other real estate owned                                             1,750             1,899
  Federal Home Loan Bank stock                                       12,281            11,755
  Other assets                                                        9,446             9,240
                                                                --------------------------------
      TOTAL ASSETS                                                $ 579,419         $ 543,917
                                                                ================================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
  Deposits
    Demand                                                        $  67,527         $  67,961
    Savings and NOW accounts                                        200,478           194,419
    Time                                                            164,253           145,072
                                                                --------------------------------
      Total deposits                                                432,258           407,452
  Short-term borrowings                                              60,289            34,176
  Other borrowings                                                   26,012            44,673
  Other liabilities                                                   4,067             4,076
                                                                --------------------------------
      TOTAL LIABILITIES                                           $ 522,626         $ 490,377
                                                                --------------------------------

STOCKHOLDERS' EQUITY
  Common stock, $1.00 par value 3,000,000 shares authorized;
    1,502,543 and 1,501,277 shares issued as of September 30,
    2004 and December 31, 2003, respectively; 1,494,886 and
    1,500,760 shares outstanding as of September 30, 2004 and
    December 31, 2003, respectively                                   1,503             1,501
  Surplus                                                             4,624             4,612
  Retained earnings                                                  50,133            46,161
  Accumulated other comprehensive income                                912             1,290
  Common stock in treasury, at cost- 7,657 and 517 shares as
   of September 30, 2004 and December 31, 2003, respectively           (379)              (24)
                                                                --------------------------------
      TOTAL STOCKHOLDERS' EQUITY                                  $  56,793         $  53,540
                                                                --------------------------------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $ 579,419         $ 543,917
                                                                ================================

                See accompanying notes to unaudited consolidated financial statements
3
FIRST BANKING CENTER, INC. AND SUBSIDIARY
                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended            Nine Months Ended
                                                                    September 30,                 September 30,
                                                                  2004           2003          2004           2003
                                                             ----------------------------------------------------------
                                                                (Dollars in thousands,       (Dollars in thousands,
                                                                except per share data)       except per share data)
INTEREST AND DIVIDEND INCOME

  Interest and fees on loans                                  $   6,502      $   5,925     $  18,197      $  16,884
  Interest and dividends on securities:
    Taxable                                                         229            275           739            956
    Non-taxable                                                     364            408         1,122          1,242
  Interest on federal funds sold                                      5             13            14             73
  Interest on interest-bearing deposits in banks                      1              1             3             16
  Other interest and dividends                                      159            183           524            582
                                                             ----------------------------------------------------------
      TOTAL INTEREST AND DIVIDEND INCOME                          7,260          6,805        20,599         19,753
                                                             ----------------------------------------------------------

INTEREST EXPENSE
  Interest on deposits                                            1,355          1,243         3,687          4,079
  Interest on short-term borrowings                                 214             44           525            171
  Interest on other borrowings                                      326            442         1,198          1,365
                                                             ----------------------------------------------------------
      TOTAL INTEREST EXPENSE                                      1,895          1,729         5,410          5,615
                                                             ----------------------------------------------------------

      NET INTEREST INCOME                                         5,365          5,076        15,189         14,138

  Provision for loan losses                                          77              0           177             90
                                                             ----------------------------------------------------------
      NET INTEREST INCOME AFTER PROVISION FOR
        LOAN LOSSES                                               5,288          5,076        15,012         14,048
                                                             ----------------------------------------------------------

NON-INTEREST INCOME
  Trust fees                                                        150            119           488            377
  Service charges on deposit accounts                               743            478         1,781          1,423
  Commissions                                                        18             48           101            135
  Automated banking fees                                            132            106           314            284
  Securities gains, net                                               0            107           123            107
  Loan gains, net                                                   161            479           649          1,593
  Other                                                             302            280           790            621
                                                             ----------------------------------------------------------
      TOTAL NON-INTEREST INCOME                                   1,506          1,617         4,246          4,540
                                                             ----------------------------------------------------------

NON-INTEREST EXPENSE
  Salary and employee benefits                                    2,401          2,239         7,104          6,673
  Occupancy                                                         332            262           986            838
  Equipment                                                         362            355         1,066          1,049
  Data processing services                                          295            261           844            763
  Other                                                             975            927         2,698          2,465
                                                             ----------------------------------------------------------
      TOTAL NON-INTEREST EXPENSE                                  4,365          4,044        12,698         11,788
                                                             ----------------------------------------------------------
      INCOME BEFORE INCOME TAXES                                  2,429          2,649         6,560          6,800

  Income taxes                                                      774            796         1,945          1,926
                                                             ----------------------------------------------------------
      NET INCOME                                              $   1,655      $   1,853     $   4,615      $   4,874
                                                             ==========================================================

Basic earnings per share                                      $    1.11      $    1.24     $    3.09      $    3.26
Diluted earnings per share                                    $    1.06      $    1.21     $    2.97      $    3.19

                        See accompanying notes to unaudited consolidated financial statements
4
FIRST BANKING CENTER, INC. AND SUBSIDIARY
                           UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
                                                                                           September 30,
                                                                                        2004          2003
                                                                                    ---------------------------
                                                                                       (Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                          $  4,615      $  4,874
  Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:
    Depreciation                                                                           789           686
    Provision for loan losses                                                              177            90
    Loan gains, net                                                                       (649)       (1,593)
    Amortization of premiums and accretion of discounts
      on securities, net                                                                   207           384
    Amortization                                                                           135           113
    Securities gains, net                                                                 (123)         (107)
    Tax benefit of nonqualified stock options exercised                                     20            -
    Increase in other assets                                                              (523)       (3,346)
    Decrease in other liabilities                                                           (8)         (349)
                                                                                    ---------------------------
      Net cash provided by operating activities before loan originations and sales       4,640           752
    Loans originated for sale                                                          (39,026)      (57,898)
    Proceeds from sale of loans                                                         39,670        63,605
                                                                                    ---------------------------
        NET CASH PROVIDED BY OPERATING ACTIVITIES                                        5,284         6,459
                                                                                    ---------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Net (increase) decrease in interest-bearing deposits in banks                          (32)          213
    Net (increase) decrease in federal funds sold                                         (880)        3,853
    Proceeds from sales of available-for-sale securities                                 6,297         9,135
    Proceeds from maturities and calls of available-for-sale securities                 71,009        54,808
    Purchase of available-for-sale securities                                          (64,057)      (56,792)
    Net increase in loans                                                              (53,166)      (13,604)
    Purchase of office buildings and equipment, net                                     (1,853)       (1,508)
                                                                                    ---------------------------
        NET CASH USED IN INVESTING ACTIVITIES                                          (42,682)       (3,895)
                                                                                    ---------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net increase (decrease) in deposits                                                 24,806       (15,829)
    Dividends paid                                                                        (643)         (583)
    Proceeds from other borrowings                                                         -           9,084
    Payments on other borrowings                                                       (18,661)       (2,063)
    Net increase (decrease) in short-term borrowings                                    26,113          (246)
    Sale of common stock for the exercise of stock options                                  30            62
    Purchase of treasury stock                                                            (634)          (10)
    Sale of treasury stock for the exercise of stock options                               243            -
                                                                                    ---------------------------
        NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                             31,254        (9,585)
                                                                                    ---------------------------
    NET DECREASE IN CASH AND DUE FROM BANKS                                             (6,144)       (7,021)

CASH AND DUE FROM BANKS:
    Beginning                                                                           19,960        22,203
                                                                                    ---------------------------
    Ending                                                                           $  13,816     $  15,182
                                                                                    ===========================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
    Cash paid during the year for:
      Interest                                                                       $   5,385     $   5,894
      Income taxes                                                                   $   1,557     $   1,058

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
  Change in accumulated other comprehensive income,
    Unrealized gains (losses) on available-for-sale securities, net                  $    (378)    $    (224)
  Other real estate aquired in settlement of loans                                   $      -      $   1,750

                See accompanying notes to unaudited consolidated financial statements
5
FIRST BANKING CENTER, INC AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2004

NOTE 1 - Basis of Presentation

The unaudited  consolidated  financial  statements include the accounts of First
Banking Center,  Inc. (the "Company") and First Banking Center, its wholly owned
subsidiary.  In the opinion of management,  all adjustments  (consisting only of
normal recurring adjustments) necessary for a fair presentation of the financial
position,  results of operation and cash flows for the interim periods have been
made.  The results of operations  for the three and nine months ended  September
30, 2004 are not  necessarily  indicative  of the results to be expected for the
entire fiscal year.

The unaudited interim financial statements have been prepared in conformity with
accounting  principles  generally  accepted in the United  States of America and
industry practice.  Certain information in footnote disclosure normally included
in  financial  statements  prepared in  accordance  with  accounting  principles
generally  accepted in the United  States of America and  industry  practice has
been  condensed or omitted  pursuant to rules and  regulations of the Securities
and  Exchange   Commission.   These  financial  statements  should  be  read  in
conjunction  with  the  consolidated  financial  statements  and  notes  thereto
included in the Company's December 31, 2003 audited financial statements.

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  which  affect  the  reported  amounts of assets and
liabilities  and disclosure of contingent  assets and liabilities as of the date
of the  financial  statements,  as well as the  reported  amounts  of income and
expenses  during the reported  periods.  Actual  results could differ from those
estimates.

NOTE 2 - Earnings per Share

The following information  calculates the computation of earnings per share on a
basic and diluted basis:
Three Months Ended    Nine Months Ended
                                                           September 30,         September 30,
                                                          2004       2003       2004       2003
                                                        -------------------------------------------
                                                            (Amounts in           (Amounts in
                                                         thousands, except     thousands, except
                                                          per share data)       per share data)
Basic
Net income                                               $ 1,655    $ 1,853    $ 4,615    $ 4,874
Weighted average shares outstanding                        1,496      1,496      1,496      1,496
Basic earnings per share                                 $  1.11    $  1.24    $  3.09    $  3.26

Diluted
Net income                                               $ 1,655    $ 1,853    $ 4,615    $ 4,874
Weighted average shares outstanding                        1,496      1,496      1,496      1,496
Effect of dilutive stock options outstanding                 -            2         59         32
                                                        -------------------------------------------
Diluted weighted average shares outstanding                1,496      1,498      1,555      1,528
Diluted earnings per share                               $  1.06    $  1.21    $  2.97    $  3.19
NOTE 3 - Comprehensive Income

The following table presents our comprehensive income:
Three Months Ended    Nine Months Ended
                                                           September 30,         September 30,
                                                          2004       2003       2004       2003
                                                        -------------------------------------------
                                                            (Dollars in           (Dollars in
                                                             thousands)            thousands)
Net income                                               $ 1,655    $ 1,853    $ 4,615    $ 4,874
Other comprehensive income
  Net change in unrealized gain (loss) on available
    for sale securities                                      578       (762)      (378)      (224)
                                                        -------------------------------------------
Total comprehensive income                               $ 2,233    $ 1,091    $ 4,237    $ 4,650
                                                        ===========================================
6
NOTE 4 - Stock-based Compensation Plan:

For the nine months  ended  September  30, 2004,  and  September  30, 2003,  the
Company had one  stock-based  compensation  plan for officers and key employees.
The  Company  accounts  for this plan  under the  recognitions  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 the income,  as all options  granted under those plans had an exercise  price
equal to the market value of the  underlying  common stock on the date of grant.
The following table  illustrates the effect on net income and earnings per share
if the Company had applied the fair value  recognition  provisions  of Financial
Accounting  Standards Board (FASB) Statement No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation:
Three Months Ended    Nine Months Ended
                                                           September 30,         September 30,
                                                          2004       2003       2004       2003
                                                        -------------------------------------------
                                                            (Dollars in           (Dollars in
                                                         thousands, except     thousands, except
                                                        for per share data)   for per share data)
Net income, as reported                                  $ 1,655    $ 1,853    $ 4,615    $ 4,874
Deduct total stock-based employee compensation
  expense determined under fair value based method
  for all awards, net of related tax effects                 -          -         (160)      (193)
                                                        -------------------------------------------
Pro forma net income                                     $ 1,655    $ 1,853    $ 4,455    $ 4,681
                                                        ===========================================

Earnings per share:
  Basic:
  As reported                                            $  1.11    $  1.24    $  3.09    $  3.26
  Pro forma                                                 1.11       1.24       2.98       3.13
Diluted:
  As reported                                            $  1.06    $  1.21    $  2.97    $  3.19
  Pro forma                                                 1.06       1.21       2.87       3.06
In  determining  compensation  cost using the fair value  method  prescribed  in
Statement  No. 123,  the value of each grant is estimated at the grant date with
the  following  weighted-average  assumptions  used for grants on September  30,
2004,  and September 30, 2003,  respectively:  dividend yield of 1.7 percent and
1.7 percent;  expected price volatility of 5.3 percent and 5.2 percent,  blended
risk-free interest rates of 4.14 percent and 4.22 percent; and expected lives of
10 years, respectively.

NOTE 5 - Commitments and Contingencies

Information  in the following  table  provides a summary of the Company's  other
contractual  obligations and commercial commitments as of September 30, 2004, as
well as that information for its depository products:
Payments Due by Fiscal Period
                                                                                    (in thousands)
                                                            ---------------------------------------------------------------
Contractual Obligations (a)                                               Remaining in     2005-       2007-     2009 and
                                                               Total          2004         2006        2008     thereafter
                                                            ---------------------------------------------------------------
Time deposits, certificates of deposit                      $ 164,253      $  20,518    $ 105,367   $  15,983   $  22,385
  and similar products                       (b)
Short-term obligations                       (c)               60,289         60,289          -           -           -
Other borrowings                             (d)               26,012          3,741       11,060      11,211         -
Operating leases                                                  332             95          174          63         -
Other long-term obligations                  (e)                2,270             66          497         427       1,280
                                                            ---------------------------------------------------------------
    Total contractual cash obligations                      $ 253,156      $  84,709    $ 117,098   $  27,684   $  23,665
                                                            ===============================================================
7
Notes

a.   Excluding the "off balance sheet" lending commitments discussed below.

b.   Excludes demand, savings and money market deposits.

c.   See Note 8 in the Notes to Consolidated  Financial  Statements for the year
     ended  December  31,  2003  for a  description  of  the  Company's  various
     short-term  borrowings.  Many  short-term  borrowings such as federal funds
     purchased and security  repurchase  agreements  are expected to be reissued
     and, therefore, do not necessarily represent an immediate need for cash.

d.   See Note 9 in the Notes to Consolidated  Financial  Statements for the year
     ended  December 31, 2003 for a description  of the Company's  various other
     borrowings.

e.   Other  long-term  obligations  consisted  primarily of salary  continuation
     agreements and benefit plans. See Exhibits 10.1, 10.2, 10.3 and 10.4 to the
     Form  10-K as of  December  31,  2003  for a  detailed  description  of the
     Company's salary continuation agreements and benefit plans.

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

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

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

Information  in the  following  table  provides  a summary  of the  contract  or
notional  amount  of the  Company's  exposure  to  off-balance-sheet  risk as of
September 30:
2004               2003
                                                             -----------------------------
                                                                (Dollars in thousands)
Commitments to extend credit
  Unused revolving home equity, consumer lines of credit     $ 21,867           $ 17,708
  Unused commercial lines of of credit                         74,815             61,172
Standby letters of credit                                       4,392              3,087
Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since many of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent future cash requirements.

Standby  letters of credit  are  conditional  commitments  issued by the Bank to
guarantee the performance of a customer to a third-party.  Those  guarantees are
primarily  issued to support  public and  private  borrowing  arrangements  and,
generally,  have terms of one year or less.  The credit risk involved in issuing
letters of credit is  essentially  the same as that  involved in extending  loan
facilities to customers.  The Bank holds collateral,  which may include accounts

                                       8
receivable,  inventory,  property,  equipment, and income-producing  properties,
supporting those commitments if deemed necessary. In the event the customer does
not perform in accordance with the terms of the agreement with the  third-party,
the Bank would be required to fund the commitment.  The maximum potential amount
of future  payments  the Bank could be  required to make is  represented  by the
contractual amount shown earlier in the summary. If the commitment is funded the
Bank would be entitled to seek recovery from the customer. At September 30, 2004
and December 31, 2003,  no amounts  have been  recorded as  liabilities  for the
Bank's potential obligations under these guarantees.

NOTE 6 - Derivative Instruments

At  September  30,  2004,  the  Company was  entered in two  interest  rate swap
transactions which, in effect,  resulted in the Company converting $20.0 million
of fixed rate brokered CD's into  variable  rate debt.  These swap  transactions
require  the payment of  interest  by the  Company at a variable  interest  rate
payment based on the one month LIBOR rate adjusted monthly. In turn, the Company
receives fixed rate interest payments equal to 5.0% and 4.0% using an actual/365
day basis.

Summary information about the interest rate swaps at September 30 is as follows:
2004             2003
                                            -------------------------------
                                                (Dollars in thousands)
Notional amount                              $  10,000          $    -
Weighted average fixed rate                       5.00%              -
Weighted average variable rate                    1.53%              -
Weighted average maturity, years                   7.5               -
Fair value                                         (19)              -
2004             2003
                                            -------------------------------
                                                (Dollars in thousands)
Notional amount                              $  10,000          $    -
Weighted average fixed rate                       4.00%              -
Weighted average variable rate                    1.63%              -
Weighted average maturity, years                   7.0               -
Fair value                                          (1)              -
In October and November 2004, the Company was entered in three new interest rate
swap  transactions  that  convert  an  additional  $20.0  million  of fixed rate
brokered  CD's into  variable  rate debt.  These  swaps  require  the payment of
interest by the Company at a variable  interest  rate  payment  based on the one
month LIBOR rate adjusted  monthly.  In turn,  the Company  receives  fixed rate
interest payments equal to 5.0% and 3.0% using an actual/365 day basis.

NOTE 7 - Recent Accounting Pronouncements

At the March 17-18, 2004 Emerging Issues Task Force ("EITF")  meeting,  the Task
Force reached a consensus on Issue No. 03-1, The Meaning of Other-Than-Temporary
Impairment  and its  Application  to  Certain  Investments.  EITF 03-1  provides
guidance for  determining the meaning of  "other-than-temporarily  impaired" and
its  application  to  certain  debt and  equity  securities  within the scope of
Statement of Financial  Accounting  Standards  No. 115,  Accounting  for Certain
Investments in Debt and Equity Securities ("SFAS 115") and investments accounted
for  under  the  cost  method.  The  guidance  set  forth in the  Statement  was
originally  effective  for the Company in the  September  30, 2004  consolidated
financial statements. However, in September 2004, the effective dates of certain
parts of the  Statement  were  delayed.  Management  is currently  assessing the
impact of Issue 03-1 on the consolidated financial statements.

                                       9
In March 2004,  the Financial  Accounting  Standards  Board  ("FASB")  issued an
Exposure Draft,  Share-Base Payment - an amendment of Statements No. 123 and 95.
This  Statement  amends SFAS  Statement  No.  123,  Accounting  for  Stock-Based
Compensation,  SFAS Statement No. 95,  Statement of Cash Flows,  and APB Opinion
No.  125,  Accounting  for  Stock  Issued to  Employees.  The  objective  of the
amendment to SFAS No. 123 is to recognize in the financial  statements  the cost
of employee services received in exchange for equity instruments and liabilities
incurred as the result of such transactions.  The grant-date fair value of stock
options would be determined using an option-pricing  model, and expense would be
recognized  over the vesting  period.  In October 2004,  the FASB  postponed the
effective  date of the  proposed  standard  from fiscal  years  beginning  after
December 15, 2004 to periods beginning after June 15, 2005. The FASB is expected
to issue a final standard by the end of calendar  2004.  Management is reviewing
the proposed standard to determine the impact on the financial statements.

NOTE 8 - Proposed Going Private Transaction

On August 12, 2004 the  company's  board of directors  announced a going private
transaction  by means of a 1-for-2,000  reverse  split of the  company's  common
stock,  followed  immediately by a 2,000-for-1 forward split. The effect of this
transaction  would be to reduce  the number of  shareholders  of record to fewer
than 300, thereby eliminating the company's  obligation to file reports with the
SEC.  Shareholders  with fewer than 2,000 shares of First Banking  Center,  Inc.
common stock,  held of record in their name,  immediately  before the split will
receive a cash payment equal to $60.00 per pre-split  share.  Shareholders  with
2,000 or more shares of record in their name  immediately  before the split will
continue  to hold the same  number  of  shares  after  completion  of the  split
transaction.

                                       10
Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Forward Looking  Statements- Safe Harbor Statement under the Private  Securities
Litigation Reform Act of 1995

This report contains certain  forward-looking  statements  within the meaning of
Section  27A of the  Securities  Act of 1933,  as amended and Section 21E of the
Securities  Exchange  Act of 1934,  as amended.  We intend such  forward-looking
statements  to be  covered by the safe  harbor  provisions  for  forward-looking
statements  contained in the Private  Securities Reform Act of 1995, and include
this  statement  for purposes of these safe harbor  provisions.  Forward-looking
statements,  which are based on  certain  assumptions  and  describe  our future
plans,  strategies and  expectations  are generally  identifiable  by use of the
words "believe,"  "expect,"  "intend,"  "anticipate,"  "estimate,"  "project" or
similar  expressions.  First Banking  Center's ability to predict results or the
actual effect of future plans or strategies  is  inherently  uncertain.  Factors
which  could  have a  material  adverse  affect  on our  operations  and  future
prospects include,  but are not limited to, changes in: interest rates,  general
economic  conditions,   legislative/regulatory   changes,   acts  of  terrorism,
challenges  by tax  authorities,  monetary  and  fiscal  policies  of  the  U.S.
Government,  including  policies of the U.S.  Treasury  and the Federal  Reserve
Board, the quality or composition of the loan or investment  portfolios,  demand
for loan products, deposit flows, competition,  demand for financial services in
our market area, our implementation of new technologies,  our ability to develop
and maintain secure and reliable  electronic systems and accounting  principles,
policies and guidelines.  These risks and uncertainties  should be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements.

                    FIRST BANKING CENTER, INC AND SUBSIDIARY
                       MANAGEMENTS DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                            As of September 30, 2004

The following discussion provides additional analysis of the financial condition
and results of operations of the Company for the three and the nine months ended
September 30, 2004.  This  discussion  focuses on the  significant  factors that
affected the Company's  earnings so far in 2004, with comparisons to 2003. As of
September  30,  2004,  First  Banking  Center  (the  "Bank") was the only direct
subsidiary  of the  Company  and its  operations  contributed  nearly all of the
revenue for the year. The Company  provides  various  support  functions for the
Bank and receives payment from the Bank for these services.  These  intercompany
payments  are  eliminated  for  the  purpose  of  these  consolidated  financial
statements.  The  Bank  has  three  wholly  owned  subsidiaries,  FBC  Financial
Services, Corp., a brokerage and financial services subsidiary,  FBC-Burlington,
Inc., an investment subsidiary located in Nevada and Burco Holdings, LLC, a real
estate  subsidiary for the purpose of holding and liquidating  property acquired
as other real estate.

Overview

As of September 30, 2004,  total Company assets were $579.4 million,  increasing
6.53% from $543.9  million as of December 31,  2003.  Net income for the quarter
ended September 30, 2004 was $1.7 million or $1.06 per diluted share, decreasing
$198,000  or 10.69% from $1.9  million or $1.21 per  diluted  share in the third
quarter of 2003.  Net income for the nine months  ended  September  30, 2004 was
$4.6 million or $2.97 per diluted share,  decreasing $259,000 or 5.31% from $4.9
million  or $3.19 per  diluted  share in the  first  nine  months  of 2003.  The
significant items resulting in these results are discussed below.

Financial Condition

Loans

Loans  outstanding  were $460.9 million and $407.9 million on September 30, 2004
and  December  31,  2003  respectively.  This  represented  an increase of $53.0
million or 13.0%.  The increase  was  primarily  the result of continued  strong
demand for  commercial  loans secured by real estate and  construction  and land
development  loans. The increase in agricultural real estate loans was primarily
the  reclassification of farm residential  property from residential real estate
to agricultural real estate.  Loan demand outpaced the growth in deposits in the
first nine  months of 2004;  therefore,  the Company  also sold some  investment
securities  and borrowed  additional  funds to fund a portion of this  increased
loan demand.

                                       11
The  following  table   summarizes  the  changes  to  date  in  the  major  loan
classifications:
As a % of Total Loans
                                           September 30,    December 31,   Change in         September 30,    December 31,
                                               2004             2003         Balance             2004             2003
                                         ----------------------------------------------     -------------------------------
                                                       (Dollars in millions)
Residential Real Estate                       $155.1           $178.5        ($23.4)             33.7%            43.8%
Commercial Real Estate                        $128.0           $101.1         $26.9              27.8%            24.8%
Construction and Land Development              $63.7            $43.0         $20.7              13.8%            10.5%
Commercial                                     $32.6            $27.6          $5.0               7.1%             6.8%
Agricultural Real Estate                       $54.4            $25.9         $28.5              11.8%             6.4%
Allowance for Loan Losses

One measure of the adequacy of the allowance for loan losses is the ratio of the
allowance for loan losses to total loans. The allowance for loan losses was $4.7
million  or 1.01% of gross  loans on  September  30,  2004,  compared  with $4.6
million or 1.13% of gross loans on  December  31,  2003.  Net  charge-offs  were
$122,000 or .03% of gross loans and $351,000 or .09% of gross loans for the nine
months ended September 30, 2004 and 2003,  respectively.  The allowance for loan
losses was 123.17% of  non-accrual  loans at  September  30, 2004 as compared to
226.1% at December 31, 2003.  See below for further  information  regarding  the
increase in  non-accrual  loans and  "Results of  Operations-Provision  for Loan
Losses" for matters  relating to the  determination  of the  provision  for loan
losses in the first nine months of 2004.

The allowance for loan losses is established through a provision for loan losses
charged to expense. See "Provision for Loan Losses" below for information on the
provision  during the periods.  Loans are charged against the allowance for loan
losses when  management  believes  that the  collectibility  of the principal is
unlikely. Not withstanding the increase in non-accrual loans, it is management's
belief that the allowance for loan losses is adequate to cover  probable  credit
losses  relating to  specifically  identified  loans, as well as probable credit
losses inherent in the balance of the loan portfolio.  However,  there can be no
assurance  that the  allowance  for loan  losses  will be  adequate to cover all
losses that actually  occur.  In accordance  with FASB Statements 5 and 114, the
allowance is provided for losses that have been incurred as of the balance sheet
date. The allowance is based on past events and current economic conditions, and
does not include the effects of expected  losses on specific  loans or groups of
loans  that are  related  to  future  events or  expected  changes  in  economic
conditions. Management reviews a calculation of the allowance for loan losses on
a quarterly basis. 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 or trends,  potential exposure in
the loan  portfolio or other  factors.  Impaired loans are measured based on the
present value of expected future cash flows  discounted at the loan's  effective
interest  rate or, as a practical  expedient,  at the loan's  observable  market
price or the fair value of the collateral if the loan is collateral dependent. A
loan is impaired  when it is probable  the Company will be unable to collect all
contractual  principal and interest payments due in accordance with the terms of
the loan agreement.

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

                                       12
The  following  table  provides a detailed  analysis of changes in the indicated
periods in the allowance for estimated loan losses:
Nine Months Ended
                                                                            September 30,
                                                                       2004                2003
                                                                  ----------------------------------
                                                                        (Dollars in thousands)
Balance, beginning of fiscal year                                   $   4,617           $   4,988

Charge-offs:
  Commercial                                                               18                   7
  Agricultural production                                                   0                  42
  Real estate:
    Construction                                                            0                   0
    Commercial                                                              0                 257
    Agriculture                                                            93                   0
    Other mortgages                                                        46                  42
  Consumer (including installmment loans)                                   6                  11
                                                                  ----------------------------------
      Total Charge-offs                                                   163                 359
                                                                  ----------------------------------

Recoveries:
  Commercial                                                                0                   2
  Agricultural production                                                   0                   0
  Real estate:
    Construction                                                            0                   0
    Commercial                                                              0                   0
    Agriculture                                                            20                   0
    Other mortgages                                                         8                   0
  Consumer (including installment loans)                                   13                   6
                                                                  ----------------------------------
      Total Recoveries                                                     41                   8
                                                                  ----------------------------------

Net Charge-offs                                                           122                 351

Provision charged to operations                                           177                  90
                                                                  ----------------------------------
Balance, end of period                                              $   4,672           $   4,727
                                                                  ==================================

Average amount of loans outstanding
   before allowance for estimated losses on loans                   $ 437,273           $ 371,448
                                                                  ==================================

Ratio of net charge-offs during the
   period to average loans outstanding
   during the period                                                    0.028%              0.094%
                                                                  ==================================
13
Non-accrual, Past Due and Renegotiated Loans
September 30,    December 31,
                                                                       2004             2003
                                                                  ---------------- ----------------
                                                                       (Dollars in thousands)
Non-accrual Loans (a)                                                 $3,793           $2,041
Past Due 90 days + (b)                                                     0                0
Restructured Loans                                                         0                0
The policy of the Company is to place a loan on non-accrual status if:

(a)  payment in full of interest and principal is not expected, or

(b)  principal  or interest  has been in default for a period of 90 days or more
     unless  the  obligation  is both in the  process  of  collection  and  well
     secured. Well secured is defined as collateral with sufficient market value
     to repay  principal and all accrued  interest.  A debt is in the process of
     collection  if  collection  of the debt is  proceeding in due course either
     through legal action,  including  judgment  enforcement  procedures,  or in
     appropriate  circumstances,  through collection efforts not involving legal
     action which are reasonably  expected to result in repayment of the debt or
     in its restoration to current status.

The non-accrual  loans consisted  primarily of $2.3 million of residential  real
estate loans,  $378,000 of farmland,  $487,000 of agricultural  production loans
and $546,000 of commercial and commercial real estate loans. The increase during
the first nine  months of 2004 was the result of  non-accrual  residential  real
estate  loans  increasing   $838,000,   non-accrual  farmland  loans  increasing
$303,000,  non-accrual  agricultural  production loans  increasing  $484,000 and
non-accrual  commercial and commercial real estate loans of $38,000. The bulk of
the increase  related to factors  involving  specific  loans in the  foreclosure
process.  The legal aspects of the foreclosure  process  increasingly extend the
period of final  collection  of the  loan,  causing  loans to be in  non-accrual
status for longer periods of time.

As of  September  30, 2004,  the Company had loans  totaling  $24.2  million (in
addition to those listed as  non-accrual,  past due or  restructured)  that were
identified by the Bank's  internal asset rating system as classified  assets and
loans which  management  has  determined  require  additional  monitoring.  This
represented  an increase of $5.8 million or 31.2% from  December  31, 2003.  The
increase  was  primarily  the result of the  Company  modifying  its  standards,
beginning  in the first  quarter of 2004,  whereby it now  identifies  potential
problem loans earlier in the process than in the past. By identifying  the loans
earlier,  they can be  monitored  more  closely with the idea that action can be
taken before they become problem loans. A portion of the increase, $1.2 million,
represented a change in the way the Company treats the  guaranteed  portion of a
loan.  Beginning  with the first  quarter  of 2004,  the  Company  included  the
guaranteed  portion of a  classified  loan in the  classified  loan  total.  The
Company  believes it has  adequate  reserves for  anticipated  losses that could
result  from  the  increase  in  classified  assets;  however,  there  can be no
assurance  that the  allowance  for loan  losses  will be  adequate to cover all
losses that actually occur.  Management is not aware of any  significant  loans,
group of loans or segments of the loan portfolio not included above,  where full
collectibility cannot reasonably be expected. Management has committed resources
and is focusing on efforts designed to control the amount of classified  assets.
The Company does not have a substantial portion of its loans concentrated in one
or a few  industries  nor  does it have  any  foreign  loans  outstanding  as of
September 30, 2004. The Company's loans are concentrated  geographically  in the
Wisconsin counties of Racine, Walworth, Kenosha, Lafayette and Green.

Investment Securities - Available for Sale

The fair value of the securities  available-for-sale  portfolio at September 30,
2004,  decreased  $13.9  million or 16.8% from  December  31,  2003.  During the
period, the Company sold securities in the investment  portfolio in part to fund
the increase in loans.

For the purposes of this discussion, changes in investment security balances are
based on amortized  costs.  The decrease came from three areas of the portfolio.
The Company  purchased $60.5 million of U.S.  government  agency  securities and
$3.6  million of  municipal  securities.  The Company  sold $4.6 million of U.S.

                                       14
government  agency notes and $1.7 million of  municipal  securities.  There were
maturities and calls of $66.1 million of U.S.  government  agency notes and U.S.
government  agency  mortgage-backed  securities  and $4.9  million of  municipal
securities.

Deposits

Total  deposits  were $432.3  million on September  30, 2004  compared to $407.5
million on December 31, 2003. This was an increase of $24.8 million or 6.1%. The
net gain in deposits of $24.8 million was mainly a result of the Company issuing
$20.0  million  in  brokered  time  deposits.  Brokered  deposits  are  deposits
generated  outside of the  Company's  market area.  They are sold by a broker to
individuals who have no other relationships with the Company,  and are therefore
inherently less stable a source of funds than locally  generated  deposits.  The
brokered  deposits have a 7.0 - 7.5 year maturity,  which exposes the Company to
interest rate risk for a period of time longer than the Company is accustomed to
when issuing time deposits in its market.  To offset this risk, the deposits are
callable  every six months and the Company has also  entered  into two  callable
interest  rate  swaps  that  effectively  convert  the 7.0 - 7.5 year fixed rate
liabilities  to one month LIBOR based  variable  rate  liabilities.  See Item 1,
"NOTE 6 - Derivative  Instruments" for more information regarding the swaps. The
Bank's  brokered  deposits  totaled  $40.0  million at September  30, 2004.  The
following table summarizes  changes during 2004 in the major  classifications of
deposits:
September 30,      December 31,                Change in
                                                               2004              2003                     Balance
                                                        -----------------------------------           --------------
                                                               (Amounts in millions)
Money Market and Savings                                    $  154.4          $  149.2                    $   5.2
NOW Accounts                                                    46.1              45.2                        0.9
Demand  Deposits                                                67.5              68.0                       (0.5)
Time Deposits less than $100,000                                91.0              87.1                        3.9
Time Deposits equal or greater than $100,000                    73.3              57.9                       15.4
Borrowed Funds

Total borrowed funds were $86.3 million on September 30, 2004, compared to $78.8
million on December  31,  2003.  This was an  increase of $7.5  million or 9.5%.
Federal Home Loan  borrowings  decreased  $18.5 million as  maturities  were not
replaced. The Company replaced these funds with brokered time deposits.  Federal
funds  borrowed  increased  by $25.7  million to fund the demand for loans.  The
following table summarizes  changes during 2004 in the major  classifications of
borrowed funds:
September 30,      December 31,                Change in
                                                               2004              2003                     Balance
                                                        -----------------------------------           --------------
                                                               (Amounts in millions)
Securities sold under agreement to repurchase               $   27.9          $   27.4                    $   0.5
Federal Home Loan Borrowings                                    25.7              44.2                      (18.5)
Federal Funds Borrowed                                          32.3               6.7                       25.6
Further  information  regarding  our FHLB  borrowings as of December 31, 2003 is
included in Note 9 of our Consolidated Financial Statements in our annual report
on Form 10-K for the year ended December 31, 2003.

Capital resources

As of September 30, 2004,  the Company's  stockholders'  equity  increased  $3.3
million or 6.1% from  December  31,  2003.  Net income of $4.6  million  was the
primary reason for the increase.  In addition,  the Company  issued  $243,000 of
common stock  through its  incentive  stock option plan.  These  increases  were
partially  offset by the  Company's  repurchase of $634,000 of common stock into
treasury,  cash  dividends  of $643,000  (or $.43 per share for the period ended
June 30, 2004),  and a decrease in  accumulated  other  comprehensive  income of
$378,000, to $912,000 at September 30, 2004 from $1.3 million at year end.

Under the Federal Reserve  Board's  risk-based  guidelines,  capital is measured
against the Company's subsidiary bank's risk-weighted assets. The Company's tier

                                       15
1 capital (common  stockholders'  equity less goodwill) to risk-weighted  assets
was 11.4% at  September  30,  2004,  well above the 4% minimum  required.  Total
capital  to  risk-adjusted  assets  was 12.4 %; also well  above the 8%  minimum
requirement.  The  leverage  ratio  was at  9.5%  compared  to  the  4%  minimum
requirement. According to FDIC capital guidelines, the Company and the Bank were
considered to be "well capitalized" at September 30, 2004.

On October 15,  2004,  the  Company  completed  an  offering of $7.5  million of
variable rate  cumulative  trust  preferred  securities  representing  undivided
beneficial  interests in First  Banking  Center  Trust I. The proceeds  from the
offering were used by the trust to purchase junior subordinated  debentures from
the Company. The proceeds will be used for general corporate purposes, including
future  transactions or the retirement of debt. Interest is payable quarterly on
January 7, April 7, July 7 and  October 7 of each  year,  commencing  January 7,
2005 at a variable rate reset  quarterly  equal to three month LIBOR plus 2.50%.
The debentures will mature and the trust  preferred  securities must be redeemed
on January 7, 2035. The Company has the option to shorten the maturity date to a
date not earlier than January 7, 2010.  The Company may not shorten the maturity
date without  prior  approval of the Board of  Governors of the Federal  Reserve
System, if required.  Prior redemption is permitted under certain circumstances,
such as changes in tax or regulatory capital rules.

Asset/liability management

The principal  function of  asset/liability  management is to manage the balance
sheet mix,  maturities,  repricing  characteristics  and pricing  components  to
provide an adequate and stable net interest  margin with an acceptable  level of
risk over time and through interest rate cycles.

Interest-sensitive  assets  and  liabilities  are  those  that  are  subject  to
repricing   within  a  specific   relevant  time  horizon.   The  Bank  measures
interest-sensitive  assets and  liabilities,  and their  relationship  with each
other at terms of immediate, quarterly intervals up to 1 year, and over 1 year.

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

The Bank's  strategy with respect to  asset/liability  management is to maximize
net  interest  income  while  limiting  its  exposure  to a  potential  downward
movement.  This strategy is  implemented by the Bank's  management,  which takes
action  based upon its  analysis  of a number of factors,  including  the Bank's
present positioning, its desired future positioning, economic forecasts, and its
goals.  It is the Bank's  desire to  maintain a  cumulative  gap of  positive or
negative 15% of rate sensitive  assets at the 1-year time frame.  The percentage
at September 30, 2004 was a positive 16%, which compared to a positive 20% as of
December 31, 2003.  Although  these ratios were outside the Bank's target range,
and the Bank would therefore be somewhat exposed to declining rates,  management
felt the ratios  were  appropriate  due to  management's  projection  for future
interest rates.

Liquidity

Liquidity  measures  the  ability  to meet  maturing  obligations  and  existing
commitments,  to withstand  fluctuations in deposit levels,  to fund operations,
and to provide for customers'  credit needs. One source of liquidity is cash and
short-term assets, such as interest-bearing  deposits in other banks and federal
funds sold,  which totaled  $18.1  million at September 30, 2004,  compared with
$23.3  million  at  December  31,  2003.  The Bank has a variety  of  sources of
short-term  liquidity  available to it,  including  federal funds purchased from
correspondent  banks,  sales of securities  available for sale,  FHLB  advances,
lines of credit  and loan  participations  or sales.  As in the second and third
quarters,  the Bank can also use brokered  deposits to raise additional cash. In
addition,  brokered  deposits are inherently less stable than locally  generated
ones  because  they  are  not  generated  from  local  customers   having  other
relationships with the Bank. See "Financial  Condition - Deposits" above. During
the third quarter of 2004, the Bank became increasingly  dependent upon borrowed
funds as its loans outstanding  increased at a higher rate than deposits.  While
management  believes that these types of brokered  deposits and  borrowings  are
available on reasonable  terms,  there can be no assurance they will continue to
be. The Bank also generates  liquidity from the regular  principal  payments and
prepayments made on its portfolio of loans and  mortgage-backed  securities and,
if appropriate,  by selling  available for sale securities.  Although changes in
interest rates could negatively impact liquidity,  management feels the Bank has
adequate  sources to meet its  liquidity  needs.  Any  effects  that  changes in
interest rates have on income should have minimal impact on liquidity.

                                       16
The cash  position  of the  Bank is  determined  by  activity  in three  primary
classifications: cash flows from operating activities, cash flows from investing
activities,  and cash flows from financing activities.  As a net result of these
activities,  the Bank's cash  decreased  for the nine  months of 2004.  Net cash
provided by operating  activities was $5.3 million.  This was primarily a result
of net income,  normal  increases  and  decreases  in  operations  offset by net
secondary market loan proceeds over originating secondary market loans. Net cash
used in investing activities, consisting primarily of loan funding and purchases
of  securities,  was $42.7 million.  Net cash provided by financing  activities,
consisting  primarily of a $26.1 million  increase in short term  borrowings and
deposit  growth of $24.8  million  offset by $18.7  million in payments on other
borrowings, was $31.3 million for the nine months ended September 30, 2004.

As an additional  source of liquidity,  the Company  received  proceeds from its
trust  preferred  securities  transaction  as  previously  discussed  in Item 2.
Capital Resources. The Company believes that it has sufficient resources to fund
its proposed going private  transaction as discussed in Item 1. Note  8-Proposed
Going Private Transaction.

For the nine months ended  September  30, 2003,  net cash  provided by operating
activities was $6.5 million. This was primarily a result of net secondary market
loan  proceeds over  originating  secondary  market  loans.  Net cash used in by
investing activities,  consisting primarily of loans funding, federal funds sold
and proceeds from  security  transactions,  was $3.9  million.  Net cash used in
financing  activities,  consisting  primarily of decreased deposits and proceeds
from other borrowings, was $9.6 million.

Off-Balance Sheet Liabilities and Contractual Obligations

Because  the  Company  is a holding  company  for a  financial  institution,  it
inherently has lending and other  off-balance  sheet financial  commitments.  It
also has substantial contractual obligations to pay monies deposited with it, in
addition to the types of long-term contractual obligations which other companies
incur.  Information regarding the Company's off-balance sheet arrangements and a
summary of future  contractual  commitments  is included in Note 5 - Commitments
and Contingencies in the interim financial statements included in this report in
Item 1. The information  included in Note 5 is incorporated by reference in this
management's discussion and analysis.

Impact of Inflation and Changing Prices

The  consolidated  financial  statements  and the  accompanying  notes have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America,  which require the  measurement of financial  position
and operating results in terms of historical dollar amounts without  considering
the  changes  in the  relative  purchasing  power  of  money  over  time  due to
inflation.  The impact of inflation is  reflected in the  increased  cost of our
operations.   Unlike  industrial  companies,   nearly  all  of  our  assets  and
liabilities are monetary in nature.  As a result,  interest rates have a greater
impact on our  performance  than do the effects of general  levels of inflation.
Interest  rates do not  necessarily  move in the same  direction  or to the same
extent as the price of goods and services.

Results of operations

Net Interest Income

Net interest income is the difference  between interest income and fees on loans
and interest expense,  and is the largest  contributing factor to net income for
the Company. All discussions of rate are on an annualized  tax-equivalent basis,
which accounts for income earned on nontaxable loans and securities that are not
fully  subject to federal  taxes.  Net  interest  income was $4.6 million in the
third  quarter of 2004,  a decrease  of $259,000  from $4.9  million in the same
period in 2003. For the nine month period ended September 30, 2004, net interest
income was $15.2 million, an increase of $1.1 million from $14.1 million in that
period in 2003.  Net interest  margin as a percentage of average  earning assets
(includes loans placed on nonaccrual status) declined to 4.08% from 4.45% and to
4.01% from 4.12% for the three months and nine months ended  September  30, 2004
and 2003, respectively.

The major component of interest income and fees on loans is the income generated
by loans.  Although average yield declined to 5.72% from 6.32% and to 5.56% from

                                       17
6.09% for the three  months and nine months ended  September  30, 2004 and 2003,
respectively,  interest  income  and fees on  loans  increased  as a  result  of
increased average loan balances.

The major  components of interest  expense are interest paid on  certificates of
deposit (time deposits) and on money market deposits.  The average interest rate
declined  to 1.67% from  1.79% and to 1.64% from 1.94% for the three  months and
nine months ended September 30, 2004 and 2003,  respectively.  Interest  expense
decreased due to decreased rates paid on increased average balances.

The  following  table  summarizes  the  changes  and  reasons for the changes in
interest  earned and paid during the three and nine months ended  September  30,
2004 and 2003:

                                       18
Three months ended
                                                                              September 30,
                                                                     2004                          2003
                                                       -------------------------------------------------------------
                                                                  Interest    Average              Interest  Average
                                                       Average     Earned      Yield     Average    Earned    Yield
                                                       Balance    or Paid     or Cost    Balance   or Paid   or Cost
                                                       -------------------------------------------------------------
                                                                          (Dollars in thousands)
Interest Income:
  Interest and fees on loans (a) (b)                  $ 455,383    6,511       5.72%     375,757    5,937     6.32%
  Interest and dividends on securities:
      Taxable                                            47,436      338       2.85%      58,044      458     3.16%
      Nontaxable (a)                                     35,187      552       6.28%      36,392      618     6.79%
  Interest on Fed funds sold                              1,794        1       0.22%       5,987       13     0.87%
  Interest on interest-bearing deposits in banks            294        5       6.80%         382        1     1.05%
                                                       -------------------------------------------------------------
      Total Interest Income                           $ 540,094    7,407       5.49%     476,562    7,027     5.90%
                                                       =============================================================

Interest Expense
  Interest on deposits                                $ 368,184    1,355       1.47%     314,871    1,243     1.58%
  Interest on short-term borrowings                      49,270      216       1.75%      25,413       44     0.69%
  Interest on other borrowings                           37,167      325       3.50%      45,101      442     3.92%
                                                       -------------------------------------------------------------
      Total Interest Expense                          $ 454,621    1,896       1.67%     385,385    1,729     1.79%
                                                       =============================================================
Net interest margin                                             $  5,511       4.08%             $  5,298     4.45%
                                                                ====================             ===================
Nine months ended
                                                                              September 30,
                                                                     2004                          2003
                                                       -------------------------------------------------------------
                                                                  Interest    Average              Interest  Average
                                                       Average     Earned      Yield     Average    Earned    Yield
                                                       Balance    or Paid     or Cost    Balance   or Paid   or Cost
                                                       -------------------------------------------------------------
                                                                          (Dollars in thousands)
Interest Income:
  Interest and fees on loans (a) (b)                  $ 437,273   18,224       5.56%     370,589   16,916     6.09%
  Interest and dividends on securities:
      Taxable                                            50,105    1,263       3.36%      60,984    1,538     3.36%
      Nontaxable (a)                                     35,896    1,700       6.31%      36,391    1,882     6.90%
  Interest on Fed funds sold                              2,059       14       0.91%       9,530       73     1.02%
  Interest on interest-bearing deposits in banks            284        3       1.41%       1,751       16     1.22%
                                                       -------------------------------------------------------------
      Total Interest Income                           $ 525,617   21,204       5.38%     479,245   20,425     5.68%
                                                       =============================================================

Interest Expense
  Interest on deposits                                $ 348,733    3,687       1.41%     315,984    4,079     1.72%
  Interest on short-term borrowings                      49,634      526       1.41%      24,391      171     0.93%
  Interest on other borrowings                           41,879    1,197       3.81%      45,962    1,365     3.96%
                                                       -------------------------------------------------------------
      Total Interest Expense                          $ 440,246    5,410       1.64%     386,337    5,615     1.94%
                                                       =============================================================
Net interest margin                                             $ 15,794       4.01%             $ 14,810     4.12%
                                                                ====================             ===================
(a)  The interest and average yield for  nontaxable  loans and  investments  are
     presented on an annualized  federal taxable equivalent basis assuming a 34%
     tax rate.
(b)  Interest and fees on loans  decreased  $479,000 and $1.593  million for the
     three and nine  months  ending  September  30, 2003  respectively  due to a
     reclassification of gains on the sales of loans.

                                       19
Provision for Loan Losses

For the nine months ended  September  30, 2004,  $177,000 was charged to current
earnings and added to the allowance for loan losses  compared to $90,000  during
the  first  nine  months of 2003.  In the third  quarter  of 2004,  $77,000  was
expensed to the provision,  as compared to no addition in the comparable  period
in 2003. Net charge-offs decreased to $122,000 from $351,000 for the nine months
ended  September  30, 2004 as compared to the nine months  ended  September  30,
2003.  Non-accrual  loans  and  classified  loans  increased  $975,000  and $1.8
million,  respectively,  during the third quarter of 2004, and at the same time,
increased $1.8 million and $5.8 million,  respectively, in the first nine months
of 2004.  As a result of the  increase  in total  loans and  non-performing  and
classified  assets,  charges  to  earnings  rose  during the nine  months  ended
September  30, 2004 versus 2003.  The  majority of existing and new  non-accrual
loans are  secured by real  estate.  These are loans the  Company has had in its
collection process before they became non-accrual loans. The legal aspect of the
collections  process often extends the collection period to the point that these
loans  become  past  due  greater  than  90  days,  thus  causing  them to go to
non-accrual  status.  Management  believes the exposure to loss on the increased
non-performing  and  classified  loans is minimal  and that,  there is  adequate
collateral to cover the loan balances.

See "Allowance  for Loan Losses" above for a description of the processes  which
the Company uses in  determining  the amount of the  provision and the allowance
for loan losses.

Non-interest Income

Non-interest  income  decreased  $111,000  or 6.9% for the  three  months  ended
September  30, 2004 compared to the three months ended  September 30, 2003.  The
decrease  was  primarily  the result of  decreased  gains from the sale of loans
offset by an increase in service charge income on deposit accounts. Non-interest
income  decreased  $294,000 or 6.5% for the nine months ended September 30, 2004
compared to the nine months ended September 30, 2003. The decrease was primarily
the result of $944,000 in  decreased  gains from the sales of loans  offset by a
$358,000  increase in service charge income on deposit  accounts,  $111,000 from
trust fees and  $74,000 of income from other real estate  owned.  The  decreased
income  from the sale of loans was the  result of  increased  interest  rates on
fixed rate residential real estate loans. The increased  interest rates caused a
decline in the volume of fixed rate  residential  real  estate  loans  which the
Company sells to the secondary market.

Non-interest Expense

Non-interest  expense  increased  $321,000 or 7.9% and  $910,000 or 7.7% for the
three and nine months ended  September  30, 2004  compared to the three and nine
months ended  September  30,  2003.  Salaries  and benefit  costs,  which is the
largest component of non-interest  expense,  accounted for $162,000 and $431,000
of the increase for the three and nine months ended  September 30, 2004 compared
to the three and nine months ended  September 30, 2003. The increase in salaries
and costs can be  attributed  primarily to normal wage  increases  and increased
health insurance costs. Occupancy expense increased $70,000 and $148,000 for the
three and nine months ended  September  30, 2004  compared to the three and nine
months  ended  September  30,  2003  due to  increases  in  real  estate  taxes,
depreciation and utilities. Other expense increased $48,000 and $233,000 for the
three and nine months ended  September  30, 2004  compared to the three and nine
months ended  September 30, 2003.  The bulk of the increase in other expense was
twofold.  Professional  service  fees  increased  due to  additional  regulatory
requirements.  Amortization expense increased due to the acquisition of a branch
in the second quarter of 2003.

Income Taxes

Income tax expense for the nine months ending  September 30, 2004 was $1,945,000
compared to  $1,926,000  for the nine months  ending  September  30,  2003.  The
effective tax rate  increased to 29.7% for the nine months ending  September 30,
2004  compared to 28.3% for the nine  months  ending  September  30,  2003.  The
increase was primarily a result of an increase in taxable interest income.

Like  many  Wisconsin  financial  institutions,  the  Bank  has a  non-Wisconsin
subsidiary which holds and manages investments assets, the income from which has
not yet been  subject to  Wisconsin  tax. The  Wisconsin  Department  of Revenue
instituted an audit program,  including an audit of the Bank, specifically aimed
at out of state bank  subsidiaries and indicated that it may withdraw  favorable

                                       20
rulings previously issued in connection with such  subsidiaries.  As a result of
these developments, the Department may take the position that some or all of the
income of the out of state subsidiary is taxable in Wisconsin, which will likely
be  challenged  by financial  institutions  in the state.  If the  Department is
successful in its efforts,  it could result in a substantial  negative impact on
the earnings of the Bank.

In late July 2004,  the  Department  sent letters to financial  institutions  in
Wisconsin  (whether  or  not  undergoing  an  audit)  reporting  on  settlements
involving 17 banks and their out-of-state  investment  subsidiaries.  The letter
provided  a  summary  of  the  Department's   currently   available   settlement
parameters.  For  prior  periods  they  include:  restrictions  on the  types of
subsidiary income excluded from Wisconsin  taxation;  assessment of certain back
taxes  for  a  limited  period  of  time;  limitations  on  net  operating  loss
carryforwards and interest  deductions related to subsidiary loans; and interest
(but not penalties) on past-due  taxes.  For 2004 and going forward,  the letter
states similar provisions,  including limits on subsidiaries' assets. Settlement
on the terms outlined  would result in the  rescission of prior letter  rulings,
and purport to be binding going forward except for future  legislation or change
by mutual  agreement.  Implicit in the letter appears to be an acceptance of the
general proposition that some out-of-state  investment  subsidiary income is not
subject to Wisconsin taxes.

The Company has advised the  Department  that it wishes to obtain and consider a
settlement proposal from the Department and will provide requested  information.
The Company has not yet received a specific  proposal nor has an assessment been
made  against  the  Company  or its  subsidiaries.  The  Company  will need more
specific detail to quantify in any definitive way the  Department's  view of its
exposure and to evaluate alternatives.  The Company continues to believe that it
has  reported  income and paid  Wisconsin  taxes  correctly in  accordance  with
applicable  tax laws and the  Department's  prior  longstanding  interpretations
thereof.  However,  as a result of the  Department's  changes  in  position  and
aggressive   stance,  any  final  resolution  of  these  matters  could  have  a
substantial  adverse  affect  relating to prior periods and/or  practices  going
forward.

Critical Accounting Policies

Allowance for Loan Losses

Management  believes the allowance for loan losses accounting policy is critical
to the portrayal  and  understanding  of our financial  condition and results of
operations.  As such,  selection and  application of this  "critical  accounting
policy" inherently  involves  judgments,  estimates,  and uncertainties that are
susceptible  to change.  In the event that  different  assumptions or conditions
were  to  prevail,  and  depending  upon  the  severity  of  such  changes,  the
possibility of materially different financial condition or results or operations
is a reasonable  likelihood.  For further  detail,  see the  explanations  under
"Financial Condition-Loans" above.

Income Taxes

See Note 1 of the notes to our audited consolidated financial statements for the
year ended  December 31, 2003 for our income tax accounting  policy.  Income tax
expense recorded in the consolidated  income statement  involves  interpretation
and application of certain  accounting  pronouncements and federal and state tax
codes, and is, therefore,  considered a critical  accounting  policy. We undergo
examinations by various regulatory taxing authorities. Such agencies may require
that changes in the amount of tax expense or valuation  allowance be  recognized
when  their  interpretations  differ  from those of  management,  based on their
judgments about information available to them at the time of their examinations.
In addition,  as noted above,  the Bank is undergoing a state tax audit relating
to  the  activities  and  holdings  of one of its  subsidiaries;  we  must  make
judgments   as  to  the  expected   effect  of  that  audit.   See  "Results  of
Operations-Income  Taxes" and Note 12 of the notes to our  audited  consolidated
financial  statements  for the year ended  December 31, 2003 for more income tax
information.

                                       21
Item 3.  Quantitative and Qualitative Disclosures about Market Risk

The  Company,  like  other  financial  institutions,  is  subject  to direct and
indirect market risk.  Direct market risk exists from changes in interest rates.
The Company's net income is dependent on its net interest  income.  Net interest
income is susceptible to interest rate risk to the degree that  interest-bearing
liabilities mature or reprice on a different basis than interest-earning assets.
When   interest-bearing   liabilities   mature  or  reprice  more  quickly  than
interest-earning  assets in a given  period,  a  significant  increase in market
rates of interest could adversely affect net interest income.

Similarly,  when  interest-earning  assets  mature or reprice  more quickly than
interest-bearing liabilities,  falling interest rates could result in a decrease
in net income.

In an  attempt to manage  exposure  to changes  in  interest  rates,  management
monitors  interest rate risk. The  Asset/Liability  Committee meets quarterly to
review  the  interest  rate  risk  position  and  profitability,  and to make or
recommend  adjustments.   Management  also  reviews  the  securities  portfolio,
formulates investment strategies,  and oversees the timing and implementation of
transactions  to  assure  attainment  of the  Company's  objectives  in the most
effective manner.  Notwithstanding our interest rate risk management activities,
the potential for changing  interest  rates is an  uncertainty  that can have an
adverse effect on net income.

In  adjusting  the  asset/liability  position,  management  attempts  to  manage
interest  rate risk while  maintaining  or enhancing  net interest  margins.  At
times,  depending  on the level of  general  interest  rates,  the  relationship
between  long-term  and  short-term   interest  rates,   market  conditions  and
competitive  factors,  management  may decide to increase the interest rate risk
position  somewhat in order to increase the net interest  margin.  The Company's
results of operations and net portfolio values remain vulnerable to increases in
interest  rates and to  fluctuations  in the  difference  between  long-term and
short-term interest rates.

One approach  used to quantify  interest  rate risk is the net  portfolio  value
("NPV") analysis.  In essence,  this analysis  calculates the difference between
the present  value of  liabilities  and the present value of expected cash flows
from assets and off-balance-sheet contracts. The most recent NPV analysis, as of
September  30,  2004,  projected  that net  portfolio  value  would  decrease by
approximately  6.64% if  interest  rates  would rise 200 basis  points and would
decrease by  approximately  2.42% if interest  rates would rise 100 basis points
over  the  next  year.  It  projects  an  increase  in net  portfolio  value  of
approximately  4.85% if  interest  rates  would  drop 200  basis  points  and an
increase of  approximately  2.91% if interest rates would drop 100 basis points.
Both simulations are within board-established policy limits. The Company has not
experienced any material  changes to its market risk position since December 31,
2003, as disclosed in the Company's 2003 Form 10-K Annual Report.  The Company's
policy is to limit the  effect of a 200 basis  point rate shock to plus or minus
20% of  projected  net  interest  income and to minus 20% of the market value of
portfolio equity.

The Company does not currently engage in trading  activities to control interest
rates.  Even though such  activities  may be permitted  with the approval of the
Board of Directors,  the Company does not intend to engage in such activities in
the immediate future.  However, the Company has engaged in the use of derivative
instruments  for the period  ended  September  30, 2004 and intends to engage in
such activities going forward.

Interest rate risk is the most  significant  market risk  affecting the Company.
Other types of market  risk,  such as foreign  currency  exchange  rate risk and
commodity  price  risk,  do not  arise in the  normal  course  of the  Company's
business activities.

                                       22
Item 4.  Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure that
the information the Company must disclose in its filings with the Securities and
Exchange Commission is recorded, processed,  summarized and reported on a timely
basis. The Company's principal executive officer and principal financial officer
have reviewed and evaluated the Company's  disclosure controls and procedures as
defined in Rules  13a-15(e) and 15d-15(e)  under the Securities and Exchange Act
of 1934, as amended (the "Exchange Act"), as of the end of the period covered by
this report (the "Evaluation  Date").  Based on such  evaluation,  such officers
have  concluded  that,  as of the  Evaluation  Date,  the  Company's  disclosure
controls  and  procedures  are  effective in bringing to their  attention,  on a
timely  basis,  material  information  relating  to the  Company  required to be
included in the Company's periodic filings under the Exchange Act.

There have not been any changes in the Company's internal control over financial
reporting  (as defined in  Exchange  Act Rules  13a-15(f)  and  15d-15(f))  that
occurred  during the Company's most recent fiscal  quarter that have  materially
affected,  or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

Part II-OTHER INFORMATION

Item 1.  Legal Proceedings

         None

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

         None

Item 3.  Defaults upon Senior Securities

         None

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

         None

Item 5.  Other Information

          On October 15, 2004, the Company completed an offering of $7.5 million
          of variable rate cumulative trust  preferred  securities  representing
          undivided  beneficial  interests in First Banking  Center Trust I. The
          proceeds from the offering  were used by the trust to purchase  junior
          subordinated  debentures  from the Company.  The proceeds will be used
          for general corporate  purposes,  including future transactions or the
          retirement of debt.  Interest is payable quarterly on January 7, April
          7, July 7 and October 7 of each year,  commencing January 7, 2005 at a
          variable rate reset  quarterly  equal to three month LIBOR plus 2.50%.
          The debentures will mature and the trust preferred  securities must be
          redeemed on January 7, 2035. The Company has the option to shorten the
          maturity date to a date not earlier than January 7, 2010.  The Company
          may not shorten the maturity date without prior  approval of the Board
          of  Governors  of the  Federal  Reserve  System,  if  required.  Prior
          redemption is permitted under certain  circumstances,  such as changes
          in tax or regulatory capital rules.

                                       23
Item 6.  Exhibits

         10.1  Indenture  dated  as  of  October 15, 2004, between First Banking
               Center,  Inc. and Wells Fargo Bank, National Association.

         31.1  Certification  of  the  Chief  Executive Officer pursuant to Rule
               13a-14(a)/15(d)-14(a)  as  adopted pursuant to Section 302 of the
               Sarbanes-Oxley Act of 2002 (exhibit is being filed herewith).

         31.2  Certification  of  the  Chief  Financial Officer pursuant to Rule
               13a-14(a)/15(d)-14(a) as adopted  pursuant  to Section 302 of the
               Sarbanes-Oxley Act of 2002 (exhibit is being filed herewith).

         32.1  Certification  of  the  Chief  Executive  Officer  pursuant to 18
               U.S.C. Section  1350 as  adopted  pursuant to  Section 906 of the
               Sarbanes-Oxley Act of 2002 (exhibit is being filed herewith).

         32.2  Certification  of  the  Chief  Executive  Officer  pursuant to 18
               U.S.C. Section  1350 as  adopted  pursuant to  Section 906 of the
               Sarbanes-Oxley Act of 2002 (exhibit is being filed herewith).

                                       24
FIRST BANKING CENTER, INC AND SUBSIDIARIES

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1943,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                           First Banking Center, Inc.

November  15, 2004                          /s/ Brantly Chappell
Date                                        -----------------------
                                            Brantly Chappell
                                            Chief Executive Officer

November  15, 2004                          /s/ James Schuster
Date                                        -----------------------
                                            James Schuster
                                            Chief Financial Officer

                                       25