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 June 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 July 28, 2004,  Common stock,  $1.00 par value,  1,492,836
shares outstanding.




<PAGE>


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



Part I   Financial Information                                          Page
                                                                        ----

         Item 1  Consolidated Financial Statements

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

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

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

                 Notes to Unaudited Consolidated Financial Statements    6-9

         Item 2  Management's Discussion and Analysis of
                 Financial Condition and Results of Operations           10-19

         Item 3  Quantitative and Qualitative Disclosures about Market
                 Risk                                                    20

         Item 4  Controls and Procedures                                 21

Part II  Other Information

         Item 1  Legal Proceedings                                       21

         Item 2  Changes in Securities, Use of Proceeds and Issuer
                 Purchases of Equity Securities                          21

         Item 3  Defaults upon Senior Securities                         22

         Item 4  Submission of Matters to a Vote of Security Holders     22

         Item 5  Other Information                                       22

         Item 6  Exhibits and Reports on Form 8-K                        22

         Signatures                                                      23



<PAGE>



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

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

                                                                                        June 30,     December 31,
ASSETS                                                                                    2004          2003
                                                                                    ------------------------------
                                                                                        (Dollars in thousands)
 <S>                                                                                <C>              <C>
  Cash and due from banks                                                            $   15,484       $   19,960
  Federal funds sold                                                                      4,047            3,047
  Interest-bearing deposits in banks                                                        281              274
  Available for sale securities                                                          68,563           82,672
  Loans, less allowance for loan losses of $4,696 and
    $4,617 at 2004 and 2003, respectively                                               440,450          403,252
  Office buildings and equipment, net                                                    12,979           11,818
  Other real estate owned                                                                 1,853            1,899
  Federal Home Loan Bank stock                                                           11,657           11,755
  Other assets                                                                           10,094            9,240
                                                                                    ------------------------------
      TOTAL ASSETS                                                                   $  565,408       $  543,917
                                                                                    ==============================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
  Deposits
    Demand                                                                           $   62,241       $   67,961
    Savings and NOW accounts                                                            204,876          194,419
    Time                                                                                150,575          145,072
                                                                                     -----------------------------
      Total deposits                                                                    417,692          407,452
  Short-term borrowings                                                                  50,820           34,176
  Other borrowings                                                                       38,633           44,673
  Other liabilities                                                                       3,784            4,076
                                                                                     -----------------------------
      TOTAL LIABILITIES                                                              $  510,929       $  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 June 30, 2004 and December 31, 2003,
    respectively; 1,492,683 and 1,500,760 shares outstanding as of June 30, 2004
    and December 31, 2003, respectively                                                   1,503            1,501
  Surplus                                                                                 4,646            4,612
  Retained earnings                                                                      48,478           46,161
  Accumulated other comprehensive income                                                    334            1,290
  Common stock in treasury, at cost- 9,860 and 517 shares as of June 30, 2004
    and December 31, 2003, respectively                                                    (482)             (24)
                                                                                     -----------------------------
      TOTAL STOCKHOLDERS' EQUITY                                                     $   54,479       $   53,540
                                                                                     -----------------------------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                     $  565,408       $  543,917
                                                                                     =============================



                      See accompanying notes to unaudited consolidated financial statements

</TABLE>


<PAGE>

<TABLE>

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

<CAPTION>

                                                            Three Months Ended          Six Months Ended
                                                                 June 30,                   June 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 INCOME

  Interest and fees on loans                            $   5,928     $   5,555    $   11,695    $  10,959
  Interest and dividends on securities:
    Taxable                                                   230           356           510          681
    Non-taxable                                               365           409           758          834
  Interest on federal funds sold                                5            22             9           60
  Interest on interest-bearing deposits in banks                1             1             2           15
  Other interest and dividends                                176           222           365          399
                                                        ----------------------------------------------------
      TOTAL INTEREST INCOME                                 6,705         6,565        13,339       12,948
                                                        ----------------------------------------------------

INTEREST EXPENSE
  Interest on deposits                                      1,156         1,374         2,332        2,836
  Interest on short-term borrowings                           153            55           311          127
  Interest on other borrowings                                441           463           872          923
                                                        ----------------------------------------------------
      TOTAL INTEREST EXPENSE                                1,750         1,892         3,515        3,886
                                                        ----------------------------------------------------
      NET INTEREST INCOME                                   4,955         4,673         9,824        9,062

  Provision for loan losses                                    50             0           100           90
                                                        ----------------------------------------------------
      NET INTEREST INCOME AFTER PROVISION FOR
        LOAN LOSSES                                         4,905         4,673         9,724        8,972
                                                        ----------------------------------------------------

NON-INTEREST INCOME
  Trust fees                                                  188           139           338          258
  Service charges on deposit accounts                         576           480         1,038          945
  Commissions                                                  41            46            83           87
  Automated banking fees                                       96            93           182          178
  Securities gains, net                                         0             0           123            0
  Loan gains, net                                             262           600           488        1,114
  Other                                                       219           170           488          341
                                                        ----------------------------------------------------
      TOTAL NON-INTEREST INCOME                             1,382         1,528         2,740        2,923
                                                        ----------------------------------------------------

NON-INTEREST EXPENSE
  Salary and employee benefits                              2,324         2,236         4,703        4,434
  Occupancy                                                   324           292           654          576
  Equipment                                                   357           353           704          694
  Data processing services                                    274           257           549          502
  Other                                                       893           790         1,723        1,538
                                                        ----------------------------------------------------
      TOTAL NON-INTEREST EXPENSE                            4,172         3,928         8,333        7,744
                                                        ----------------------------------------------------
      INCOME BEFORE INCOME TAXES                            2,115         2,273         4,131        4,151

  Income taxes                                                605           640         1,171        1,130
                                                        ----------------------------------------------------
      NET INCOME                                        $   1,510     $   1,633     $   2,960    $   3,021
                                                        ====================================================

Basic earnings per share                                $    1.01     $    1.09     $    1.98    $    2.02
Diluted earnings per share                              $    0.98     $    1.07     $    1.92    $    1.98


                    See accompanying notes to unaudited consolidated financial statements

</TABLE>

<PAGE>

<TABLE>

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


                                                                                      Six Months Ended
                                                                                           June 30,
                                                                                      2004          2003
                                                                                   ------------------------
                                                                                    (Dollars in thousands)
<S>                                                                                <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                        $  2,960      $  3,021
  Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:
    Depreciation                                                                         531           473
    Provision for loan losses                                                            100            90
    Loan gains, net                                                                     (488)       (1,114)
    Amortization of premiums and accretion of discounts
     on securities, net                                                                  150           100
    Amortization                                                                          90            62
    Securities gains, net                                                               (123)           -
    Tax benefit of nonqualified stock options exercised                                   17            -
    Increase in other assets                                                            (306)         (853)
    Increase in other liabilities                                                       (290)         (295)
                                                                                   ------------------------
     Net cash provided by operating activities before loan originations and sales      2,641         1,484
    Loans originated for sale                                                        (28,722)      (51,341)
    Proceeds from sale of loans                                                       29,751        53,517
                                                                                   ------------------------
        NET CASH PROVIDED BY OPERATING ACTIVITIES                                      3,670         3,660
                                                                                   ------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Net (increase) decrease in interest-bearing deposits in banks                         (7)          229
    Net (increase) decrease in federal funds sold                                     (1,000)        4,816
    Proceeds from sales of available-for-sale securities                               6,297            -
    Proceeds from maturities and calls of available-for-sale securities               44,890        50,014
    Purchase of available-for-sale securities                                        (38,557)      (48,703)
    Net increase in loans                                                            (37,839)         (934)
    Purchase of office buildings and equipment                                        (1,692)         (859)
                                                                                   ------------------------
        NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                          (27,908)        4,563
                                                                                   ------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net increase (decrease) in deposits                                               10,240        (7,355)
    Dividends paid                                                                      (643)         (583)
    Payments on other borrowings                                                      (6,040)         (437)
    Net increase (decrease) in short-term borrowings                                  16,644        (3,359)
    Sale of common stock for the exercise of stock options                                19            60
    Purchase of treasury stock                                                          (634)          (66)
    Sale of treasury stock for the exercise of stock options                             176            66
                                                                                   ------------------------
        NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                           19,762       (11,674)
                                                                                   ------------------------
    NET DECREASE IN CASH AND DUE FROM BANKS                                           (4,476)       (3,451)

CASH AND DUE FROM BANKS:
    Beginning                                                                         19,960        22,203
                                                                                   ------------------------
    Ending                                                                          $ 15,484      $ 18,752
                                                                                   ========================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION,
    Cash paid during the year for:
      Interest                                                                      $  3,524      $  3,973
      Income taxes                                                                  $    620      $    452

SUPPLEMETAL SCHEDULE OF NONCASH INVESTING ACTIVITIES,
    Change in accumulated other comprehensive income,
      Unrealized gains (losses) on available-for-sale securities, net               $   (956)     $    538
    Other real estate aquired in settlement of loans                                $    103      $     -


             See accompanying notes to unaudited consolidated financial statements

</TABLE>


<PAGE>

                    FIRST BANKING CENTER, INC AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 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 six months ended June 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    Six Months Ended
                                                         June 30,             June 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                                          $ 1,510   $ 1,633    $ 2,960   $ 3,021
Weighted average shares outstanding                   1,496     1,496      1,496     1,495
Basic earnings per share                            $  1.01   $  1.09    $  1.98   $  2.02

Diluted
Net income                                          $ 1,510   $ 1,633    $ 2,960   $ 3,021
Weighted average shares outstanding                   1,496     1,496      1,496     1,495
Effect of dilutive stock options outstanding             45        30         45        30
                                                    ---------------------------------------
Diluted weighted average shares outstanding           1,541     1,526      1,541     1,525
Diluted earnings per share                          $  0.98   $  1.07    $  1.92   $  1.98

</TABLE>


NOTE 3 - Comprehensive Income
<TABLE>

The following table presents our comprehensive income:
<CAPTION>
                                                    Three Months Ended    Six Months Ended
                                                         June 30,             June 30,
                                                      2004      2003       2004      2003
                                                    ---------------------------------------
                                                       (Dollars in          (Dollars in
                                                        thousands)           thousands)
<S>                                                <C>       <C>        <C>       <C>
Net income                                          $ 1,510   $ 1,633    $ 2,960   $ 3,021
Other comprehensive income
  Net change in unrealized gain (loss) on
   available for sale securities                       (956)      625       (789)      538
                                                    ---------------------------------------
Total comprehensive income                          $   554   $ 2,258    $ 2,171   $ 3,559
                                                    =======================================
</TABLE>
<PAGE>

NOTE 4 - Stock-based Compensation Plan:

For the six months ended June 30, 2004,  and June 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    Six Months Ended
                                                         June 30,             June 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                             $ 1,510   $ 1,633    $ 2,960   $ 3,021
Deduct total stock-based employee compensation
 expense determined under fair value based method
 for all awards, net of related tax effects               2         8       (168)     (193)
                                                    ---------------------------------------
Pro forma net income                                $ 1,512   $ 1,641    $ 2,792   $ 2,828
                                                    =======================================

Earnings per share:
 Basic:
 As reported                                        $  1.01   $  1.09    $  1.98   $  2.02
 Pro forma                                             1.01      1.10       1.87      1.89
Diluted:
 As reported                                        $  0.98   $  1.07    $  1.92   $  1.98
 Pro forma                                             0.98      1.07       1.81      1.85

</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 June 30, 2004, and
June 30,  2003,  respectively:  dividend  yield of 1.7 percent and 1.7  percent;
expected  price  volatility  of 5.1 percent and 5.2 percent,  blended  risk-free
interest  rates of 4.9 percent and 3.5 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 June 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                       $ 150,575     $  81,780     $  48,127   $  10,711    $  9,957
  and similar products                       (b)
Short-term obligations                       (c)                50,820        50,820            -           -           -
Other borrowings                             (d)                38,633        13,362        11,060      11,211       3,000
Operating leases                                                   332            95           174          63          -
Other long-term obligations                  (e)                 2,336           132           497         427       1,280
                                                             ---------------------------------------------------------------
    Total contractual cash obligations                       $ 242,696     $ 146,189     $  59,858   $  22,412    $ 14,237
                                                             ===============================================================

</TABLE>
<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 June
30:

<TABLE>
<CAPTION>
                                                                   2004         2003
                                                                -----------------------
                                                                 (Dollars in thousands)
<S>                                                             <C>          <C>
Commitments to extend credit
  Unused revolving home equity, consumer lines of credit         $ 20,523     $ 16,189
  Unused commercial lines of credit                                75,699       56,685
Standby letters of credit                                           3,334        2,341

</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
<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 June 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 June 30, 2004,  the Company was entered in an interest rate swap  transaction
which resulted in the Company converting $10 million of fixed rate brokered CD's
into variable rate debt. This swap transaction  requires 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 a fixed rate  interest
payment equal to 5.0% using an actual/365 day basis.

<TABLE>

Summary information about the interest rate swap at June 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                   1.27%            -
Weighted average maturity, years                  7.5             -
Fair value                                       (114)            -

</TABLE>


<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,  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 June 30, 2004

The following discussion provides additional analysis of the financial condition
and results of  operations of the Company for the three and the six months ended
June 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 June 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 June 30, 2004, total Company assets were $565.4 million,  increasing 3.95%
from $543.9  million as of December 31, 2003.  Net income for the quarter  ended
June 30, 2004 was $1.5 million or $0.98 per diluted share,  decreasing  $123,000
or 7.53% from $1.6 million or $1.07 per diluted  share in the second  quarter of
2003.  Net  income for the six months  ended June 30,  2004 was $3.0  million or
$1.92 per diluted share,  decreasing $61,000 or 2.00% from $3.0 million or $1.98
per  diluted  share in the  first  six  months of 2003.  The  significant  items
resulting in these results are discussed below.

Financial Condition

Loans

Loans  outstanding  were $445.1  million and $407.9 million on June 30, 2004 and
December 31, 2003 respectively. This represented an increase of $37.2 million or
9.1%.  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. Our loan demand outpaced the growth in deposits in the
first six  months of 2004;  therefore,  the  Company  also sold some  investment
securities  and borrowed  additional  funds to fund a portion of this  increased
loan demand.

<PAGE>

The  following  table   summarizes  the  changes  to  date  in  the  major  loan
classifications:
<TABLE>
<CAPTION>

                                                                                                 As a % of Total Loans
                                             June 30,       December 31,   Change in           June 30,       December 31,
                                               2004             2003         Balance             2004             2003
                                          ---------------------------------------------     --------------------------------
                                                        (Dollars in millions)
<S>                                          <C>           <C>             <C>                 <C>               <C>
Residential Real Estate                       $160.9          $178.5        ($17.6)             36.1%             43.8%
Commercial Real Estate                        $120.6          $101.1         $19.5              27.1%             24.8%
Construction and Land Development              $55.4           $43.0         $12.4              12.4%             10.5%
Commercial                                     $33.7           $27.6          $6.1               7.6%              6.8%
Agricultural Real Estate                       $45.9           $25.9         $20.0              10.3%              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 1.05% of gross loans on June 30, 2004,  compared with $4.6 million or
1.13% of gross loans on December 31, 2003. Net charge-offs  were $21,000 or .01%
of gross  loans and  $46,000 or .01% for the six months  ended June 30, 2004 and
2003,  respectively.  The allowance  for loan losses was 166.64% of  non-accrual
loans at June 30, 2004 as compared to 226.21% 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 six 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.  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.


<PAGE>

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

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

Charge-offs:
  Commercial                                                               3                   6
  Agricultural production                                                  0                  42
  Real estate:
    Construction                                                           0                   0
    Commercial                                                             0                   0
    Agriculture                                                            0                   0
    Other mortgages                                                       46                   0
    Consumer (including installmment loans)                                6                   1
                                                                  -----------------------------------
      Total Charge-offs                                                   55                  49
                                                                  -----------------------------------

Recoveries:
    Commercial                                                             0                   1
    Agricultural production                                               20                   0
    Real estate:
    Construction                                                           0                   0
    Commercial                                                             0                   0
    Agriculture                                                            0                   0
    Other mortgages                                                        8                   0
    Consumer (including installment loans)                                 6                   2
                                                                  -----------------------------------
      Total Recoveries                                                    34                   3
                                                                  -----------------------------------

Net Charge-offs                                                           21                  46

Provision charged to operations                                          100                  90
                                                                  -----------------------------------
Balance, end of period                                              $  4,696            $  5,032
                                                                  ===================================

Average amount of loans outstanding
    before allowance for estimated losses on loans                  $439,334            $370,789
                                                                  ===================================

Ratio of net charge-offs during the
    period to average loans outstanding
    during the period                                                  0.005%              0.012%
                                                                  ===================================
</TABLE>



<PAGE>

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

                                                                     June 30,         December 31,
                                                                       2004               2003
                                                                  -----------------------------------
                                                                        (Dollars in thousands)
<S>                                                                  <C>                <C>
Non-accrual Loans (a)                                                 $2,818             $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 $1.9 million of residential  real
estate loans, $350,000 of farmland,  $213,000 of agricultural  production loans,
and $190,000 of commercial  loans.  The increase  during the first six months of
2004 was the result of  non-accrual  residential  real estate  loans  increasing
$511,000,  non-accrual  farmland  loans  increasing  $274,000,  and  non-accrual
agricultural  production  loans  increasing  $210,000,   offset  by  non-accrual
commercial  real estate loans of $300,000.  The bulk of the increase  relates to
factors involving specific loans.

As of June 30, 2004,  the Company had loans  totaling $26.1 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 $7.7  million or 41.8% 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 June 30, 2004.  The Company's
loans are  concentrated  geographically  in the  Wisconsin  counties  of Racine,
Walworth, Kenosha, Lafayette and Green.


Investments securities - Available for Sale

The fair value of the securities  available-for-sale portfolio at June 30, 2004,
decreased $14.1 million or 17.1% 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 $35.0 million of U.S.  government  agency  securities and
$3.6  million of  municipal  securities.  The Company  sold $4.6 million of U.S.
government  agency notes and $1.7 million of  municipal  securities.  There were
maturities and calls of $42.3 million of U.S.  government  agency notes and U.S.
government  agency  mortgage-backed  securities  and $2.7  million of  municipal
securities.

<PAGE>

Deposits

Total  deposits were $417.7  million on June 30, 2004 compared to $407.5 million
on December 31, 2003.  This is an increase of $10.2 million or 2.5%. Most of the
increase was in money market  accounts as deposits  shifted from demand and time
deposits;  however,  deposits showed a net gain because the Company issued a $10
million brokered time deposit.  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.  The brokered deposits have a 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 a callable  interest  rate swap that  effectively
converts this 7.5 year fixed rate  liability to a one month LIBOR based variable
rate  liability.  See  Item  1,  "NOTE  6 -  Derivative  Instruments"  for  more
information  regarding the swap. The following table  summarizes  changes during
2004 in the major classifications of deposts:

<TABLE>
<CAPTION>

                                                                    June 30,      December 31,                Change in
                                                                      2004            2003                     Balance
                                                               -----------------------------------           -----------
                                                                      (Amounts in millions)
<S>                                                            <C>               <C>                        <C>
Money Market and Savings                                        $    159.0        $   149.2                  $   9.8
NOW Accounts                                                          45.9             45.2                      0.7
Demand  Deposits                                                      62.2             68.0                     (5.8)
Time Deposits less than $100,000                                      87.8             87.1                      0.7
Time Deposits equal or greater than $100,000                          62.8             57.9                      4.9

</TABLE>

Borrowed Funds

Total  borrowed  funds were $89.5  million on June 30,  2004,  compared to $78.8
million on December  31, 2003.  This was an increase of $10.7  million or 13.6%.
Securities  sold under  agreement to repurchase and Federal Home Loan borrowings
each  decreased  $6.0  million as  maturities  were not  replaced.  The  Company
replaced  these  funds with  brokered  time  deposits.  Federal  funds  borrowed
increased by $22.7  million to fund the demand for loans.  The  following  table
summarizes changes during 2004 in the major classifications of borrowed funds:

<TABLE>
<CAPTION>
                                                             June 30,       December 31,          Change in
                                                               2004             2003               Balance
                                                          --------------------------------       -----------
                                                               (Amounts in millions)
<S>                                                            <C>             <C>                 <C>
Securities sold under agreement to repurchase                $   21.4        $   27.4            $   (6.0)
Federal Home Loan Borrowing                                      38.2            44.2                (6.0)
Federal Funds Borrowed                                           29.4             6.7                22.7

</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 June 30, 2004, the Company's  stockholders'  equity increased  $939,000 or
1.8% from December 31, 2003.  Net income of $3.0 million was the primary  reason
for the  increase.  In  addition,  the Company  issued  $176,000 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  accummulated  other  comprehensive  income of  $956,000,  to
$334,000 at June 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
1 capital (common  stockholders'  equity less goodwill) to risk-weighted  assets
was 11.6% at June 30, 2004, well above the 4% minimum required. Total capital to
risk-adjusted assets was 12.7%; 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 June 30, 2004.

<PAGE>

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 June 30, 2004 was a positive  18%,  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  $19.8 million at June 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 quarter,  the Bank can also
use brokered  deposits to raise  additional  cash.  See  "Financial  Condition -
Deposits" above. During the second 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 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.

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  slightly for the six months of 2004. Net
cash provided by operating  activities  was $3.7  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 $27.9 million.  Net cash provided by financing  activities,
consisting  primarily of a $16.6 million  increase in short term  borrowings and
deposit growth of $10.2 million, was $19.8 million for the six months ended June
30, 2004.

For the six  months  ending  June 30,  2003,  net  cash  provided  by  operating
activities was $3.7 million. This was primarily a result of net secondary market
loan  proceeds over  originating  secondary  market loans.  Net cash provided by
investing  activities,  consisting  primarily of federal funds sold and proceeds
from  security  transactions,  was  $4.6  million.  Net cash  used in  financing
activities,   consisting   primarily  of  decreased   deposits  and  short  term
borrowings, was $11.7 million.

<PAGE>

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 $5.0 million in the
second  quarter of 2004, an increase of $282,000 from $4.7 million in the period
in 2003. For the six month period ended June 30, 2004,  net interest  income was
$9.8 million,  an increase of $762,000 from $9.1 million in that period in 2003.
Net interest  margin as a percentage of average  earning assets  (includes loans
placed on nonaccrual  status) declined slightly to 3.95% from 4.10% and to 3.94%
from 4.11% for the three  months and six  months  ended June 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 5.40% from 6.00% and to 5.47% from
5.96%  for the  three  months  and six  months  ended  June 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 1.59% from  1.99% and to 1.62% from 2.01% for the three  months and
six  months  ended  June  30,  2004 and  2003,  respectively.  Interest  expense
decreased due to decreased rates paid on increased average balances.

<PAGE>

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

<TABLE>
<CAPTION>
                                                                        Three months ended
                                                                             June 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 thusands)
<S>                                                <C>        <C>      <C>      <C>       <C>       <C>
Interest Income:
  Interest and fees on loans (a) (b)                $ 439,334   5,936   5.40%    370,789   5,566     6.00%
  Interest and dividends on securities:
      Taxable                                          46,656     406   3.48%     41,227     578     5.61%
      Nontaxable (a)                                   35,444     554   6.25%     56,206     620     4.41%
  Interest on Fed funds sold                            1,967       5   1.02%      7,792      22     1.13%
  Interest on interest-bearing deposits in banks          280       1   1.43%        212       1     1.89%
                                                      --------------------------------------------------------
       Total Interest Income                        $ 523,681   6,902   5.27%    476,226   6,787     5.70%
                                                      ========================================================

Interest Expense
  Interest on deposits                              $ 342,632   1,156   1.35%    313,052    1,374    1.76%
  Interest on short-term borrowings                    53,361     153   1.15%     21,198       55    1.04%
  Interest on other borrowings                         43,860     441   4.02%     46,325      463    4.00%
                                                      --------------------------------------------------------
       Total Interest Expense                       $ 439,853   1,750   1.59%    380,575    1,892    1.99%
                                                      ========================================================
Net interest margin                                            $5,152   3.94%              $4,895    4.11%
                                                               ==============              ===============
</TABLE>

<TABLE>
<CAPTION>
                                                                         Six months ended
                                                                             June 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)                 $ 428,118  11,713   5.47%    368,381   10,981    5.96%
  Interest and dividends on securities:
      Taxable                                          51,052     875   3.43%     36,360    1,080    5.94%
      Nontaxable (a)                                   36,254   1,149   6.34%     46,651    1,264    5.42%
  Interest on Fed funds sold                            2,193       9   0.82%      9,925       60    1.21%
  Interest on interest-bearing deposits in banks          279       2   1.43%      2,447       15    1.23%
                                                      --------------------------------------------------------
       Total Interest Income                        $ 517,896  13,748   5.31%    463,764   13,400    5.78%
                                                      ========================================================

Interest Expense
  Interest on deposits                              $ 338,900   2,332   1.38%    315,984    2,836    1.80%
  Interest on short-term borrowings                    49,818     311   1.25%     23,871      127    1.06%
  Interest on other borrowings                         44,261     872   3.94%     46,399      923    3.98%
                                                      --------------------------------------------------------
       Total Interest Expense                       $ 432,979   3,515   1.62%    386,254    3,886    2.01%
                                                      ========================================================
Net interest margin                                           $10,233   3.95%              $9,514    4.10%
                                                              ===============              ===============
</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  $600,000  and $1.1  million for the
     three  and  six  months  ending  June  30,  2003   respectively  due  to  a
     reclassification of gains on the sales of loans.

<PAGE>

Provision for Loan Losses

For the six months ended June 30, 2004, $100,000 was charged to current earnings
and added to the allowance for loan losses  compared to $90,000 during the first
six months of 2003. In the second  quarter of 2004,  $50,000 was expensed to the
provision,  as compared to no addition  in the  comparable  period in 2003.  Net
charge-offs  decreased slightly to $21,000 from $46,000 for the six months ended
June 30, 2004 as compared to the six months  ended June 30,  2003.  At this time
however,  non-accrual  loans increased  $318,000 and classified  loans increased
$471,000  during the second  quarter of 2004,  and  increased  $777,000 and $7.5
million,  in the first six months of 2004.  As a result of the increase in total
loans and non-performing and classified assets,  charges to earnings rose during
the six months ended June 30, 2004 versus 2003. 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" below 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  $146,000 or 9.6% for the three months ended June
30, 2004  compared to the three  months  ended June 30,  2003.  The decrease was
primarily  the result of  decreased  gains from the sale of loans.  Non-interest
income  decreased  $183,000  or 6.3% for the six  months  ended  June  30,  2004
compared to the six months ended June 30, 2003.  The decrease was  primarily the
result of $626,000 in decreased gains from the sales of loans offset by $123,000
of gains  from the sale of  securities  and  $74,000  of income  from other real
estate  owned and  increases of $80,000 from trust fees and $93,000 from service
charges on deposit accounts. The decreased income from the sale of loans was the
result of increased  interest rates on fixed rate  residental real estate loans.
The  increased  interest  rates  caused a decline  in the  volume of fixed  rate
residental real estate loans which the Company sells to the secondary market.

Non-interest Expense

Non-interest  expense  increased  $244,000 or 6.2% and  $589,000 or 7.6% for the
three and six months  ended June 30,  2004  compared to the three and six months
ended June 30, 2003.  Salaries and benefit costs, which is the largest component
of non-interest expense,  accounted for $88,000 and $269,000 of the increase for
the three and six  months  ended  June 30,  2004  compared  to the three and six
months  ended June 30, 2003.  The increase in salaries and benefit  costs can be
attributed  primarily to normal wage  increases and increased  health  insurance
costs.  Occupancy  expense  increased  $32,000 and $78,000 for the three and six
months  ended June 30, 2004  compared to the three and six months ended June 30,
2003 due to increases in real estate taxes,  depreciation  and utilities.  Other
expense increased  $103,000 and $185,000 for the three and six months ended June
30, 2004  compared to the three and six months ended June 30, 2003.  The bulk of
the increase is 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 six months  ending  June 30,  2004 was  $1,171,000
compared to $1,130,000  for the six months  ending June 30, 2003.  The effective
tax rate  increased to 28.3% for the six months ending June 30, 2004 compared to
27.2% for the six months  ending June 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
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.

<PAGE>

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.

At this time, no assessment has yet been made by the Department against the Bank
nor has the Company  determined  how it intends to  respond.  The letter did not
provide  sufficient  detail to permit the  Company to assess  what  effects  the
acceptance  of such a settlement  offer might have upon it, nor does the Company
have sufficient information to determine what the Department's position would be
if an  assessment  were made and the Company were to  challenge  it. The Company
intends  to seek to obtain  that  detail  and to  evaluate  the impact of such a
settlement after it receives more specific details.

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.

<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 its  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  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
June  30,  2004,   projected   that  net  portfolio   value  would  decrease  by
approximately  1.80% if  interest  rates  would rise 200 basis  points and would
decrease by  approximately  0.49% if interest  rates would rise 100 basis points
over  the  next  year.  It  projects  an  increase  in net  portfolio  value  of
approximately  3.47% if  interest  rates  would  drop 200  basis  points  and an
increase of  approximately  1.65% 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 June 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.

<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.  Changes in  Securities,  Use of Proceeds and Issuer  Purchases of
         Equity Securities.

(e)      The following table sets forth information on the Company's repurchase
         of shares of its common stock during the quarter ended June 30, 2004:

Issuer Purchases of Equity Securities
<TABLE>
<CAPTION>

---------------- ----------- ------------- ----------------------- -----------------------
    Period       (a) Total   (b) Average    (c) Total Number of    (d)  Maximum Number
                 Number of    Price Paid    Shares Purchased as       (or Approximate
                 Shares       per Share     Part of  Publicly           Dollar Value) of
                 Purchased                  Announced Plans or     Shares that May Yet
                                             Programs*      Be Purchased Under the
                                                                    Plans or Programs*

------------------------------------------------------------------------------------------
<S>              <C>         <C>           <C>                      <C>
  Month #1
   April 1 -
   April 30,       5,321        49.95                -                        -
     2004

  Month #2
    May 1 -
    May 31,          533        47.86                -                        -
     2004

  Month #3
    June 1 -
    June 30,       1,000        50.00                -                        -
     2004
------------------------------------------------------------------------------------------
     Total         6,854*       49.80                *                        *
------------------------------------------------------------------------------------------


<FN>

* There  is no  active  trading  market  for the  Company's  common  stock.  All
repurchases  were therefore made in private  transactions.  Although the Company
does not have a formal  repurchase  program,  it regularly  repurchases  shares,
particularly in situations in which it is approached by shareholders  seeking to
sell shares,  it has disclosed the fact that it will from time to time make such
purchases.
</FN>
</TABLE>
<PAGE>

Item 3.  Defaults upon Senior Securities

             None

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

On April 20, 2004, the Company held its 2004 annual meeting of shareholders. The
only matter for action at the meeting was the  election of three  directors  for
the class of  directors  whose  terms  expired  at the  meeting.  The  following
management  nominees for directors were the only nominees;  they were re-elected
by the votes indicated to serve for terms expiring at the 2007 annual meeting.

<TABLE>

<CAPTION>
           Nominee                            Votes For           Votes Withheld
          <S>                                <C>                  <C>
           David Boilini                      1,140,663               563
           Daniel T. Jacobson                 1,140,713               513
           Thomas Laken, Jr.                  1,140,713               513

</TABLE>

In addition,  the following  directors continued in office for terms expiring at
the 2005 annual  meeting of  shareholders:  Brantly  Chappell,  Dr. Robert Fait,
Melvin Wendt and Charles R.  Wellington.  The  following  directors  continue in
office for terms expiring at the annual meeting of shareholders  in 2006:  Keith
Blumer, John M. Ernster and John S. Smith

In  addition,  subsequent  to the  2004  annual  meeting  of  shareholders,  the
following  persons  were  elected by the board as  additional  directors  of the
Company for terms expiring at the annual  meetings of  shareholders in the years
indicated following their names: James Schuster (2007),  James V. Scherrer,  Sr.
(2005), Frank Cannella, Jr. (2007) and Richard Torhorst (2006).

Item 5.  Other Information

               None

Item 6.  Exhibits and Reports on Form 8-K

           (a) Exhibits

          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).

           (b) Reports on Form 8-K

                None


<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.





August 6, 2004                              /s/ Brantly Chappell
Date                                        -----------------------
                                            Brantly Chappell
                                            Chief Executive Officer



August 6, 2004                              /s/ James Schuster
                                            -----------------------
                                            James Schuster
                                            Chief Financial Officer
[{"type": "10-Q", "sequence": "1", "filename": "june10q.txt", "description": "FIRST BANKING CENTER, INC. JUNE 2004 10-Q", "secsgml_size_bytes": 95025}]
{"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": "04960888"}, "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 June 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 July 28, 2004,  Common stock,  $1.00 par value,  1,492,836
shares outstanding.
FIRST BANKING CENTER, INC AND SUBSIDIARY
                                TABLE OF CONTENTS
                                  June 30, 2004

Part I   Financial Information                                          Page
                                                                        ----

         Item 1  Consolidated Financial Statements

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

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

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

                 Notes to Unaudited Consolidated Financial Statements    6-9

         Item 2  Management's Discussion and Analysis of
                 Financial Condition and Results of Operations           10-19

         Item 3  Quantitative and Qualitative Disclosures about Market
                 Risk                                                    20

         Item 4  Controls and Procedures                                 21

Part II  Other Information

         Item 1  Legal Proceedings                                       21

         Item 2  Changes in Securities, Use of Proceeds and Issuer
                 Purchases of Equity Securities                          21

         Item 3  Defaults upon Senior Securities                         22

         Item 4  Submission of Matters to a Vote of Security Holders     22

         Item 5  Other Information                                       22

         Item 6  Exhibits and Reports on Form 8-K                        22

         Signatures                                                      23
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements

                    FIRST BANKING CENTER, INC. AND SUBSIDIARY
                      UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30,     December 31,
ASSETS                                                                                    2004          2003
                                                                                    ------------------------------
                                                                                        (Dollars in thousands)
Cash and due from banks                                                            $   15,484       $   19,960
  Federal funds sold                                                                      4,047            3,047
  Interest-bearing deposits in banks                                                        281              274
  Available for sale securities                                                          68,563           82,672
  Loans, less allowance for loan losses of $4,696 and
    $4,617 at 2004 and 2003, respectively                                               440,450          403,252
  Office buildings and equipment, net                                                    12,979           11,818
  Other real estate owned                                                                 1,853            1,899
  Federal Home Loan Bank stock                                                           11,657           11,755
  Other assets                                                                           10,094            9,240
                                                                                    ------------------------------
      TOTAL ASSETS                                                                   $  565,408       $  543,917
                                                                                    ==============================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
  Deposits
    Demand                                                                           $   62,241       $   67,961
    Savings and NOW accounts                                                            204,876          194,419
    Time                                                                                150,575          145,072
                                                                                     -----------------------------
      Total deposits                                                                    417,692          407,452
  Short-term borrowings                                                                  50,820           34,176
  Other borrowings                                                                       38,633           44,673
  Other liabilities                                                                       3,784            4,076
                                                                                     -----------------------------
      TOTAL LIABILITIES                                                              $  510,929       $  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 June 30, 2004 and December 31, 2003,
    respectively; 1,492,683 and 1,500,760 shares outstanding as of June 30, 2004
    and December 31, 2003, respectively                                                   1,503            1,501
  Surplus                                                                                 4,646            4,612
  Retained earnings                                                                      48,478           46,161
  Accumulated other comprehensive income                                                    334            1,290
  Common stock in treasury, at cost- 9,860 and 517 shares as of June 30, 2004
    and December 31, 2003, respectively                                                    (482)             (24)
                                                                                     -----------------------------
      TOTAL STOCKHOLDERS' EQUITY                                                     $   54,479       $   53,540
                                                                                     -----------------------------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                     $  565,408       $  543,917
                                                                                     =============================

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

  Interest and fees on loans                            $   5,928     $   5,555    $   11,695    $  10,959
  Interest and dividends on securities:
    Taxable                                                   230           356           510          681
    Non-taxable                                               365           409           758          834
  Interest on federal funds sold                                5            22             9           60
  Interest on interest-bearing deposits in banks                1             1             2           15
  Other interest and dividends                                176           222           365          399
                                                        ----------------------------------------------------
      TOTAL INTEREST INCOME                                 6,705         6,565        13,339       12,948
                                                        ----------------------------------------------------

INTEREST EXPENSE
  Interest on deposits                                      1,156         1,374         2,332        2,836
  Interest on short-term borrowings                           153            55           311          127
  Interest on other borrowings                                441           463           872          923
                                                        ----------------------------------------------------
      TOTAL INTEREST EXPENSE                                1,750         1,892         3,515        3,886
                                                        ----------------------------------------------------
      NET INTEREST INCOME                                   4,955         4,673         9,824        9,062

  Provision for loan losses                                    50             0           100           90
                                                        ----------------------------------------------------
      NET INTEREST INCOME AFTER PROVISION FOR
        LOAN LOSSES                                         4,905         4,673         9,724        8,972
                                                        ----------------------------------------------------

NON-INTEREST INCOME
  Trust fees                                                  188           139           338          258
  Service charges on deposit accounts                         576           480         1,038          945
  Commissions                                                  41            46            83           87
  Automated banking fees                                       96            93           182          178
  Securities gains, net                                         0             0           123            0
  Loan gains, net                                             262           600           488        1,114
  Other                                                       219           170           488          341
                                                        ----------------------------------------------------
      TOTAL NON-INTEREST INCOME                             1,382         1,528         2,740        2,923
                                                        ----------------------------------------------------

NON-INTEREST EXPENSE
  Salary and employee benefits                              2,324         2,236         4,703        4,434
  Occupancy                                                   324           292           654          576
  Equipment                                                   357           353           704          694
  Data processing services                                    274           257           549          502
  Other                                                       893           790         1,723        1,538
                                                        ----------------------------------------------------
      TOTAL NON-INTEREST EXPENSE                            4,172         3,928         8,333        7,744
                                                        ----------------------------------------------------
      INCOME BEFORE INCOME TAXES                            2,115         2,273         4,131        4,151

  Income taxes                                                605           640         1,171        1,130
                                                        ----------------------------------------------------
      NET INCOME                                        $   1,510     $   1,633     $   2,960    $   3,021
                                                        ====================================================

Basic earnings per share                                $    1.01     $    1.09     $    1.98    $    2.02
Diluted earnings per share                              $    0.98     $    1.07     $    1.92    $    1.98

                    See accompanying notes to unaudited consolidated financial statements
FIRST BANKING CENTER, INC. AND SUBSIDIARY
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
                                                                                           June 30,
                                                                                      2004          2003
                                                                                   ------------------------
                                                                                    (Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                        $  2,960      $  3,021
  Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:
    Depreciation                                                                         531           473
    Provision for loan losses                                                            100            90
    Loan gains, net                                                                     (488)       (1,114)
    Amortization of premiums and accretion of discounts
     on securities, net                                                                  150           100
    Amortization                                                                          90            62
    Securities gains, net                                                               (123)           -
    Tax benefit of nonqualified stock options exercised                                   17            -
    Increase in other assets                                                            (306)         (853)
    Increase in other liabilities                                                       (290)         (295)
                                                                                   ------------------------
     Net cash provided by operating activities before loan originations and sales      2,641         1,484
    Loans originated for sale                                                        (28,722)      (51,341)
    Proceeds from sale of loans                                                       29,751        53,517
                                                                                   ------------------------
        NET CASH PROVIDED BY OPERATING ACTIVITIES                                      3,670         3,660
                                                                                   ------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Net (increase) decrease in interest-bearing deposits in banks                         (7)          229
    Net (increase) decrease in federal funds sold                                     (1,000)        4,816
    Proceeds from sales of available-for-sale securities                               6,297            -
    Proceeds from maturities and calls of available-for-sale securities               44,890        50,014
    Purchase of available-for-sale securities                                        (38,557)      (48,703)
    Net increase in loans                                                            (37,839)         (934)
    Purchase of office buildings and equipment                                        (1,692)         (859)
                                                                                   ------------------------
        NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                          (27,908)        4,563
                                                                                   ------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net increase (decrease) in deposits                                               10,240        (7,355)
    Dividends paid                                                                      (643)         (583)
    Payments on other borrowings                                                      (6,040)         (437)
    Net increase (decrease) in short-term borrowings                                  16,644        (3,359)
    Sale of common stock for the exercise of stock options                                19            60
    Purchase of treasury stock                                                          (634)          (66)
    Sale of treasury stock for the exercise of stock options                             176            66
                                                                                   ------------------------
        NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                           19,762       (11,674)
                                                                                   ------------------------
    NET DECREASE IN CASH AND DUE FROM BANKS                                           (4,476)       (3,451)

CASH AND DUE FROM BANKS:
    Beginning                                                                         19,960        22,203
                                                                                   ------------------------
    Ending                                                                          $ 15,484      $ 18,752
                                                                                   ========================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION,
    Cash paid during the year for:
      Interest                                                                      $  3,524      $  3,973
      Income taxes                                                                  $    620      $    452

SUPPLEMETAL SCHEDULE OF NONCASH INVESTING ACTIVITIES,
    Change in accumulated other comprehensive income,
      Unrealized gains (losses) on available-for-sale securities, net               $   (956)     $    538
    Other real estate aquired in settlement of loans                                $    103      $     -

             See accompanying notes to unaudited consolidated financial statements
FIRST BANKING CENTER, INC AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 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 six months ended June 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    Six Months Ended
                                                         June 30,             June 30,
                                                      2004      2003       2004      2003
                                                    ---------------------------------------
                                                        (Amounts in         (Amounts in
                                                     thousands, except   thousands, except
                                                      per share data)     per share data)
Basic
Net income                                          $ 1,510   $ 1,633    $ 2,960   $ 3,021
Weighted average shares outstanding                   1,496     1,496      1,496     1,495
Basic earnings per share                            $  1.01   $  1.09    $  1.98   $  2.02

Diluted
Net income                                          $ 1,510   $ 1,633    $ 2,960   $ 3,021
Weighted average shares outstanding                   1,496     1,496      1,496     1,495
Effect of dilutive stock options outstanding             45        30         45        30
                                                    ---------------------------------------
Diluted weighted average shares outstanding           1,541     1,526      1,541     1,525
Diluted earnings per share                          $  0.98   $  1.07    $  1.92   $  1.98
NOTE 3 - Comprehensive Income

The following table presents our comprehensive income:
Three Months Ended    Six Months Ended
                                                         June 30,             June 30,
                                                      2004      2003       2004      2003
                                                    ---------------------------------------
                                                       (Dollars in          (Dollars in
                                                        thousands)           thousands)
Net income                                          $ 1,510   $ 1,633    $ 2,960   $ 3,021
Other comprehensive income
  Net change in unrealized gain (loss) on
   available for sale securities                       (956)      625       (789)      538
                                                    ---------------------------------------
Total comprehensive income                          $   554   $ 2,258    $ 2,171   $ 3,559
                                                    =======================================
NOTE 4 - Stock-based Compensation Plan:

For the six months ended June 30, 2004,  and June 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    Six Months Ended
                                                         June 30,             June 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                             $ 1,510   $ 1,633    $ 2,960   $ 3,021
Deduct total stock-based employee compensation
 expense determined under fair value based method
 for all awards, net of related tax effects               2         8       (168)     (193)
                                                    ---------------------------------------
Pro forma net income                                $ 1,512   $ 1,641    $ 2,792   $ 2,828
                                                    =======================================

Earnings per share:
 Basic:
 As reported                                        $  1.01   $  1.09    $  1.98   $  2.02
 Pro forma                                             1.01      1.10       1.87      1.89
Diluted:
 As reported                                        $  0.98   $  1.07    $  1.92   $  1.98
 Pro forma                                             0.98      1.07       1.81      1.85
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 June 30, 2004, and
June 30,  2003,  respectively:  dividend  yield of 1.7 percent and 1.7  percent;
expected  price  volatility  of 5.1 percent and 5.2 percent,  blended  risk-free
interest  rates of 4.9 percent and 3.5 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 June 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                       $ 150,575     $  81,780     $  48,127   $  10,711    $  9,957
  and similar products                       (b)
Short-term obligations                       (c)                50,820        50,820            -           -           -
Other borrowings                             (d)                38,633        13,362        11,060      11,211       3,000
Operating leases                                                   332            95           174          63          -
Other long-term obligations                  (e)                 2,336           132           497         427       1,280
                                                             ---------------------------------------------------------------
    Total contractual cash obligations                       $ 242,696     $ 146,189     $  59,858   $  22,412    $ 14,237
                                                             ===============================================================
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 June
30:
2004         2003
                                                                -----------------------
                                                                 (Dollars in thousands)
Commitments to extend credit
  Unused revolving home equity, consumer lines of credit         $ 20,523     $ 16,189
  Unused commercial lines of credit                                75,699       56,685
Standby letters of credit                                           3,334        2,341
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
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 June 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 June 30, 2004,  the Company was entered in an interest rate swap  transaction
which resulted in the Company converting $10 million of fixed rate brokered CD's
into variable rate debt. This swap transaction  requires 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 a fixed rate  interest
payment equal to 5.0% using an actual/365 day basis.

Summary information about the interest rate swap at June 30 is as follows:
2004            2003
                                           -------------------------------
                                               (Dollars in thousands)
Notional amount                             $  10,000       $     -
Weighted average fixed rate                      5.00%            -
Weighted average variable rate                   1.27%            -
Weighted average maturity, years                  7.5             -
Fair value                                       (114)            -
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,  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 June 30, 2004

The following discussion provides additional analysis of the financial condition
and results of  operations of the Company for the three and the six months ended
June 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 June 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 June 30, 2004, total Company assets were $565.4 million,  increasing 3.95%
from $543.9  million as of December 31, 2003.  Net income for the quarter  ended
June 30, 2004 was $1.5 million or $0.98 per diluted share,  decreasing  $123,000
or 7.53% from $1.6 million or $1.07 per diluted  share in the second  quarter of
2003.  Net  income for the six months  ended June 30,  2004 was $3.0  million or
$1.92 per diluted share,  decreasing $61,000 or 2.00% from $3.0 million or $1.98
per  diluted  share in the  first  six  months of 2003.  The  significant  items
resulting in these results are discussed below.

Financial Condition

Loans

Loans  outstanding  were $445.1  million and $407.9 million on June 30, 2004 and
December 31, 2003 respectively. This represented an increase of $37.2 million or
9.1%.  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. Our loan demand outpaced the growth in deposits in the
first six  months of 2004;  therefore,  the  Company  also sold some  investment
securities  and borrowed  additional  funds to fund a portion of this  increased
loan demand.
The  following  table   summarizes  the  changes  to  date  in  the  major  loan
classifications:
As a % of Total Loans
                                             June 30,       December 31,   Change in           June 30,       December 31,
                                               2004             2003         Balance             2004             2003
                                          ---------------------------------------------     --------------------------------
                                                        (Dollars in millions)
Residential Real Estate                       $160.9          $178.5        ($17.6)             36.1%             43.8%
Commercial Real Estate                        $120.6          $101.1         $19.5              27.1%             24.8%
Construction and Land Development              $55.4           $43.0         $12.4              12.4%             10.5%
Commercial                                     $33.7           $27.6          $6.1               7.6%              6.8%
Agricultural Real Estate                       $45.9           $25.9         $20.0              10.3%              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 1.05% of gross loans on June 30, 2004,  compared with $4.6 million or
1.13% of gross loans on December 31, 2003. Net charge-offs  were $21,000 or .01%
of gross  loans and  $46,000 or .01% for the six months  ended June 30, 2004 and
2003,  respectively.  The allowance  for loan losses was 166.64% of  non-accrual
loans at June 30, 2004 as compared to 226.21% 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 six 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.  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.
The  following  table  provides a detailed  analysis of changes in the indicated
periods in the allowance for estimated loan losses:
Six Months Ended
                                                                              June 30,
                                                                       2004                2003
                                                                  -----------------------------------
                                                                        (Dollars in thousands)
Balance, beginning of fiscal year                                   $  4,617            $  4,988

Charge-offs:
  Commercial                                                               3                   6
  Agricultural production                                                  0                  42
  Real estate:
    Construction                                                           0                   0
    Commercial                                                             0                   0
    Agriculture                                                            0                   0
    Other mortgages                                                       46                   0
    Consumer (including installmment loans)                                6                   1
                                                                  -----------------------------------
      Total Charge-offs                                                   55                  49
                                                                  -----------------------------------

Recoveries:
    Commercial                                                             0                   1
    Agricultural production                                               20                   0
    Real estate:
    Construction                                                           0                   0
    Commercial                                                             0                   0
    Agriculture                                                            0                   0
    Other mortgages                                                        8                   0
    Consumer (including installment loans)                                 6                   2
                                                                  -----------------------------------
      Total Recoveries                                                    34                   3
                                                                  -----------------------------------

Net Charge-offs                                                           21                  46

Provision charged to operations                                          100                  90
                                                                  -----------------------------------
Balance, end of period                                              $  4,696            $  5,032
                                                                  ===================================

Average amount of loans outstanding
    before allowance for estimated losses on loans                  $439,334            $370,789
                                                                  ===================================

Ratio of net charge-offs during the
    period to average loans outstanding
    during the period                                                  0.005%              0.012%
                                                                  ===================================
Non-accrual, Past Due and Renegotiated Loans
June 30,         December 31,
                                                                       2004               2003
                                                                  -----------------------------------
                                                                        (Dollars in thousands)
Non-accrual Loans (a)                                                 $2,818             $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 $1.9 million of residential  real
estate loans, $350,000 of farmland,  $213,000 of agricultural  production loans,
and $190,000 of commercial  loans.  The increase  during the first six months of
2004 was the result of  non-accrual  residential  real estate  loans  increasing
$511,000,  non-accrual  farmland  loans  increasing  $274,000,  and  non-accrual
agricultural  production  loans  increasing  $210,000,   offset  by  non-accrual
commercial  real estate loans of $300,000.  The bulk of the increase  relates to
factors involving specific loans.

As of June 30, 2004,  the Company had loans  totaling $26.1 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 $7.7  million or 41.8% 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 June 30, 2004.  The Company's
loans are  concentrated  geographically  in the  Wisconsin  counties  of Racine,
Walworth, Kenosha, Lafayette and Green.

Investments securities - Available for Sale

The fair value of the securities  available-for-sale portfolio at June 30, 2004,
decreased $14.1 million or 17.1% 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 $35.0 million of U.S.  government  agency  securities and
$3.6  million of  municipal  securities.  The Company  sold $4.6 million of U.S.
government  agency notes and $1.7 million of  municipal  securities.  There were
maturities and calls of $42.3 million of U.S.  government  agency notes and U.S.
government  agency  mortgage-backed  securities  and $2.7  million of  municipal
securities.
Deposits

Total  deposits were $417.7  million on June 30, 2004 compared to $407.5 million
on December 31, 2003.  This is an increase of $10.2 million or 2.5%. Most of the
increase was in money market  accounts as deposits  shifted from demand and time
deposits;  however,  deposits showed a net gain because the Company issued a $10
million brokered time deposit.  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.  The brokered deposits have a 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 a callable  interest  rate swap that  effectively
converts this 7.5 year fixed rate  liability to a one month LIBOR based variable
rate  liability.  See  Item  1,  "NOTE  6 -  Derivative  Instruments"  for  more
information  regarding the swap. The following table  summarizes  changes during
2004 in the major classifications of deposts:
June 30,      December 31,                Change in
                                                                      2004            2003                     Balance
                                                               -----------------------------------           -----------
                                                                      (Amounts in millions)
Money Market and Savings                                        $    159.0        $   149.2                  $   9.8
NOW Accounts                                                          45.9             45.2                      0.7
Demand  Deposits                                                      62.2             68.0                     (5.8)
Time Deposits less than $100,000                                      87.8             87.1                      0.7
Time Deposits equal or greater than $100,000                          62.8             57.9                      4.9
Borrowed Funds

Total  borrowed  funds were $89.5  million on June 30,  2004,  compared to $78.8
million on December  31, 2003.  This was an increase of $10.7  million or 13.6%.
Securities  sold under  agreement to repurchase and Federal Home Loan borrowings
each  decreased  $6.0  million as  maturities  were not  replaced.  The  Company
replaced  these  funds with  brokered  time  deposits.  Federal  funds  borrowed
increased by $22.7  million to fund the demand for loans.  The  following  table
summarizes changes during 2004 in the major classifications of borrowed funds:
June 30,       December 31,          Change in
                                                               2004             2003               Balance
                                                          --------------------------------       -----------
                                                               (Amounts in millions)
Securities sold under agreement to repurchase                $   21.4        $   27.4            $   (6.0)
Federal Home Loan Borrowing                                      38.2            44.2                (6.0)
Federal Funds Borrowed                                           29.4             6.7                22.7
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 June 30, 2004, the Company's  stockholders'  equity increased  $939,000 or
1.8% from December 31, 2003.  Net income of $3.0 million was the primary  reason
for the  increase.  In  addition,  the Company  issued  $176,000 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  accummulated  other  comprehensive  income of  $956,000,  to
$334,000 at June 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
1 capital (common  stockholders'  equity less goodwill) to risk-weighted  assets
was 11.6% at June 30, 2004, well above the 4% minimum required. Total capital to
risk-adjusted assets was 12.7%; 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 June 30, 2004.
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 June 30, 2004 was a positive  18%,  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  $19.8 million at June 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 quarter,  the Bank can also
use brokered  deposits to raise  additional  cash.  See  "Financial  Condition -
Deposits" above. During the second 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 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.

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  slightly for the six months of 2004. Net
cash provided by operating  activities  was $3.7  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 $27.9 million.  Net cash provided by financing  activities,
consisting  primarily of a $16.6 million  increase in short term  borrowings and
deposit growth of $10.2 million, was $19.8 million for the six months ended June
30, 2004.

For the six  months  ending  June 30,  2003,  net  cash  provided  by  operating
activities was $3.7 million. This was primarily a result of net secondary market
loan  proceeds over  originating  secondary  market loans.  Net cash provided by
investing  activities,  consisting  primarily of federal funds sold and proceeds
from  security  transactions,  was  $4.6  million.  Net cash  used in  financing
activities,   consisting   primarily  of  decreased   deposits  and  short  term
borrowings, was $11.7 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 $5.0 million in the
second  quarter of 2004, an increase of $282,000 from $4.7 million in the period
in 2003. For the six month period ended June 30, 2004,  net interest  income was
$9.8 million,  an increase of $762,000 from $9.1 million in that period in 2003.
Net interest  margin as a percentage of average  earning assets  (includes loans
placed on nonaccrual  status) declined slightly to 3.95% from 4.10% and to 3.94%
from 4.11% for the three  months and six  months  ended June 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 5.40% from 6.00% and to 5.47% from
5.96%  for the  three  months  and six  months  ended  June 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 1.59% from  1.99% and to 1.62% from 2.01% for the three  months and
six  months  ended  June  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 six months ended June 30, 2004 and
2003:
Three months ended
                                                                             June 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 thusands)
Interest Income:
  Interest and fees on loans (a) (b)                $ 439,334   5,936   5.40%    370,789   5,566     6.00%
  Interest and dividends on securities:
      Taxable                                          46,656     406   3.48%     41,227     578     5.61%
      Nontaxable (a)                                   35,444     554   6.25%     56,206     620     4.41%
  Interest on Fed funds sold                            1,967       5   1.02%      7,792      22     1.13%
  Interest on interest-bearing deposits in banks          280       1   1.43%        212       1     1.89%
                                                      --------------------------------------------------------
       Total Interest Income                        $ 523,681   6,902   5.27%    476,226   6,787     5.70%
                                                      ========================================================

Interest Expense
  Interest on deposits                              $ 342,632   1,156   1.35%    313,052    1,374    1.76%
  Interest on short-term borrowings                    53,361     153   1.15%     21,198       55    1.04%
  Interest on other borrowings                         43,860     441   4.02%     46,325      463    4.00%
                                                      --------------------------------------------------------
       Total Interest Expense                       $ 439,853   1,750   1.59%    380,575    1,892    1.99%
                                                      ========================================================
Net interest margin                                            $5,152   3.94%              $4,895    4.11%
                                                               ==============              ===============
Six months ended
                                                                             June 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)                 $ 428,118  11,713   5.47%    368,381   10,981    5.96%
  Interest and dividends on securities:
      Taxable                                          51,052     875   3.43%     36,360    1,080    5.94%
      Nontaxable (a)                                   36,254   1,149   6.34%     46,651    1,264    5.42%
  Interest on Fed funds sold                            2,193       9   0.82%      9,925       60    1.21%
  Interest on interest-bearing deposits in banks          279       2   1.43%      2,447       15    1.23%
                                                      --------------------------------------------------------
       Total Interest Income                        $ 517,896  13,748   5.31%    463,764   13,400    5.78%
                                                      ========================================================

Interest Expense
  Interest on deposits                              $ 338,900   2,332   1.38%    315,984    2,836    1.80%
  Interest on short-term borrowings                    49,818     311   1.25%     23,871      127    1.06%
  Interest on other borrowings                         44,261     872   3.94%     46,399      923    3.98%
                                                      --------------------------------------------------------
       Total Interest Expense                       $ 432,979   3,515   1.62%    386,254    3,886    2.01%
                                                      ========================================================
Net interest margin                                           $10,233   3.95%              $9,514    4.10%
                                                              ===============              ===============
(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  $600,000  and $1.1  million for the
     three  and  six  months  ending  June  30,  2003   respectively  due  to  a
     reclassification of gains on the sales of loans.
Provision for Loan Losses

For the six months ended June 30, 2004, $100,000 was charged to current earnings
and added to the allowance for loan losses  compared to $90,000 during the first
six months of 2003. In the second  quarter of 2004,  $50,000 was expensed to the
provision,  as compared to no addition  in the  comparable  period in 2003.  Net
charge-offs  decreased slightly to $21,000 from $46,000 for the six months ended
June 30, 2004 as compared to the six months  ended June 30,  2003.  At this time
however,  non-accrual  loans increased  $318,000 and classified  loans increased
$471,000  during the second  quarter of 2004,  and  increased  $777,000 and $7.5
million,  in the first six months of 2004.  As a result of the increase in total
loans and non-performing and classified assets,  charges to earnings rose during
the six months ended June 30, 2004 versus 2003. 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" below 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  $146,000 or 9.6% for the three months ended June
30, 2004  compared to the three  months  ended June 30,  2003.  The decrease was
primarily  the result of  decreased  gains from the sale of loans.  Non-interest
income  decreased  $183,000  or 6.3% for the six  months  ended  June  30,  2004
compared to the six months ended June 30, 2003.  The decrease was  primarily the
result of $626,000 in decreased gains from the sales of loans offset by $123,000
of gains  from the sale of  securities  and  $74,000  of income  from other real
estate  owned and  increases of $80,000 from trust fees and $93,000 from service
charges on deposit accounts. The decreased income from the sale of loans was the
result of increased  interest rates on fixed rate  residental real estate loans.
The  increased  interest  rates  caused a decline  in the  volume of fixed  rate
residental real estate loans which the Company sells to the secondary market.

Non-interest Expense

Non-interest  expense  increased  $244,000 or 6.2% and  $589,000 or 7.6% for the
three and six months  ended June 30,  2004  compared to the three and six months
ended June 30, 2003.  Salaries and benefit costs, which is the largest component
of non-interest expense,  accounted for $88,000 and $269,000 of the increase for
the three and six  months  ended  June 30,  2004  compared  to the three and six
months  ended June 30, 2003.  The increase in salaries and benefit  costs can be
attributed  primarily to normal wage  increases and increased  health  insurance
costs.  Occupancy  expense  increased  $32,000 and $78,000 for the three and six
months  ended June 30, 2004  compared to the three and six months ended June 30,
2003 due to increases in real estate taxes,  depreciation  and utilities.  Other
expense increased  $103,000 and $185,000 for the three and six months ended June
30, 2004  compared to the three and six months ended June 30, 2003.  The bulk of
the increase is 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 six months  ending  June 30,  2004 was  $1,171,000
compared to $1,130,000  for the six months  ending June 30, 2003.  The effective
tax rate  increased to 28.3% for the six months ending June 30, 2004 compared to
27.2% for the six months  ending June 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
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.

At this time, no assessment has yet been made by the Department against the Bank
nor has the Company  determined  how it intends to  respond.  The letter did not
provide  sufficient  detail to permit the  Company to assess  what  effects  the
acceptance  of such a settlement  offer might have upon it, nor does the Company
have sufficient information to determine what the Department's position would be
if an  assessment  were made and the Company were to  challenge  it. The Company
intends  to seek to obtain  that  detail  and to  evaluate  the impact of such a
settlement after it receives more specific details.

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.
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 its  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  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
June  30,  2004,   projected   that  net  portfolio   value  would  decrease  by
approximately  1.80% if  interest  rates  would rise 200 basis  points and would
decrease by  approximately  0.49% if interest  rates would rise 100 basis points
over  the  next  year.  It  projects  an  increase  in net  portfolio  value  of
approximately  3.47% if  interest  rates  would  drop 200  basis  points  and an
increase of  approximately  1.65% 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 June 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.
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.  Changes in  Securities,  Use of Proceeds and Issuer  Purchases of
         Equity Securities.

(e)      The following table sets forth information on the Company's repurchase
         of shares of its common stock during the quarter ended June 30, 2004:

Issuer Purchases of Equity Securities
---------------- ----------- ------------- ----------------------- -----------------------
    Period       (a) Total   (b) Average    (c) Total Number of    (d)  Maximum Number
                 Number of    Price Paid    Shares Purchased as       (or Approximate
                 Shares       per Share     Part of  Publicly           Dollar Value) of
                 Purchased                  Announced Plans or     Shares that May Yet
                                             Programs*      Be Purchased Under the
                                                                    Plans or Programs*

------------------------------------------------------------------------------------------
Month #1
   April 1 -
   April 30,       5,321        49.95                -                        -
     2004

  Month #2
    May 1 -
    May 31,          533        47.86                -                        -
     2004

  Month #3
    June 1 -
    June 30,       1,000        50.00                -                        -
     2004
------------------------------------------------------------------------------------------
     Total         6,854*       49.80                *                        *
------------------------------------------------------------------------------------------
* There  is no  active  trading  market  for the  Company's  common  stock.  All
repurchases  were therefore made in private  transactions.  Although the Company
does not have a formal  repurchase  program,  it regularly  repurchases  shares,
particularly in situations in which it is approached by shareholders  seeking to
sell shares,  it has disclosed the fact that it will from time to time make such
purchases.
Item 3.  Defaults upon Senior Securities

             None

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

On April 20, 2004, the Company held its 2004 annual meeting of shareholders. The
only matter for action at the meeting was the  election of three  directors  for
the class of  directors  whose  terms  expired  at the  meeting.  The  following
management  nominees for directors were the only nominees;  they were re-elected
by the votes indicated to serve for terms expiring at the 2007 annual meeting.
Nominee                            Votes For           Votes Withheld
David Boilini                      1,140,663               563
           Daniel T. Jacobson                 1,140,713               513
           Thomas Laken, Jr.                  1,140,713               513
In addition,  the following  directors continued in office for terms expiring at
the 2005 annual  meeting of  shareholders:  Brantly  Chappell,  Dr. Robert Fait,
Melvin Wendt and Charles R.  Wellington.  The  following  directors  continue in
office for terms expiring at the annual meeting of shareholders  in 2006:  Keith
Blumer, John M. Ernster and John S. Smith

In  addition,  subsequent  to the  2004  annual  meeting  of  shareholders,  the
following  persons  were  elected by the board as  additional  directors  of the
Company for terms expiring at the annual  meetings of  shareholders in the years
indicated following their names: James Schuster (2007),  James V. Scherrer,  Sr.
(2005), Frank Cannella, Jr. (2007) and Richard Torhorst (2006).

Item 5.  Other Information

               None

Item 6.  Exhibits and Reports on Form 8-K

           (a) Exhibits

          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).

           (b) Reports on Form 8-K

                None
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.

August 6, 2004                              /s/ Brantly Chappell
Date                                        -----------------------
                                            Brantly Chappell
                                            Chief Executive Officer

August 6, 2004                              /s/ James Schuster
                                            -----------------------
                                            James Schuster
                                            Chief Financial Officer