<PAGE>   1
                                  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 OF 1934

                For the Quarterly Period Ended September 30, 1997

                                       OR

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

                FOR THE TRANSITION PERIOD FROM _______ TO _______

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

                        COMMISSION FILE NUMBER 000-23013

                   T & W FINANCIAL CORPORATION (Exact name of
                     registrant as specified in its charter)

                   WASHINGTON                               91-1844249
        -------------------------------                 -------------------
        (State or other jurisdiction of                  (I.R.S. Employer
        incorporation or organization)                  Identification No.)

6416 PACIFIC HIGHWAY EAST, TACOMA, WASHINGTON                     98424
---------------------------------------------                   ----------
  (Address of principal executive offices)                      (Zip Code)


       Registrant's telephone number, including area code: (253) 922-5164


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 [ ]      No [X]

The number of shares of common stock outstanding November 14, 1997 was
8,000,000.

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


<PAGE>   2



                           T & W FINANCIAL CORPORATION

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1997

                                      INDEX

<TABLE>
<CAPTION>
Part I.  Financial Information

         Item 1. Financial Statements                                                  Page
                                                                                       ----
<S>      <C>                                                                            <C>
         a)      Income Statements
                 for the Three and Nine Months Ended September 30, 1996 and 1997         1

         b)      Balance Sheets
                 as of September 30, 1997 and December 31, 1996                          2

         c)      Cash Flows Statements
                 for the Nine Months Ended September 30, 1996 and 1997                   3

         d)      Notes to Financial Statements                                           4


         Item 2. Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                                     8

Part II. Other Information

         Item 2. Use of Proceeds                                                        17

         Item 6. Exhibits and Reports on Form 8-K                                       18

Signatures                                                                              20
</TABLE>




<PAGE>   3



                          Part I. Financial Information

Item 1.

                    T&W FINANCIAL CORPORATION AND AFFILIATES
                          COMBINED STATEMENTS OF INCOME
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED               NINE MONTHS ENDED
                                                        SEPTEMBER 30,                    SEPTEMBER 30,
                                                   -------         -------         --------         --------
                                                    1997            1996             1997             1996
                                                   -------         -------         --------         --------
<S>                                                <C>             <C>             <C>              <C>
Revenues:
  Lease contract revenue ..................        $ 3,514         $ 4,650         $ 10,812         $ 11,594
  Gain on sale of leases ..................          4,492              --            7,940               --
  Fee income ..............................            288             392              422            1,491
  Servicing and other income ..............            168              52              906              569
                                                   -------         -------         --------         --------
      Total Revenues ......................          8,462           5,094           20,080           13,654
                                                   -------         -------         --------         --------

Expenses:
  Interest expense ........................          1,912           1,663            5,638            4,574
  Compensation and related expenses .......          1,254             608            3,240            1,913
  Amortization of initial direct costs ....            558             732            1,780            1,586
  Provision for credit losses .............            372             237              774              582
  Other general and administrative expenses            765             397            1,838            1,154
                                                   -------         -------         --------         --------
      Total Expenses ......................          4,861           3,637           13,270            9,808
                                                   -------         -------         --------         --------
Net Income ................................        $ 3,601         $ 1,457         $  6,810         $  3,845
                                                   =======         =======         ========         ========

Pro Forma Amounts
  Income before minority interest and
    income taxes ..........................        $ 3,601         $ 1,457         $  6,810         $  3,845

  Minority interest .......................           (540)           (219)          (1,022)            (577)
                                                   -------         -------         --------         --------
  Income before income taxes ..............          3,061           1,238            5,788            3,268
  Provision for income taxes ..............         (1,102)           (446)          (2,084)          (1,176)
                                                   -------         -------         --------         --------
  Net income ..............................        $ 1,959         $   792         $  3,704         $  2,092
                                                   =======         =======         ========         ========

  Net income per share ....................        $   .34         $   .14         $    .64         $    .36

  Weighted average number of shares of
    Common Stock and Common Stock
    Equivalents Outstanding ...............          5,800           5,800            5,800            5,800
</TABLE>





                             See accompanying notes.
                                     Page 1


<PAGE>   4



                    T&W FINANCIAL CORPORATION AND AFFILIATES
                             COMBINED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                       September 30, 1997
                                                     -----------------------
                                                      Actual        ProForma   December 31, 1996
                                                     --------       --------   -----------------
                                                    (Unaudited)    (Unaudited      (Audited)
<S>                                                  <C>            <C>            <C>
Cash and Cash Equivalents ....................       $  9,247       $  9,247       $  8,064

Net Investment in Leases .....................        105,978        105,978        135,087

Securitization Receivable, Net ...............         17,680         17,680             --

Intangible Assets, net .......................          2,265          2,265             --

Other Assets .................................          2,637          2,637          1,286
                                                     --------       --------       --------
        Total Assets .........................       $137,807       $137,807       $144,437
                                                     ========       ========       ========

Accounts Payable and Other Accrued Liabilities       $ 19,195       $ 19,195       $  5,634

Notes Payable - Recourse .....................         24,245         24,245         32,272

Notes Payable - Nonrecourse ..................         70,354         70,354         89,975

Security Deposits ............................          8,301          8,301          6,259

Pro Forma Deferred Income Tax ................             --          4,602             --
                                                     --------       --------       --------
        Total Liabilities ....................        122,095        126,697        134,140
                                                     --------       --------       --------

ProForma Minority Interest ...................             --          2,365             --

Commitments and Contingencies

Shareholders' Equity:
  Common stock and paid-in capital ...........          3,438          3,438          3,438
  Retained earnings ..........................         12,274          5,307          6,859
                                                     --------       --------       --------
        Total Shareholders' Equity ...........         15,712          8,745         10,297
                                                     --------       --------       --------

        Total Liabilities and Shareholders'
          Equity .............................       $137,807       $137,807       $144,437
                                                     ========       ========       ========
</TABLE>





                             See accompanying notes.
                                     Page 2

<PAGE>   5



                    T&W FINANCIAL CORPORATION AND AFFILIATES
                        COMBINED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                   NINE MONTHS ENDED
                                                                     SEPTEMBER 30,
                                                               ------------------------
                                                                 1997            1996
                                                               --------        --------
<S>                                                            <C>             <C>
Net Income .............................................       $  6,810        $  3,845
Adjustments to reconcile net income to net cash provided
  (used) by operating activities:
      Amortization .....................................          1,780           1,586
      Provision for credit losses ......................            774             582
      Gain on sale of leases ...........................         (7,940)             --
Changes in assets and liabilities, exclusive of the
  effects of business combinations:
      Increase (decrease) in accounts payable and
        other accrued liabilities ......................         13,561           2,958
                                                               --------        --------
Net Cash Provided (Used) by Operating Activities .......         14,985           3,055
                                                               --------        --------

Cash Flows From Investing Activities
      New leases originated ............................        (96,400)        (59,670)
      Lease payments received, Net .....................         35,749          23,011
      Cash received in acquisition net of cash paid ....            191              --
                                                               --------        --------

Net Cash (Used) Provided by Investing Activities .......        (60,460)        (36,659)
                                                               --------        --------

Cash Flows From Financing Activities:
      Proceeds from sale of lease portfolio ............         73,953              --
      Proceeds from recourse and nonrecourse borrowings          37,242          48,979
      Payments on  recourse and nonrecourse borrowings .        (64,890)        (17,265)
      Net increase in security deposits ................          2,042           1,205
      Debt issue costs paid ............................           (294)            (80)
      Distributions to shareholders ....................         (1,395)         (2,418)
                                                               --------        --------

Net Cash Provided by Financing Activities ..............         46,658          30,421

Net Increase (Decrease) in Cash and Cash Equivalents ...          1,183          (3,183)
                                                               --------        --------

Cash and Cash Equivalents, beginning of period .........          8,064           4,323
                                                               --------        --------

Cash and Cash Equivalents, end of period ...............       $  9,247        $  1,140
                                                               ========        ========
</TABLE>





                             See accompanying notes.
                                     Page 3



<PAGE>   6



                          T & W FINANCIAL CORPORATION AND AFFILIATES
                            NOTES TO INTERIM FINANCIAL STATEMENTS

NOTE 1.  DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

T & W Financial Corporation, T & W Financial Services Company L.L.C. and special
purpose entities (together, "SPEs" and individually, "SPE"), T & W Finance
Corporation I through III and T & W Funding Company II and T & W Funding Company
IV through VII, LLC (together, the "Company"), are affiliated companies. The
Company's business operations consist primarily of writing leases on various
types of capital equipment for commercial entities. The Company's operations
extend throughout the United States, with no significant concentration in any
region except the Pacific Northwest. The Company's headquarters are located in
Tacoma, Washington.

The accompanying combined balance sheets and related interim combined statements
of income, and cash flows are unaudited. In the opinion of management, all
adjustments, which consist of only normal recurring items necessary for the fair
presentation of these interim financial statements, have been included. Interim
results are not necessarily indicative of the results expected for the full
year. The information included in this Form 10-Q should be read in conjunction
with the Company's Form S-1 Registration Statement (Registration No. 333-34123)
declared effective on November 3, 1997 by the Securities and Exchange
Commission.

NOTE 2.  NET INVESTMENT IN LEASES

The Company's investments in leases have been pledged as collateral for certain
notes payable. The investment in leases which are in SPEs and pledged as
collateral for related debt are referred to herein as "securitized". The net
investment in leases presented on a basis by type of borrowing for which the
investment is pledged as collateral is summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                        SEPTEMBER 30, 1997     DECEMBER 31, 1996
                                                            (UNAUDITED)            (AUDITED)
<S>                                                          <C>                   <C>
Securitized -
Minimum lease payments receivable                            $  95,282             $ 106,279
Estimated residual value of leased equipment, net                9,098                 9,719
Unearned lease revenue                                         (17,530)              (19,683)
                                                             ---------             ---------
   Securitized, net                                             86,850                96,315
                                                             ---------             ---------
Not Securitized-
Minimum lease payments receivable                               19,339                41,807
Estimated residual value of leased equipment, net                1,911                 2,337
Unearned lease revenue                                          (4,195)               (8,576)
                                                             ---------             ---------
   Not Securitized, net                                         17,055                35,568
Allowance for Credit Losses                                     (1,030)               (1,323)
Initial Direct Costs, net                                        3,103                 4,527
                                                             ---------             ---------
   Net Investment in Leases                                  $ 105,978             $ 135,087
                                                             =========             =========
</TABLE>



                                     Page 4


<PAGE>   7



A summary of activity in the allowance for credit losses account is as follows
(in thousands):

<TABLE>
<CAPTION>
                                      NINE MONTHS ENDED      YEAR ENDED
                                      SEPTEMBER 30, 1997  DECEMBER 31, 1996
                                      ------------------  -----------------
                                         (UNAUDITED)          (AUDITED)
<S>                                        <C>                 <C>
BALANCE, beginning of period               $ 1,323             $   889
Provision for credit losses                    774               1,137
Charge-offs                                   (248)             (1,691)
Recoveries                                      47                 988
                                           -------             -------
Net Charge-offs                                201                (703)
                                           -------             -------
Decrease related to leases sold               (866)                 --
                                           -------             -------
BALANCE, end of period                     $ 1,030             $ 1,323
                                           =======             =======
</TABLE>

NOTE 3.  NOTES PAYABLE - RECOURSE

Notes payable and lines of credit borrowings for which the lender has recourse
against the Company are secured by guarantees of senior management, besides the
underlying pledged leases, and are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                   SEPTEMBER 30, 1997  DECEMBER 31, 1996
                                                   ------------------  -----------------
                                                       (UNAUDITED)         (AUDITED)
<S>                                                      <C>                <C>
Payable to bank drawn on a $15 million credit            $ 3,819            $14,996
    line, interest payable monthly at 2.0%
    above the 30 day LIBOR rate, due May 1998
Payable to bank drawn on a $25 million credit            $13,128            $15,000
    line (reduced to $10 million in February
    1997), interest payable monthly at the
    annual Eurodollar rate, due October 1998
Payable to bank drawn on a $5 million credit               1,048              1,526
    line, interest payable monthly at 2.0%
    above LIBOR, due July 1998
Payable to affiliate, interest payable                     1,500                750
    monthly at 2.0% above LIBOR, due May and
    July 1998
Acquisition notes payable, interest at 8%,                 4,750                 --
    $750,000 due October 1998 with remaining
    principal and interest due quarterly to
    2007, net of imputed interest discount
    of $255,000
          Total Notes Payable-Recourse                   $24,245            $32,272
                                                         -------            -------
</TABLE>


NOTE 4.  SECURITIZATIONS

On September 30, 1997 the Company entered into a one-year, revolving credit, $74
million privately placed securitization facility and in connection therewith,
SPE's were formed to issue lease-backed notes. Pursuant to terms of the
facility, the Company sells and transfers pool of leases to the first SPE, which
then sells and transfers rights and pledges an interest in the leased equipment
to a second SPE. The Company retains servicing rights for which it receives
monthly servicing fee income. In September 1997, the Company received proceeds
from this facility of approximately $49 million and accounted for such
transaction for financial reporting purposes as a sale of the lease interests.



                                     Page 5

<PAGE>   8



NOTE 5.  SUBSEQUENT EVENTS

The Company completed its initial public offering on November 7, 1997, at which
time the Company sold 2.2 million shares of common stock (excluding the
Underwriters' over-allotment), at $16.00 per share, raising net cash proceeds of
approximately $32.7 million to the Company.

T & W Financial Services Company L.L.C. was recently organized for the purpose
of succeeding to the business of the Company following its initial public
offering. In connection with the initial public offering, substantially all of
the assets and liabilities of the SPEs were effectively transferred to and
assumed by T & W Financial Services Company L.L.C., and all of the employees of
such entities (excluding the executive officers of T & W Financial Corporation)
became employees of T & W Financial Services Company L.L.C. (the
"Restructuring"). As a result of the Restructuring, which was effective on
November 7, 1997, T & W Financial Services Company L.L.C. conducts all of the
Company's leasing operations and business. T & W Financial Corporation is the
manager of, and owns an 85% membership interest in, T & W Financial Services
Company L.L.C. An affiliate of the Company owned by the executive officers of
T & W Financial Corporation owns the remaining 15% membership interest in
T & W Financial Services Company L.L.C.

NOTE 6.  PENDING ACQUISITION

The Company signed a definitive purchase and sale agreement on November 12, 1997
for the acquisition of a portfolio of (i) loans financing equipment used in the
funeral home industry, and (ii) secured inventory loans to dealers for such
equipment. Based upon asset balances at September 30, 1997, the Company
anticipates that the purchase price for such portfolio will be approximately $60
million. The final purchase price will be calculated based upon actual asset
balances on the closing date, which is currently anticipated to be December 1,
1997, subject to final due diligence. The Company anticipates funding the
acquisition, if consummated, primarily through securitization of most of the
acquired assets, supplemented by approximately $1.0 million of the net proceeds
from the Company's initial public offering and other internally generated funds.

NOTE 7.  PRO FORMA

The accompanying unaudited September 30, 1997 pro forma combined balance sheet
information is presented on a basis giving effect to a 15% minority interest and
estimated deferred income tax liabilities, both of which will be determined and
recorded as of the effective date of the Restructuring and will decrease
shareholders' equity and increase minority interest and deferred tax
liabilities. Deferred income taxes to be recorded in connection with the
conversion of the Company to a tax paying entity relate to temporary differences
arising from accounting for leases as (i) direct financing for financial
reporting purposes and as "true leases" or operating leases for tax purposes,
and (ii) sale transactions for financial reporting purposes versus debt or
borrowing transactions for income tax purposes, both differences initially
resulting in a net deferral of income for income tax purposes.



                                     Page 6


<PAGE>   9



The accompanying unaudited pro forma combined statements of income information
is presented on a basis giving effect to establishment of a 15% minority
interest and conversion from an affiliated group of passthrough entities to a
taxable corporate entity, as if such transactions and events had occurred as of
the beginning of the periods presented. The pro forma tax provision excludes the
effect of recognizing the deferred tax liability upon change in tax status,
which will be reported as a component of the income tax provision. Pro forma
income per share is determined on a basis of 5.8 million shares outstanding, the
actual number of shares to be outstanding immediately prior to the closing of
the offering.






















                                     Page 7


<PAGE>   10



Item 2.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

     Forward-looking statements are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. Any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes", "anticipates", "plans", "expects", "seeks", "estimates", and
similar expressions are intended to identify forward-looking statements. As
discussed in the Company's registration statement referenced above, there are
a number of important factors that could cause the results of the Company
to differ materially from those indicated by such forward-looking statements.

OVERVIEW

     The leases that the Company originates are "direct financing" leases in
that they transfer substantially all of the benefits and risks of equipment
ownership to the lessee. A lease is classified as a direct financing lease for
accounting purposes if the collection of the minimum lease payments is
reasonably predictable, no significant uncertainties exist relating to
non-reimbursable costs yet to be incurred by the lessor under the lease and the
lease meets one of the following criteria: (i) ownership of the property is
transferred to the lessee at the end of the lease term; (ii) the lease contains
a bargain purchase option; (iii) the term of the lease is at least equal to 75%
of the estimated economic life of the leased equipment; or (iv) the present
value of the minimum lease payments is at least equal to 90% of the fair value
of the leased equipment at the inception of the lease. Since the Company's
leases are classified as direct financing leases, the Company records total
lease rentals, estimated residual values and initial direct costs as the gross
investment in the lease. The difference between the gross investment in the
lease and the cost of the leased equipment (including initial direct costs) is
recorded as "unearned income". Lease contract income is recognized over the term
of the lease by amortizing the unearned income using the interest method. For
income tax purposes, the Company treats its leases as "true" leases or operating
leases which, through depreciation deductions related to the leased equipment,
generate tax benefits for the Company and its affiliates.

     The Company finances a majority of its lease originations utilizing
securitizations. The Company has utilized several structures in its
securitizations, each designed to reduce the Company's cost of capital or
improve upon existing financing terms. Prior to 1997, the Company's
securitizations, which did not transfer control of the leases, were recorded as
financings for financial reporting purposes. Beginning in 1997, the Company's
securitizations qualified as sales for financial reporting purposes in
accordance with the new accounting standard for the transfer of financial
assets, SFAS No. 125, as control of the leases was transferred to an unrelated
party. Accordingly, gain on sale of leases was recognized beginning in 1997. The
Company's February 1997 securitization structure was a commercial paper based
conduit facility in which the Company contributed its leases (including related
residuals) to a special purpose limited liability entity. Such entity sold the
leases to an owner trust and the owner trust then sold certificates backed by
the leases to an unaffiliated special purpose



                                     Page 8


<PAGE>   11



corporate entity which administers a multi-seller commercial paper conduit. In
addition, the Company, on September 30, 1997 entered into a one year, revolving
credit privately placed securitization facility and in connection therewith,
SPEs were formed to issue lease-backed notes. Pursuant to terms of the facility,
the Company sells and transfers a pool of leases to one SPE, which then sells
and transfers rights and pledges an interest in the leased equipment to a second
SPE.

     The change in structure of the Company's securitizations from financings to
sales has had, and will continue to have, a significant effect on the Company's
balance sheet and income statement. Under financing treatment the Company
recorded its net investment in leases as assets and the funds raised from
securitizations as non-recourse notes payable on its balance sheet. Under sale
treatment the only item to appear on the balance sheet is an asset, the
securitization receivable. The existing balance of net investment in leases and
non-recourse notes payable should decline over time as the related leases are
paid down. Under financing treatment the Company records lease contract revenue
and interest expense on the non-recourse debt. Initial direct costs associated
with the origination of leases are amortized as an expense over the life of the
leases and provisions for credit losses are recorded based upon loss experience.
Under sale treatment the Company records a gain on sale of leases. Initial
direct costs associated with the origination of the leases sold are expensed at
the time of the sale and reduce the reported gain on sale. As a result of
structuring its securitizations as sales, the Company's lease contract revenue
and interest expense on the non-recourse notes payable will decline over time.

     The Company sells each pool of leases for a price equal to the present
value of future cash flows, including guaranteed residuals. Upon sale, the
Company receives in cash a substantial portion of the present value of future
cash flows, with the remaining balance held as collateral by the owner trust and
a SPE under the recent privately placed securitization facility. Any such amount
is included on the Company's balance sheet as the securitization receivable.
Recourse to the Company in such sales is limited to the extent of the
securitization receivable with respect to the leases sold. The Company retains
the servicing rights and responsibilities for each pool of leases sold and
receives as compensation normal servicing fees over the life of such leases.

     The Company recognizes gain on the sale of leases at each sale date based
on a determination of the present value of the estimated future amounts to be
realized by the Company in connection with such sale. These estimates consider
all cash flows generated by the leases sold over their life less: (i) trustee
and other transaction related fees; (ii) credit enhancement expenses, if any
(such as the monoline insurers' fee, if the leases are wrapped as in one of the
most recent securitizations); (iii) normal servicing fees, which are retained by
the Company in its capacity as servicer and are recognized over the life of the
transaction; and (iv) payments to purchasers under the certificates. The
securitization receivable is reduced by an allowance which is estimated by the
Company to be adequate to cover future credit losses. No allowance is made for
estimated prepayments, which historically have been insignificant due to the
non-cancelable nature of the leases.



                                     Page 9


<PAGE>   12



     The Company evaluates the carrying value of the securitization receivable
for each sale transaction at the end of each reporting period in light of actual
credit loss experience of the underlying leases sold and makes adjustments to
charge or credit operating results accordingly. To date, the Company has not
recorded any such adjustments. The Company believes that there is no active
market for the sale of its securitization receivable.

     The Company intends to continue to sell a substantial portion of its
leases which it originates, using the most recent securitization structure or
similar securitization structures. There can be no assurance, however, that the
Company will be able to sell its future leases, or that the terms of any such
sales will be as favorable or similar to the terms of the Company's current
sale transactions.

     Due to the recognition of earnings from the gain resulting from the sale
of the Company's leases, the Company's reported earnings during a particular
period will be impacted by the amount and timing of sales which the Company
may consummate in such future period. Variations in quarterly earnings will
depend on the amount and timing of the completion of such sales.

RESULTS OF OPERATIONS

     The Company's revenues are comprised of lease contract revenue, gain on
sale of leases, fee income, and servicing and other income. Lease contract
revenue is the revenue recognized from the net investment in leases held. Gain
on sale of leases is the revenue recognized under sale treatment for leases
securitized. Fee income represents security deposits which are recognized as
income upon lease expirations and commitment fees received upon the origination
of leases. Servicing and other income includes normal servicing fees, late
fees,interest income and amounts received from the owner trust relating to
interest rate collar agreements.

     The Company's expenses are comprised of interest expense, compensation
and related expenses, amortization of initial direct costs, provisions for
credit losses and other general and administrative expenses. Interest expense
includes the expense related to notes payable and the amortization of related
debt issuance costs. Compensation and related expenses include salaries and
bonuses paid to employees and management fees to affiliates. Amortization of
initial direct costs relates to costs associated with originating leases,
including commissions, which are amortized over the period of the leases.
Provisions for credit losses are provided based on estimated future credit
losses. Other general and administrative expenses include trustee, legal and
other professional fees, and occupancy and other office-related expenses.

     Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996. Leases originated increased from $59.7 million for the nine
months ended September 30, 1996 to $96.4 million for the comparable period in
1997, representing an increase of 61%.



                                     Page 10


<PAGE>   13



The number of leases originated decreased from 3,311 for the nine months ended
September 30, 1996 to 1,830 for the comparable period in 1997. Increase in
dollar volume and the decrease in the number of leases originated was due to an
increase in the average ticket size in 1997 over the 1996 period. During the
nine months ended September 30, 1996, the Company originated a relatively high
volume of leases having a small average ticket size to businesses in the funeral
home industry. The average annualized yield of the portfolio of leases serviced
decreased from 13.6% for the nine months ended September 30, 1996 to 12.6% for
the comparable period in 1997. This decrease in yield resulted primarily from
(i) the reduction in the average estimated residual income inherent in lease
contracts originated in 1997 and (ii) the impact of the Company's continuing
focus on relatively larger lease transactions involving lessees with relatively
stronger credit (and hence lower implicit interest rates) including high volume
equipment provider programs.

     The portfolio of leases serviced increased from $138.8 million at September
30, 1996 to $216.9 million at September 30, 1997, representing an increase of
56%. This increase was due to an increase in lease originations.

     Lease contract revenue decreased from $11.6 million for the nine months
ended September 30, 1996 to $10.8 million for the comparable period in 1997,
representing a decrease of 7.0% due primarily to a decreased average net
investment in leases owned during the 1997 period.

     As described above, in 1997, the Company's securitizations have
predominantly been structured as sales for financial reporting purposes, rather
than as financing transactions as was the case in prior years. During the nine
months ended September 30, 1997, the Company recognized a gain on sale of $7.9
million. Since the Company plans to continue to structure its securitizations as
sale transactions, it anticipates that gain on sale of leases will increase and
become a larger portion of revenues in the future.

     Fee income decreased from $1.5 million for the nine months ended September
30, 1996 to $422,000 for the comparable period in 1997, representing a decrease
of 72%. This decrease was due primarily to the decline of security deposits
recognized as income upon lease expiration. Commencing in late 1996, the Company
began to credit security deposits to customers at lease expiration rather than
retaining and recognizing such deposits as income.

     Servicing and other income increased from $569,000 for the nine months
ended September 30, 1996 to $906,000 for the comparable period in 1997,
representing an increase of 59%, due primarily to income received from the owner
trust securitization structure entered into during February 1997 principally
related to interest rate collar agreements during 1997.

     Total revenues increased from $13.7 million for the nine months ended
September 30, 1996 to $20.1 million for the comparable period in 1997,
representing an increase of 47%.

     Interest expense increased from $4.6 million for the nine months ended
September 30, 1996 to $5.6 million for the comparable period in 1997,
representing an increase of 22%. The increase was due to increased average
borrowings outstanding during the 1997 period as compared to the prior year as
well as increased interest rates in 1997 due to the fixing of interest rates
associated with a substantial portion of the borrowings in 1997.



                                     Page 11


<PAGE>   14



     Compensation and related expenses increased from $1.9 million for the nine
months ended September 30, 1996 to $3.2 million for the comparable period in
1997, representing an increase of 68%. The increase was due primarily to
management fees of $900,000 paid to an affiliate during the nine months ended
September 30, 1997, pursuant to a management services arrangement which
commenced in July 1996, and increases in the number of employees and
compensation levels necessitated by the growth of the Company.

     Amortization of initial direct costs increased from $1.6 million for the
nine months ended September 30, 1996 to $1.8 million for the comparable period
in 1997, representing an increase of 13%. Initial direct costs, relative to the
investment in leases, increased from December 31, 1995 to December 31, 1996 (the
beginning of the nine month periods ended September 30, 1996 and 1997,
respectively), which resulted in increased amortization charges during the 1997
period as compared to the prior year.

     The provision for credit losses increased from $582,000 for the nine months
ended September 30, 1996 to $774,000 for the comparable period in 1997,
representing an increase of 33%. This increase was due to increased originations
offset by a decrease in the provision rate (as a percentage of originations) due
to improved actual loss experience.

     Other general and administrative expenses increased from $1.2 million for
the nine months ended September 30, 1996 to $1.8 million for the comparable
period in 1997, representing an increase of 50%. The increase was due primarily
to increased trustee and legal fees incurred during the 1997 period, a
significant portion of which relates to the most recent securitization
structure, and to increased occupancy and related costs associated with
supporting the Company's growth.

     Total expenses increased from $9.8 million for the nine months ended
September 30, 1996 to $13.3 million for the comparable period in 1997,
representing an increase of 36%.

     As a result of the above factors, net income increased from $3.8 million
for the nine months ended September 30, 1996 to $6.8 million for the comparable
period in 1997, an increase of 79%. After giving effect to the Restructuring
which would result in a minority interest charge of $1.0 million and a provision
for income taxes of $2.1 million pro forma net income for the nine months ended
September 30, 1997 would have been $3.7 million.

     Three Months Ended September 30, 1997 Compared to Three Months Ended
September 30, 1996. Leases originated increased from $28.3 million for the three
months ended September 30, 1996 to $46.1 million for the comparable period in
1997. The number of leases originated decreased from 702 for the three months
ended September 30, 1996 to 529 for the comparable period in 1997.

     Lease contract revenue decreased from $4.6 million for the three months
ended September 30, 1996 to $3.5 million for the comparable period in 1997,
representing an increase of 24%. The decrease in lease contract revenue was due
to the decrease in the Company's average net investment in leases.



                                     Page 12


<PAGE>   15



     Fee income decreased from $392,000 for the three months ended September 30,
1996 to $288,000 for the comparable period in 1997, representing a decrease of
27%. The decrease in fee income was primarily attributable to the decrease in
the amount of security deposits recognized as income upon lease expiration.

     Servicing and other income increased from $52,000 for the three months
ended September 30, 1996 to $168,000 for the comparable period in 1997,
representing an increase of 223%. This increase was primarily attributable to an
increase in collar or related to interest rate collar agreements.

     Total revenues increased from $5.1 million for the three months ended
September 30, 1996 to $8.5 million for the comparable period in 1997,
representing an increase of 67%.

     Interest expense directly associated with the Company's lease borrowings
increased from $1.7 million for the three months ended September 30, 1996 to
$1.9 for the comparable period in 1997, representing an increase of 12%. The
increase in such interest expense was primarily due to the increased cost of
funds due to fixed rates versus floating rates.

     Compensation related expenses increased from $608,000 for the three months
ended September 30, 1996 to $1.3 million for the comparable period in 1997,
representing an increase of 114%. The increase was due to management fees of
$300,000 paid to an affiliate for certain management, accounting, financial 
and other advisory services and increases in the number of employees and 
compensation levels necessitated by the growth of the Company.

     Amortization of initial direct costs decreased from $732,000 for the three
months ended September 30, 1996 to $558,000 for the comparable period in 1997, a
decrease of 24%, due primarily to the decrease in investment in leases.

     The provisions for credit losses increased from $237,000 for the three
months ended September 30, 1996 to $372,000 for 1997, representing an increase
of 57%. This increase was due to increased originations offset by a decrease in
the provision rate as a percentage of origination due to improved actual loss
experience.

     General and administrative expenses, increased from $397,000 for the three
months ended September 30, 1996 to $765,000, representing an increase of 93%.
This increase was primarily due to the increased costs associated with the
increased lease originations for the three months ended September 30, 1996, and
from servicing such portfolio of leases.

     Total expenses increased from $3.6 million for the three months ended
September 30, 1996 to $4.9 million for the comparable period in 1997,
representing an increase of 36%.

     As a result of the above factors, net income increased from $1.5 million
for the three months ended September 30, 1996 to $3.6 million for the comparable
period in 1997, representing an increase of 140%. After giving effect to the
restructuring, which would result in a minority interest charge of $540,000 and
a provision for income taxes of $1.1 million, pro forma net income for the three
months ended September 30, 1997 would have been $2.0 million.



                                     Page 13


<PAGE>   16



LIQUIDITY AND CAPITAL RESOURCES

     The Company requires a substantial amount of cash to implement its
business strategy. The Company funds its operations primarily through
securitizations and bank borrowings. The Company will continue to require access
to significant additional funding to maintain and expand its volume of lease
originations. The Company's most significant use of cash includes the purchase
of equipment subject to direct financing leases and the principal payments on
notes payable.

     The following table sets forth the major components of the increase in
cash and cash equivalents:

<TABLE>
<CAPTION>
                                                             Nine Months Ended
                                                               September 30,
                                                            1996           1997
                                                            ----           ----
<S>                                                       <C>            <C>     
Net cash provided by operating activities                 $  3,055       $ 14,985
Net cash used for investing activities                     (36,659)       (60,460)
Net cash provided by financing activities                   30,421         46,658
                                                          --------       --------
Net increase (decrease) in cash and cash equivalents      $ (3,183)      $  1,183
                                                          ========       ========
</TABLE>

     The Company must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to support lease originations and satisfy line
of credit repayment requirements. The Company generally maintains sufficient
cash and short-term investments to meet short-term liquidity needs. At September
30,1997, cash and cash equivalents totaled $9.2 million or 7% of total assets.
At September 30, 1997, the Company maintained various lines of credit which
provided for immediately available advances of up to $45.0 million, and advances
under these lines of credit totaled $18.0 million.

     Cash provided by operating activities totaled $15.0 million for the nine
months ended September 30, 1997 compared to cash provided by operating
activities of $10.7 million and $6.0 million for the years ended December 31,
1996 and 1995, respectively. The providing of cash from operating activities in
1997 is attributed principally to payables of $13.6 million during the nine
months ended September 30, 1997.

     Cash used by investing activities totaled $60.5 million for the nine months
ended September 30, 1997, compared to cash used in investing activities of $49.8
million and $35.2 million for the years ended December 31, 1996 and
1995,respectively. Lease payments received for the nine months ended September
30, 1997 totaled $35.8 million as compared to $36.6 million and $21.0 million in
the years ended December 31, 1996 and 1995, respectively. Cash used for
equipment purchased for leases originated in these same periods totaled $96.4
million, $82.1 million and $53.8 million, respectively.





                                     Page 14


<PAGE>   17



     Cash provided by financing activities was $46.7 million during the nine
months ended September 30, 1997, consisting principally of $37.2 million of
borrowings under line of credit arrangements to fund lease originations and
paydowns of those lines of credit of $64.9 million upon receipt of proceeds of
$74 million from the sale of leases. Financing activities provided cash of $42.9
million and $29.4 million during the years ended December 31, 1996 and 1995,
respectively, principally resulting from borrowings to finance leases of $76.1
million and $107.9 million, less pay downs on such borrowings of $30.4 million
and $78.9 million during the years ended December 31, 1996 and 1995,
respectively.

SECURITIZATIONS.

     Securitizations involve the pooling of lease receivables for sale in the
secondary market. The primary advantages of securitizations include: (i) quick
access to significant amounts of capital to fund growth in lease originations;
(ii) relatively lower cost of funds than commercial bank financing; and (iii)
greater flexibility with respect to sources of funding. From 1992 through
September 30, 1997 the Company has completed the following securitizations:

<TABLE>
<CAPTION>
        COMMENCEMENT
            DATE                     AMOUNT         RATING         AGENCY       SUBORDINATION LEVEL
-----------------------------    --------------     -------     -------------   -------------------
<S>                              <C>                <C>         <C>                     <C>
April 1992...................    $ 12.1 million     AA+         Duff & Phelps           20%
May 1993.....................      10.6 million     AAA/Aaa     S&P/Moody's             13%
June 1994....................      30.0 million     A-1/P-1     S&P/Moody's             13%
July 1995....................      90.0 million     AAA/Aaa     S&P/Moody's              8%
February 1997................      27.1 million     AAA/Aaa     S&P/Moody's              8%
September 1997...............      74.2 million     AAA/BBB     Duff & Phelps            2%
                                 --------------
     TOTAL...................    $244.0 million
</TABLE>

     The Company continually seeks to improve the efficiency of
its securitizations by reducing the Company's cost of capital or improving
upon existing financing terms. In the Company's latest securitization
the subordination level was 2% and the spread was 64 basis points over
comparable United States Treasury securities. The effect of these reduced
subordination levels and spreads has been to decrease the effective cost of
the securitizations to the Company.





                                     Page 15


<PAGE>   18



     The Company has been able to fund substantially all of its
lease originations without impairing its working capital. Cash used for
principal payments on notes payable is principally generated from the monthly
lease payments which are pledged as collateral for the notes.

     BANK LINES OF CREDIT. The Company as of November 10, 1997 maintains an
aggregate of $45 million in secured lines of credit to finance equipment
purchases subject to direct financing leases. At September 30, 1997, the Company
had an aggregate of $27 million available under such lines of credit. These
lines of credit as of September 30, 1997 included: (i) a $15.0 million line of
credit with Seafirst Bank under which interest is payable monthly at a rate of
LIBOR plus 2% (although this line of credit expired in May 1997, Seafirst Bank
has continued to make advances thereunder and the Company has negotiated an
extension to May 1998); (ii) a $25.0 million line of Credit, which had
originally been $10 million, with CoreStates Bank, N.A. under which interest is
payable at the annual Eurodollar rate (this line of credit expired on October
30, 1997 and has been extended until the committed facility is in place,
described below); and (iii) a $5 million line of credit with Key Bank of
Washington under which interest is payable monthly at a rate of LIBOR plus 2.0%
(this line of credit was renewed on August 12, 1997 for the amount of $5.0
million under which interest is payable monthly at a rate of LIBOR plus 2% and
expires on July 31, 1998). These lines of credit are secured by the leases
financed with funds therefrom and a guarantee from an affiliate and senior
management of the Company, and limit the amount of funds which may be advanced
to the Company to a percentage of the discounted value of such leases.

     At September 30, 1997, the Company also maintained an additional aggregate
of $4.0 million in an unsecured line of credit from a bank and a credit
arrangement with an affiliate to finance internal operations and the purchase 
of leases prior to their securitization or placement on "lease-line" secured 
credit facilities. At September 30, the Company had an aggregate of $4.0 million
available thereunder.

     The Company entered into a commitment letter with CoreStates Bank, N.A. for
a secured line of credit in the amount of $50 million, which would replace the
existing lines of credit. The facility would be utilized for the financing of
eligible leases and loans at an interest rate of LIBOR plus 1.5%. Such credit
facility would be secured by the leases financed with funds from such credit
facility and by a guarantee from an affiliate and senior management of the
Company, and would limit the amount of funds which may be advanced to the
Company to a percentage of the discounted value of such leases.

     The Company believes, based on its historical cash requirements and
anticipated uses of cash, that the cash derived from its initial public offering
and the Company's operating, investing and financing activities will be
sufficient to meet its cash requirements and implement its business plan through
the end of 1998.






                                     Page 16


<PAGE>   19



                           Part II. Other Information


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

     The Company filed a Registration Statement on Form S-1, file no. 333-34123,
for the Company's initial public offering of its Common Stock and a Registration
Statement on Form 8-A, file no. 000-23013, for the registration of the Company's
class of Common Stock. Such Registration Statements were declared effective by
the Securities Exchange Commission on November 3, 1997 and the offering of the
Common Stock commenced on November 4, 1997. The initial public offering of the
Company's Common Stock was managed by CIBC Oppenheimer Corp. and Prudential
Securities Incorporated.

     As of November 10, 1997, the Company registered and sold 2,200,000 shares
of Common Stock for an aggregate price of $35,200,000 and the selling
shareholders registered and sold 360,000 shares of Common Stock for an aggregate
price of $5,760,000.

USE OF PROCEEDS

<TABLE>
<S>                                                 <C>           <C>
GROSS PROCEEDS                                                   $ 35,200,000

  Less:  Underwriting Commission                     2,464,000
         Finders Fee                                        --
         Underwriting Expenses(2)                           --
         Offering Expenses                             800,000
         Payments to Directors/Officers                     --
                                                    ----------
         Total(1)                                                $ (3,264,000)

  Uses:  Construction of facility                           --
         Purchase of Real Estate                            --
         Purchase of Equipment                              --
         Acquisition                                 1,100,000
         Repayment of Debt(3)                       25,000,000
         Working Capital                             5,836,000
         Temporary Investment                               --
         Other                                              --
                                                    ----------
         Total                                                   $(31,936,000)

Remaining Proceeds                                               $          0
                                                                 ------------
</TABLE>

     The payments indicated above were not direct or indirect payments to
directors, officers, general partners of the issuer or their associates; and to
affiliates of the issuer.

(1) Amount excludes the effect of the underwriters' over-allotment option to
    purchase up to 384,000 additional shares of the registrant's Common Stock as
    more fully described in the registrant's Prospectus dated November 4, 1997.
    If the Underwriters exercise such option in full, the proceeds to the
    registrant will be $38,449,920.

(2) Including a reasonable estimate of registration fees, listing fees, filing
    fees, printing expenses, legal expenses, accounting expenses and insurance
    fees.

(3) Represents an increase of $7 million from the amount estimated in the
    Prospectus due to larger balances outstanding.



                                    Page 17

<PAGE>   20




ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(A)      EXHIBITS

         27.  Financial Data Schedule for the nine months ended September 30,
              1997.

(B)      REPORTS ON FORM 8-K

         T&W Financial Corporation filed no reports on Form 8-K during the
         quarter ended September 30, 1997.






















                                     Page 18


<PAGE>   21



                                    Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereundo duly authorized.


                                      T & W Financial Corporation


                                         
Date:  November 14, 1997              By: /s/ Paul B. Luke
                                         --------------------------------------
                                         Paul B. Luke
                                         Senior Vice President, Chief Financial
                                         Officer, Secretary,Treasurer and
                                         Director



                                      By:______________________________________














                                     Page 19