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: December 31, 1997

                         Commission File Number: 0-8673


                  Financial Services Corporation of the Midwest
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                              36-2301786
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

         224 - 18th Street, Suite 202, Rock Island, Illinois 61201-8737
         --------------------------------------------------------------
               (Address of principal executive offices) (zip code)

                                 (309) 794-1120
                         -------------------------------
                         (Registrant's telephone number)

Indicated  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 the number of shares  outstanding  of each of the  issuer's  classes of
Common Stock, as of the latest  practicable  date: Common Stock, $.50 Par Value,
260,424 Shares

<PAGE>


                  FINANCIAL SERVICES CORPORATION OF THE MIDWEST

                                      INDEX



Part I -- Financial Information

          Item 1     Unaudited Financial Statements:


                      Consolidated Balance Sheets --
                      December 31, 1997 and March 31, 1997  

                      Consolidated Statements of Income --
                      Nine and Three Months Ended December 31, 1997 and 1996 

                      Consolidated Statements of Stockholders' Equity --
                      Nine Months Ended December 31, 1997 and 1996

                      Consolidated Statements of Cash Flows --
                      Nine Months Ended December 31, 1997 and 1996

                      Notes to Consolidated Financial Statements    

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

Part II -- Other Information and Signatures

<PAGE>


FINANCIAL SERVICES CORPORATION OF THE MIDWEST


CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
                                                                                                              (Unaudited)
                                                                                                      -----------------------------
                                                                                                      December 31,        March 31,
                                                                                                         1997               1997
                                                                                                      -----------------------------
<S>                                                                                                   <C>                <C>   
ASSETS
Cash and due from banks ......................................................................        $ 17,340           $  16,306
Interest-bearing deposits with other financial institutions...................................           5,048                 131
Investment securities:
    Held-to-maturity (approximate market value December 31, 1997 - $33,723 and
        March 31, 1997 - $39,502).............................................................          33,519              39,805
    Available-for-sale (amortized cost December 31, 1997 - $97,056 and
            March 31, 1997 - $83,336).........................................................          97,860              82,475
Federal funds sold ...........................................................................           9,000                 800
Loans and direct financing leases ............................................................         325,981             296,470
    Less:  Allowance for possible loan and lease losses ......................................          (6,901)             (5,442)
                                                                                                      ----------------------------
        Total loans and leases, net ..........................................................         319,080             291,028
Premises, furniture and equipment, net .......................................................           5,437               5,496
Accrued interest receivable ..................................................................           3,724               2,969
Other real estate, net .......................................................................             214                 594
Other assets .................................................................................           6,231               6,065
                                                                                                      ----------------------------
        Total assets..........................................................................        $497,453            $445,669
                                                                                                      ============================

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
    Noninterest-bearing demand ...............................................................        $ 37,833            $ 36,785
    Interest-bearing:
        N.O.W. accounts ......................................................................          34,577              23,575
        Savings ..............................................................................          37,445              37,777
        Insured money market .................................................................          48,262              38,862
        Other time ...........................................................................         255,760             224,892
                                                                                                     -----------------------------
           Total deposits ....................................................................         413,877             361,891
Accounts payable and accrued liabilities .....................................................           7,135               5,330
Securities sold under agreements to repurchase ...............................................          31,584              38,154
Other short-term borrowings ..................................................................           2,000               1,500
Notes payable ................................................................................          10,000              10,000
Mandatory convertible debentures .............................................................             ---               1,250
                                                                                                     -----------------------------
        Total liabilities ....................................................................         464,596             418,125
                                                                                                     -----------------------------
Stockholders' equity:
Capital stock:
    Preferred, no par value; authorized, 100,000 shares:
        Class A Preferred  Stock,  stated  value  $1,000 per share;  authorized,
           5,000  shares;  issued and  outstanding:  December  31,  1997 - 5,000
           shares; March 31, 1997 - 0 shares .................................................           5,000                 ---
        Class B Preferred Stock, stated value $500 per share; authorized, 1,000 shares;
           issued and outstanding:  December 31, 1997 - 0 shares; March 31, 1997 -
           1,000 shares ......................................................................             ---                 500
        Class C Preferred Stock, stated value $425 per share; authorized, 2,400 shares;.
           issued and outstanding:  December 31, 1997 - 0 shares; March 31, 1997 -
           2,400 shares ......................................................................             ---               1,020
        Class F Preferred Stock, stated value $100 per share; authorized, 50,000 shares;
           issued and outstanding:  December 31, 1997 - 0 shares; March 31, 1997 -
           50,000 shares .....................................................................             ---               5,000
    Common, par value $.50 per share; authorized, 600,000 shares;
        issued:  340,662 shares; outstanding:  December 31, 1997 - 260,424 shares;
        March 31, 1997 - 177,711 shares ......................................................             170                 170
Capital surplus ..............................................................................           2,598               2,634
Net unrealized gain (loss) on available-for-sale securities, net of taxes ....................             531                (568)
Retained earnings ............................................................................          27,209              24,002
Treasury stock ...............................................................................          (2,651)             (5,214)
                                                                                                      ----------------------------
           Total stockholders' equity ........................................................          32,857              27,544
                                                                                                      ----------------------------
          Total liabilities and stockholders' equity..........................................        $497,453            $445,669
                                                                                                      ============================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>


FINANCIAL SERVICES CORPORATION OF THE MIDWEST

CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
                                                                             (Unaudited)          (Unaudited)
                                                                       ------------------------------------------
                                                                          Nine Months Ended    Three Months Ended
                                                                        -----------------------------------------
                                                                             December 31,         December 31,
                                                                        -----------------------------------------
                                                                          1997       1996       1997       1996
                                                                        --------   --------   --------   --------
<S>                                                                     <C>        <C>        <C>        <C> 
Interest income:
    Interest and fees on loans and leases ...........................   $ 22,583   $ 20,616   $  7,719   $  7,231
    Interest on investment securities ...............................      5,796      4,369      2,041      1,466
    Interest on federal funds sold ..................................        525        382        166        200
    Interest on interest-bearing deposits with other financial
            institutions ............................................         73        197         71         68
                                                                        --------   --------   --------   --------
        Total interest income .......................................     28,977     25,564      9,997      8,965
                                                                        --------   --------   --------   --------

Interest expense:
    Interest on deposits ............................................     13,701     10,711      4,704      3,814
    Interest on securities sold under agreements to repurchase ......        947      1,817        192        549
    Interest on other short-term borrowings .........................         61         69        161         20
    Interest on notes payable .......................................        600        343        200        152
    Interest on mandatory convertible debentures ....................         69         73         19         24
                                                                        --------   --------   --------   --------
        Total interest expense ......................................     15,378     13,013      5,276      4,559
                                                                        --------   --------   --------   --------
        Net interest income .........................................     13,599     12,551      4,721      4,406
Provision for possible loan and lease losses ........................      2,752      2,000        930        950
                                                                        --------   --------   --------   --------
        Net interest income after provision for possible loan
                   and lease losses .................................     10,847     10,551      3,791      3,456
                                                                        --------   --------   --------   --------
Other income:
    Trust fees ......................................................        427        333        177        133
    Investment securities gains, net ................................        135       --          115       --
    Loan servicing fees .............................................        566        552        191        188
    Gain on sales of loans ..........................................        362        287        156        107
    Service charges on deposit accounts .............................        927        849        318        296
    Insurance commissions ...........................................        289        157         99          8
    Other ...........................................................        710        554        204        193
                                                                        --------   --------   --------   --------
        Total other income ..........................................      3,416      2,732      1,260        925
                                                                        --------   --------   --------   --------
Other expenses:
    Salaries and employee benefits ..................................      4,291      4,706      1,625      1,542
    Occupancy, net ..................................................        675        633        222        209
    Insurance .......................................................        100         86         34         31
    Equipment .......................................................        887        741        312        257
    Data processing .................................................        643        503        224        175
    Advertising .....................................................        475        295        218         65
    Other operating .................................................      1,256      1,662        440        619
                                                                        --------   --------   --------   --------
        Total other expenses ........................................      8,327      8,626      3,075      2,898
                                                                        --------   --------   --------   --------
        Income before income taxes ..................................      5,936      4,657      1,976      1,483
Income taxes ........................................................      1,918      1,725        675        592
                                                                        --------   --------   --------   --------
Net income ..........................................................   $  4,018   $  2,932   $  1,301   $    891
                                                                        ========   ========   ========   ========

Net income available for Common Stock ...............................   $  3,566   $  2,485   $  1,149   $    742
                                                                        ========   ========   ========   ========
Earnings per common share:
    Basic ...........................................................   $  19.73   $  14.07   $   6.09   $   4.20
                                                                        ========   ========   ========   ========
    Diluted .........................................................   $  13.14   $   9.06   $   4.35   $   2.77
                                                                        ========   ========   ========   ========

Weighted average common shares outstanding ..........................    180,701    176,611    188,793    176,611
                                                                        ========   ========   ========   ========
Weighted average common and contingently issuable
     common shares outstanding ......................................    309,283    328,838    302,036    326,961
                                                                        ========   ========   ========   ========

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


FINANCIAL SERVICES CORPORATION OF THE MIDWEST
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
                                                                                                           
                                                                                                         Net  
                                                                                                     Unrealized
                                                                                                     Gain (Loss)
                                                                                                         On    
                                                        Preferred Stock                               Available-
Nine Months Ended                             -----------------------------------   Common   Capital  For-Sale    Retained  Treasury
December 31, 1997 (Unaudited)                 Class A   Class B  Class C  Class F   Stock    Surplus  Securities1 Earnings   Stock
                                              --------------------------------------------------------------------------------------
<S>                                            <C>     <C>       <C>      <C>       <C>      <C>       <C>         <C>      <C>
Balance at March 31, 1997 .................    $   --  $   500   $1,020   $ 5,000   $   170  $ 2,634   $  (568)    $24,002  $(5,214)
Net income ................................        --       --       --        --        --       --        --       4,018       --
Change in net unrealized gain (loss) on
   available-for-sale securities1 .........        --       --       --        --        --       --     1,099          --       --
Redemption of Class F Preferred ...........        --       --       --    (5,000)       --       --        --          --       --
Issuance of Class A Preferred .............     5,000       --       --        --        --       --        --          --       --
Purchase of 2,498 shares of
    Treasury Stock and costs ..............        --       --       --        --        --       --        --          --     (253)
Sale of 100 shares Treasury Stock .........        --       --       --        --        --        6        --          --        4
Conversion of mandatory convertible
    debentures into 50,000 shares of
    Common Stock from Treasury Stock ......        --       --       --        --        --     (402)       --          --    1,652
Conversion of Class B Preferred into 11,111
    shares Common Stock from
    Treasury Stock ........................        --     (500)      --        --        --      133        --          --      367
Conversion of Class C Preferred into 24,000
    shares Common Stock from
    Treasury Stock ........................        --       --   (1,020)       --        --      227        --          --      793
Cash dividends declared:
   Class A Preferred, $44.97 per share ....        --       --       --        --        --       --        --        (225)      --
   Class B Preferred, $35.79 per share ....        --       --       --        --        --       --        --         (36)      --
   Class C Preferred, $27.09 per share ....        --       --       --        --        --       --        --         (65)      --
   Class F Preferred, $3.30 per share .....        --       --       --        --        --       --        --        (165)      --
   Common, $1.75 per share ................        --       --       --        --        --       --        --        (320)      --
                                              -------- -------  -------   -------  --------   -------  -------     -------  -------
Balance at December 31, 1997 ..............   $ 5,000  $    --  $    --   $    --  $    170   $ 2,598  $   531     $27,209  $(2,651)
                                              =======  =======  =======   =======  ========   =======  =======     =======  =======



Nine Months Ended
December 31, 1996 (Unaudited)

Balance at March 31, 1996 .................   $   --   $   500  $ 1,020   $ 5,000  $    170   $ 2,574  $  (422)    $20,694  $(5,249)
Net income                                        --        --       --        --        --        --       --       2,932       --
Change in net unrealized gain (loss) on
   available-for-sale securities1 .........       --        --       --        --        --        --      165          --       --
Cash dividends declared:
   Class B Preferred, $34.85 per share ....       --        --       --        --        --        --       --         (35)      --
   Class C Preferred, $27.09 per share ....       --        --       --        --        --        --       --         (65)      --
   Class F Preferred, $6.94 per share .....       --        --       --        --        --        --       --        (347)      --
   Common, $1.50 per share ................       --        --       --        --        --        --       --        (265)      --
                                              ------   -------   -------   -------  -------    -------  ------     -------  -------
Balance at December 31, 1996 ..............   $   --   $   500   $ 1,020   $ 5,000  $   170    $ 2,574  $ (257)    $22,914  $(5,249)
                                              ======   =======   =======   =======  ========   =======  ======     =======  =======

<FN>
1 Net of taxes
</FN>
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>


FINANCIAL SERVICES CORPORATION OF THE MIDWEST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>

                                                                                        (Unaudited)
                                                                                    --------------------
                                                                                     Nine Months Ended
                                                                                        December 31,
                                                                                    --------------------
                                                                                     1997         1996
                                                                                    --------------------
<S>                                                                                 <C>         <C>  
Cash Flows From Operating Activities:
Net income ......................................................................   $  4,018    $  2,932
Adjustments to reconcile net income to net cash provided by operating activities:
    Depreciation and amortization ...............................................        838         937
    Provision for possible loan and lease losses ................................      2,752       2,000
    Investment securities gains, net ............................................       (135)         --
    Investment amortization, net ................................................         58         183
    Loans and leases originated for sale ........................................    (51,485)    (25,928)
    Proceeds from sales of loans and leases .....................................     48,808      35,057
    Gain on sales of loans and leases ...........................................       (362)       (287)
    Increase in interest receivable .............................................       (755)       (525)
    Increase in interest payable ................................................        486         667
    Increase in other assets ....................................................       (619)     (1,068)
    Increase in other liabilities ...............................................      1,319         624
                                                                                    --------    --------
Net cash provided by operating activities .......................................      4,923      14,592
                                                                                    --------    --------

Cash Flows From Investing Activities:
Net (increase) decrease in federal funds sold ...................................     (8,200)      5,700
Net increase in interest-bearing deposits with other financial institutions .....     (4,917)       (116)
Purchase of investment securities held-to-maturity ..............................       (175)    (14,542)
Proceeds from maturity or call of investment securities held-to-maturity ........      6,500      10,000
Purchase of investment securities available-for-sale ............................    (31,684)    (12,629)
Proceeds from maturity or call of investment securities available-for-sale ......      5,976       9,784
Proceeds from sales of investment securities available-for-sale .................     12,026          --
Net increase in loans and leases ................................................    (27,765)    (38,149)
Purchase of premises, furniture and equipment ...................................       (892)       (426)
Other investing activities, net .................................................        380         264
                                                                                    --------    --------
Net cash used in investing activities ...........................................    (48,751)    (40,114)
                                                                                    --------    --------

Cash Flows From Financing Activities:
Net increase in deposits ........................................................     51,986      39,652
Net increase (decrease) in short-term borrowings ................................        500        (276)
Net decrease in securities sold under agreements to repurchase ..................     (6,570)     (9,338)
Proceeds from notes payable .....................................................         --      10,000
Payments on note payable ........................................................         --      (4,500)
Redemption of Preferred Stock ...................................................     (5,000)         --
Proceeds from issuance of Preferred Stock .......................................      5,000          --
Treasury Stock purchase and costs ...............................................       (253)         --
Sale of Treasury Stock ..........................................................         10          --
Cash dividends paid on Preferred Stock ..........................................       (491)       (447)
Cash dividends paid on Common Stock .............................................       (320)       (265)
                                                                                    --------    --------
Net cash provided by financing activities .......................................     44,862      34,826
                                                                                    --------    --------

Net increase in cash and due from banks .........................................      1,034       9,304
Cash and due from banks at the beginning of the year ............................     16,306      14,423
                                                                                    --------    --------
Cash and due from banks at the end of the period ................................   $ 17,340    $ 23,727
                                                                                    ========    ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>


                  FINANCIAL SERVICES CORPORATION OF THE MIDWEST
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.   Interim  Financial  Statements - The  accompanying  unaudited  consolidated
     financial  statements  have been prepared in accordance  with the rules and
     regulations of the Securities and Exchange Commission.  Certain information
     and footnote disclosures normally included in financial statements prepared
     in accordance  with  generally  accepted  accounting  principles  have been
     condensed  or  omitted  pursuant  to  such  rules  and  regulations.  These
     consolidated  financial  statements  should be read in conjunction with the
     consolidated  financial statements and notes thereto contained in Financial
     Services  Corporation  of the  Midwest's  ("FSCM") Form 10-K for the fiscal
     year  ended  March  31,  1997,  filed  with  the  Securities  and  Exchange
     Commission.  Forward-looking  information  contained  in  the  Management's
     Discussion  and  Analysis  section of this report is based on  projections.
     Actual   results   may   differ    materially   from   such    information.

     In  the  opinion  of  management  of  FSCM,  the   accompanying   unaudited
     consolidated  financial  statements contain all adjustments  (consisting of
     only normal recurring  accruals)  necessary to present fairly the financial
     position  of FSCM,  its  results of  operations  and its cash flows for the
     interim periods presented.  Interim results are not necessarily  indicative
     of the results to be expected for the full year.
   
2.   Supplemental Disclosures of Cash Flow Information - Cash paid for:

                                                   Nine Months Ended
                                                      December  31,
                                                  --------------------
                                                    1997        1996
       (Dollars in Thousands)                     --------------------
    
       Interest...............................    $14,892     $ 12,346
       Income taxes ..........................      2,356        1,895

     In November 1997, $500,000 mandatory  convertible  debentures ("MCDs") were
     converted  into 20,000  shares of Common Stock.  On December 31, 1997,  the
     remaining MCDs of $750,000,  the $500,000  Class B Preferred  Stock and the
     $1,020,000  Class C Preferred  Stock were  converted  into  30,000  shares,
     11,111 shares and 24,000 shares, respectively, of Common Stock.

3.   Earnings Per Common Share Data

     Basic earnings per share is computed by dividing net income by the weighted
     average  number of shares of Common Stock  outstanding  for the  respective
     periods.  Dilutive  earnings per share is calculated by dividing net income
     by the weighted average number of Common Stock and common stock equivalents
     outstanding for the respective periods.  The Financial Accounting Standards
     Board's ("FASB") Statement of Financial  Accounting  Standards ("SFAS") No.
     128, "Earnings per Share" did not affect prior year share data.

     On July 1,  1997 FSCM  granted  certain  management  officials  options  to
     acquire 800 shares of Common  Stock at an exercise  price of $100 per share
     subject to certain  vesting  requirements  and expire within the next eight
     years.  These options were granted  under the 1996  Combined  Incentive and
     Nonstatutory   Stock  Option  Plan  that  was  ratified  by  FSCM's  common
     stockholders  at the August  1996 annual  meeting  which  provides  for the
     issuance  of options to acquire a total of 20,000  shares of FSCM's  Common
     Stock. Currently,  only 800 shares of FSCM's Common Stock have been granted
     under the Plan of which 160 shares were  exercisable  at December  31, 1997
     and no options have previously  been  exercised.  The exercise price of the
     options  exceeded  the Common  Stock's fair market  value,  both at time of
     issuance  and  current  (which  approximated  $85 and $90 per share for the
     respective periods);  therefore, no compensation costs have been recognized
     for said options.
<PAGE>


     The  following  information  was used in the  computation  of earnings  per
     common share on both a basic and diluted basis for the respective periods.
<TABLE>
                                                                   Nine Months Ended        Three Months Ended
                                                                     December 31,               December 1,
                                                                ----------------------    ----------------------
                                                                  1997          1996        1997         1996
(Dollars in Thousands)                                          ---------    ---------    ---------    ---------
<S>                                                             <C>          <C>          <C>          <C>   
Net income ..................................................   $   4,018    $   2,932    $   1,301    $     891
Accrued preferred dividends .................................        (452)        (447)        (152)        (149)
                                                                ---------    ---------    ---------    ---------
   Basic earnings ...........................................       3,566        2,485        1,149          742
Accrued convertible preferred dividends .....................         452          447          152          149
Mandatory convertible debentures interest expense, net of tax          45           48           12           16
                                                                ---------    ---------    ---------    ---------
   Diluted earnings .........................................   $   4,063    $   2,980    $   1,313    $     907
                                                                =========    =========    =========    =========

Weighted average common shares outstanding1,3 ...............     180,701      176,611      188,793      176,611
Weighted average common shares issuable upon conversion of:
   Class A Preferred Stock2 .................................      26,515         --         41,666         --
   Class B Preferred Stock3 .................................      11,071       11,111       10,990       11,111
   Class C Preferred Stock3 .................................      23,913       24,000       23,739       24,000
   Class F Preferred Stock2 .................................      21,483       67,116         --         65,239
   Mandatory convertible debentures3 ........................      45,600       50,000       36,848       50,000
                                                                ---------    ---------    ---------    ---------
      Weighted average common and contingently issuable
         common shares outstanding ..........................     309,283      328,838      302,036      326,961
                                                                =========    =========    =========    =========
<FN>
    1  FSCM's  Common Stock tender  offer  terminated  in August 1997 with 2,498
       shares of Common Stock  tendered for $90 per share cash. On July 1, 1997,
       FSCM granted  options to acquire 800 shares of Common Stock at a price of
       $100 per share exercisable within the next eight years. These options are
       currently  antidilutive  and have no impact on the  numbers  of  weighted
       average common and contingently issuable common shares outstanding.

    2  In July 1997,  the Class A  Cumulative  Convertible  Preferred  Stock was
       reclassified  to  Class F  Cumulative  Convertible  Preferred  Stock  and
       redeemed in its entirety. Funding for the redemption was provided through
       the private  placement  of $5,000 in new Class A  Cumulative  Convertible
       Preferred  Stock ("Class A Preferred  Stock").  The new Class A Preferred
       Stock is  immediately  convertible,  at the option of the  holders,  into
       41,666 shares of FSCM's Common Stock.

    3  In November  1997,  $500 MCDs were converted into 20,000 shares of Common
       Stock. On December 31, 1997, the remaining MCDs of $750, the $500 Class B
       Preferred  Stock and the $1,020  Class C Preferred  Stock were  converted
       into 30,000  shares,  11,111 shares and 24,000 shares,  respectively,  of
       Common Stock.
</FN>
</TABLE>
<PAGE>


                  FINANCIAL SERVICES CORPORATION OF THE MIDWEST
                      MANAGEMENT'S DISCUSSION AND ANALYSIS


Business Development

In May 1997,  FSCM extended a tender offer to all  shareholders of Common Stock.
The offer  terminated  on August 13 with a total of 2,498 shares of Common Stock
exchanged  for $90 cash per share and was  funded,  including  costs of $28,000,
with cash on hand.

In July 1997, FSCM  reclassified  the Class A Cumulative  Convertible  Preferred
Stock to Class F  Cumulative  Convertible  Preferred  Stock  ("Class F Preferred
Stock").  On July 10, 1997, FSCM redeemed the $5 million 9.25% Class F Preferred
Stock at a  redemption  price of $100 per share as  provided in the terms of the
Class F Preferred  Stock.  Funding for the  retirement  of the Class F Preferred
Stock was  provided  through  the  issuance  of $5 million of new 9.25%  Class A
Cumulative  Convertible  Preferred Stock ("Class A Preferred Stock"). Each share
of the Class A  Preferred  Stock has a stated  value of $1,000  per share and is
immediately  convertible,  at the option of the  holder,  into  8-1/3  shares of
Common  Stock.  All of the  Class A  Preferred  Stock was  issued  to  principal
shareholders  of FSCM who are also executive  officers and directors of FSCM and
THE Rock Island Bank, N.A. ("TRIB").

In  November  1997,  holders of  $500,000 in MCDs  exercised  their  options and
converted the MCDs into 20,000 shares of Common Stock. On December 31, 1997, the
remaining  MCDs of  $750,000,  the  $500,000  Class B  Preferred  Stock  and the
$1,020,000  Class C Preferred  Stock were converted  into 30,000 shares,  11,111
shares  and  24,000  shares,   respectively,   of  Common  Stock.   For  further
information, please refer to Capital Resources.

Income Statement

Overview

Net income of $1,301,000  was earned during the three months ended  December 31,
1997,  resulting in the nine-month net income totaling $4,018,000 as compared to
December  1996's  comparable  three and nine  month net income of  $891,000  and
$2,932,000,  respectively.  Earnings per diluted common share equaled $13.14 and
$9.06 for the nine months ended  December 31, 1997 and 1996  ("fiscal  1998" and
"fiscal 1997"), respectively, and $4.35 and $2.77 for the respective three-month
periods.  Annualized net income stated as a percentage of average assets (return
on  assets)  equaled  1.15% and 0.98% for  fiscal  1998 and 1997,  respectively.
Annualized net income available to common stockholders stated as a percentage of
average  common equity  (return on equity)  equaled 20.33% and 17.66% for fiscal
1998 and 1997, respectively.  FSCM's Peer Group ROA and ROE ratios equaled 1.21%
and 13.64%, respectively. FSCM's Peer Group is defined as bank holding companies
with consolidated  assets between $300 million and $500 million.  The Peer Group
numbers  presented  here and  throughout  the  report  are as of  September  30,
1997--which is the most recent data available.

Changes in net income between the nine- and  three-month  periods ended December
31, 1997 and 1996 were as follows.  Further discussion relating to these changes
can be found  throughout  the  remaining  Management's  Discussion  and Analysis
section of this report.

                                                             Change in Income 
                                                           --------------------
                                                             Nine        Three
(Dollars in Thousands)                                      Months       Months
                                                           -------      -------
Interest income ......................................     $ 3,413      $ 1,032
Interest expense .....................................      (2,365)        (717)
                                                           -------      -------
Net interest income ..................................       1,048          315
Provision for possible loan and lease losses .........        (752)          20
Other income .........................................         684          335
Other expenses .......................................         299         (177)
Income taxes .........................................        (193)         (83)
                                                           -------      -------
Net increase in net income ...........................     $ 1,086      $   410
                                                           =======      =======
<PAGE>


The   efficiency  and  overhead   ratios  are  two  commonly  used   performance
measurements.  Both measure the  coverage of  operating  expense by net interest
income.  In the efficiency  ratio,  other income is added to net interest income
and in the overhead  ratio other  income is netted  against  operating  expense.
Lower ratios generally  reflect better  performance and therefore are considered
more  favorable.  FSCM's  ratios as of  December  31, 1997 and 1996 and the Peer
Group's  efficiency  ratio are presented  below.  The  improvement in the ratios
between the nine-month  comparative periods primarily resulted from the combined
effect of increased net interest income and other income and decreased operating
expense between periods.
                                                   FSCM
                                         --------------------------
                                         December 31,  December 31,      Peer
                                             1997         1996           Group
                                         ------------  ------------   ----------

Efficiency Ratio ..................         49.33%        56.44%         61.37%
Overhead Ratio ....................         37.11         49.96            N/A

Net Interest Income

As  reflected  in the  following  two  tables,  the  $1,048,000  increase in net
interest  income between fiscal 1998 versus fiscal 1997 primarily  resulted from
growth in  investments  and in loans  which  was  funded  by  increases  in time
deposits. The increase due to growth compensated for the 36 basis point decrease
in yield of  interest-earning  assets or 8.84% from  9.20% for  fiscal  1998 and
fiscal  1997,  respectively,  and for the three basis point  increase in cost of
interest-bearing  liabilities  or 5.21% from  5.18% for  fiscal  1998 and fiscal
1997,  respectively.  The resulting  net interest  margin,  net interest  income
divided by average  interest-earning  assets,  decreased to 4.15% from 4.52% for
fiscal 1998 and fiscal 1997,  respectively.  The Peer Group  comparative  yield,
cost and margin equaled 8.28%, 4.44% and 4.65%, respectively.

The decreased yield on interest-earning assets was primarily due to the 53 basis
point  decrease  in yield of loans  which  equaled  10.02% in fiscal 1998 versus
10.55% in fiscal  1997  compared  to Peer  Group's  yield on loans and leases of
9.38%.  Loan and lease fees  included  in  interest  income  decreased  $892,000
between  periods to equal  $376,000 from  $1,268,000  for fiscal 1998 and fiscal
1997, respectively. This decrease was primarily the result of increased deferral
of loan fees, which will be amortized into interest income as loan fees over the
life of the related  loans.  The  unfavorable  impact of the  decreased  fees on
fiscal  1998 yield of loans and leases as compared  to fiscal  1997's  yield was
approximately 39 basis points.

Part of the increase in time  deposit  balances and the majority of the decrease
in  repurchase  agreements  balances  were due to the shift of $17.5  million in
State funds between the two types of accounts.

                   AVERAGE BALANCE AND INTEREST RATE ANALYSIS
<TABLE>

                                                                                          Nine Months Ended
                                                             -----------------------------------------------------------------------
    (Dollars in Thousands)                                          December 31, 1997                         December 31, 1996
                                                             ------------------------------------  ---------------------------------
                                                                                         Average                             Average
                                                             Average                     Annual      Average                  Annual
                             ASSETS                          Balance      Interest        Rate       Balance     Interest      Rate
    ------------------------------------------------        -------------------------------------  ---------------------------------
    <S>                                                     <C>           <C>            <C>       <C>          <C>          <C>
    Interest-bearing deposits with other
        financial institutions ........................     $  1,580      $     73          6.16%  $  4,923     $    197       5.34%
    Investment securities .............................      122,332         5,796          6.32     95,698        4,369       6.09
    Federal funds sold ................................       12,562           525          5.57      9,572          382       5.32
    Loans and leases, net1 ............................      300,653        22,583         10.02    260,449       20,616      10.55
                                                            ----------------------                 ---------------------
        Total interest-earning assets .................     $437,127        28,977          8.84   $370,642       25,564       9.20
                                                            ======================                 =====================
                         LIABILITIES
    Savings deposits ..................................     $110,645         2,753          3.32   $ 86,693        1,900       2.92
    Time deposits .....................................      244,421        10,948          5.97    193,692        8,811       6.07
    Federal funds purchased ...........................           87             4          6.13        135            6       5.93
    Securities sold under agreements to repurchase ....       25,769           947          4.90     46,469        1,817       5.21
    Other short-term borrowings .......................        1,440            57          5.28      1,392           63       6.03
    Notes payable .....................................       10,000           600          8.00      5,480          343       8.35
    Mandatory convertible debentures ..................        1,143            69          8.05      1,250           73       7.79
                                                            ----------------------                 ---------------------
        Total interest-bearing liabilities ............     $393,505        15,378          5.21   $335,111       13,013       5.18
                                                            ========      --------                 ========     --------
    Net interest income ...............................                   $ 13,599                              $ 12,551
                                                                          ========                              ========
    Net interest margin (net interest income
        divided by average total interest-
        earning assets) ...............................                                    4.15%                               4.52%
                                                                                           =====                               =====
<PAGE>
<FN>
1    Nonaccruing loans and leases are included in the average balance.  Loan and
     lease fees of $376 and $1,268 for the nine months  ended  December 31, 1997
     and  1996,  respectively,  are  included  in  interest  income on loans and
     leases.
</FN>
</TABLE>

                           INTEREST VARIANCE ANALYSIS
<TABLE>

                                                                       Nine Months Ended
                                                              December 31, 1997 vs. December 31, 1996
                                                              ---------------------------------------
                                                                      Increase (Decrease)
                                                                       Due to Change in1
                                                              ---------------------------------------
                                                                  Average    Average     Total
                                                                  Balance      Rate      Change
(Dollars In Thousands)                                        ---------------------------------------
<S>                                                               <C>        <C>        <C> 
Interest income:
    Interest-bearing deposits with other financial institutions   $  (134)   $    10    $  (124)
    Investment securities .....................................     1,216        211      1,427
    Federal funds sold ........................................       119         24        143
    Loans and leases ..........................................     3,182     (1,215)     1,967
                                                                  -------    -------    -------
       Total interest income ..................................     4,383       (970)     3,413
                                                                  -------    -------    -------

Interest expense:
    Savings deposits ..........................................       525        328        853
    Time deposits .............................................     2,308       (171)     2,137
    Federal Funds purchased ...................................        (2)        --         (2)
    Securities sold under agreements to repurchase ............      (809)       (61)      (870)
    Short-term borrowings .....................................         2         (8)        (6)
    Notes payable .............................................       283        (26)       257
    Mandatory convertible debentures ..........................        (6)         2         (4)
                                                                  -------    -------    -------
       Total interest expense .................................     2,301         64      2,365
                                                                  -------    -------    -------
Change in net interest income .................................   $ 2,082    $(1,034)   $ 1,048
                                                                  =======    =======    =======
<FN>
1    The change in interest due to the volume and rate has been allocated to the
     change in  average  rate.  Nonaccruing  loans and leases  are  included  in
     average balance. Loan and lease fees of $376 and $1,268 for the nine months
     ended  December  31,  1997 and  1996,  respectively,  are  included  in the
     interest income on loans and leases.
</FN>
</TABLE>
Provisions for Possible Loan and Lease Losses

The  amounts  of the  provisions  for  possible  loan and lease  losses  equaled
$2,752,000 and $2,000,000 for fiscal 1998 and 1997,  respectively,  and $930,000
and  $950,000  for the  respective  three  month  periods.  The  amounts  of the
provisions  were  based  on  management's  assessment  of  the  adequacy  of the
allowances  for  possible  loan and lease losses in relation to both total loans
and leases  and  nonperforming  loans  (those  past-due  90 days or more or in a
nonaccrual  status).  The allowances,  stated as a percentage of  non-performing
loans and leases,  equaled 193.47% and 162.29% as of December 31, 1997 and 1996,
respectively.   FSCM's  comparative  Peer  Group  ratio  equaled  293.91%.   The
allowances,  stated as a percentage of total loans and leases, equaled 2.12% and
1.94% at  December  31,  1997 and 1996,  respectively,  and the Peer Group ratio
equaled  1.34%.  Net  charge-offs  for  fiscal  1998  and  fiscal  1997  totaled
$1,293,000  and  $955,000,  respectively,  and  for the  respective  three-month
periods totaled $319,000 and $133,000. The ratios of net losses to average loans
and leases for the nine months ended  December  31, 1997 and 1996 equaled  0.57%
and 0.49%,  respectively,  as compared to the ratio for the twelve  months ended
March 31, 1997 of 0.57% or the Peer Group ratio of 0.19%.
<PAGE>


Other Income

Other  income  totaled  $3,416,000  and  $2,732,000  for the nine  months  ended
December 31, 1997 and 1996, respectively, an increase of $684,000 or 25.04%. The
ratios of annualized fiscal 1998 and 1997 other income, excluding net investment
security  gains,  to average  assets equaled 0.94% and 0.92%,  respectively,  as
compared  to the Peer Group  ratio of 0.93%.  Other  income for the  three-month
periods  ended  December  31, 1997 and 1996  equaled  $1,260,000  and  $925,000,
respectively.

For the nine and three month periods  ended  December 31, 1997,  net  investment
securities gains totaled $135,000 and $115,000,  respectively, in contrast to no
investment gains in either December 31, 1996 periods. Additionally,  syndication
fees on credit financing  arrangements increased $95,000 between fiscal 1998 and
1997 and comprised the majority of the $156,000 increase in other  miscellaneous
income.

Other Expenses

Other expenses totaled  $8,327,000 and $8,626,000 for the nine months ended, and
$3,075,000  and  $2,898,000  for the three months  ended,  December 31, 1997 and
1996, respectively. The change in other expenses between years was due primarily
to increased  deferral in fiscal 1998 of direct loan related  expenses that will
be amortized over the life of the related loans. The increased deferrals reduced
salaries and employee benefits by $1,225,000 and $414,000 for the nine and three
months ended  December  31,  1997,  respectively,  and reduced  other  operating
expenses by $113,000  and $23,000,  respectively.  Other  expense,  stated as an
annualized percentage of average assets, equaled 2.38% and 2.89% for fiscal 1998
and fiscal 1997, respectively, and compared favorably to the Peer Group ratio of
3.18%.  The deferral of direct loan related  expense  favorably  impacted fiscal
1998's ratio by 38 basis points.

The number of full-time equivalent employees increased to 203 as of December 31,
1997 as  compared  to 182 and 184 at March  31,  1997  and  December  31,  1996,
respectively.  Salaries and employee benefits equaled  $4,291,000 and $4,706,000
for fiscal 1998 and 1997,  respectively,  and  $1,625,000 and $1,542,000 for the
respective  three  month  periods.  Annualized  personnel  expense,  stated as a
percentage of average assets equaled 1.22% and 1.58% for the respective  periods
as compared to the Peer Group ratio of 1.69%.  The impact on fiscal 1998's ratio
of the aforementioned deferred costs was 35 basis points.

The $140,000  increase in data  processing  expense  between the fiscal 1998 and
fiscal 1997  ($49,000  between the  three-month  periods) was  primarily  due to
increased  number  of  accounts,   both  deposit  and  loan,  supported  by  the
third-party  service  vendor.  Other operating  expense  equaled  $1,256,000 and
$1,662,000  for fiscal 1998 and fiscal  1997,  respectively,  and  $440,000  and
$619,000 for the respective  three month  periods.  The reduction in expenses in
both periods ended December 31, 1997 as compared to 1996 primarily resulted from
the  combination  of the  previously  discussed  deferred  direct loan  expense.
Further,  fiscal  1997  expense  included  a  $140,000  charge  related  to  the
acceleration of amortization of note offering costs due to prepayment.

Income Taxes

Income taxes totaled  $1,918,000 and  $1,725,000  for the respective  nine-month
periods and $675,000 and $592,000 for the respective  three-month  periods ended
December 31, 1997 and 1996. The equivalent  combined Federal and State effective
tax rates equaled  32.31% and 37.04% for the respective  nine-month  periods and
34.16% and 39.92% for the respective  three-month  periods. The reduction in the
effective tax rates for the periods ended December 31, 1997  primarily  resulted
from a $258 thousand over accrual of State taxes that was partially  offset by a
$175 thousand deferred tax adjustment for the fiscal March 31, 1997 year-end.
<PAGE>


Risk Management

Risk management encompasses many different types of risk, including credit risk,
liquidity risk and interest rate risk.  Regulatory  agencies have modified their
examination procedures to rate the exposure of financial institutions to risk by
the various types of risk, the direction of change in the risk, and management's
ability to monitor and control each type of risk. FSCM utilizes the expertise of
both in-house personnel and at times outside consultants to perform loan reviews
to monitor loan  documentation,  ensure  compliance  with internal  policies and
governmental  regulations,  and maintain the internal loan and lease watch list.
Internal  audit and  compliance  staff are also  utilized  to  provide  on-going
operational audits and review of regulatory compliance. In addition,  management
continues to cautiously  assess the risks  associated with the potential  future
impact of adverse  changes in the overall  economic  climate and more  stringent
regulatory  standards  and  requirements.   Management  monitors  the  liquidity
position of FSCM in order to provide for future  liquidity  requirements as well
as  maintain  an  acceptable  return on  assets.  Further,  computer  simulation
modeling is used to assess the  interest  rate  sensitivity  characteristics  of
assets and liabilities and predict possible impacts of new marketing and product
development strategies.

Management has commenced  preparation for the "Year 2000" in terms of reviewing,
identifying, correcting and testing any potential risk exposures associated with
the inability of certain computer  hardware and software  components to function
into  the new  millenium.  In  addition,  management  is also  taking  steps  to
ascertain the readiness of major vendors and  significant  borrowers to identify
and reduce  potential  operations and credit risk  exposures to FSCM  associated
with  Year  2000   preparedness.   Management  has  budgeted   expenditures   of
approximately $100,000 in the forthcoming year for identification and correction
of Year 2000 issues.

As depicted in FSCM's  Consolidated  Statement of Cash Flows,  the operating and
financing  activities  are  generally  net sources of  liquidity  and  investing
activities  are net uses of  liquidity.  For the nine months ended  December 31,
1997,  sources of cash were  primarily  provided by the net increase in deposits
over the reduction in repurchase  agreements  and uses of cash were primarily to
finance the net increase in loans and leases.  

Balance Sheet

Overview

Assets totaled $497,453,000 at December 31, 1997, an increase of $51,784,000, or
11.62%,  from  March's  total  of  $445,669,000.   The  increase  was  primarily
distributed  between  net loans  and  leases  and  investment  securities  which
increased $28,052,000 and $9,079,000,  respectively. The asset growth was funded
by a  $51,986,000  net  increase in deposits  partially  offset by a  $6,570,000
decrease  in  repurchase  agreements.  FSCM's  annualized  rate of asset  growth
equaled 15.49% as compared to the Peer Group growth rate of 12.14%.

Investment Securities

Fiscal 1998's net investment  securities gains of $135,000 was the net result of
a  $49,000  loss  from  the sale of  $11,501,000  in  available-for-sale  agency
securities by TRIB when repositioning the portfolio and a $184,000 gain from the
sales and call of $565,000 in financial institution stocks by FSCM.
<PAGE>


Loans and Direct Financing Leases

Net loans and leases increased  $28,052,000,  or 9.64%, between December 31, and
March 31, 1997. The ratio of net loans and leases to total assets as of December
31,  1997 and March 31, 1997  equaled  64.14% and  65.30%,  respectively,  while
FSCM's comparable Peer Group ratio equaled 61.60%.  The principal area of growth
centered in the consumer  financing area,  which  increased  $13,976,000 and was
primarily comprised of indirect financing  arrangements that TRIB purchased from
dealers (e.g.  auto,  boat and  recreational  vehicle  dealerships)  rather than
directly  financing  the  consumer.  The  $6,670,000  growth in the  residential
mortgage  portfolio  primarily  reflects a temporary  rise due to the  increased
level of loan activity generated by the current low interest rate environment in
terms of both  new  purchase  and  refinance  loan  volume.  TRIB's  residential
mortgage servicing  portfolio totaled  $195,668,000 and $185,295,000 at December
31, and March 31, 1997, respectively.  The following table presents the December
and March 1997 comparative distribution of loans and leases.

                           LOAN AND LEASE DISTRIBUTION

                                                        December  31,  March 31,
        (Dollars in Thousands)                              1997         1997
------------------------------------------------------  ------------------------

Commercial, financial and agricultural ...............     $ 94,353     $ 93,502
Direct financing leases ..............................        9,708        5,612
Real estate:
   Residential mortgage1 .............................       70,979       64,309
   Construction ......................................       32,292       29,790
   Commercial mortgage ...............................       73,064       71,648
Consumer, not secured by a real estate mortgage2 .....       45,585       31,609
                                                           ---------------------
         Total loans and leases ......................     $325,981     $296,470
                                                           =====================

1    Includes  first  mortgages  pending  conclusion  of their  sale to  outside
     investors,  such as the Federal Home Loan  Mortgage  Corporation  ("Freddie
     Mac"), Fannie Mae and the Illinois Housing Development  Authority ("IHDA");
     home equity lines of credit; home improvement loans; and consumer loans for
     which junior liens were taken as primary and secondary sources of security.
     2 Consumer loans, both direct and indirect and credit card plans.

Notes Payable

Notes payable  totaled  $10,000,000 at both December 31, and March 31, 1997. The
change in average notes payable  balances between December 31, 1997 and 1996 was
due to the November 1996  redemption of $4.5 million 8.5% notes.  The notes were
replaced during the same month by a new issuance of $10 million at 8.0%.
<PAGE>


Capital Resources

In August 1997 FSCM acquired 2,498 shares of Common Stock in a company sponsored
tender  offer at a price  of $90 per  share  and  costs  approximating  $28,000.
Additionally,  in July 1997 the $5,000,000 of 9.25% Class F Preferred  Stock was
redeemed and replaced with a private  placement of $5,000,000 of new 9.25% Class
A Cumulative  Convertible  Preferred  Stock.  The new Class A Preferred Stock is
immediately  convertible at the option of the holders into 41,666 shares of FSCM
Common Stock.  In November  1997,  holders of $500,000 in MCDs  exercised  their
options and converted  the MCDs into 20,000 shares of Common Stock.  On December
31, 1997, the remaining MCDs of $750,000,  the $500,000 Class B Preferred  Stock
and the  $1,020,000  Class C Preferred  Stock were converted into 30,000 shares,
11,111 shares and 24,000  shares,  respectively,  of Common  Stock.  In summary,
capital increased by $1,007,000,  the net of the $1,250,000 MCD conversions less
the $243,000 net reduction  associated  with Treasury  Stock  transactions.  The
redemption  and issuance of the Class A Preferred  Stock and the  conversions of
the Class B and Class C Preferred  Stock into common stock from  Treasury had no
net impact on total  capital.  At December 31, 1997 a total of 260,424 shares of
Common Stock were outstanding as compared to 177,711 shares outstanding at March
31, 1997.

On July 1, 1997 FSCM granted certain management officials options to acquire 800
shares of Common Stock at an exercise  price of $100 per share.  The options are
subject to certain vesting  requirements and expire within the next eight years.
In addition,  the options were granted  under the 1996  Combined  Incentive  and
Nonstatutory  Stock Option Plan that was ratified by FSCM's common  stockholders
at the August 1996 annual  meeting which provides for the issuance of options to
acquire a total of 20,000  shares of FSCM's Common  Stock.  Currently,  only 800
shares of FSCM's  Common  Stock  have been  granted  under the Plan of which 160
shares were exercisable at December 31, 1997 and no options have previously been
exercised.  The exercise  price of the options  exceeded the Common Stock's fair
market value,  both at time of issuance and current (which  approximated $85 and
$90 per share for the respective periods); therefore, no compensation costs have
been recognized for said options.

Effective for the September  1997 payment,  FSCM  increased the dividend rate on
Common  Stock to $2.50 per share per annum from the  previous  rate of $2.00 per
share per annum.

Total stockholders' equity increased $5,313,000, or 19.29%, to equal $32,857,000
at  December  31,  1997 as  compared to  $27,544,000  at March 31,  1997.  On an
annualized  basis,  FSCM's equity growth rate was 25.72% as compared to the Peer
Group  growth  rate of  15.36%.  The  $1,250,000  MCD  conversion  impacted  the
annualized equity growth rate by 6.05%.

FSCM's  capital,  as measured by standards  established  by the federal  banking
regulators,  exceeded  those defined for "well  capitalized"  institutions.  The
table below sets forth FSCM's  ratios as of December 31, and March 31, 1997,  as
well as the  minimum  regulatory  ratios  and  capital  requirements  for  "well
capitalized" and "adequately capitalized" financial institutions. The $1,250,000
MCD conversion increased Tier I capital ratio by 36 basis points.

                                 CAPITAL RATIOS
<TABLE>
                                                                   Minimum Capital Required To Be Categorized As:          
                                                                   ----------------------------------------------
                                                        Actual       Adequately Capitalized    Well Capitalized
                                                    --------------   ----------------------    ----------------
                                                     Amount  Ratio    Amount         Ratio     Amount    Ratio 
                                                    --------------   ----------------------    ----------------
<S>                                                 <C>      <C>     <C>             <C>       <C>       <C>
             As of December 31, 1997:
                 Total  Capital (to Risk
                   Weighted Assets) .............   $46,325  13.07%   $28,363        8.00%    $35,453    10.00%
                 Tier I Capital (to Risk
                   Weighted Assets)  ............    31,863   8.99     14,181        4.00      21,272     6.00
                 Tier I Capital (to Average
                   Assets) ......................    31,863   6.83     17,858        4.00      22,323     5.00
             As of March 31, 1997:
                 Total  Capital (to Risk
                   Weighted Assets) .............   $42,840  13.50%   $25,381        8.00%    $31,726    10.00%
                 Tier I Capital (to Risk 
                   Weighted Assets)  ............    27,606   8.70     12,690        4.00      19,035     6.00
                 Tier I Capital (to Average 
                   Assets) ......................    27,606   6.79     16,258        4.00      20,322     5.00
</TABLE>
Impact of Recently Issued Statements of Financial Accounting Standards

The FASB has issued SFAS No. 130,  "Reporting  Comprehensive  Income,"  which is
effective for fiscal years  beginning  after  December 15, 1997.  This Statement
establishes  standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. The purpose of
reporting comprehensive income is to disclose a measure of all changes in equity
that result from recognized transactions. Currently, FSCM's comprehensive income
would  include  net  income  and the  change in net  unrealized  gain  (loss) on
available-for-sale securities, net of taxes.
<PAGE>

The FASB has issued SFAS No. 131,  "Disclosure  about  Segments of an Enterprise
and Related  Information,"  which is effective for fiscal years  beginning after
December 15, 1997. This Statement  establishes standards for the way that public
business  enterprises  report  information  about  operating  segments in annual
financial  statements  and  requires  that  those  enterprises  report  selected
information  about  operating  segments in interim  financial  reports issued to
stockholders.  It also  establishes  standards  for  related  disclosures  about
products  and  services,  geographic  areas,  and  major  customers.  Management
believes that adoption of this Statement will not have a material  effect on the
consolidated financial statements.


<PAGE>


                  FINANCIAL SERVICES CORPORATION OF THE MIDWEST


Part II - Other Information and Signatures

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

              None

         (b)  Reports on Form 8-K

              None
<PAGE>


                                   Signatures

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 thereunto duly authorized.


                                  FINANCIAL SERVICES CORPORATION OF THE MIDWEST




Date:  February 13, 1998                    By: /s/ Douglas M. Kratz
                                                --------------------------------
                                                Douglas M. Kratz
                                                Chairman of the Board, CEO, CFO



                                            By: /s/ Jean M. Hanson
                                                --------------------------------
                                                Jean M. Hanson
                                                Vice President, Controller, CAO