<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

               QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934


For Quarter Ended                                       SEPTEMBER 30, 1997

Commission file number                                       0-18166


                      STATE FINANCIAL SERVICES CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)



           WISCONSIN                                      39-1489983
-------------------------------            ------------------------------------
(State or other jurisdiction of            (I.R.S. Employer identification No.)
incorporation or organization)   

           10708 WEST JANESVILLE ROAD, HALES CORNERS, WISCONSIN 53130
           ----------------------------------------------------------
             (Address and Zip Code of principal executive offices)

                                 Not applicable
              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)


                                 (414) 425-1600
                                 --------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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
                                             ---     ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

     As of November 5, 1997, there were 3,225,008 shares of Registrant's $0.10
     Par Value Common Stock outstanding.


<PAGE>   2



                                  FORM 10-Q

                    STATE FINANCIAL SERVICES CORPORATION

                                    INDEX


                       PART I - FINANCIAL INFORMATION


                                                                       Page No.

Item 1.        Financial Statements (Unaudited)

               Consolidated Balance Sheets as of
               September 30, 1997 and December 31, 1996                     2 
                                                                              
               Consolidated Statements of Income for the                      
               Three Months ended September 30, 1997 and 1996               3 
                                                                              
               Consolidated Statements of Income for the                      
               Nine Months ended September 30, 1997 and 1996                4 
                                                                              
               Consolidated Statements of Cash Flows for the                  
               Nine Months ended September 30, 1997 and 1996                5 
                                                                              
               Notes to Consolidated Financial Statements                   6 
                                                                              
Item 2.        Management's Discussion and Analysis of                        
               Financial Condition and Results of Operations                7 
                                                                              
                                                                              


                         PART II - OTHER INFORMATION


Items 1-6                                                                  17
                                                                            
Signatures                                                                 18
                                                                            
                                                                            

<PAGE>   3




      PART I.  FINANCIAL INFORMATION
      ITEM 1.  FINANCIAL STATEMENTS

STATE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   September 30,   December 31,
                                                                       1997            1996
                                                                   -------------   -------------
<S>                                                                <C>            <C>
ASSETS
 Cash and due from banks                                           $  18,995,359   $  15,581,811
 Federal funds sold                                                      173,804       2,599,107
 Other short-term investments                                            500,000       3,100,000
                                                                   -------------   -------------
 Cash and cash equivalents                                            19,669,162      21,280,918
Investment securities
 Held-to-maturity (fair value $24,295,000 - September 30, 1997
   and $31,541,000 - December 31, 1996)                               24,081,679      31,302,232
 Available for sale (at fair value)                                   47,269,606      37,776,116

Loans (net of allowance for loan losses of $2,707,988-1997            
  and $2,607,579-1996)                                               209,035,823     199,063,121

 Premises and equipment                                                4,864,978       4,691,988
 Accrued interest receivable                                           2,247,745       2,095,839
 Other assets                                                          4,720,879       5,011,683
                                                                   -------------   -------------
                                                     TOTAL ASSETS  $ 311,889,872   $ 301,221,897
                                                                   =============   =============

LIABILITIES AND STOCKHOLDERS' EQUITY
 Deposits:
  Demand                                                             $54,087,909     $55,109,370
  Savings                                                             59,986,539      61,847,490
  Money market                                                        74,452,161      68,393,363
  Other time                                                          79,440,567      69,306,323
                                                                   -------------   -------------
                                                   TOTAL DEPOSITS    267,967,176     254,656,546

 Notes payable                                                               -0-         961,844
 Securities sold under agreements to repurchase                        3,700,160       2,400,160
 Federal funds purchased                                                     -0-       5,600,000
 Accrued expenses and other liabilities                                1,552,059       1,082,479
 Accrued interest payable                                              1,338,087         994,324
                                                                   -------------   -------------
                                                TOTAL LIABILITIES    274,557,482     265,695,353
Stockholders' equity:
 Preferred stock, $1 par value; authorized--100,000 shares;
  issued and outstanding--none
 Common stock, $0.10 par value; authorized--10,000,000 shares;
  issued and outstanding--3,224,935  shares in 1997
  and 3,198,253 in 1996                                                  322,493         319,825
 Capital surplus                                                      28,993,489      28,687,633
 Net unrealized holding gain on securities available for sale            537,585          62,728
 Retained earnings                                                     8,958,310       6,932,623
 Less:  Guaranteed ESOP obligation                                    (1,479,487)       (476,265)
                                                                   -------------   -------------
                                       TOTAL STOCKHOLDERS' EQUITY     37,332,390      35,526,544
                                                                   -------------   -------------
                       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 311,889,872   $ 301,221,897
                                                                   =============   =============
</TABLE>

See notes to unaudited consolidated financial statements.

                                      2
<PAGE>   4



STATE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


<TABLE>
<CAPTION>
                                                         Three months ended September 30,
                                                            1997                  1996
                                                         ----------            ----------
<S>                                                     <C>                   <C>
INTEREST INCOME:   
 Loans, including fees                                   $4,963,805            $4,523,880
 Investment securities                                   
  Taxable                                                   849,024               838,968
  Tax-exempt                                                205,675               187,092
 Federal funds sold                                          30,927                35,231
                                                         ----------            ----------
                                 TOTAL INTEREST INCOME    6,049,431             5,585,171

INTEREST EXPENSE: 
 Deposits                                                 2,352,856             2,097,964
 Notes payable and other borrowings                          71,380                90,697
                                                         ----------            ----------
                                TOTAL INTEREST EXPENSE    2,424,236             2,188,661
                                   NET INTEREST INCOME    3,625,195             3,396,510
Provision for loan losses                                    82,500                52,500
                                                         ----------            ----------
                             NET INTEREST INCOME AFTER    
                             PROVISION FOR LOAN LOSSES    3,542,695             3,344,010
OTHER INCOME:                                             
 Service charges on deposit accounts                        264,368               248,747
 Merchant service fees                                      296,646               273,590
 Building rent                                               77,684                86,505
 ATM fees                                                    60,639                53,114
 Other                                                      185,797               152,117
                                                         ----------            ----------
                                    TOTAL OTHER INCOME      885,134               814,073
OTHER EXPENSES:                                           
 Salaries and employee benefits                           1,230,988             1,138,407
 Net occupancy expense                                      231,496               216,040
 Equipment rentals, depreciation and maintenance            277,557               272,315
 Data processing                                            197,634               170,049
 Legal and professional                                      91,277                74,724
 Merchant service charges                                   232,796               228,265
 ATM charges                                                 52,393                52,514
 Postage and courier                                         73,702                63,784
 Advertising                                                 97,525                69,425
 Other                                                      326,589               414,583
                                                         ----------            ----------
                                  TOTAL OTHER EXPENSES    2,811,957             2,700,106

                            INCOME BEFORE INCOME TAXES    1,615,872             1,457,977
Income taxes                                                546,710               488,866
                                                         ----------            ----------
                                            NET INCOME   $1,069,162            $  969,111
                                                         ==========            ==========
Net income per common share                                   $0.34                 $0.31
Dividends per common share                                     0.12                  0.10

Weighted average common shares outstanding                3,137,487             3,146,454
</TABLE> 
                                                                       
See notes to unaudited consolidated financial statements.

                                      3
<PAGE>   5



STATE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


<TABLE>
<CAPTION>
                                                        Nine months ended September 30,
                                                           1997                1996
                                                        -----------         -----------
<S>                                                     <C>               <C>
INTEREST INCOME:
 Loans, including fees
 Investment securities                                  $14,772,013         $13,465,515
   Taxable                                                2,569,164           2,425,760
   Tax-exempt                                               585,065             570,598
 Federal funds sold                                          43,610             215,965
                                                        -----------         -----------
                                 TOTAL INTEREST INCOME   17,969,852          16,677,838
INTEREST EXPENSE:  
 Deposits                                                 6,610,585           6,246,745
 Notes payable and other borrowings                         394,709             328,038
                                                        -----------         -----------
                                TOTAL INTEREST EXPENSE    7,005,294           6,574,783
                                                        -----------         -----------
                                   NET INTEREST INCOME   10,964,558          10,103,055
Provision for loan losses                                   247,500             157,500
                                                        -----------         -----------
                             NET INTEREST INCOME AFTER    
                             PROVISION FOR LOAN LOSSES   10,717,058           9,945,555
OTHER INCOME:                                             
 Service charges on deposit accounts                        777,095             739,866
 Merchant service fees                                      855,551             760,003
 Building rent                                              232,777             202,085
 ATM fees                                                   155,968             144,523
 Other                                                      457,644             413,887
                                                        -----------         -----------
                                    TOTAL OTHER INCOME    2,479,035           2,260,364
                                                                                       
OTHER EXPENSES:                                           
 Salaries and employee benefits                           3,684,914           3,473,294
 Net occupancy expense                                      714,900             649,095
 Equipment rentals, depreciation and maintenance            813,273             745,943
 Data processing                                            565,937             473,667
 Legal and professional                                     271,490             266,113
 Merchant service charges                                   693,922             635,625
 ATM charges                                                150,384             151,771
 Postage and courier                                        195,934             192,234
 Advertising                                                287,700             208,175
 Other                                                    1,012,176           1,068,711
                                                        -----------         -----------
                                  TOTAL OTHER EXPENSES    8,390,630           7,864,628

                            INCOME BEFORE INCOME TAXES    4,805,463           4,341,291
Income taxes                                              1,636,769           1,463,938
                                                        -----------         -----------
                                            NET INCOME  $ 3,168,694         $ 2,877,353
                                                        ===========         ===========
Net income per common share                                   $1.00               $0.92
Dividends per common share                                     0.36                0.30
                                                          
Weighted average common shares outstanding                3,159,698           3,139,376
</TABLE>                                                  

See notes to unaudited consolidated financial statements.

                                      4
<PAGE>   6




STATE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)




<TABLE>
<CAPTION>
                                                                     Nine months ended September 30,
                                                                          1997               1996
                                                                      -----------        -----------
<S>                                                                   <C>               <C>
OPERATING ACTIVITIES
 Net income                                                           $ 3,168,694        $ 2,877,353
 Adjustments to reconcile net income to net
   cash provided by operating activities:
   Provision for loan losses                                              247,500            157,500
   Provision for depreciation                                             525,089            484,992
   Amortization of investment security                               
    premiums and accretion of discounts-net                                28,895            132,639
   Amortization of goodwill                                               113,569             99,766
   Amortization of branch acquisition premium                              22,249             22,249
   Increase in interest receivable                                       (151,906)          (103,844)
   Increase (decrease) in interest payable                                343,763            (96,783)
   Other                                                                  379,938         (1,422,702)
                                                                      -----------        -----------
                           NET CASH PROVIDED BY OPERATING ACTIVITIES    4,677,791          2,151,170 

INVESTING ACTIVITIES 
 Purchases of investment securities                                           -0-         (1,344,153)
 Maturities of investment securities                                    7,150,000         10,350,000 
 Purchases of securities available for sale                           (23,860,010)       (22,000,407)
 Maturities of securities available for sale                           15,127,663          7,073,325 
 Net increase in loans                                                (10,220,202)        (9,319,436)
 Purchases of premises and equipment                                     (698,079)          (590,743)
                                                                      -----------        -----------
                               NET CASH USED BY INVESTING ACTIVITIES  (12,500,628)       (15,831,414)

FINANCING ACTIVITIES                                      
 Increase (decrease) in deposits                                       13,310,630          4,712,106 
 Decrease in notes payable                                               (961,844)          (100,000)
 Increase (decrease) in guaranteed ESOP obligation                     (1,003,222)            48,628 
 Net proceeds from securities sold under agreement to repurchase        1,300,000           (950,000)
 Increase (decrease) in federal funds purchased                        (5,600,000)         2,450,000 
 Cash dividends                                                        (1,143,007)          (945,486)
 Issuance of common stock under Dividend Reinvestment Plan                204,818                  0 
 Proceeds from exercise of stock options                                  103,706            164,796 
                                                                      -----------        -----------
                           NET CASH PROVIDED BY FINANCING ACTIVITIES    6,211,081          5,380,044 
                                                                      -----------        -----------
DECREASE IN CASH AND CASH EQUIVALENTS                                  (1,611,756)        (8,300,200)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                       21,280,918         28,517,922 
                                                                      -----------        -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                            $19,669,162        $20,217,722 
                                                                      ===========        ===========
Supplemental information: 
 Interest paid                                                        $ 6,661,531        $ 6,671,566 
 Income taxes paid                                                      1,760,251          1,796,275 
</TABLE>  

See notes to unaudited consolidated financial statements.

                                      5
<PAGE>   7




STATE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

NOTE A--BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements include the
accounts of State Financial Services Corporation (the "Company") and its
subsidiaries - State Financial Bank, State Financial Bank - Waterford
("Waterford"), and State Financial Mortgage Company.  State Financial Bank also
includes the accounts of its wholly owned subsidiaries, Hales Corners
Development Corporation and Hales Corners Investment Corporation.  Waterford
also includes the accounts of its wholly owned subsidiary, Waterford Investment
Corporation.  All significant intercompany balances and transactions have been
eliminated.

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X.  Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.  In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included.  Operating results for the nine month
period ending September 30, 1997  are not necessarily indicative of the results
that may be expected for the year ended December 31, 1997.  For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report to stockholders for the year
ended December 31, 1996.


NOTE B--EARNINGS PER SHARE

     In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, ("Statement 128")  which is required to
be adopted on December 31, 1997.  Statement 128 may not be adopted early.  Upon
adoption, the Company will be required to change the method currently used to
compute earnings per share and to restate earnings per share for all prior
periods according to the methodology detailed in Statement 128.  Under the
current requirements for calculating and disclosing primary earnings per share,
dilutive effects of stock options are required to be included in the
calculation if the dilution caused thereby is considered material (defined as
greater than 3%).  If the dilution is material, a dual presentation of primary
and fully diluted earnings per share is required.   If the dilutive effect of
stock options is not material (i.e. less than 3%), only disclosure of earnings
per common share, exclusive of the impact of unexercised stock options in the
calculation, is required.  Because the effects of the Company's unexercised
stock options currently is not material, the Company is only required to
disclose earnings per common share figures.

     Statement 128 will require a dual presentation of earnings per share
regardless of the difference between earnings per common share  and fully
diluted earnings per share for companies having common stock equivalents such
as stock options.  Additionally, Statement 128 requires some modifications to
the calculation of the dilutive effect of common stock equivalents.  The
following table sets forth a pro forma calculation of the Company's basic and
dilutive earnings per share as calculated pursuant to Statement 128 for the
periods indicated.


                               For the Three months ended   For the Nine months
                                                                    ended
                                Sept. 30,   Sept. 30,     Sept. 30,    Sept. 30,
                                  1997        1996           1997       1996  
                                ---------   -----------------------    ---------
    Basic earnings per share      $0.34       $0.31         $1.00        $0.92  
    Diluted earnings per share    $0.34       $0.30         $0.99        $0.91  
                                                                  



                                      6
<PAGE>   8



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

CHANGES IN FINANCIAL CONDITION

     At September 30, 1997, total assets were $311,890,000 compared to
$301,222,000 at December 31, 1996.  Significant sources of funds through the
first nine months of 1997 were $13,311,000 in deposit growth, $4,678,000 in
cash provided by operating activities, $1,612,000 in contraction in cash and
cash equivalents, $1,300,000 in net proceeds from securities sold under
repurchase agreements, and $308,000 in additional equity resulting from stock
option exercises and additional shares issued under the Company's Dividend
Reinvestment Plan.  Deposit growth came primarily in time deposits and money
market balances.  For the nine months ended September 30, 1997, total time
deposits increased $10,134,000  which came mainly from additional deposits
attracted through a promotional campaign run at the end of the first quarter
and approximately $4,200,000 in large time deposits obtained through a state
investment program. Additionally, money market balances increased $6,059,000
for the nine months ended September 30, 1997.  Virtually all of this increase
came in the third quarter as local business and municipalities experience
cyclical build-up of cash reserves and have deployed more of their residual
balances in interest-bearing money market products.  The increases in time
deposits and money market balances were offset by declines of $1,021,000 and
$1,861,000 in demand and savings balances, respectively.

     Consistent loan demand continued to comprise the most significant
utilization of the Company's funding sources through the first nine months of
1997.  For the nine months ended September 30, 1997, net loans increased
$10,220,000 as the local economic climate continued to produce strong loan
demand in the Company's market area.  In addition to supporting loan growth,
funding sources through the first nine months of 1997 were used to reduce the
Company's level of federal funds purchased ($5,600,000), fund the net increase
in investment securities and securities available for sale ($1,582,000), pay
dividends ($1,143,000), fund the net increase in guaranteed ESOP obligations
($1,003,000), reduce notes payable ($962,000), and purchase fixed assets
($698,000).   Guaranteed ESOP obligations increased in the third quarter of
1997 as the Company acquired an additional 50,000 shares for the plan in July,
1997.  The reduction in notes payable represented the final maturity of the
installment notes issued in the Company's 1995 acquisition of the former
Waterford Bancshares, Inc.  Fixed asset purchases were mainly related to the
opening of the State Financial Bank - Waterford's Burlington office.


ASSET QUALITY

     At September 30, 1997, non-performing assets were $2,023,000, a $286,000
decrease from June 30, 1997.  The decrease in the level of non-performing
assets was due to a $301,000 net decrease in non-performing loans offset by an
additional $15,000 in other real estate during the third quarter of 1997.  The
percentage of non-performing loans to total loans decreased to 0.95% and
non-performing assets to total assets decreased to 0.65% at September 30, 1997
compared to 1.10% and 0.75% for the respective asset quality ratios as of June
30, 1997.








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                                      7
<PAGE>   9




     The following table summarizes non-performing assets on the dates
indicated (dollars in thousands).




<TABLE>
<CAPTION>
                                                  Sep. 30            Jun. 30            Mar. 31            Dec. 31       Sep. 30
                                                     1997               1997               1997               1996          1996
                                               ---------------------------------------------------------------------------------
<S>                                            <C>                  <C>                <C>                <C>           <C>     
Nonaccrual loans ............................. $    1,981         $    2,275         $    1,881         $    2,363         2,867
Accruing loans past due 90 days or more ......         27                 34                 15                 38            20
Restructured loans............................          0                  0                  0                  0             0
                                               ---------------------------------------------------------------------------------
Total non-performing and restructured loans...      2,008              2,309              1,896              2,401         2,887
                                               ---------------------------------------------------------------------------------
Other real estate owned ......................         15                  0                250                345           379
                                               ---------------------------------------------------------------------------------
Total non-performing assets................... $    2,023         $    2,309         $    2,146         $    2,746         3,266
                                               =================================================================================
Ratios:
 Non-performing loans to total loans .........       0.95%              1.10%              0.90%              1.19%         1.48%
 Allowance to non-performing loans ...........     134.86             115.64             141.30             108.62         94.80
 Non-performing assets to total assets .......       0.65               0.75               0.71               0.91          1.11  
                                               =================================================================================
</TABLE>

     When, in the opinion of management, serious doubt exists as to the
collectibility of a loan, the loan is placed on nonaccrual status.  At the time
a loan is classified as nonaccrual, interest income accrued in the current year
is reversed and interest income accrued in the prior year is charged to the
allowance for loan losses.  With the exception of credit cards, the Company
does not recognize income on loans past due 90 days or more.

ALLOWANCE FOR LOAN LOSSES

     Management maintains the allowance for loan losses (the "Allowance") at a
level considered adequate to provide for future loan losses.  The Allowance is
increased by provisions charged to earnings and is reduced by charge-offs, net
of recoveries.  At September 30, 1997, the Allowance was $2,708,000, an
increase of $100,000 from the balance at December 31, 1996.  This increase was
due to loan loss provisions exceeding net charge-offs through the first nine
months of 1997.  The Company increased its level of loan loss provisions
$90,000 in the first nine months of 1997 to recognize the general  increase in
the size of its loan portfolio.

     The determination of Allowance adequacy is determined quarterly based upon
an evaluation of the Company's loan portfolio by the internal loan review
officer and management.  These evaluations consider a variety of factors,
including, but not limited to, general economic conditions, loan portfolio size
and composition, previous loss experience, the borrower's financial condition,
collateral adequacy, the level of non-performing loans, and management's
estimation of future losses.  As a percentage of loans, the Allowance was 1.28%
at September 30, 1997 compared to 1.29% at December 31, 1996.  Based upon its
analyses, management considers the Allowance adequate to recognize the risk
inherent in the Company's loan portfolio at September 30, 1997.





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                                      8
<PAGE>   10




     The following table sets forth an analysis of the Company's Allowance and
actual loss experience for the periods indicated (dollars in thousands):

<TABLE>
<CAPTION>
                                                     Nine months                       
                                                        ended            Year ended    
                                                    Sept. 30, 1997      Dec. 31, 1996  
                                                    ---------------------------------                                   
<S>                                                 <C>                    <C>                
Balance at beginning of period ..................       $ 2,608            $ 2,711
Charge-offs:                                                        
 Commercial .....................................            45                122
 Real estate ....................................             6                100
 Installment ....................................            64                 46
 Other ..........................................            94                117
                                                    ---------------------------------                                   
 Total charge-offs ..............................           209                385
                                                    ---------------------------------                                   
Recoveries:                                                         
 Commercial .....................................             6                 19
 Real estate ....................................            29                  2
 Installment ....................................            13                 26
 Other ..........................................            13                 25
                                                    ---------------------------------                                   
 Total recoveries ...............................            61                 72
                                                    ---------------------------------                                   
Net charge-offs .................................           148                313
Additions charged to operations .................           248                210
                                                    ---------------------------------                                   
Balance at end of period                                $ 2,708            $ 2,608
                                                    =================================                
Ratios:                                                             
 Net charge-offs to                                                 
  average loans outstanding(1)...................          0.09%              0.16%
 Net charge-offs to total allowance(1)...........          7.29              12.00
 Allowance to period end                                            
  loans outstanding .............................          1.28               1.29
</TABLE>                                                            
                                                                    
     1. Annualized






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                                      9
<PAGE>   11



RESULTS OF OPERATION - COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997
AND 1996

GENERAL

     For the quarter ended September 30, 1997, the Company reported net income
of $1,069,000, an increase of $100,000 or 10.3% from the $969,000 reported for
the quarter ended September 30, 1996.  Improvements in the Company's third
quarter operating performance resulted from improvements in net interest income
and non-interest income, partially offset by increased non-interest expenses
and loan loss provisions.

NET INTEREST INCOME

     The following table sets forth average balances, related interest income
and expenses, and effective interest yields and rates for the three months
ended September 30, 1997 and September 30, 1996 (dollars in thousands):



<TABLE>
<CAPTION>
                                                                      1997                              1996                  
                                                        -------------------------------   ------------------------------      
                                                        Average                 Yield/     Average               Yield/      
                                                        Balance      Interest   Rate(4)   Balance     Interest   Rate(4)   
                                                        -------------------------------   ------------------------------      
<S>                                                     <C>           <C>       <C>        <C>         <C>        <C>         
   ASSETS                                                                                                                     
   Interest-earning assets:                                                                                                   
    Loans (1,2,3) ..............................        $ 210,177     $  4,982   9.40%    $ 192,944    $  4,539   9.36%        
    Taxable investment securities ..............           54,485          849   6.18        56,686         839   5.89        
    Tax-exempt investment securities (3) .......           16,943          312   7.31        14,962         283   7.52        
    Federal funds sold .........................            2,286           31   5.38         2,749          35   5.07       
                                                        ------------------------------    -----------------------------       
   Total interest-earning assets ...............          283,891        6,174   8.63       267,341       5,696   8.48        
   Non-interest-earning assets:                                                                                               
    Cash and due from banks ....................           15,821                            11,258                           
    Premises and equipment, net ................            4,860                             4,984                           
    Other assets ...............................            7,106                             7,211                           
   Less: Allowance for loan losses .............           (2,682)                           (2,741)                          
                                                        ---------                         ---------                           
   TOTAL                                                $ 308,996                         $ 288,053                           
                                                        =========                         =========                           
   LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                       
                                                                                                                              
   Interest-bearing liabilities:                                                                                              
    NOW and money market accounts ..............        $  93,285          944   4.01     $  84,894         800   3.75        
    Savings deposits ...........................           37,798          263   2.76        41,839         292   2.78        
    Time deposits ..............................           79,862        1,146   5.69        70,699       1,006   5.66        
    Notes payable ..............................              810           14   6.86         1,047          18   6.84        
    Federal funds purchased ....................              253            4   6.27         1,122          16   5.67        
    Securities sold under                                                                                                     
     agreement to repurchase ...................            4,015           53   5.24         4,502          57   5.04        
                                                        ------------------------------    -----------------------------       
   Total interest-bearing liabilities ..........          216,023        2,424   4.45       204,103       2,189   4.27        
                                                        ------------------------------    -----------------------------       
   Non-interest-bearing liabilities:
    Demand deposits ............................           53,497                            48,465                           
    Other ......................................            2,331                             1,549                           
                                                        ---------                         ---------                           
   Total liabilities ...........................          271,851                           254,117                           
                                                        ---------                         ---------                           
   Stockholders' equity ........................           37,145                            33,936                           
                                                        ---------                         ---------                           
   TOTAL .......................................        $ 308,996                         $ 288,053                           
                                                        =========                         =========                           
   Net interest earning and interest rate spread                    $  3,750   4.18%                   $  3,507   4.21%        
                                                                    ===============                    ===============         
   Net yield on interest-earning assets ........                               5.24%                              5.22%        
                                                                               ====                               ====         
</TABLE> 
--------------
 1.   For the purposes of these computations, nonaccrual loans are included
      in the daily average loan amounts outstanding.
 2.   Interest earned on loans includes loan fees (which are not material in
      amount) and interest income which has been received from borrowers whose
      loans were removed from nonaccrual during the period indicated.
 3.   Taxable-equivalent adjustments are made in calculating interest income
      and yields using a 34% rate for all years presented.
 4.   Annualized



                                      10
<PAGE>   12



     For the quarter ended September 30, 1997, the Company reported
taxable-equivalent net interest income of $3,750,000, an increase of $243,000
or 6.9% from the $3,507,000 reported for the quarter ended September 30, 1996.
The increase was due to an increase of $478,000 in taxable-equivalent total
interest income offset by an increase of $235,000 in total interest expense.
As a result of the aforementioned changes, the Company's taxable-equivalent
yield on interest-earning assets (net interest margin) improved to 5.24% for
the quarter ended September 30, 1997 from 5.22% for the quarter ended September
30, 1996.

     Taxable-equivalent total interest income improved $478,000 in the third
quarter of 1997 mainly due to growth in the level of average outstanding
interest-earning assets, a greater percentage of the Company's interest-earning
assets deployed in loans, and improvements in investment securities yields
between third quarter 1996 and third quarter 1997.  Total average
interest-earning assets increased $16,550,000 (6.2%) for the quarter ended
September 30, 1997 over the comparable quarter in 1996 mainly due to growth in
average deposits between the two periods providing an additional source of
funds.  A greater percentage of the Company's assets  deployed in loans also
benefitted the third quarter 1997 yield on interest-earning assets.  For the
quarter ended September 30, 1997, average loans grew to 74.0% of
interest-earning assets from 72.2% for the quarter ended September 30, 1996.
Loans are historically the Company's highest yielding interest-earning asset.
Accordingly, the greater percentage mix of interest-earning assets in loans
enhanced the Company's third quarter 1997 yield on interest-earning assets.
This increase in the volume and change in composition  of the Company's average
interest-earning assets represented approximately $348,000 of the increase in
taxable-equivalent total interest income for the third quarter of 1997.  The
Company also experienced improvement in the yields on taxable investment
securities to 6.18% for the quarter ended September 30, 1997 compared to 5.89%
for the third quarter of 1996.  These investment yield improvements were
primarily the result of maturing investment securities upwardly repricing into
the current interest-rate environment over the preceding twelve months.  These
rate improvements, as well as a four basis point improvement in loan yield
accounted for approximately $130,000 of the third quarter 1997 increase in
taxable-equivalent total interest income and improved the Company's
consolidated yield on interest-earning assets to 8.63% for the third quarter of
1997 from 8.48% for the third quarter of 1996.

     Funding costs increased $235,000 in the third quarter of 1997 due to
growth in the average level of interest-bearing liabilities, an increased
percentage of interest-bearing liabilities in time deposits, and higher rates
paid on money market balances compared to the third quarter 1996.  Average
interest-bearing liabilities increased $11,920,000 (5.8%) between third quarter
1997 and 1996 due to time deposit and money market growth between the two
periods.  As a result of this growth, time deposits, historically the Company's
highest deposit funding cost, comprised a greater percentage of average
interest-bearing liabilities during the quarter ended September 30, 1997.  Time
deposits averaged 37.0% of interest-bearing liabilities during third quarter
1997 compared to 34.6% during third quarter 1996.  The increased volume and
changed composition of the Company's interest-bearing liabilities combined to
account for approximately $177,000 of the third quarter 1997 increased funding
cost. In addition to these volume and composition changes, the Company's
overall funding cost increased in the third quarter mainly due to higher costs
associated with money market accounts for third quarter 1997.   The average
cost of NOW and money market accounts increased to 4.01% in the third quarter
of 1997 compared to 3.75% in third quarter 1996.  The Company's single largest
money market account product is the Money Market Index Account, the rate on
which is priced to the IBC average seven day yield on taxable money funds.  The
general increase in market interest rates during the third quarter of 1997
resulted in an increase in the rate paid on this deposit product during the
period.  The Company's third quarter 1997 funding costs increased approximately
$58,000 due to rate changes, virtually all of which was related to the
increased rates on money market accounts.  The aforementioned changes resulted
in the Company's cost of funds on interest-bearing liabilities increasing to
4.45% for the quarter ended September 30, 1997 from 4.27% for the comparable
period in 1996.  An increase in the percentage of non-interest bearing funding
sources, primarily demand deposits and capital, neutralized the increased
funding cost in other areas and resulted in State's taxable-equivalent net
interest margin improving to 5.24% in third quarter 1997 from 5.22% in third
quarter 1996.

PROVISION FOR LOAN LOSSES

     The Company increased its provision for loan losses $30,000 for the
quarter ended September 30, 1997 compared to quarter ended September 30, 1996
to recognize the general growth in the Company's loan portfolio.

OTHER INCOME

     Total other income increased $71,000 or 8.7% for the quarter ended
September 30, 1997 compared to the same period in 1996.  Exclusive of the
recognition of approximately $20,000 in other real estate gains during third



                                      11
<PAGE>   13



quarter 1996, the Company's other income improved $91,000 in third quarter
1997. Improvements of $49,000 in gains on mortgage origination sales, $23,000
in merchant service fees, $16,000 in service charge income, and $7,000 in ATM
fees, offset by reductions of $9,000 in building rent were the significant
reasons for the net improvement in third quarter 1997 other income.  Increased
gains from mortgage origination sales were the result of growth and development
of the Company's newest subsidiary, State Financial Mortgage Company which
commenced operation at the end of 1996.  Merchant services, the fees the
Company charges merchants to process credit card payments, continued to
increase as a result of rate adjustments and volume increases over the
preceding twelve months resulting from continued business development efforts
at State Financial Bank, and the introduction of merchant services at State
Financial Bank - Waterford.  The improvement in service charge income during
third quarter 1997 was primarily the result of an increased volume of checks
returned for insufficient funds and the fees resulting therefrom. ATM fee
income increased in third quarter 1997 due to increased usage of the Company's
automated teller machines.  Building rent income decreased in third quarter
1997 compared to third quarter 1996 due to a vacancy in space the Company
previously sublet at its Greenfield office.

OTHER EXPENSES

     Total other expenses increased $112,000 or 4.1% for the three months ended
September 30, 1997 compared to the same period in 1996.  Third quarter 1996
included a one-time expense of approximately $59,000 related to additional FDIC
insurance assessments in resolution of the agency's funding of the Savings
Association Insurnace Fund.  Excluding this expense, other expenses increased
$171,000 in third quarter 1997 over third quarter 1996.  Salaries and employee
benefits increased $92,000, mainly due to annual salary adjustments and
additional personnel costs associated with the new Burlington office of State
Financial Bank - Waterford.  Occupancy expenses increased $21,000 primarily due
to greater expenses for rent and depreciation in third quarter 1997, mainly
related to the new Burlington office.  Data processing expense increased
$27,000 due to rate adjustments from the Company's service provider, additional
costs incurred related to converting ATM cards to debit cards, and additional
costs related to the introduction of PC Banking products in 1997.  Legal and
professional fees increased $17,000 primarily due to additional accruals for
estimated expected costs associated with the Company's pending acquisition of
Richmond Bancorp, Inc.  Expenses related to the Company's merchant services
program increased $5,000 due to increased volume, resulting from continued
growth at State Financial Bank and the program's inception at Waterford at the
beginning of 1997, as well as rate adjustments from the Company's service
provider.  Advertising expense increased $28,000 mainly due to increased
television advertising to enhance State Financial Bank's name recognition and
promotions related to opening the Burlington office.   Other expenses decreased
$88,000 in total, $59,000 of which was related to the aforementioned reduction
in FDIC insurance assessments.  The remaining decrease of $29,000 in other
expenses was primarily due to reduced costs for correspondent bank service fees
between the two periods.

INCOME TAXES

     Income taxes for the quarter ended September 30, 1997 increased $58,000
over the third quarter of 1996.  The increase in income tax expense was mainly
due to a $158,000 increase in the Company's income before income taxes between
third quarter 1996 and third quarter 1997.








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                                      12


<PAGE>   14



RESULTS OF OPERATION - COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND 1996

GENERAL

     For the nine months ended September 30, 1997, the Company reported net
income of $3,169,000, an increase of $291,000 or 10.1% from the $2,877,000
reported for the nine months ended September 30, 1996.  Improvements in net
interest income and non-interest income, partially offset by increased
non-interest expenses and loan loss provisions, were the primary reasons the
Company showed improved operating performance through the first nine months of
1997.

NET INTEREST INCOME

     The following table sets forth average balances, related interest income
and expenses, and effective interest yields and rates for the nine months ended
September 30, 1997 and September 30, 1996 (dollars in thousands):



<TABLE>
<Capton>


                                                                      1997                              1996              
                                                        ------------------------------    ------------------------------  
                                                        Average                 Yield/     Average                Yield/  
                                                        Balance      Interest   Rate(4)    Balance     Interest   Rate(4)   
                                                        ------------------------------    ------------------------------  
<C>                                                     <C>           <C>       <C>        <C>         <C>        <C>      
   ASSETS                                           
   Interest-earning assets:                         
    Loans (1,2,3) ..............................        $ 209,295     $ 14,830   9.47%    $ 189,790    $ 13,507   9.51% 
    Taxable investment securities ..............           55,881        2,569   6.15        55,431       2,426   5.85 
    Tax-exempt investment securities (3) .......           15,918          886   7.45        15,625         865   7.39 
    Federal funds sold .........................            1,087           44   5.41         5,439         216   5.30
                                                        ------------------------------    ------------------------------  
   Total interest-earning assets ...............          282,181       18,329   8.68       266,285      17,014   8.53 
   Non-interest-earning assets:                                                                                        
    Cash and due from banks ....................           12,993                            12,444 
    Premises and equipment, net ................            4,700                             4,933 
    Other assets ...............................            7,185                             6,202 
   Less: Allowance for loan losses .............           (2,652)                           (2,746)
                                                        ---------                         ---------                           
   TOTAL                                                $ 304,407                         $ 287,118 
                                                        =========                         =========                           
                                                                                                                       
   LIABILITIES AND STOCKHOLDERS' EQUITY             
   Interest-bearing liabilities:                    
    NOW and money market accounts ..............        $  90,058        2,614   3.88     $  83,846       2,324   3.70
    Savings deposits ...........................           38,293          793   2.77        42,208         880   2.78
    Time deposits ..............................           75,758        3,204   5.65        70,833       3,043   5.74
    Notes payable ..............................              893           46   6.88         1,057          54   6.82
    Federal funds purchased ....................            2,436          106   5.82           377          16   5.67
    Securities sold under                                                                                             
     agreement to repurchase ...................            6,188          243   5.25         6,550         258   5.26
                                                        ------------------------------    ------------------------------  
   Total interest-bearing liabilities ..........          213,626        7,006   4.38       204,871       6,575   4.29
                                                        ------------------------------    ------------------------------  
   Non-interest-bearing liabilities:                                                                      
    Demand deposits ............................           52,051                            47,049
    Other ......................................            2,024                             1,573
                                                        ---------                         ---------                           
   Total liabilities ...........................          267,701                           253,493 
                                                        ---------                         ---------                           
   Stockholders' equity ........................           36,706                            33,625
                                                        ---------                         ---------                           
   TOTAL .......................................        $ 304,407                          $287,118
                                                        =========                         =========                           
   Net interest earning and interest rate spread                      $ 11,323   4.30%                 $ 10,439   4.24%
                                                                      ===============                  ===============
   Net yield on interest-earning assets ........                                 5.36%                            5.24%
                                                                                 ====                             ====         
</TABLE> 
--------------
 1.   For the purposes of these computations, nonaccrual loans are included
      in the daily average loan amounts outstanding.
 2.   Interest earned on loans includes loan fees (which are not material in
      amount) and interest income which has been received from borrowers whose
      loans were removed from nonaccrual during the period indicated.
 3.   Taxable-equivalent adjustments are made in calculating interest income
      and yields using a 34% rate for all years presented.
 4.   Annualized


                                      13
<PAGE>   15




     The Company reported taxable-equivalent net interest income of $11,323,000
for the nine months ended September 30, 1997, an increase of $884,000 or 8.5%
from the $10,439,000 reported for the nine months ended September 30, 1996.
The increase was due to a $1,315,000 increase in taxable-equivalent total
interest income offset by a $431,000 increase in total interest expense.   As a
result of the aforementioned changes, the Company's taxable-equivalent yield on
interest-earning assets (net interest margin) improved to 5.36% for the nine
months ended September 30, 1997 from 5.24% for the nine months ended September
30, 1996.

     The $1,315,000 year-to-date improvement in taxable-equivalent total
interest income through the first  nine months of 1997 was primarily due to
growth in the level of outstanding interest-earning assets, a greater
percentage of the Company's interest-earning assets deployed in loans, and
yield improvements on investment securities as compared to the first nine
months of 1996.  For the nine months ended September 30, 1997, average
interest-earning assets increased $15,896,000 (6.0%) due to growth in average
deposits, federal funds purchased, and shareholders equity (retained earnings)
as compared to the nine months ended September 30, 1996.  A greater percentage
of the Company's average interest-earning assets  deployed in loans also
benefitted the year-to-date 1997 yield on interest-earning assets.  For the
nine months ended September 30, 1997, average loans grew to 74.2% of
interest-earning assets from 71.3% for the nine months ended September 30,
1996.  As a result of the volume increases and composition changes in the
Company's average interest-earning assets, taxable-equivalent total interest
income increased approximately $1,108,000 for the nine months ended September
30, 1997 as compared to the same period in 1996.  The Company's yield on
taxable investment securities improved to 6.15% for the nine months ended
September 30, 1997 from 5.85% for the first nine months of 1996 as  maturing
investment securities upwardly repriced into the current interest-rate
environment over the preceding twelve months.  This yield improvements,
combined with approximately $66,000 in nonaccrual loan interest recoveries in
the first quarter of 1997 accounted for approximately $207,000 of the
year-to-date 1997 increase in taxable-equivalent total interest income. As a
result of the aforementioned changes in composition and rate, the Company's
consolidated yield on interest-earning assets improved to 8.68% for the nine
months ended September 30, 1997 from 8.53% for the nine months ended September
30, 1996.

     On a year-to-date basis, the Company's funding costs increased $431,000 in
1997 as compared to 1996, mainly due to growth in the average level of
interest-bearing liabilities.  Year-to-date average interest-bearing
liabilities increased $8,755,000 (4.3%) between 1997 and 1996 due to growth in
NOW and money market accounts, time deposits, and federal funds purchased
between the two periods.  Additionally, average time deposits and NOW and money
market accounts, historically the Company's highest costs of deposits funds,
increased to 77.6% of average interest-bearing liabilities in 1997 from 75.5%
in 1996.  The increased volume and changed composition of the Company's
interest-bearing liabilities combined to account for approximately $391,000 of
the year-to-date increase in interest expense through the first nine months of
1997.   In addition to these volume and composition changes, higher rates paid
on money market accounts also increased the Company's cost of funds during the
first nine months of 1997. The year-to-date average cost of NOW and money
market accounts increased to 3.88% in 1997 from 3.70% in 1996 and accounted for
the majority of the Company's $140,000 in increased funding cost attributable
to interest rate changes through the first nine months of 1997.   The
aforementioned changes resulted in the Company's cost of funds on
interest-bearing liabilities increasing to 4.38% for the nine months ended
September 30, 1997 from 4.29% for the comparable period in 1996.

PROVISION FOR LOAN LOSSES

     The Company increased the provision for loan losses $90,000 in the first
nine months of 1997 as compared to the first nine months of 1996 to recognize
the general growth in its loan portfolio over the preceding twelve months.

OTHER INCOME

     Total other income increased $219,000 or 9.7% for the nine months ended
September 30, 1997 compared to the same period in 1996.   Exclusive of the
nonrecurring recognition of approximately $20,000 in other real estate gains
and $32,000 in corporate life insurance dividends during third quarter and
second quarter 1996, respectively, total other income improved $271,000 for the
first nine months of 1997 over the first nine months of 1996.  Improvements of
$97,000 in gains on mortgage origination sales, $95,000 in merchant service
fees, $37,000 in service charge income, $31,000 in building rent, and $11,000
in ATM fees  were the significant areas of other income improvement.
Offsetting these gains from mortgage origination sales improved due to
development of the Company's newest subsidiary, State Financial Mortgage
Company which commenced operation at the end of 1996.  Year-to-date merchant
services


                                      14
<PAGE>   16



increased as a result of rate adjustments and volume increases over the
preceding twelve months, continued business development efforts at State
Financial Bank, and the introduction of merchant services at  Waterford.
Service charge income improved during the first nine months of  1997 mainly due
to an increased volume of checks returned for insufficient funds and the fees
resulting therefrom. Building rent income increased as a result of the
Company's acquisition of an additional property in May, 1996.


OTHER EXPENSES

     For the nine months ended September 30, 1997, total other expenses
increased $526,000 or 6.7% as compared to the same period in 1996.  Salaries
and employee benefits increased $212,000, mainly due to annual salary
adjustments and additional personnel related to the new Burlington office of
State Financial Bank - Waterford.  Occupancy expenses increased $133,000
primarily due to greater expenses for rent and depreciation related to the
Burlington office, as well as increased depreciation expense resulting from the
additional real estate property purchased in second quarter 1996 and the
upgrade of the Company's teller equipment during 1996.  Data processing expense
increased $92,000 mainly due to additional costs incurred at Waterford
resulting from the bank's conversion in April 1996 to the Company's more
sophisticated data services provider at which time the additional costs
associated with outsourcing this function commenced.  Expenses related to the
Company's merchant services program increased $58,000 due to increased volume
resulting from continued growth at State Financial Bank and the program's
inception at Waterford at the beginning of 1997, as well as rate adjustments
from the Company's service provider.  Advertising expense increased $80,000
mainly due to increased television advertising to enhance State Financial
Bank's name recognition and promotion of the new Burlington office.  Other
expenses decreased $57,000 primarily due to higher than normal costs for
regulatory insurance assessments in third quarter 1996 related to the FDIC's
special assessment to resolve funding shortfall in the Savings Association
Insurance Fund.


INCOME TAXES

     Income taxes for the nine months ended September 30, 1997 increased
$173,000 compared to the nine months ended September 30, 1996.  The increase in
income tax expense was the result of a $464,000 increase in income before
income taxes and a reduction in the proportionate amount of the Company's
interest income derived from tax-exempt sources, between the two periods.


LIQUIDITY

     Liquidity management involves the ability to meet the cash flow
requirement of customers who may be either depositors wanting to withdraw funds
or borrowers needing assurance that sufficient funds will be available to meet
their credit needs.  Liquid assets (including cash deposits with banks, and
federal funds sold) are maintained to meet customers' needs.  The Company had
liquid assets of $19,669,000 and $21,281,000 at September 30, 1997 and December
31, 1996, respectively.


FORWARD LOOKING STATEMENTS

     When used in this report, the words "believes," "expects," and similar
expressions are intended to identify forward-looking statements.  The Company's
actual results may differ materially from those described in the
forward-looking statements.  Factors which could cause such a variance to occur
included, but are not limited to, changes in interest rates, local market
competition, levels of consumer bankruptcies, customer loan and deposit
preferences, regulation, and other general economic conditions.






                                      15


<PAGE>   17



CAPITAL RESOURCES

     There are certain regulatory constraints which affect the Company's level
of capital.   The following table sets forth these requirements and the
Company's capital levels and ratios at September 30, 1997, including the Tier 1
leverage ratio, the risk-based capital ratios based upon Tier 1 capital, and
total risk-based capital:


<TABLE>
<CAPTION>
           
                                                         Regulatory                    Regulatory      
                                                           Minimum                  Well-capitalized   
                               Actual                    Requirement                   Requirement      
                           ---------------         ----------------------          ------------------  
                                                   (dollars in thousands)                       

                           Amount      Percent      Amount       Percent           Amount       Percent   
                           ------      -------      ------       -------           ------       -------   
<S>                        <C>       <C>           <C>          <C>             <C>          <C>         
Tier 1 leverage            35,055      11.4%        12,032         4.0%            15,039         5.0%     
Tier 1 risk-based capital  35,055      16.2%         8,538         4.0%            12,806         6.0%     
Risk-based capital         37,755      17.5%        17,075         8.0%            21,344        10.0%     
</TABLE>   

     The Company is pursuing a policy of continued asset growth which requires
the maintenance of appropriate ratios of capital to assets.  The existing
capital levels allow for additional asset growth without further capital
injection.  It is the Company's desire to maintain its capital position at or
in excess of the definition of a "well-capitalized" institution.  The Company
seeks to obtain additional capital growth through earnings retention and a
conservative dividend policy.











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                                      16
<PAGE>   18



PART II. OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

     As of September 30, 1997, the Company is involved in various  pending
legal proceedings consisting of  ordinary routine litigation incidental to the
business of the Company.  None of these proceedings is considered material,
either in part or in the aggregate, and are therefore not expected to have a
material adverse impact on the Company's financial condition, results of
operations, cash flows, and capital ratios.

ITEM 2.   CHANGES IN SECURITIES

           None

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

           None

ITEM 4.   SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

           None

ITEM 5.   OTHER INFORMATION

           None

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

     There were no Form 8-K reports filed during the quarter ended September
30, 1997.









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                                      17

<PAGE>   19










                                   SIGNATURES


Pursuant to the requirement 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.


                                STATE FINANCIAL SERVICES CORPORATION
                                ------------------------------------
                                (Registrant)

                                


                                
Date: November 5, 1997          Michael J. Falbo  
      --------------------      ------------------------------------
                                Michael J. Falbo
                                President and Chief Executive Officer



Date: November 5, 1997          Michael A. Reindl
      --------------------      ------------------------------------
                                Michael A. Reindl
                                Senior Vice President, Controller, and 
                                Chief Financial Officer






<PAGE>   20







                                   SIGNATURES

Pursuant to the requirement 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.


                                STATE FINANCIAL SERVICES CORPORATION
                                ------------------------------------
                                (Registrant)



Date: November 5, 1997
      ------------------- 


                                By /s/ Michael J. Falbo
                                   ----------------------------
                                   Michael J. Falbo
                                   President and Chief Executive Officer



Date: November 5, 1997
      -------------------


                                By /s/ Michael A. Reindl
                                   ----------------------------
                                   Michael A. Reindl
                                   Senior Vice President, Controller, and 
                                   Chief Financial Officer