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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Form 10-Q

x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2003
 
or
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from ______________________ to ______________________


Commission File Number 1-018166

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


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


815 NORTH WATER STREET, MILWAUKEE, WISCONSIN 53202-3526
(Address and Zip Code of principal executive offices)



(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

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yes X No

As of November 12 , 2003 , there were 7,051,709 shares of Registrant's $0.10 Par Value Common Stock outstanding.

 
 
     
 
 
 
FORM 10-Q
 
     
 
STATE FINANCIAL SERVICES CORPORATION
 
 
INDEX
 
 
PART I - FINANCIAL INFORMATION
 
 
 
Page No.
Item 1.
Financial Statements (Unaudited)
 
 
Consolidated Statements of Financial Condition as of September 30, 2003 and December 31, 2002 (audited)
3
 
Consolidated Statements of Income for the Three Months ended September 30, 2003 and 2002
4
 
Consolidated Statements of Income for the Nine Months ended September 30, 2003 and 2002
5
 
Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2003 and 2002
6
 
Notes to Consolidated Financial Statements
7
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
9
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
18
Item 4.
Controls and Procedures
18
 
PART II - OTHER INFORMATION
 
Item 1.
Legal Proceedings
19
Item 2.
Exhibits and Reports on Form 8-K
19
Item 4.
Submission of Matters to a Vote of Security Holders
19
Signatures
 
20
Exhibits
 
Exhibit Index
 
     
 
Part I.     Financial Information
Item 1.  Financial Statements

STATE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
 
  
September 30,
2003
(unaudited)
December 31,
2002
(audited)
   
 
 
ASSETS
   
 
    
 
  
Cash and due from banks
 
$
41,723,339
 
$
56,767,916
 
Interest-bearing bank balances
   
5,281,647
   
2,040,592
 
Federal funds sold
   
2,620,958
   
8,708,297
 
Cash and cash equivalents
   
49,625,944
   
67,516,805
 
Investment securities
   
 
    
 
  
Available-for-sale (at fair value)
   
396,035,172
   
422,081,645
 
Held-to-maturity (fair value of $1,145,240 – September 30, 2003 and $1,551,666 - December 31, 2002)
   
1,116,110
   
1,505,269
 
Loans (net of allowance for loan losses of $10,365,329 – September 30, 2003 and $8,805,000 –December 31, 2002)
   
771,686,974
   
703,968,455
 
Loans held for sale
   
4,810,691
   
31,750,135
 
Premises and equipment
   
26,930,721
   
27,789,893
 
Accrued interest receivable
   
5,417,204
   
7,789,746
 
Goodwill
   
27,465,062
   
27,465,062
 
Bank owned life insurance
   
20,804,533
   
20,258,388
 
Other assets
   
11,355,067
   
6,698,985
 
   
 
 
TOTAL ASSETS
 
$
1,315,247,478
 
$
1,316,824,383
 
   
 
 
 
    
 
    
 
  
LIABILITIES AND SHAREHOLDERS' EQUITY
   
 
    
 
  
Deposits:
   
 
    
 
  
Demand
   
158,373,425
   
163,036,430
 
Savings
   
231,053,465
   
228,312,579
 
Money market
   
212,107,261
   
221,142,347
 
Time deposits in excess of $100,000
   
94,043,137
   
88,001,266
 
Other time deposits
   
211,204,069
   
240,381,060
 
   
 
 
TOTAL DEPOSITS
   
906,781,357
   
940,873,682
 
 
    
 
    
 
  
Federal Home Loan Bank advances
   
77,400,000
   
92,400,000
 
Notes payable
   
16,100,000
   
15,700,000
 
Trust preferred securities
   
15,000,000
   
15,000,000
 
Securities sold under agreements to repurchase
   
177,817,658
   
126,636,913
 
Federal funds purchased
   
3,500,000
   
10,000,000
 
Accrued expenses and other liabilities
   
6,876,938
   
9,089,417
 
Accrued interest payable
   
1,783,710
   
2,191,711
 
   
 
 
TOTAL LIABILITIES
   
1,205,259,663
   
1,211,891,723
 
 
    
 
    
 
  
Shareholders' Equity:
   
 
    
 
  
Preferred stock, $1 par value; authorized--100,000 shares;
issued and outstanding—none
   
--
   
--
 
Common stock, $0.10 par value; authorized--25,000,000 shares; issued 9,491,182 shares in 2003 and 9,406,321 shares in 2002, outstanding 7,026,842 shares in 2003 and 6,946,981 shares in 2002
   
949,118
   
940,632
 
Additional paid in capital
   
84,239,823
   
83,157,808
 
Retained earnings
   
60,697,618
   
54,288,325
 
Accumulated other comprehensive income
   
3,951,656
   
6,518,045
 
Unearned shares held by ESOP
   
(3,946,310
)
 
(4,160,060
)
Treasury Stock – 2,464,340 shares in 2003 and 2,459,340 in 2002
   
(35,904,090
)
 
(35,812,090
)
   
 
 
TOTAL SHAREHOLDERS' EQUITY
   
109,987,815
   
104,932,660
 
   
 
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
 
$
1,315,247,478
 
$
1,316,824,383
 
   
 
 
See notes to unaudited consolidated financial statements.
 
 
     
 
 
STATE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)

 
  
Three Months Ended September 30,
   
 
  
2003
2002
   
 
 
INTEREST INCOME:
   
 
    
 
  
Loans
 
$
11,427,984
 
$
11,606,922
 
Investment securities:
   
 
    
 
  
Taxable
   
3,293,913
   
4,739,741
 
Tax-exempt
   
553,689
   
669,844
 
Federal funds sold and other short-term investments
   
38,714
   
217,803
 
   
 
 
TOTAL INTEREST INCOME
   
15,314,300
   
17,234,310
 
 
    
 
    
 
  
INTEREST EXPENSE:
   
 
    
 
  
Deposits
   
3,003,273
   
4,550,169
 
Notes payable and other borrowings
   
1,623,110
   
1,377,236
 
   
 
 
TOTAL INTEREST EXPENSE
   
4,626,383
   
5,927,405
 
   
 
 
NET INTEREST INCOME
   
10,687,917
   
11,306,905
 
 
    
 
    
 
  
Provision for loan losses
   
600,000
   
1,050,000
 
   
 
 
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
   
10,087,917
   
10,256,905
 
 
    
 
    
 
  
OTHER INCOME:
   
 
    
 
  
Service charges on deposit accounts
   
741,877
   
665,705
 
ATM and merchant service fees
   
406,395
   
785,314
 
Security commissions and management fees
   
131,986
   
136,002
 
Investment securities gains, net
   
187,210
   
(24,085
)
Gain on sale of loans
   
1,406,750
   
734,588
 
Bank owned life insurance
   
236,388
   
33,334
 
Mortgage origination fees
   
129,698
   
59,375
 
Gain on sale or fixed assets
   
723
   
670,390
 
Other
   
343,973
   
312,511
 
   
 
 
TOTAL OTHER INCOME
   
3,585,000
   
3,373,134
 
 
    
 
    
 
  
OTHER EXPENSES:
   
 
    
 
  
Salaries and employee benefits
   
4,918,055
  &