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 June 30, 2000

                                      OR

      [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
            EXCHANGE ACT OF 1934
            For the transition period from _____________ to _____________


                         Commission File Number: 1-12109

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

            DELAWARE                                           11-3336165
      (State or other jurisdiction of                       (I.R.S. Employer
      incorporation or organization)                       Identification No.)

             1000 WOODBURY ROAD, SUITE 200, WOODBURY, NEW YORK 11797
    (Address of registrant's principal executive offices including ZIP Code)

                                (516) 364 - 8500
              (Registrant's telephone number, including area code)


                                    NO CHANGE
  (Former name, former address and former fiscal year, if changed since last
                                   report)


      Indicate  by check mark  whether the  registrant(1)  has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  and 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 [ ]

      As of June 30, 2000,  15,883,749 shares of the Registrant's  common stock,
par value $.01 per share, were outstanding.


<PAGE>

                               INDEX TO FORM 10-Q

                                                                        Page No.

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)

         Consolidated Balance Sheets as of June 30, 2000 and
         December 31, 1999................................................... 1

         Consolidated  Statements of Operations for the three months and
         six months ended June 30, 2000 and June 30, 1999.................... 2

         Consolidated Statements of Cash Flows for the six months ended
         June 30, 2000 and June 30, 1999..................................... 3

         Notes to Consolidated Financial Statements.......................... 4

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations............................................... 6

Item 3.  Quantitative and Qualitative Disclosures About Market Risk..........22


PART II - OTHER INFORMATION

Item 1.  Legal Proceedings...................................................23

Item 2.  Changes in Securities and Use of Proceeds...........................26

Item 3.  Defaults Upon Senior Securities.....................................26

Item 4.  Submission of Matters to a Vote of Security Holders.................26

Item 5.  Other Information...................................................26

Item 6.  Exhibits and Current Reports on Form 8-K........................... 26

Signatures...................................................................27

<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
<CAPTION>
                  DELTA FINANCIAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                    JUNE 30,      DECEMBER 31,
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)         2000            1999
                                                   ----------      ----------
<S>                                              <C>               <C>
ASSETS
Cash and interest-bearing deposits                $    58,228          69,557
Accounts receivable                                    39,814          32,367
Loans held for sale, net                               65,500          89,036
Accrued interest receivable                            13,223          63,309
Capitalized mortgage servicing rights                  42,872          45,927
Interest-only and residual certificates               238,089         224,659
Equipment, net                                         19,765          21,721
Prepaid and other assets                               19,542           5,428
Goodwill                                                4,239           4,831
                                                   ----------      ----------
   Total assets                                   $   501,272         556,835
                                                   ==========      ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Bank payable                                      $       617           1,195
Warehouse financing and other borrowings               82,582         109,019
Senior Notes                                          149,521         149,474
Accounts payable and accrued expenses                  30,262          43,607
Investor payable                                       70,896          82,204
Advance payment by borrowers for taxes and insurance   14,841          13,784
Deferred tax liability                                  7,113          10,411
                                                   ----------      ----------
   Total liabilities                                  355,832         409,694
                                                   ----------      ----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value. Authorized 49,000,000 shares;
  16,000,549 shares issued and 15,883,749 shares
   outstanding at June 30, 2000 and December 31, 1999     160             160
Additional paid-in capital                             99,472          99,472
Retained earnings                                      47,126          48,827
Treasury stock, at cost (116,800 shares)               (1,318)         (1,318)
                                                   ----------      ----------
   Total stockholders' equity                         145,440         147,141
                                                   ----------      ----------
     Total liabilities and stockholders' equity   $   501,272         556,835
                                                   ==========      ==========


          See accompanying notes to consolidated financial statements.

                                       1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                  DELTA FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                                                     Three Months Ended          Six Months Ended
                                                           June 30,                   June 30,
(Dollars in thousands, except per share data)         2000          1999         2000        1999
                                                     -------      -------       -------     ------
<S>                                                <C>          <C>          <C>          <C>
Revenues
   Net gain on sale of mortgage loans               $ 11,274     $ 22,901     $ 25,928     $ 48,004
   Interest                                            7,567        9,680       18,104       16,113
   Servicing fees                                      3,738        3,743        7,804        7,356
   Origination fees                                    6,365        8,125       13,053       15,489
                                                     -------      -------      -------      -------
        Total revenues                                28,944       44,449       64,889       86,962
                                                     -------      -------      -------      -------
Expenses
   Payroll and related costs                          15,699       17,744       31,260       33,586
   Interest expense                                    8,528        6,077       16,331       12,249
   General and administrative (1)                     10,750       16,937       20,206       27,994
                                                     -------      -------      -------      -------
       Total expenses                                 34,977       40,758       67,797       73,829
                                                     -------      -------      -------      -------
(Loss) income before income
    tax (benefit) expense                             (6,033)       3,691       (2,908)      13,133
Income taxes (benefit) expense                        (2,506)       1,476       (1,207)       5,174
                                                     -------      -------      --------     -------
Net (loss) income                                   $ (3,527)    $  2,215     $ (1,701)    $  7,959
                                                     =======      =======      ========     =======

Per share data
     Net (loss) income per common
       share - basic and diluted                    $  (0.22)    $   0.14     $  (0.11)    $   0.52
                                                     ========     =======      ========     =======
     Weighted-average number
       of shares outstanding                       15,920,869  15,358,749    15,920,869  15,358,749



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

(1) The Company  recorded a $6.0 million pre-tax charge in the second quarter of
1999 when it reached a settlement in principle  with the NYOAG.  (An  additional
$6.0  million  pre-tax  charge  was  recorded  in the third  quarter  of 1999 in
connection  with the Company's  final global  settlement  with the NYSBD and the
NYOAG,  which was later joined by the U.S.  Department  of Justice,  the Federal
Trade Commission and the U.S.  Department of Housing and Urban Development.  See
"Legal Proceedings" for a more detailed discussion of the settlement.



          See accompanying notes to consolidated financial statements.

                                       2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                  DELTA FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                                                                         Six Months Ended
                                                                                             June 30,
(Dollars in thousands)                                                                 2000             1999
                                                                                     -------           -------
<S>                                                                                <C>               <C>
Cash flows from operating activities:
    Net (loss) income                                                               $ (1,701)         $  7,959
    Adjustments to reconcile net income to net cash used in
      operating activities:
       Provision for loan and recourse losses                                            542                50
       Depreciation and amortization                                                   3,664             2,742
       Deferred tax benefit                                                           (3,298)             (746)
       Capitalized mortgage servicing rights, net of amortization                      3,055            (5,062)
       Deferred origination costs                                                        499               232
       Interest-only and residual certificates received in
          securitization transactions, net                                           (13,430)          (12,450)
       Changes in operating assets and liabilities:
          Increase in accounts receivable                                             (7,447)           (4,727)
          Decrease in loans held for sale, net                                        23,033             1,519
          Decrease (increase) in accrued interest receivable                          50,086            (7,426)
          (Increase) decrease in prepaid and other assets                            (14,640)              659
          (Decrease) increase in accounts payable and accrued expenses               (13,357)            9,575
          (Decrease) increase in investor payable                                    (11,308)           13,038
          Increase in advance payments by borrowers for taxes and insurance            1,057             2,249
                                                                                     -------           -------
             Net cash provided by operating activities                                16,755             7,612
                                                                                     -------           -------
Cash flows from investing activities:
    Purchase of equipment                                                             (1,069)           (4,905)
                                                                                     -------           -------
             Net cash used in investing activities                                    (1,069)           (4,905)
                                                                                     -------           -------
Cash flows from financing activities:
    (Repayments) proceeds from warehouse financing and other borrowings              (26,437)           12,019
    Decrease in bank payable, net                                                       (578)              (23)
                                                                                     -------           -------
             Net cash (used in) provided by financing activities                     (27,015)           11,996
                                                                                     -------           -------
             Net (decrease) increase in cash and interest-bearing deposits           (11,329)           14,703

Cash and interest-bearing deposits at beginning of period                             69,557            59,183
                                                                                     -------           -------
Cash and interest-bearing deposits at end of period                                 $ 58,228          $ 73,886
                                                                                     =======           =======

Supplemental Information:
Cash paid during the period for:
    Interest                                                                        $ 15,540          $ 11,717
                                                                                     =======           =======
    Income taxes                                                                    $  2,101          $  5,921
                                                                                     =======           =======

                          See accompanying notes to consolidated financial statements.

                                       3
</TABLE>
<PAGE>


                  DELTA FINANCIAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

   Delta  Financial  Corporation  (the  "Company"  or  "Delta")  is  a  Delaware
corporation, which was organized in August 1996.

   The accompanying  unaudited  consolidated  financial  statements  include the
accounts of the  Company  and its wholly  owned  subsidiaries.  All  significant
inter-company accounts and transactions have been eliminated in consolidation.

   The  accompanying  unaudited  consolidated  financial  statements  have  been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q. 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 the rules and  regulations  of the  Securities and Exchange
Commission. The accompanying unaudited consolidated financial statements and the
information included under the heading "Management's  Discussion and Analysis of
Financial  Condition and Results of  Operations"  should be read in  conjunction
with the audited  consolidated  financial  statements  and related  notes of the
Company for the year ended  December 31, 1999. The results of operations for the
three- and six-month periods ended June 30, 2000 are not necessarily  indicative
of the results that will be expected for the entire year.

    All  adjustments  that  are,  in  the  opinion  of  management,  considered
necessary  for a fair  presentation  of the  financial  position  and results of
operations  for the interim  periods  presented  have been made.  Certain  prior
period amounts in the financial  statements  have been  reclassified  to conform
with the current year presentation.


(2) SUMMARY OF REGULATORY SETTLEMENTS

   In September  1999,  the Company  settled  allegations  by the New York State
Banking  Department  (the "NYSBD") and a lawsuit by the New York State Office of
the Attorney General  ("NYSOAG")  alleging that Delta had violated various state
and federal  lending laws.  The global  settlement was evidenced by that certain
(a) Remediation  Agreement by and between Delta Funding and the NYSBD,  dated as
of  September  17, 1999 and (b)  Stipulated  Order on Consent by and among Delta
Funding,  Delta Financial and the NYOAG, dated as of September 17, 1999. As part
of the Settlement, Delta, among other things, implemented agreed upon changes to
its lending  practices;  will provide  reduced loan payments  aggregating  $7.25
million to certain  borrowers  identified  by the NYSBD;  and  created a fund of
approximately  $4.75  million  financed by the grant of 525,000  shares of Delta
Financial's common stock valued at a constant assumed priced of $9.10 per share,
which  approximates book value. The proceeds of the fund will be used, for among
other  things,  payments  to  borrowers,  to  pay  for  a  variety  of  consumer
educational and counseling programs.

   In March 2000, the Company finalized an agreement with the U.S. Department of
Justice (the "DOJ"), the Federal Trade Commission (the "FTC") and the Department
of Housing and Urban

                                       4


Development  ("HUD"),     to     complete     the    global    settlement     it
had  reached  with the NYSBD and NYOAG.  The  Federal  agreement  mandates  some
additional  compliance efforts for Delta, but it does not require any additional
financial commitment by Delta.

(3) IMPACT OF NEW ACCOUNTING STANDARDS

   In June  2000,  the FASB  issued  SFAS No.  138,  "Accounting  for  Certain
Derivative  Instruments and Certain Hedging  Activities - an amendment of FASB
Statement No. 133." This statement  amends and supersedes  certain  paragraphs
of SFAS No.  133.  The  effective  date for SFAS No. 138 is for  fiscal  years
beginning  after June 15, 2000.  SFAS No. 138 and 133 apply to  quarterly  and
annual financial  statements.  The Company does not believe that there will be
a material  impact on its financial  condition or results of  operations  upon
the adoption of SFAS No. 138 and 133.


(4) EARNINGS PER SHARE

   The  following  is  a  reconciliation   of  the  denominators   used  in  the
computations of basic and diluted Earnings Per Share ("EPS").  The numerator for
calculating both basic and diluted EPS is net income.




<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED          SIX MONTHS ENDED
                                                   JUNE 30,                   JUNE 30,
                                             -------------------        -----------------
<S>                                     <C>          <C>          <C>          <C>

(DOLLARS IN THOUSANDS, EXCEPT EPS DATA)      2000           1999        2000         1999
-------------------------------------------------------------------------------------------
Net (loss) income                          $(3,527)       $2,215     $(1,701)       $7,959
Weighted-average shares - basic          15,920,869   15,358,749   15,920,869   15,358,749
Basic EPS                                   $(0.22)        $0.14      $(0.11)        $0.52

Weighted-average shares - basic          15,920,869   15,358,749   15,920,869   15,358,749
Incremental shares-options                      ---       36,942          693       24,619
-------------------------------------------------------------------------------------------
Weighted-average shares - diluted        15,920,869   15,395,691   15,921,562   15,383,368
Diluted EPS                                 $(0.22)        $0.14      $(0.11)        $0.52
</TABLE>


(5) SUBSEQUENT EVENTS


   In July 2000, the Company decided to discontinue its correspondent operations
to focus exclusively on its less cash intensive broker and retail channels.

   In July 2000, the Company also sold a domain name for $2.125 million.

     In August 2000,  the Company  announced an  agreement to  restructure  (the
"Debt Restructuring") its outstanding $150 million aggregate principal amount of
9 1/2% senior notes due 2004 (the "Senior Notes"). With the consent of more than
fifty  percent of its Senior  Note  holders,  a negative  covenant in the Senior
Notes  Indenture  that  prevented  the Company  from  encumbering,  or otherwise
obtaining  financing against,  any of its residual assets has been modified.  In
consideration  for the Senior Note holders' consent to modify this  restriction,
the  Company  has agreed to offer  current  Senior  Note  holders  the option of
exchanging  in an  exchange  offering  (the  "Exchange  Offer")  their  existing
securities  for new senior  notes (the

                                       5

"New  Notes"),  to   be  secured   by  at least  $165  million of the  Company's
residual  assets.  The New Notes will have the same  coupon,  face  amount,  and
maturity  date as the Senior  Notes.  Note holders of the New Notes will receive
ten-year  warrants  to buy  approximately  1.6  million  shares,  at an  initial
exercise price of $9.10 per share,  subject to upward or downward  adjustment in
certain  circumstances.  The Company  expects that this  Exchange  Offer will be
completed by October 15,  2000.  All of the other terms of the New Notes will be
substantially similar to the terms of the Senior Notes.

   In August  2000,  the Company also  announced  that it was  streamlining  its
operations to improve  efficiencies  and increase  profitability by reducing its
workforce,  consolidating  some of its offices and reducing the  compensation of
its senior management and some of its general staff.

   In August  2000,  the  Company  entered  into  a financing  agreement  with a
lender to finance  approximately  $17 million of its  interest-only and residual
certificates in accordance with its Debt Restructuring.



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

THE FOLLOWING  DISCUSSION  SHOULD BE READ IN CONJUNCTION  WITH THE  CONSOLIDATED
FINANCIAL  STATEMENTS  OF THE COMPANY  AND  ACCOMPANYING  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS SET FORTH THEREIN.

GENERAL

   Delta  Financial   Corporation  (the  "Company"  or  "Delta"),   through  its
wholly-owned   subsidiaries,   engages  in  the  consumer  finance  business  by
originating,  acquiring, selling and servicing non-conforming home equity loans.
Throughout its 18 years of operating history, the Company has focused on lending
to individuals  who generally have impaired or limited credit profiles or higher
debt-to-income ratios for such purposes as debt consolidation, home improvement,
mortgage refinancing or education.

   Through  its  wholly-owned  subsidiary,  Delta  Funding  Corporation  ("Delta
Funding"),  the Company originates home equity loans indirectly through licensed
mortgage   brokers  and  other  real  estate   professionals   who  submit  loan
applications  on behalf of the borrower  ("Brokered  Loans") and also  purchases
loans from  mortgage  bankers and smaller  financial  institutions  that satisfy
Delta's underwriting guidelines  ("Correspondent Loans"). However, in July 2000,
the  Company  decided  to  discontinue  its  correspondent  operations  to focus
exclusively on its less cash intensive broker and retail channels. Delta Funding
currently originates the majority of its loans in 24 states, through its network
of approximately 1,500 brokers.

   Through its  wholly-owned  subsidiary,  Fidelity  Mortgage  Inc., the Company
develops retail loan leads ("Retail Loans")  primarily through its telemarketing
system and its network of 14 retail  offices  located in eight states.  In March
2000, the Company closed a loan production center in Georgia.  In July 2000, the
Company  opened a new retail  origination  call  center to expand the  Company's
existing retail operations at its office in Woodbury, New York.

                                       6

   In June 1999, the Company announced a settlement in principle with the NYOAG,
which was to provide for  retrospective  relief to certain borrowers in the form
of reduced monthly obligations aggregating $6 million and prospective changes to
some of the  Company's  lending  practices.  The NYOAG took  issue with  Delta's
lending  practices,  specifically  which loans  should and should not be made by
Delta.  The  settlement in principle was later expanded to include the NYSBD and
the  DOJ,  which  had  raised  similar  concerns  relating  to  Delta's  lending
practices.  In September 1999, the Company  finalized its  settlements  with the
NYSBD and the NYOAG,  but only after the NYOAG filed suit against the Company in
August  1999,  as evidenced  by (1) a  Remediation  Agreement by and between the
Company and the NYSBD,  and (2) a  Stipulated  Order on Consent by and among the
Company and the NYOAG.

   As part of the final global  settlement (in lieu of the previously  announced
$6 million  settlement  with the  NYOAG),  the  Company  agreed to,  among other
things, implement agreed upon changes to its lending practices;  provide reduced
loan payments  aggregating $7.25 million to certain borrowers  identified by the
NYSBD;  and create a reversionary  fund ("the Fund"),  administered by a trustee
named by the NYSBD,  financed by the grant by Delta of 525,000 shares of Delta's
common  stock,  valued at an assumed  constant  price of $9.10 per share,  which
approximates the book value of the shares.  All proceeds raised through the Fund
shall be used for  restitution  and/or to pay for a variety of  educational  and
counseling programs at the discretion of the NYSBD.

   The Company  recorded a $6.0 million  pre-tax charge in the second quarter of
1999 when it reached a settlement in principle with the NYOAG. Subsequently,  an
additional $6.0 million pre-tax charge was recorded in the third quarter of 1999
when the Company reached a global  settlement with the NYSBD and the NYOAG.  The
Company  finalized its agreement with the DOJ in March 2000. The DOJ settlement,
which parallels the NYSBD and NYOAG  settlement  agreements,  was also signed by
the FTC and HUD. See "Legal Proceedings" for a discussion of the settlement.

   For the three months ended June 30, 2000 the Company originated and purchased
$264  million  of  loans,  a  decrease  of 36% over the  $414  million  of loans
originated  and purchased in the  comparable  period in 1999. Of these  amounts,
approximately $167 million were originated  through its network of brokers,  $71
million  were  originated  through  its  retail  network  and $26  million  were
purchased from its network of correspondents  during the three months ended June
30, 2000  compared to $257 million,  $92 million and $65 million,  respectively,
for the same period in 1999. In July  2000, the  Company  decided to discontinue
its  correspondent operations  to  focus exclusively  on its less cash intensive
broker and retail channels.


   The following  table sets forth  information  relating to the delinquency and
loss experience of the mortgage loans serviced by the Company (primarily for the
securitization  trusts,  as  described  below) for the  periods  indicated.  The
Company is not the holder of the  securitization  loans,  but generally  retains
interest-only or residual  certificates issued by the securitization  trusts, as
well as the  servicing  rights,  the  value  of each of which  may be  adversely
affected by defaults.

                                       7



                                                   THREE MONTHS ENDED
                                             --------------------------------
(Dollars in thousands)                         JUNE 30,            MARCH 31,
                                                2000                2000
                                             -----------          -----------
Total Outstanding Principal Balance
  (at period end)......................     $  3,816,818         $  3,732,118
Average Outstanding(1).................        3,792,340            3,698,545
DELINQUENCY (at period end) 30-59 Days:
  Principal Balance....................     $    208,674         $    195,375
  Percent of Delinquency(2)............            5.47%                5.24%
60-89 Days:
  Principal Balance....................     $    103,347         $     81,290
  Percent of Delinquency(2)............            2.71%                2.18%
90 Days or More:
  Principal Balance...................      $     54,718         $     48,619
  Percent of Delinquency(2)............            1.43%                1.30%
Total Delinquencies:
  Principal Balance....................     $    366,739         $    325,284
  Percent of Delinquency(2)............            9.61%                8.72%
FORECLOSURES
  Principal Balance....................     $    190,059         $    192,067
  Percent of Foreclosures by Dollar(2).            4.98%                5.15%
REO (at period end)...................      $     47,098         $     44,588
   Percent of REO......................            1.23%                1.19%
Net Losses on Liquidated Loans.........     $    (6,517)         $    (4,544)
Percentage of Net Losses on Liquidated Loans
  (based on Average Outstanding Balance)(3)      (0.69%)              (0.49%)
---------------
(1)Calculated by summing the actual outstanding principal balances at the end of
   each month and dividing the total  principal  balance by the number of months
   in the applicable period.
(2)Percentages are expressed based upon the total outstanding  principal balance
   at the end of the indicated period.
(3)Annualized.

    Management   believes  that its loan  servicing  portfolio  may incur higher
delinquency  and loss  experience  for the  foreseeable  future as its portfolio
becomes more seasoned (aged) and is not offset as much by newer originated loans
(loan  originations  have been lower as compared to prior periods) which usually
carry a lower  delinquency and loss experience and due to the overall decline in
its servicing portfolio due to the sale of its servicing on loans sold through a
securitization in June 2000.



FAIR VALUE ADJUSTMENTS

   The  fair  values  of  both  interest-only  and  residual   certificates  and
capitalized mortgage servicing rights are significantly affected by, among other
factors,  prepayments  of loans and estimates of future  prepayment  rates.  The
Company continually  reviews its prepayment  assumptions in light of company and
industry  experience  and  makes  adjustments  to those  assumptions  when  such
experience indicates.

                                       8

   The Company makes assumptions  concerning prepayment rates and defaults based
upon the seasoning of its existing securitization loan portfolio.  The following
table  compares the prepayment  assumptions  used during the first six months of
2000 (the "new"  assumptions),  with  those used  during the first six months of
1999 (the "old" assumptions):

LOAN TYPE               MONTH 1 SPEED                 PEAK SPEED
---------               -------------                 ----------
                         NEW      OLD                 NEW     OLD
                         ---      ---                 ---     ---
Fixed Rate Loans        4.0%     4.8%                 31%     31%
Six-Mo. LIBOR ARMs     10.0%    10.0%                 50%     50%
Hybrid ARMs             4.0%     6.0%                 50%     50%

   In the fourth  quarter of 1999,  the  Company  lowered its  prepayment  speed
assumption  along parts of the  prepayment  rate vector curve while  leaving the
peak  speeds  intact.  In  addition,  the  Company  increased  its loss  reserve
initially  established  for both  fixed- and  adjustable-rate  loans sold to the
securitizations  trusts from 2.20% to approximately 3.10% of the issuance amount
securitized.

   The prepayment rate assumption was revised primarily to reflect the Company's
actual loan performance  experience over the past several  quarters.  Management
believes that industry  consolidation and a higher interest rate environment has
and will continue to deter borrowers from refinancing  their mortgage loans. The
loan loss reserve  assumption  was revised to reflect  management's  belief that
slower prepayment speeds,  coupled with an anticipated flat to slightly moderate
rise in home  values as  compared  to the past few years and  borrowers  who had
avoided  default  through  refinancing may be readily unable to do so because of
industry  consolidation  and a higher  interest  rate  environment,  may have an
adverse effect on the Company's non-performing loans.

   An annual  discount  rate of 12.0% was  utilized in  determining  the present
value of cash flows from residual  certificates,  using the  "cash-out"  method,
which are the predominant  form of retained  interests at both June 30, 2000 and
December 31, 1999.

   In the second  quarter  of 2000,  the  Company  was  required  to take a $3.7
million valuation  adjustment to its interest only and residual  certificates in
accordance  with SFAS 115, due to the increase in one-month  LIBOR.  Some of the
Company's  interest only and residual  certificates  are backed by floating rate
securities, which are susceptible to interest rate risk associated with movement
in short-term interest rates.

   The Company uses the same prepayment assumptions in estimating the fair value
of its mortgage servicing rights.

                                       9


RESULTS OF OPERATIONS
THREE MONTHS  ENDED JUNE 30, 2000  COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1999

GENERAL

   The  Company's  net loss for the three  months  ended June 30,  2000 was $3.5
million, or ($0.22) per share,  compared to net income of $2.2 million, or $0.14
per share, for the three months ended June 30, 1999. Excluding a one-time charge
relating to the Company's original settlement in principle with the NYOAG (which
settlement has been replaced by the Company's global  settlement with the NYSBD,
NYOAG and the DOJ), the Company's net income for the three months ended June 30,
1999 would have been $5.8 million,  or $0.38 per share.  Comments  regarding the
components of net income are detailed in the following paragraphs.

REVENUES

   Total  revenues  decreased  $15.5  million,  or 35%, to $28.9 million for the
three months ended June 30, 2000,  from $44.4 million for the comparable  period
in 1999. The decrease in revenue was primarily attributable to a decrease in the
net  gain  recognized  on the sale of  mortgage  loans  and to a lesser  extent,
decreases in interest income and origination fees.

   The Company  originated  and purchased $264 million of mortgage loans for the
three months ended June 30, 2000,  representing a 36% decrease from $414 million
of mortgage loans  originated  and purchased for the comparable  period in 1999.
The  Company  securitized  and sold $275  million in loans (and sold the related
servicing  rights)  during the three months ended June 30, 2000 compared to $420
million securitized or sold in the corresponding period in 1999,  representing a
35% decrease.  Total loans  serviced  increased 14% to $3.82 billion at June 30,
2000 from $3.36 billion at June 30, 1999.

   NET  GAIN ON SALE OF  MORTGAGE  LOANS.  Net  gain on sale of  mortgage  loans
represents (1) the sum of (a) the fair value of the  interest-only  and residual
certificates retained by the Company in a securitization for each period and the
market value of the  interest-only  certificates  sold in  connection  with each
securitization,  (b) the fair value of  capitalized  mortgage  servicing  rights
associated  with  loans  securitized  in each  period  and the  market  value of
capitalized   mortgage   servicing   rights   sold  in   connection   with  each
securitization,  and (c)  premiums  earned  on the  sale  of  whole  loans  on a
servicing-released basis, (2) less the (x) premiums paid to originate or acquire
mortgage loans, (y) costs associated with securitizations and (z) any hedge loss
(gain) associated with a particular securitization.

   Net gain on sale of mortgage loans decreased $11.6 million,  or 51%, to $11.3
million for the three  months ended June 30,  2000,  from $22.9  million for the
comparable  period in 1999. This decrease was primarily due to a 35% decrease in
the amount of loans  securitized  or sold to $275  million in 2000,  compared to
$420 million of loans  securitized  or sold in 1999; and a lower amount of gross
excess spread  expected to be earned over the life of the loans as calculated by
the weighted  average coupon on the pool of mortgage loans  securitized less the
total cost of funds on the  securitization.  The  decrease  in the gross  excess
spread was attributable primarily to wider   spreads  demanded  by  asset-backed
investors   who   purchased  the   pass-through   certificates   issued  by  the
securitization trust during the three months ended June 30, 2000 compared to the
corresponding  period  in 1999.  The  decrease  was  partially  offset  by lower


                                       10

aggregate  premiums  paid to acquire  loans,  resulting  from both a decrease in
amount of loans purchased  through the  correspondent  channel and lower average
premiums paid to correspondents. The weighted average net gain on sale ratio was
4.1%  for the  three  months  ended  June  30,  2000  compared  to 5.5%  for the
comparable period in 1999.

   INTEREST INCOME.  Interest  income  primarily  represents  the sum of (1) the
difference  between the  distributions the Company receives on its interest-only
and residual certificates and the adjustments recorded to reflect changes in the
fair  value  of the  interest-only  and  residual  certificates,  (2) the  gross
interest  earned on loans  held for sale  (other  than for  loans  sold into the
mortgage loan conduit,  in which case it is the net interest  spread),  (3) with
respect to loans sold into the mortgage  loan conduit,  the net interest  margin
earned  (excess  servicing)  between the  weighted  average rate on the mortgage
loans less the conduit's variable funding rate plus administrative fees, and (4)
interest earned on cash collection balances.

   Interest  income  decreased  $2.1  million,  or  22%, to $7.6 million for the
three months ended June 30, 2000, from $9.7 million for the comparable period in
1999.  The decrease in interest  income was  primarily  due to (1) a higher fair
value  adjustment  during the second  quarter of 2000 due to an  increase in one
month LIBOR (see "Fair Value Adjustment")and (2)a decreased amount of loans held
prior to  securitization,  reflecting lower overall loan production in the three
months ended June 30, 2000.  This was partially  offset by (a) a higher mortgage
coupon  rate of 11.2% from 10.0%  reflecting  a higher  economic  interest  rate
environment  and (b) the  accounting  for loans  sold  through a  mortgage  loan
conduit (special purpose vehicle) prior to  securitization in the second quarter
of 1999, in which the Company earns and records the net interest  margin between
the interest rate earned on the pool of mortgage loans sold to the mortgage loan
conduit and the conduit financing rate, less administrative expenses.

   SERVICING  FEES.  Servicing  fees  represent  all  contractual  and ancillary
servicing  revenue received by the Company less (1) the offsetting  amortization
of the capitalized  mortgage servicing rights,  and any adjustments  recorded to
reflect valuation allowances for the impairment in mortgage servicing rights and
(2) prepaid interest shortfalls.

   Servicing  fees remained flat at $3.7 million for both the three months ended
June 30, 2000, and June 30, 1999.  Contractual servicing income increased due to
the increase in the aggregate size of the Company's servicing portfolio, but was
offset by a decrease in ancillary service fees collected. The average balance of
the mortgage  loans  serviced by the Company  increased 15% to $3.79 billion for
the three months ended June 30, 2000 from $3.29  billion  during the  comparable
period in 1999.

   ORIGINATION  FEES.  Origination  fees  represent  fees earned on brokered and
retail  originated  loans.  Origination fees decreased $1.7 million,  or 21%, to
$6.4 million for the three months ended June 30, 2000, from $8.1 million for the
comparable  period in 1999.  The decrease was  primarily the result of (a) a 35%
decrease in broker  originated loans and (b) a 23% decrease in retail originated
loans.

                                       11

EXPENSES

   Total  expenses  decreased by $5.8 million,  or 14%, to $35.0 million for the
three months ended June 30, 2000,  from $40.8 million for the comparable  period
in 1999.  The  decrease  was  primarily  the result of a decrease in general and
administrative  costs related to the Company's original  settlement in principle
with the NYOAG in June 1999 (which settlement has been replaced by the Company's
global settlement with the NYSBD, NYOAG and the DOJ) and a decrease in personnel
costs, partially offset by an increase in interest expense.

   PAYROLL  AND RELATED  COSTS.  Payroll and  related  costs  include  salaries,
benefits  and  payroll  taxes  for all  employees.  Payroll  and  related  costs
decreased by $2.0  million,  or 11%, to $15.7 million for the three months ended
June 30,  2000,  from  $17.7  million  for the  comparable  period in 1999.  The
decrease was primarily due to a decline in staffing in the Company's  broker and
retail  divisions  and in  commissions  paid to these  employees,  related  to a
decrease  in loans  originated.  In  addition,  there was a decrease  in bonuses
related to  executive  employees.  This was  partially  offset by an increase in
staffing related to growth in the Company's servicing portfolio, coupled with an
increase in employee fringe benefits.  As of June 30, 2000, the Company employed
1,063 full- and  part-time  employees,  compared  to 1,278  full- and  part-time
employees as of June 30, 1999.

   INTEREST  EXPENSE.  Interest  expense includes the borrowing costs to finance
loan  originations  and  purchases,   equipment   financing  and  the  Company's
overall operations under the Senior Notes and the Company's credit facilities.

   Interest expense  increased by $2.4 million,  or 39%, to $8.5 million for the
three months ended June 30, 2000 from $6.1 million for the comparable  period in
1999. The increase was primarily  attributable  to the accounting for loans sold
through a mortgage loan conduit prior to their securitization  during the second
quarter of 1999, in which the Company earns and records the net interest  margin
between  the  interest  rate  earned on the pool of  mortgage  loans sold to the
mortgage  loan  conduit  and the conduit  financing  rate,  less  administrative
expenses.  Typically,  interest expense related to the Company's other warehouse
financing and borrowings are recorded directly to interest expense.  The Company
did not utilize its mortgage loan conduit  during the second quarter of 2000. In
addition,  there was an  increase in the cost of funds on the  Company's  credit
facilities,  which were tied to  one-month  LIBOR.  The  one-month  LIBOR  index
increased to an average interest rate of 6.5% in the three months ended June 30,
2000,  compared to an average interest rate of 5.0% for the comparable period in
1999.

   GENERAL AND  ADMINISTRATIVE  EXPENSES.  General and  administrative  expenses
consist primarily of office rent, insurance, telephone,  depreciation,  goodwill
amortization, legal reserves and fees, license fees, accounting fees, travel and
entertainment  expenses,  advertising and promotional expenses and the provision
for loan losses on the inventory of loans held for sale and recourse loans.

     General and  administrative  expenses  decreased  $6.2 million,  or 37%, to
$10.7  million for the three months ended June 30, 2000,  from $16.9 million for
the    comparable  period      in     1999.    This    decrease  was   primarily
attributable to  the  Company's  original   settlement in   principle  with  the

                                       12

NYOAG  (which   settlement  has  been    replaced  by    the   Company's  global
settlement with the NYSBD, NYOAG and the DOJ).

   INCOME TAXES. Income taxes are accounted for under SFAS No. 109,  "Accounting
for Income  Taxes."  Deferred tax assets and  liabilities  are recognized on the
income  reported in the financial  statements  regardless of when such taxes are
paid. These deferred taxes are measured by applying current enacted tax rates.

   The Company  recorded a tax benefit of $2.5  million and a tax  provision  of
$1.5 million for the three months ended June 30, 2000 and 1999, respectively.



SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999

GENERAL

   The  Company's  net  loss for the six  months  ended  June 30,  2000 was $1.7
million, or ($0.11) per share,  compared to net income of $8.0 million, or $0.52
per share,  for the six months ended June 30, 1999.  Excluding a one-time charge
relating to the Company's original settlement in principle with the NYOAG (which
settlement has been replaced by the Company's global  settlement with the NYSBD,
NYOAG and the DOJ),  the  Company's net income for the six months ended June 30,
1999 would have been $11.6 million,  or $0.76 per share.  Comments regarding the
components of net income are detailed in the following paragraphs.

REVENUES

   Total revenues decreased $22.1 million,  or 25%, to $64.9 million for the six
months  ended June 30, 2000,  from $87.0  million for the  comparable  period in
1999.  The decrease in revenue was primarily  attributable  to a decrease in the
net  gain  recognized  on the  sale of  mortgage  loans  and  origination  fees,
partially offset by an increase in interest income and servicing fees.

   The Company  originated  and purchased $551 million of mortgage loans for the
six months ended June 30, 2000, representing a 33% decrease from $819 million of
mortgage loans  originated and purchased for the comparable  period in 1999. The
Company  securitized  and sold  $565  million  in loans  (and  sold the  related
servicing rights on its second quarter $275 million  securitization)  during the
six months ended June 30, 2000 compared to $795 million  securitized  or sold in
the  corresponding  period in 1999,  representing  a 29%  decrease.  Total loans
serviced  increased  14% to $3.82 billion at June 30, 2000 from $3.36 billion at
June 30, 1999.

   NET GAIN ON SALE OF  MORTGAGE  LOANS.  Net  gain  on sale of  mortgage  loans
decreased $22.1 million,  or 46%, to $25.9 million for the six months ended June
30, 2000,  from $48.0 million for the comparable  period in 1999.  This decrease
was primarily due to a 29% decrease in the amount of loans  securitized or sold;
a revision to the  Company's  loan loss reserve  assumption  in 1999 (see "-Fair
Value Adjustments");  a change in the securitization structure which reduced the
Company's profitability (but provided better cash flow dynamics, such as selling
of the senior interest-only certificate), coupled with wider spreads demanded by
asset-backed  investors  who purchase the  pass-through  certificates  issued by
securitization  trusts during the six months ended June 30, 2000 compared to the
corresponding  period  in 1999.  The  decrease  was  partially  offset  by lower
aggregate  premiums  paid to acquire  loans,  resulting  from both a decrease in
amount of

                                       13

loans    purchased  through    the  correspondent  channel   and   lower average
premiums paid to correspondents. The weighted average net gain on sale ratio was
4.6% for the six months ended June 30, 2000 compared to 6.0% for the  comparable
period in 1999.

   INTEREST  INCOME.  Interest income  increased $2.0 million,  or 12%, to $18.1
million  for the six months  ended June 30,  2000,  from $16.1  million  for the
comparable  period in 1999. The increase in interest income was primarily due to
(1) the  accounting  of loans sold  through a  mortgage  loan  conduit  prior to
securitization  in the first six months of 1999,  in which the Company earns and
records the net interest  margin between the interest rate earned on the pool of
mortgage loans sold to the mortgage loan conduit and the conduit financing rate,
less administrative expenses and (2) a higher mortgage coupon rate of 11.1% from
10.1% reflecting a higher economic interest rate environment.

   SERVICING FEES. Servicing fees increased $0.4 million, or 5%, to $7.8 million
for the six months  ended June 30, 2000,  from $7.4  million for the  comparable
period in 1999.  This increase was primarily due to an increase in the aggregate
size of the  Company's  servicing  portfolio,  but was offset by a  decrease  in
ancillary  service fees  collected.  The average  balance of the mortgage  loans
serviced by the Company  increased 18% to $3.75 billion for the six months ended
June 30, 2000 from $3.19 billion during the comparable period in 1999.

   ORIGINATION FEES.  Origination fees decreased $2.4 million,  or 15%, to $13.1
million  for the six months  ended June 30,  2000,  from $15.5  million  for the
comparable  period in 1999.  The decrease was  primarily the result of (a) a 31%
decrease in broker  originated loans and (b) a 16% decrease in retail originated
loans.



EXPENSES

   Total expenses decreased by $6.0 million, or 8%, to $67.8 million for the six
months  ended June 30, 2000,  from $73.8  million for the  comparable  period in
1999.  The  decrease  was  primarily  the  result of a decrease  in general  and
administrative  costs related to the Company's original  settlement in principle
with the NYOAG in June 1999 (which settlement has been replaced by the Company's
global settlement with the NYSBD, NYOAG and the DOJ) and a decrease in personnel
costs, partially offset by an increase in interest expense.

   PAYROLL  AND RELATED  COSTS.  Payroll and  related  costs  decreased  by $2.3
million,  or 7%, to $31.3  million for the six months ended June 30, 2000,  from
$33.6 million for the comparable  period in 1999. The decrease was due primarily
to a decline in staffing in the  Company's  broker and retail  divisions  and in
commissions paid to these employees,  related to a decrease in loans originated.
In addition,  there was a decrease in bonuses  related to  executive  employees.
This was  partially  offset by an increase in staffing  related to growth in the
Company's  servicing  portfolio,  coupled  with an increase  in employee  fringe
benefits.  As of June 30, 2000,  the Company  employed 1,063 full- and part-time
employees, compared to 1,278 full- and part-time employees as of June 30, 1999.

   INTEREST  EXPENSE.  Interest  expense  increased by $4.1 million,  or 34%, to
$16.3  million for the six months ended June 30, 2000 from $12.2 million for the
comparable  period in 1999.  The  increase  was  primarily  attributable  to the
accounting  for  loans  sold  through a  mortgage  loan

                                       14

conduit   prior   to their  securitization  during the six months ended June 30,
1999, in which the Company earns and records the net interest margin between the
interest  rate earned on the pool of mortgage  loans sold to the  mortgage  loan
conduit and the conduit financing rate, less administrative expenses. Typically,
interest  expense  related  to  the  Company's  other  warehouse  financing  and
borrowings  are  recorded  directly  to  interest  expense.  The Company did not
utilize its mortgage loan conduit  during the six months ended June 30, 2000. In
addition,  there was a  increase  in the cost of funds on the  Company's  credit
facilities,  which were tied to  one-month  LIBOR.  The  one-month  LIBOR  index
increased to an average  interest  rate of 6.2% in the six months ended June 30,
2000,  compared to an average interest rate of 5.0% for the comparable period in
1999.

   GENERAL AND  ADMINISTRATIVE  EXPENSES.  General and  administrative  expenses
decreased  $7.8 million,  or 28%, to $20.2 million for the six months ended June
30, 2000,  from $28.0 million for the comparable  period in 1999.  This decrease
was primarily  attributable to the Company's original  settlement with the NYOAG
(which  settlement has been replaced by the Company's global settlement with the
NYSBD, NYOAG and the DOJ) and higher legal-related costs and reserves during the
six months ended June 30, 1999.

   INCOME  TAXES.  The Company  recorded a tax benefit of $1.2 million and a tax
provision  of $5.2  million  for the six months  ended  June 30,  2000 and 1999,
respectively.


FINANCIAL CONDITION

JUNE 30, 2000 COMPARED TO DECEMBER 31, 1999

   Cash and interest-bearing  deposits decreased $11.4 million, or 16%, to $58.2
million at June 30, 2000,  from $69.6 million at December 31, 1999. The decrease
was primarily the result of lower  prepayments which caused a decrease in monies
held in securitization trust accounts by the Company, acting as servicer for its
ongoing securitization program.

   Accounts receivable  increased $7.4 million, or 23%, to $39.8 million at June
30, 2000,  from $32.4  million at December 31, 1999.  The increase was primarily
attributable  to an  increase in  reimbursable  servicing  advances  made by the
Company, acting as servicer on its securitizations,  related to a higher average
servicing portfolio,  coupled with a $2.7 million receivable related to the sale
of  servicing  rights in  conjunction  with the  Company's  second  quarter loan
securitization.

   Loans held for sale, net decreased $23.5 million, or 26%, to $65.5 million at
June 30,  2000,  from $89.0  million at December  31,  1999.  This  decrease was
primarily due to the net difference  between loan originations and loans sold or
securitized during the six months ended June 30, 2000.

   Accrued interest receivable decreased $50.1 million, or 79%, to $13.2 million
at June 30, 2000,  from $63.3  million at December 31, 1999.  This  decrease was
primarily due to the sale of interest receivable assets,  partially offset by an
increase  in  reimbursable  interest  advances  made by the  Company,  acting as
servicer on its securitizations.

   Capitalized  mortgage  servicing  rights  decreased  $3.0 million,  or 7%, to
$42.9 million at June 30, 2000,  from $45.9  million at December 31, 1999.  This
decrease was  primarily  due to the

                                       15

amortization   of   the  capitalized  mortgage  servicing  rights  which was not
offset in the second  quarter  2000,  with a new recorded  capitalized  mortgage
servicing rights usually associated with a securitization.  The Company sold its
contractual right to service the loans on its second quarter 2000 securitization
for a cash premium.

   Interest-only and residual  certificates  increased $13.4 million,  or 6%, to
$238.1 million at June 30, 2000,  from $224.7 million at December 31, 1999. This
increase  is  primarily  attributable  to  the  Company's  receipt  of  residual
certificates  valued and recorded at $17.8 million from loans securitized during
the six months ended June 30, 2000,  partially offset by normal amortization due
to cash distributions and fair value adjustments.

   Prepaid and other assets  increased $14.1 million,  or 261%, to $19.5 million
at June 30, 2000,  from $5.4 million at December  31,  1999.  This  increase was
primarily  attributable to the Company's  investment in new affiliate  companies
(qualified special purpose entities used for securitizations).

   Warehouse financing and other borrowings  decreased $26.4 million, or 24%, to
$82.6 million at June 30, 2000,  from $109.0 at December 31, 1999. This decrease
was  primarily  attributable  to the  repayment  in full of the  Company's  bank
syndicate working capital line in June 2000.

   The aggregate principal balance of the Senior Notes totaled $149.5 million at
June 30, 2000 and December 31,  1999,  net of  unamortized  bond  discount.  The
Senior Notes accrue interest at a rate of 9.5% per annum, payable  semi-annually
on February 1 and August 1 (See Subsequent Events, Note 5).

   Accounts  payable and accrued  expenses  decreased $13.3 million,  or 31%, to
$30.3  million at June 30, 2000,  from $43.6  million at December 31, 1999.  The
decrease was  primarily the result of timing of various  operating  accruals and
payables.

   Investor  payable  decreased $11.3 million,  or 14%, to $70.9 million at June
30, 2000,  from $82.2  million at December 31, 1999.  The decrease was primarily
the result of lower  prepayments,  which caused a decrease in the amount payable
to  investors.  Investor  payable is  comprised  of all  principal  collected on
mortgage  loans and accrued  interest.  Variability in this account is primarily
due to the principal payments collected within a given collection period.

   Deferred tax liability  decreased  $3.3  million,  or 32%, to $7.1 million as
June 30,  2000,  from $10.4  million as  December  31,  1999.  This  decrease is
primarily due to a tax benefit of $1.2 million and tax payments of $2.1 million.


LIQUIDITY AND CAPITAL RESOURCES

    The Company has primarily operated on a negative cash flow basis in the past
and anticipates that it will continue to have a negative operating cash flow for
the   foreseeable  future   due  primarily  to lower  projected  aggregate  cash
inflows from the Company's retained interest-only and residual certificates. The
lower  projected  inflows are due to expected timing  differences  between older
deals cash flowing  less per month per deal as the  mortgage  pool pays down and
newer  deals  not yet  cash  flowing  until  initial  reserve  requirements  are
satisfied.  As initial reserve requirements on some newer deals are reached, the
Company

                                       16

will   begin   to  receive    additional   cash   inflows  from   its   retained
interest-only and residual  certificates  which,  coupled with (a) the Company's
continued   concentration   on  its  less   cash-intensive   broker  and  retail
originations,  and (b) its recent history of utilizing favorable  securitization
structures   that  have  allowed  the  Company  to  sell  senior   interest-only
certificates  and/or  mortgage  servicing  rights for an up front cash  purchase
price, may help offset the operating cash deficit in future  quarters.  However,
market conditions and various other  possibilities  identified below under "Risk
Factors" could impact the Company's cash flows  potentially  resulting in a more
significant negative cash flow.

   For the six months  ended June 30, 2000,  the Company had an  operating  cash
flow of $16.8 million compared to an operating cash flow of $7.6 million for the
comparable period in 1999. The increase in operating cash flow was primarily due
to the Company's sale of interest  receivable assets during the six months ended
June 30, 2000, which, due to the "off-balance  sheet" nature of the transactions
are classified as "operating  activities." However, the majority of the proceeds
-  approximately  $25 million - from these interest  receivable  asset sales was
used to repay the  Company's  bank  syndicate  working  capital  line,  which is
classified as a "financing activity." Excluding those proceeds that were used to
repay the working  capital line from operating cash flows results in a pro forma
net operating deficit of $[8.2] million.

   To a lesser extent, the increase in operating  cash flow  also  was  due to a
reduction in tax payments and the  Company's  de-emphasis  of the  correspondent
loan  production  channel  (thereby  decreasing  the amount of premiums  paid to
correspondents)  during the six months ended June 30, 2000.  This  was partially
offset by a decrease in cash flows from the Company's retained interest-only and
residual certificates, a reduction in cash received on the sale of interest only
assets at the time of securitization  and the Company's use of operating cash to
fund  interest  (delinquency)  and  servicing  advance  obligations  required as
servicer for its securitization  program.  These interest and servicing advances
are  reimbursable to the Company as the borrowers repay their  obligations  over
time. As such, the exact timing of these reimbursements cannot be predicted with
certainty.

   Currently, the Company's primary cash requirements include the funding of (1)
loan  originations  pending their pooling and sale, (2) interest  expense on its
Senior Notes and warehouse and other financings,  (3) fees,  expenses,  interest
(delinquency) advances,  servicing-related advances and tax payments incurred in
connection with its securitization  program, and (4) ongoing  administrative and
other operating expenses.

   The Company must be able to sell loans and obtain adequate credit  facilities
and other  sources of funding in order to  continue  to  originate  and  service
loans.  Historically,  the Company has utilized various financing facilities and
an equity  financing  to offset  negative  operating  cash flows and support the
continued growth of its loan originations, securitizations and general operating
expenses. In July 1997, the Company completed an offering of the Senior Notes. A
portion of the Senior Notes  proceeds  were used to pay down  various  financing
facilities  with  the  remainder  used  to fund  the  Company's  growth  in loan
originations  and its ongoing  securitization  program.  The  Company's  primary
sources of liquidity  continue to be warehouse and other  financing  facilities,
securitizations  (of  mortgage  loans,  interest   (delinquency)   advances  and
servicing advances) and, subject to market conditions, sales of whole loans, and
debt and equity  securities.  The Company  also  anticipates,  subject to market
conditions,  utilizing net interest

                                       17

margin   securitizations ("NIMS") and/or   other financing  against its residual
assets, following its Debt Restructuring, which was announced subsequent to June
30,  2000 and which  permits the  Company to now sell  and/or  obtain  financing
against a portion of its residual and interest-only certificates.

   To  accumulate  loans for  securitization,  the  Company  borrows  money on a
short-term basis through warehouse lines of credit.  The Company has relied upon
a few lenders to provide the primary credit facilities for its loan originations
and purchases.  The Company had three  warehouse  facilities as of June 30, 2000
for this purpose.  One of the Company's facilities is a $200 million credit line
with a variable  rate of  interest.  This  credit line was renewed in June 2000.
However, the Company and the lender have not finalized all terms and as such are
still operating under the existing  agreement.  The Company's  second  warehouse
facility is a renewal of a $200  million  mortgage  loan conduit with a variable
rate of interest and a final  maturity  date of September  2000.  The  Company's
third  warehouse  facility is a $200 million credit facility that has a variable
rate of interest and a final  maturity date of September  2000.  There can be no
assurance  that  the  Company  will be  able to  renew  any of  these  warehouse
facilities at their respective maturities.

   The  Company is  required  to comply with  various  operating  and  financial
covenants as provided in the agreements  described above which are customary for
agreements of their type.  The continued  availability  of funds provided to the
Company  under these  agreements  is subject to,  among  other  conditions,  the
Company's  continued  compliance with these covenants.  Management believes that
the Company is in compliance with all such covenants  under these  agreements as
of June 30, 2000.

   The Company  purchased a total of 116,800  shares of its common  stock during
the year ended December 31, 1998, under the Company's stock repurchase  program,
at a total cost of $1.3 million. All of the repurchased shares were purchased in
open market transactions at then prevailing market prices.  During the first six
months of 2000, no additional shares were repurchased.



INTEREST RATE RISK

    The  Company's   primary   market  risk  exposure  is  interest  rate  risk.
Profitability  may be  directly  affected by the level of, and  fluctuation  in,
interest  rates,  which affect the  Company's  ability to earn a spread  between
interest  received on its loans and the costs of its borrowings,  which are tied
to various United States  Treasury  maturities,  commercial  paper rates and the
London  Inter-Bank  Offered Rate ("LIBOR").  The profitability of the Company is
likely to be adversely affected during any period of unexpected or rapid changes
in interest rates.

    A  substantial  and  sustained  increase in interest  rates could  adversely
affect the  Company's  ability to purchase and  originate  loans.  A significant
decline in interest rates could increase the level of loan  prepayments  thereby
decreasing  the size of the Company's loan  servicing  portfolio.  To the extent
servicing rights and  interest-only  and residual  classes of certificates  have
been capitalized on the books of the Company,  higher than anticipated  rates of
loan  prepayments or losses could require the Company to write down the value of
such servicing rights and  interest-only  and residual  certificates,  adversely
impacting  earnings.  In an effort to mitigate the effect of

                                       18

interest  rate  risk, the  Company  periodically  reviews  its  various mortgage
products and identifies and modifies  those that have proven  historically  more
susceptible  to  prepayments.  However,  there  can be no  assurance  that  such
modifications to its product line will effectively  mitigate  interest rate risk
in the future.

    Periods of  unexpected  or rapid  changes in interest  rates,  and/or  other
volatility or uncertainty  regarding  interest rates,  can also adversely affect
the Company by increasing the likelihood that asset-backed investors will demand
higher spreads than normal to offset the volatility  and/or  uncertainty,  which
decreases  the value of the  residual  assets  received by the  Company  through
securitization.

   Fluctuating  interest rates also may affect the net interest income earned by
the Company  resulting from the  difference  between the yield to the Company on
loans held pending sales and the interest paid by the Company for funds borrowed
under the Company's  warehouse  facilities,  although the Company  undertakes to
hedge its  exposure to this risk by using  treasury  rate lock  contracts.  (See
"--Hedging").  Fluctuating interest rates may also affect net interest income as
certain of the  Company's  asset-backed  securities  are priced off of one-month
LIBOR,  but the collateral  underlying such securities are comprised of mortgage
loans with either fixed  interest  rates or "hybrid"  interest rates - fixed for
the initial 2 or 3 years,  and then adjusts  thereafter every six months - which
creates basis risk (See "--Fair Value Adjustments").


HEDGING

   The  Company  originates  and  purchases  mortgage  loans and then sells them
primarily through securitizations. At the time of securitization and delivery of
the  loans,  the  Company  recognizes  gain on sale based on a number of factors
including the  difference,  or "spread,"  between the interest rate on the loans
and the interest rate paid to asset-backed  investors who purchase  pass-through
certificates issued by securitization trusts. Historically, the rate paid on the
pass-through certificates generally was related to the interest rate on treasury
securities with maturities  corresponding  to the anticipated life of the loans.
If interest rates rise between the time the Company  originates or purchases the
loans and the time the  loans  are sold at  securitization,  the  excess  spread
narrows,  resulting in a loss in value of the loans. The Company has implemented
a strategy to protect  against such losses and to reduce  interest  rate risk on
loans  originated and purchased that have not yet been  securitized  through the
use of treasury rate lock contracts with various durations (which are similar to
selling a combination of United States Treasury  securities),  which equate to a
duration  similar  to the  duration  of the  underlying  loans.  The  nature and
quantity  of hedging  transactions  are  determined  by the  Company  based upon
various  factors  including,  without  limitation,  market  conditions  and  the
expected volume of mortgage  originations and purchases.  The Company will enter
into treasury rate lock  contracts  through one of its warehouse  lenders and/or
one of the investment bankers,  which underwrite the Company's  securitizations.
These contracts are designated as hedges in the Company's records and are closed
out when the associated loans are sold through securitization.

   If the value of the hedges  decrease,  offsetting an increase in the value of
the loans, the Company,  upon settlement with its hedge  counterparty,  will pay
the hedge loss in cash and then realize the corresponding  increase in the value
of the  loans  as part  of its net  gain  on  sale  of

                                       19

mortgage    loans   and    its    corresponding   interest-only   and   residual
certificates.  Conversely,  if the value of the hedges  increase,  offsetting  a
decrease in the value of the loans, the Company,  upon settlement with its hedge
counterparty,  will receive the hedge gain in cash and realize the corresponding
decrease  in the value of the  loans  through  a  reduction  in the value of the
corresponding interest-only and residual certificates.

   The Company  has  continued  to review its hedging  strategy in order to best
mitigate risk pending securitization.  As the asset-backed securitization market
improved  in the first  quarter of 1999,  and  spreads  over  treasuries  became
largely more  predictable,  the Company resumed its hedging  strategy of selling
treasury  rate-lock  contracts  to  mitigate  its  interest  rate  risk  pending
securitization.  For the six months  ended June 30,  2000 and 1999,  the Company
recorded  a hedge  loss  of  $0.1  million  and a  hedge  gain  of $4.1  million
respectively, which largely offset a change in the value of mortgage loans being
hedged, as part of its gain on sale of loans.


INFLATION

   Inflation  affects  the  Company  most  significantly  in the  area  of  loan
originations and can have a substantial effect on interest rates. Interest rates
normally  increase  during periods of high inflation and decrease during periods
of low inflation. (See "--Interest Rate Risk.")


IMPACT OF NEW ACCOUNTING STANDARDS

   For  discussion  regarding the impact of new accounting  standards,  refer to
Note 3 of Notes to the Consolidated Financial Statements.

RISK FACTORS

   Except for historical information contained herein, certain matters discussed
in this Form 10-Q are  "forward-looking  statements"  as defined in the  Private
Securities  Litigation  Reform Act  ("PSLRA")  of 1995,  which  involve risk and
uncertainties that exist in the Company's  operations and business  environment,
and are subject to change on various  important  factors.  The Company wishes to
take  advantage  of the "safe  harbor"  provisions  of the  PSLRA by  cautioning
readers that numerous  important factors discussed below,  among others, in some
cases have caused, and in the future could cause the Company's actual results to
differ  materially from those expressed in any  forward-looking  statements made
by, or on behalf of, the Company.  The following  include some,  but not all, of
the  factors or  uncertainties  that could cause  actual  results to differ from
projections:

o  Costs associated with litigation,  compliance with the NYSBD Remediation
   Agreement and NYOAG  Stipulated  Order on Consent,  and rapid or unforeseen
   escalation of the cost of regulatory  compliance,  generally  including but
   not  limited to,  adoption  of new, or changes in state or federal  lending
   laws and  regulations  and the  application  of such laws and  regulations,
   licenses,   environmental  compliance,  adoption  of  new,  or  changes  in
   accounting  policies and practices and the  application of such polices and
   practices.  Failure  to  comply  with  various  federal,  state  and  local
   regulations,  accounting policies, environmental compliance, and compliance
   with the Remediation  Agreement and Stipulated Order on Consent can lead to

                                       20


   loss of approved  status,  certain rights of rescission for mortgage loans,
   class action  lawsuits and  administrative  enforcement  action against the
   Company.

o  The  Company's  ability or inability to continue to access lines of credit at
   favorable terms and conditions,  including without limitation,  warehouse and
   other credit facilities used to finance newly originated  mortgage loans held
   for sale and interest and delinquency advances.

o  The Company's ability or inability to continue its practice of securitization
   of mortgage  loans held for sale,  as well as its ability to utilize  optimal
   securitization structures at favorable terms to the Company.

o  A general economic  slowdown.  Periods of economic slowdown or recession
   may be  accompanied by decreased  demand for consumer  credit and declining
   real  estate  values.  Because of the  Company's  focus on  credit-impaired
   borrowers,  the actual rate of  delinquencies,  foreclosures  and losses on
   loans  affected  by the  borrowers  reduced  ability to use home  equity to
   support borrowings could be higher than those generally  experienced in the
   mortgage   lending   industry.    Any   sustained   period   of   increased
   delinquencies,  foreclosure,  losses or  increased  costs  could  adversely
   affect the  Company's  ability to securitize or sell loans in the secondary
   market.

o  The  effects of  interest  rate  fluctuations  and the  Company's  ability or
   inability to hedge  effectively  against such fluctuations in interest rates;
   the effect of changes in monetary and fiscal policies,  laws and regulations,
   other activities of governments, agencies, and similar organizations,  social
   and  economic  conditions,  unforeseen  inflationary  pressures  and monetary
   fluctuation.

o  Increased  competition  within the Company's markets has taken on many forms,
   such as  convenience  in obtaining a loan,  customer  service,  marketing and
   distribution channels,  loan origination fees and interest rates. The Company
   is currently  competing with large finance companies and conforming  mortgage
   originators many of whom have greater financial,  technological and marketing
   resources.

                                       21
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

   The primary  market  risk to which the  Company is exposed is  interest  rate
risk, which is highly sensitive to many factors, including governmental monetary
and  tax   policies,   domestic  and   international   economic  and   political
considerations  and other factors beyond the control of the Company.  Changes in
the general level of interest rates between the time when the Company originates
or purchases  mortgage  loans and the time when the Company  sells such mortgage
loans at  securitization  can affect the value of the Company's  mortgage  loans
held for sale and,  consequently,  the  Company's  net gain on sale  revenue  by
affecting the "excess  spread"  between the interest rate on the mortgage  loans
and the interest rate paid to asset-backed  investors who purchase  pass-through
certificates issued by the securitization trusts. If interest rates rise between
the time the Company  originates  or purchases  the loans and the time the loans
are sold at securitization,  the excess spread generally narrows, resulting in a
loss in value of the loans and a lower net gain on sale reported by the Company.

   A hypothetical 10 basis point increase in interest rates,  which historically
has resulted in  approximately  a 10 basis point  decrease in the excess spread,
would be expected to reduce the Company's net gain on sale by  approximately  25
basis  points.  Many  factors,  however,  can  affect the  sensitivity  analysis
described  above  including,   without  limitation,  the  structure  and  credit
enhancement used in a particular securitization,  the Company's prepayment, loss
and  discount  rate  assumptions,  and the spread  over  treasuries  demanded by
asset-backed investors who purchase the Companies asset-backed securities.

   To reduce  its  financial  exposure to changes in interest rates, the Company
generally hedges its mortgage loans held for sale by entering into treasury rate
lock contracts (see "-Hedging"). The Company's hedging strategy has been for the
most part an effective tool to manage the Company's  interest rate risk on loans
prior to securitization,  by providing the Company with a cash gain (or loss) to
largely offset the reduced  (increase)  excess spread (and  resultant  lower (or
higher) net gain on sale) from an increase (decrease) in interest rates. A hedge
may not, however, perform its intended purpose of offsetting changes in net gain
on sale.

   Changes in interest rates also could adversely  affect the Company's  ability
to  purchase  and  originate  loans  and/or  could  affect  the  level  of  loan
prepayments thereby impacting the size of the Company's loan servicing portfolio
and the value of the  Company's  interest  only and  residual  certificates  and
capitalized mortgage servicing rights. (See "-Interest Rate Risk").

                                       22

<PAGE>

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

   Because the nature of the  Company's  business  involves  the  collection  of
numerous  accounts,  the validity of liens and compliance with various state and
federal lending laws, the Company is subject,  in the normal course of business,
to numerous claims and legal  proceedings.  The Company's lending practices have
been  the  subject  of  several   lawsuits   styled  as  class  actions  and  of
investigations  by  various  regulatory  agencies  including  the New York State
Banking  Department  (the  "NYSBD"),  the Office of the Attorney  General of the
State of New York (the "NYOAG") and the United States Department of Justice (the
"DOJ"). The current status of these actions are summarized below.

o     In or about November 1998, the Company  received notice that it had been
      named in a lawsuit  filed in the United  States  District  Court for the
      Eastern  District of New York.  In December  1998,  plaintiffs  filed an
      amended  complaint  alleging  that the  Company  had  violated  the Home
      Equity and Ownership Protection Act ("HOEPA"),  the Truth in Lending Act
      ("TILA") and New York State  General  Business Lawss.349. The  complaint
      seeks  (a)  certification  of a class  of  plaintiffs,  (b)  declaratory
      judgment  permitting  rescission,  (c)  unspecified  actual,  statutory,
      treble and punitive  damages  (including  attorneys'  fees), (d) certain
      injunctive  relief,  and (e)  declaratory  judgment  declaring  the loan
      transactions   as  void  and   unconscionable.   On  December  7,  1998,
      plaintiff  filed a motion  seeking  a  temporary  restraining  order and
      preliminary  injunction,  enjoining  Delta from  conducting  foreclosure
      sales on 11  properties.  The  District  Court Judge ruled that in order
      to consider  such a motion,  plaintiff  must move to intervene on behalf
      of these 11  borrowers.  Thereafter,  plaintiff  moved to  intervene  on
      behalf of 3 of these 11 borrowers  and sought the  injunctive  relief on
      their  behalf.  The Company  opposed the motions.  On December 14, 1998,
      the  District  Court  Judge  granted  the  motion  to  intervene  and on
      December  23,  1998,  the  District  Court  Judge  issued a  preliminary
      injunction  enjoining the Company from  proceeding  with the foreclosure
      sales of the three  intervenors'  properties.  The  Company  has filed a
      motion for  reconsideration  of the December 23, 1998 order.  In January
      1999,  the  Company  filed  an  answer  to  plaintiffs'   first  amended
      complaint.  In July 1999,  plaintiffs were granted leave, on consent, to
      file a second  amended  complaint.  In August 1999,  plaintiffs  filed a
      second amended  complaint  that,  among other things,  added  additional
      parties but  contained  the same  causes of action  alleged in the first
      amended  complaint.  In September  1999,  the Company  filed a motion to
      dismiss  the  complaint,  which was opposed by  plaintiffs  and, in June
      2000,  was  denied in part and  granted  in part by the  Court.  Also in
      September  1999,  plaintiffs  filed a motion  for  class  certification,
      which was opposed by Delta in February  2000,  and is now fully  briefed
      and filed pending  hearing.  In or about October 1999,  plaintiffs filed
      a motion seeking an order  preventing the Company,  its attorneys and/or
      the NYSBD from  issuing  notices to  certain  of Delta's  borrowers,  in
      accordance with a settlement  agreement  entered into by and between the
      Company  and the NYSBD.  In or about  October  1999 and  November  1999,
      respectively,  Delta and the NYSBD  submitted  opposition to plaintiffs'
      motion.  In March 2000,  the Court issued an order that permits Delta to
      issue an approved

                                       23

      form of the  notice.  The  Company  believes  that it  has   meritorious
      defenses   and   intends    to   defend    this     suit,  but    cannot
      estimate with a ny certainty its ultimate legal or financial  liability,
      if any, with respect to the alleged claims.

o     In or about March 1999,  the  Company  received  notice that it had been
      named in a lawsuit  filed in the Supreme Court of the State of New York,
      New York County,  alleging  that Delta had  improperly  charged  certain
      borrowers  processing  fees. The complaint seeks (a)  certification of a
      class  of   plaintiffs,   (b)  an   accounting,   and  (c)   unspecified
      compensatory and punitive damages  (including  attorneys'  fees),  based
      upon  alleged (i) unjust  enrichment,  (ii) fraud,  and (iii)  deceptive
      trade  practices.  In April  1999,  the  Company  filed an answer to the
      complaint.   In  August  1999,  plaintiffs  filed  a  motion  for  class
      certification, which the Company  opposed in July 2000 and the motion is
      now  submitted.  In  September  1999,  the  Company  filed a  motion  to
      dismiss the complaint,  which was opposed by plaintiffs, and in February
      2000,  the Court  denied  the  motion to  dismiss.  In April  1999,  the
      Company  filed a motion to  change  venue and  Plaintiff's  opposed  the
      motion.  In July 1999,  the Court  denied  the  motion to change  venue.
      The Company  appealed and in March 2000,  the  Appellate  Court  granted
      Delta's  appeal to change  venue from New York County to Nassau  County.
      The Company  believes  that it has  meritorious  defenses and intends to
      defend this suit,  but cannot  estimate  with any certainty its ultimate
      legal or  financial  liability,  if any,  with  respect  to the  alleged
      claims.

o     In or about July 1999,  the  Company  received  notice  that it had been
      named in a lawsuit  filed in the United  States  District  Court for the
      Western  District  of New York,  alleging  that  amounts  collected  and
      maintained  by  it  in  certain  borrowers'  tax  and  insurance  escrow
      accounts  exceeded  certain  statutory  (RESPA) and/or  contractual (the
      respective  borrowers'  mortgage  agreements)  ceilings.  The  complaint
      seeks  (a)  certification  of a class  of  plaintiffs,  (b)  declaratory
      relief finding that the Company's  practices violate applicable statutes
      and/or  the  mortgage   agreements,   (c)  injunctive  relief,  and  (d)
      unspecified  compensatory  and punitive  damages  (including  attorneys'
      fees).  In October  1999,  the  Company  filed a motion to  dismiss  the
      complaint.  In or about November  1999, the case was  transferred to the
      United States District Court for the Northern  District of Illinois.  In
      February  2000, the plaintiff  opposed the Company's  motion to dismiss.
      In March  2000,  the Court  granted the  Company's  motion to dismiss in
      part,  and  denied  it  in  part.  The  Company  believes  that  it  has
      meritorious  defenses  and  intends  to defend  this  suit,  but  cannot
      estimate with any certainty its ultimate  legal or financial  liability,
      if any, with respect to the alleged claims.

o     In or about August 1999,  the NYOAG filed a lawsuit  against the Company
      alleging violations of (a) RESPA (by paying yield spread premiums),  (b)
      HOEPA and TILA, (c) ECOA,  (d) New York  Executive Lawss.296-a,  and (e)
      New York  Executive  Lawss. 63(12).  In  September  1999,  Delta and the
      NYOAG settled the lawsuit,  as part of a global  settlement by and among
      Delta,  the  NYOAG  and  the  NYSBD,   evidenced  by  that  certain  (a)
      Remediation  Agreement by and between  Delta and the NYSBD,  dated as of
      September  17,  1999 and (b)  Stipulated  Order on  Consent by and among
      Delta,  Delta

                                       24

      Financial   and   the   NYOAG,  dated   as   of   September  17,   1999.
      As part of the  Settlement,  Delta will,  among other things,  implement
      agreed  upon  changes to its lending  practices;  provide  reduced  loan
      payments  aggregating $7.25 million to certain  borrowers  identified by
      the  NYSBD;  and  create a fund of  approximately  $4.75  million  to be
      financed  by the grant of  525,000  shares of Delta  Financial's  common
      stock  valued at a constant  assumed  priced of $9.10 per  share,  which
      approximates  book value.  The  proceeds  of the fund will be used,  for
      among  other  things,  to pay  borrowers  and for a variety of  consumer
      educational  and  counseling  programs.  As a result,  the NYOAG lawsuit
      has been dismissed as against the Company.

      The Remediation Agreement and Stipulated Order on Consent  supersede the
      Company's  previously announced settlements with the NYSBD and NYOAG. In
      March 2000, the Company finalized a settlement agreement with the United
      States  Department of  Justice, the  Federal  Trade  Commission  and the
      Department   of   Housing  and  Urban  Renewal, to  complete  the global
      settlementit had reached with the NYSBD and NYOAG. The Federal agreement
      mandates  some  additional compliance efforts for Delta, but it does not
      require any additional financial commitment.

o     In November 1999, the Company  received notice that it had been named in
      a lawsuit  filed in the United  States  District  Court for the  Eastern
      District  of New  York,  seeking  certification  as a class  action  and
      alleging  violations of the federal  securities  laws in connection with
      the  Company's   initial  public   offering  in  1996  and  its  reports
      subsequently  filed with the  Securities  and Exchange  Commission.  The
      complaint  alleges that the scope of the violations  alleged recently in
      the  consumer  lawsuits  and  regulatory  actions  indicate a  pervasive
      pattern  of action  and risk  that  should  have  been  more  thoroughly
      disclosed to investors in the Company's  common stock.  In May 2000, the
      Court   consolidated   this  case  and  several   other   lawsuits  that
      purportedly  contain  the  same  or  similar  allegations.  The  Company
      believes  that it has  meritorious  defenses and intends to defend these
      suits,  but has not answered yet and cannot  estimate with any certainty
      its ultimate legal or financial  liability,  if any, with respect to the
      alleged claims.

o     In or about April 2000,  the  Company  received  notice that it had been
      named in a lawsuit  filed in the Supreme Court of the State of New York,
      Nassau  County,  alleging  that the Company has  improperly  charged and
      collected from borrowers  certain fees when they paid off their mortgage
      loans with Delta.  The complaint seeks (a)  certification  of a class of
      plaintiffs,  (b) declaratory  relief finding that the payoff  statements
      used include  unauthorized  charges and are  deceptive  and unfair,  (c)
      injunctive  relief,  and (d)  unspecified  compensatory,  statutory  and
      punitive damages  (including legal fees),  based upon alleged violations
      of Real Property Law 274-a,  unfair and deceptive  practices,  money had
      and  received  and  unjust  enrichment,   and  conversion.  The  Company
      answered the complaint in June 2000.  The Company  believes that  it has
      meritorious  defenses  and  intends  to defend  this  suit,  but  cannot
      estimate with any certainty its ultimate  legal or financial  liability,
      if any, with respect to the alleged claims.


                                       25

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS. None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.  None

ITEM 4.  SUBMISSION TO A VOTE OF SECURITY HOLDERS.

  The annual meeting of stockholders was held on May 16, 2000. At the meeting,
Richard  Blass and Arnold B. Pollard were elected as a Class I Directors for a
term of three  years. Sidney A. Miller,  Hugh  Miller,  Martin D.  Payson  and
Margaret Williams continue to serve as members of the Board of Directors.

            Votes  cast in favor of Mr.  Blass' selection totaled  14,598,596,
            while 30,340 votes were withheld.

            Votes cast in favor of Mr. Pollard's selection totaled 14,598,596,
            while 30,340 votes were withheld.

   The  stockholders  also  voted to ratify the appointment of KPMG LLP as the
Company's  independent auditors  for the fiscal year ending December 31, 2000.
Votes  cast in favor of this ratification  were 14,620,621,  while  votes cast
against were 7,365 and abstentions totaled 950.

ITEM 5.  OTHER INFORMATION.  None

ITEM 6.  EXHIBITS AND CURRENT REPORTS ON FORM 8-K.

      (a)  Exhibits:          11.1  Statement re: Computation of Per
                                    Share Earnings

                              27.1  Financial   Data  Schedule  -  Six  Months
                                    Ended June 30, 2000


      (b)  Reports on Form 8-K:     None.


                                       26

<PAGE>
                                   SIGNATURES

            Pursuant to the  requirements  of the Securities and Exchange Act of
      1934, as amended,  the Registrant has duly caused this Report on Form 10-Q
      to be signed on its behalf by the undersigned, thereunto duly authorized.


                                                DELTA FINANCIAL CORPORATION
                                                            (Registrant)

            Date:  August 11, 2000
                                                By:       /S/ HUGH MILLER
                                                          ---------------
                                                      Hugh Miller
                                                      PRESIDENT & CHIEF
                                                      EXECUTIVE OFFICER


                                                By:       /S/ RICHARD BLASS
                                                          -----------------
                                                      Richard Blass
                                                      SENIOR  VICE   PRESIDENT
                                                      AND
                                                      CHIEF FINANCIAL OFFICER


                                       27
<PAGE>


                                EXHIBIT INDEX

EXHIBIT
NUMBER      DESCRIPTION
------      -----------

27.1        Financial Data Schedule - Six Months Ended June 30, 2000