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, 1999

                                       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, 1999,  15,358,749 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, 1999 and
         December  31, 1998................................................  2

         Consolidated Statements of Operations for the three months and
         six months ended June 30, 1999 and June 30, 1998..................  3

         Consolidated Statements of Cash Flows for the six months ended
         June 30, 1999 and June 30, 1998...................................  4

         Notes to Consolidated Financial Statements........................  5


Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations.............................................  7


Item 3.  Quantitative and Qualitative Disclosures About Market Risk........ 25



PART II- OTHER INFORMATION

Item 1.  Legal Proceedings................................................. 27

Item 2.  Changes in Securities and Use of Proceeds......................... 28

Item 3.  Defaults Upon Senior Securities................................... 28

Item 4.  Submission of Matters to a Vote of Security Holders............... 29

Item 5.  Other Information................................................. 29

Item 6.  Exhibits and Current Reports on Form 8-K.......................... 29

Signatures................................................................. 30



                                       1

<PAGE>
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)           1999           1998
                                                    ------------    ------------
<S>                                                 <C>             <C>
ASSETS
Cash and interest-bearing deposits                   $   61,713          49,152
Accounts receivable                                      27,276          22,549
Loans held for sale, net                                 85,404          87,170
Accrued interest and late charges receivable             54,323          46,897
Capitalized mortgage servicing rights                    38,552          33,490
Interest-only and residual certificates                 216,253         203,803
Equipment, net                                           19,759          16,962
Cash held for advance payments                           12,173          10,031
Prepaid and other assets                                  5,180           5,839
Goodwill                                                  5,422           6,014
                                                    ------------    ------------
   Total assets                                      $  526,055         481,907
                                                    ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES

Bank payable                                          $   1,373           1,396
Warehouse financing and other borrowings                 92,292          80,273
Senior Notes                                            149,429         149,387
Accounts payable and accrued expenses                    30,576          20,966
Investor payable                                         76,828          63,790
Advance payment by borrowers for taxes and insurance     11,808           9,559
Deferred tax liability                                   18,102          18,848
                                                    ------------    ------------
   Total liabilities                                    380,408         344,219
                                                    ------------    ------------

STOCKHOLDERS' EQUITY

Common stock, $.01 par value. Authorized
 49,000,000 shares; 15,475,549 shares issued
 and 15,358,749 shares outstanding at
 June 30, 1999 and December 31, 1998                        155             155
Additional paid-in capital                               94,700          94,700
Retained earnings                                        52,110          44,151
Treasury stock, at cost (116,800 shares at
 June 30, 1999 and December 31, 1998, respectively)      (1,318)         (1,318)
                                                   -------------    ------------
   Total stockholders' equity                           145,647         137,688
                                                   -------------    ------------
     Total liabilities and stockholders' equity       $ 526,055         481,907
                                                   =============    ============

          See accompanying notes to consolidated financial statements.

                                       2
</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)           1999           1998               1999           1998
                                                     ----------     ----------         ----------     ----------
<S>                                                  <C>            <C>                <C>            <C>
REVENUES

   Net gain on sale of mortgage loans                $  22,901      $  24,493          $  48,004      $  51,072
   Interest                                              9,680        (10,393)            16,113         (3,728)
   Servicing fees                                        3,743            673              7,356          2,834
   Origination fees                                      8,125          5,909             15,489         11,658
                                                     ----------     ----------         ----------     ----------
       Total revenues                                   44,449         20,682          $  86,962         61,836
                                                     ----------     ----------         ----------     ----------
EXPENSES

   Payroll and related costs                            17,744         13,148             33,586         26,502
   Interest expense                                      6,077          7,626             12,249         14,692
   General and administrative (1)                       16,937          7,944             27,994         15,577
                                                     ----------     ----------         ----------     ----------
       Total expenses                                   40,758         28,718             73,829         56,771
                                                     ----------     ----------         ----------     ----------

Income (loss) before income
    tax expense (benefit)                                3,691         (8,036)            13,133          5,065
Provision for income taxes                               1,476         (3,134)             5,174          1,716
                                                     ----------     ----------         ----------     ----------
Net income (loss)                                    $   2,215      $  (4,902)         $   7,959      $   3,349
                                                     ==========     ==========         ==========     ==========
PER SHARE DATA
     Net income (loss) per common
       share - basic and diluted                     $    0.14      $   (0.32)         $    0.52      $    0.22
                                                     ==========     ==========         ==========     ==========
     Weighted-average number
       of shares outstanding                        15,358,749     15,376,416         15,358,749     15,374,535
                                                   ============   ============       ============   ============

-----------------
<FN>
(1) The three- and six-month  periods ended June 30, 1999 include a $6.0 million
pre-tax  charge for a settlement  in  principle  with the Office of the Attorney
General for the State of New York. On August 16, 1999, the Company  entered into
an agreement in principle with the New York State Banking  Department,  New York
Office of the Attorney General and the Department of Justice,  which $12 million
global  settlement  shall be entered  into in lieu of the prior  agreement.  See
"Legal  Proceedings"  herein  for a more  detailed  discussion  of the  proposed
settlement.
</FN>
            See accompanying notes to consolidated financial statements.


                                       3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

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


                                                                                 SIX MONTHS ENDED
                                                                                      JUNE 30,
(DOLLARS IN THOUSANDS)                                                          1999          1998
                                                                             ---------     ---------
<S>                                                                          <C>           <C>
Cash flows from operating activities:
    Net income                                                               $  7,959         3,349
    Adjustments to reconcile net income to net cash used in
      operating activities:
       Provision for loan and recourse losses                                      50            50
       Depreciation and amortization                                            2,742         1,953
       Deferred tax benefit                                                      (746)       (1,060)
       Capitalized mortgage servicing rights, net of amortization              (5,062)       (4,025)
       Deferred origination costs                                                 232           896
       Interest-only and residual certificates received in
          Securitization transactions, net                                    (12,450)      (16,129)
       Changes in operating assets and liabilities:
          (Increase) decrease in accounts receivable                           (4,727)        5,542
          Decrease (increase) in loans held for sale, net                       1,519        (3,544)
          Increase in accrued interest and late charges receivable             (7,426)       (8,248)
          Increase in cash held for advance payments                           (2,142)       (2,210)
          Decrease (increase) in prepaid and other assets                         659          (248)
          Increase in accounts payable and accrued expenses                     9,575            62
          Increase in investor payable                                         13,038        10,576
          Increase in advance payments by borrowers for taxes and insurance     2,249         2,184
                                                                             ---------     ---------
              Net cash provided by (used in) operating activities               5,470       (10,852)
                                                                             ---------     ---------
Cash flows from investing activities:
    Purchase of equipment                                                      (4,905)       (4,584)
                                                                             ---------     ---------
              Net cash used in investing activities                            (4,905)       (4,584)
                                                                             ---------     ---------
Cash flows from financing activities:

    Proceeds from warehouse financing and other borrowings, net                12,019        22,030
    Decrease in bank payable, net                                                 (23)       (1,358)
    Purchase of treasury stock                                                    ---          (269)
    Proceeds from exercise of stock options                                       ---            25
                                                                             ---------     ---------
              Net cash provided by financing activities                        11,996        20,428
                                                                             ---------     ---------
              Net increase in cash and interest-bearing deposits               12,561         4,992

Cash and interest-bearing deposits at beginning of period                      49,152        32,858
                                                                             ---------     ---------
Cash and interest-bearing deposits at end of period                          $ 61,713        37,850
                                                                             =========     =========
Supplemental Information:
Cash paid during the period for:
Interest                                                                     $ 11,717        14,513
                                                                             =========     =========
Income taxes                                                                 $  5,921         2,799
                                                                             =========     =========
          See accompanying notes to consolidated financial statements.

                                       4
</TABLE>
<PAGE>
                  DELTA FINANCIAL CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)    ORGANIZATION

   Delta  Financial  Corporation  (the  "Company"  or  "Delta")  is  a  Delaware
corporation which was organized in August 1996. On October 31, 1996, the Company
acquired  all of the  outstanding  common  stock  of Delta  Funding  Corporation
("Delta Funding"), a New York corporation which had been organized on January 8,
1982 for the  purpose  of  originating,  selling,  servicing  and  investing  in
residential  first and  second  mortgages.  On  November  1, 1996,  the  Company
completed an initial public  offering of 4,600,000  shares of common stock,  par
value $.01 per share.

   On February  11,  1997,  the Company  acquired  Fidelity  Mortgage  Inc.  and
Fidelity  Mortgage  (Florida),  Inc.  (together  referred to herein as "Fidelity
Mortgage"), retail residential mortgage origination companies, for a combination
of  cash  and  stock  with a value  of $6.3  million.  These  transactions  were
accounted for under the purchase method of accounting.  Accordingly, the results
of operations of Fidelity  Mortgage from February 11, 1997 have been included in
the  Company's  consolidated  financial  statements.  In  connection  with these
acquisitions the Company recorded goodwill of approximately $6.3 million,  which
is being  amortized on a  straight-line  basis over seven  years.  On October 1,
1997,  the  acquired  operations  were merged and have  continued  to operate as
Fidelity  Mortgage.  As a result of meeting certain  production  targets for the
twelve month period  ended June 30,  1998,  the sellers were paid an  additional
$1.2 million of purchase price in the form of, and at a fair value equivalent to
101,361   shares  of  the  Company's   stock  in  August  1998.  The  additional
consideration  has been  recorded as  additional  goodwill and will be amortized
over the remaining life of the goodwill.

(2)    BASIS OF PRESENTATION

   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 consolidated  financial statements and related notes of the Company for
the year ended  December 31, 1998.  The results of operations  for the three and
six month  periods  ended June 30, 1999 are not  necessarily  indicative  of the
results that will be expected for the entire year.

   All adjustments which 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

                                       5


have  been  made. Certain prior period amounts in the financial  statements have
been reclassified to conform with the current year presentation.

 (3) 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,

                                       ------------------------   ------------------------
(DOLLARS IN THOUSANDS, EXCEPT EPS DATA)      1999         1998          1999         1998
<S>                                    <C>          <C>           <C>          <C>
------------------------------------------------------------------------------------------
Net income                                 $2,215      $(4,902)       $7,959       $3,349
Weighted-average shares - basic        15,358,749   15,376,416    15,358,749   15,374,535
Basic EPS                                   $0.14       $(0.32)        $0.52        $0.22
Weighted-average shares - basic        15,358,749   15,376,416    15,358,749   15,374,535
Incremental shares-options                 36,942      143,616        24,619       51,656

------------------------------------------------------------------------------------------
Weighted-average shares - diluted      15,395,691   15,520,032    15,383,368   15,426,191
Diluted EPS                                 $0.14       $(0.32)        $0.52        $0.22
</TABLE>

(4) STOCK REPURCHASE PLAN

   On May 7, 1998,  the  Company's  Board of  Directors  authorized a program to
repurchase  up to two  hundred  thousand  (200,000)  shares  of its  issued  and
outstanding  common stock.  No time limit has been placed on the duration of the
stock repurchase program.  Subject to applicable securities laws, such purchases
will be made at times and in amounts as the Company deems appropriate and may be
discontinued  at any time. The  repurchases may be effected from time to time in
accordance with applicable  securities  laws,  through  solicited or unsolicited
transactions in the open market,  on the New York Stock Exchange or in privately
negotiated  transactions,  subject to  availability  of shares at prices  deemed
appropriate by the Company.  Repurchased  shares will be held as treasury shares
available  for  general  corporate  purposes,  including,  but not  limited  to,
satisfying the Company's contingent share obligations to the former shareholders
of Fidelity  Mortgage,  and in connection with Delta Financial's  employee stock
plans.

   During the six months ended June 30, 1999, the Company did not repurchase any
shares of its common stock under its stock  repurchase  plan.  At June 30, 1999,
the total number of treasury shares held by the Company equaled  116,800.  Given
the  sector-wide  focus  on  liquidity  and  conserving  capital,  the  Board of
Directors decided in November 1998 to suspend  repurchases under the program and
no subsequent decision has been made to recommence repurchases.

                                       6

<PAGE>

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")  engages  in the
consumer  finance  business by  originating,  acquiring,  selling and  servicing
non-conforming home equity loans.  Throughout its 17 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 and  typically  have
substantial equity in their homes.

   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"). Delta Funding currently
originates  and  purchases  the majority of its loans in 24 states,  through its
network of approximately 1,400 brokers and correspondents.

   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 15 retail  offices  located in nine states.  Through a
strategic  alliance  between  DFC  Funding  of Canada  Limited,  a  wholly-owned
subsidiary of Delta Funding, and MCAP Mortgage Corporation,  a Canadian mortgage
loan originator,  the Company  originated loans in Canada.  In February 1999 the
Company decided to close its Canadian  business to focus exclusively on its U.S.
based business.

                                       7


  For the  three  months  ended  June 30,  1999,  the  Company  originated  and
purchased  $414  million of loans,  a decrease of 8% from $450  million of loans
originated  and purchased in the  comparable  period in 1998. Of these  amounts,
approximately $257 million were originated  through its network of brokers,  $65
million were purchased from its network of  correspondents  and $92 million were
originated  through its retail  network for the three months ended June 30, 1999
compared to $199 million,  $199 million and $52 million,  respectively,  for the
same period in 1998. The decrease in  year-over-year  loan  originations  is the
result of a decline in correspondent  purchases as the Company has strategically
shifted its loan  production  mix to a greater  percentage  of broker and retail
originations.  This production shift reflects the Company's strategy to focus on
its broker and retail channels, which are less cash intensive than correspondent
loan purchases. As a result of this change in strategy,  coupled with the timing
of the  cash  flows  received  from the  Company's  retained  interest-only  and
residual  certificates and the sale of its interest-only strips, the Company has
been able to achieve positive operating cash flows for the past three quarters.

   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.

                                       8
<PAGE>

                                                      THREE MONTHS ENDED
                                                --------------------------------
(DOLLARS IN THOUSANDS)                             JUNE 30,          MARCH 31,
                                                     1999              1999
                                                --------------    --------------
Total Outstanding Principal Balance
  (at period end).............................. $  3,358,818      $  3,156,232
Average Outstanding(1).........................    3,288,247         3,085,118
DELINQUENCY (at period end) 30-59 Days:
  Principal Balance............................ $    155,321      $    136,549
  Percent of Delinquency(2)....................         4.62%             4.33%
60-89 Days:
  Principal Balance............................ $     58,528      $     54,511
  Percent of Delinquency(2)....................         1.74%             1.73%
90 Days or More:
  Principal Balance............................ $     51,654$           52,757
  Percent of Delinquency(2)....................         1.54%             1.67%
Total Delinquencies:
  Principal Balance............................ $    265,503      $    243,817
  Percent of Delinquency(2)....................         7.90%             7.72%
FORECLOSURES
  Principal Balance............................ $    161,073      $    154,629
  Percent of Foreclosures by Dollar(2).........         4.80%             4.90%
REO (at period end)............................ $     27,907      $     21,868
   Percent of REO..............................         0.83%             0.69%
Net Losses on Liquidated Loans................. $     (3,255)     $     (3,038)
Percentage of Net Losses on Liquidated Loans
  (based on Average Outstanding Balance)(3)....        (0.40%)           (0.39%)
---------------
(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.

   On June 23, 1999, the  Company  announced a  settlement in principle with the
office of the Attorney  General for the State of New York  ("NYOAG").  The NYOAG
took issue with Delta's lending  practices,  specifically which loans should and
should not be made. The Banking Department of the State of New York ("NY Banking
Department")  and the U.S.  Department of Justice (the "DOJ") had raised similar
concerns relating to Delta's lending practices.  On August 16, 1999, the Company
entered into an agreement in principle with the NY Banking Department, NYOAG and
the DOJ with respect to their concerns.

   As part of  the  global  settlement (in lieu of the previously  announced six
million  settlement  with the NYOAG),  the  Company  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 NY
Banking  Department,  NYOAG and the DOJ; and the creation of a reversionary fund
(the  "fund"),  administered  by a  trustee  named  by  the  NYOAG,  NY  Banking
Department  and/or the DOJ,  financed by the grant by Delta of 525,000 shares of
Delta's common stock, valued at $9.10 per share. All proceeds raised through the
funds shall be used to pay for a variety of educational and counseling programs,
approved by the NY Banking Department, NYOAG and the DOJ.

     The Company  previously  recorded a charge of $6 million  for its  original
settlement in principle  with the NYOAG.  This expense was included in General &
Administrative  expenses in the Company's  Statement of Operations for the three
and six months ended June 30, 1999.

FAIR VALUE ADJUSTMENTS

    In accordance with Statement of Financial  Accounting Standards ("SFAS") No.
125,   "Accounting   for  Transfers  and  Servicing  of  Financial   Assets  and
Extinguishment of Liabilites", upon the sale or securitization of a loan, a gain
on sale  and a  corresponding  asset is  recognized  for any  interest-only  and
residual  certificates and capitalized  mortgage  servicing rights. The carrying
amount of the interest-only and residual  certificates is classifed as a trading
security  and,  as such,  they are  recorded  at their fair  value.  The Company
implemented SFAS No. 134,  "Accounting for Mortgage-Backed  Securities after the
Securitization of Mortage Loans Held for Sale by a Mortgage Banking  Enterprise"
in the first  quarter  of 1999.  The  implementation  of SFAS 134 did not have a
material impact on the Company's  financial  condition or results of operations.
For capitalized  mortgage servicing rights, a valuation allowance is recorded if
the fair value of such rights is less than the carrying amount.

   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.

   The Company's review of its prepayment experience and assumptions at June 30,
1998  indicated  that  the  prepayment  rates  during  1998,   particularly  for
adjustable-rate  mortgages ("ARMs"), and in particular during the second quarter
of  1998,  were  higher  than  those  historically  experienced,  or  previously
projected,  by the  Company.  The  Company  believes  that  these  increases  in
prepayment rates were attributable to the continuation, for a longer period than
historically  experienced,  of low interest rates,  together with changes,  to a
flatter or inverted curve, of the relationship  between long-term and short-term
interest rates (the "yield curve").

   As  a  result,  at  June  30,  1998,  the  Company  adjusted  its  prepayment
assumptions, increasing the maximum prepayment rates for all loans, and changing
the rate at which  prepayments  are assumed to increase from the initial rate to
the  maximum  rate from a  straight-line  build-up  to a "vector"  curve.  These
revised  prepayment  assumptions  were used to  estimate  the fair  value of the
interest-only  and residual  certificates  and  capitalized  mortgage  servicing
rights retained by the Company in securitizations  completed prior to the second
quarter  of  1998.  These  revised

                                       10


prepayment  assumptions  were  also  used  in  initially  valuing and  recording
the interest-only and residual  certificates and capitalized  mortgage servicing
rights retained by the Company in its  securitizations  completed  subsequent to
the first quarter of 1998.

   During  the second  quarter of 1998,  the  Company  recorded a $15.5  million
reduction in the carrying amount of its interest-only and residual certificates,
and also  recorded  a $1.9  million  reduction  in the  carrying  amount  of its
capitalized mortgage servicing rights to reflect a provision for impairment (the
"fair value adjustments").  Both impairment  provisions resulted from reductions
in the Company's  estimates of the fair value of those assets. The reductions in
the  estimated  fair  value  resulted  from  the  aforementioned  change  in the
prepayment  assumptions used by the Company to estimate the future cash flows to
be derived from the  interest-only  and residual  certificates  and the mortgage
servicing rights.

   The Company assumes prepayment rates and defaults based upon the seasoning of
its existing  securitization  loan  portfolio.  The following table compares the
prepayment  assumptions  used subsequent to the first quarter of 1998 (the "new"
assumptions)  with those used at December 31, 1997 and through the first quarter
of 1998 ( the "old" assumptions):

--------------------------------------------------------------------------------
    LOAN TYPE                 CURVE           MONTH 1 SPEED         PEAK SPEED
                           DESCRIPTION
--------------------------------------------------------------------------------
                            NEW    OLD        NEW       OLD        NEW      OLD
--------------------------------------------------------------------------------
Loans Fixed Rate         Vector    Ramp       4.8%     4.8%        31%      24%
Six-Month LIBOR ARMs     Vector    Ramp       10.0%    5.6%        50%      28%
Hybrid ARMs              Vector    Ramp       6.0%     5.6%        50%      28%
--------------------------------------------------------------------------------

   In addition,  in the first  quarter of 1999,  the Company  increased its loss
reserve initially  established for both fixed- and adjustable-rate loans sold to
the  securitizations  trusts from 2.00% to  approximately  2.20% of the issuance
amount  securitized.  The  Company  made  this  change to  better  reflect  what
management  believes  its loss  experience  will be, as the Company  experienced
significantly  slower  prepayment  rates in the  first  quarter  of 1999  which,
coupled with an  anticipated  flat to slightly  moderate  rise in home values as
compared  to the past few  years,  may have an adverse  effect on the  Company's
non-performing  loans.  This change  resulted in  approximately  a $3.8  million
reduction in the Company's value of the residual and interest-only certificates.
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, 1999 and December
31, 1998.

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

   To date, aggregate actual cash flows from the Company's securitization trusts
have either met or exceeded management's expectations.


                                       11


RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999  COMPARED TO  THE THREE  MONTHS ENDED JUNE 30,
 1998

GENERAL

     The  Company's net income for the three months ended June 30, 1999 was $2.2
million, or $0.14 per share,  compared to a net loss of $4.9 million, or ($0.32)
per share, for the three months ended June 30, 1998. 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 NYOAG,
NY Banking  Department,  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 for the three  months ended June 30, 1999  increased by $23.7
million,  or 114%, to $44.4 million from $20.7 million for the comparable period
in 1998.  The  increase  in revenue  was  primarily  attributable  to fair value
adjustments the Company made to its interest-only and residual  certificates and
capitalized  mortgage servicing rights in the second quarter of 1998 (See "-Fair
Value Adjustments"), an increase in servicing fees and origination fees, and was
partially  offset  by a  decrease  in the net  gain  recognized  on the  sale of
mortgage loans.

   The Company  originated  and purchased $414 million of mortgage loans for the
three months ended June 30, 1999, representing 8% decrease from the $450 million
of mortgage  loans  originated and purchased for the three months ended June 30,
1998.  The Company  completed  a $420  million  securitization  during the three
months  ended June 30, 1999  compared to a $445  million  securitization  in the
corresponding period in 1998,  representing a 6% decrease.  Total loans serviced
at June 30, 1999  increased  41% to $3.36 billion from $2.39 billion at June 30,
1998.

   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  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 (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 for the three  months ended June 30, 1999
decreased by $1.6  million,  or 7%, to $22.9  million from $24.5 million for the
comparable  period in 1998.  This decrease was primarily due to a 6% decrease in
the amount of loans securitized and wider spreads to U.S. treasuries demanded by
asset-backed investors who purchased the pass-through certificates issued by the
securitization  trust in the  second  quarter  of 1999  compared  to the  second
quarter of 1998.  This was partially  offset by both a decrease in the amount of
loans purchased through the correspondent  channel and a decrease in the average
premium paid to correspondents (i.e., costs in acquiring these loans), resulting
in aggregate  reduction in the amount of premiums  paid to  correspondents.  The
weighted average net gain on sale ratio was 5.5% for the three months ended June
30, 1999 and 1998.

                                       12


   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) interest earned
on loans held for sale, and (3) interest earned on cash collection balances.

   Interest  income for the three months ended June 30, 1999  increased by $20.1
million to $9.7 million from ($10.4)  million in the comparable  period in 1998.
The increase in interest income was primarily due to fair value adjustments made
in 1998 to the Company's  interest-only and residual  certificates,  including a
$15.5 million  reduction in the second  quarter of 1998 related to the change in
prepayment  assumptions  (see "-Fair  Value  Adjustments").  This was  partially
offset by the  accounting  for loans sold by the  Company  through a  commercial
paper conduit prior to their securitization. For such conduit-related sales, the
Company  earns and records the net interest  margin  between the  interest  rate
earned on the pool of mortgage  loans sold to the  commercial  paper conduit and
the commercial paper financing rate, plus  administrative  expenses,  during the
three months ended June 30, 1999.  Typically,  interest  expense  related to the
Company's  other  warehouse  financing and borrowings  are recorded  directly to
interest expense.

   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
provide valuation allowances for the impairment in mortgage servicing rights and
(2) prepaid interest shortfalls.

   Servicing  fees for the three  months  ended June 30, 1999  increased by $3.0
million,  or 429%, to $3.7 million from $0.7 million in the comparable period in
1998.  This  increase was  primarily  due to (1) the recording of a $1.9 million
impairment  provision for the  Company's  mortgage  servicing  rights during the
second  quarter of 1998 (See "-Fair Value  Adjustments")  and (2) an increase in
the aggregate size of the Company's servicing portfolio.  The average balance of
the mortgage loans serviced  increased 44% to $3.29 billion for the three months
ended June 30, 1999 from $2.29 billion during the comparable period in 1998.

   ORIGINATION  FEES.  Origination  fees  represent  fees  earned on retail  and
brokered originated loans.  Origination fees for the three months ended June 30,
1999 increased by $2.2 million, or 37%, to $8.1 million from $5.9 million in the
comparable  period in 1998.  The increase is  primarily  the result of (1) a 77%
increase in retail  originated loans and (2) a 29% increase in broker originated
loans.

EXPENSES

     Total  expenses  for three  months  ended June 30, 1999  increased by $12.1
million,  or 42%, to $40.8 million from $28.7 million for the comparable  period
in 1998.  The  increase in expenses was the result of an increase in general and
administrative  primarily  related  to the  Company's  origainal  settlement  in
principle  with the NYOAG (which  settlement  has been replaced by the Company's
global  settlement with the NYOAG,  the NY Banking  Department and the DOJ), and
personnel  costs  associated  with the  Company's  expanded  retail  and  broker
divisions, partially offset by a decrease in interest expense.

   PAYROLL  AND RELATED  COSTS.  Payroll and  related  costs  include  salaries,
benefits and payroll taxes for all employees.  Payroll and related costs for the
three months ended June 30, 1999

                                       13


increased by  $4.6 million,  or 35%, to $17.7 million from $13.1 million for the
comparable  period in  1998. This  increase is  primarily due to staff increases
related to growth in the Company's loan  originations  and the costs  associated
with the Company's broker and retail divisions. As of June 30, 1999, the Company
employed  1,278 full- and  part-time  employees,  444 of which are  employees of
Fidelity Mortgage,  compared to 980 full- and part-time employees as of June 30,
1998.

   INTEREST  EXPENSE.  Interest  expense includes the borrowing costs to finance
loan  originations  and  purchases  under the $150 million  aggregate  principal
amount of 9.5% Senior  Notes due 2004 issued in July 1997 (the  "Senior  Notes")
and the Company's credit facilities.

   Interest  expense for the three months ended June 30, 1999  decreased by $1.5
million,  or 20%, to $6.1 million from $7.6 million for the comparable period in
1998.  The decrease in interest  expense was primarily due to the accounting for
loans sold through a commercial paper conduit prior to their securitization,  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  commercial  paper conduit
and the commercial paper financing rate, plus  administrative  expenses,  during
the three months ended June 30, 1999. Typically, interest expense related to the
Company's  other  warehouse  financing and borrowings  are recorded  directly to
interest expense. In addition,  there was a decrease in the cost of funds on the
Company's  credit  facilities  which were tied to  one-month  London  Inter-Bank
Offering  Rate  ("LIBOR").  The  one-month  LIBOR index  decreased to an average
interest  rate of 5.0% in the three months  ended June 30, 1999,  compared to an
average interest rate of 5.7% for the comparable period in 1998.

   GENERAL AND  ADMINISTRATIVE  EXPENSES.  General and  administrative  expenses
consist primarily of office rent, insurance, telephone,  depreciation,  goodwill
amortization,  license fees, legal and 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  for the three  months ended June 30,
1999 increased $9.0 million, or 114%, to $16.9 million from $7.9 million for the
comparable  period in 1998. This increase was primarily  attributable to (1) the
Company's original settlement with the NYOAG (which settlement has been replaced
by the Company's global settlement with the NYOAG, the NY Banking Department and
the DOJ), (2) an increase in expenses  associated with the Company's increase in
retail and broker  loan  originations  (which was offset by the  de-emphasis  of
correspondent purchases, resulting in a reduction in premiums paid, reflected in
the gain on sale of mortgage loans) and (3) an increase in depreciation  expense
and management and consulting fees,  reflecting the Company's ongoing investment
in technology.

   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  provision  of $1.5  million and a tax benefit of
$3.1  million  for the  three  month  periods  ended  June 30,  1999  and  1998,
respectively.

                                       14


SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998

GENERAL

    The Company's  net income for the six  months  ended June 30,  1999 was $8.0
million,  or $0.52 per share,  compared to $3.3 million, or $0.22 per share, for
the six months ended June 30, 1998.  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 regulators), 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  for the six months  ended June 30, 1999  increased  by $25.2
million,  or 41%, to $87.0 million from $61.8 million for the comparable  period
in 1998.  The  increase  in revenue  was  primarily  attributable  to fair value
adjustments the Company made to its interest-only and residual  certificates and
capitalized  mortgage servicing rights in the second quarter of 1998 (See "-Fair
Value Adjustments"), an increase in servicing fees and origination fees, and was
partially  offset  by a  decrease  in the net  gain  recognized  on the  sale of
mortgage loans.

   The Company  originated  and purchased $819 million of mortgage loans for the
six months ended June 30, 1999, which represented a decrease of 2% from the $836
million of mortgage loans originated and purchased for the six months ended June
30, 1998. The Company completed two securitizations totaling $795 million during
the six months ended June 30, 1999 compared to two securitizations totaling $845
million in the corresponding period in 1998,  representing a 6% decrease.  Total
loans  serviced  at June 30,  1999  increased  41% to $3.36  billion  from $2.39
billion at June 30, 1998.

   NET GAIN ON SALE OF MORTGAGE  LOANS.  Net gain on sale of mortgage  loans for
the six months ended June 30, 1999  decreased by $3.1  million,  or 6%, to $48.0
million from $51.1 million for the comparable  period in 1998. This decrease was
primarily  due to a 6%  decrease  in the amount of loans  securitized  and wider
spreads  demanded  by  asset-backed  investors  who  purchase  the  pass-through
certificates  issued by  securitization  trusts during the six months ended June
30, 1999 compared to the same period in 1998. This was partially  offset by both
a decrease in the amount of loans purchased  through the  correspondent  channel
and the reduced costs in acquiring these loans, resulting in aggregate reduction
in the amount of premiums paid to correspondents.  The weighted average net gain
on sale ratio was 6.0% for the six months ended June 30, 1999 and 1998.

   INTEREST  INCOME.  Interest  income  for the six months  ended June 30,  1999
increased  by  $19.8  million  to  $16.1  million  from  ($3.7)  million  in the
comparable  period in 1998. The increase in interest income was primarily due to
fair value adjustments made in 1998 to the Company's  interest-only and residual
certificates,  including a $15.5 million reduction in the second quarter of 1998
related to the change in prepayment assumptions (see "-Fair Value Adjustments").
This was  partially  offset by the  accounting  for  loans  sold by the  Company
through a  commercial  paper  conduit  prior to their  securitization.  For such
conduit-related  sales,  the Company  earns and records the net interest  margin
between  the  interest  rate  earned on the pool of  mortgage  loans sold to the
commercial   paper  conduit  and  the  commercial  paper  financing  rate,  plus
administrative  expenses,  during the six months ended June 30, 1999. Typically,
interest  expense

                                       15


related to the  Company's  other warehouse financing and borrowings are recorded
directly to interest expense.

   SERVICING  FEES.  Servicing  fees for the six  months  ended  June  30,  1999
increased  by $4.6  million,  or 164%,  to $7.4 million from $2.8 million in the
comparable  period in 1998. This increase was primarily due to (1) the recording
of a $1.9 million  impairment  provision  for the Company's  mortgage  servicing
rights during the second quarter of 1998 (See "-Fair Value Adjustments") and (2)
an increase in the aggregate  size of the  Company's  servicing  portfolio.  The
average  balance of the mortgage loans  serviced  increased 48% to $3.19 billion
for the six months ended June 30, 1999 from $2.15 billion  during the comparable
period in 1998.

   ORIGINATION  FEES.  Origination  fees for the six months  ended June 30, 1999
increased by $3.8  million,  or 32%, to $15.5  million from $11.7 million in the
comparable  period in 1998.  The increase is  primarily  the result of (1) a 63%
increase in retail  originated loans and (2) a 35% increase in broker originated
loans.

EXPENSES

     Total  expenses  for six months  ended  June 30,  1999  increased  by $17.0
million,  or 30%, to $73.8 million from $56.8 million for the comparable  period
in 1998.  The  increase in expenses was the result of an increase in general and
administrative  primarily  related  to  the  Company's  original  settlement  in
principle  with the NYOAG (which  settlement  has been replaced by the Company's
global  settlement with the NYOAG,  the NY Banking  Department and the DOJ), and
personnel  costs  associated  with the  Company's  expanded  retail  and  broker
divisions, partially offset by a decrease in interest expense.

   PAYROLL AND RELATED COSTS. Payroll and related costs for the six months ended
June 30, 1999  increased by $7.1  million,  or 27%, to $33.6  million from $26.5
million for the  comparable  period in 1998.  This  increase is primarily due to
staff  increases  related to growth in the Company's loan  originations  and the
costs  associated  with  the  Company's  broker  and  Fidelity  Mortgage  retail
division.  As of June 30, 1999,  the Company  employed 1,278 full- and part-time
employees,  444 of which are  employees  of Fidelity  Mortgage,  compared to 980
full- and part-time employees as of June 30, 1998.

   INTEREST  EXPENSE.  Interest  expense for the six months  ended June 30, 1999
decreased by $2.5  million,  or 17%, to $12.2 million from $14.7 million for the
comparable period in 1998. The decrease in interest expense was primarily due to
the accounting for loans sold through a commercial  paper conduit prior to their
securitization,  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
commercial   paper  conduit  and  the  commercial  paper  financing  rate,  plus
administrative  expenses,  during the six months ended June 30, 1999. Typically,
interest  expense  related  to  the  Company's  other  warehouse  financing  and
borrowings are recorded directly to interest expense.  In addition,  there was a
decrease in the cost of funds on the Company's credit facilities which were tied
to one-month  LIBOR.  The one-month LIBOR index decreased to an average interest
rate of 5.0% in the six  months  ended  June 30,  1999,  compared  to an average
interest rate of 5.7% for the comparable period in 1998.

     GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative  expenses
for the six months ended June 30, 1999 increased $12.4 million, or 79%, to $28.0
million from $15.6 million for the comparable  period in 1998. This increase was
primarily  attributable to (1) the Company's original  settlement with the NYOAG
(which  settlement has been replaced by the Company's global settlement with the
NYOAG,  the NY Banking  Department  and the DOJ),  (2) an  increase  in expenses
associated  with the Company's  increase in retail and broker loan  originations
(which was offset by the de-emphasis of correspondent purchases,  resulting in a
reduction in premiums paid, reflected in the gain on sale of mortgage loans) and
(3) an increase in  depreciation  expense and management  and  consulting  fees,
reflecting the Company's ongoing investment in technology.

   INCOME  TAXES.  The Company  recorded a tax  provision  of $5.2 million and
$1.7 million for the periods ended June 30, 1999 and 1998, respectively.

FINANCIAL CONDITION

JUNE 30, 1999 COMPARED TO DECEMBER 31, 1998

   Cash and interest-bearing  deposits increased $12.5 million, or 25%, to $61.7
million at June 30, 1999,  from $49.2 million at December 31, 1998. The increase
was the result of additional monies held in securitization trust accounts by the
Company,  acting as servicer for its ongoing securitization program and the cash
received by the Company from generating positive cash flow from operations.

   Accounts receivable  increased $4.7 million, or 21%, to $27.3 million at June
30, 1999, from $22.6 million at December 31, 1998. The increase was 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.  The Company's  servicing portfolio increased 14% to $3.36 billion as
of June 30, 1999 from $2.95 billion as of December 31, 1998.

   Loans held for sale, net decreased  $1.8 million,  or 2%, to $85.4 million at
June 30,  1999,  from $87.2  million at December  31,  1998.  This  increase was
primarily  due to  the  net  difference  between  loan  originations  and  loans
securitized during the six months ended June 30, 1999.

   Accrued interest and late charges receivable  increased $7.4 million, or 16%,
to $54.3 million at June 30, 1999, from $46.9 million at December 31, 1998. This
increase was primarily due to a larger loan servicing  portfolio  which resulted
in increased  reimbursable  interest  advances  made by the  Company,  acting as
servicer on its securitizations.

   Capitalized  mortgage  servicing  rights  increased $5.1 million,  or 15%, to
$38.6 million at June 30, 1999,  from $33.5  million at December 31, 1998.  This
increase was directly attributable to the Company's capitalizing the fair market
value  of the  servicing  assets,  totaling  $9.2  million,  resulting  from the
Company's completion of two securitizations during the six months ended June 30,
1999,  partially  offset by the amortization of capitalized  mortgage  servicing
rights.

   Interest-only and residual  certificates  increased $12.5 million,  or 6%, to
$216.3 million at June 30, 1999,  from $203.8 million at December 31, 1998. This
increase  is  primarily  attributable  to  the  Company's  receipt  of  residual
certificates  valued and  recorded  at $28.1  million  from its  securitizations
during  the  six  months  ended  June  30,  1999,  partially  offset  by  normal
amortization due to cash distributions and fair value adjustments.

   Equipment,  net, increased $2.8 million, or 16%, to $19.8 million at June 30,
1999, from $17.0 million at December 31, 1998. The increase was primarily due to
capital expenditures related to new technology and expansion.

                                       17


   Cash held for  advance  payments  increased  $2.2  million,  or 22%, to $12.2
million at June 30, 1999,  from $10.0 million at December 31, 1998. The increase
was  primarily due to a higher  average loan  servicing  portfolio  resulting in
additional  monies held in escrow  trust  accounts by the  Company,  acting as a
servicer.

   Warehouse financing and other borrowings  increased $12.0 million, or 15%, to
$92.3 million at June 30, 1999,  from $80.3 at December 31, 1998.  This increase
was primarily attributable to the operating cash deficit and to a lesser extent,
the funding of the company's investment in technology.

   The aggregate principal balance of the Senior Notes totaled $149.4 million at
June 30, 1999 and December 31,  1998,  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.

   Accounts  payable and  accrued  expenses  increased $9.6 million,  or 46%, to
$30.6 million at June 30, 1999,  from $21.0  million at December 31, 1998.  This
decrease was primarily  attributable  to the accrual of the  Company's  original
settlement  with the NYOAG (which  settlement has been replaced by the Company's
global  settlement  with the NYOAG,  the NY Banking  Department and the DOJ), in
addition to the timing of various other operating accruals.

   Investor  payable  increased $13.0 million,  or 20%, to $76.8 million at June
30, 1999,  from $63.8 million at December 31, 1998.  This increase was primarily
due to the 14% increase in the  Company's  portfolio of serviced  loans to $3.36
billion at June 30,  1999 from $2.95  billion at  December  31,  1998.  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.

   Advance payments by borrowers for taxes and insurance increased $2.2 million,
or 23%, to $11.8  million at June 30,  1999,  from $9.6  million at December 31,
1998.  This  increase  is  primarily  due to a  higher  average  loan  servicing
portfolio  and the timing of  payments  collected  and  disbursed  resulting  in
additional  monies held in escrow  trust  accounts  by the  Company  acting as a
servicer.

   Stockholders' equity increased $8.0 million, or 6%, to $145.7 million at June
30, 1999,  from $137.7 million at December 31, 1998. This increase is due to net
income for the six month period ending June 30, 1999.

LIQUIDITY AND CAPITAL RESOURCES

   The  Company  has  historically  operated  on a negative  cash flow basis due
primarily to increases in the volume of loan purchases and  originations and the
growth of its securitization  program. In recent quarters,  however, the Company
has  reduced  its  negative  cash flow and  achieved a  positive  cash flow from
operations during the last three consecutive quarters. The Company's strategy is
to  maintain  a  neutral  to  slightly  negative  cash  flow  position  for  the
foreseeable  future,  as a result of  aggregate  annual  cash  inflows  from the
Company's retained interest-only and residual certificates, advantageous changes
in  the   securitization   structures   the  Company  has  used  and  a  greater
concentration on less cash-intensive  broker and retail  originations.  However,
market conditions could impact the Company's cash flows potentially resulting in
a more  significant  negative cash flow.  Since the second  quarter of 1997, the
Company  has  sold  the  senior  interest-only   certificates  in  each  of  its
securitizations  and, in the

                                       18


Company's  six most recent  securitizations, it  has successfully  increased the
amount of senior interest-only  certificates  offered  to investors, compared to
prior securitizations, which has also enhanced cash flow.

   For the six months  ended June 30, 1999,  the Company had positive  operating
cash flow of $5.5 million  compared to a negative  operating  cash flow of $10.9
million for the  comparable  period in 1998. The increase in operating cash flow
was  primarily  due to the  Company's  de-emphasis  of  the  correspondent  loan
production   channel,   thereby  decreasing  the  amount  of  premiums  paid  to
correspondents  and an  increase in the cash flows from the  Company's  retained
interest-only and residual certificates.  The increase was partially offset by a
one-time tax refund during the first quarter of 1998.

   Currently, the Company's primary cash requirements include the funding of (1)
mortgage  originations  and purchases  pending  their pooling and sale,  (2) the
points and expenses paid in connection  with the  acquisition  of  correspondent
loans,  (3)  interest  expense  on its  Senior  Notes  and  warehouse  and other
financings, (4) fees, expenses, delinquency advances, servicing-related advances
and tax payments incurred in connection with its securitization program, and (5)
ongoing  administrative and other operating expenses including fees and expenses
associated with the Company's settlement of claims by the NY Banking Department,
NYOAG and the DOJ.  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 purchase 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 and purchases,  securitizations  and
general operating expenses.  On July 23, 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  purchases  and its  ongoing  securitization
program. The Company's primary sources of liquidity continue to be warehouse and
other financing  facilities,  securitizations and, subject to market conditions,
sales of whole loans and additional debt and equity securities.

   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 five warehouse facilities as of June 30, 1999 for
this purpose.  One warehouse  facility is a $200 million  committed  credit line
with a  variable  rate of  interest  and a  maturity  date of March  2000.  This
facility's  maturity  date was extended  from February 1999 to March 2000 during
the three months ended March 31, 1999. The Company's second warehouse  facility,
a  syndicated  $100 million  committed  revolving  line with a variable  rate of
interest  was  renewed in June 1999 and  extended  to mature in June  2000.  The
Company's third warehouse facility is a $200 million committed  commercial paper
conduit with a variable rate of interest and a maturity date of September  1999.
During the second quarter of 1999, the Company obtained two additional warehouse
facilities,  which include,  a warehouse  facility with a $200 million committed
credit  facility  that has a variable  rate of interest  and a maturity  date of
April 2000,  and a  warehouse  facility  with a $250  million  committed  credit
facility that has a variable rate of interest and a maturity date of April 2000.
Only the first $200 million warehouse facility had an outstanding  balance as of
June 30, 1999 of $78.4 million.

                                       19


   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  Company  does not  believe  that its  existing
financial  covenants  will  restrict its  operations  or growth.  The  continued
availability of funds provided to the Company under these  agreements is subject
to 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, 1999.

      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 1999, no additional shares were repurchased.

On June 23,  1999,  the Company  announced a settlement  in  principle  with the
office of the Attorney  General for the State of New York  ("NYOAG").  The NYOAG
took issue with Delta's lending  practices,  specifically which loans should and
should not be made. The Banking Department of the State of New York ("NY Banking
Department")  and the U.S.  Department of Justice (the "DOJ") had raised similar
concerns relating to Delta's lending practices.  On August 16, 1999, the Company
entered into an agreement in principle with the NY Banking Department, NYOAG and
the DOJ with respect to their concerns.

     As part of the global  settlement (in lieu of the previously  announced six
million  settlement  with the NYOAG),  the  Company  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 NY
Banking  Department,  NYOAG and the DOJ; and the creation of a reversionary fund
(the  "fund"),  administered  by a trustee  named by the  NYOAG,  the NY Banking
Department  and/or the DOJ,  financed by the grant by Delta of 525,000 shares of
Delta's common stock, valued at $9.10 per share. All proceeds raised through the
funds shall be used to pay for a variety of educational and counseling programs,
approved by the  NYOAG,  the NY Banking Department  and/or the DOJ.

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.")

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

                                       20


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:

   *  Rapid  or  unforeseen  escalation  of  the cost of  regulatory  compliance
      and/or litigation, including but not limited to, environmental compliance,
      licenses,  adoption of new, or changes in accounting polices and practices
      and the application of such polices and practices.  Failure to comply with
      various federal,  state and local regulations,  accounting  policies,  and
      environmental  compliance  can lead to loss of  approved  status,  certain
      rights of  rescission  for  mortgage  loans,  class  action  lawsuits  and
      administrative enforcement action.

   *  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.

   *  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.

   *  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.

   *  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.

   *  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.

   *  The unanticipated expenses  of assimilating newly-acquired businesses into
      the

                                       21


      Company's  structure;  as  well as  the  impact  of unusual  expenses from
      ongoing   evaluations   of   business   strategies,    asset   valuations,
      acquisitions, divestitures and organizational structures.

   *  Unpredictable  delays  or  difficulties  in  development  of  new  product
      programs.

   *  Year  2000  Compliance  and  Technology  Enhancements.   The  Company   is
      utilizing  both  internal  and external  resources  to identify,  correct,
      reprogram  or  replace,  and test its  systems  for year 2000  compliance.
      Although to date, the Company has been completing its Year 2000 compliance
      efforts  on time,  there can be no  assurance  that the  Company  will not
      experience  unexpected  delay.  There  can also be no  assurance  that the
      systems of other  companies  on which the  Company's  systems rely will be
      timely reprogrammed for year 2000 compliance.

INFORMATION SERVICES YEAR 2000 PROJECT

   The Year 2000 issue centers on the inability of certain computer hardware and
software systems and associated  applications to correctly recognize and process
dates beyond December 31, 1999. Many computer programs used by the Company,  its
suppliers and outside service  providers were developed using only six digits to
define  the date  field (two  fields  each for the month,  day and year) and may
recognize "00" as the year 1900, rather than the year 2000. Due to the nature of
financial information, if corrective action is not taken, calculations that rely
on the integrity of the date field for the  processing of  information  could be
significantly misstated.

STATE OF READINESS

   The  Company  has  implemented  a  detailed  Year 2000 Plan (the  "Plan")  to
evaluate  the Year 2000  readiness  of the  computer  systems  that  support the
operation  of the  Company  including  vendor  computer  systems.  This  Plan is
expected to conclude in August 1999 with all systems year 2000 compliant.

   The Plan includes  upgrading the origination  system software,  upgrading the
loan servicing software, upgrading the accounting system software, upgrading the
wide area network software,  assessing the proper integration of all systems and
communicating with vendors and liquidity  providers to ascertain their Year 2000
compliance.

   To date,  the Company  believes  its internal  control  systems are Year 2000
compliant  and vendors and liquidity  providers  have been  contacted  regarding
their  readiness.  Results of system  tests  conducted  by the Company and other
service  providers  will  continue to be carefully  monitored to ensure that all
issues have been identified and addressed.

   The Company  believes it has developed an effective  Plan to address the Year
2000 issue and that based on the  available  information,  the  execution of the
Plan will not have any significant or material  impact to the Company's  ability
to  operate  before,  during  or after  the  transition  to the new  millennium.
However,  the  Company  has no  control  over the  process  of third  parties in
addressing  their own Year 2000  issues and,  if the  necessary  changes are not
effected or are not

                                       22


completed in a timely manner, or if unanticipated problems arise, there may be a
material impact on the Company's financial condition  and result  of operations.

COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES

   The Company's costs to resolve the Year 2000 issue are not expected to have a
material  financial  impact on the Company and are expected to be less than $1.0
million, which the Company intends to fund from its current operations. To date,
the Company has paid and expensed approximately $0.7 million. However, as stated
above,  there can be no assurance that all such costs have been  identified,  or
that there may not be some  unforeseen  cost  which may have a material  adverse
effect on the Company's financial condition and results of operations.

RISK OF YEAR 2000 ISSUES

   To date,  the Company has not identified any system which presents a material
risk of failing to be Year 2000  complaint  in a timely  manner,  or for which a
suitable  alternative cannot be implemented.  However, as the Company progresses
with its Plan,  systems or equipment may be identified  which present a material
risk of business  interruption.  Such  disruption  may include the  inability to
process  customer  accounting  transactions;   the  inability  to  process  loan
applications;  the  inability  to  reconcile  and  record  daily  activity;  the
inability to track  delinquencies;  or the  inability  to generate  checks or to
clear funds. In addition,  if any of the Company's  liquidity  providers  should
fail to achieve the Year 2000  compliance  and they  experience a disruption  of
their own businesses which prevents them from fulfilling their obligations,  the
Company may be materially impacted.

   To the extent that the risks  posed by the Year 2000 issue,  which are beyond
the  Company's   control,   are  pervasive  in  data  processing,   utility  and
telecommunication  services worldwide, the Company cannot predict with certainty
that it will remain  materially  unaffected  by issues  related to the Year 2000
problem.

CONTINGENCY PLANS

   As part of the Plan implemented by the Company, periodic assessments are made
to  determine  that all Year  2000  issues  will be  addressed  prior to the new
millennium.  If this  assessment  determines  that any systems are not Year 2000
compliant,  and will not become Year 2000 compliant in a timely  manner,  then a
contingency  plan to implement a suitable  alternative  will be put in place. At
this time all systems are expected to be compliant and no contingency plan is in
place.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

SFAS NO. 133

In June 1998, SFAS No. 133  "Accounting  for Derivative  Instruments and Hedging
Activities"  was issued.  SFAS No. 133 is effective  for fiscal years that begin
after June 15,  2000,  and in  general  requires  that  entities  recognize  all
derivative  financial  instruments  as assets or  liabilities,  measured at fair
value,  and include in earnings the changes in the fair value of such assets and

                                       23


liabilities. SFAS No. 133 also provides that changes in the fair value of assets
or liabilities being hedged with recognized derivative instruments be recognized
and included in earnings.  Management of the Company believes the implementation
of SFAS No.  133 will not have a  material  impact  on the  Company's  financial
condition or results of operations.

                                       24
<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 the Company  originates or
purchases  mortgage  loans and the time 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.

   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 largely been
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  (increased)  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  primarily  due to a less then  perfect  correlation  between  the  hedging
instrument used to hedge the securities issued by the securitization trust.

   Changes in interest rates could also 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").

INTEREST RATE RISK

    Among 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 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

                                       25


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.  As
previously  discussed,  the fair value  adjustments that the Company recorded in
the second quarter of 1998 were primarily  attributable to the Company's  change
in prepayment assumptions to reflect higher than originally anticipated rates of
prepayments  (see  "--Fair  Value  Adjustments").  In an effort to mitigate  the
effect of interest  rate risk,  the Company has  reviewed  its various  mortgage
products and has  identified  and modified  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.

   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").

                                       26
<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,  including  several  class  action
lawsuits set forth below.  While it is impossible to estimate with certainty the
ultimate legal and financial  liability with respect to such claims and actions,
the Company  believes that the  aggregate  amount of such  liabilities  will not
result in monetary  damages which in the aggregate would have a material adverse
effect on the financial condition or results of operations of the Company.

   *  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, the Truth in Lending Act and New York State
      General  Business Law ss. 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 the 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 the amended complaint. In July 1999, Plaintiffs
      were granted leave, on consent, to file a second amended complaint.

   *  In or  about January 1999,  the Company  received  notice that it had been
      named in a lawsuit filed in the Court of Common Pleas in Cuyahoga  County,
      Ohio,  alleging  that Delta had  violated  Ohio state law and breached its
      contract  with  Plaintiff by  assessing a  prepayment  penalty and certain
      other  miscellaneous  fees when Plaintiff paid off his loan. The complaint
      seeks  certification  of two classes of  plaintiffs.  In March  1999,  the
      Company filed an answer to the complaint. In July 1999, the Company agreed
      to an  individual  settlement  with  Plaintiff  and the  lawsuit  has been
      dismissed with prejudice.

   *  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)

                                       27


      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 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). Delta has not yet answered the complaint.

   The Company  believes that it has meritorious  defenses and intends to defend
each of these  lawsuits,  but cannot  estimate  with any  certainty its ultimate
legal or financial liability, if any, with respect to the alleged claims.

On June 23,  1999,  the Company  announced a settlement  in  principle  with the
office of the Attorney  General for the State of New York  ("NYOAG").  The NYOAG
took issue with Delta's lending  practices,  specifically which loans should and
should not be made. The Banking Department of the State of New York ("NY Banking
Department")  and the U.S.  Department of Justice (the "DOJ") had raised similar
concerns relating to Delta's lending practices.  On August 16, 1999, the Company
entered into an agreement in principle with the NY Banking Department, NYOAG and
the DOJ with respect to their concerns.

     As part of the global  settlement (in lieu of the previously  announced six
million  settlement  with the NYOAG),  the  Company  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 NY
Banking  Department,  NYOAG and the DOJ; and the creation of a reversionary fund
(the  "fund"),  administered  by a trustee  named by the  NYOAG,  the NY Banking
Department  and/or the DOJ,  financed by the grant by Delta of 525,000 shares of
Delta's common stock, valued at $9.10 per share. All proceeds raised through the
funds shall be used to pay for a variety of educational and counseling programs,
approved by the NY Banking Department, NYOAG and the DOJ.

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

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.  None


                                       28



ITEM 4.  SUBMISSION TO A VOTE OF SECURITY HOLDERS.

   The  annual  meeting  of  stockholders  was  held on May 12,  1999.  At the
meeting,  Hugh Miller was elected as a Class III  Director for a term of three
years.  Sidney  A.  Miller,  Martin D.  Payson,  Richard  Blass and  Arnold B.
Pollard continue to serve as members of the Board of Directors.

            Votes cast in favor of Mr. Miller's  election totaled 14,125,210,
            while 26,985 votes were withheld.

   The  stockholders  also  voted to ratify the  appointment  of KPMG LLP as the
Company's independent public accountants for the fiscal year ending December 31,
1999. Votes cast in favor of this  ratification were  14,140,984,  while votes
cast against were 9,861 and abstentions totaled 1,350.

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, 1999

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

                                       29

<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 13, 1999

                                          By:/S/ HUGH MILLER
                                             -----------------------------------
                                             Hugh Miller
                                             PRESIDENT & CHIEF EXECUTIVE OFFICER

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



                                       30
<PAGE>

                                  EXHIBIT INDEX

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

11.1        Statement re: Computation of  Per Share Earnings.

27.1        Financial Data Schedule - Six Months Ended June 30, 1999