SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 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 March 31, 1998

                                       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                       (IRS 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 March 31, 1998,  15,372,688 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

Consolidated Balance Sheets as of March  31,  1998 and  
December  31,  1997...........................................................1

Consolidated Statements of Income for the three months
ended  March 31, 1998 and March 31, 1997......................................2

Consolidated Statements of Cash Flows for the three months ended
March 31, 1998 and March 31, 1997 ............................................3

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

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

Certain Accounting Considerations.............................................16

PART II - OTHER INFORMATION

Other Information.............................................................18

Signatures....................................................................20

<PAGE>
Part I - Financial Information
<TABLE>
<CAPTION>
                 DELTA FINANCIAL CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)

                                                       March 31,    December 31,
(Dollars in thousands, except for share data)            1998           1997
                                                     ------------   ------------
<S>                                                  <C>            <C>
Assets                                              
Cash and interest bearing deposits                      $ 39,608       $ 32,858
Accounts receivable                                       24,689         31,209
Loans held for sale                                       71,381         79,247
Accrued interest and late charges receivable              33,009         29,598
Capitalized mortgage servicing rights                     25,916         22,862
Interest-only and residual certificates                  186,082        167,809
Equipment, net                                            13,699         11,211
Cash held for advance payments                             7,335          6,325
Real estate owned                                            ---            ---
Prepaid and other assets                                   5,847          6,224
Goodwill                                                   5,647          5,889
                                                       ---------      ---------
     Total assets                                      $ 413,213      $ 393,232
                                                       =========      =========
                                                 
Liabilities and Stockholders' Equity                
Liabilities:                                        
Bank payable                                           $   1,517      $   2,222
Warehouse financing and other borrowings                  27,593         28,233
Senior notes                                             149,326        149,307
Accounts payable and accrued expenses                     10,850         15,503
Investor payable                                          52,555         40,852
Advance payment by borrowers for taxes and insurance       6,953          5,750
Income taxes payable                                      29,715         24,912
                                                       ---------      ---------
   Total liabilities                                   $ 278,509      $ 266,779
                                                       ---------      ---------
                                                    
Stockholders' Equity:                               
Capital stock, $.01 par value. Authorized           
 49,000,000 shares; issued and outstanding          
 15,372,688 at March 31,  1998 and                  
 December 31, 1997                                     $     154      $     154
Additional paid-in capital                                93,476         93,476
Retained earnings                                         41,074         32,823
                                                       ---------      ---------
   Total stockholders' equity                            134,704        126,453
                                                       ---------      ---------
     Total liabilities and stockholders' equity        $ 413,213      $ 393,232
                                                       =========      =========
                                                    
                                             
                                                                                                                                    
          See accompanying notes to consolidated financial statements.

                                       1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                  DELTA FINANCIAL CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

                                                          Three Months Ended
                                                               March 31,
(Dollars in thousands, except per share data)            1998             1997
                                                       --------         --------
<S>                                                    <C>              <C> 
Revenues:
  Net gain on sale of mortgage loans                   $26,826          $17,314
  Interest                                               6,665            5,559
  Servicing fees                                         1,914            1,392
  Origination fees                                       5,749            3,040
                                                       -------          -------
     Total revenues                                     41,154           27,305
                                                       -------          -------
Expenses:                                 
  Payroll and related costs                             12,502            7,496
  Interest expense                                       7,066            3,170
  General and administrative                             8,485            4,399
                                                       -------          -------
     Total expenses                                     28,053           15,065
                                                       -------          -------
                                            
Income before income taxes                              13,101           12,240
Provision for income taxes                               4,850            5,250
                                                       -------          -------
Net income                                             $ 8,251          $ 6,990
                                                       =======          =======

Per share data:
   Earnings per common share - basic and diluted         $0.54            $0.45
   Weighted-average number of shares outstanding    15,372,688       15,319,271











         See accompanying notes to consolidated financial statements.

                                       2

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                  DELTA FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                                                              Three Months Ended
                                                                                   March 31,
(Dollars in thousands)                                                        1998          1997
                                                                            --------      --------
<S>                                                                         <C>           <C>
Cash flows from operating activities:
    Net income                                                              $ 8,251       $ 6,990
    Adjustments to reconcile net income to net cash used in
      Operating activities:
       Provision for loan and recourse losses                                    25            25
       Depreciation and amortization                                            928           444
       Capitalized mortgage servicing rights, net of amortization            (3,054)       (2,036)
       Deferred origination fees                                                850            25
       Interest-only and residual certificates received in
         securitization transactions, net                                   (18,273)      (18,786)
       Changes in operating assets and liabilities:
          Decrease (increase) in accounts receivable                          6,520        (4,562)
          Decrease in loans held for sale, net                                7,008         5,812
          Increase in accrued interest and late charges receivable           (3,411)       (1,441)
          Increase in cash held for advance payments                         (1,010)          (97)
          Decrease in prepaid and other assets                                  377            17
          Decrease in accounts payable and  accrued expenses                 (4,670)         (431)
          Increase (decrease) in investor payable                            11,703        (2,199)
          Increase in advance payments by borrowers for taxes and
             insurance                                                        1,203            83
          Increase in income taxes payable                                    4,803         4,719
                                                                            --------      --------
              Net cash provided by (used in) operating activities            11,250       (11,437)
                                                                            --------      --------
Cash flows from investing activities:
    Acquisition of Fidelity Mortgage                                              -        (3,675)
    Purchase of equipment                                                    (3,155)         (660)
                                                                            --------      --------
              Net cash used in investing activities                          (3,155)       (4,335)
                                                                            --------      --------
Cash flows from financing activities:
    (Repayments of) proceeds from  warehouse financing and other
      borrowings, net                                                          (640)       16,794
    Decrease in bank payable, net                                              (705)         (651)
                                                                            --------      --------
              Net cash (used in) provided by financing activities            (1,345)       16,143
                                                                            --------      --------
              Net increase in cash and interest bearing deposits              6,750           371

Cash and interest bearing deposits at beginning of period                    32,858        18,741
                                                                            --------      --------
Cash and interest bearing deposits at end of period                        $ 39,608      $ 19,112
                                                                           =========     =========

Supplemental Information:
Cash paid during the period for:
    Interest                                                               $ 10,626      $  3,906
    Income taxes                                                                118         4,444


          See accompanying notes to consolidated financial statements.

                                       3

</TABLE>
<PAGE>

                 DELTA FINANCIAL CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     March 31, 1998 and December 31, 1997


(1) Organization
Delta Financial  Corporation (the "Company") 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 will  continue  to  operate  as  Fidelity
Mortgage Inc. going forward.

(2) Basis of Presentation
The consolidated  financial  statements  include the accounts of the Company and
its  wholly-owned  subsidiaries.   All  significant  intercompany  accounts  and
transactions have been eliminated.

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial information and 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   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, 1997.

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

                                       4


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

For the periods ended March 31:

(Dollars in thousands, except EPS data)        1998               1997

------------------------------------------------------------------------------
Net income                                   $8,251               $6,990
Weighted-average shares                  15,372,688           15,319,271
 Basic EPS                                    $0.54                $0.45

Weighted-average shares                  15,372,688           15,319,271
Incremental shares-options                    1,081              101,612
------------------------------------------------------------------------------
                                         15,373,769           15,420,883
Diluted EPS                                   $0.54                $0.45



                                       5
<PAGE>
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  engages in the consumer  finance  business by  originating,
acquiring,  selling and servicing  non-conforming home equity loans.  Throughout
its 16 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,  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  Corporation  currently  originates and
purchases  the  majority  of its loans in 22  states,  through  its  network  of
approximately 1,150 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 9 states.

   For the three  months  ended  March 31,  1998,  the  Company  originated  and
purchased  $387  million  of loans,  an  increase  of 63% over the $237  million
originated  and purchased in the  comparable  period in 1997. Of these  amounts,
approximately $168 million were originated through its network of brokers,  $167
million were purchased from its network of  correspondents  and $52 million were
originated  through its retail network in the three months ended March 31, 1998,
compared to $106  million,  $123 million and $8 million,  respectively,  for the
same period in 1997.

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

                                       6

<TABLE>
<CAPTION>
                                                               Three Months Ended
                                                       ----------------------------------
(Dollars in thousands)                                 March 31, 1998   December 31, 1997 
                                                       --------------   -----------------  
<S>                                                    <C>              <C> 
Total Outstanding Principal Balance                                                
    (at period end)..................................   $ 2,100,124         $ 1,840,150      
Average Outstanding(1)...............................   $ 2,007,612         $ 1,744,810      
DELINQUENCY (at period end) 30-59 Days:                                                      
    Principal Balance................................     $  88,795          $   90,053      
    Percent of Delinquency(2)........................         4.23%               4.89%      
60-89 Days:                                                                                  
    Principal Balance................................     $  33,401          $   28,864      
    Percent of Delinquency(2)........................         1.59%               1.57%      
90 Days or More:                                                                             
    Principal Balance................................     $  22,607          $   17,696      
    Percent of Delinquency(2)........................         1.08%               0.96%      
Total Delinquencies:                                                                         
    Principal Balance................................     $ 144,803          $  136,613      
    Percent of Delinquency(2)........................         6.90%               7.42%      
FORECLOSURES                                                                                 
    Principal Balance................................     $ 102,743           $  85,500      
    Percent of Foreclosures by Dollar(2).............         4.89%               4.65%      
REO (at end of period)...............................      $ 13,192            $ 10,292      
Net Gains/(Losses) on liquidated loans...............      $ (1,542)           $ (1,579)     
Percentage of Net Gains/(Losses) on liquidated loans                      
    (based on Average Outstanding Balance)(3)........        (0.31%)             (0.36%)            
---------------
<FN>                                                         
(1) Calculated by summing the actual  outstanding  principal balances at the end
    of each  month  and  dividing  the  total  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
</FN>
</TABLE>

Securitizations

   As a fundamental part of its business and financing strategy, Delta sells the
majority of its loans through  securitization and derives a substantial  portion
of its income therefrom. In a securitization,  the Company sells a pool of loans
it has originated or purchased to a REMIC trust for a cash price.  The trust, in
turn,  finances  the pool of  loans it has  acquired  by  issuing  "pass-through
certificates," or bonds, which represent  undivided  ownership  interests in the
trust.  The holders of the  pass-through  certificates  are  entitled to receive
monthly  distributions of all principal received on the underlying mortgages and
a specified amount of interest, as determined at the time of the trust offering.

   When  the  Company  sells a pool of  loans to the  securitization  trust,  it
receives  the  following  economic  interests in the trust:  (a) the  difference
between  the  interest  payments  due on the  loans  sold to the  trust  and the
interest rate paid to the  pass-through  certificateholders,  less the Company's
contractual  servicing  fee and other costs and  expenses of  administering  the
trust, represented by interest-only and residual certificates, and (b) the right
to  service  the loans on

                                       7

behalf of  the trust and  earn a  contractual  servicing fee,  as well  as other
ancillary  servicing  related fees directly from the borrowers on the underlying
loans.

   Upon the  securitization  of a pool of loans,  the Company (i)  recognizes in
income,  as origination  fees, the unamortized  origination fees included in the
investment  in the loans sold,  and (ii)  recognizes a gain on sale of loans for
the  difference  between cash received from the trust and the  investment in the
loans  remaining  after the allocation of portions of that  investment to record
interest-only and residual  certificates and mortgage  servicing rights received
in the  securitization.  The majority of the net gain on sale of mortgage  loans
results  from,  and is  initially  realized  in the form of,  the  retention  of
interest-only and residual certificates.

   In recording and accounting for mortgage  servicing rights and  interest-only
and residual  certificates,  the Company makes estimates of rates of prepayments
and defaults, and the value of collateral,  which it believes reasonably reflect
economic  and other  relevant  conditions  then in effect.  The  actual  rate of
prepayments, defaults and the value of collateral will generally differ from the
estimates  used,  due to  subsequent  changes  in  economic  and other  relevant
conditions and the implicit  imprecision of estimates,  and such differences can
be material.  Prepayment and default rates which are higher than those estimated
would adversely  affect the value of both the mortgage  servicing rights (actual
mortgage servicing income will be less, and significant changes could require an
impairment of the capitalized  mortgage  servicing rights) and the interest-only
and  residual  certificates,  for which  changes in fair value are  recorded  in
operations.  Conversely, prepayment and default rates which are lower than those
estimated would increase the servicing  income earned over the life of the loans
and positively impact the value of the interest-only and residual certificates.

   The  Company  has,  from  time to time,  sold its  economic  interest  in the
interest-only  certificates  for cash proceeds  including,  most  recently,  the
interest-only  certificates on its last three 1997  securitization  transactions
and its 1998 first quarter securitization transaction.

Recent Growth

   The Company has experienced  significant loan origination and purchase growth
in the last few years,  particularly since January 1, 1995.  Management believes
that this growth is  primarily  attributable  to the  Company's  (i)  geographic
expansion of its  operations,  (ii)  further  penetration  into its  established
markets,  (iii)  increased  access to capital  and  additional  funding  sources
through (a) the  capital  markets and (b) larger  warehouse  finance  agreements
which have  enabled the Company to  accumulate  larger  pools of loans for sales
through  securitizations,  and (iv) recent expansion of its production  channels
through the acquisition of the Fidelity Mortgage retail operations.

   In connection  with its  geographic  expansion,  the Company has continued to
focus  on  developing  loan  production  from  brokers  and  correspondents.  In
addition,  the Company is also  committed to developing and growing the Fidelity
Mortgage retail origination network.  There can be no assurance that the Company
will  continue to grow  significantly  in the future.  Any future growth will be
limited  by,  among other  things,  the  Company's  need for  continued  funding
sources, access to capital markets,  sensitivity to economic slowdowns,  ability
to attract and retain  qualified  personnel,  fluctuations in interest rates and
competition from other consumer

                                       8


finance  companies and  from new  market entrants. To date, the  Company has not
experienced  any  significant  seasonal  variations  in  loan  originations  and
purchases.

   The Company's recent and rapid growth may have a somewhat  distortive  impact
on  certain  of the  Company's  ratios  and  financial  statistics  and may make
period-to-period  comparisons  difficult.  In  light  of the  Company's  growth,
historical  performance of the Company's earnings may be of limited relevance in
predicting future performance.  Furthermore,  the Company's financial statistics
may not be indicative of the Company's results in future periods.  Any credit or
other  problems  associated  with  the  large  number  of loans  originated  and
purchased  in the recent  past may not become  apparent  until  sometime  in the
future.

   The  comparability  of the results of  operations  for the three months ended
March 31, 1998 and March 31, 1997,  and financial  position as of March 31, 1998
and  December  31,  1997 may also be affected by the  Company's  acquisition  of
Fidelity Mortgage.

Results of Operations

Three Months Ended March 31, 1998 Compared to the Three Months Ended March 31,
1997

Revenues

   Total  revenues  for the three months  ended March 31, 1998  increased  $13.9
million,  or 51%, to $41.2 million from $27.3 million for the comparable  period
in 1997. The increase in revenue was primarily  attributable  to the increase in
the net gain recognized on the sale of mortgage loans,  reflecting the growth in
the Company's level of loan originations, purchases and securitizations. Revenue
also increased in all other categories  including  origination  fees,  servicing
fees, and interest income.

   For the three  months  ended  March 31,  1998,  the  Company  originated  and
purchased $387 million of mortgage loans,  representing a 63% increase from $237
million of mortgage  loans  originated  and purchased for the three months ended
March 31, 1997. The Company completed a $400 million  securitization  during the
three months ended March 31, 1998 compared to a $235 million  securitization  in
the corresponding period in the prior year,  representing a 70% increase.  Total
loans  serviced  at March 31, 1998  increased  89% to $2.10  billion  from $1.11
billion at March 31, 1997.

   Net  Gain on Sale of  Mortgage  Loans.  Net  gain on sale of  mortgage  loans
represents (i) the sum of (a) the fair value of the retained  interest-only  and
residual  certificates  associated with loans securitized in each period and the
market value of the sold  interest-only  strips,  (b) the fair value of 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, (ii)
less the (x) premiums  paid to originate or acquire  mortgage  loans,  (y) costs
associated with securitizations and (z) any hedge loss (gain).

   For the three months ended March 31, 1998, net gain on sale of mortgage loans
increased  $9.5  million,  or 55%, to $26.8  million from $17.3  million for the
three months  ended March 31, 1997.  This  increase was  primarily  due to a 70%
increase  in the  amount  of loans  securitized  in the  first  quarter  of 1998
compared to the same period in 1997. Net gains from the sale of loans  increased
less than the overall  increase  in loan  securitizations  primarily  because of
market  driven

                                       9


increases  in the  pass-through rates  required by  REMIC trust investors  which
reduced the value of the  interest-only  and residual  certificates  the Company
received in connection with that quarter's securitization.  The weighted average
net gain on sale ratio for the three months  ended March 31,  1998,  and for the
comparable period in 1997, was 6.7% and 7.4%, respectively. The weighted-average
net gain on sale ratio is  calculated  by  dividing  the net gain on sale by the
total amount of loans securitized.

   Interest Income. Interest income primarily represents the sum of (i) interest
earned on loans held for sale, (ii) interest earned on cash collection balances,
and (iii) the difference  between the  distributions the Company receives on its
interest-only and residual  certificates and the adjustments recorded to reflect
the change in the fair value in the interest-only and residual certificates.

   Interest  income for the three  months  ended March 31, 1998  increased  $1.1
million,  or 20%, to $6.7 million from $5.6 million in the comparable  period in
1997. The increase in interest  income was primarily due to (a) a higher average
balance of mortgage  loans held for sale during the three months ended March 31,
1998 driven by higher loan  originations and purchases as noted above and (b) an
increase in excess  servicing  received  from the  Company's  interest-only  and
residual  certificates,  partially  offset by the fair value  adjustment  to the
interest-only  and residual  certificates,  primarily  related to  distributions
received from the securitization trusts. This increase was partially offset by a
lower mortgage coupon of 10.4% from 11.3%  reflecting the Company's shift to a
higher credit quality borrower and a lower economic interest rate environment.

   Servicing  Fees.  Servicing  fees  represent  all  contractual  and ancillary
servicing  revenue received by the Company less (a) 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
(b) prepaid interest shortfalls.

   Servicing  fees for the three  months  ended  March 31, 1998  increased  $0.5
million,  or 36%, to $1.9 million from $1.4 million in the comparable  period in
1997.  This  increase  was  primarily  due to a higher  average  loan  servicing
portfolio,  which resulted in increased  contractual and ancillary service fees,
net of amortization of the Company's  capitalized  mortgage servicing rights, in
1998 compared to 1997. During the three months ended March 31, 1998, the average
balance of mortgage loans serviced by the Company increased 91% to $2.01 billion
from $1.05 billion during the comparable  period in 1997. The amount of mortgage
loans  serviced  by the  Company  increased  at a faster rate than the amount of
servicing  fees,  primarily  as a result of (a) a reduction  in the  contractual
servicing  fee rate  from  0.65% to 0.50% per annum  beginning  with the  1996-2
securitization  in  September  1996,  and  (b)  an  increase  in the  amount  of
amortization  during the three  months  ended  March 31, 1998 as compared to the
comparable period in 1997.

   Origination  Fees.  Origination  fees  represent  fees earned on brokered and
retail originated  loans.  Origination fees for the three months ended March 31,
1998  increased  $2.7 million,  or 90%, to $5.7 million from $3.0 million in the
comparable  period in 1997. The increase is primarily the result of (a) the 1997
acquisition  of Fidelity  Mortgage  and the  subsequent  expansion of its retail
network which  accounted for $3.9 million of  origination  fees  in  1998, or  a

                                       10


144% increase  from  $1.6  million  in 1997,  and  (b) a 58% increase in  broker
originated loans and a commensurate increase  in broker  loan  origination fees.

Expenses

   Total expenses  increased  $13.0 million,  or 86%, to $28.1 million for three
months ended March 31, 1998,  from $15.1  million for the  comparable  period in
1997.  The  increase  in  expenses  was  primarily  the result of (i)  increased
interest  expense due to (a) higher  interest  costs  associated  with increased
borrowings  under the  Company's  warehouse  facilities to finance the growth in
loan origination and purchase  activities,  and (b) the issuance in July 1997 of
$150  million  aggregate  principal  amount of 9.5%  Senior  Notes due 2004 (the
"Senior Notes"),  (ii) an increase in the Company's  personnel related to higher
loan originations,  including in its Fidelity Mortgage retail division and (iii)
costs  associated  with  the  expansion  of the  Company's  retail,  broker  and
correspondent divisions.

   Payroll  and Related  Costs.  Payroll and  related  costs  include  salaries,
benefits and payroll taxes for all  employees.  For the three months ended March
31, 1998,  payroll and related costs expense increased $5.0 million,  or 67%, to
$12.5 million from $7.5 million for the comparable period in 1997. 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,  correspondent
and  Fidelity  Mortgage  retail  division.  As of March 31,  1998,  the  Company
employed  941 full- and  part-time  employees,  319 of which  are  employees  of
Fidelity Mortgage, compared to 530 full- and part-time employees as of March 31,
1997.

   Interest  Expense.  Interest  expense includes the borrowing costs to finance
loan originations and purchases under (i) the Company's credit facilities,  (ii)
the  Senior  Notes,  and (iii) its  investment  in  interest-only  and  residual
certificates.

   For the three months ended March 31, 1998,  interest  expense  increased $3.9
million, or 122%, to $7.1 million from $3.2 million for the comparable period in
1997. The increase in interest  expense was  attributable  to (i) growth in loan
production,  which  increased  the  level of debt  needed  throughout  the first
quarter of 1998 to finance the  inventory  of loans held for sale prior to their
securitization,  (ii) a higher cost of funds on the Company's credit  facilities
which were tied to one-month  LIBOR,  and (iii) the  Company's  issuance in July
1997 of the Senior  Notes.  The  one-month  LIBOR index  increased to an average
interest  rate of 5.6% in the three months ended March 31, 1998,  compared to an
average interest rate of 5.5% for the comparable period in 1997.

   General and  Administrative  Expenses.  General and  administrative  expenses
consist primarily of office rent, insurance, telephone,  depreciation,  goodwill
amortization,  real estate owned  expenses,  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.

   For the  three  months  ended  March 31,  1998,  general  and  administrative
expenses  increased $4.1 million,  or 93%, to $8.5 million from $4.4 million for
the comparable  period in 1997. This increase was primarily  attributable to (i)
the  expansion  costs  associated  with the Company's 

                                       11


increasing the  number of Fidelity  Mortgage  retail branch  offices  from  five
to fifteen  and (ii) an  increase  in  expenses  associated  with the  Company's
increase in loan origination and purchases.

   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 $4.9 million and $5.3 million for the
periods ended March 31, 1998 and 1997, respectively.

   Income taxes  provided a 37.0%  effective tax rate for the three months ended
March 31, 1998,  compared to a 42.9%  assumed  effective  tax rate for the three
months  ended  March  31,  1997.  The  reduction  in the  effective  tax rate is
primarily attributable to the Company's expansion into lower tax rate states and
local jurisdictions.

Financial Condition

March 31, 1998 compared to December 31, 1997

   Cash and interest bearing deposits  increased $6.7 million,  or 20%, to $39.6
million at March 31, 1998 from $32.9 million at December 31, 1997.  The increase
was  primarily  the result of  additional  monies held in  securitization  trust
accounts  by the  Company,  acting as servicer  for its  ongoing  securitization
program.

   Accounts receivable decreased $6.5 million, or 21%, to $24.7 million at March
31, 1998 from $31.2  million at December  31, 1997.  The decrease was  primarily
attributable  to the  receipt  of a federal  tax refund  partially  offset by 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 $2.10 billion as
of March 31, 1998 from $1.84 billion as of December 31, 1997.

   Loans held for sale decreased $7.8 million, or 10%, to $71.4 million at March
31, 1998 from $79.2  million at December 31, 1997.  This  decrease was primarily
the  result  of a larger  percentage  of loans  securitized,  compared  to loans
originated and purchased, in the first quarter of 1998.

   Accrued interest and late charges receivable  increased $3.4 million, or 11%,
to $33.0 million at March 31, 1998 from $29.6 million at December 31, 1997. This
increase was primarily due to a higher  average 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 $3.0 million,  or 13%, to
$25.9 million at March 31, 1998,  from $22.9 million at December 31, 1997.  This
increase was directly attributable to the Company's capitalizing the fair market
value  of the  servicing  assets,  totaling  $4.9  million,  resulting  from the
Company's  completion  of a  securitization  during  the first  quarter of 1998,
partially offset by the amortization of capitalized mortgage servicing rights.

   Interest-only and residual  certificates  increased $18.3 million, or 11%, to
$186.1 million at March 31, 1998 from $167.8 million at December 31, 1997.  This
increase  is  primarily 

                                       12


attributable to  the Company's  receipt of  a residual  certificate  valued  and
recorded at $23.9 million from the  securitization in the first quarter of 1998,
partially  offset by adjustments to reflect  changes in fair value primarily due
to distributions , totaling $5.6 million.

   Equipment, net, increased $2.5 million, or 22%, to $13.7 million at March 31,
1998 from $11.2 million at December 31, 1997.  The increase was primarily due to
capital  expenditures  related to new technology and our continued  expansion of
Fidelity Mortgage.

   Cash held for  advance  payments  increased  $1.0  million,  or 16%,  to $7.3
million at March 31, 1998 from $6.3 million at December  31, 1997.  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.

   The aggregate principal balance of the Senior Notes totaled $149.3 million at
March 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,  commencing  on February 1, 1998.  The Company did not have any Senior
Notes outstanding prior to July 1997.

   Accounts payable and accrued expenses decreased $4.6 million or 30%, to $10.9
million at March 31, 1998 from $15.5 million at December 31, 1997. This decrease
was primarily attributable to a payment of interest on Senior Notes.

   Investor payable  increased $11.7 million,  or 29%, to $52.6 million at March
31, 1998 from $40.9  million at December 31, 1997.  This  increase was primarily
due to the 14% increase in the Company's  portfolio of serviced loans.  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 $1.2 million,
or 21%,  to $7.0  million at March 31, 1998 from $5.8  million at  December  31,
1997.  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  $8.2 million,  or 6%, to $134.7  million at
March 31, 1998 from $126.5 million at December 31, 1997. This increase is due to
net income for the three month period ending March 31, 1998.

Liquidity and Capital Resources

   While 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,  the  Company has  partially  offset its
negative  cash flow in recent  quarters,  and  expects to continue to do for the
foreseeable  future,  as a  result  of the  securitization  structures  that the
Company  has  utilized  as  well  as the  Company's  concentration  on the  less
cash-intensive broker and retail originations.  Currently, the Company's primary
cash requirements include the funding of (i) mortgage originations and purchases
pending their pooling and sale,  (ii) the points and expenses paid in connection
with the  acquisition of  correspondent  loans,  (iii)  interest  expense on its
Senior Notes and warehouse  and other  financings,  (iv) fees,  expenses and tax

                                       13


payments incurred in connection with its securitization program, and (v) ongoing
administrative and other operating  expenses.  The Company has relied upon a few
lenders to provide the primary credit  facilities for its loan  originations and
purchases.

   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.  For the  quarters  ended  March 31,  1998 and 1997,  the  Company had an
operating  cash surplus of $11.3 million and an operating  cash deficit of $11.4
million,  respectively. The cash surplus as of March 31, 1998, was primarily due
to a one-time tax refund, an increase in the Company's  restricted cash held for
securitization  trust  accounts and an increase in loans sold from the Company's
inventory  of loans held for sale.  As it has done for the past three  quarters,
Delta  utilized  a  senior/subordinate  structure  for its  first  quarter  1998
securitization   and  sold  an   interest-only   certificate.   This   quarter's
securitization  structure  allowed  Delta to sell an  interest-only  certificate
twice  as  large  on a  percentage  basis  than  any of the  Company's  previous
interest-only certificates sales. This transaction,  coupled with the receipt of
a tax refund,  but  partially  offset by the  semi-annual  Senior Note  interest
payment, resulted in additional cash flow. During the first quarter of 1997, the
Company  had an  operating  cash  flow  deficit  as a result of  increased  loan
originations  and purchases,  and the structure of the 1997  securitization,  in
which the interest-only certificate was retained by the Company.

   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 three
warehouse  facilities for this purpose. One warehouse facility is a $400 million
committed  credit line with a variable  rate of interest and a maturity  date of
February  1999.  This facility was converted  from an uncommitted to a committed
line during the three  months  ended March 31,  1997 and the  maturity  date was
extended from February 1998 to February 1999 during the three months ended March
31, 1998. The Company's second warehouse  facility was a $200 million  committed
revolving  line with a variable rate of interest and a maturity date of February
1998. In February 1998,  management elected not to renew this line and secured a
new $250 million committed revolving line with a variable rate of interest which
has a maturity date of May 1999.  The Company's  third  warehouse  facility is a
syndicated  $140  million  committed  revolving  line  with a  variable  rate of
interest and a maturity date of June 1998. This facility was increased from $100
million to $140  million  during the three  months  ended  March 31,  1998.  The
outstanding  balance on the $400 million facility as of March 31, 1998 was $21.5
million.  The Company had no outstanding  balances for the $250 million facility
and the $140 million facility as of March 31, 1998.

                                       14


   The Company has in the past obtained  financing  facilities for interest-only
and residual certificates  acquired as part of its securitizations.  As of March
31, 1998, the Company did not have any indebtedness secured by interest-only and
residual  certificates.  In addition, the Company is limited by the terms of the
Indenture  governing  the Senior  Notes as to the amount of future  indebtedness
permitted to be secured by interest-only and residual certificates.

   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 March 31, 1998.

Interest Rate Risk

   The   Company's   primary   market  risk  exposure  is  interest  rate  risk.
Profitability  may be  directly  affected by the level of, and  fluctuation  in,
interest  rates,  which affect the  Company's  ability to earn a spread  between
interest  received on its loans and the costs of its borrowings,  which are tied
to various United States Treasury  maturities and the London Inter-Bank  Offered
Rate  ("LIBOR").  The  profitability  of the  Company is likely to be  adversely
affected  during any period of unexpected or rapid changes in interest  rates. A
substantial and sustained  increase in interest rates could adversely affect the
Company's  ability to purchase and originate  loans.  A  significant  decline in
interest rates could increase the level of loan prepayments  thereby  decreasing
the size of the Company's  loan  servicing  portfolio.  To the extent  servicing
rights  and  interest-only  and  residual  classes  of  certificates  have  been
capitalized on the books of the Company,  higher than anticipated  rates of loan
prepayments  or losses could require the Company to write down the value of such
servicing  rights  and  interest-only  and  residual   certificates,   adversely
impacting earnings.  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.

Hedging

   The  Company  originates  and  purchases  mortgage  loans and then sells them
primarily through securitizations. At the time of securitization and delivery of
the  loans,  the  Company  recognizes  gain on sale based on a number of factors
including the difference, or "spread" between the interest rate on the loans and
the interest rate on treasury  securities with maturities  corresponding  to the
anticipated  life of the loans.  If  interest  rates rise  between  the time the
Company  originates  or  purchases  the loans and the time the loans are sold at
securitization,  the excess spread narrows,  resulting in a loss in value of the
loans. The Company has implemented a strategy to protect against such losses and
to reduce interest rate risk on loans originated and purchased that have not yet
been  securitized  through the use of treasury rate lock  contracts with various
durations  (which are similar to selling a combination of United States Treasury

                                       15


securities),  which equate to a similar  duration of the underlying  loans.  The
nature and quantity of hedging  transactions are determined by the Company based
upon various factors including,  without  limitation,  market conditions and the
expected volume of mortgage  originations and purchases.  The Company will enter
into treasury rate lock  contracts  through one of its warehouse  lenders and/or
one of the investment  bankers which  underwrite the Company's  securitizations.
These contracts are designated as hedges in the Company's records and are closed
out when the associated loans are sold through securitization.

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

   The Company believes that its current hedging strategy of using treasury rate
lock  contracts is the most  effective  way to manage its interest  rate risk on
loans prior to securitization.  Because the Company's  securitization  closed on
March 31, 1998, the Company had no hedge outstanding as of that date.

Certain Accounting Considerations

SFAS No. 130

   SFAS No. 130, "Reporting on Comprehensive Income" was issued in June 1997 and
is effective for fiscal years  beginning  after December 15, 1997.  SFAS No. 130
establishes  standards for reporting and display of comprehensive income and its
components   (revenues,   expenses,   gains  and   losses)  in  a  full  set  of
general-purpose financial statements.  The Statement requires all items that are
required  to  be  recognized  under   accounting   standards  as  components  of
comprehensive  income to be reported in a financial  statement that is displayed
with  the same  prominence  as  other  financial  statements.  The  Company  has
determined that the  implementation of the requirements of SFAS No. 130 will not
affect the Company's net income, cash flows or financial position.

SFAS No. 131

   SFAS No.  131  "Disclosures  about  Segments  of an  Enterprise  and  Related
Information" was issued in June 1997 and is effective for fiscal years beginning
after  December 15, 1997.  SFAS No. 131  establishes  standards for the way that
public business  enterprises  report  information  about  operating  segments in
annual financial  statements and requires that those enterprises report selected
information  about  operating  segments in interim  financial  reports issued to
shareholders.  The Statement  requires a public business  enterprise to report a
measure of segment profit or loss,  certain  specific  revenue and expense items
and segment assets.  The Company has determined that the  implementation  of the
requirements of SFAS No.131 will not affect the Company's net income, cash flows
or financial position.

                                       16


Risk Factors

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

      *     A general economic slowdown.

      *     The effects of interest rate  fluctuations and the Company's ability
            or  inability to hedge  effectively  against  such  fluctuations  in
            interest  rates;  the  effects  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.

      *     The  Company's  ability or  inability  to continue its practice of
            securitization of mortgage loans held for sale.

      *     Increased competition within the Company's markets.

      *     The unanticipated expenses of assimilating newly-acquired businesses
            into the  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 the  development of new
            product programs.

      *     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
            policies and  practices  and the  application  of such  policies and
            practices.


                                       17
<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 state and federal
lending laws, the Company is subject to numerous claims and legal actions in the
ordinary  course  of its  business.  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 the Company.

   Several  class-action  lawsuits  have been filed against a number of consumer
finance companies alleging that the compensation of mortgage brokers through the
payment of yield spread  premiums  violates  various  federal and state consumer
protection laws. The Company has been named in two such lawsuits:

         a. On March 18,  1997,  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, alleging that the Company's  compensation of
      mortgage brokers by means of yield spread premiums  violates,  among other
      things, the Real Estate Settlement Procedures Act ("RESPA"). The complaint
      seeks  (i)  certification  of a class of  plaintiffs,  (ii) an  injunction
      against  payment  of  yield  spread  premiums  by the  Company  and  (iii)
      unspecified compensatory and punitive damages (including attorney's fees).
      On July 7, 1997,  the Company filed an answer to the  plaintiff's  amended
      complaint.

         b. On or about February 10, 1998, the Company  received  notice that it
      had been named in a lawsuit filed in the United States  District Court for
      the Northern District of Mississippi - Greenville Division,  alleging that
      the Company's  compensation  of mortgage  brokers by means of yield spread
      premiums  violates RESPA. The complaint seeks (i) certification of a class
      of  plaintiffs,  and  (ii)  unspecified  compensatory  damages  (including
      attorney's  fees).  On March 31, 1998,  the Company filed an answer to the
      complaint.

   Management  believes  the Company  has  meritorious  defenses  and intends to
defend these suits,  but the Company  cannot  estimate  with any  certainty  its
ultimate  legal or  financial  liability,  if any,  with  respect to the alleged
claims.

Item 2.  Changes in Securities.  None

Item 3.  Defaults Upon Senior Securities.  None

Item 4.  Submission to a Vote of Security Holders.  None

Item 5.  Other Information.  None

                                       18


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

    (a)Exhibits:            10.1 Eighth Amendment to Lease Agreement between 
                                 Delta Funding Corporation and the Tilles 
                                 Investment Company, dated April 1, 1998.

                            11.1 Statement re: Computation of Per Share Earnings

                            27.1 Financial Data Schedule - Three Months ended 
                                 March 31, 1998
                          
                            27.2 Financial Data Schedule - Three Months ended 
                                 March 31, 1997 
 
    (b)Reports on Form 8-K: None.


                                       19
<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:  May 11, 1998
                                          By:/s/ HUGH MILLER
                                             -----------------------------------
                                             Hugh Miller
                                             President & Chief Executive Officer


                                          By:/s/ RICHARD BLASS
                                             -----------------------------------
                                             Richard Blass
                                             Senior  Vice President and
                                             Chief Financial Officer


                                       20


<PAGE>

                                EXHIBIT INDEX

Exhibit
Number      Description

10.1        Eighth Amendment to Lease Agreement between Delta Funding
            Corporation and the Tilles Investment Company, dated April 1, 1998.

11.1        Statement re: Computation of Per Share Earnings.

27.1        Financial Data Schedule - Three Months ended March 31, 1998
                          
27.2        Financial Data Schedule - Three Months ended March 31, 1997