<PAGE>   1
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                _______________

                                   Form 10-Q

(Mark One)

    [X]
                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1997

                                       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
                                    0-22525    

                                _______________

                          First Sierra Financial, Inc.
             (Exact name of registrant as specified in its charter)

                 Delaware                                       76-0438432
         (State of incorporation)                            (I.R.S. Employer
                                                            Identification No.)

     Texas Commerce Tower, Suite 7050                              77002
            600 Travis Street                                   (Zip Code)
              Houston, Texas
 (Address of principal executive offices)

                                 (713) 221-8822
              (Registrant's telephone number, including area code)

                                _______________

  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 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      No [X]

  The number of shares outstanding of the registrant's no par value Common Stock
at August 19, 1997 was 8,716,884.

================================================================================
<PAGE>   2
                          FIRST SIERRA FINANCIAL, INC.

                                     INDEX

<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                  Number
                                                                                                  ------
 <S>              <C>                                                                               <C>
 PART I.          FINANCIAL INFORMATION: . . . . . . . . . . . . . . . . . . . . . . . . . . .  
 Item 1.          Financial Statements:
                  Consolidated Balance Sheets -- December 31, 1996 and June 30, 
                      1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . .      3
                  Consolidated Statements of Operations -- Three months and six months
                      ended June 30, 1996 and 1997 (unaudited) . . . . . . . . . . . . . . . .      4
                  Consolidated Statement of Stockholders' Equity -- Three months and
                      six months ended June 30, 1997 (unaudited) . . . . . . . . . . . . . . .      5
                  Consolidated Statements of Cash Flows -- Six months
                      ended June 30, 1996 and 1997 (unaudited) . . . . . . . . . . . . . . . .      6
                  Notes to Consolidated Financial Statements   . . . . . . . . . . . . . . . .      7
 Item 2.          Management's Discussion and Analysis of Financial Condition
                      and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 12-15
 PART II.         OTHER INFORMATION
 Item 6.          Exhibits and Reports on Form 8-K  . . . . . . . . . . . . . . . . . . . . . .    16
 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    17

</TABLE>




                                     - 2 -
<PAGE>   3
                        PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements

                 FIRST SIERRA FINANCIAL, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                             (Dollars In Thousands)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                        December 31,     June 30,
                                                                                            1996           1997
                                                                                        ------------     --------
                                                                                                        (Unaudited)
<S>                                                                                      <C>              <C>
LEASE FINANCING RECEIVABLES, net  . . . . . . . . . . . . . . . . . . . . . .            $   61,270       $52,900
INVESTMENT IN TRUST CERTIFICATES  . . . . . . . . . . . . . . . . . . . . . .                 9,534        16,105
GOODWILL AND OTHER INTANGIBLE ASSETS,
  net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 3,615        12,281
CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . .                 2,598         5,980
FURNITURE AND EQUIPMENT, net  . . . . . . . . . . . . . . . . . . . . . . . .                 1,049         2,321
OTHER ASSETS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 1,276         7,302
                                                                                         ----------       -------
          Total assets  . . . . . . . . . . . . . . . . . . . . . . . . . . .            $   79,342       $96,889
                                                                                         ==========       =======
                LIABILITIES AND STOCKHOLDERS' EQUITY                                     
DEBT:                                                                                    
  Warehouse credit facilities . . . . . . . . . . . . . . . . . . . . . . . .            $   52,380       $42,339
  Subordinated note payable . . . . . . . . . . . . . . . . . . . . . . . . .                 9,000         1,000
OTHER LIABILITIES:                                                                       
  Holdback reserve payable  . . . . . . . . . . . . . . . . . . . . . . . . .                 6,523         8,020
  Accounts payable and accrued                                                           
     liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 3,929        12,649
  Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .                 1,366         3,382
                                                                                         ----------       -------
          Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . .                73,198        67,390
                                                                                         ----------       -------
COMMITMENTS AND CONTINGENCIES                                                            
REDEEMABLE PREFERRED STOCK  . . . . . . . . . . . . . . . . . . . . . . . . .                 3,890         3,890
STOCKHOLDERS' EQUITY:                                                                    
  Common stock, $.01 par value,                                                          
     25,000,000 shares authorized, 8,716,884                                             
     and 5,696,310 shares, respectively,                                                         57            87
     issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . .            
  Additional paid-in capital  . . . . . . . . . . . . . . . . . . . . . . . .                   730        21,108
  Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 1,467         4,414
                                                                                         ----------       -------
          Total stockholders' equity  . . . . . . . . . . . . . . . . . . . .                 2,254        25,609
                                                                                         ----------       -------
          Total liabilities and
            stockholders' equity  . . . . . . . . . . . . . . . . . . . . . .            $   79,342       $96,889
                                                                                         ==========       =======
</TABLE>

   The accompanying notes are an integral part of these financial statements.





                                     - 3 -
<PAGE>   4
                 FIRST SIERRA FINANCIAL, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
   Three Month and Six Month Periods Ended June 30, 1996 and 1997 (Unaudited)
                    (In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>

                                                                                For the Three        For the Six
                                                                                 Months Ended        Months Ended
                                                                                   June 30,            June 30,
                                                                              ------------------   ----------------
                                                                                 1996      1997     1996     1997
                                                                               -------   -------   ------    ------
<S>                                                                           <C>         <C>      <C>      <C>
GAIN ON SALE OF LEASE FINANCING RECEIVABLES . . . . . . . . . . . . . . .       $1,613    $4,263   $1,613   $ 6,850
INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        1,240     2,812    3,091     5,127
SERVICING INCOME  . . . . . . . . . . . . . . . . . . . . . . . . . . . .          223       624      353     1,157
OTHER INCOME  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           15       131       44       216
                                                                                ------    ------   ------   -------
          Total revenues                                                         3,091     7,830    5,101   $13,350
                                                                                ------    ------   ------   -------
INTEREST EXPENSE  . . . . . . . . . . . . . . . . . . . . . . . . . . . .          972     1,456    2,394     3,109
SALARIES AND BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . .          323     1,424      637     2,156
PROVISION FOR CREDIT LOSSES . . . . . . . . . . . . . . . . . . . . . . .           69       369      120       663
DEPRECIATION AND AMORTIZATION . . . . . . . . . . . . . . . . . . . . . .           34       168       63       329
OTHER GENERAL AND ADMINISTRATIVE. . . . . . . . . . . . . . . . . . . . .          294     1,561      499     2,052
                                                                                ------    ------   ------   -------
          Total expenses                                                         1,692     4,978    3,713     8,309
                                                                                ------    ------   ------   -------
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES                        1,399     2,852    1,388     5,041
PROVISION (BENEFIT) FOR INCOME TAXES  . . . . . . . . . . . . . . . . . .          551     1,140      547     2,016
                                                                                ------    ------   ------   -------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . . . . . .          848     1,712      841     3,025
                                                                                ======    ======   ======   =======
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE  . . . . . . . .       $ 0.14    $ 0.22   $ 0.14   $  0.43
                                                                                ======    ======   ======   =======
</TABLE>

   The accompanying notes are an integral part of these financial statements.





                                     - 4 -
<PAGE>   5
                 FIRST SIERRA FINANCIAL, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                      (In Thousands, Except Share Amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                         Common Stock       
                                                   -----------------------    Additional    Retained      Total         
                                                     Number                     Paid-In    (Deficit)   Stockholder's    
                                                   of Shares        Amount      Capital     Earnings      Equity         
                                                   ---------       --------    ---------    ---------  -------------         
<S>                                                 <C>             <C>         <C>          <C>          <C>            
BALANCE, December 31, 1996  . . . . . . . . .       5,696,310       $   57      $   730      $ 1,467      $ 2,254        
  Net income  . . . . . . . . . . . . . . . .              --           --           --        3,025        3,025        
  Preferred stock dividends . . . . . . . . .              --           --           --          (78)         (78)       
  Initial public offering of common stock . .       2,300,000           23       16,183          --        16,206        
  Issuance of common stock in connection with                                                            
    purchase business combinations. . . . . .         522,222            5        4,195          --         4,200  
  Issuance of common stock in exchange for                                                                               
    convertible warrants                              198,352            2           --          --             2        
                                                   ----------       ------      -------      -------      -------
BALANCE, June 30, 1997  . . . . . . . . . . .       8,716,884       $   87      $21,108      $ 4,414      $25,609       
                                                   ==========       ======      =======      =======      =======       

</TABLE>
   The accompanying notes are an integral part of these financial statements.





                                     - 5 -
<PAGE>   6
                 FIRST SIERRA FINANCIAL, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                    Six Months Ended June 30, 1996 and 1997
                                 (In Thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                              For the
                                                                                          Six  Months Ended
                                                                                               June 30,
                                                                                         ---------------------
                                                                                           1996         1997
                                                                                         --------      -------
 <S>                                                                                      <C>           <C>
 CASH FLOWS FROM OPERATIONS:
   Net income  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            $    841     $  3,025
   Reconciliation of net income to cash provided by
      operations --
      Depreciation and amortization  . . . . . . . . . . . . . . . . . . . . .                  63          329
      Provision for credit losses  . . . . . . . . . . . . . . . . . . . . . .                 120          663
      Gain on sale of lease financing receivables  . . . . . . . . . . . . . .              (1,613)      (6,850)
      Increase in other assets . . . . . . . . . . . . . . . . . . . . . . . .               (1,192)        (69)
      Increase in accounts payable and accrued liabilities   . . . . . . . . .                  30        4,449
      Increase in holdback reserve payable . . . . . . . . . . . . . . . . . .               1,519        2,969
      Deferred income tax provision  . . . . . . . . . . . . . . . . . . . . .                 547        2,016  
                                                                                          --------     --------
           Net cash provided by operations . . . . . . . . . . . . . . . . . .                 315        6,532 
                                                                                          --------     --------
 CASH FLOWS FROM INVESTING ACTIVITIES:
   Funding of lease financing receivables  . . . . . . . . . . . . . . . . . .             (59,496)    (133,735)
   Principal payments received on lease financing
      receivables  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               5,134        4,894
   Proceeds from sales of lease financing receivables, net of
      trust certificates retained  . . . . . . . . . . . . . . . . . . . . . .              81,307      177,142
   Additions to furniture and equipment  . . . . . . . . . . . . . . . . . . .                (179)        (898)
   Cash used in acquisitions, net of cash acquired . . . . . . . . . . . . . .                  --       (2,484)
                                                                                          --------     --------
           Net cash provided by investing activities . . . . . . . . . . . . .              26,766       44,919
                                                                                          --------     --------
 CASH FLOWS FROM FINANCING ACTIVITIES:
   Repayments of warehouse credit facilities, net of proceeds from
      borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             (26,491)     (55,277)
   Proceeds from issuance of common stock  . . . . . . . . . . . . . . . . . .                 147       16,206
   Proceeds from exercise of convertible warrants  . . . . . . . . . . . . . .                  --            2
   Repayment of subordinated note payable  . . . . . . . . . . . . . . . . . .                  --       (9,000)
   Repurchase of common stock  . . . . . . . . . . . . . . . . . . . . . . . .                (360)          --
                                                                                          --------     --------
           Net cash used in financing  activities  . . . . . . . . . . . . . .             (26,704)     (48,069)
                                                                                          --------     --------
 NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . .                 377        3,382
 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD  . . . . . . . . . . . . . .                 876        2,598
                                                                                          --------     --------
 CASH AND CASH EQUIVALENTS AT END OF PERIOD  . . . . . . . . . . . . . . . . .            $  1,253     $  5,980
                                                                                          ========     ========
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
      Income taxes paid  . . . . . . . . . . . . . . . . . . . . . . . . . . .            $     --     $     --
                                                                                          ========     ========
      Interest paid  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            $  2,695     $  2,750
                                                                                          ========     ========

</TABLE>
   The accompanying notes are an integral part of these financial statements.





                                     - 6 -
<PAGE>   7
                 FIRST SIERRA FINANCIAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. THE COMPANY

  First Sierra Financial, Inc. ("First Sierra" or the "Company") is a
specialized finance company that was formed in June 1994 to acquire and
originate, sell and service equipment leases. The underlying leases financed by
the Company relate to a wide range of equipment, including computers and
peripherals, computer software, medical, dental and diagnostic,
telecommunications, office, automotive servicing, hotel security, food
services, tree service and industrial, as well as specialty vehicles. The
equipment generally has a purchase price of less than $250,000 (with an average
of approximately $20,000.) The Company initially funds the acquisition or
origination of its leases through its warehouse credit facilities and, upon
achieving a sufficient portfolio size, sells such receivables in the public and
private markets, principally through its securitization program.

  On February 27, 1997, the Board of Directors of the Company approved a stock
split whereby 5.47 shares of common stock were issued for each outstanding
share of common stock. All share and per share amounts included in the
accompanying financial statements and footnotes have been restated to reflect
the stock split.

  On May 20, 1997, the Company consummated its initial public offering of
Common Stock through the sale of 2,000,000 shares of Common Stock (the
"Offering"). In June 1997, the underwriters of the Company's offering exercised
their overallotment option and purchased an additional 300,000 shares of Common
Stock of the Company. The Company received net proceeds of approximately $16.4
million from the Offering and the exercise of the underwriters' option related
thereto.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

  The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and the
rules and regulations of the Securities and Exchange Commission for interim
financial statements. Accordingly, the interim statements do not include all of
the information and disclosures required for annual financial statements. In
the opinion of the Company's management, all adjustments (consisting solely of
adjustments of a normal recurring nature) necessary for a fair presentation of
these interim results have been included.  Intercompany accounts and
transactions have been eliminated. These financial statements and related notes
should be read in conjunction with the audited financial statements and notes
thereto included in the Company's Registration Statement on Form S-1
(Registration No. 333-22629). The results for the interim periods are not
necessarily indicative of the results to be expected for the entire year.

Earnings Per Share

  Earnings per share amounts are calculated based on the net income (loss)
divided by the weighted average number of shares of common stock and common
stock equivalents outstanding during the period. Common stock equivalents
consist of options, warrants and convertible redeemable preferred stock.

  The weighted average number of shares of common stock and common stock
equivalents outstanding used for computing earnings or loss per share was
5,891,589 and 7,638,563, during the quarters ended June 30, 1996 and 1997,
respectively, and 6,087,640 and 6,972,725 during the six months ended June 30,
1996 and 1997, respectively. Primary and fully diluted earnings per share are
the same for each period presented.

  In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). The
Company is required to adopt SFAS 128 in the fourth quarter of fiscal 1997 and
will restate at that time earnings per share (EPS) data for prior periods to
conform with SFAS 128. Earlier application is not permitted.


                                     -7-


<PAGE>   8
  SFAS 128 replaces current EPS reporting requirements and requires a dual
presentation of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing net income available to common shareholders by the
weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.

  If SFAS 128 had been in effect during the current and prior year periods,
basic EPS would have been $.15 and $.23 for the quarters ended June 30, 1996
and 1997, respectively, while diluted EPS would have been $.14 and $.22,
respectively. Furthermore basic EPS for the six months ended June 30, 1996 and
1997 would have been $.16 and $.44, respectively, while diluted EPS would have 
been $.14 and $.43, respectively.

Exposure to Credit Losses

  The Company provides an allowance for credit losses for leases which are
considered impaired during the period from the funding of the leases through
the date such leases are sold through the Company's securitization program.
Estimated losses on leases that are considered impaired and have been sold
through the Company's securitization program are taken into consideration in
the valuation of the Company's investment in Trust Certificates retained in
securitization transactions.

  The following table sets forth certain information as of December 31, 1996,
and June 30, 1997, with respect to leases which were held by the Company in its
portfolio or serviced by the Company pursuant to its securitization program
(dollars in thousands):

<TABLE>
<CAPTION>                      
                                     As of December 31, 1996             As of June 30, 1997(1)
                                 -------------------------------   ---------------------------------
                                 Private     Broker/                  Private    Broker/
                                  Label      Vendor      Total        Label      Vendor      Total  
                                ----------   ------    ---------   ----------    ------     --------
  <S>                           <C>          <C>        <C>        <C>         <C>         <C>
  Gross leases
    outstanding ...........     $ 244,049    $13,185   $ 257,234   $ 299,836   $141,914    $441,750  
  31 - 60 days past due...           2.46%      1.25%       2.40%       1.41%      2.85%       1.87% 
  61 - 90 days past due...           0.81%      0.21%       0.78%       0.81%      0.63%       0.75% 
  Over 90 days past due...           0.35%      0.00%       0.33%       0.58%      1.16%       0.76% 
                               ----------   --------  ----------   ---------   --------    --------  
      Total past due......           3.62%      1.46%       3.51%       2.80%      4.64%       3.38% 
</TABLE>

(1) The Broker/Vendor amounts include and the Private Label amounts do not
    include, approximately $19.7 million as of June 30, 1997, which were
    purchased by the Company pursuant to its Private Label program from Lease
    Pro, Inc. and Heritage Credit Services, Inc. Such companies were formerly
    Private Label sources until their acquisition by the Company in February
    1997 and May 1997, respectively.


  The following table sets forth the Company's allowance for credit losses for
its Private Label program and its Broker and Vendor programs for the six months 
ended June 30, 1996 and 1997 (in thousands):

<TABLE>
<CAPTION>
                                                                           Private   Broker and
                                                                            Label      Vendor
                                                                           Program   Programs(1)  Total
                                                                           -------  -----------  ------
<S>                                                                          <C>      <C>        <C>
Balance at December 31, 1995  . . . . . . . . . . . . . . . .                 $420     $  --     $  420
Provision for credit losses . . . . . . . . . . . . . . . . .                  120        --        120
                                                                              ----     -----     ------
Balance at June 30, 1996  . . . . . . . . . . . . . . . . . .                 $540     $  --     $  540
                                                                              ====     =====     ======
Balance at December 31, 1996  . . . . . . . . . . . . . . . .                 $314     $ 211     $  525
Provision for credit losses . . . . . . . . . . . . . . . . .                  136       527        663
Charge-offs, net of recoveries  . . . . . . . . . . . . . . .                   --        --         --
Reduction of allowance for leases sold  . . . . . . . . . . .                 (302)     (635)      (937)
Additional allowance related to leases acquired
  through business combinations . . . . . . . . . . . . . . .                   --       841        841
                                                                             -----     -----     ------ 
Balance at June 30, 1997  . . . . . . . . . . . . . . . . . .                 $148     $ 944     $1,092
----------                                                                    ====     =====     ======
</TABLE>

(1) The Company established its Broker and Vendor programs in July 1996.

         The following table sets forth certain aggregate information regarding
the level of credit protection afforded the Company pursuant to the recourse and
holdback provisions of the Private Label program as of December 31, 1996 and
June 30, 1997 (dollars in thousands):
<PAGE>   9

<TABLE>
<CAPTION>
                                                                                        December 31,   June 30,
                                                                                            1996        1997
                                                                                        -----------  ---------
<S>                                                                                      <C>         <C>
Leases outstanding under the Private Label program (1)  . . . . . . . . . . .            $  202,523  $  244,522
                                                                                         ==========  ==========
Recourse to Sources available . . . . . . . . . . . . . . . . . . . . . . . .            $   19,480      26,292
Holdback reserves outstanding . . . . . . . . . . . . . . . . . . . . . . . .                 6,523  $    8,621
                                                                                         ----------  ----------
Total recourse and holdback reserves available  . . . . . . . . . . . . . . .            $   26,003  $   34,913
                                                                                         ==========  ==========
Ratio of recourse and holdback reserves outstanding to total
  leases outstanding under the Private Label program(2) . . . . . . . . . . .                12.84%      14.28%
                                                                                         ==========  ==========
</TABLE>
-----------------
(1)   Represents net principal balance of leases held by the Company in its
      portfolio as well as leases serviced by the Company pursuant to its
      securities program.

         
(2)  The specific level of credit protection varies for each Private Label
     Source. Specific levels of credit protection by Source are considered by
     management in determining the allowance for credit losses and the valuation
     of the Company's investment in Trust Certificates retained in
     securitization transactions.

  The following table sets forth the experience of the Company with respect to
leases acquired pursuant to the Private Label program for the periods indicated
(dollars in thousands):

<TABLE>
<CAPTION>
                                                                                         Quarter Ended June 30,
                                                                                         ----------------------
                                                                                           1996          1997
                                                                                         --------      --------
<S>                                                                                      <C>           <C>
Average balance of leases acquired pursuant to the Private
  Label program outstanding during the period(1)  . . . . . . . . . . . . . .            $102,044      $225,813
                                                                                         ========      ========
Total amount of leases triggering action under recourse and
  holdback provisions during the period . . . . . . . . . . . . . . . . . . .            $    195      $    879
Amounts recovered under recourse provisions . . . . . . . . . . . . . . . . .                 191           839
Amounts recovered pursuant to holdback reserves . . . . . . . . . . . . . . .                   4            40
                                                                                         --------      --------
Total amounts recovered . . . . . . . . . . . . . . . . . . . . . . . . . . .                 195           879
                                                                                         --------      --------
Net loss experienced on leases acquired pursuant to the
  Private Label program . . . . . . . . . . . . . . . . . . . . . . . . . . .            $     --      $     --
                                                                                         ========      ========
Net default ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                0.00%         0.00%
----------                                                                               ========      ========
</TABLE>
(1)  Represents net principal balance of leases held by the Company in its
     portfolio as well as leases serviced by the Company pursuant to its 
     securitization program.

  Interest Rate Management Activities

  Leases acquired and originated by the Company require payments to be made by
the lessee at fixed rates for specified terms. The rates charged by the Company
are based on interest rates prevailing in the market at the time of lease
approval. Because the Company generally finances its acquisition or origination
of leases through its warehouse credit facilities which bear interest at
floating rates, the Company is exposed to risk of loss from adverse interest
rate movements during the period from the date of acquisition or origination of
the leases until the leases are securitized or otherwise sold. The Company seeks
to minimize its exposure to adverse interest rate movements during this period
through entering into amortizing swap transactions under which the notional
amount of the contract changes monthly to match the anticipated amortization of
the underlying leases. Settlements with counterparties are accrued at period-end
and either increase or decrease interest expense reported in the statement of
operations. Upon sale of leases through securitization transactions or
otherwise, the swap agreements related to such leases are either terminated or
transferred to the special purpose trusts to which the leases have been sold.
The amount received by or paid upon such termination or transfer is included in
the determination of the gain to be recognized upon the sale of the leases. 



3. ACQUISITIONS

  Concurrent with the Offering, the Company acquired the outstanding common
stock of Heritage Credit Services, Inc.  ("Heritage") for $6.4 million in cash,
subordinated notes and common stock. Heritage is located near Sacramento,
California and has additional offices in Miami, Florida; Los Angeles,
California; Seattle, Washington and  Prescott, Arizona. Heritage is involved in
the broker market on a national basis and has a significant vendor base in
California.

  On May 31, 1997, the Company acquired certain assets and liabilities of
Universal Fleet Leasing, Inc. ("UFL") for cash and stock of the Company. Total
consideration was less than $1 million. UFL is located in Houston, Texas and
focuses on developing vendor relationships, primarily in the Houston area.

  The following table reflects, on an unaudited pro forma basis, the combined
operations of the Company and the businesses acquired for the six months ended
June 30, 1996 and 1997 as if the acquisitions had taken place at the beginning
of 1996 and 1997, respectively. Appropriate adjustments have been made to
reflect the cost basis used in recording these acquisitions. These pro forma
results have been prepared for comparative purposes only and do not purport to
be indicative of the results of operations that would have resulted had the
combinations been in effect on the dates referred to above, that have resulted
since the dates of the acquisitions or that may result in the future (in
thousands, except per share amounts):

<TABLE>
<CAPTION>

<SS,1>
                                                                            Six Months Ended June 30,
                                                                           ---------------------------
                                                                            1996                1997
                                                                           ------             --------
<S>                                                                        <C>                <C>
Revenues  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $8,578             $17,233
Net income before income taxes  . . . . . . . . . . . . . . . . . . .       1,551               5,276
Net income allocated to common stockholders . . . . . . . . . . . . .         946               3,218
Income per common and common equivalent share . . . . . . . . . . . .         .14                 .43
</TABLE>




                                     - 9 -
<PAGE>   10
4. LEASE FINANCING RECEIVABLES

  The Company's lease financing receivable balance at December 31, 1996 and
June 30, 1997, consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                      December 31,    June 30,
                                                                                          1996         1997
                                                                                      -----------    ---------
<S>                                                                                     <C>          <C>
Minimum lease payments  . . . . . . . . . . . . . . . . . . . . . . . . . . .           $ 75,945      $66,373
Estimated unguaranteed residual value . . . . . . . . . . . . . . . . . . . .              1,044          674
Initial direct costs  . . . . . . . . . . . . . . . . . . . . . . . . . . . .                895          335
Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (16,089)     (13,390)
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . .               (525)      (1,092)
                                                                                        --------      ------- 
  Lease financing receivables, net  . . . . . . . . . . . . . . . . . . . . .           $ 61,270      $52,900
                                                                                        ========      =======
</TABLE>

Sales of Leases

  In June 1997, the Company entered into a securitized warehouse facility with
First Union National Bank of North Carolina (the "First Union Securitized
Warehouse Facility"). Pursuant to the First Union Securitized Warehouse
Facility, on an on-going basis, the Company will transfer and sell lease
receivables to a wholly-owned, bankruptcy remote special purpose subsidiary,
which will sell such receivables to one or more trusts. Each trust is structured
such that it will issue two classes of certificates of beneficial ownership, a
senior certificate, and a residual interest which will be owned by the Company's
subsidiary. The combined limit of all senior certificates issued by the trusts
is $90 million. Transfers and sales of lease receivables pursuant to the First
Union Securitized Warehouse Facility are accounted for as sales under generally
accepted accounting principles and the related gains on sales are recognized on
the date of such transfers. The senior certificates issued pursuant to the First
Union Securitized Warehouse Facility will earn a stated return of either 30-day
LIBOR plus 0.75% or the Commercial Paper index rate plus 0.75%.

  In June 1997, the Company transferred and sold leases with an aggregate
principal balance of $90.2 million, net of unearned income, initial direct
costs and allowance for credit losses, to two trusts pursuant to the First
Union Securitized Warehouse Facility. Senior certificates with an aggregate
principal balance of $88.5 million were issued by the trusts, while residual
interests in the trusts were retained by the Company. The Company recognized a
gain of $3.9 million upon transfer and sale of the leases to the trusts.

  Additionally, the Company sold leases with an aggregate principal balance of
$5.5 million, net of unearned income, capitalized initial direct costs and
allowance for credit losses, during the quarter ended June 30, 1997, pursuant
to terms of outstanding securitization transactions which provide for the
Company to sell additional leases to the securitization trusts during a
revolving period subsequent to closing. The Company recognized gains of $.4
million in conjunction with such sales.

5. DEBT

  Debt consisted of the following as of December 31, 1996 and June 30, 1997 (in
thousands):

<TABLE>
<CAPTION>
                                                                                      December 31,    June 30,
                                                                                          1996         1997
                                                                                      -----------    ---------
<S>                                                                                      <C>          <C>
Warehouse credit facilities --
 Dresdner Bank AG / Conti Financial Corporation . . . . . . . . . . . . . . .            $    --       14,750
 Various financial institutions under recourse and non-recourse agreements                    --       27,589
 Prudential Securities Credit Corporation  .. . . . . . . . . . . . . . . . .             40,142           --
 First Union National Bank of North Carolina                                              12,238           --
                                                                                         -------      -------
Total warehouse credit facilities . . . . . . . . . . . . . . . . . . . . . .             52,380       42,339
Subordinated note payable . . . . . . . . . . . . . . . . . . . . . . . . . .              9,000        1,000
                                                                                         -------        -----
                                                                                         $61,380      $43,678
                                                                                         =======      =======

</TABLE>
  The Company entered into a warehouse facility in June 1997 with
Dresdner Bank AG, Conti Financial Corporation (the "Dresdner Warehouse
Facility") that provides the Company with up to $50 million of warehouse
funding. Borrowings under the Dresdner Warehouse Facility bear interest at a
floating rate equal to the 30-day LIBOR plus 1.25%. The Dresdner Warehouse
Facility provides for the issuance of a letter of credit for the purpose 



                                     - 10 -
<PAGE>   11

of providing credit enhancement at securitization, which would allow the Company
to issue one senior class of securities in an amount which would be at least
94% of the present value of the remaining scheduled payments due on the leases
included in the securitization. This securitization structure does not require
the Company to obtain credit ratings on the subordinated securities issued in
the transaction and would allow the Company to enhance the level of cash
proceeds realized upon securitization.

  In May 1997, the Company used a portion of the proceeds of the Offering to
repay a $9 million Subordinated Note with a stockholder. In June 1997, the
Company entered into a new $5 million subordinated revolving credit facility
with such stockholder, with the commitment level decreasing $1 million per year.
Advances under this facility will bear interest at $11.00% per annum. No
advances were outstanding under this facility at June 30, 1997.

  In conjunction with the acquisition of Heritage, the Company issued a $1
million subordinated note payable to the former owner of Heritage. Such note
bears interest at 9.00% per annum, with principal payable semi-annually over 5
years. Additionally, the Company assumed approximately $45 million of notes
payable which had been used by Heritage to finance its purchases of leases. The
Company intends to refinance such notes with existing or new credit facilities
with terms consistent with the Company's existing warehouse facilities.





                                     - 11 -
<PAGE>   12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Results of Operations for the Three Months Ended June 30, 1996 and 1997

  As a fundamental part of its business and financing strategy, the Company
sells the leases it acquires or originates through securitization transactions
and other structured finance techniques. During the three months ended June 30,
1997 and 1996, the Company sold leases with an aggregate principal balance of
$95.7 million and $84.3 million, respectively, net of unearned income through
the Company's securitization program. The Company recognized gains of $4.3
million and $1.6 million, respectively, upon such sales and retained Trust
Certificates in the related trusts with an allocated cost basis of $2.1 million
and $4.6 million respectively. Gains recognized upon sales of leases increased
as a percentage of leases sold from 1.9% for the quarter ended June 30, 1996, to
4.8% for the quarter ended June 30, 1997. The increase is directly attributable
to an increase in the weighted average interest rate of leases sold as a result
of the inclusion of higher yielding leases acquired pursuant to the Company's
Broker and Vendor programs and a decrease in the level of Trust Certificates the
Company is required to retain in the trusts.

  Interest income increased $1.6 million, or 127%, from $1.2 million for the
three months ended June 30, 1996 to $2.8 million for the three months ended June
30, 1997. The increase was primarily related to $425,000 of interest income
recognized during the three months ended June 30, 1997 on Trust Certificates
retained by the Company in securitization transactions. The remaining difference
is a result of a 18% increase in the average lease receivable balance
outstanding and an increase in the average rate earned on leases outstanding
related to the origination of leases under the Company's Broker and Vendor
programs which were formed in July 1996.

  Servicing income increased $401,000, or 180%, from $223,000 for the three
months ended June 30, 1996 to $624,000 for the three months ended June 30,
1997. Such increase was primarily attributable to servicing fees received from
the Company's securitization transactions, the first of which took
place in May 1996. Total assets owned and serviced rose to $359 million as of
June 30, 1997, compared with $127 million as of June 30, 1996.

  Interest expense increased $484,000, or 50%, from $972,000 for the three
months ended June 30, 1996 to $1,456,000 million for the three months ended June
30, 1997. Such increase was primarily due to a 38% increase in the average
balance outstanding under the Company's warehouse credit facilities. The
remaining increase is related to interest incurred on debt assumed in connection
with the Heritage acquisition.

  Salaries and benefits increased $1,101,000, or 341%, from $323,000 for the
three months ended June 30, 1996 to $1,424,000 for the three months ended June
30, 1997. Such increase is primarily related to a 689% increase in the number of
people employed by the Company from June 30, 1996 to June 30, 1997. The increase
in the number of employees is directly related to the acquisitions of General
Interlease Corporation ("GIC") and Corporate Capital Leasing Group, Inc. ("CCL")
in July and October 1996, respectively, Lease Pro, Inc. ("Lease Pro") in
February 1997, and Heritage Credit Services, Inc. ("Heritage") and Universal
Fleet Leasing, Inc., each in May 1997. In addition, salaries and benefits have
increased due to the higher level of servicing required as a result of the
formation of the Company's Broker and Vendor programs in July 1996.

  Provision for credit losses increased $300,000 or 435% from $69,000 for the
three months ended June 30, 1996 to $369,000 for the three months ended June 30,
1997. The increase is primarily due to the origination of $33.1 million of
leases under the Company's Broker and Vendor programs during the three months
ended June 30, 1997, which have a greater exposure to credit losses than leases
originated under the Company's Private Label program which provides for recourse
to the Private Label Sources. The increase in the provision is also attributable
to a 35% increase in leases originated under the Private Label program from
$34.4 million for the three months ended June 30, 1996 to $46.4 million for the
three months ended June 30, 1997.

  Depreciation and amortization increased $134,000, from $34,000 for the three
months ended June 30, 1996, to $168,000 for the three months ended June 30,
1997. Such increase was primarily attributable to a 514% increase in fixed
assets owned at March 31, 1997, as well as amortization of goodwill and other
intangible assets resulting from the acquisitions referred to above.


                                    - 12 -

<PAGE>   13

  Other general and administrative expenses increased $1,267,000, or 431%, from
$294,000 for the three months ended June 30, 1996 to $1,561,000 for the three
months ended June 30, 1997. Such increase was primarily attributable to the
general expansion of the Company's business and the acquisitions referred to
above.

Liquidity and Capital Resources

General

  The Company's lease finance business is capital intensive and requires access
to substantial short-term and long-term credit to fund new equipment leases.
Since inception, the Company has funded its operations primarily through sales
of leases, borrowings under its warehouse facilities, sales of equity and
through its securitization transactions. The Company will continue to require
access to significant additional capital to maintain and expand its volume of
leases funded. Additionally, the Company will require additional capital to
continue its acquisitions of equipment leasing companies.

  The Company's uses of cash include the acquisition and origination of
equipment leases, payment of interest expenses, repayment of borrowings under
its warehouse facilities, operating and administrative expenses, income taxes
and capital expenditures. The structure of the Company's lease funding programs
(including the holdback and recourse features of the Private Label program),
along with the structure of the Company's warehouse facilities and
securitization program, have enabled the Company to generate positive cash flow
from operations.

  To date, proceeds received by the Company in its securitization transactions
have generally been sufficient to repay amounts borrowed under the warehouse
credit facilities, as well as issuance expenses. In addition to the proceeds
received upon closing of the sale of the securitized leases, the Company
generates cash flow from ongoing servicing and other fees, including late
charges on securitized equipment leases, and excess cash flow distributions
from the Trust Certificates retained by the Company and other assets of the
trust once the securities are retired. The Company structures its
securitization transactions to qualify as financings for income tax purposes.
Therefore, no income tax is payable in the current period on the gain
recognized. The Company anticipates that future sales of its equipment leases
will be through securitization transactions or other structured finance
techniques.

  The Company believes that cash flow from its operations, the net proceeds of
the Offering, the net proceeds from future securitization transactions and
amounts available under its warehouse facilities will be sufficient to fund the
Company's operations for the foreseeable future.

Warehouse Facilities

  In May 1995, First Sierra Receivables, Inc. (a wholly owned, bankruptcy-
remote special purpose subsidiary of the Company), entered into a $50 million
warehouse facility with First Union National Bank of North Carolina (the "First
Union Credit Facility") which was subsequently increased to $90 million.
Borrowings under the First Union Credit Facility bore interest at a floating
rate equal to the 30-day LIBOR plus 1.25%. In June 1997, the Company
substantially replaced the First Union Credit Facility with the First Union
Securitized Warehouse Facility described below.
        
  The Company completed an additional warehouse facility in June 1997 with
Dresdner Bank AG, Conti Financial Corporation (the "Dresdner Warehouse
Facility") that provides the Company with up to $50 million of 


                                    - 13 -

<PAGE>   14

warehouse funding.  Borrowings under the Dresdner Warehouse Facility bear
interest at a floating rate equal to the 30-day LIBOR plus 1.25%.  The Dresdner
Warehouse Facility provides for the issuance of a letter of credit for the
purpose of providing credit enhancement at securitization, which would allow
the Company to issue one senior class of securities in an amount which would be
at least 94% of the present value of the remaining scheduled payments due on
the leases included in the securitization. This securitization structure does
not require the Company to obtain credit ratings on the subordinated securities
issued in the transaction and would allow the Company to enhance the level of
cash proceeds realized upon securitization.

Securitization Program

  On March 31, 1997, the Company entered into a securitized warehouse facility
with Prudential Securities Credit Corporation ("Prudential")(the "Prudential
Securitized Warehouse Facility"), pursuant to which, on an on-going basis, the
Company will transfer and sell lease receivables to a wholly owned, bankruptcy-
remote special purpose subsidiary, which will sell such receivables to a trust.
The trust has issued two certificates of beneficial interest, a senior
certificate, which has a limit of $75 million and is owned by Prudential, and a
residual certificate which is owned by the Company's subsidiary. The transfer
and sale of lease receivables pursuant to the Prudential Securitized Warehouse
Facility is accounted for as a sale under generally accepted accounting
principles and the related gain is recognized on the date of such transfer.
Investments made by Prudential in the senior certificate earn a stated return of
the 30-day LIBOR plus 0.90%. As of June 30, 1997, the amount of the Prudential
investment in the senior certificate was $71.3 million. The lease receivables in
the Prudential Securitized Warehouse Facility from time to time may be
transferred by the trust to other trusts which the Company's subsidiaries may
have a minority interest.
        
  In June 1997, the Company entered into a securitized warehouse facility with
First Union National Bank of North Carolina (the "First Union Securitized
Warehouse Facility"). The structure of the First Union Securitized Warehouse
Facility is substantially equivalent to the Prudential Securitized Warehouse
Facility, allowing the Company to recognize sales under generally accepted
accounting principles, on an on-going basis, when the lease receivables are
transferred.  The senior certificates issued pursuant to the First Union
Securitized Warehouse Facility will have a limit of $90 million and earn a
stated return of either the 30-day LIBOR plus 0.75% or the Commercial Paper
index rate plus 0.75%. This facility was utilized to repay certain amounts then
outstanding under the First Union Credit Facility and has replaced such
facility. As of June 30, 1997, the amount of senior certificates outstanding
under the First Union Securitized Warehouse Facility was $88.5 million. The
lease receivables in the First Union Securitized Warehouse Facility may be
transferred by the trust to other trusts which the Company's subsidiaries may
have a minority interest.

  The Prudential Securitized Warehouse Facility and the First Union Securitized
Warehouse Facility provide several significant advantages as compared to the
warehouse credit facilities which they replace, including (i) more favorable
interest rate provisions, (ii) allowing the Company to recognize gain on sale
of lease receivables at the time such receivables are transferred to such
facilities, thus reducing the degree to which the Company's quarterly results
might fluctuate due to the timing of public securitizations and (iii) providing
greater flexibility with respect to the timing and sizing of public
securitizations, thereby reducing related transaction costs.

  To date, the Company has completed two public securitization transactions
involving lease receivables aggregating approximately $152.0 million. In
connection with each securitization transaction, Class A Certificates, rated
AAA by Standard & Poor's Rating Group and Aaa by Moody's Investors Services,
were sold in the public market. The Class B-1 and Class B-2 Certificates were
rated BBB and BB, respectively, by Duff & Phelps Rating Co., and were sold on a
non-recourse basis in the private market. Due to the Company's ability to
structure and sell its Class B-1 and Class B-2 Certificates in its two
completed securitization transactions, the sizes of the Trust Certificates
retained by the Company were reduced, thereby allowing the Company to maximize
the cash proceeds generated from such transactions. The Company has been able
to realize approximately 94% of the present value of the remaining scheduled
payments of the equipment leases included in its securitizations, which have
generally been sufficient to cover the Company's investment in the equipment
leases sold, as well as issuance costs.

Subordinated Note

  In 1994, the Company issued a $9 million Subordinated Note due June 6, 2004
to a stockholder of the Company. Interest on the Subordinated Note is payable
monthly at a rate of 11.00% per annum. The Company repaid the 


                                    - 14 -

<PAGE>   15

Subordinated Note in May 1997 with a portion of the proceeds of the Offering. In
June 1997, the Company entered into a new $5 million subordinated revolving
credit facility with such stockholder, with the commitment level thereunder
decreasing by $1 million per year. Advances under the facility will bear
interest at 11.00% per annum. As of June 30, 1995, no advances were outstanding
under such facility.

  In connection with the acquisition of Heritage in May 1997, the Company issued
a $1 million subordinated note payable to the former owner of Heritage. Such
note bears interest at 9.00% per annum, with principal payable semi-annually 
over 5 years. 
        
Hedging Strategy

  The implicit yield to the Company on all of its leases is on a fixed interest
rate basis due to the leases having scheduled payments that are fixed at the
time of origination of the lease. When the Company acquires or originates
leases, it bases its pricing in part on the "spread" it expects to achieve
between the implicit yield rate to the Company on each lease and the effective
interest cost it will pay when it sells such leases through securitization.
Increases in interest rates between the time the leases are acquired or
originated by the Company and the time they are securitized could narrow or
eliminate the spread, or result in a negative spread. The Company has adopted a
policy that is designed to provide a level of protection against the volatility
of interest rate movement between the time the Company acquires or originates a
lease and the time such lease is sold through a securitization. Such hedging
arrangements generally are implemented when the Company's portfolio of unhedged
leases reaches $10 million.





                                    - 15 -
<PAGE>   16

                          PART II -- OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a)     Exhibits

          27    Financial Data Schedule for the three months ended June 30, 1997

(b)     Reports on Form 8-K

        No reports on Form 8-K were required to be filed during the period 
ended June 30, 1997.





                                    - 16 -
<PAGE>   17
                                   SIGNATURES

  Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


              Signature                             Title
              ---------                             -----
                                        
           /s/ SANDY B. HO              Executive Vice President and
           ---------------                Chief Financial Officer
            (Sandy B. Ho)                 (principal financial
                                          officer)
                                          
                                        
         /s/ CRAIG M. SPENCER           Senior Vice President and
         --------------------             Chief Accounting Officer
          (Craig M. Spencer)              (principal accounting
                                          officer)
                                          



Date August 19, 1997





                                    - 17 -
<PAGE>   18
                               INDEX TO EXHIBITS

Exhibit Number                    Description 
--------------                    -----------

    27          Financial Data Schedule for the three months ended June 30, 1997






                                     - 18 -