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

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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 SEPTEMBER 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

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                          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)

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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.
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<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 September
                    30, 1997 (unaudited)...............................................          3

                    Consolidated Statements of Operations -- Three months and
                    nine months ended September 30, 1996 and 1997 (unaudited)..........          4

                    Consolidated Statement of Stockholders' Equity -- Three
                    months and nine months ended September 30, 1997 (unaudited)........          5

                    Consolidated Statements of Cash Flows -- Nine months ended
                    September 30, 1996 and 1997 (unaudited)............................          6

                    Notes to Consolidated Financial Statements.........................          7

ITEM 3.             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS................................       12-16

                    PART II. OTHER INFORMATION

ITEM 6.             EXHIBITS AND REPORTS ON FORM 8-K...................................         17

SIGNATURES          ...................................................................         18
</TABLE>




                                       2
<PAGE>   3



PART I -- FINANCIAL INFORMATION

ITEM 1. Financial Statements

FIRST SIERRA FINANCIAL, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
ASSETS
                                                                   DECEMBER 31,  SEPTEMBER 30,
                                                                      1996          1997
                                                                     -------       -------
                                                                                 (UNAUDITED)
<S>                                                                  <C>           <C>    
Lease financing receivables, net ................................    $61,270       $35,333
Goodwill and other intangible assets, net .......................      3,615        21,257
Investment in trust certificates ................................      9,534         9,773
Cash and cash equivalents .......................................      2,598         7,118
Marketable security .............................................         --         4,053
Furniture and equipment, net ....................................      1,049         3,033
Other assets ....................................................      1,276         2,067
                                                                     -------       -------
          Total assets ..........................................    $79,342       $82,634
                                                                     =======       =======

                          LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
  Warehouse credit facilities ...................................    $52,380       $21,706
  Subordinated note payable .....................................      9,000         1,000
Other liabilities:
  Holdback reserve payable ......................................      6,523         9,534
  Accounts payable and accrued liabilities ......................      3,929         9,834
  Deferred income taxes .........................................      1,366         5,074
                                                                     -------       -------
          Total liabilities .....................................     73,198        47,148
                                                                     -------       -------
Commitments and contingencies
Redeemable preferred stock ......................................      3,890         3,890
Stockholders' equity:
  Common stock, $.01 par value, 25,000,000 shares
     authorized, 5,696,310 and 9,038,550 shares,
     respectively, issued and outstanding .......................         57            90
  Additional paid-in capital ....................................        730        24,862
  Retained earnings .............................................      1,467         6,644
                                                                     -------       -------
          Total stockholders' equity ............................      2,254        31,596
                                                                     -------       -------
          Total liabilities and stockholders' equity ............    $79,342       $82,634
                                                                     =======       =======
</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 NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                               FOR THE THREE
                                                               MONTHS ENDED             FOR THE NINE MONTHS
                                                               SEPTEMBER 30,            ENDED SEPTEMBER 30,
                                                          ----------------------       ---------------------
                                                           1996           1997          1996          1997
                                                          -------        -------       -------       -------
<S>                                                       <C>            <C>           <C>           <C>    
Gain on sale of lease financing receivables ...........   $   320        $ 5,775       $ 1,933       $12,625
Interest income .......................................     1,664          2,534         4,755         7,661
Servicing income ......................................       258            891           611         2,048
Other income ..........................................       278          1,147           322         1,363
                                                          -------        -------       -------       -------
          Total revenues ..............................     2,520         10,347         7,621        23,697
                                                          -------        -------       -------       -------
Salaries and benefits .................................       514          2,574         1,151         4,730
Interest expense ......................................     1,381          1,293         3,775         4,402
Provision for credit losses ...........................       160            751           280         1,414
Depreciation and amortization .........................       105            413           168           742
Other general and administrative ......................       429          1,534           928         3,586
                                                          -------        -------       -------       -------

          Total expenses ..............................     2,589          6,565         6,302        14,874
                                                          -------        -------       -------       -------
Income (loss) before provision (benefit) for income
  Taxes ...............................................       (69)         3,782         1,319         8,823
                                                          -------
Provision (benefit) for income taxes ..................       (27)         1,513           520         3,529
                                                          -------        -------       -------       -------
Net income (loss) .....................................       (42)         2,269           799         5,294
                                                          =======        =======       =======       =======
Net income (loss) per common and common equivalent
  Share ...............................................   $ (0.01)       $  0.23       $  0.13       $  0.67
                                                          =======        =======       =======       =======
</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.....................................              --        --           --        5,294         5,294
  Preferred stock dividends......................              --        --           --         (117)         (117)
  Initial public offering
     of common stock.............................       2,300,000        23       16,183           --        16,206
  Issuance of common stock in
     connection with purchase business
     combinations................................         843,888         8        7,949           --         7,957
  Issuance of common stock in exchange
     for convertible warrants....................         198,352         2           --           --             2
                                                       ----------      ----      -------      -------       -------
Balance, September 30, 1997......................      $9,038,550      $ 90      $24,862      $ 6,644       $31,596
                                                       ==========      ====      =======      =======       =======
</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
                  NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                    FOR THE
                                                                                               NINE MONTHS ENDED
                                                                                                 SEPTEMBER 30,
                                                                                            ---------------------
                                                                                               1996        1997
                                                                                            ---------   ---------
<S>                                                                                         <C>         <C>      
Cash flows from operations:
  Net income..........................................................................      $     799   $   5,294
  Reconciliation of net income to cash provided by
     operations --
     Depreciation and amortization....................................................            168         742
     Provision for credit losses......................................................            280       1,414
     Gain on sale of lease financing receivables......................................         (1,933)    (12,625) 
     Increase in other assets.........................................................           (265)      5,466
     Increase in accounts payable and accrued liabilities.............................          5,897       2,723
     Increase in holdback reserve payable.............................................         (1,969)      4,483
     Deferred income tax provision....................................................            520       3,708
                                                                                            ---------   ---------
          Net cash provided by operations.............................................         (3,447)      5,911
                                                                                            ---------   ---------
Cash flows from investing activities:
  Funding of lease financing receivables..............................................        (78,702)   (226,126)
  Principal payments received on lease financing
     receivables......................................................................         (7,849)      7,768
  Proceeds from sales of lease financing receivables, net of
     trust certificates retained......................................................         85,946     290,724
  Additions to furniture and equipment................................................           (630)     (1,616)
  Cash used in acquisitions, net of cash acquired.....................................           (500)     (3,439)
                                                                                            ---------   ---------
          Net cash provided by (used in) investing activities.........................         (1,735)     67,311
                                                                                            ---------   ---------
Cash flows from financing activities:
  Repayments of warehouse credit facilities, net of proceeds
     from borrowings..................................................................             --     (75,910)
  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.......................................           (213)    (68,702)
                                                                                            ---------   ---------
Net increase in cash and cash equivalents.............................................          1,499       4,520
Cash and cash equivalents at beginning of period......................................            876       2,598
                                                                                            ---------   ---------
Cash and cash equivalents at end of period............................................      $   2,375   $   7,118
                                                                                            =========   =========
Supplemental disclosure of cash flow information:
  Income taxes paid...................................................................      $      --   $      --
                                                                                            =========   =========
  Interest paid.......................................................................      $   3,128   $   4,404
                                                                                            =========   =========
</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
6,167,770 and 9,714,233, during the quarters ended September 30, 1996 and 1997,
respectively, and 6,114,545 and 7,850,020 during the nine months ended
September 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 


                                       7
<PAGE>   8

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.

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 $(.01) and $.25 for the quarters ended September 30, 1996
and 1997, respectively, while diluted EPS would have been $(.01) and $.24,
respectively. Furthermore basic EPS for the nine months ended September 30,
1996 and 1997 would have been $.14 and $.72, respectively, while diluted EPS
would have been $.13 and $.66, 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
September 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 SEPTEMBER 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   $  354,632  $  171,857    $ 526,489
31 -- 60 days past due...............           2.46%      1.25%        2.40%        1.64%       2.29%        1.85%
61 -- 90 days past due...............           0.81%      0.21%        0.78%        0.48%       0.53%        0.49%
Over 90 days past due................           0.35%      0.00%        0.33%        0.42%       0.57%        0.47%
                                          ----------   --------   ----------   ----------  ----------    ---------
          Total past due.............           3.62%      1.46%        3.51%        2.54%       3.38%        2.81%
</TABLE>

===============================================================================

(1)  The Broker/Vendor amounts include and the Private Label amounts do not
     include, approximately $16.9 million as of September 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 nine
months ended September 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...............................................         165         115        280
Reduction of allowance related to leases sold.............................         (71)        (49)      (120)
                                                                                 -----      ------    -------
Balance at September 30, 1996.............................................       $ 514      $   66    $   580
                                                                                 =====      ======    =======
Balance at December 31, 1996..............................................       $ 314      $  211    $   525
Provision for credit losses...............................................         209       1,205      1,414
Charge-offs, net of recoveries............................................          --        (172)      (172)
Reduction of allowance for leases sold....................................        (385)     (1,545)    (1,930)
Additional allowance related to leases acquired
  through business combinations...........................................          --         841        841
                                                                                 -----      ------    -------
Balance at September 30, 1997.............................................       $ 138      $  540    $   678
                                                                                 =====      ======    =======
</TABLE>

===============================================================================

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




                                       8
<PAGE>   9
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
September 30, 1997 (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                           DECEMBER 31, SEPTEMBER 30,
                                                                                               1996         1997
                                                                                             ---------   ---------
<S>                                                                                          <C>         <C>       
Leases outstanding under the Private Label program(1).................................       $ 202,523   $  303,580
                                                                                             =========   ==========
Recourse to Sources available.........................................................       $  19,480   $  31,055
Holdback reserves outstanding.........................................................           6,523       9,534
                                                                                             ---------   ---------
Total recourse and holdback reserves available........................................       $  26,003   $  40,589
                                                                                             =========   =========
Ratio of recourse and holdback reserves outstanding to total
  leases outstanding under the Private Label program(2)...............................           12.84%       13.37%
                                                                                             =========   ==========
</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>
                                                                                              NINE MONTHS ENDED 
                                                                                            ----------------------
                                                                                                 SEPTEMBER 30,
                                                                                            ----------------------
                                                                                               1996         1997
                                                                                            ---------    ---------
<S>                                                                                         <C>          <C>      
Average balance of leases acquired pursuant to the Private
  Label program outstanding during the period(1)......................................      $ 111,333    $ 252,685
                                                                                            =========    =========
Total amount of leases triggering action under recourse and
  holdback provisions during the period...............................................      $   1,005    $   3,731
Amounts recovered under recourse provisions...........................................            900        3,365
Amounts recovered pursuant to holdback reserves.......................................             80          266
                                                                                            ---------    ---------
Total amounts recovered...............................................................            980        3,632
                                                                                            ---------    ---------
Net loss experienced on leases acquired pursuant to the
  Private Label program...............................................................      $      25    $      99
                                                                                            =========    =========
Net default ratio.....................................................................           0.02%        0.04%
                                                                                            =========    =========
</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.



                                       9
<PAGE>   10
3.       Acquisitions

Effective September 2, 1997, the Company acquired the outstanding capital stock
of Northcoast Capital Leasing Company ("Northcoast"). Northcoast is located in
Cleveland, Ohio and focuses primarily on the arbor, rental and construction
equipment market in the mid-western region of the United States. By virtue of
the Northcoast acquisition, the Company gained a geographic presence in the
mid-western market.

On September 30, 1997, the Company acquired the outstanding capital stock of
Financial Management Services, Inc., commonly referred to as Cascade. Cascade
is located near Seattle, Washington and focuses primarily on the equipment
rental and agricultural equipment market in the Northwestern region of the
United States.


4.       Lease Financing Receivables

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

<TABLE>
<CAPTION>
                                                                                          DECEMBER 31,  SEPTEMBER 30,
                                                                                              1996         1997
                                                                                           ---------    ---------
<S>                                                                                        <C>          <C>      
Minimum lease payments.................................................................    $  75,945    $  44,473
Estimated unguaranteed residual value..................................................        1,044        3,572
Initial direct costs...................................................................          895          259
Unearned income........................................................................      (16,089)     (12,293)
Allowance for credit losses............................................................         (525)        (678)
                                                                                           ---------    ---------
     Lease financing receivables, net..................................................    $  61,270    $  35,333
                                                                                           =========    =========
</TABLE>

SALES OF LEASES
The Company has entered into three securitized warehouse facilities. In March
1997, the Company entered into a facility with Prudential Securities Credit
Corporation ("Prudential") (the "Prudential Securitized Credit Facility") and
in June 1997, the Company entered into two securitized warehouse facilities
with First Union National Bank of North Carolina (the "First Union Securitized
Warehouse Facility"). The structure of the facilities is essentially the same.
The facilities allow the Company on an ongoing basis to 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 pursuant to the First Union Securitized Warehouse Facility was
$90 million as of November 14, 1997 while the limit related to the Prudential
Securitized Warehouse facility was $200 million as of such date. Transfers and
sales of lease receivables pursuant to the facilities 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 earn a stated
return of either 30-day LIBOR plus 0.75% or the Commercial Paper index rate
plus 0.75% while the senior certificates issued by the Prudential Securitized
Warehouse Facility earn a stated rate of return of the 30-day LIBOR plus .75%.

During the three months ended September 30, 1997, the Company transferred and
sold leases with an aggregate principal balance of $51.1 million, net of
unearned income, initial direct costs and allowance for credit losses, to the
securitized warehouse facilities. Senior certificates with an aggregate
principal balance of $48.2 million were issued by the trusts, while residual
interests in the trusts were retained by the Company. The Company recognized a
gain of $3.0 million upon transfer and sale of the leases to the trusts.

Additionally, the Company sold leases with an aggregate principal balance of
$3.5 million, net of unearned income, capitalized initial direct costs and
allowance for credit losses, during the quarter ended September 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 $.3
million in conjunction with such sales.



                                      10
<PAGE>   11
The majority of the amounts outstanding under the Prudential Securitized
Warehouse Facility and the First Union Securitized Warehouse Facility during
the three months ended September 30, 1997 were repaid as the equipment lease
receivables included in these facilities were transferred to the First Sierra
Equipment Contract Trust 1997-1 on September 10, 1997 in conjunction with the
Company's public medium-term note securitization. In connection with this
transaction, the Company exchanged its related residual interest in the
underlying securitized warehouse facilities and sold additional leases with 
an aggregate principal balance of $54.4 million, net of unearned income 
to the trust. Gains of $2.5 million were recognized by the Company in 
connection with the sale of the leases and the exchange of the residual 
interest.


5.       Debt

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

<TABLE>
<CAPTION>
                                                                                        DECEMBER 31, SEPTEMBER 30,
                                                                                            1996       1997
                                                                                          -------    --------
  <S>                                                                                     <C>        <C>     
  Various financial institutions under recourse and
     non-recourse agreements..........................................................    $    --    $ 16,706
  Prudential Securities Credit Corporation............................................     40,142       5,000
  First Union National Bank of North Carolina.........................................     12,238          --
                                                                                          -------    --------
Total warehouse credit facilities.....................................................     52,380      21,706
Subordinated note payable.............................................................      9,000       1,000
                                                                                          -------    --------
                                                                                          $61,380    $ 22,706
                                                                                          =======    ========
</TABLE>

On June 1, 1997, the Company entered into a warehouse facility with Dresdner
Bank AG, New York Branch and ContiFinancial Corporation (the "Dresdner
On-Balance Sheet Facility") that provided the Company with up to $50.0 million
of additional warehouse funding. The Company borrowed $48.2 million under the
Dresdner On-Balance Sheet Facility and paid off such borrowings on September
10, 1997 with funds received from the securitization transaction completed by
the Company in September 1997. Borrowings under the Dresdner On-Balance Sheet
Facility bore interest at a floating rate equal to the 30-day LIBOR plus 1.25%.

In September 1997, the Company entered into a on-balance sheet warehouse 
facility with Prudential which provides additional warehouse funding capacity.
As of November 14, 1997, the line had a borrowing limit of $50 million.

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 September 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.


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

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 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 September
30, 1997, the Company sold leases with an aggregate principal balance of $108.5
million, net of 



                                      11
<PAGE>   12

unearned income through the Company's securitization program. The Company
recognized gains of $5.8 million upon such sales and retained Trust
Certificates in the related trusts with an allocated cost basis of $3.8
million. The increase in sales is directly related to the creation of the
Securitized Warehouse Facilities as discussed below which enabled the Company
to effectively transfer and sell equipment lease and loan contract receivables
virtually on a daily basis. During the three months ended September 30, 1996,
the Company sold leases with an aggregate principal balance of $4.7 million
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.

Interest income increased $.9 million, or 52%, from $1.7 million for the three
months ended September 30, 1996 to $2.5 million for the three months ended
September 30, 1997. The increase was primarily related to $427,000 of interest
income recognized during the three months ended September 30, 1997 on Trust
Certificates retained by the Company in securitization transactions. The
remaining difference is a result of a 8% 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 $633,000, or 245%, from $258,000 for the three
months ended September 30, 1996 to $891,000 for the three months ended
September 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 serviced rose to $395 million as of
September 30, 1997, compared with $82 million as of September 30, 1996.

Interest expense decreased $88,000, or 6%, from $1,381,000 for the three months
ended September 30, 1996 to $1,293,000 for the three months ended September 30,
1997. Such increase was primarily due to a decrease in the effective rate of
Company's warehouse credit facilities.

Salaries and benefits increased $2,060,000, or 401%, from $514,000 for the
three months ended September 30, 1996 to $2,574,000 for the three months ended
September 30, 1997. Such increase is primarily related to a 420% increase in
the number of people employed by the Company from September 30, 1996 to
September 30, 1997. The increase in the number of employees is directly related
to the acquisitions of nine companies from July 1996 through September 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 $591,000 or 369% from $160,000 for the
three months ended September 30, 1996 to $751,000 for the three months ended
September 30, 1997. The increase is primarily due to the origination of $34.6
million of leases under the Company's Broker and Vendor programs during the
three months ended September 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 56% increase in leases originated under the
Private Label program from $37.4 million for the three months ended September
30, 1996 to $58.4 million for the three months ended September 30, 1997.

Depreciation and amortization increased $308,000, from $105,000 for the three
months ended September 30, 1996, to $413,000 for the three months ended
September 30, 1997. Such increase was primarily attributable to a 189% increase
in fixed assets owned at September 30, 1997, as well as amortization of
goodwill and other intangible assets resulting from the acquisitions referred
to above.

Other general and administrative expenses increased $1,105,000, or 257%, from
$429,000 for the three months ended September 30, 1996 to $1,534,000 for the
three months ended September 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




                                      12
<PAGE>   13
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

On June 1, 1997, the Company entered into a warehouse facility with Dresdner
Bank AG, New York Branch and ContiFinancial Corporation (the "Dresdner
On-Balance Sheet Facility") that provided the Company with up to $50.0 million
of additional warehouse funding. The Company borrowed $48.2 million under the
Dresdner On-Balance Sheet Facility and paid off such borrowings on September
10, 1997 with funds received from the securitization transaction completed by
the Company in September 1997. Borrowings under the Dresdner On-Balance Sheet
Facility bore interest at a floating rate equal to the 30-day LIBOR plus 1.25%.

On September 30, 1997, the Company entered into a $5.0 million on-balance sheet
warehouse facility with Prudential (the "Prudential On-Balance Sheet
Facility"). This facility provides additional warehouse funding capacity and
may be increased up to $50.0 million upon the mutual consent of the Company and
Prudential.


SECURITIZATION PROGRAM

Securitized Warehouse Facilities
 
The Company maintains three securitized warehouse facilities. In March 1997 the
Company entered into a facility with Prudential (the "Prudential Securitized
Warehouse Facility") and in June 1997 the Company entered into two separate
facilities with First Union (the "First Union Securitized Warehouse
Facilities"). As of November 14, 1997, the total amount available under the
Prudential Securitized Warehouse Facility was $200.0 million and the total
amount available under the First Union Securitized Warehouse Facilities was
$90 million. The structure of all of the facilities is essentially the same.
The facilities allow the Company to transfer and sell equipment lease and loan
contract receivables to a trust. The trust issues two certificates of
beneficial interest: a senior certificate which is owned by either Prudential
or First Union, as the case may be, and a residual certificate which is owned
by the Company's special purpose subsidiary.


                                      13
<PAGE>   14

As of November 14, 1997, the amount of Prudential's investment in the senior
certificate was 3.4 million and the amount of First Union's investment in
senior certificates was $88.8 million. The Prudential certificate had a stated
return equal to the 30 day LIBOR plus .90% and the First Union certificates had
a stated return equal to the 30 day LIBOR or the Commercial Paper rate plus
 .75%.
 
The Prudential Securitized Warehouse Facility and the First Union Securitized
Warehouse Facilities provide several significant advantages to the Company,
including (i) favorable interest rates, (ii) allowing the Company to recognize
gain on sale of lease receivables on an on-going basis, at the time such
receivables are transferred to such facility, rather than at the time of
permanent securitization, thus reducing the degree to which the Company's
quarterly results might fluctuate due to timing of permanent securitizations
and (iii) providing greater flexibility with respect to the timing and size of
permanent securitizations, thereby reducing related transaction costs.
 
The equipment lease receivables included in the Prudential Securitized
Warehouse Facility and the First Union Securitized Facilities may be
transferred by the trust to other trusts in which the Company has a minority
interest.

The majority of the amounts outstanding on the certificates under the
Prudential Securitized Warehouse Facility and the First Union Securitized
Warehouse Facility during the three months ended September 30, 1997 were repaid
as the equipment lease receivables included in these facilities were
transferred to the First Sierra Equipment Contract Trust 1997-1 on September
10, 1997 in conjunction with the Company's public medium-term note
securitization.

Securitization Transactions
 
As of November 14, 1997 the Company had completed three permanent securitization
transactions involving lease receivables aggregating $378.0 million. The Series
1996-1 and 1996-2 transactions were completed in 1996 and the Series 1997-1
transaction was completed in September 1997. In connection with the Series
1996-1 and 1996-2 transactions, Class A certificates, rated AAA by Standard and
Poor's, Aaa by Moody's Investor Services and AAA by Duff & Phelps Credit Rating
Co., were sold in the public market. The Class B-1 and Class B-2 Certificates
were rated BBB and BB, respectively, by Duff & Phelps Credit Rating Co., and
were sold on a non-recourse basis in the private market. In connection with the
Series 1997-1 transaction, four tranches of Class A Notes, rated AAA by
Standard and Poor's, Aaa by Moody's Investor Services, Inc. and AAA by Duff &
Phelps Credit Rating Co., were sold in the public market. The Class B-1 and
Class B-2 Notes were rated BBB and AA, respectively, by Duff & Phelps Credit
Rating Co., and were sold on a non-recourse basis in the private market. The
Class B-2 Note was enhanced through a letter of credit with Dresdner Bank AG,
which resulted in the higher ratings. A Class B-3 Note was rated B by Duff and
Phelps Credit Rating Co., and was retained by the Company for future sale in
the private market. Due to the Company's ability to structure and sell Class
B-1 and Class B-2 rated components of its securitizations, the remaining
interest retained by the Company was reduced, thereby allowing the Company to
maximize the cash proceeds generated from each transaction. The Company was
able to realize approximately 94.0% of the present value of the remaining
scheduled payments of the equipment leases included in its Series 1996-1 and
1996-2 securitizations, and approximately 96.0% of the present value of the
remaining scheduled payments of the equipment leases included in its Series
1997-1 securitization.

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 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 September 30, 1997, 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.



                                      14
<PAGE>   15



PART II -- OTHER INFORMATION

ITEM 6. Exhibits and Reports on Form 8-K

(a)      EXHIBITS

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



(b) REPORTS ON FORM 8-K NO REPORTS ON FORM 8-K WERE REQUIRED TO BE FILED DURING
THE PERIOD ENDED SEPTEMBER 30, 1997.



<PAGE>   16



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.

<TABLE>
<CAPTION>
SIGNATURE                                              TITLE                               DATE
---------                                              -----                               ----
<S>                                       <C>                                         <C>
/s/ SANDY B. HO                           Executive Vice President and Chief          November 14, 1997
--------------------                        Financial Officer (principal
(Sandy B. Ho)                               financial officer)

/s/ CRAIG M. SPENCER                      Senior Vice President and Chief             November 14, 1997
--------------------                        Accounting Officer (principal
(Craig M. Spencer)                          accounting officer)
</TABLE>






                                      16
<PAGE>   17



INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
------                             -----------
 <S>          <C>
 27           -- Financial Data Schedule for the three months ended 
                 September 30, 1997
</TABLE>