<PAGE>   1
 
================================================================================
 
                                 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 MARCH 31, 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)
 
<TABLE>
<S>                                            <C>
                   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)
</TABLE>
 
                                 (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 June 30, 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 March
            31, 1997 (unaudited)......................................      3
          Consolidated Statements of Operations -- Three months ended
            March 31, 1996 and 1997 (unaudited).......................      4
          Consolidated Statement of Stockholders' Equity -- Three
            months ended March 31, 1997 (unaudited)...................      5
          Consolidated Statements of Cash Flows -- Three months ended
            March 31, 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>
<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,     MARCH 31,
                                              1996           1997
                                          ------------    -----------
                                                          (UNAUDITED)
<S>                                       <C>             <C>
LEASE FINANCING RECEIVABLES, net........    $61,270         $31,141
INVESTMENT IN TRUST CERTIFICATES........      9,534          14,881
NOTE RECEIVABLE.........................         --           4,880
GOODWILL AND OTHER INTANGIBLE ASSETS,
  net...................................      3,615           4,318
CASH AND CASH EQUIVALENTS...............      2,598           3,026
FURNITURE AND EQUIPMENT, net............      1,049           1,429
OTHER ASSETS............................      1,276             869
                                            -------         -------
          Total assets..................    $79,342         $60,544
                                            =======         =======
 
                LIABILITIES AND STOCKHOLDERS' EQUITY
DEBT:
  Warehouse credit facilities...........    $52,380         $27,903
  Subordinated note payable.............      9,000           9,000
OTHER LIABILITIES:
  Holdback reserve payable..............      6,523           7,686
  Accounts payable and accrued
     liabilities........................      3,929           6,296
  Deferred income taxes.................      1,366           2,241
                                            -------         -------
          Total liabilities.............     73,198          53,126
                                            -------         -------
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 shares issued and
     outstanding........................         57              57
  Additional paid-in capital............        730             730
  Retained earnings.....................      1,467           2,741
                                            -------         -------
          Total stockholders' equity....      2,254           3,528
                                            -------         -------
          Total liabilities and
            stockholders' equity........    $79,342         $60,544
                                            =======         =======
</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 PERIODS ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                               FOR THE THREE
                                                                MONTHS ENDED
                                                                 MARCH 31,
                                                              ----------------
                                                               1996      1997
                                                              ------    ------
<S>                                                           <C>       <C>
GAIN ON SALE OF LEASE FINANCING RECEIVABLES.................  $   --    $2,587
INTEREST INCOME.............................................   1,851     2,315
SERVICING INCOME............................................     130       533
OTHER INCOME................................................      29        85
                                                              ------    ------
          Total revenues....................................   2,010     5,520
                                                              ------    ------
INTEREST EXPENSE............................................   1,422     1,653
SALARIES AND BENEFITS.......................................     314       732
PROVISION FOR CREDIT LOSSES.................................      51       294
DEPRECIATION AND AMORTIZATION...............................      29       161
OTHER GENERAL AND ADMINISTRATIVE............................     205       491
                                                              ------    ------
          Total expenses....................................   2,021     3,331
                                                              ------    ------
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES...     (11)    2,189
PROVISION (BENEFIT) FOR INCOME TAXES........................      (4)      876
                                                              ------    ------
NET INCOME (LOSS)...........................................      (7)    1,313
                                                              ======    ======
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE....  $(0.00)   $ 0.21
                                                              ======    ======
</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)    STOCKHOLDERS'
                                        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..........................         --      --           --          1,313         1,313
  Preferred stock dividends...........         --      --           --            (39)          (39)
                                        ---------     ---         ----         ------        ------
BALANCE, March 31, 1997...............  5,696,310     $57         $730         $2,741        $3,528
                                        =========     ===         ====         ======        ======
</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
                   THREE MONTHS ENDED MARCH 31, 1996 AND 1997
                                 (IN THOUSANDS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                     FOR THE
                                                               THREE MONTHS ENDED
                                                                    MARCH 31,
                                                              ---------------------
                                                                1996        1997
                                                              --------    ---------
<S>                                                           <C>         <C>
CASH FLOWS FROM OPERATIONS:
  Net income (loss).........................................  $     (7)   $   1,313
  Reconciliation of net income (loss) to cash provided by
     operations --
     Depreciation and amortization..........................        29          161
     Provision for credit losses............................        51          294
     Gain on sale of lease financing receivables............        --       (2,587)
     Decrease (increase) in other assets....................      (265)         530
     Increase (decrease) in accounts payable and accrued
      liabilities...........................................      (339)       2,266
     Increase in holdback reserve payable...................       575        1,239
     Deferred income tax provision (benefit)................        (4)         876
                                                              --------    ---------
          Net cash provided by operations...................        40        4,092
                                                              --------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Funding of lease financing receivables....................   (25,112)     (60,549)
  Principal payments received on lease financing
     receivables............................................     3,933        4,120
  Proceeds from sales of lease financing receivables, net of
     trust certificates retained............................        --       83,146
  Additions to furniture and equipment......................       (73)        (316)
  Investment in note receivable.............................        --       (4,880)
  Cash used in acquisitions, net of cash acquired...........        --         (922)
                                                              --------    ---------
          Net cash provided by (used in) investing
            activities......................................   (21,252)      20,599
                                                              --------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from warehouse credit facilities, net of
     repayments.............................................    21,132      (24,263)
                                                              --------    ---------
          Net cash provided by (used in) financing
            activities......................................    21,132      (24,263)
                                                              --------    ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........       (80)         428
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............       876        2,598
                                                              --------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................  $    796    $   3,026
                                                              ========    =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Income taxes paid......................................  $     --    $      --
                                                              ========    =========
     Interest paid..........................................  $  1,268    $   1,242
                                                              ========    =========
</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 $17,000.) 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.
 
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
6,283,736 and 6,324,404, during the quarters ended March 31, 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.
 
     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 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.
 
                                        7
<PAGE>   8
 
                 FIRST SIERRA FINANCIAL, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     If SFAS 128 had been in effect during the current and prior year periods,
basic EPS would have been $.00 and $.23 for the quarters ended March 31, 1996
and 1997, respectively while diluted EPS would have been $.00 and $.21,
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 March 31, 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 MARCH 31, 1997
                           -------------------------------------   ---------------------------------------
                           PRIVATE                                 PRIVATE
                            LABEL     BROKER   VENDOR    TOTAL      LABEL     BROKER    VENDOR     TOTAL
                           --------   ------   ------   --------   --------   -------   -------   --------
<S>                        <C>        <C>      <C>      <C>        <C>        <C>       <C>       <C>
Gross leases
  outstanding............  $244,049   $9,715   $3,470   $257,234   $280,036   $23,407   $10,518   $313,961
31 - 60 days past due....      2.46%    1.69%    0.00%      2.40%      2.21%     0.73%     0.17%      2.03%
61 - 90 days past due....      0.81%    0.29%    0.00%      0.78%      0.81%     0.17%     0.00%      0.74%
Over 90 days past due....      0.35%    0.00%    0.00%      0.33%      0.48%     0.00%     0.00%      0.43%
                           --------   ------   ------   --------   --------   -------   -------   --------
         Total past
           due...........      3.62%    1.98%    0.00%      3.51%      3.50%     0.90%     0.17%      3.20%
</TABLE>
 
     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
quarters ended March 31, 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.......................      51          --         51
                                                     -----       -----      -----
Balance at March 31, 1996.........................   $ 471       $  --      $ 471
                                                     =====       =====      =====
Balance at December 31, 1996......................   $ 314       $ 211      $ 525
Provision for credit losses.......................      89         205        294
Charge-offs, net of recoveries....................      --          --         --
Reduction of allowance for leases sold............    (244)       (265)      (509)
                                                     -----       -----      -----
Balance at March 31, 1997.........................   $ 159       $ 151      $ 310
                                                     =====       =====      =====
</TABLE>
 
---------------
(1) The Company established its Broker and Vendor programs in July 1996.
 
                                        8
<PAGE>   9
 
                 FIRST SIERRA FINANCIAL, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     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
March 31, 1997 (dollars in thousands):
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,    MARCH 31,
                                                                  1996          1997
                                                              ------------    ---------
<S>                                                           <C>             <C>
Leases outstanding under the Private Label program (1)......    $202,523      $230,335
                                                                ========      ========
 
Recourse to Sources available...............................    $ 19,480        27,697
Holdback reserves outstanding...............................       6,523      $  7,686
                                                                --------      --------
Total recourse and holdback reserves available..............    $ 26,003      $ 35,383
                                                                ========      ========
Ratio of recourse and holdback reserves outstanding to total
  leases outstanding under the Private Label program(2).....       12.84%        15.36%
                                                                ========      ========
</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.
 
(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 MARCH 31,
                                                              ------------------------
                                                                1996           1997
                                                              ---------     ----------
<S>                                                           <C>           <C>
Average balance of leases acquired pursuant to the Private
  Label program outstanding during the period(1)............    $77,117       $216,932
                                                                =======       ========
Total amount of leases triggering action under recourse and
  holdback provisions during the period.....................    $    45       $  1,390
Amounts recovered under recourse provisions.................          5          1,284
Amounts recovered pursuant to holdback reserves.............         40            106
                                                                -------       --------
Total amounts recovered.....................................         45          1,390
                                                                -------       --------
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.
 
3. ACQUISITIONS
 
     On February 4, 1997, the Company acquired certain assets and liabilities of
Lease Pro, Incorporated (Lease Pro) for approximately $900,000 in cash. Lease
Pro is located in Atlanta, Georgia and has a significant presence in the
national market for veterinary equipment financing. The pro forma results of
operations of Lease Pro would not be materially different from the amounts of
revenues, net income or earnings per share reflected on the accompanying
statements of operations for the three months ended March 31, 1996 and 1997, had
such acquisition taken place as of January 1, 1996 and 1997, respectively.
 
                                        9
<PAGE>   10
 
                 FIRST SIERRA FINANCIAL, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
4. LEASE FINANCING RECEIVABLES
 
     The Company's lease financing receivable balance at December 31, 1996 and
March 31, 1997, consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,    MARCH 31,
                                                                  1996          1997
                                                              ------------    ---------
<S>                                                           <C>             <C>
Minimum lease payments......................................    $ 75,945       $38,819
Estimated unguaranteed residual value.......................       1,044           824
Initial direct costs........................................         895           387
Unearned income.............................................     (16,089)       (8,579)
Allowance for credit losses.................................        (525)         (310)
                                                                --------       -------
  Lease financing receivables, net..........................    $ 61,270       $31,141
                                                                ========       =======
</TABLE>
 
  Sales of Leases
 
     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 is structured such that it will issue two classes of
certificates of beneficial ownership, a senior certificate, which has a limit of
$75 million and will be owned by Prudential, and a residual interest which will
be owned by the Company's subsidiary. Transfers and sales of lease receivables
pursuant to the Prudential 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. Investments made by
Prudential in the senior certificate will earn a stated rate of return of 30-day
LIBOR plus 0.90%.
 
     On March 31, 1997, the Company transferred and sold leases with an
aggregate principal balance of $77.5 million, net of unearned income, initial
direct costs and allowance for credit losses, to a trust pursuant to the
Prudential Securitized Warehouse Facility. Senior certificates with an aggregate
principal balance of $73.8 million were retained by Prudential, while residual
interests in the trust were retained by the Company. The Company recognized a
gain of $2.2 million upon transfer and sale of the leases to the trust.
 
     Additionally, the Company sold leases with an aggregate principal balance
of $8.9 million, net of unearned income, capitalized initial direct costs and
allowance for credit losses, during the quarter ended March 31, 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. NOTE RECEIVABLE
 
     During the quarter ended March 31, 1997, the Company advanced $4.9 million
pursuant to a note receivable with Heritage Credit Services, Inc. ("Heritage").
The note receivable is secured by lease financing receivables originated and
owned by Heritage and has a stated maturity date of May 31, 1997. The note
receivable was eliminated in conjunction with the Company's acquisition of
Heritage in May 1997 (see Note 7).
 
                                       10
<PAGE>   11
 
                 FIRST SIERRA FINANCIAL, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
6. DEBT
 
     Debt consisted of the following as of December 31, 1996 and March 31, 1997
(in thousands):
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,    MARCH 31,
                                                                  1996          1997
                                                              ------------    ---------
<S>                                                           <C>             <C>
Warehouse credit facilities --
  First Union National Bank of North Carolina...............    $12,238        $27,903
  Prudential Securities Credit Corporation..................     40,142             --
                                                                -------        -------
Total warehouse credit facilities...........................     52,380         27,903
Subordinated note payable...................................      9,000          9,000
                                                                -------        -------
                                                                $61,380        $36,903
                                                                =======        =======
</TABLE>
 
7. SUBSEQUENT EVENTS
 
     On May 20, 1996, 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. Concurrent with the Offering, the Company acquired the outstanding
common stock of Heritage Credit Services, Inc. for $6.4 million in cash,
subordinated notes and common stock. Additionally, the Company used a portion of
the proceeds of the Offering to repay in full the outstanding subordinated note
payable with one of the Company's stockholders.
 
     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.
 
     Subsequent to March 31, 1997, the Company modified the warehouse credit
facility with First Union National Bank of North Carolina ("First Union") to
increase the level of borrowings available under such facility to $90 million
and to extend the maturity date for such facility to July 31, 1997.
 
     In June 1997, the Company completed a warehouse facility with Dresdner Bank
AG and ContiFinancial Corporation that provides for borrowings up to $50 million
at a rate of interest equal to the 30-day LIBOR plus 1.25%.
 
     In June 1997, the Company entered into a new $5 million subordinated
revolving credit facility with one of its stockholders, with the commitment
level decreasing $1 million per year. Advances under this facility will bear
interest at $11.00% per annum.
 
     In June 1997, the Company entered into a securitized warehouse facility
with First Union (the "First Union Securitized Warehouse Facility"). The
structure of the First Union Securitized Warehouse Facility is substantially the
same as the Prudential Securitized Warehouse Facility. The senior certificates
issued pursuant to the First Union Securitized Warehouse Facility will have a
limit of $90 million and will earn a stated return of either 30-day LIBOR plus
0.75% or the Commercial Paper index rate plus 0.75%.
 
                                       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 March 31, 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 March 31,
1997, the Company sold leases with an aggregate principal balance of $86.4
million, net of unearned income through the Company's securitization program.
The Company recognized gains of $2.6 million upon such sales and retained Trust
Certificates in the related trust with an allocated cost basis of $5.7 million.
The Company did not sell any leases during the three month period ended March
31, 1996.
 
     Interest income increased $464,000, or 25%, from $1.8 million for the three
months ended March 31, 1996 to $2.3 million for the three months ended December
31, 1997. The increase was primarily related to $278,000 of interest income
recognized during the three months ended March 31, 1997 on Trust Certificates
retained by the Company in securitization transactions. The remaining difference
is a result of a 6% increase in the average lease receivable balance outstanding
and a 56 basis point increase in the average rate earned on leases outstanding.
The increase in the average rate is directly related to the origination of
leases under the Company's Broker and Vendor programs which were formed in July
1996.
 
     Servicing income increased $403,000, or 310%, from $130,000 for the three
months ended March 31, 1996 to $533,000 for the three months ended December 31,
1997. Such increase was primarily attributable to servicing fees received from
the Company's two 1996 securitization transactions, the first of which took
place in May 1996. At March 31, 1996, the Company serviced 131 leases for others
with an aggregate principal amount of $8.2 million. At March 31, 1997, the
Company serviced 8,260 leases with an aggregate principal amount of $151.9
million, excluding leases sold on March 31, 1997 through the Prudential
Securitized Warehouse Facility.
 
     Interest expense increased $231,000, or 16%, from $1.4 million for the
three months ended March 31, 1996 to $1.7 million for the three months ended
December 31, 1997. Such increase was primarily due to a 14% increase in the
average balance outstanding under the Company's warehouse credit facilities, as
well as a 16 basis point increase in the average rate of the Company's
borrowings under its warehouse credit facilities.
 
     Salaries and benefits increased $418,000, or 133%, from $314,000 for the
three months ended March 31, 1996 to $732,000 for the three months ended March
31, 1997. Such increase was primarily attributable to a general expansion of the
Company's business and an increase in the number of employees resulting from the
acquisitions of General Interlease Corporation ("GIC") and Corporate Capital
Leasing Group, Inc. ("CCL") in July and October 1996, respectively, and Lease
Pro, Inc. ("Lease Pro") in February 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 from $51,000 for the three months
ended March 31, 1996 to $294,000 for the three months ended March 31, 1997. The
increase is primarily due to the origination of $16.4 million of leases under
the Company's Broker and Vendor programs during the three months ended March 31,
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
76% increase in leases originated under the Private Label program from $25.1
million for the three months ended March 31, 1996 to $44.1 million for the three
months ended March 31, 1997.
 
     Depreciation and amortization increased $132,000, from $29,000 for the
three months ended March 31, 1996, to $161,000 for the three months ended March
31, 1997. Such increase was primarily attributable to a 313% increase in fixed
assets owned at March 31, 1997, as well as amortization of goodwill and other
intangible assets resulting from the acquisitions of GIC, CCL and Lease Pro.
 
     Other general and administrative expenses increased $286,000, or 140%, from
$205,000 for the three months ended March 31, 1996 to $491,000 for the three
months ended March 31, 1997. Such increase was primarily attributable to the
general expansion of the Company's business and the acquisitions of GIC, CCL and
Lease Pro.
 
                                       12
<PAGE>   13
 
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 to
the Company's existing stockholders 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"). The First Union Credit Facility has been
increased to $75 million and subsequent to March 31, 1997, was further increased
to $90 million. As of March 31, 1997, $27.9 million was outstanding under this
facility. As of March 31, 1997, the First Union Credit Facility bore interest at
a floating rate equal to the 30-day LIBOR plus 1.25%. The First Union Credit
Facility matures on July 31, 1997, at which time any amounts outstanding would
convert to a term loan which matures on the tenth day of the month following the
date on which the last scheduled payment on the leases pledged is due. In June
1997, the Company substantially replaced the First Union Credit Facility with
the First Union Securitized Warehouse Facility described below.
 
     In September 1996, the Company entered into a warehouse facility with
Prudential Securities Credit Corporation (the "Prudential Facility"). The
Prudential Facility provided the Company with $75 million of warehouse
financing. Borrowings under the Prudential Facility bore interest at a floating
rate equal to the 30-day LIBOR plus 0.95%. The Prudential Facility matured on
March 31, 1997 and was replaced by the Prudential 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 additional
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
 
                                       13
<PAGE>   14
 
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 March 31, 1997, the amount of the
Prudential investment in the senior certificate was $74 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 will 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 will replace such
facility.
 
     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 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.
 
                                       14
<PAGE>   15
 
  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 March 31, 1997
 
     (b) Reports on Form 8-K
 
           No reports on Form 8-K were required to be filed during the three
         months ended March 31, 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.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                    TITLE
                      ---------                                    -----
<C>                                                    <S>                               <C>
 
                   /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)
</TABLE>
 
Date June 30, 1997
 
                                       17
<PAGE>   18
                               INDEX TO EXHIBITS

Exhibit
Number                             Description
------                             -----------
 
  27       Financial Data Schedule for the three months ended March 31, 1997