<PAGE>
 
                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C.  20549

                                   FORM 10-Q

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

               For the quarterly period ended  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   000-22633
                                               ---------  

                       NEW CENTURY FINANCIAL CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

        DELAWARE                                      33-0683629
-------------------------------        ------------------------------------
(State or other jurisdiction of        (I.R.S. Employer Identification No.)
 incorporation or organization)


          18400 VON KARMAN, SUITE 1000, IRVINE,  CALIFORNIA   92612
          -----------------------------------------------------------
          (Address of principal executive offices)         (Zip code)

Registrant's telephone number, including area code:    (714)  440-7030
                                                       ---------------

------------------------------------------------------------------------------- 
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by check mark whether  the registrant  (1)  has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2)  has been subject to such
filing requirements for the past 90 days.

       YES  X     NO 
           ___      ___

As of October 24, 1997, 14,155,124 shares of common stock of New Century
Financial Corporation were outstanding.

                                       1
<PAGE>
 
               NEW CENTURY FINANCIAL CORPORATION AND SUBSIDIARY
                                   FORM 10-Q
                       QUARTER ENDED SEPTEMBER 30, 1997

                                     INDEX
<TABLE>
<C>                  <S>                                                      <C>
PART I           -   FINANCIAL INFORMATION                                    PAGE

           Item 1.   Financial Statements                                        4

           Item 2.   Management's Discussion and Analysis of
                     Financial Condition and Results of Operations              12

PART II          -   OTHER INFORMATION

           Item 1.   Legal Proceedings                                          20

           Item 2.   Changes in Securities and Use of Proceeds                  20

           Item 3.   Defaults Upon Senior Securities                            20

           Item 4.   Submission of Matters to a Vote of
                     Security Holders                                           20

           Item 5.   Other Information                                          20

           Item 6.   Exhibits and Reports on Form 8-K                           20

SIGNATURES                                                                      21

EXHIBIT INDEX                                                                   22

Exhibit 10.1         Second Amended and Restated Credit Agreement between
                     the Company and First Bank National Association, dated
                     July 31, 1997                                              23

Exhibit 10.2         Agreement to Add Lender between the Company, First
                     Bank National Association and First Union National
                     Bank, dated August 27, 1997

Exhibit 10.3         Agreement to Add Lender between the Company, First
                     Bank National Association and Residential Funding
                     Corporation, dated September 18, 1997

Exhibit 10.4         Agreement to Add Lender between the Company, First
                     Bank National Association and Bank One, Texas, N.A.,
                     dated September 25, 1997
</TABLE> 

                                       2
<PAGE>
 
<TABLE>
<C>                  <S>                                                      <C>
Exhibit 11.1         Statement re Computation of Per Share Amounts
Exhibit 27.1         Financial Data Schedule
</TABLE> 
 
Certain information included in this Form 10-Q may include "forward-looking"
statements under federal securities laws, and the Company intends that such
forward-looking statements be subject to the safe-harbor created thereby.  There
are many important factors that could cause the Company's actual results to
differ materially from expected results in the forward-looking statements.  Such
factors include, but are not limited to, the Company's limited operating
history, the Company's ability to sustain and manage its rate of growth, the
impact of increasing competition in the subprime mortgage banking industry, the
Company's ability to access funding sources, and other risks identified in the
Company's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission.

                                       3
<PAGE>
 
                         Item 1.  Financial Statements

                New Century Financial Corporation and Subsidiary
                          Consolidated Balance Sheets
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                   September 30,    December 31,
                                                                        1997            1996
                                                                   -------------    ------------
<S>                                                                <C>              <C>
ASSETS:
Cash and cash equivalents.........................................  $  2,602,000     $ 3,041,000
Securities available for sale, at market..........................     5,014,000              --
Loans receivable held for sale, net (notes 2 and 4)...............   314,223,000      57,990,000
Residual interests in securitizations (note 3)....................    79,776,000              --
Accrued interest receivable.......................................     2,016,000         786,000
Office property and equipment.....................................     3,444,000       1,620,000
Prepaid expenses and other assets.................................     2,405,000       1,201,000
                                                                    ------------     -----------

TOTAL ASSETS......................................................  $409,480,000     $64,638,000
                                                                    ============     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Warehouse and aggregation lines of credit (note 4)................  $290,398,000     $55,659,000
Residual financing................................................    43,413,000              --
Notes payable.....................................................     2,000,000       1,326,000
Income taxes payable..............................................            --         839,000
Accounts payable and accrued liabilities..........................     6,324,000       2,283,000
Deferred income taxes.............................................    10,245,000         128,000
                                                                    ------------     -----------
     Total liabilities............................................   352,380,000      60,235,000

Stockholders' equity:
Preferred stock, $.01 par value. Authorized 7,500,000 shares:
Series A Convertible Preferred Stock - issued and outstanding
0 and 5,500,000 shares at September 30, 1997 and December
31, 1996, respectively............................................            --          54,000
Series B Convertible Preferred Stock - issued and outstanding
0 and 320,000 shares at September 30, 1997 and December
31, 1996, respectively............................................            --           4,000
Common stock, $.01 par value.  Authorized 45,000,000
shares; issued and outstanding 14,147,474 and 528,618 shares
at September 30, 1997 and December 31, 1996,
respectively......................................................       141,000           6,000
Additional paid-in capital........................................    43,457,000       3,086,000
Retained earnings, restricted.....................................    15,713,000       1,253,000
                                                                    ------------     -----------
                                                                      59,311,000       4,403,000
Deferred compensation costs.......................................    (2,211,000)             --
                                                                    ------------     -----------
     Total stockholders' equity...................................    57,100,000       4,403,000

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY..............................................  $409,480,000     $64,638,000
                                                                    ============     ===========
See notes to unaudited consolidated financial statements.
</TABLE>

                                       4
<PAGE>
 
                New Century Financial Corporation and Subsidiary
                     Consolidated Statements of Operations
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                           Nine Months Ended               Three Months Ended
                                                            September 30,                     September 30,
                                                   -------------------------------     --------------------------
                                                        1997             1996              1997           1996
                                                   --------------   --------------     -------------   ----------
<S>                                                <C>              <C>                <C>             <C>
Revenues:
Gain on sale of loans...........................     $51,504,000       $3,488,000      $24,394,000     $2,658,000
Interest income.................................      13,657,000          847,000        6,313,000        560,000
Servicing income................................       2,957,000           10,000        1,793,000         10,000
                                                     -----------       ----------      -----------     ----------
  Total revenues................................      68,118,000        4,345,000       32,500,000      3,228,000


Expenses:
Personnel.......................................      17,904,000        2,779,000        8,207,000      1,350,000
Interest........................................      11,207,000          529,000        5,492,000        346,000
General and administrative......................       9,202,000        1,058,000        4,708,000        592,000
Advertising and promotion.......................       3,459,000          602,000        1,427,000        297,000
Servicing.......................................         988,000           81,000          365,000         57,000
Professional services...........................         427,000          191,000          163,000         79,000
                                                     -----------       ----------      -----------     ----------
  Total expenses................................      43,187,000        5,240,000       20,362,000      2,721,000

Earnings (loss) before income
taxes (benefit).................................      24,931,000         (895,000)      12,138,000        507,000

Income taxes (benefit)..........................      10,471,000         (374,000)       5,098,000        213,000
                                                     -----------       ----------      -----------     ----------

Net earnings (loss).............................     $14,460,000       $ (521,000)     $ 7,040,000     $  294,000
                                                     ===========       ==========      ===========     ==========

Primary earnings (loss) per share...............     $      1.16       $    (0.08)     $      0.46     $     0.05
                                                     ===========       ==========      ===========     ==========

Fully-diluted earnings (loss) per share.........     $      1.13       $    (0.08)     $      0.46     $     0.04
                                                     ===========       ==========      ===========     ==========
</TABLE>
See notes to unaudited consolidated financial statements.

                                       5
<PAGE>
 
                New Century Financial Corporation and Subsidiary
                     Consolidated Statements of Cash Flows
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                               Nine Months Ended  September 30,
                                                                      1997            1996
                                                               -----------------  -------------
<S>                                                            <C>                <C>
Cash flows from operating activities:
Net earnings (loss).........................................   $    14,460,000    $    (521,000)
Adjustments to reconcile net earnings (loss)
  to net cash used in operating activities:
  Deprecation and amortization..............................         3,663,000          145,000
  Deferred income taxes.....................................        10,117,000               --
  Gain on sale of loans.....................................       (64,899,000)              --
  Initial over-collateralization amount.....................       (16,859,000)              --
  Net interest receivables collected........................        (4,437,000)              --
  Over-collateralization amount released....................         4,437,000               --
  Provision for losses......................................         2,130,000          100,000
  Loans originated or acquired for sale.....................    (1,263,848,000)    (180,672,000)
  Loan sales, net...........................................     1,000,269,000      108,241,000
  Principal repayments in loans receivable held for sale....         5,818,000           91,000
  Increase in accrued interest receivable...................        (1,230,000)        (231,000)
  Increase in prepaid expenses and other assets.............          (169,000)      (1,466,000)
  Increase in warehouse and aggregation lines of credit.....       234,739,000       71,188,000
  Decrease in income taxes payable..........................          (839,000)              --
  Increase in accounts payable and other liabilities........         3,439,000          698,000
                                                               ---------------    -------------
Net cash used in operating activities.......................       (73,209,000)      (2,427,000)
                                                               ---------------    -------------

Cash flows from investing activities:
  Purchase of office property and equipment.................        (2,476,000)      (1,245,000)
  Purchase of securities available for sale.................        (5,014,000)              --
                                                               ---------------    -------------
Net cash used in investing activities.......................        (7,490,000)      (1,245,000)

Cash flows from financing activities:
  Net proceeds from notes payable...........................           674,000          713,000
  Net proceeds from residual financing......................        43,413,000               --
  Proceeds from issuance of stock...........................        36,173,000               --
                                                               ---------------    -------------
Net cash provided by financing activities...................        80,260,000          713,000
                                                               ---------------    -------------

Net decrease in cash and cash equivalents...................          (439,000)      (2,959,000)

Cash and cash equivalents, beginning of period..............         3,041,000        3,029,000
                                                               ---------------    -------------

Cash and cash equivalents, end of period....................   $     2,602,000    $      70,000
                                                               ===============    =============

Supplemental cash flow disclosure:
  Interest paid.............................................   $    10,593,000    $     387,000
  Income taxes paid.........................................   $     1,193,000    $       3,000
</TABLE>
See notes to unaudited consolidated financial statements.

                                       6
<PAGE>
 
               NEW CENTURY FINANCIAL CORPORATION AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                          September 30, 1997 and 1996


1.  Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information.  Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.  Operating results for the nine months ended September 30, 1997
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1997.

Recent Accounting Developments - In June 1996, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards No.
125 (FASB No. 125), "Accounting for Transfer and Servicing of Financial Assets
and Extinguishment of Liabilities."  FASB No. 125 addresses the accounting for
all types of securitization transactions, securities lending and repurchase
agreements, collateralized borrowing arrangements and other transactions
involving the transfer of financial assets.  FASB No. 125 distinguishes
transfers of financial assets that are sales from transfers that are secured
borrowings.  FASB No. 125 requires the Company to allocate its basis in the
mortgage loans between the portion of the mortgage loans sold through mortgage
backed securities and the portion retained (the residual interests) based on the
relative fair values of those portions on the date of sale.  The pronouncement
requires the Company to account for the residual interests as "held-for-trading"
securities which are to be recorded at fair value in accordance with SFAS No.
115.  The Company adopted FASB No. 125 on January 1, 1997.

In February 1997, FASB issued Statement of Financial Accounting Standards No.
128, (FASB No. 128), "Earnings Per Share."  FASB No. 128 supersedes APB Opinion
No. 15, (APB 15), "Earnings Per Share" and specifies the computation,
presentation, and disclosure requirements for earnings per share (EPS) for
entities with publicly held common stock or potential common stock.  FASB No.
128 was issued to simplify the computation of EPS and to make the U.S. standard
more compatible with the EPS standards of other countries and that of the
International Accounting Standards Committee (IASC). It replaces the
presentation of primary earnings per share with a presentation of basic EPS and
fully diluted EPS with diluted EPS.

Basic EPS, unlike primary EPS, excludes dilution and is computed by dividing
income available to common stockholders 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 or resulted in the issuance of common
stock that then shared in the 

                                       7
<PAGE>
 
earnings of the entity. Diluted EPS is computed similarly to fully diluted EPS
under APB No. 15.

FASB No. 128 is effective for financial statements for both interim and annual
periods ending after December 15, 1997.  Earlier application is not permitted.
After adoption, all prior-period EPS data presented shall be restated to conform
with FASB No. 128.

FASB No. 129, Disclosure of Information about Capital Structure, is effective
for financial statements for periods ending after December 15, 1997.  It is not
expected that the issuance of FASB No. 129 will require significant revision of
prior disclosures since the Statement lists required disclosures that had been
included in a number of previously existing separate statements and opinions.

FASB No. 130, Reporting Comprehensive Income, establishes standards for
reporting and display of comprehensive income and its components ( revenues,
expenses, gains and losses) in a full set of  general-purpose financial
statements.  FASB No. 130 requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements.  FASB No. 130 does not require a specific format for
that financial statement but requires that an enterprise display an amount
representing total comprehensive income for the period in that financial
statement.

FASB No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position.

FASB N0. 130 is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required.

FASB No. 131, Disclosures About Segments of an Enterprise and Related
Information, establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to stockholders.  It also
establishes standards for related disclosures about products and services,
geographic areas and major customers.  FASB No. 131 supersedes FASB Statement
No. 14, "Financial Reporting for Segments of a Business Enterprise," but retains
the requirement to report information about major customers.  It amends FASB
Statement No. 94, "Consolidation of All Majority-Owned Subsidiaries," to remove
the special disclosure requirements for previously unconsolidated subsidiaries.

FASB No. 131 requires that a public business enterprise report financial and
descriptive information about its reportable operating segments.  Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.  Generally, financial information is required to be reported on 

                                       8
<PAGE>
 
the basis that it is used internally for evaluating segment performance and
deciding how to allocate resources to segments.

FASB No. 131 requires that a public business enterprise report a measure of
segment profit or loss, certain specific revenue and expense items, and segment
assets.  It requires reconciliations of total segment revenues, total segment
profit or loss, total segment assets, and other amounts disclosed for segments
to corresponding amounts in the enterprise's general-purpose financial
statements.  It requires that all public business enterprises report information
about the revenues derived from the enterprise's products or services (or groups
of similar products and services), about the countries in which the enterprise
earns revenues and holds assets, and  about major customers regardless of
whether that information is used in making operating decisions.  However, FASB
No. 131  does not require an enterprise to report information that is not
prepared for internal use if reporting it would be impracticable.

FASB No. 131 also requires that a public business enterprise report descriptive
information about the way that the operating segments were determined, the
products and services provided by the operating segments, differences between
the measurements used in reporting segment information and those used in the
enterprise's general-purpose financial statements, and changes in the
measurement of segment amounts from period to period.

FASB No. 131 is effective for financial statements for periods beginning after
December 15, 1997.  In the initial year of application, comparative information
for earlier years is to be restated.  This Statement need not be applied to
interim financial statements in the initial year of its application, but
comparative information for interim periods in the initial year of application
is to be reported in financial statements for interim periods in the second
year of application.

Residual interests in securitizations - Residual interests in securitizations
are recorded as a result of the sale of loans through securitization.  At the
closing of each securitization, the Company removes from its balance sheet the
mortgage loans held for sale and adds to its balance sheet (i) the cash
received; and (ii) the estimated fair value of the residual interests from the
securitization, which consists of (a) an overcollateralization amount (OC) and
(b) a net interest receivable (NIR).  The excess of the cash received and assets
retained by the Company over the carrying value of the loans sold, less
transaction costs, equals the gain on sale of loans recorded by the Company.

The Company allocates its basis in the mortgage loans between the portion of the
mortgage loans sold through mortgage-backed securities (the senior and junior
certificates) and the portion retained (the residual interests) based on the
relative fair values of those portions on the date of sale.

The Company may recognize gains or losses attributable to the change in the fair
value of the residual interests, which are recorded at estimated fair value and
accounted for as "held-for-trading" securities.  The Company is not aware of an
active market for the purchase or sale of residual interests; accordingly, the
Company estimates the fair value of the residual interests by calculating the
present value of the estimated expected future cash flows using a discount rate
commensurate with the risks involved.

                                       9
<PAGE>
 
NIRs are determined by using the amount of the excess of the weighted-average
coupon on the loans sold over the sum of : (1) the coupon on the senior and
junior certificates; (2) a base servicing fee paid to the servicer of the loans;
(3) estimated losses to be incurred on the portfolio of loans sold over the
estimated lives of the loans; and (4) other expenses and revenues, which include
anticipated prepayment penalties.  The significant assumptions used by the
Company to estimate NIR cash flows are anticipated prepayments and estimated
credit losses.  The Company estimates prepayments by evaluating historical
prepayment performance of comparable loans and the impact of trends in the
industry.  The Company estimates credit losses using available historical loss
data for comparable loans and the specific characteristics of the loans included
in the Company's securitizations.

The OC primarily represents the portion of the loans which are held by the trust
as overcollateralization for the senior and junior certificates sold and, along
with a certificate guarantor insurance policy, if any, serves as credit
enhancement to the senior and junior certificate holders.  Generally, the OC
initially consists of the excess of the principal balance of the mortgage loans
sold to the trust, less the principal balance of the certificates sold to
investors.  The OC is required to be maintained at a specified target level of
the principal balance of the certificates, which can be increased significantly
in the event delinquencies and/or losses exceed certain specified levels.  Cash
flows received by the trust in excess of the obligations of the trust are
deposited into the overcollateralization account until the target OC is reached.
Once the target OC is reached, distributions of excess cash are remitted to the
Company.


2. Loans Receivable Held for Sale

A summary of loans receivable held for sale, at the lower of cost or market at
September 30, 1997 and December 31, 1996 follows (dollars in thousands):

<TABLE>
<CAPTION>
                                            September 30,       December 31,
                                                1997                1996
                                            -------------       ------------
     <S>                                    <C>                 <C>
     Mortgage loans receivable..............  $313,559             $57,701
     Net deferred origination costs.........       664                 289
                                              --------             -------
                                              $314,223             $57,990
                                              ========             =======
</TABLE>

3. Residual Interests in Securitizations

Residual interests in securitizations consist of the following components at
September 30, 1997 (dollars in thousands):


<TABLE> 
     <S>                                                          <C> 
     Over-collateralization amount.............................   $16,859
     Net interest receivable (NIR).............................    62,917
                                                                  -------
                                                                  $79,776
                                                                  =======
</TABLE> 

                                       10
<PAGE>
 
The following table summarizes activity in the NIR interests at September 30,
1997 (dollars in thousands):

<TABLE> 
     <S>                                                         <C> 
     Balance, beginning of period..............................  $   ---
     NIR recognized............................................   64,899
     Amortization..............................................   (1,982)
                                                                 -------
     Balance, end of period....................................  $62,917
                                                                 =======
</TABLE> 

4. Warehouse and Aggregation Lines of Credit

Warehouse and aggregation lines of credit consist of the following at September
30, 1997 and December 31, 1996 (dollars in thousands):

<TABLE>
<CAPTION>
                                                                  September 30,   December 31,
                                                                      1997            1996
                                                                  -------------   ------------
     <S>                                                          <C>             <C>
     A $245 million line of credit expiring in May 1998
     secured by loans receivable held for sale, bearing
     interest based on one month LIBOR (5.66% at
     September 30, 1997).......................................      $191,138        $41,702

     A $335 million master repurchase agreement bearing
     interest based on one month LIBOR (5.66% at
     September 30, 1997).  The agreement may be terminated
     by the lender giving 28 days written notice...............        99,260         13,957
                                                                     --------        -------

                                                                     $290,398        $55,659
                                                                     ========        =======
</TABLE>
The warehouse and aggregation line of credit agreements contain certain
restrictive financial and other covenants which require the Company to, among
other requirements, restrict dividends and maintain certain levels of net worth,
specific liquidity requirements, debt-to-net-worth ratios and  compliance with
regulatory and investor requirements.  At September 30, 1997, the Company was in
compliance with these financial and other covenants.

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

General

New Century Financial Corporation (the "Company") is a specialty finance company
engaged in the business of originating, purchasing, selling and servicing
subprime mortgage loans secured primarily by first mortgages on single family
residences. The Company originates and purchases loans through its Wholesale and
Retail Divisions, and acquires loans individually and through bulk acquisitions.
The Company's borrowers generally have substantial equity in the property
securing the loan, but have impaired or limited credit profiles or higher debt-
to-income ratios than traditional mortgage lenders allow. The Company's
borrowers also include individuals who, due to self-employment or other
circumstances, have difficulty verifying their income, as well as individuals
who prefer the prompt and personalized service provided by the Company. These
borrowers typically use the proceeds of the Company's loans to consolidate and
refinance debt, and to finance home improvements, education and other consumer
needs.

Loan Sales and Securitizations

The Company's loan sale strategy includes both securitizations and whole loan
sales in order to advance the Company's goal of enhancing profits while managing
cash flows.  Loan sales through securitizations permit the Company to enhance
operating profits and to benefit from future cash flows generated by the
residual interests retained by the Company.  Whole loan sale transactions enable
the Company to generate current cash flow, protect against the potential
volatility of the securitization market and reduce the risks inherent in
retaining residual interests in securitizations.

The Company's primary source of revenue is the recognition of gains from the
sale of its loans through whole loan sales and securitizations. In a whole loan
sale, the Company recognizes and receives a cash gain upon sale. In a
securitization, the Company recognizes a gain on sale at the time the loans are
sold, but receives corresponding cash flows, represented by the
overcollateralization amount ("OC") and the Net Interest Receivable ("NIR"),
over the actual life of the loans. The OC represents the portion of the loans
which are held by the trust as overcollateralization for the senior and junior
certificate holders, and generally consists of the excess of the principal
balance of the mortgage loans sold to the trust, less the principal balance of
the certificates sold to investors. The NIR represents the difference between
the interest received from the loans sold and (i) interest required to be passed
through to the senior and junior certificate holders, (ii) all servicing fees;
(iii) estimated losses to be incurred on the portfolio of loans; and (iv) other
expenses and revenues, including anticipated prepayment penalties. At the time
of securitization, the Company capitalizes the OC and the NIR, based upon
certain prepayment and loan loss assumptions and a discount rate that the
Company believes is consistent with what market participants would use for
similar financial instruments. The capitalized assets are recorded on the
Company's balance sheet as interest-only and residual certificates. A gain or
loss is recorded on the income statement for the value of the residual
certificates created by the securitization in excess of the cost basis of the
loans and transaction expenses. As a result of timing differences in receiving
cash from whole loan sales versus securitizations,

                                       12
<PAGE>
 
the relative percentage of whole loan sales to securitizations will impact the
Company's operating cash flow. For the nine months ended September 30, 1997,
73.5% of the Company's total loan sales were in the form of securitizations.

The Company has, to date, elected to fund the required OC at the closing of each
securitization for all but one securitization. An OC is created within each
securitization trust, as required by the rating agencies or the bond insurance
companies. The overcollateralization requirement ranges from two to four percent
of the initial securitization bond debt principal balance or four to six percent
of the remaining principal balance after thirty to thirty-six months of
principal amortization. When funding all of the OC up front, the Company begins
to receive cash flow from the NIR immediately, and in those cases where a
portion of the OC is funded up front, the Company will begin to receive cash
flow from the NIR more quickly than in cases where no initial funding is
undertaken, in both cases subject to certain delinquency or credit loss tests,
as defined by the rating agencies or the bond insurance companies. Over time,
the Company will also receive the OC, subject to the performance of the mortgage
loans in each securitization.

In connection with the origination and purchase of loans, the Company may either
receive or pay origination fees.  These fees, referred to as "points" or
"premiums" in the mortgage industry, are dependent on the source of loan
production and typically correspond to the amount of further processing required
for a loan to be funded and are determined as a percentage of the loan amount.
The points received from the origination of loans and the premiums paid to
originate and acquire loans are included in the gain recognized from the sale of
loans in the income statement.

The following table sets forth loan sales for the periods indicated (dollars in
thousands):

<TABLE>
<CAPTION>
                               For the Quarter          For the Nine Months
                              Ended September 30,       Ended September 30,
                              -------------------    -----------------------
                                1997       1996         1997         1996
                              --------    -------    ----------   ----------
<S>                           <C>         <C>        <C>          <C>
Securitizations............   $404,242    $   --     $  735,585     $    --
Whole loan sales...........    104,715     79,419       264,684      108,241
                              --------    -------    ----------     --------
   Total                      $508,957    $79,419    $1,000,269     $108,241
                              ========    =======    ==========     ========
</TABLE>

In the nine months ended September 30, 1997, the Company securitized $735.6
million, or 73.5% of total loan sales, excluding approximately $40.0 million in
loans that were securitized through a pre-funding arrangement which settled in
October 1997.  In the three months ended September 30, 1997, securitizations
represented 79.4% of total loan sales.  During the quarter ended September 30,
1997, the Company repurchased through arms-length negotiations $63.8 million in
loans which it had previously sold on a whole loan basis, which were immediately
securitized.  This repurchase is not included in loan originations and
purchases.

Results of Operations

The Company began lending operations in February 1996.  Accordingly, the nine
month period ended September 30, 1996 includes a period of time during which the
Company incurred costs to begin operations, as well as a period of time during
which operations 

                                       13
<PAGE>
 
were expanding and maturing. Therefore, results of operations for the nine month
period ended September 30, 1996 include substantial startup costs incurred.

As of September 30, 1997, the Company's Wholesale Division operated through 32
sales offices and 4 regional operating centers located in 22 states.  The number
of account executives in the Wholesale Division  grew to 90 at September 30,
1997, from 25 at September 30, 1996.  The Company's Retail Division operated
through 62 sales offices located in 23 states and the number of loan officers
grew to 243 at September 30, 1997, from 24 at September 30, 1996.

Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996

The Company originated and purchased $1.3 billion in loans for the nine months
ended September 30, 1997, compared to $180.2 million for the nine months ended
September 30, 1996.  Loans originated and purchased through the Company's
Wholesale Division were $821.0 million, or 65.3%, of total originations and
purchases for the nine months ended September 30, 1997.  Loans originated
through the Company's Retail Division were $376.7 million, or 29.9%, of total
originations and purchases for the nine month period.  Loans purchased through
bulk acquisition were $59.9 million, or 4.8%, of total originations and
purchases for the nine months ended September 30, 1997.  For the same period in
1996, Wholesale and Retail originations and purchases totaled $152.1 million, or
84.4%, and $28.1 million, or 15.6%, respectively, of total originations and
purchases for such period.  There were no bulk acquisitions in the nine months
ended September 30, 1996.

Total revenues for the nine months ended September 30, 1997 increased to $68.1
million, from $4.3 million for the nine months ended September 30, 1996, due
primarily to the increase in loan originations and purchases and sales in 1997.
Gain on sale of loans increased to $51.5 million for the nine months ended
September 30, 1997, from $3.5 million for the nine months ended September 30,
1996, due to the increase in loan sales in 1997.

The Company sold $1.0 billion in loans for the nine month period ended September
30, 1997, of which $735.6 million, or 73.5%, were sold through loan
securitizations and the remainder represented whole loan sales.

                                       14
<PAGE>
 
The components of the gain on sale of loans are illustrated in the following
table (dollars in thousands):

<TABLE>
<CAPTION>
                                                     Nine Months Ended September 30,
                                                          1997              1996
                                                    ----------------   --------------
<S>                                                 <C>                <C>
Gain from whole loan sale transactions and
   securitizations, net                                 $ 62,167           $ 4,783

Unrealized gain on held-for-trading securities             5,535                --
Provision for losses                                      (2,130)             (100)
Non-refundable loan fees                                  15,266             1,665
Premiums paid                                            (12,368)             (815)
Origination costs                                        (16,966)           (2,045)
                                                        --------           -------

Gain on sale of loans                                   $ 51,504           $ 3,488
                                                        ========           =======
</TABLE>

Whole loan sales increased to $264.7 million for the nine months ended September
30, 1997, from $108.2 million for the corresponding period in 1996.  This
increase is the result of the increase in loan originations and purchases.

Interest income increased to $13.7 million for the nine months ended September
30, 1997, from $847,000 for the same period in 1996, primarily due to increased
interest income from loans held for sale. Interest income is earned on loans
held in inventory for sale. Such interest income accrues during periods when
loans are accumulated for future sales, and increases as loan originations and
purchases increase. The increase in interest income for the nine months ended
September 30, 1997 is the result of a higher average inventory of loans held for
sale compared to the corresponding period in 1996. The average inventory of
loans held for sale for the nine months ended September 30, 1997, based on
quarter-end balances, was $167.9 million, compared to $26.1 million for the
corresponding period in 1996.

Servicing income increased to $3.0 million for the nine months ended September
30, 1997, from $10,000 for the nine months ended September 30,1996, as a result
of the increase in securitizations, pursuant to which the Company retains
ownership of the servicing rights.  Servicing income reflects servicing fees
received on loans sold or securitized by the Company, as well as income
recognized on residual cash flows from securitizations.  The increase in
servicing income for the nine months ended September 30, 1997 is due to the fact
that the Company securitized $735.6 million in loans and retained the servicing
rights, while the Company sold substantially all of its loans through whole loan
sale transactions on a servicing-released basis in 1996.

Total expenses increased to $43.2 million for the nine months ended September
30, 1997, from $5.2 million for the nine months ended September 30, 1996.
Interest expense increased due to the higher level of loan inventory and
corresponding warehouse borrowing. All other expense components increased from
1996 to 1997 due primarily to (1) primarily due to higher loan origination
volume in the nine months ended September 30, 1997 compared to the same period
in 1996; (2) an increase in staffing from 178 employees at September 30, 1996 to
885 employees at September 30, 1997; and (3) the addition of 27

                                       15
<PAGE>
 
wholesale sales offices and 54 retail sales offices from September 30,
1996 to September 30, 1997.

Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996

The Company originated and purchased $574.0 million in loans in the three months
ended September 30, 1997, compared to $123.4 million for the three months ended
September 30, 1996. Loans originated and purchased through the Company's
Wholesale Division were $358.6 million, or 62.5%, of total originations and
purchases for the three months ended September 30, 1997. Loans originated
through the Company's Retail Division were $179.5 million, or 31.3%, of total
originations and purchases for the three month period. Loans acquired through
bulk purchases were $35.9 million, or 6.2%, of total originations and purchases
for the three months ended September 30, 1997. Loans originated and purchased
through the Wholesale and Retail Divisions for the three months ended September
30, 1996 totaled $104.4 million, or 84.6%, and $19.0 million, or 15.4%,
respectively, of total originations and purchases for such period. There were no
bulk purchases of loans in the quarter ended September 30, 1996.

Total revenues for the three months ended September 30, 1997 increased to $32.5
million, from $3.2 million for the three months ended September 30, 1996, due
primarily to the increase in loan originations and purchases and sales in 1997.
Gain on sale of loans increased to $24.4 million for the three months ended
September 30, 1997, from $2.7 million for the three months ended September 30,
1996, due to the increase in loan sales in 1997.

The Company sold $509.0 million in loans during the three month period ended
September 30, 1997, of which $404.3 million, or 79.4%, were sold through loan
securizations and the remainder represented whole loan sales.  Loans sold
through securitization for the three months ended September 30, 1997 include
$63.8 million in loans that were repurchased on an arms-length basis from a
whole loan sale investor and immediately securitized.  These repurchased loans
are not included in loan originations and purchases for the third quarter.  The
components of the gain on sale of loans are illustrated in the following table
(dollars in thousands):

<TABLE>
<CAPTION>
                                                      Three Months Ended September 30,
                                                          1997              1996
                                                    ----------------   ---------------
<S>                                                 <C>                <C>
Gain from whole loan sale transactions and
   securitizations, net                                 $29,556           $ 3,749

Unrealized gain on held-for-trading securities            1,687                --
Provision for losses                                       (745)              (80)
Non-refundable loan fees                                  6,907             1,106
Premiums paid                                            (6,311)             (739)
Origination costs                                        (6,700)           (1,378)
                                                        -------           -------

Gain on sale of loans                                   $24,394           $ 2,658
                                                        =======           =======
</TABLE>

                                       16
<PAGE>
 
Whole loan sales increased to $104.7 million for the three months ended
September 30, 1997, from $79.4 million for the corresponding period in 1996.
This increase is the result of an increase in loan originations and purchases
for the same period.

Interest income increased to $6.3 million for the three months ended September
30, 1997, from $560,000 for the same period in 1996, primarily due to increased
interest income from loans held for sale.  Interest income is earned on loans
held in inventory for sale. Such interest income accrues during periods when
loans are accumulated for future sales, and increases as loan originations and
purchases increase. The increase in interest income for the three months ended
September 30, 1997 is the result of a higher average inventory of loans held for
sale compared to the corresponding period in 1996.

Servicing income increased to $1.8 million for the three months ended September
30, 1997, from $10,000 for the three months ended September 30, 1996.  Servicing
income reflects servicing fees received on loans sold or securitized by the
Company on which the Company has retained ownership of the servicing rights, as
well as income recognized on residual cash flows from securitizations.  The
increase in servicing income for the three months ended September 30, 1997 is
due to the fact that, as of September 30, 1997, the Company had securitized
$735.6 million in loans and retained the servicing rights, while the Company
sold substantially all of its loans through whole loan sale transactions on a
servicing-released basis in 1996.

Total expenses increased to $20.4 million for the three months ended September
30, 1997, from $2.7 million for the three months ended September 30, 1996.
Interest expense increased due to the higher level of loan inventory and
corresponding warehouse borrowing, while all other expense components increased
primarily due to the increase in sales offices and staffing to support the
increased loan originations and purchases in the three months ended September
30, 1997, compared to the same period in 1996.

Liquidity and Capital Resources

The Company requires access to short-term warehouse and aggregation credit
facilities in order to fund loan originations and purchases pending the pooling
and sale of such loans.  As of September 30, 1997, the Company had a $245.0
million warehouse line of credit led by First Bank National Association which
expires in May 1998 and bears interest at a rate equal to the one month LIBOR
plus 1.25%. At September 30, 1997, the balance outstanding under the warehouse
line of credit was $191.1 million.  As of September 30, 1997, the Company also
had a $335.0 million aggregation facility with Salomon Brothers, which is
subject to renewal by Salomon on  a monthly basis and bears interest at a rate
generally equal to the one month LIBOR plus 1.25%. At September 30, 1997, the
balance outstanding under the aggregation facility was $99.3 million.  The
Company utilizes the First Bank warehouse line to finance the actual funding of
its loan originations and purchases. After loans are funded by the Company
utilizing the First Bank warehouse line and all loan documentation is complete,
the loans are generally transferred to the Salomon aggregation facility.  The
aggregation facility is paid down with the proceeds of loan sales and
securitizations.  The Company expects to continue to expand its credit
facilities to finance its increasing levels of loan production.

                                       17
<PAGE>
 
The Company has residual financing arrangements with the lead underwriters of
its securitizations, pursuant to which such lead underwriters provide financing
of the Company's residual interests in securitizations.  The amount of residual
financing provided upon each securitization is determined pursuant to formulas
set forth in the respective agreements and is generally subject to repayment as
a result of changes in the formula used by the lead underwriter to determine the
market value of the residual interest.  The facilities bear interest at a rate
based on the one month LIBOR.  The Company intends to add new credit facilities,
as well as expand these credit facilities, in order to finance future
securitization transactions.  At September 30, 1997, the balance outstanding
under these facilities was $43.4 million.

The Company's business requires substantial cash to support its operating
activities and growth plans.  The Company's growing negative cash flow position
is primarily a function of its securitization strategy and rapid growth.  The
Company records a residual interest in securitization and recognizes a gain on
sale when it effects a securitization, but only receives the cash representing
such gain over the life of the loans securitized.  In order to support its loan
origination, purchase and securitization programs, the Company is required to
make significant cash investments that include the funding of: (1) fees paid to
brokers and correspondents in connecting with generating loans through wholesale
and correspondent lending activities; (2) fees and expenses incurred in
connection with the securitization and sale of loans including over-
collateralization requirements for securitization; (3) commissions paid to sales
employees to originate loans; (4) the difference between the amount funded per
loan and the amount advanced under the current warehouse facility; and (5)
income tax payments arising from the recognition of gain on sale of loans.  The
Company also requires cash to fund ongoing operating and administrative
expenses, including sub-servicing expenses incurred in the servicing of the
Company's loans, capital expenditures and debt service.  The Company's sources
of operating cash flow include (1) the premium advance component of the Salomon
aggregation facility; (2) premiums obtained in whole loan sales; (3) mortgage
origination income and fees; (4) interest income on loans held for sale; (5)
excess cash flow from securitization trusts; and (6) cash servicing income.  As
a result of its strategy to significantly grow its loan origination, purchase
and securitization programs, the Company expects that its operating uses of cash
will substantially exceed its operating sources of cash.  This gap will continue
to increase to the extent that the Company's securitization volumes increase,
whether due to increased volumes of loan production or as a result of a
continued shift towards securitization in its loan sales mix.  However, the
Company believes that its cash flow profile will improve over time as its rate
of loan production growth moderates and the balance of its residual interests
and the size of its servicing portfolio increases.

The Company has a discretionary, non-revolving line of credit of $2.5 million
with an affiliate of First Bank secured by the Company's furniture and
equipment. Advances under this facility are made periodically at the discretion
of the lender, and bear interest at a fixed rate established at the time of each
advance. As of September 30, 1997, the balance outstanding under this facility
was $2.0 million, and the weighted-average interest rate was 9.0%.

                                       18
<PAGE>
 
In March 1997, the Company established a $2.5 million unsecured line of credit
with First Bank for working capital purposes. In June 1997, the line was
increased to $4.0 million. As of September 30, 1997, the balance outstanding was
zero.

In October 1997, the Company established at $2.2 million line of credit with GE
Capital to finance furniture and equipment.  As of September 30, 1997, there
were no advances under this facility.

The Company's business requires substantial cash to support its operating
activities and growth plans.  Securitizations of the Company's loans, as well as
continued growth in loan production volume, create negative operating cash flow
primarily as a result of (1) the difference between the cash required to fund
loans and the financing received under the warehouse line of credit;; and (2)
the Company's securitization strategy, pursuant to which cash flows are received
over the life of the loans securitized.

In July 1997, the Company completed its initial public offering, raising an
aggregate of $31.0 million, net of offering expenses. The Company believes that
its current liquidity, credit facilities and capital resources are adequate to
support its anticipated operations for the foreseeable future.

                                       19
<PAGE>
 
PART II - OTHER INFORMATION

Item 1.      Legal Proceedings

             The Company occasionally becomes involved in litigation arising in
             the normal course of business. Management believes that any
             liability with respect to such legal actions, individually or in
             the aggregate, will not have a material adverse effect on the
             Company's financial position or results of operations.

Item 2.      Change in Securities and Use of Proceeds

             None.

Item 3.      Defaults Upon Senior Securities

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

             None.

Item 5.      Other Information

             None.

Item 6. (a)  Exhibits required by Item 601 of Regulation S-K

             See "Exhibit Index."

        (b)  Reports on Form 8-K

             None.

                                       20
<PAGE>
 
                                   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 hereunto duly authorized.


                                    NEW CENTURY FINANCIAL CORPORATION



DATE: November 13, 1997             By:  /s/ Brad A. Morrice
                                        -------------------
                                        Brad A. Morrice
                                        President


DATE: November 13, 1997             By:  /s/ Edward F. Gotschall
                                        -----------------------
                                        Edward F. Gotschall
                                        C.O.O. - Finance

                                       21
<PAGE>
 
                                 EXHIBIT INDEX

<TABLE> 
<CAPTION> 
Exhibit        Description of                                      Sequentially
Number            Exhibit                                          Numbered Page
------         --------------                                      -------------
<C>            <S>                                                 <C> 
*   3.1        First Amended and Restated Certificate of 
               Incorporation of the Company

*   3.2        First Amended and Restated Bylaws of the Company

** 4.1         Specimen Stock Certificate

10.1           Second Amended and Restated Credit Agreement 
               between the Company and First Bank National
               Association, dated July 31, 1997

10.2           Agreement to Add Lender between the Company,
               First Bank National Association and First Union
               National Bank, dated August 27, 1997

10.3           Agreement to Add Lender between the Company,
               First Bank National Association and Residential
               Funding Corporation, dated September 18, 1997

10.4           Agreement to Add Lender between the Company,
               First Bank National Association and Bank One,
               Texas, N.A., dated September 25, 1997

11.1           Statement re Computation of Per Share Earnings

27.1           Financial Data Schedule
</TABLE> 

*  Incorporated by reference from Amendment No. 1 to the Registration
   Statement on Form S-1 of the Company as filed with the SEC on June 2, 1997.

** Incorporated by reference from Amendment No. 2 to the Registration Statement
   on Form S-1 of the Company as filed with the SEC on June 18, 1997.

                                       22