<PAGE>   1
                       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

                         Commission file number 0-18001


                              THE PRESLEY COMPANIES

             (Exact name of registrant as specified in its charter)


            Delaware                                        33-0475923
   (State or jurisdiction of                             (I.R.S. Employer
  incorporation or organization)                         Identification No.)

         19 Corporate Plaza                                     92660
      Newport Beach, California                               (Zip Code)
(Address of principal executive offices)

                                 (714) 640-6400
              (Registrant's telephone number, including area code)

                                 Not Applicable
              (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 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

          YES    X                                 NO
               -----                                   -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
                                                              Outstanding at
Class of Common Stock                                       September 30, 1997
---------------------                                       -------------------
<S>                                                                <C>       
Series A, par value $.01                                            17,838,535
Series B, restricted voting convertible, par value $.01             34,357,143
</TABLE>


--------------------------------------------------------------------------------



<PAGE>   2



                              THE PRESLEY COMPANIES

                                      INDEX

<TABLE>
<CAPTION>

                                                                                                           Page No.

<S>                                                                                                        <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements:
              Consolidated Balance Sheets - September 30, 1997 and
                  December 31, 1996...........................................................................3

              Consolidated Statements of Operations - Three and Nine Months Ended
                  September 30, 1997 and 1996.................................................................4

              Consolidated Statement of Stockholders' Equity - Nine Months
                  Ended September 30, 1997....................................................................5

              Consolidated Statements of Cash Flows - Nine Months Ended
                  September 30, 1997 and 1996.................................................................6

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

Item 2.  Management's Discussion and Analysis of  Financial Condition
                  and Results of Operations..................................................................10


PART II.  OTHER INFORMATION..................................................................................17

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


                                        2

<PAGE>   3




                              THE PRESLEY COMPANIES

                           CONSOLIDATED BALANCE SHEETS
         (IN THOUSANDS EXCEPT NUMBER OF SHARES AND PAR VALUE PER SHARE)


<TABLE>
<CAPTION>

                                                                          September 30,           December 31,
                                                                              1997                    1996
                                                                          -------------           ------------
                                                                           (unaudited)
                                                      ASSETS
<S>                                                                              <C>                    <C>  
Cash and cash equivalents                                                     $  5,406               $  4,550
Receivables                                                                      5,207                  4,225
Real estate inventories - Note 2                                               243,110                304,126
Property and equipment, less accumulated
  depreciation of $2,125 and $1,432 at September 30,
  1997 and December 31, 1996, respectively                                       3,834                  3,047
Deferred loan costs                                                              4,199                  4,347
Other assets                                                                     6,546                 11,320
                                                                              --------               --------
                                                                              $268,302               $331,615
                                                                              ========               ========

                                       LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable                                                             $  10,518               $ 18,428
Accrued expenses                                                                14,892                 20,450
Notes payable                                                                   50,907                 18,524
12 1/2% Senior Notes due 2001 - Note 3                                         190,000                190,000
                                                                              --------               --------
                                                                               266,317                247,402
                                                                              --------               --------
Stockholders' equity
  Common stock:
      Series A common stock, par value $.01 per share; 100,000,000
         shares authorized; 17,838,535 issued and outstanding at 
         September 30, 1997 and December 31, 1996, respectively                    178                    178

      Series B restricted voting convertible common stock,
         par value $.01 per share; 50,000,000 shares authorized; 
         34,357,143 shares issued and outstanding at September
         30, 1997 and December 31, 1996, respectively                              344                    344

  Additional paid-in capital                                                   114,599                114,599

  Accumulated deficit from January 1, 1994 - Note 1                           (113,136)               (30,908)
                                                                              --------               --------
                                                                                 1,985                 84,213
                                                                              --------               --------
                                                                              $268,302               $331,615
                                                                              ========               ========
</TABLE>




                                        3

<PAGE>   4



                              THE PRESLEY COMPANIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands except per common share amounts)
                                   (unaudited)




<TABLE>
<CAPTION>

                                                               Three Months Ended                  Nine Months Ended
                                                                  September 30,                       September 30,
                                                             -----------------------            -----------------------
                                                               1997           1996                1997           1996
                                                             --------       --------            --------       --------
<S>                                                          <C>            <C>                 <C>            <C>     
Sales
  Homes                                                      $ 67,583       $ 79,547            $223,234       $221,564
  Lots, land and other                                            766              3              10,476          1,276
                                                             --------       --------            --------       --------
                                                               68,349         79,550             233,710        222,840
                                                             --------       --------            --------       --------
Operating costs
   Cost of sales - homes                                      (59,737)       (69,904)           (200,679)      (195,755)
   Cost of sales - lots, land and other                          (913)          (265)             (9,983)        (1,496)
   Impairment loss on real estate assets -
      Note 2                                                       --             --             (74,000)            --
   Sales and marketing                                         (5,191)        (5,609)            (15,826)       (16,292)
   General and administrative                                  (3,686)        (3,467)            (12,047)       (10,621)
                                                             --------       --------            --------       --------
                                                              (69,527)       (79,245)           (312,535)      (224,164)
                                                             --------       --------            --------       --------

Operating income (loss)                                        (1,178)           305             (78,825)        (1,324)

Interest expense, net of amounts capitalized                   (2,237)          (387)             (5,001)        (1,666)

Other income (expense), net                                       215            765               1,598          1,719
                                                             --------       --------            --------       --------

Net income (loss)                                            $ (3,200)      $    683            $(82,228)      $ (1,271)
                                                             ========       ========            ========       ========

Net income (loss) per common share - Note 1                  $  (0.06)      $   0.01            $  (1.58)      $  (0.02)
                                                             ========       ========            ========       ========

</TABLE>







                                        4

<PAGE>   5

                              THE PRESLEY COMPANIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                      NINE MONTHS ENDED SEPTEMBER 30, 1997
                                 (in thousands)
                                   (unaudited)





<TABLE>
<CAPTION>

                                                                                                    
                                                    Common Stock                                   
                                   ------------------------------------------                      Accumulated
                                        Series A                 Series B           Additional     Deficit from  
                                   ------------------       -----------------        Paid-In        January 1,
                                   Shares      Amount       Shares     Amount        Capital           1994            Total
                                   ------      ------       ------     ------      ------------    ------------       --------

<S>                               <C>           <C>        <C>          <C>        <C>                <C>             <C>    
Balance - December 31, 1996        17,839        $178       34,357       $344       $114,599           $(30,908)       $84,213

Net loss                               --          --           --         --             --            (82,228)       (82,228)

                                   --------------------------------------------------------------------------------------------

Balance - September 30, 1997       17,839        $178       34,357       $344       $114,599          $(113,136)       $ 1,985
                                   ============================================================================================

</TABLE>





                                        5

<PAGE>   6

                              THE PRESLEY COMPANIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>

                                                                                      Nine Months Ended
                                                                                         September 30,
                                                                                  --------------------------
                                                                                     1997            1996
                                                                                  ---------       ----------
<S>                                                                               <C>             <C>       
OPERATING ACTIVITIES
  Net loss                                                                        $ (82,228)       $ (1,271)
  Adjustments to reconcile net loss to net
     cash used in operating activities
        Depreciation and amortization                                                   546             449
        Impairment loss on real estate assets                                        74,000              --
        Net changes in operating assets and liabilities:
           Other receivables                                                         (1,776)         (2,350)
           Real estate inventories                                                  (12,984)         (4,355)
           Deferred loan costs                                                          148             764
           Other assets                                                               4,774            (789)
           Accounts payable                                                          (7,910)          1,014
           Accrued expenses                                                          (5,558)         (6,606)
                                                                                  ---------        --------

   Net cash used in operating activities                                            (30,988)        (13,144)
                                                                                  ---------        --------

INVESTING ACTIVITIES
  Principal payments on notes receivable                                                794             340
  Property and equipment, net                                                        (1,333)           (736)
                                                                                  ---------        --------
  Net cash used in investing activities                                                (539)           (396)
                                                                                  ---------        --------

FINANCING ACTIVITIES
  Proceeds from borrowing on notes payable                                          115,418          84,602
  Principal payments on notes payable                                               (83,035)        (72,071)
                                                                                   --------        --------

  Net cash provided by financing activities                                          32,383          12,531
                                                                                  ---------        --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                    856          (1,009)

CASH AND CASH EQUIVALENTS - beginning of period                                       4,550           4,217
                                                                                  ---------        --------

CASH AND CASH EQUIVALENTS - end of period                                         $   5,406        $  3,208
                                                                                  =========        ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the period for interest, net of amounts capitalized            $  10,395        $  7,603
                                                                                  =========        ========
  Cash paid during the period for income taxes                                    $      --        $     --
                                                                                  =========        ========

</TABLE>




                                        6

<PAGE>   7



                              THE PRESLEY COMPANIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and in accordance with the rules and regulations of the
Securities and Exchange Commission. Effective as of January 1, 1994, the Company
completed a capital restructuring and quasi-reorganization. The
quasi-reorganization resulted in the adjustment of assets and liabilities to
estimated fair values and the elimination of an accumulated deficit effective
January 1, 1994. The consolidated financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The consolidated financial statements
included herein should be read in conjunction with the Company's Annual Report
on Form 10-K for the year ended December 31, 1996.

The interim consolidated financial statements have been prepared in accordance
with the Company's customary accounting practices. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a presentation in accordance with generally accepted accounting principles
have been included. Operating results for the three and nine months ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997.

The consolidated financial statements include the accounts of the Company and
all majority-owned or controlled subsidiaries and joint ventures. All
significant intercompany accounts and transactions have been eliminated.
Investments in unconsolidated joint ventures in which the Company has less than
a controlling interest are accounted for using the equity method. The accounting
policies of the joint ventures are substantially the same as those of the
Company.

The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of the assets and liabilities
as of September 30, 1997 and December 31, 1996 and revenues and expenses for the
periods presented. Accordingly, actual results inevitably will differ from those
estimates in the near-term and such differences may be material to the Company's
financial statements.

Net income (loss) per common share for the three and nine months ended September
30, 1997 and 1996 is based on 52,195,678 of Series A and Series B common stock
outstanding.








                                        7

<PAGE>   8



                              THE PRESLEY COMPANIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                   (CONTINUED)




NOTE 2 - IMPAIRMENT OF REAL ESTATE ASSETS

In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("Statement No. 121"), which requires impairment
losses to be recorded on assets to be held and used by the Company when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets (excluding interest) are less than the carrying
amount of the assets. Statement No. 121 also requires that long-lived assets
that are held for disposal be reported at the lower of the assets' carrying
amount or fair value less cost of disposal. Under this pronouncement, when an
impairment loss is required for assets to be held and used by the Company, the
related assets are adjusted to their estimated fair value which becomes the new
cost basis of the respective asset. Fair value represents the amount at which an
asset could be bought or sold in a current transaction between willing parties,
that is, other than a forced or liquidation sale. The estimation process
involved in determining if assets have been impaired and in the determination of
fair value is inherently uncertain since it requires estimates of current market
yields as well as future events and conditions over a period of many years. Such
future events and conditions include economic and market conditions during the
life of the related project, as well as the availability and cost of suitable
financing to fund development and construction activities. The realization of
the Company's real estate projects is dependent upon future uncertain events and
conditions and, accordingly, the actual timing and amounts realized by the
Company may be materially different from the estimated fair values as described
herein.

The loss for the nine months ended September 30, 1997 includes a non-cash charge
of $74,000,000 as a result of the recognition of impairment losses on certain of
the Company's real estate assets in accordance with Statement No. 121. The fair
values utilized to calculate the impairment losses were estimated based upon
discounted expected future cash flows. The impairment losses are related to
three of the Company's weak performing master-planned communities. The
impairment losses related to two communities located in the Inland Empire area
of Southern California arose primarily due to declines in sales prices resulting
from weak economic conditions and competitive pressures in that area of Southern
California. The impairment losses related to a community located in Contra Costa
County in the East San Francisco Bay area of Northern California are primarily
attributable to a deterioration in value of the non-residential parcels of the
project which are now held for sale and to lower than expected cash flow
relating to one high end residential product in this community.









                                        8

<PAGE>   9



                              THE PRESLEY COMPANIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                   (CONTINUED)




NOTE 3 - SENIOR NOTES

In accordance with the bond indenture agreement governing the Company's Senior
Notes, which are due in 2001, because the Company's Consolidated Tangible Net
Worth was less than $60,000,000 as of September 30, 1997, the Company will,
effective on December 4, 1997, be required to make an offer to purchase
$20,000,000 of the Senior Notes at par plus accrued interest, less the face
amount of Senior Notes acquired by the Company after September 30, 1997. Each
six months thereafter, until such time as the Company's Consolidated Tangible
Net Worth is $60,000,000 or more at the end of a fiscal quarter, the Company
would be required to make similar offers to purchase Senior Notes. At September
30, 1997, the Company's Consolidated Tangible Net Worth was ($2,214,000). The
Company's management is presently in discussions with representatives of the
holders of the Senior Notes with respect to modifying this repurchase provision
of the bond indenture agreement. Any such change in the terms or conditions of
the bond indenture agreement requires the affirmative vote of at least a
majority in principal amount of the Senior Notes then outstanding. No assurances
can be given that any such change will be made.


NOTE 4 - WITHDRAWAL OF REQUEST FOR REGISTRATION OF ADDITIONAL SERIES A
COMMON STOCK

In accordance with the Registration Rights Agreement, dated as of May 20, 1994,
among the Company and the holders of the Company's Series B Common Stock, the
holders had previously requested registration under the Securities Act of 1933
of 18,145,467 shares of the Company's Series A Common Stock into which the
Series B Common Stock may be converted. That request for registration is no
longer in effect, and, accordingly, the Company will not file a registration
statement with the Securities and Exchange Commission at this time.





                                        9

<PAGE>   10



                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS



The following discussion of results of operations and financial condition should
be read in conjunction with the consolidated financial statements and notes
thereto included in Item 1, as well as the information presented in the Annual
Report on Form 10-K for the year ended December 31, 1996.


FINANCIAL CONDITION AND LIQUIDITY

The Company provides for its ongoing cash requirements from internally generated
funds from the sales of real estate and from outside borrowings. The Company
currently maintains the following major credit facilities, which are summarized
below: 12 1/2% Senior Notes (the "Senior Notes"); a secured revolving lending
facility (the "Working Capital Facility"); and a revolving line of credit
relating to Carmel Mountain Ranch, its wholly-owned joint venture partnership
(the "Joint Venture Facility").


SENIOR NOTES

The Company filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 for the sale of $200,000,000 of Senior Notes which became
effective on June 23, 1994. The offering closed on June 29, 1994 and was fully
subscribed and issued. The following discussion of the Senior Notes should be
read in conjunction with the Registration Statement as filed with the Securities
and Exchange Commission.

The 12 1/2% Senior Notes due 2001 (the "Senior Notes") were offered by The
Presley Companies, a Delaware corporation ("Delaware Presley"), and are
unconditionally guaranteed on a senior basis by Presley Homes (formerly The
Presley Companies), a California corporation and a wholly-owned subsidiary of
Delaware Presley ("California Presley"). However, California Presley has granted
liens on substantially all of its assets as security for its obligations under
the Working Capital Facility. Because the California Presley guarantee is not
secured, holders of the Senior Notes are effectively junior to borrowings under
the Working Capital Facility with respect to such assets. Delaware Presley and
its consolidated subsidiaries are referred to collectively herein as "Presley"
or the "Company". Interest on the Senior Notes is payable on January 1 and July
1 of each year.

Except as set forth in the Indenture Agreement (the "Indenture"), the Senior
Notes are not redeemable by Presley prior to July 1, 1998. Thereafter, the
Senior Notes will be redeemable at the option of Delaware Presley, in whole or
in part, at the redemption prices set forth in the Indenture.

                                       10

<PAGE>   11


                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)


The Senior Notes are senior obligations of Presley and rank pari passu in right
of payment to all existing and future unsecured indebtedness of Presley, and
senior in right of payment to all future indebtedness of the Company which by
its terms is subordinated to the Senior Notes.

Upon a Change of Control as described in the Indenture, Presley must offer to
repurchase Senior Notes at a price equal to 101% of the principal amount plus
accrued and unpaid interest, if any, to the date of repurchase.

In accordance with the Indenture, because the Company's Consolidated Tangible
Net Worth was less than $60,000,000 as of September 30, 1997, the Company will,
effective on December 4, 1997, be required to make an offer to purchase
$20,000,000 of the Senior Notes at a purchase price equal to 100% of the
principal amount plus accrued interest, less the face amount of Senior Notes
acquired by the Company after September 30, 1997. Each six months thereafter,
until such time as the Company's Consolidated Tangible Net Worth is $60,000,000
or more at the end of a fiscal quarter, the Company would be required to make
similar offers to purchase Senior Notes. At September 30, 1997, the Company's
Consolidated Tangible Net Worth was ($2,214,000). The Company's management is
presently in discussions with representatives of the holders of the Senior Notes
with respect to modifying this repurchase provision of the Indenture. Any such
change in the terms or conditions of the bond indenture agreement requires the
affirmative vote of at least a majority in principal amount of the Senior Notes
outstanding. No assurances can be given that any such change will be made.

The Indenture governing the Senior Notes restricts, among other things: (i) the
payment of dividends on and redemptions of capital stock by Presley, (ii) the
incurrence of indebtedness by Presley or the issuance of preferred stock by
Delaware Presley's subsidiaries, (iii) the creation of certain liens, (iv)
Delaware Presley's ability to consolidate or merge with or into, or to transfer
all or substantially all of its assets to, another person, and (v) transactions
with affiliates. These restrictions are subject to a number of important
qualifications and exceptions.


WORKING CAPITAL FACILITY

The collateral for the loans provided by the Working Capital Facility includes
substantially all real estate and other assets of the Company (excluding assets
of partnerships and the portion of the partnership interests in Carmel Mountain
Ranch partnership which are currently pledged to another lender). The borrowing
base is calculated based on specified percentages of book values of real estate
assets. The borrowing base at September 30, 1997 was approximately $157,000,000;
however, the maximum loan under the Working Capital Facility is limited to
$72,000,000. The principal outstanding under the Working Capital Facility at
September 30, 1997 was $39,000,000.


                                       11

<PAGE>   12


                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)



The Working Capital Facility had a termination date of May 20, 1997, with two
one-year extensions at the Company's option. On April 18, 1997, the Company
exercised its option to extend the termination date of the Working Capital
Facility for one period of twelve months from May 20, 1997 to May 20, 1998. Upon
the extension of the termination date, the Company paid an extension fee of 1%
of the Working Capital Facility commitment amount (in addition to the loan fee
described below). The Company still holds the option to extend the termination
date for an additional twelve (12) months. If the Company elects to exercise
this option in the future, an additional extension fee of 1% of the Working
Capital Facility commitment amount (in addition to the loan fee described below)
would be incurred.

Pursuant to the terms of the Working Capital Facility, outstanding advances bear
interest at the prime rate plus 2%. An alternate option provides for interest
based on a specified overseas base rate plus 4.44%, but not less than the prime
rate option in effect at December 31, 1993 (8.00%). In addition, the Company
pays a loan fee of 1% per annum, payable quarterly, on the total Working Capital
Facility commitment amount.

The Working Capital Facility requires certain minimum cash flow and pre-tax and
pre-interest tests. The Working Capital Facility also provides for negative
covenants which, among other things, place limitations on the payment of cash
dividends, merger transactions, transactions with affiliates, the incurrence of
additional debt and the acquisition of new land as described in the following
paragraph.

Under the terms of the Working Capital Facility, the Company may acquire new
improved land for development of housing units of no more than 300 lots in any
one location without approval from the lenders if certain conditions are
satisfied. The Company may, however, acquire any new raw land or improved land
provided the Company has obtained the prior written approval of lenders holding
two-thirds of the obligations under the Working Capital Facility.


JOINT VENTURE FACILITY

Carmel Mountain Ranch ("CMR"), the partnership that owns the Carmel Mountain
Ranch master-planned community, is a California general partnership and is 100%
owned by The Presley Companies and its wholly-owned subsidiary. Effective in
March 1995, the development and construction of the project has been financed
through a revolving line of credit, the terms of which have been amended from
time to time. Currently, the revolving line of credit consists of several
components relating to production units, models and residential lots. At
September 30, 1997, the revolving line of credit had an outstanding balance of
$6,397,000. Availability under the line is subject to a number of limitations,
but in any case cannot exceed $10,000,000. Interest on the outstanding balance
is at prime plus 1.00% and the loan matures on March 17, 1998.



                                       12

<PAGE>   13


                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)



SELLER FINANCING

Another potential source of financing available to the Company is
seller-provided financing for land acquired by the Company. At September 30,
1997, the Company had notes outstanding related to land acquisitions for which
seller financing was provided in the amount of $5,510,000. During the few years
prior to this year, the Company had not used this form of financing
significantly.


ASSESSMENT DISTRICT BONDS

In some locations in which the Company develops its projects, assessment
district bonds are issued by municipalities to finance major infrastructure
improvements and fees. Such financing has been an important part of financing
master-planned communities due to the long-term nature of the financing,
favorable interest rates when compared to the Company's other sources of funds
and the fact that the bonds are sold, administered and collected by the relevant
government entity. As a landowner benefited by the improvements, the Company is
responsible for the assessments on its land. When Presley's homes or other
properties are sold, the assessments are either prepaid or the buyers assume the
responsibility for the related assessments.


                             RESULTS OF OPERATIONS

OVERVIEW AND RECENT RESULTS

Homes sold, closed and in backlog as of and for the periods presented are as
follows:

<TABLE>
<CAPTION>
                                                                          As of and for                As of and for
                                                                         the Three Months             the Nine Months
                                                                        Ended September 30,          Ended September 30,
                                                                        -------------------          -------------------
                                                                        1997          1996           1997          1996
                                                                        ----          ----           ----          ----
<S>                                                                      <C>            <C>          <C>          <C>  
    Number of homes sold                                                 419            429          1,296        1,498

    Number of homes closed                                               357            467          1,186        1,326

    Backlog of homes sold but not closed at end of period                392            488            392          488
</TABLE>


Closings of homes in backlog generally occur within six months of the date
indicated. The dollar amount of backlog of homes sold but not closed as of
September 30, 1997 was $81,258,000, as compared to $91,513,000 as of September
30, 1996 and $65,252,000 as of June 30, 1997. The cancellation rate of buyers
who contracted to buy a home but did not close escrow at the Company's projects
was approximately 22% during 1996 and approximately 19% during the first nine
months of 1997.

                                       13

<PAGE>   14


                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)


The number of homes closed in the third quarter of 1997 was down 24 percent to
357 from 467 in the third quarter of 1996. Net new home orders for the quarter
ended September 30, 1997 decreased 2 percent to 419 units from 429 a year ago.
For the third quarter of 1997, net new orders decreased 2 percent to 419 from
428 units in the second quarter of 1997. The backlog of homes sold as of
September 30, 1997 was 392, down 20 percent from 488 units a year earlier, and
up 19 percent from 330 units at June 30, 1997. The Company's inventory of
completed and unsold homes as of September 30, 1997 has increased by 32 percent
to 135 units from 102 units as of June 30, 1997.

The declines in net new home orders, closings and backlog for the third quarter
are primarily the result of the completion or near completion of certain of the
Company's older master-planned communities and delays in completion of new land
acquisitions, which has resulted in less product available for sale. At
September 30, 1997, the Company had 12 sales locations in its master-planned
communities as compared to 24 sales locations in its master-planned communities
at September 30, 1996.

The Company recently consolidated certain operating units in order to operate
more efficiently. The Company's operating units in the Inland Empire area and
the Orange/Los Angeles area of Southern California were consolidated into one
operating unit based in Newport Beach. The Company's operating units in the San
Francisco Bay Area and the Sacramento Area of Northern California were
consolidated into one operating unit based in the East Bay area of San
Francisco. In addition, the Company's previously announced entry into the
Colorado market place was postponed to allow the Company to focus its attention
on the existing market places in which it currently operates.

In general, housing demand is adversely affected by increases in interest and
housing costs. Interest rates, the length of time that assets remain in
inventory, and the proportion of inventory that is financed affect the Company's
interest cost. If the Company is unable to raise sales prices sufficiently to
compensate for higher costs, which has generally been the case recently, or if
mortgage interest rates increase significantly, affecting prospective buyers'
ability to adequately finance home purchases, the Company's sales, gross margins
and net results may be adversely impacted. To a limited extent, the Company
hedges against increases in interest costs by acquiring interest rate protection
that locks in or caps interest rates for limited periods of time for mortgage
financing for prospective homebuyers.


COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 TO THREE MONTHS ENDED
SEPTEMBER 30, 1996

Sales (which represent recorded revenues from closings) for the three months
ended September 30, 1997 were $68.3 million, a decrease of $11.3 million (14.0%)
from sales of $79.6 million for the three months ended September 30, 1996.
Revenue from sales of homes decreased $12.0 million to $67.6 million in the 1997
period from $79.6 million in the 1996 period. This decrease was due primarily to
a decrease in the number of units closed, partially offset by an increase in the
average sales prices of homes to $189,000 in the 1997 period from $170,000 in
the 1996 period, primarily as a result of changes in the mix of product and, to
a lesser extent, some price increases in certain markets. Revenue from lots,
land and other increased $0.8 million to $0.8 million in the 1997 period from a
nominal amount in the 1996 period.

                                       14

<PAGE>   15


                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)


Total operating income (loss), changed from an income of $0.3 million in the
1996 period to a loss of $1.2 million in the 1997 period. The excess of revenue
from sales of homes over the related cost of sales decreased by $1.7 million, to
$7.9 million in the 1997 period from $9.6 million in the 1996 period. These
decreases were primarily due to a decrease in the number of units closed, as
well as increases in house construction costs and other development costs which
could not be entirely recovered from increased sales prices. Sales and marketing
expenses decreased by $0.4 million to $5.2 million in the 1997 period from $5.6
million in the 1996 period primarily as a result of decreased direct sales
expenses related to the decreased sales volume. General and administrative
expenses increased by $0.2 million to $3.7 million in the 1997 period from $3.5
million in the 1996 period, primarily as a result of start-up operations in
Nevada.

Total interest incurred increased $0.1 million (1.2%) from $8.1 million in the
1996 period to $8.2 million in the 1997 period as a result of an increase in
interest rates. Net interest expense increased to $2.2 million in the 1997
period from $0.4 million for the 1996 period. This increase was due primarily to
a reduction in real estate assets which qualify for interest capitalization.

Other (income) expense, net decreased to $0.2 million in the 1997 period from
$0.8 million in the 1996 period primarily as a result of decreased income from
recreational facilities.


COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 TO NINE MONTHS ENDED
SEPTEMBER 30, 1996

Sales (which represent recorded revenues from closings) for the nine months
ended September 30, 1997 were $233.7 million, an increase of $10.9 million
(4.9%), from sales of $222.8 million for the nine months ended September 30,
1996. Revenue from sales of homes increased $1.6 million to $223.2 million in
the 1997 period from $221.6 million in the 1996 period. This increase was due
primarily to an increase in the average sales prices of homes to $188,000 in the
1997 period from $167,000 in the 1996 period, primarily as a result of changes
in the mix of product and, to a lesser extent, some price increases in certain
markets, offset by a reduction in the number of homes closed in the 1997 period
compared to the 1996 period. Revenue from lots, land and other increased $9.2
million to $10.5 million in the 1997 period from $1.3 million in the 1996
period.

Total operating loss, excluding the impairment loss on real estate assets,
increased from a loss of $1.3 million in the 1996 period to a loss of $4.8
million in the 1997 period. The excess of revenue from sales of homes over the
related cost of sales decreased by $3.3 million, to $22.5 million in the 1997
period from $25.8 million in the 1996 period. These decreases were primarily due
to an increase in average sales prices offset by a decrease in the number of
units closed, as well as increases in house construction costs and other
development costs which could not be entirely recovered from increased sales
prices. Impairment losses on real estate assets amounting to $74.0 million were
recorded in the 1997 period, with no corresponding charge in the comparable
period for 1996. As a result of the impairment losses, gross margins on the
affected projects are expected to be higher in the future. Sales and marketing
expenses decreased from $16.3 million in the 1996 period to $15.8 million in the
1997 period, which is the result

                                       15

<PAGE>   16


                              THE PRESLEY COMPANIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                   (CONTINUED)


of decreased advertising and decreased direct sales expenses related to the
decreased sales volume. General and administrative expenses increased by $1.4
million to $12.0 million in the 1997 period from $10.6 million in the 1996
period, primarily as a result of increased overhead from start-up operations in
Nevada and a charge of approximately $0.7 million for expenses related to the
closing and consolidation of certain operating units.

Total interest incurred increased $0.6 million (2.5%) from $23.7 million in the
1996 period to $24.3 million in the 1997 period as a result of increased
interest rates. Net interest expense increased to $5.0 million in the 1997
period from $1.6 million for the 1996 period. This increase was due primarily to
a reduction in real estate assets which qualify for interest capitalization.
Interest expense will continue to be higher in the future due to a decrease in
real estate assets which qualify for interest capitalization resulting from the
impairment losses described above.

Other (income) expense, net decreased $0.1 million to a net income of $1.6
million in the 1997 period from a net income of $1.7 million in the 1996 period
primarily as a result of decreased income from mortgage operations and
recreation facilities, partially offset by increased income from design
operations.


CASH FLOWS - COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 TO NINE MONTHS 
ENDED SEPTEMBER 30, 1996

Net cash used in operating activities increased from $13.1 million in the 1996
period to $31.0 million in the 1997 period. This change was primarily as a
result of increased land acquisition and construction activity.

Net cash used in investing activities increased by $0.1 million in the 1997
period as compared to the 1996 period primarily as a result of purchases of
fixed assets, partially offset by increased principal collections on notes
receivable.

Net cash provided by financing activities increased by $19.9 million in the 1997
period as compared to the 1996 period as a result of an increase in net
borrowings activity.

                                    * * * * *

Certain statements contained herein that are not historical information contain
forward-looking statements. The forward-looking statements involve risks and
uncertainties and actual results may differ materially from those projected or
implied. Further, certain forward-looking statements are based on assumptions of
future events which may not prove to be accurate. Factors that may impact such
forward-looking statements include, among others, changes in general economic
conditions and in the markets in which the Company competes, changes in interest
rates and competition.

                                       16

<PAGE>   17





                              THE PRESLEY COMPANIES

                           PART II. OTHER INFORMATION


ITEMS 1, 2, 3, 4 AND 5. Not applicable.


ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K


             (A)   EXHIBITS.

             10.1       Third Amendment to Master Credit Agreement, dated as of
                        September 25, 1997, by and between Carmel Mountain
                        Ranch, a California general partnership (Borrower) and
                        Bank One, Arizona, N.A., a national banking association
                        (Bank).

             27         Financial Data Schedule


             (B)   REPORTS ON FORM 8-K.

                        The Company did not file any reports on Form 8-K during
                        the three months ended September 30, 1997.








                                       17

<PAGE>   18



                              THE PRESLEY COMPANIES


                                   SIGNATURES

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



Date: November 13, 1997              By:   /s/  David M. Siegel
                                         --------------------------------------
                                         DAVID M. SIEGEL
                                         Senior Vice President, Chief Financial
                                         Officer and Treasurer (Principal
                                         Financial Officer)



Date: November 13, 1997              By:   /s/  W. Douglass Harris
                                         --------------------------------------
                                         W. DOUGLASS HARRIS
                                         Vice President, Corporate Controller
                                         (Principal Accounting Officer)




                                       18