<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-Q
 
<TABLE>
<S>        <C>
/X/          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                    EXCHANGE ACT OF 1934
 
                                        OR
 
/ /          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                    EXCHANGE ACT OF 1934
</TABLE>
 
For the quarter ended September 30, 1998          Commission file number 0-20526
 
                            ------------------------
 
                             ARCADIA FINANCIAL LTD.
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                            <C>
          MINNESOTA                 41-1664848
(State or other jurisdiction     (I.R.S. Employer
     of incorporation or          Identification
        organization)                 Number)
</TABLE>
 
            7825 WASHINGTON AVENUE SOUTH, MINNEAPOLIS, MN 55439-2435
              (Address of principal executive offices) (Zip Code)
 
       Registrant's telephone number, including area code (612) 942-9880
 
                            ------------------------
 
    Indicate by checkmark 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 ____
 
    The number of shares of the Common Stock of the registrant outstanding as of
October 30, 1998 was 39,166,813.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                                 FORM 10-Q INDEX
                                                                 PAGE

PART I    FINANCIAL INFORMATION                                     
Item 1.   Consolidated Financial Statements                       3
Item 2.   Management's Discussion and Analysis of 
            Financial Condition and Results of Operations        11

PART II   OTHER INFORMATION
Item 1.   Legal Proceedings                                      23
Item 2.   Changes in Securities                                  23
Item 3.   Defaults Upon Senior Securities                        23
Item 4.   Submission of Matters to a Vote of 
            Security Holders                                     23
Item 5.   Other Information                                      23
Item 6.   Exhibits and Reports on Form 8-K                       23

SIGNATURES                                                       26

EXHIBIT INDEX                                                    27

     The financial information for the interim periods presented herein is 
unaudited. In the opinion of management, all adjustments necessary (which are 
of a normal recurring nature) have been included for a fair presentation of 
the results of operations. The results of operations for an interim period 
are not necessarily indicative of the results that may be expected for a full 
year or any other interim period.

                         SAFE HARBOR STATEMENT UNDER THE
                PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

     Certain statements under the caption "Management's Discussion and 
Analysis of Financial Condition and Results of Operations" and elsewhere in 
this Form 10-Q constitute "forward-looking statements" within the meaning of 
the Private Securities Litigation Reform Act of 1995. Such forward-looking 
statements may be identified by the use of terminology such as "may," "will," 
"expect," "anticipate," "estimate," "should," or "continue" or the negative 
thereof or other variations thereon or comparable terminology. Such 
forward-looking statements are subject to certain risks and uncertainties 
that could cause actual results to differ materially from historical results 
or from those results presently anticipated or projected. Such factors 
include, among other things, the following: delinquency and loan loss rates 
which vary from assumptions; modifications to the Company's repossession 
disposition program; accounting and regulatory changes; interest rate 
fluctuations; difficulties or delays in the securitization of automobile 
loans; availability of adequate short- and long-term financing; general 
economic and business conditions; and other matters set forth under the 
caption "Cautionary Statements" in exhibit 99.1 to the Company's June 30, 
1998, Quarterly Report on Form 10-Q filed August 8, 1998.

                                       2


<PAGE>

                             ARCADIA FINANCIAL LTD.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                        (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE  AND PER SHARE AMOUNTS)          SEPTEMBER 30, 1998   DECEMBER 31, 1997
                                                                     ------------------   -----------------
<S>                                                                       <C>                 <C>
                                     ASSETS

Cash and cash equivalents                                                 $  6,328            $ 17,274
Due from securitization trust                                               98,384             107,207
Auto loans held for sale                                                    20,045              49,133
Finance income receivable                                                  345,298             371,985
Restricted cash in spread accounts                                         252,923             250,297
Furniture, fixtures and equipment                                           17,140              17,371
Other assets                                                                30,328              32,483
                                                                          --------            --------
     Total assets                                                         $770,446            $845,750
                                                                          --------            --------
                                                                          --------            --------


                      LIABILITIES AND SHAREHOLDERS' EQUITY

Amounts due under warehouse facilities                                    $ 57,843            $ 30,880
Senior notes                                                               366,403             365,640
Subordinated notes                                                          48,902              50,772
Capital lease obligations                                                    3,735               5,368
Deferred income taxes                                                            -              18,846
Accounts payable and accrued liabilities                                    25,718              26,302
                                                                          --------            --------
     Total liabilities                                                    $502,601            $497,808


Commitments and contingencies

Shareholders' equity:
  Capital stock, $.01 par value, 100,000,000 shares authorized:
    Common stock 39,166,813 and 38,813,735 shares issued
    and outstanding, respectively                                              392                 388
Additional paid-in capital                                                 325,143             322,819
Retained earnings (deficit)                                                (57,690)             24,735
                                                                          --------            --------
     Total shareholders' equity                                            267,845             347,942
                                                                          --------            --------
     Total liabilities and shareholders' equity                           $770,446            $845,750
                                                                          --------            --------
                                                                          --------            --------
</TABLE>


            See notes to unaudited consolidated financial statements.

                                       3

<PAGE>

                             ARCADIA FINANCIAL LTD.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                  SEPTEMBER 30,                     SEPTEMBER 30,
                                                         ---------------------------       -----------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)            1998              1997             1998              1997
                                                         -----------      -----------      -----------      ------------
<S>                                                      <C>              <C>              <C>              <C>
REVENUES:
  Net interest margin                                    $    15,058      $    17,157      $    44,107      $    49,557
  Gain (loss) on sale of loans                                27,280           28,788          (23,967)         (22,640)
  Servicing fee income                                        21,236           17,719           61,086           47,723
                                                         -----------      -----------      -----------      -----------
      Total revenues                                          63,574           63,664           81,226           74,640

EXPENSES:
  Salaries and benefits                                       15,658           16,230           48,778           45,823
  General and administrative and other 
    operating expenses                                        27,695           24,471           95,100           74,446
                                                         -----------      -----------      -----------      -----------
      Total operating expenses                                43,353           40,701          143,878          120,269
  Long-term debt and other interest expense                   12,926           10,400           38,619           28,642
                                                         -----------      -----------      -----------      -----------
      Total expenses                                          56,279           51,101          182,497          148,911
                                                         -----------      -----------      -----------      -----------
  Operating income (loss) before income 
    taxes and extraordinary item                               7,295           12,563         (101,271)         (74,271)
  Income tax expense (benefit)                                     -            4,774          (18,846)         (28,292)
                                                         -----------      -----------      -----------      -----------
  Income (loss) before extraordinary item                      7,295            7,789          (82,425)         (45,979)
  Extraordinary item, net of tax                                   -                -                -          (15,828)
                                                         -----------      -----------      -----------      -----------
      Net income (loss)                                 $      7,295     $      7,789     $    (82,425)     $   (61,807)
                                                         -----------      -----------      -----------      -----------
                                                         -----------      -----------      -----------      -----------

BASIC EARNINGS PER SHARE:
  Net income (loss) per share before 
    extrordinary item                                   $       0.19     $       0.20     $      (2.11)    $      (1.19)
  Extraordinary item per share                                     -                -                -            (0.41)
                                                         -----------      -----------      -----------      -----------
      Net income (loss) per share                       $       0.19     $       0.20     $      (2.11)    $      (1.60)
                                                         -----------      -----------      -----------      -----------
                                                         -----------      -----------      -----------      -----------

DILUTED EARNINGS PER SHARE:
  Net income (loss) per share before 
    extraordinary item                                  $       0.19     $       0.20     $      (2.11)    $      (1.19)
  Extraordinary item per share                                     -                -                -            (0.41)
                                                         -----------      -----------      -----------      -----------
      Net income (loss) per share                       $       0.19     $       0.20     $      (2.11)    $      (1.60)
                                                         -----------      -----------      -----------      -----------
                                                         -----------      -----------      -----------      -----------

Weighted average shares outstanding:
      Basic                                               39,142,050       38,740,078       39,031,668       38,615,060
      Diluted                                             39,279,813       39,231,962       39,031,668       38,615,060
</TABLE>

            See notes to unaudited consolidated financial statements.

                                       4

<PAGE>

                             ARCADIA FINANCIAL LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                         NINE MONTHS ENDED
                                                                                            SEPTEMBER 30,
                                                                                 ----------------------------------
(DOLLARS IN THOUSANDS)                                                               1998                   1997
                                                                                 ------------          ------------
<S>                                                                              <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                                $   (82,425)          $   (61,807)
Adjustments to reconcile net income to net cash used in
  operating activities:
  Depreciation and amortization                                                        8,044                 5,163
  (Increase) decrease in assets:
      Automobile loans held for sale:
        Purchases of automobile loans                                             (1,731,546)           (2,323,464)
        Sales of automobile loans                                                  1,714,710             2,276,335
        Repayments of automobile loans                                                45,925                27,784
      Finance income receivable                                                       26,687                 9,897
      Restricted cash in spread accounts                                              (2,626)              (83,589)
      Due from securitization trusts                                                   8,823                27,646
      Other assets                                                                       340                   350
  Increase (decrease) in liabilities:
      Deferred income taxes                                                          (18,846)              (37,993)
      Accounts payable and accrued liabilities                                          (584)                3,303
                                                                                 -----------           -----------

          Total cash used in operating activities                                    (31,498)             (156,375)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchase of furniture, fixtures and equipment                                     (4,704)               (7,064)
Collections on subordinated certificates                                                 758                 1,187
                                                                                 -----------           -----------

          Total cash used in investing activities                                     (3,946)               (5,877)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Stock                                             1,038                 2,976
Proceeds from borrowings under warehouse facilities                                2,067,182             2,559,245
Repayment of borrowings under warehouse facilities                                (2,040,219)           (2,544,122)
Unsecured subordinated notes, net                                                     (1,870)               (2,395)
Repayments of long-term debt                                                               -              (145,000)
Proceeds from issuance of long term debt                                                   -               300,000
Deferred debt issuance cost                                                                -                (4,870)
Reduction of capital lease obligations                                                (1,633)               (1,919)
                                                                                 -----------           -----------

          Total cash provided by financing activities                                 24,498               163,915
                                                                                 -----------           -----------

Net increase (decrease) in cash and cash equivalents                                 (10,946)                1,663
Cash and cash equivalents at beginning of period                                      17,274                16,057
                                                                                 -----------           -----------

Cash and cash equivalents at end of period                                       $     6,328           $    17,720
                                                                                 -----------           -----------
                                                                                 -----------           -----------

Supplemental disclosures of cash flow information: Non cash activities:
    Additions to capital leases                                                            -           $       132
  Cash paid for:
    Interest                                                                     $    53,628           $    36,669
</TABLE>

            See notes to unaudited consolidated financial statements.

                                       5

<PAGE>

                             ARCADIA FINANCIAL LTD.
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                    FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
                                               ------------------------------------------------------
                                                NUMBER OF   COMMON    ADDITIONAL  RETAINED
                                                 COMMON       PAR       PAID IN   EARNINGS
                                                 SHARES      VALUE      CAPITAL   (DEFICIT)   TOTAL
                                               ----------   ------    ----------  ---------  --------
<S>                                            <C>          <C>       <C>         <C>        <C>
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

BALANCE, DECEMBER 31, 1997                     38,813,735    $388     $322,819    $ 24,735    $347,942
Exercise of options and warrants                  149,323       2          539           -         541
Issuance of Common Stock:
    Benefit plans                                 203,755       2          495           -         497
Amortization of deferred compensation                   -       -        1,290           -       1,290
Net loss                                                -       -            -     (82,425)    (82,425)
                                               ----------    ----     --------    --------    --------
BALANCE, SEPTEMBER 30, 1998                    39,166,813    $392     $325,143    $(57,690)   $267,845
                                               ----------    ----     --------    --------    --------
                                               ----------    ----     --------    --------    --------
</TABLE>

            See notes to unaudited consolidated financial statements.

                                       6

<PAGE>

                             ARCADIA FINANCIAL LTD.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION. The interim financial statements have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission applicable to quarterly reports on Form 10-Q. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although management
believes that the disclosures present fairly the financial position of the
Company and its subsidiaries for the periods presented. These financial
statements should be read in conjunction with the audited consolidated financial
statements and related notes and schedules included in the Company's 1997 Annual
Report on Form 10-K/A filed March 30, 1998.

     The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

     Certain reclassifications have been made to the September 30, 1997 balances
to conform to current period presentation.

     USE OF ESTIMATES

     In conformity with generally accepted accounting principles, management
utilizes assumptions and estimates that affect the reported value of finance
income receivable and the gain on sale of automobile receivables. Such
assumptions include, but are not limited to, estimates of loan prepayments,
defaults, recovery rates and present value discount. The Company uses a
combination of its own historical experience, industry statistics and
expectation of future performance to determine such estimates. The Company's
estimation process is evaluated on a regular basis and modified when deemed
necessary. Modifications to the estimation process may result in changes in
estimates utilized to determine the carrying value of finance income receivable.
Actual results may differ from the Company's estimates due to numerous factors
both within and beyond the control of Company management. Changes in these
factors could require the Company to revise its assumptions concerning the
amount of voluntary prepayments, the frequency and/or severity of defaults and
the recovery rates associated with the disposition of repossessed vehicles. The
range of assumptions, as well as actual performance, are reflective of the risk
characteristics of the loans within specific securitization pools.

                                       7

<PAGE>

                             ARCADIA FINANCIAL LTD.
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998

2.   FINANCE INCOME RECEIVABLE

     The following table sets forth the components of finance income receivable:

<TABLE>
<CAPTION>
                                                                AT                   AT
                                                           SEPTEMBER 30,        DECEMBER 31,
                                                               1998                 1997
                                                           -------------        ------------
     <S>                                                     <C>                  <C>
     (DOLLARS IN THOUSANDS)
     Estimated cash flows on loans sold, net of 
       estimated prepayments                                 $ 908,094            $ 735,557
     Deferred servicing income                                (103,515)             (88,282)
     Reserve for loan losses                                  (413,112)            (235,599)
                                                             ---------            ---------
     Undiscounted cash flows on loans sold, net of 
       estimated prepayments                                   391,467              411,676
     Discount to present value                                 (46,169)             (39,691)
                                                             ---------            ---------
                                                             $ 345,298            $ 371,985
                                                             ---------            ---------
                                                             ---------            ---------
     Reserve for loan losses as a percentage of 
       servicing portfolio                                        8.04 %               4.75 %


     The following represents the roll-forward of the finance income receivable balance:


     (DOLLARS IN THOUSANDS)
     BALANCE, DECEMBER 31, 1997                                                    $ 371,985
     Estimated cash flows on loans sold, net of estimated prepayments                191,333
     Recognition of present value effect of discounted cash flows                     17,007
          Less:
     
     Excess cash flows deposited to spread accounts                                 (120,527)
     Changes in estimates of charge-offs, recovery rates and prepayments            (114,500)
                                                                                   ---------
     BALANCE, SEPTEMBER 30, 1998                                                   $ 345,298
                                                                                   ---------
                                                                                   ---------
</TABLE>

                                       8

<PAGE>

                             ARCADIA FINANCIAL LTD.
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998

3.   RESTRICTED CASH IN SPREAD ACCOUNTS

     The following represents the roll-forward of restricted cash in spread
     accounts:

<TABLE>
<CAPTION>

     <S>                                                     <C>
     (DOLLARS IN THOUSANDS)
     BALANCE, DECEMBER 31, 1997                              $ 250,297
     Excess cash flows deposited to spread accounts            120,527
     Interest earned on spread accounts                         10,695
         Less:
     Spread account recourse reduction amount (1)              (25,000)
     Excess cash flows released to the Company (2)            (103,596)
                                                             ---------
     BALANCE, SEPTEMBER 30, 1998                             $ 252,923
                                                             ---------
                                                             ---------
</TABLE>

(1)  In May 1998, the Company and its provider of asset-backed securities
     insurance entered into an arrangement whereby the Company was allowed to
     receive $25 million of cash from certain spread accounts sooner than it
     would have absent such arrangement. The arrangement may be extended on an
     annual basis upon mutual arrangement by and between the Company and its
     provider of assetbacked securities insurance. The Company pays a monthly
     fee to its provider of asset-backed securities insurance to maintain the
     arrangement. The $25 million will be replenished in the relevant spread
     accounts by means of a $3 million reduction in the level of monthly cash
     releases from the spread accounts. The replenishment period will begin in
     May 1999, unless the terms of the arrangement are extended.

(2)  Includes $0.6 million that has been restricted pursuant to an arrangement
     between the Company and its provider of asset-backed securities insurance.
     Such arrangement provides that, if any insured securitization trust exceeds
     the specified portfolio performance test as specified portfolio performance
     test as defined within the trust agreement, the Company may, in lieu of
     retaining excess cash from that securitization trust in the related spread
     accounts, pledge an equivalent amount of cash, which has the effect of
     preventing the violation of the portfolio performance test. Such pledged
     amounts are included in cash and cash equivalents. Restrictions on the
     pledged amounts may be lifted if the portfolio performance tests are met
     and maintained for the related securitization trusts as defined in the
     arrangement, the violations are waived, or the loans within the
     securitization trust are repurchased by the Company.

4.   OTHER ASSETS                        

<TABLE>
<CAPTION>
                                                       AT                AT
                                                  SEPTEMBER 30,      DECEMBER 31,
                                                      1998              1997
                                                  -------------      ------------
     <S>                                             <C>               <C>
     (DOLLARS IN THOUSANDS)
     Advances due to servicer                         $ 5,464          $ 6,072
     Deferred debt issuance costs                      10,462           11,518
     Investment in subordinated certificates            2,106            2,864
     Servicing fee receivable                           4,846            4,389
     Prepaid expenses                                   1,532            1,078
     Repossessed assets                                   132            1,181
     Other assets                                       5,786            5,381
                                                      -------          -------
                                                      $30,328          $32,483
                                                      -------          -------
                                                      -------          -------
</TABLE>

                                       9

<PAGE>

                             ARCADIA FINANCIAL LTD.
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998

5.   SUBORDINATED NOTES                     

<TABLE>
<CAPTION>
                                                         AT                   AT
                                                     SEPTEMBER 30,        DECEMBER 31,
                                                        1998                 1997
                                                     -------------        ------------
     <S>                                               <C>                  <C>
     (DOLLARS IN THOUSANDS)
     Senior subordinated notes, Series 1996-A          $30,000              $30,000
     Junior subordinated notes                          18,902               20,772
                                                       -------              -------
                                                       $48,902              $50,772
                                                       -------              -------
                                                       -------              -------
</TABLE>


6.   EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted 
     earnings per share for each of the three and nine month periods ended 
     September 30:


<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                  SEPTEMBER 30,                     SEPTEMBER 30,
                                                         ---------------------------       -----------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)            1998              1997             1998              1997
                                                         -----------      -----------      -----------      ------------
<S>                                                      <C>              <C>              <C>              <C>
     Numerator:
         Net income (loss ) before
           extraordinary item                            $     7,295     $     7,789       $   (82,425)    $   (45,979)
                                                         -----------     -----------       -----------     -----------
                                                         -----------     -----------       -----------     -----------

     Denominator:
         Denominator for basic earnings per
           share - weighted average shares                39,142,050      38,740,078        39,031,668      38,615,060
         Dilutive effect of options and warrants (1)         137,763         491,884                 -               -
                                                         -----------     -----------       -----------     -----------

         Denominator for diluted earnings per
           share - adjusted weighted average
           shares                                         39,279,813      39,231,962        39,031,668      38,615,060
                                                         -----------     -----------       -----------     -----------
                                                         -----------     -----------       -----------     -----------

     Basic earnings (loss) per share before
       extraordinary item                                $      0.19     $      0.20       $     (2.11)    $     (1.19)
                                                         -----------     -----------       -----------     -----------
                                                         -----------     -----------       -----------     -----------

     Diluted earnings (loss) per share before
        extraordinary item                               $      0.19     $      0.20       $     (2.11)    $     (1.19)
                                                         -----------     -----------       -----------     -----------
                                                         -----------     -----------       -----------     -----------
</TABLE>

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


(1) For the nine months ended September 30, 1998 and 1997, the weighted average
shares under the diluted computation have an anti-dilutive effect; therefore
diluted earnings per share are shown equal to basic earnings per share.

                                      10

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

     Substantially all of the Company's revenues are derived from the purchase,
securitization and servicing of consumer automobile loans originated in 45
states primarily by car dealers affiliated with major foreign and domestic
manufacturers. Loans are purchased through 18 regional buying centers (or
"hubs") located in 15 states, supplemented by a network of dealer development
representatives ("DDRs") which develop and maintain relationships with car
dealers operating within each "hub's" immediate market area or in surrounding
market areas referred to as "spokes." Credit approval and loan processing are
generally performed at the "hub" or at the Company's headquarters in
Minneapolis, Minnesota. The Company acts as the servicer of all loans originated
and securitized by it in return for a monthly servicing fee. To perform its
servicing responsibilities the Company operates a national customer service
center in Minneapolis, Minnesota and four regional collection centers located in
Charlotte, North Carolina; Dallas, Texas; Denver, Colorado; and Minneapolis,
Minnesota.

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

 RESULTS OF OPERATIONS

     CHANGES IN ACCOUNTING ESTIMATES AND NON-RECURRING CHARGES

     Included in the Company's financial results for the nine months ended
September 30, 1998, are two non-cash charges totaling $125 million. The non-cash
charges include a pre-tax $114.5 million charge to gain on sale of loans
associated with a change in accounting estimates to reflect (i) a higher
estimate of the frequency of defaulted receivables (ii) a reduction in assumed
loan loss recovery rates, (iii) a reduction in estimated voluntary loan
prepayments, and (iv) additions to general reserves applicable to unanticipated
changes in the future performance of the existing portfolio of receivables. An
additional $10.5 million pre-tax charge relates to the elimination of the
Company's retail remarketing program and other organizational changes designed
to improve future operating efficiencies.

     Historically, management's estimate of the frequency of loan defaults was
based on actual credit performance incurred to date segregated by each
securitization transaction and loan product (Premier and Classic) as well as
comparisons to externally-generated industry information when available. In
response to a perception of increased risk within the consumer finance industry
and the Company's dependence on internal historical experience as an indicator
of future credit performance, management commenced a project to identify what it
hoped would be a more predictive alternative to estimating future performance of
its servicing portfolio to not only improve the Company's assessment of its
finance income receivable carrying amount but also to enhance the Company's
pricing of its loan products. This project focused on identifying correlations
between the credit performance of the loans in the Company's servicing portfolio
and the credit characteristics of each contract at the time of origination,
including externally-developed credit score, loan-to-value ratio, debt-to-income
ratio and payment-to-income ratio. The Company's decision to obtain and utilize
a credit score from a nationally recognized independent credit scoring company
rather than utilizing its own internally-developed credit score was based on its
desire to reduce the subjectivity of the analysis. As a result of this project,
management determined that the combination of externally-developed credit score
and loan-to-value ratio was most predictive of future loan performance. Using
the information derived from this process, management was then able to segregate
the loans in its servicing portfolio into eight distinct tranches of credit
performance that management believes provide a higher level of precision in
estimating future default experience than its previous methodology. As a result,
management determined in June 1998 that it was necessary to revise its estimate
with respect to the frequency of future loan defaults and reduce the carrying
value of its finance income receivable by approximately $67 million.

                                      11

<PAGE>

     In addition to the frequency of loan defaults, the valuation of the
Company's finance income receivable is based in part on an estimate of the
recovery upon the disposition of repossessed vehicles. Although the Company was
reserved for and realized recovery rates slightly above 50% on the sale of
repossessed vehicles during the first six months of 1998, management believes
that market pressure on used car prices will force future recovery rates
downward and therefore, believes that it was appropriate to lower the estimated
recovery rate to 45%. This decrease to the Company's estimated recovery rate,
taking into consideration the increase in the estimated frequency of defaults
discussed above, led to a further reduction in the carrying value of finance
income receivable at June 30, 1998, of approximately $51 million.

     A third component in the valuation of finance income receivable is an
estimate of the amount and timing of voluntary prepayments of loans.
Historically, management has estimated the percentage of receivables it expects
to prepay on a monthly basis and has assumed that such monthly prepayment speed
would remain constant throughout the life of the securitization trust. A
detailed analysis of the Company's actual prepayment data indicated, however,
that for an extended period of time prepayment speeds have performed slower than
expected and have progressively declined as a securitization trust ages. As a
result, management determined that it was appropriate to reduce its prepayment
speed assumption, which resulted in an increase to its finance income receivable
carrying value at June 30, 1998, of approximately $49 million.

     Finally, to provide for current uncertainties related to the consumer
finance industry and the remaining subjectivity of the estimates used in valuing
the finance income receivable, management believes that it was appropriate to
increase its finance income receivable reserves at June 30, 1998, by an
additional $45.5 million.

     Also during the second quarter of 1998, the Company decided to discontinue
its retail remarketing operations and finalized plans aimed at reducing
infrastructure costs and improving operating efficiencies. After a detailed
review during 1997 and first half of 1998 the Company determined that its retail
remarketing operation which was responsible for the liquidation of repossessed
vehicles through retail consignment lots did not provide an adequate
risk-adjusted return commensurate with the attention necessary by management to
operate such strategy and therefore decided to cease such operations. Also
during this time period, the Company conducted an exhaustive study of
substantially all Company functions and developed a plan which includes further
consolidation of the Company's servicing and collection operations into its four
regional collection centers and streamlining of other operating procedures. As a
result, the Company recognized a $10.5 million pre-tax charge through other
operating expenses during the second quarter of 1998 associated with estimated
severance and benefit costs, termination or subleasing of certain lease
commitments, and legal expenses associated with the operational changes.

     Included in the Company's financial results during the nine month period
ended June 30, 1997, are two special charges taken in March 1997. These charges
included a non-cash pre-tax charge of approximately $103 million, due primarily
to a change in accounting estimate related to the assumed recovery rates on
repossessed vehicles and modifications to the Company's retail disposition
strategy, and an extraordinary charge of approximately $15.8 million, net of
tax, due to the early extinguishment of the Company's 13% Senior Term Notes, due
2000 (the "13% Notes").

                                      12

<PAGE>

     NET INTEREST MARGIN. The components of net interest margin for each of the
three and nine months ended September 30 were:

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                  SEPTEMBER 30,                     SEPTEMBER 30,
                                                         ---------------------------       -----------------------------
                                                            1998              1997             1998              1997
                                                         -----------      -----------      -----------      ------------
<S>                                                      <C>              <C>              <C>              <C>
(DOLLARS IN THOUSANDS)
Interest income on loans, net                            $ 7,947         $ 9,260           $20,979          $26,391
Interest income on short-term investments
   and other cash accounts                                 2,538           3,273             8,485            8,444
Recognition of present value discount                      5,268           5,671            17,007           16,603
Provision for credit losses on loans held for sale          (695)         (1,047)           (2,364)          (1,881)
                                                         -------         -------           -------          -------
   Net interest margin                                   $15,058         $17,157           $44,107          $49,557
                                                         -------         -------           -------          -------
                                                         -------         -------           -------          -------
</TABLE>


     Net interest margin declined 12% and 11% during the three and nine months
ended September 30, 1998, respectively, compared with the same periods in 1997.
The decline in net interest margin is primarily due to a reduction in the
average balance of loans held for sale pending securitization partially off-set
by a rise in net interest rate spread.

     A decline in loan purchasing volume (see table below) of approximately 25%
and the timing of securitization transactions during the three and nine months
ended September 30, 1998, respectively, resulted in a reduction in the average
monthly balance of loans held for sale, on which the Company earns interest
income until such loans are securitized, to $210.3 million and $189.5 million,
respectively, down from $258.1 million and $254.4 million in the same periods of
1997, respectively. The decline in purchasing volume is primarily due to the
Company's emphasis on more selective loan purchases and the time needed to
market the Company's refined purchasing focus to its dealer base. The impact of
the lower average balance of loans held for sale on interest income was
partially offset by a rise in net interest rate spreads. During the three and
nine months ended September 30, 1998, the weighted average net interest rate
spread rose to 11.02% and 11.16% respectively, compared with 10.43% and 10.08%,
respectively, during the same periods in 1997. The rise in net interest rate
spread earned on loans held for sale is principally due to higher average annual
percentage rates ("APRs") on loans purchased during 1998 primarily resulting
from a greater proportion of loan volume consisting of higher rate Classic
loans.

     The Company's loan purchasing and securitization volume for each of the
three and nine months ended September 30 are set forth in the table below.


<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                  SEPTEMBER 30,                     SEPTEMBER 30,
                                                         ---------------------------       -----------------------------
                                                            1998              1997             1998              1997
                                                         -----------      -----------      -----------      ------------
<S>                                                      <C>              <C>              <C>              <C>
(DOLLARS IN THOUSANDS)
Premier                                                  $177,068         $326,087         $  510,906       $1,087,825
Classic                                                   392,953          434,230          1,215,968        1,192,865
                                                         --------         --------         ----------       ----------
   Total loans purchased                                 $570,021         $760,317         $1,726,874       $2,280,690
                                                         --------         --------         ----------       ----------
                                                         --------         --------         ----------       ----------
Automobile loans securitized                             $554,734         $754,200         $1,714,710       $2,276,335
</TABLE>


     GAIN ON SALE OF LOANS. During the three months ended September 30, 1998,
gain on sale of loans declined 5% compared to the same period in 1997. During
the nine months ended September 30, 1998 and 1997, the Company recognized
non-recurring pre-tax charges to gain on sale of loans of $114.5 million and
$98.0 million, respectively, resulting in year to date losses on the sale of
loans of $24.0 million and $22.6 million, respectively. See "CHANGES IN
ACCOUNTING ESTIMATES AND NON-RECURRING CHARGES" for additional discussion.
Securitization volume decreased 26% and 25% during the three and nine months
ended September 30, 1998, respectively, compared with the same periods of 1997
due to lower origination growth. The impact of lower securitization volume

                                      13

<PAGE>

on revenues from gain on sale of loans was minimized during 1998, however, by 
the widening of the gross interest rate spread earned. The following table 
summarizes the Company's gross interest rate spreads for each of the three 
and nine month periods ended September 30, 1998:

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                  SEPTEMBER 30,                     SEPTEMBER 30,
                                                         ---------------------------       -----------------------------
                                                            1998              1997             1998              1997
                                                         -----------      -----------      -----------      ------------
<S>                                                      <C>              <C>              <C>              <C>
Weighted average APR of loans securitized                16.81%           16.25%           16.97%           15.85%
Weighted average securitization rate                      5.64             6.37             5.87             6.46
                                                         -----            -----            -----            -----
       Gross interest rate spread (1)                    11.17%            9.88%           11.10%            9.39
                                                         -----            -----            -----            -----
                                                         -----            -----            -----            -----%
</TABLE>

-----------

(1)  Before gains/losses on hedging transactions.


     The rise in gross interest rate spread during the three and nine months
ended September 30, 1998 is primarily due to an increased proportion of loan
volume consisting of higher rate Classic loans and general rate increases on the
Company's Premier loans resulting from the Company's continued refinements to
its risk-based pricing strategy. Gross interest rate spreads further benefited
from a reduction in the securitization rate reflecting a general decline in U.S.
Treasury rates compared to the same periods of 1997. During the third quarter of
1998, however, uncertainties in the bond market caused investors in asset-backed
securities to demand higher interest rates. As a result, the spread over the
two-year U.S. Treasury at which the Company sells its loans increased by
approximately 50 basis points compared to its securitization transactions during
1997 and the first two quarters of 1998, partially off-setting the favorable
movement in the U.S. Treasury market and its positive impact on the Company's
gross interest rate spread.

     Any unamortized balance of participations paid to dealers is expensed at
the time the related loans are securitized and recorded as a reduction to gain
on sale. Due to the increased proportion of Classic loan purchases, which
generally require lower participation rates than Premier loans, participations
paid as a percentage of the principal balance of loans purchased declined to
2.94% and 2.87% during the three and nine months ended September 30, 1998, from
3.08% and 3.16%, respectively, in the same periods a year ago.

     The Company employs hedging strategies, including the use of derivative
financial instruments to manage the gross interest rate spread on securitization
transactions. The Company's securitization rate is indexed to rates on U.S.
Treasury Notes with maturities similar to the average maturities of the assets
being sold. To lock in the indexed rate for a specific anticipated
securitization transaction and protect against changes in the treasury rate, the
Company uses Forward U.S. Treasury Rate Lock agreements that most closely
parallel the average life of its loans held for sale. Such hedging strategy
includes certain risks created by the cash versus non-cash relationship of the
hedging instrument and the related securitization. This relationship arises
because the gain or loss realized from Forward U.S. Treasury Rate Lock
agreements is settled with current cash payments and is subsequently recovered
over time through a higher or lower gross interest rate spread at the time of
securitization. During the three and nine months ended September 30, 1998, the
Company had net realized losses on hedging transactions of $8.4 million and
$16.8 million, respectively, compared with $4.0 million and $4.3 million,
respectively, in the same periods of 1997. These hedging losses have been
charged against gain on sale of loans. The increase in realized hedging losses
during 1998 is primarily due to significant downward movement of treasury rates
during the third quarter of 1998.

     SERVICING FEE INCOME. The components of servicing fee income for each of
the three and nine months ended September 30 were:

                                      14

<PAGE>

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                  SEPTEMBER 30,                     SEPTEMBER 30,
                                                         ---------------------------       -----------------------------
                                                            1998              1997             1998              1997
                                                         -----------      -----------      -----------      ------------
<S>                                                      <C>              <C>              <C>              <C>
(DOLLARS IN THOUSANDS)
Contractual servicing fee income                         $14,577          $12,154          $42,756          $32,679
Other servicing income                                     6,659            5,565           18,330           15,054
                                                         -------          -------          -------          -------
   Total servicing fee income                            $21,236          $17,719          $61,086          $47,733
                                                         -------          -------          -------          -------
                                                         -------          -------          -------          -------
</TABLE>


     The Company earns contractual servicing fee income for servicing loans sold
to investors through securitizations. The servicing fee is 1% per annum of the
outstanding principal balance of the loans for all securitizations entered into
prior to September 1997 and 1.25% per annum on loans included in and subsequent
to the third quarter 1997 securitization. The growth in contractual servicing
fee income is directly related to an increase in the average servicing portfolio
outstanding and the increase in the contractual servicing rate in September
1997.

     Other servicing income consists primarily of collection fees, such as late
payment fees and insufficient fund charges, and interest on collection accounts
earned by the Company as servicer of the loans. The rise in other servicing
income is principally due to increases in income from late fees and insufficient
fund charges reflecting the increase in delinquency rates and growth in the
Company's servicing portfolio compared to the same periods a year ago and
increased collection account interest attributable to the growth in the average
servicing portfolio outstanding.

     The following table reflects the growth in the Company's servicing
portfolio from September 30, 1997 to September 30, 1998:

<TABLE>
<CAPTION>

                                                                                AT SEPTEMBER 30,
                                                                        ------------------------------
                                                                           1998                 1997
                                                                        ----------          ----------
     <S>                                                                <C>                 <C>
     (DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
     Principal balance of automobile loans held for sale                $   20,785          $   57,023
     Principal balance of loans serviced under securitizations           5,117,013           4,767,605
                                                                        ----------          ----------
     Servicing portfolio                                                $5,137,798          $4,824,628
                                                                        ----------          ----------
                                                                        ----------          ----------
     Average unpaid principal balance (actual dollars)                  $   11,480          $   12,248
     Number of loans serviced                                              447,542             393,926
</TABLE>


     The principal balance of the Company's servicing portfolio increased 6%
from September 30, 1997 to September 30, 1998. This increase reflects loan
purchases and subsequent securitizations, partially offset by defaults,
prepayments and scheduled repayments. The decline in average outstanding balance
of loans during the first nine months of 1998 reflects an increase in the
proportion of used to new cars financed by the Company and a reduction in
loan-to-value ratios on loan purchases resulting from the Company's more
selective buying practices.

     The Company's servicing fee approximates adequate compensation as defined
by SFAS 125 and therefore, the Company has not recorded a servicing asset or
liability at September 30, 1998.

     OPERATING EXPENSES. During the three months ended September 30, 1998,
salaries and benefits decreased approximately 4% from the same period in 1997.
This reduction is primarily due to a decrease in the average number of employees
to 1,417 during the third quarter of 1998 compared with 1,545 during the same
period of 1997 resulting primarily from efforts to centralize the Company's
collection operations. Beginning in the first quarter of 1998, the Company began
to move collection personnel out of buying centers into centralized sites to
better leverage collections resources and technology and to control collection
processes more tightly. The 6% increase in salaries and benefits during the
first nine months of 1998 is primarily due to increased overtime compensation
incurred during the first and second quarter of 1998 migration to the
centralized collection sites.

                                      15

<PAGE>


     Other operating costs, including administrative, occupancy, depreciation
and amortization, origination, servicing and collection expenses, increased 13%
and 28% for the three and nine months ended September 30, 1998, respectively,
compared with the same periods in 1997. Included in operating costs during the
nine months ended September 30, 1998 is a pre-tax charge of approximately $10.5
million. This charge is related to the elimination of the Company's retail
remarketing program and other organizational changes designed to improve
operating efficiency. See "CHANGES IN ACCOUNTING ESTIMATES AND NON-RECURRING
CHARGES." Included in operating costs during the first nine months of 1997 was a
pre-tax charge of approximately $5.0 million primarily related to legal costs
and severance expenses for certain former executives of the Company. Excluding
these charges, other operating costs increased 22% for the nine months ended
September 30, 1998, compared with the same period in 1997. The increase in other
operating costs during the three and nine months periods is primarily a result
of the higher percentage of Classic program loans in the portfolio, since these
loans generally require greater collection efforts and related costs (including
increased telephone, fax, postage and repossession expenses) than Premier
program loans.

     LONG-TERM DEBT AND OTHER INTEREST EXPENSE. Long-term debt and other
interest expense increased 24% and 35% for the three and nine months ended
September 30, 1998, respectively, compared to the same periods in 1997. The
increases are primarily due to the issuance of $300.0 million and $75.0 million
of 11.5% Senior Notes due 2007 (the "Senior Notes") in March 1997 and October
1997, respectively, partially offset by the concurrent extinguishment of $145.0
million of the 13% Notes in March 1997.

     INCOME TAXES. The Company did not incur an income tax provision during the
three months ended September 30, 1998, due to the utilization of net operating
loss carryforwards resulting from the non-recurring non-cash charge during the
second quarter of 1998. See "CHANGES IN ACCOUNTING ESTIMATES AND NON-RECURRING
CHARGES" for additional discussion.

     EXTRAORDINARY ITEM. In March 1997, the Company issued $300.0 million of its
Senior Notes and utilized approximately $173.5 million of the proceeds to
repurchase and covenant defease the Company's $145.0 million of 13% Notes,
including accrued interest of $7.9 million and a premium of approximately $20.3
million. These charges and additional professional fees incurred to retire such
debt were treated as an extraordinary item, net of tax.

     FINANCIAL CONDITION

     FINANCE INCOME RECEIVABLE. Finance income receivable decreased to $345.3
million at September 30, 1998 from $372.0 million at December 31, 1997. This 7%
decrease reflects a non-recurring $114.5 million pre-tax charge during the
second quarter of 1998 (see "CHANGES IN ACCOUNTING ESTIMATES AND NON-RECURRING
CHARGES") partially offset by amounts capitalized upon completion of the
Company's securitization transactions related to the present value of estimated
cash flows.

     DEFERRED INCOME TAX. There were no deferred income taxes at September 30,
1998 compared with a net deferred tax liability of $18.8 million at December 31,
1997. This decrease reflects the recognition of a portion of the tax benefit
from the 1998 second quarter loss from operations. In accordance with SFAS No.
109, "Accounting for Income Taxes," the Company established a valuation
allowance during the quarter ended June 30, 1998. The valuation allowance was
established to offset the deferred tax asset associated with the Company's net
operating loss carryforward resulting in no net deferred income taxes at
September 30, 1998.

     IMPACT OF YEAR 2000

     The Company recognizes that the arrival of the Year 2000 poses a unique
worldwide challenge to the ability of all computer based applications to
recognize the date change from December 31, 1999 to January 1, 2000, potentially
causing miscalculations, system failures and other operational problems.

     One of the Company's most critical operating systems is its loan accounting
system. In July 1997, an internal implementation team along with outside
consultants was assigned to evaluate, select, and implement a new installment
loan accounting system and various sub-systems (the "ILA system") in connection
with an initiative to replace and enhance the Company's key operating systems.
One of the requirements for consideration was that

                                      16
<PAGE>

the new ILA system be Year 2000 compliant. In late 1997, a contract was 
signed with a nationally recognized vendor to provide the Company with such a 
system. The contract warrants, among other things, that the core software 
system being purchased would be fully Year 2000 compliant by mid 1998. The 
contract further warrants that the software will be installed and in parallel 
testing with the Company's current system in the first quarter of 1999. To 
date, the terms of the contract have been met.

     In addition, in early 1998 the Company formed a dedicated project team to
conduct an extensive analysis of the impact that the Year 2000 issue would have
on its automated information systems (exclusive of the ILA system), business
support systems and facility operating systems. The project team has been
responsible for the prioritization of Year 2000 tasks, development of
implementation plans, and the establishment of timetables for completion and
testing of all necessary modifications. As a result, the Company has initiated
the replacement, modification or reprogramming of Year 2000 non-compliant
hardware and software and since 1997 has required that all new hardware and
software be certified as Year 2000 compliant prior to purchase. To assist in
this process, the Company has engaged an independent company to aid in the
remediation of non-compliant programs. The modification and reprogramming of
these programs is currently underway and scheduled to be completed and tested by
the end of 1998 with implementation completed during the first quarter of 1999.
All Year 2000 testing will be completed in an isolated systems environment
dedicated for Year 2000 issues. As a contingency to the possibility of an
unplanned delay in the implementation of the new ILA system discussed above, the
Company's current loan accounting system has been included in the programs
provided to the independent company for remediation. This will provide a Year
2000 compliant installment loan accounting system even if the implementation of
the new ILA system should be delayed beyond the end of 1999.

     The Company currently expects to have all business critical hardware and
software Year 2000 compliant by the end of the first quarter of 1999 and to
complete a Year 2000 certification process by mid-1999. The Company estimates
that the cost of its Year 2000 project will aggregate approximately $1.5
million, of which approximately $0.3 million has been expended through September
30, 1998. These costs do not include amounts related to the implementation of
the ILA system or other hardware and software purchases which the Company had
planned to acquire and which are not directly related to, or the purchase of
which has not been accelerated because of, the Year 2000 issue. Consistent with
the Company's capitalization policy, the cost of such non-Year 2000 hardware and
software purchases will be capitalized and amortized over their expected useful
lives.

     Ultimately, the potential impact of the Year 2000 issue will depend not
only on the success of the corrective measures that the Company undertakes, but
also on the way in which the Year 2000 issue is addressed by its business
partners, service providers, utility providers, governmental agencies and other
entities with which the Company does business. The Company is developing a plan
to contact parties which provide services critical to the successful operation
of its business to heighten their awareness of the Year 2000 issue, to learn how
they are addressing it and to evaluate any likely impact on the Company. For
example, the Company plans to begin a Year 2000 survey of its credit bureaus,
investment bankers and warehouse providers during the fourth quarter of 1998.
The Year 2000 efforts of third parties are not within the Company's control,
however, and their failure to remediate Year 2000 issues successfully could
result in business disruption, increased operating costs and increased credit
risk for the Company. At the current time, it is not possible to determine
whether any such events are likely to occur, or to quantify any potential
negative impact they may have on the Company's future results of operations and
financial condition.

     The Company believes that it has an effective plan in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Company has not yet
completed all necessary processes of its Year 2000 plan. In the event that the
Company does not complete any additional phases of its plan, the Company may be
unable to perform its key operating activities such as the purchase of loans and
the invoicing, collecting and application of obligor repayments. In addition,
disruptions in the economy generally resulting for Year 2000 issues could also
materially adversely affect the Company. The Company could be subject to
litigation for computer systems failure, such as improper application of
repayments and resulting incorrect credit reporting to credit bureaus. The
amount of potential liability and lost revenue cannot reasonably be estimated at
this time. The Company currently has no contingency plans in place in the event
it does not complete all phases of its Year 2000 program. The Company plans to
continuously monitor the status of completion of its Year 2000 plan and, based
on such information, will 
                                      17
<PAGE>

develop contingency plans as necessary.

     The foregoing discussion regarding Year 2000, including the discussion of
the timing and effectiveness of implementation and cost of the Company's Year
2000 project, contains forward-looking statements, which are based on
management's best estimates derived using various assumptions. These
forward-looking statements involve inherent risks and uncertainties, and actual
results could differ materially from those contemplated by such statements.
Factors that might cause material difference include, but are not limited to,
the continued availability of key Year 2000 personnel, the Company's ability to
locate and correct all relevant computer codes, the performance of contractors
and companies retained to provide new software and to remediate existing
hardware and software, and the Company's ability to respond to unforeseen Year
2000 complications. Such material differences could result in, among other
things, business disruption, operational problems, financial loss, legal
liability and similar risks.

DELINQUENCY, CREDIT LOSS AND REPOSSESSION EXPERIENCE

     The following tables describe the Company's delinquency, credit loss and
repossession experience for the periods indicated. A delinquent loan may result
in the repossession and foreclosure of the collateral for the loan. Losses
resulting from repossession and foreclosure of the collateral are charged
against applicable allowances.

DELINQUENCY EXPERIENCE (1):

<TABLE>
<CAPTION>

                                                            SEPTEMBER 30, 1998               DECEMBER 31, 1997
                                                        ---------------------------     ---------------------------
                                                        NUMBER OF                       NUMBER OF
                                                          LOANS            BALANCE        LOANS             BALANCE
                                                        ---------        ----------     ---------        ----------
<S>                                                     <C>              <C>            <C>              <C>
(DOLLARS IN THOUSANDS)
     Servicing portfolio at end of period               447,542          $5,137,798     411,429          $4,956,090
     Delinquencies:
       31-60 days                                         9,820          $  114,398       8,297          $  100,161
       61-90 days                                         3,662              43,666       3,635              45,485
       91 days or more                                    4,363              51,440       3,019              34,047
                                                        -------          ----------     -------          ----------
     Total loans delinquent 31 or more days              17,845          $  209,504      14,951          $  179,693
                                                        -------          ----------     -------          ----------
                                                        -------          ----------     -------          ----------

     Delinquencies as a percentage of
       number of loans and amount
       outstanding at end of period (2)                    3.99%               4.08%       3.63%               3.63%
     Amount in repossession                               5,912          $   35,739       6,083          $   55,300
</TABLE>

-----------

(1)  All amounts and percentages are based on the principal amount scheduled to
     be paid on each loan. The information in the table includes previously sold
     loans which the Company continues to service.

(2)  Amounts shown do not include loans which are less than 31 days delinquent.

                                      18

<PAGE>

CREDIT LOSS/REPOSSESSION EXPERIENCE (1):

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                  SEPTEMBER 30,                     SEPTEMBER 30,
                                                         ---------------------------       -----------------------------
                                                            1998              1997             1998              1997
                                                         -----------      -----------      -----------      ------------
<S>                                                      <C>              <C>              <C>              <C>
(DOLLARS IN THOUSANDS)
Average servicing portfolio outstanding 
  during the period                                      $5,133,325       $4,661,818       $5,062,745       $4,318,830

Average number of loans outstanding 
  during the period                                         444,285          379,681          431,694          349,480
Number of charge-offs                                         9,125            6,843           25,399           17,208

Gross charge-offs (2)                                    $   60,896       $   38,681       $  192,322       $  118,352
Recoveries (3)                                                5,841            2,468           13,589            6,881
                                                         ----------       ----------       ----------       ----------

Net losses                                               $   55,055       $   36,213       $  178,733       $  111,471
                                                         ----------       ----------       ----------       ----------
                                                         ----------       ----------       ----------       ----------

Annualized gross charge-offs as a percentage 
  of average servicing portfolio                               4.75%            3.32%            5.07%           3.65%
Annualized net losses as a percentage 
  of average servicing portfolio                               4.29%            3.11%            4.71%           3.44%
</TABLE>

-----------

(1)  All amounts and percentages are based on the principal amount scheduled to
     be paid on each loan. The information in the table includes previously sold
     loans which the Company continues to service.

(2)  Gross charge-offs represent principal amounts which management estimated to
     be uncollectable after the consideration of anticipated proceeds from the
     disposition of repossessed assets and selling expenses.

(3)  Includes post-disposition collection amounts received on previously
     charged-off loans.

     The increase in delinquency rate at September 30, 1998, compared with
December 31, 1997, reflects the continued rise in the proportion of Classic
loans in the Company's servicing portfolio, which approximated 53% of loans
serviced at September 30, 1998, compared with 43% at December 31, 1997.
Repossessed inventory has decreased since December 31, 1997, primarily due to
the Company's decision to increase its use of wholesale disposition channels to
liquidate repossessed vehicles thereby shortening the average number of days a
vehicle is in inventory. During the first nine months of 1998 the Company sold
approximately 77% of its repossessed inventory through wholesale channels
compared with 48% in the same period a year ago, resulting in a reduction in the
average number of days vehicles are held in inventory to approximately 64 days
at September 30, 1998 compared with 105 days at December 31, 1997.

     The increase in gross charge-offs and net losses during the three and nine
months ended September 30, 1998, compared to the same periods a year ago
primarily reflects the continued rise in the proportion of Classic loans in the
Company's servicing portfolio and the increase in the utilization of wholesale
disposition channels. As previously discussed, the Company announced that it is
planning to discontinue the sale of repossessed vehicles through retail
disposition channels and anticipates that it will be completely out of these
operations by the end of 1998 (see "Changes in Accounting Estimates and
Non-Recurring Charges"). The Company believes that its decision to discontinue
its retail remarketing operations will enable it to better manage its level of
repossessed inventory and improve the timing of excess cash flows released to
the Company from securitization trusts as a result of an increase in the speed
at which repossessed vehicles can be liquidated. Annualized gross charge-offs
and net losses during the nine month period ended September 30, 1998, include a
charge of 0.57%, representing the impact of a write-down of current inventory
resulting from a revision to the estimate of net realizable value (see "Changes
in Accounting Estimates and Non-Recurring Charges") and an additional provision
primarily associated with loans originated in connection with retail
dispositions.

                                      19

<PAGE>

LIQUIDITY

     The Company's business requires substantial cash to support its operating
activities. The principal cash requirements include (i) amounts necessary to
purchase and finance automobile loans pending securitization, (ii) payment of
dealer participations, (iii) cash held from time to time in restricted spread
accounts to support securitizations and warehouse facilities and other
securitization expenses, (iv) interest advances to securitization trusts, (v)
repossessed inventory, and (vi) interest expense. The Company also uses
significant amounts of cash for operating expenses. The Company receives cash
principally from interest on loans held pending securitization, from excess cash
flow received from securitization trusts and from fees earned through servicing
of loans held by such trusts. The Company has operated on a negative operating
cash flow basis and expects to continue to do so in the near future. The Company
has historically funded these negative operating cash flows principally through
borrowings from financial institutions, sales of equity securities and sales of
senior and subordinated notes. The Company may require additional capital in the
future to fund continued negative cash flows, although there can be no assurance
that the Company will have access to capital markets in the future or that
financing will be available to satisfy the Company's operating and debt service
requirements or to fund its future growth. See "Capital Resources."

     PRINCIPAL USES OF CASH IN OPERATING ACTIVITIES

     PURCHASE AND FINANCING OF AUTOMOBILE LOANS. Automobile loan purchases
represent the Company's most significant cash flow requirement. The Company
purchased $1.7 billion of loans during the first nine months of 1998 compared to
$2.3 billion during the same period in 1997. The Company funds the purchase of
loans primarily through the use of warehouse facilities prior to securitization
of such assets. However, because the warehouse facilities are subject to advance
rate restrictions and do not advance 100% of the loan balances being purchased,
the Company is required to fund the remainder of all purchases with other
available cash resources prior to securitization.

     DEALER PARTICIPATIONS. Consistent with industry practice, the Company pays
dealers participations for selling loans to the Company. These participations
typically require the Company to advance an up-front amount to dealers.
Participations paid by the Company to dealers during the nine months ended
September 30, 1998 were $49.5 million, or approximately 2.87% of the principal
balance of loans purchased, compared with $72.1 million, or approximately 3.16%
of loans purchased, during the same period in 1997. The decrease in dealer
participations as an aggregate amount and as a percentage of loans purchased
reflects the growth in volume in Classic loans, which are generally associated
with lower dealer participations.

     SECURITIZATION OF AUTOMOBILE LOANS. In connection with securitizations, the
Company is required to fund spread accounts related to each transaction. The
Company funds these spread accounts by foregoing receipt of excess cash flow
from the relevant securitization trust until these spread accounts exceed
predetermined levels. In addition, for certain securitizations prior to the
third quarter of 1997, the Company has been required to provide initial cash
deposits into the spread accounts. The Company had $252.9 million of restricted
cash in spread accounts at September 30, 1998, compared with $250.3 million at
December 31, 1997. The increase in restricted cash in spread accounts reflects
the Company's continued securitization of loan purchases and the related
accumulation of excess cash flows to levels defined within each securitization
agreement, partially offset by the release of excess cash flows. Restricted cash
in spread accounts was further reduced by $25.0 million during the second
quarter of 1998 under an agreement between the Company and its provider of
asset-backed securities insurance which allowed the Company to receive an early
release from the spread accounts. See "Liquidity - Other Capital Resources" for
additional discussion.

     The Company also incurs certain expenses in connection with
securitizations, including underwriting fees, credit enhancement fees, trustee
fees and other costs, which approximate 0.5% of the principal amount of the
asset-backed securities sold in the securitizations.

     ADVANCES DUE TO SERVICER. As the servicer of loans sold in securitizations,
the Company periodically 

                                      20

<PAGE>

makes interest advances to the securitization trusts to provide for temporary 
delays in the receipt of required interest payments from borrowers. In 
accordance with the relevant servicing agreements, the Company makes advances 
only in the event it expects to recover such advances through payments from 
the obligor over the life of the loan.

     REPOSSESSED INVENTORY. At September 30, 1998, repossessed inventory managed
or owned by the Company and held for resale was $35.7 million, compared with
$55.3 million at December 31, 1997. The rate of repossessed inventory turnover
impacts cash available for spread accounts under securitization trusts and,
consequently, the excess cash available for distribution to the Company. At
September 30, 1998, repossessed inventory was 0.7% of the total servicing
portfolio compared with 1.1% at December 31, 1997. In June 1998, the Company
decided to discontinue liquidating its repossession inventory through retail
disposition channels and began disposing of its repossessed vehicles exclusively
through wholesale auctions (see "CHANGES IN ACCOUNTING ESTIMATES AND
NON-RECURRING CHARGES"). Any improvement in excess cash flows due to an increase
in the inventory turnover rate may be partially reduced by lower recoveries
realized through the exclusive use of wholesale auctions and generally lower
wholesale used car prices.

     INTEREST EXPENSE. Although the Company records net interest margin as
earned, a significant portion of the interest income component is generally
received in cash from excess cash flow, while the interest expense component
(primarily warehousing interest) is paid prior to securitization. The Company
also incurs interest expense related to both short-term and long-term debt
obligations.

     PRINCIPAL SOURCES OF CASH IN OPERATING ACTIVITIES

     EXCESS CASH FLOW. The Company receives excess cash flow from securitization
trusts, including the realization of gain on sale, the recovery of dealer
participations, and the recovery of accrued interest receivable earned, but not
yet collected, on loans held for sale prior to securitization. Recovery of
dealer participations and accrued interest receivable, which occur throughout
the life of the securitization, result in a reduction of the finance income
receivable but, because they have been considered in the original determination
of the gain on sale of loans, have no effect on the Company's results of
operations in the year in which the participations and interest are recovered
from the securitization trust. During the first nine months of 1998, the Company
received $103.6 million of excess cash flow (which amount does not include the
$25 million released sooner than would otherwise have been the case pursuant to
an arrangement with the Company's providers of asset-backed securities
performance see "Capital Resources - Other Capital Resources"), compared with
$59.0 million during the same nine months in 1997. Included in the 1998 cash
released from spread accounts is $0.6 million of cash which is restricted
pursuant to an arrangement between the Company and its asset-backed securities
insurance provider.

     SERVICING FEES. The Company receives servicing fees for servicing
securitized loans included in various securitization trusts. The servicing fee
for loans in securitization trusts is equal to one percent per annum of the
outstanding principal balance of the loans for all securitizations entered into
prior to September 1997 and 1.25 percent per annum on loans subsequently
securitized. The Company also receives collection fees, such as late payment
fees and insufficient fund charges, and interest on collection accounts earned
by the Company as servicer of the loans. During the nine months ended September
30, 1998 and 1997, the Company received cash for such servicing in the amount of
$61.1 million and $47.5 million, respectively. Servicing fee income is reflected
in the Company's revenues as earned.

CAPITAL RESOURCES

     The Company finances the acquisition of automobile loans primarily through
(i) warehouse facilities, pursuant to which loans are sold or financed generally
on a temporary basis, and (ii) the securitization of loans, pursuant to which
loans are sold as asset-backed securities. Additional financing is required to
fund the Company's operations.

     WAREHOUSE FACILITIES. Automobile loans held for sale are funded primarily
through warehouse 

                                      21

<PAGE>

facilities. At September 30, 1998, the Company had three warehouse facilities 
in place with various financial institutions and institutional lenders with 
an aggregate capacity of $700.0 million, of which $642.2 million was 
available. The Company's current warehouse facilities have expiration dates 
between July 1999 and October 1999, subject to renewal or extension at the 
lenders' option. Proceeds from securitizations, generally received within 
seven to ten days following the cut-off date established for the 
securitization transaction, are applied to repay amounts outstanding under 
warehouse facilities.

     SECURITIZATION PROGRAM. An important capital resource for the Company 
has been its ability to sell automobile loans in the secondary markets 
through securitizations. The following table summarizes the Company's 
securitization transactions for the nine months ended September 30, 1998, all 
of which were publicly issued and rated "AAA/Aaa".

<TABLE>
<CAPTION>

                                                            REMAINING                                    CURRENT
                                            REMAINING      BALANCE AS A    CURRENT        WEIGHTED        GROSS
                                          BALANCE AS OF     PERCENTAGE     WEIGHTED        AVERAGE       INTEREST
                            ORIGINAL      SEPTEMBER 30,    OF ORIGINAL     AVERAGE      SECURITIZATION     RATE
DATE                        BALANCE           1998           BALANCE         APR            RATE          SPREAD
----------------------   -----------      -------------    ------------    --------     --------------   --------
<S>                      <C>                <C>               <C>            <C>             <C>          <C>
(DOLLARS IN THOUSANDS)
March 1998               $  525,000         $  455,230        86.71%         17.15%          5.93%        11.22%
June 1998                   550,000            514,691        93.58%         17.16%          5.97%        11.19%
September 1998 (1)          600,000            536,722        89.45%         16.82%          5.63%        11.19%
                         ----------         ----------
                         $1,675,000         $1,506,643
                         ----------         ----------
                         ----------         ----------
</TABLE>

(1)  As of September 30, 1998, the Company had delivered $541.4 million of
     automobile loans and $58.6 million of cash remained in the pre-funded
     portion of the trust.


     HEDGING STRATEGY

     The Company enters into hedging transactions to manage its gross interest
rate spread on loans held for sale. The Company sells Forward U.S. Treasury
Locks that most closely parallel the average life of its portfolio of loans held
for sale. Hedging gains and losses are recognized as a component of the gain on
sale of loans on the date such loans are sold. To the extent hedging gains or
losses are significant, the resulting up-front cash payments or receipts may
impact the Company's liquidity. The Company receives the up-front gains or
losses back over time through a lower or higher spread, respectively, at the
time of securitization. During the first nine months of 1998, the Company had
net realized losses on hedging transactions of $16.8 million. The Company had
unrealized losses on hedge contracts of $4.7 million that remained outstanding
at September 30, 1998.

     OTHER CAPITAL RESOURCES

     Historically, the Company has utilized various debt and equity financings
to offset negative operating cash flows and support its operations.

     The Company has a program to sell up to $100.0 million of unsecured
subordinated notes (the "Junior Subordinated Notes") to be offered to the public
from time to time (the "Note Program"). Issuance of Junior Subordinated Notes
under the Note Program is subject to restrictions under the Company's Senior
Note indenture. The Note Program includes Junior Subordinated Notes extendible
by the investor having maturities of 90 and 180 days and one year after the date
of issue and fixed-term Junior Subordinated Notes having maturities of one, two,
three, four, five and 10 years after the date of issue. Interest rates on any
unsold Junior Subordinated Notes are subject to change by the Company from time
to time based on market 

                                      22

<PAGE>

conditions. Interest rates on extendible Junior Subordinated Notes may be 
adjusted at any roll-over date. During the first nine months of 1998, the 
Company issued $6.2 million of Junior Subordinated Notes.

     In May 1998, the Company and its provider of asset-backed securities
insurance entered into an arrangement whereby the Company was allowed to receive
$25 million of cash from certain spread accounts sooner than it would have
absent such arrangement. The arrangement may be extended on an annual basis upon
mutual arrangement by and between the Company and its provider of asset-backed
securities insurance. The Company pays a monthly fee to its provider of
asset-backed securities insurance to maintain the arrangement. The $25 million
will be replenished in relevant spread accounts by means of a $3 million
reduction in the level of monthly cash releases from the spread accounts
beginning in May 1999, unless the terms of the arrangement are extended.

                            PART II-OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     Under the applicable Securities and Exchange Commission rules, there is no
further new information with respect to legal proceedings that the Company is
required to report in connection with this Quarterly Report on Form 10-Q.

ITEM 2.  CHANGES IN SECURITIES

         None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURING HOLDERS

         None

ITEM 5.  OTHER INFORMATION

         None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      EXHIBITS

     The following exhibits are filed in response to Item 601 of Regulation S-K.


<TABLE>
<CAPTION>
EXHIBIT
   NO.    DESCRIPTION
-------   -----------
<S>       <C>

3.1       Restated Articles of Incorporation of the Company, as amended
          (incorporated by reference to Exhibit 3.1 to the Company's Quarterly
          Report on Form 10-Q for the quarter ended June 30, 1997).

3.2       Restated Bylaws of the Company, as amended (incorporated by reference
          to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the
          quarter ended June 30, 1998).
</TABLE>

                                      23

<PAGE>


<TABLE>
<CAPTION>
EXHIBIT
   NO.    DESCRIPTION
-------   -----------
<S>       <C>

4.1       Rights Agreement dated as of November 1, 1996, between the Company and
          Norwest Bank Minnesota, National Association, as Rights Agent
          (incorporated by reference to Exhibit 1 to the Company's Registration
          Statement on Form 8-A filed November 7, 1996).

4.2       Amendment No. 1 to Rights Agreement, dated January 16, 1998, to Rights
          Agreement, dated as of November 1, 1996 between the Company and
          Norwest Bank Minnesota, National Association, as Rights Agent
          (incorporated by reference to Exhibit 4.1 to the Company's Current
          Report on Form 8-K dated January 8, 1998 and filed January 20, 1998).

4.3       Amendment No. 2 to Rights Agreement, dated October 5, 1998, to Rights
          Agreement, dated as of November 1, 1996 between the Company and
          Norwest Bank Minnesota, National Association, as Rights Agent
          (incorporated by reference to Exhibit 4.1 to the Company's Current
          Report on Form 8-K dated September 30, 1998 and filed October 8,
          1998).

4.4       First Amendment and Restatement, dated as of April 28, 1995 of
          Indenture, dated July 1, 1994, between the Company and Norwest Bank
          Minnesota, National Association, as Trustee, relating to the Company's
          Unsecured Extendible Notes and Fixed Term Notes, including forms of
          Notes (incorporated by reference to Exhibit No. 4.8.1 to
          Post-Effective Amendment No. 2 on Form S-3 to the Company's
          Registration Statement on Form S-1, File No. 33-81512).

4.5       Instrument of Resignation, Appointment and Acceptance, dated as of
          August 13, 1998, among the Company, Norwest Bank Minnesota, National
          Association, as Resigning Trustee, and Marine Midland Bank, as
          Successor Trustee, relating to the Company's Unsecured Extendible
          Notes and Fixed Term Notes (incorporated by reference to Exhibit 4.2
          to the Company's Registration Statement on Form S-3, File No.
          333-60531).

4.6       First Supplemental Indenture dated as of August 13, 1998, to Indenture
          dated as of July 1, 1994 as amended and restated by that First
          Amendment and Restatement dated as of April 28, 1995 and as further
          amended by that Instrument of Resignation, Appointment and Acceptance
          dated as of August 13,1998, between the Company and Marine Midland
          Bank, as Trustee, relating to the Company's Unsecured Extendible Notes
          and Fixed Term Notes (incorporated by reference to Exhibit 4.3 to the
          Company's Registration Statement on Form S-3, File No. 333-60531).

4.7       Indenture dated as of March 15, 1996, between the Company and Norwest
          Bank Minnesota, National Association, as Trustee, relating to the
          Company's Subordinated Notes, Series 1996-A due 2001 (incorporated by
          reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K
          for the year ended December 31, 1996).

4.8       First Supplemental Indenture, dated as of March 15, 1996, to
          Indenture, dated as of March 15, 1996, between the Company and Norwest
          Bank Minnesota, National Association, as Trustee, relating to the
          Company's Subordinated Notes, Series 1996-A due 2001 (incorporated by
          reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K
          for the year ended December 31, 1996).

4.9       Indenture dated as of March 12, 1997, between the Company and Norwest
          Bank Minnesota, National Association, as Trustee, relating to the
          Company's 11 1/2% Senior Notes due 2007 (incorporated by reference to
          Exhibit 4.1 to the Company's Current Report on Form 8-K dated March
          12, 1997 and filed March 18, 1997).

4.10      First Supplemental Indenture, dated as of March 12, 1997 between the
          Company and Norwest Bank Minnesota, National Association, as Trustee,
          relating to $300,000,000 of the Company's 11 1/2% Senior Notes due
          2007 issued March 12, 1997 (incorporated by reference to Exhibit 4.2
          to the Company's Current Report on Form 8-K dated March 12, 1997 and
          filed March 18, 1997).

4.11      Warrant Agreement, dated as of March 12, 1997 by and between the
          Company and Norwest Bank Minnesota, National Association, as Warrant
          Agent (incorporated by reference to Exhibit 4.3 to the Company's
          Current Report on Form 8-K dated March 12, 1997 and filed March 18,
          1997).

4.12      Form of Unit (incorporated by reference to Exhibit 4.4 to the
          Company's Current Report on Form 8-K dated March 12, 1997 and filed
          March 18, 1997).

4.13      Form of 11 1/2% Senior Notes due March 15, 2007 (incorporated by
          reference to Exhibit 4.5 to the Company's Current Report on Form 8-K
          dated March 12, 1997 and filed March 18, 1997).

4.14      Form of Initial Warrant Certificate (incorporated by reference to
          Exhibit 4.6 to the Company's Current Report on Form 8-K dated March
          12, 1997 and filed March 18, 1997).

4.15      Second Supplemental Indenture, dated as of October 8, 1997, to
          Indenture, dated as of March 12, 1997, between the Company and Norwest
          Bank Minnesota, National Association, as Trustee, including form of
</TABLE>

                                      24

<PAGE>


<TABLE>
<CAPTION>
EXHIBIT
   NO.    DESCRIPTION
-------   -----------
<S>       <C>

          Notes , relating to $75,000,000 of the Company's 11 1/2% Senior Notes
          due 2007 issued October 8, 1997 (incorporated by reference to Exhibit
          4.1 to the Company's Current Report on Form 8-K dated October 8, 1997,
          filed October 15, 1997).

10.1      Series 1998-C Supplement, dated as of September 22, 1998, to Spread
          Account Agreement dated as of March 25, 1993, as amended and restated,
          among the Company, Arcadia Receivables Finance Corp., Financial
          Security Assurance, Inc. and Norwest Bank Minnesota, National
          Association (filed herewith).

10.2      Insurance and Indemnity Agreement, dated as of September 22, 1998,
          among Financial Security Assurance, Inc., Arcadia Automobile
          Receivables Trust 1998-C, Arcadia Receivables Finance Corp. and the
          Company (filed herewith).

10.3      Receivables Financing Agreement dated as of September 24, 1998 among
          Arcadia Receivables Finance Corp. IV, as Borrower, the Company, as
          Servicer and Custodian, the Lenders Parties thereto, Credit Suisse
          First Boston, New York Branch, as Agent, and Norwest Bank Minnesota,
          National Association, as Backup Servicer and Collateral Agent (filed
          herewith).

10.4      Receivables Purchase Agreement and Assignment dated as of September
          24, 1998, between Arcadia Receivables Finance Corp. IV, as Purchaser,
          and the Company, as Seller (filed herewith).

10.5      Receivables Transfer Agreement dated as of October 16, 1998, by and
          among Arcadia Receivables Finance Corp. V, as Seller, the Company, as
          Servicer, Park Avenue Receivables Corporation, as purchaser, and The
          Chase Manhattan Bank, as Funding Agent (filed herewith).

10.6      Receivables Purchase Agreement dated as of October 16, 1998, by and
          between Arcadia Receivables Finance Corp. V, as buyer, and the Company
          (filed herewith).

10.7      Receivables Purchase Agreement dated as of October 16, 1998, by and
          between Arcadia Receivables Finance Corp. V, 10.6 as buyer, and the
          Company (filed herewith). Amendments to 1994-1997 Restricted Stock
          Election Plan (filed herewith).

10.8      Amendments to 1998-2000 Restricted Stock Election Plan (filed
          herewith).

10.9      Amendments to 1992 Director Stock Option Plan (filed herewith).

27.1      Financial Data Schedule (filed herewith).
</TABLE>

            (b)  REPORTS ON FORM 8-K

  None

                                      25

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                             ARCADIA FINANCIAL LTD.

<TABLE>
<CAPTION>

        SIGNATURE                               TITLE                                   DATE
        --------                                -----                                   ----
<S>                         <C>                                                   <C>
/s/ Richard A. Greenawalt   President, Chief Executive Officer, and Director      November 12,1998
--------------------------
  Richard A. Greenawalt

    /s/ John A. Witham      Executive Vice President and Chief Financial Officer  November 12,1998
--------------------------  (Principal Financial Officer)
      John A. Witham      

  /s/ Brian S. Anderson     Senior Vice President, Corporate Controller and       November 12,1998
--------------------------  Assistant Secretary (Principal Accounting Officer)
    Brian S. Anderson     

</TABLE>

                                      26

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>

EXHIBIT
 NO.      DESCRIPTION
-------   -----------
<S>       <C>

3.1       Restated Articles of Incorporation of the Company, as amended
          (incorporated by reference to Exhibit 3.1 to the Company's Quarterly
          Report on Form 10-Q for the quarter ended June 30, 1997).

3.2       Restated Bylaws of the Company, as amended (incorporated by reference
          to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the
          quarter ended June 30, 1998).

4.1       Rights Agreement dated as of November 1, 1996, between the Company and
          Norwest Bank Minnesota, National Association, as Rights Agent
          (incorporated by reference to Exhibit 1 to the Company's Registration
          Statement on Form 8-A filed November 7, 1996).

4.2       Amendment No. 1 to Rights Agreement, dated January 16, 1998, to Rights
          Agreement, dated as of November 1, 1996 between the Company and
          Norwest Bank Minnesota, National Association, as Rights Agent
          (incorporated by reference to Exhibit 4.1 to the Company's Current
          Report on Form 8-K dated January 8, 1998 and filed January 20, 1998).

4.3       Amendment No. 2 to Rights Agreement, dated October 5, 1998, to Rights
          Agreement, dated as of November 1, 1996 between the Company and
          Norwest Bank Minnesota, National Association, as Rights Agent
          (incorporated by reference to Exhibit 4.1 to the Company's Current
          Report on Form 8-K dated September 30, 1998 and filed October 8,
          1998).

4.4       First Amendment and Restatement, dated as of April 28, 1995 of
          Indenture, dated July 1, 1994, between the Company and Norwest Bank
          Minnesota, National Association, as Trustee, relating to the Company's
          Unsecured Extendible Notes and Fixed Term Notes, including forms of
          Notes (incorporated by reference to Exhibit No. 4.8.1 to
          Post-Effective Amendment No. 2 on Form S-3 to the Company's
          Registration Statement on Form S-1, File No. 33-81512).

4.5       Instrument of Resignation, Appointment and Acceptance, dated as of
          August 13, 1998, among the Company, Norwest Bank Minnesota, National
          Association, as Resigning Trustee, and Marine Midland Bank, as
          Successor Trustee, relating to the Company's Unsecured Extendible
          Notes and Fixed Term Notes (incorporated by reference to Exhibit 4.2
          to the Company's Registration Statement on Form S-3, File No.
          333-60531).

4.6       First Supplemental Indenture dated as of August 13, 1998, to Indenture
          dated as of July 1, 1994 as amended and restated by that First
          Amendment and Restatement dated as of April 28, 1995 and as further
          amended by that Instrument of Resignation, Appointment and Acceptance
          dated as of August 13,1998, between the Company and Marine Midland
          Bank, as Trustee, relating to the Company's Unsecured Extendible Notes
          and Fixed Term Notes (incorporated by reference to Exhibit 4.3 to the
          Company's Registration Statement on Form S-3, File No. 333-60531).

4.7       Indenture dated as of March 15, 1996, between the Company and Norwest
          Bank Minnesota, National Association, as Trustee, relating to the
          Company's Subordinated Notes, Series 1996-A due 2001 (incorporated by
          reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K
          for the year ended December 31, 1996).

4.8       First Supplemental Indenture, dated as of March 15, 1996, to
          Indenture, dated as of March 15, 1996, between the Company and Norwest
          Bank Minnesota, National Association, as Trustee, relating to the
          Company's Subordinated Notes, Series 1996-A due 2001 (incorporated by
          reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K
          for the year ended December 31, 1996).

4.9       Indenture dated as of March 12, 1997, between the Company and Norwest
          Bank Minnesota, National Association, as Trustee, relating to the
          Company's 11 1/2% Senior Notes due 2007 (incorporated by reference to
          Exhibit 4.1 to the Company's Current Report on Form 8-K dated March
          12, 1997 and filed March 18, 1997).

4.10      First Supplemental Indenture, dated as of March 12, 1997 between the
          Company and Norwest Bank Minnesota, National Association, as Trustee,
          relating to $300,000,000 of the Company's 11 1/2% Senior Notes due
          2007 issued March 12, 1997 (incorporated by reference to Exhibit 4.2
          to the Company's Current Report on Form 8-K dated March 12, 1997 and
          filed March 18, 1997).

4.11      Warrant Agreement, dated as of March 12, 1997 by and between the
          Company and Norwest Bank Minnesota, National Association, as Warrant
          Agent (incorporated by reference to Exhibit 4.3 to the 
</TABLE>
                                      27

<PAGE>


<TABLE>
<CAPTION>

EXHIBIT
 NO.      DESCRIPTION
-------   -----------
<S>       <C>

          Company's Current Report on Form 8-K dated March 12, 1997 and filed 
          March 18, 1997).

4.12      Form of Unit (incorporated by reference to Exhibit 4.4 to the
          Company's Current Report on Form 8-K dated March 12, 1997 and filed
          March 18, 1997).

4.13      Form of 11 1/2% Senior Notes due March 15, 2007 (incorporated by
          reference to Exhibit 4.5 to the Company's Current Report on Form 8-K
          dated March 12, 1997 and filed March 18, 1997).

4.14      Form of Initial Warrant Certificate (incorporated by reference to
          Exhibit 4.6 to the Company's Current Report on Form 8-K dated March
          12, 1997 and filed March 18, 1997).

4.15      Second Supplemental Indenture, dated as of October 8, 1997, to
          Indenture, dated as of March 12, 1997, between the Company and Norwest
          Bank Minnesota, National Association, as Trustee, including form of
          Notes , relating to $75,000,000 of the Company's 11 1/2% Senior Notes
          due 2007 issued October 8, 1997 (incorporated by reference to Exhibit
          4.1 to the Company's Current Report on Form 8-K dated October 8, 1997,
          filed October 15, 1997).

10.1      Series 1998-C Supplement, dated as of September 22, 1998, to Spread
          Account Agreement dated as of March 25, 1993, as amended and restated,
          among the Company, Arcadia Receivables Finance Corp., Financial
          Security Assurance, Inc. and Norwest Bank Minnesota, National
          Association (filed herewith).

10.2      Insurance and Indemnity Agreement, dated as of September 22, 1998,
          among Financial Security Assurance, Inc., Arcadia Automobile
          Receivables Trust 1998-C, Arcadia Receivables Finance Corp. and the
          Company (filed herewith).

10.3      Receivables Financing Agreement dated as of September 24, 1998 among
          Arcadia Receivables Finance Corp. IV, as Borrower, the Company, as
          Servicer and Custodian, the Lenders Parties thereto, Credit Suisse
          First Boston, New York Branch, as Agent, and Norwest Bank Minnesota,
          National Association, as Backup Servicer and Collateral Agent (filed
          herewith).

10.4      Receivables Purchase Agreement and Assignment dated as of September
          24, 1998, between Arcadia Receivables Finance Corp. IV, as Purchaser,
          and the Company, as Seller (filed herewith).

10.5      Receivables Transfer Agreement dated as of October 16, 1998, by and
          among Arcadia Receivables Finance Corp. V, as Seller, the Company, as
          Servicer, Park Avenue Receivables Corporation, as purchaser, and The
          Chase Manhattan Bank, as Funding Agent (filed herewith).

10.6      Receivables Purchase Agreement dated as of October 16, 1998, by and
          between Arcadia Receivables Finance Corp. V, as buyer, and the Company
          (filed herewith).

10.7      Amendments to 1994-1997 Restricted Stock Election Plan (filed
          herewith).

10.8      Amendments to 1998-2000 Restricted Stock Election Plan (filed
          herewith).

10.9      Amendments to 1992 Director Stock Option Plan (filed herewith).

27.1      Financial Data Schedule (filed herewith).
</TABLE>


          (b)       REPORTS ON FORM 8-K

  None

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