<PAGE>
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-Q
 
             /X/  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
                                       OR
 
             / /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarter ended June 30, 1997               Commission file number 0-20526
 
                            ------------------------
 
                             ARCADIA FINANCIAL LTD.
             (Exact name of registrant as specified in its charter)
 
             MINNESOTA                            41-1664848
    (State or other jurisdiction       (I.R.S. Employer Identification
 of incorporation or organization)                 Number)
 
            7825 WASHINGTON AVENUE SOUTH, MINNEAPOLIS, MN 55439-2435
                    (Address of principal executive office)
 
       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
July 28, 1997 was 38,097,501.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                                FORM 10-Q INDEX
 
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>       <C>                                                               <C>
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...............................................   22
 
Item 2.   Changes in Securities...........................................   22
 
Item 3.   Defaults Upon Senior Securities.................................   22
 
Item 4.   Submission of Matters to a Vote of Security Holders.............   22
 
Item 5.   Other Information...............................................   24
 
Item 6.   Exhibits and Reports on Form 8-K................................   24
 
SIGNATURES................................................................   27
 
EXHIBIT INDEX.............................................................   28
</TABLE>
 
    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
 
    This Form 10-Q for quarter ended June 30, 1997 contains certain
forward-looking statements as defined in the Private Securities Litigation
Reform Act of 1995, which can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate," "should"
or "continue" or the negative thereof or other variations thereon or comparable
terminology. The matters set forth under the captions "Management's Discussion
and Analysis of Financial condition and Results of Operations--Cautionary
Statements" herein and "Cautionary Statements" in Exhibit 99.1 to the 1996
Annual Report on Form 10-K constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to differ
materially from those in such forward-looking statements.
 
                                       2
<PAGE>
                             ARCADIA FINANCIAL LTD.
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                                   (UNAUDITED)
                                                                                  JUNE 30, 1997  DECEMBER 31, 1996
                                                                                  -------------  -----------------
<S>                                                                               <C>            <C>
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                                      ASSETS
 
Cash and cash equivalents.......................................................   $    28,135      $    16,057
Due from securitization trust...................................................       168,211          177,076
Auto loans held for sale........................................................        47,472           36,285
Finance income receivable.......................................................       338,092          362,916
Restricted cash in spread accounts..............................................       189,643          142,977
Furniture, fixtures and equipment...............................................        16,465           13,630
Other assets....................................................................        34,576           29,289
                                                                                  -------------        --------
      Total assets..............................................................   $   822,594      $   778,230
                                                                                  -------------        --------
                                                                                  -------------        --------
 
                                       LIABILITIES AND SHAREHOLDERS' EQUITY
 
Amounts due under warehouse facilities..........................................   $    97,722      $   111,140
Senior term notes...............................................................       291,671          145,000
Subordinated notes..............................................................        51,742           53,689
Capital lease obligations.......................................................         6,583            7,729
Deferred income taxes...........................................................        11,620           54,387
Accounts payable and accrued liabilities........................................        27,986           13,192
                                                                                  -------------        --------
      Total liabilities.........................................................       487,324          385,137
 
Commitments and contingencies
 
Shareholders' equity:
  Capital stock, $.01 par value, 100,000,000 shares authorized:
    Common stock 38,060,023 and 36,416,802 shares issued and outstanding,
      respectively..............................................................           381              364
  Additional paid-in capital....................................................       321,943          310,187
  Retained earnings.............................................................        12,946           82,542
                                                                                  -------------        --------
      Total shareholders' equity................................................       335,270          393,093
                                                                                  -------------        --------
      Total liabilities and shareholders' equity................................   $   822,594      $   778,230
                                                                                  -------------        --------
                                                                                  -------------        --------
</TABLE>
 
           See notes to unaudited consolidated financial statements.
 
                                       3
<PAGE>
                             ARCADIA FINANCIAL LTD.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED             SIX MONTHS ENDED
                                                                JUNE 30,                      JUNE 30,
                                                      ----------------------------  -----------------------------
                                                          1997           1996            1997           1996
                                                      -------------  -------------  --------------  -------------
<S>                                                   <C>            <C>            <C>             <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUES:
  Net interest margin...............................  $      19,130  $      15,085  $       37,495  $      27,385
  Gain on sale of loans, net of $98.0 million
    special charge in March 1997....................         26,459         25,452         (51,428)        50,681
  Servicing fee income..............................         11,047          6,557          20,525         12,300
  Other non-interest income.........................          2,203          2,449           4,384          3,173
                                                      -------------  -------------  --------------  -------------
    Total revenues..................................         58,839         49,543          10,976         93,539
EXPENSES:
  Salaries and benefits.............................         15,115          8,813          29,593         17,910
  General and administrative and other operating
    expenses........................................         23,810         11,124          49,975         22,043
                                                      -------------  -------------  --------------  -------------
    Total operating expenses........................         38,925         19,937          79,568         39,953
  Long-term debt and other interest expense.........         10,651          6,433          18,242         11,949
                                                      -------------  -------------  --------------  -------------
    Total expenses..................................         49,576         26,370          97,810         51,902
                                                      -------------  -------------  --------------  -------------
  Operating income (loss) before income taxes and
    extraordinary item..............................          9,263         23,173         (86,834)        41,637
  Income tax expense (benefit)......................          3,520          8,458         (33,066)        15,844
                                                      -------------  -------------  --------------  -------------
  Income (loss) before extraordinary item...........          5,743         14,715         (53,768)        25,793
  Extraordinary item................................             --             --         (15,828)            --
                                                      -------------  -------------  --------------  -------------
  Net income (loss).................................  $       5,743  $      14,715  $      (69,596) $      25,793
                                                      -------------  -------------  --------------  -------------
                                                      -------------  -------------  --------------  -------------
PRIMARY EARNINGS PER SHARE:
  Net income (loss) per common share before
    extraordinary item..............................  $        0.15  $        0.43  $        (1.37) $        0.85
  Extraordinary item per common share...............             --             --           (0.41)            --
                                                      -------------  -------------  --------------  -------------
  Net income (loss) per common share................  $        0.15  $        0.43  $        (1.78) $        0.85
                                                      -------------  -------------  --------------  -------------
                                                      -------------  -------------  --------------  -------------
FULLY DILUTED EARNINGS PER SHARE:
  Net income (loss) per share before extraordinary
    item............................................  $        0.15  $        0.40  $        (1.37) $        0.76
  Extraordinary item per share......................             --             --           (0.41)            --
                                                      -------------  -------------  --------------  -------------
  Net income (loss) per share.......................  $        0.15  $        0.40  $        (1.78) $        0.76
                                                      -------------  -------------  --------------  -------------
                                                      -------------  -------------  --------------  -------------
Weighted average common and common equivalent shares
  outstanding:
  Primary...........................................     39,182,748     33,508,215      39,163,325     29,397,320
  Fully diluted.....................................     39,182,748     37,205,287      39,239,574     33,981,805
</TABLE>
 
                                       4
<PAGE>
                             ARCADIA FINANCIAL LTD.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                       SIX MONTHS ENDED JUNE 30,
                                                                                      ----------------------------
                                                                                          1997           1996
                                                                                      -------------  -------------
<S>                                                                                   <C>            <C>
(DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................................................  $     (69,596) $      25,793
Adjustments to reconcile net income to net cash used in operating activities:
  Depreciation and amortization.....................................................          3,262          1,858
  (Increase) decrease in assets:
    Automobile loans held for sale:
      Purchases of automobile loans.................................................     (1,557,818)    (1,291,687)
      Sales of automobile loans.....................................................      1,522,135      1,330,262
      Repayments of automobile loans................................................         24,496         27,681
    Finance income receivable.......................................................         24,824        (78,465)
    Restricted cash in spread accounts..............................................        (46,666)       (38,368)
    Due from securitization trusts..................................................          8,865       (151,635)
    Advances due to servicer........................................................          3,390         (1,676)
    Servicing fee receivable........................................................           (579)          (557)
    Prepaid expenses................................................................          1,048            292
    Other assets....................................................................         (4,592)        (1,289)
  Increase (decrease) in liabilities:
    Deferred income taxes...........................................................        (42,767)        15,843
    Accounts payable and accrued liabilities........................................         14,794          6,927
                                                                                      -------------  -------------
        Total cash used in operating activities.....................................       (119,204)      (155,021)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchase of furniture, fixtures and equipment...................................         (5,006)        (1,451)
Purchase of subordinated certificates...............................................             --         (1,219)
Collections on subordinated certificates............................................            572            539
                                                                                      -------------  -------------
        Total cash used in investing activities.....................................         (4,434)        (2,131)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Stock..........................................          2,485        150,500
Payment of dividends on 8% Convertible Preferred Stock..............................             --           (807)
Proceeds from borrowings under warehouse facilities.................................      1,074,410        952,596
Repayment of borrowings under warehouse facilities..................................     (1,087,828)      (961,289)
Subordinated notes, net proceeds (repayments).......................................         (1,947)        39,283
Repayments of long-term debt........................................................       (145,000)            --
Proceeds from issuance of Senior Notes..............................................        300,000             --
Deferred debt issuance cost, net....................................................         (5,127)          (664)
Reduction of capital lease obligations..............................................         (1,277)        (1,232)
                                                                                      -------------  -------------
        Total cash provided by financing activities.................................        135,716        178,387
                                                                                      -------------  -------------
Net increase in cash and cash equivalents...........................................         12,078         21,235
Cash and cash equivalents at beginning of period....................................         16,057          1,340
                                                                                      -------------  -------------
Cash and cash equivalents at end of period..........................................  $      28,135  $      22,575
                                                                                      -------------  -------------
                                                                                      -------------  -------------
Supplemental disclosures of cash flow information:
  Non cash activities:
    Additions to capital leases.....................................................  $         132  $       4,754
  Cash paid for:
    Interest........................................................................  $      14,656  $      16,417
</TABLE>
 
            See notes to unaudited consolidated financial statements
 
                                       5
<PAGE>
                             ARCADIA FINANCIAL LTD.
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                 FOR THE SIX MONTHS ENDED JUNE 30, 1997
                                                     --------------------------------------------------------------
                                                      NUMBER OF                 ADDITIONAL
                                                        COMMON     COMMON PAR    PAID IN     RETAINED
                                                        SHARES        VALUE      CAPITAL     EARNINGS      TOTAL
                                                     ------------  -----------  ----------  -----------  ----------
 
<S>                                                  <C>           <C>          <C>         <C>          <C>
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
BALANCE, DECEMBER 31, 1996.........................    36,416,802   $     364   $  310,187  $    82,542  $  393,093
Issuance of options and warrants...................            --          --        8,590           --       8,590
Exercise of options and warrants...................     1,476,539          15        2,342           --       2,357
Issuance of Common Stock:
  Benefit plans....................................       166,682           2          125           --         127
Amortization of deferred compensation..............            --          --          699           --         699
Net income.........................................            --          --           --      (69,596)    (69,596)
                                                     ------------       -----   ----------  -----------  ----------
BALANCE, JUNE 30, 1997.............................    38,060,023   $     381   $  321,943  $    12,946  $  335,270
                                                     ------------       -----   ----------  -----------  ----------
                                                     ------------       -----   ----------  -----------  ----------
</TABLE>
 
           See notes to unaudited consolidated financial statements.
 
                                       6
<PAGE>
                             ARCADIA FINANCIAL LTD.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                      FOR THE QUARTER ENDED JUNE 30, 1997
 
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 1996 Annual
Report filed on Form 10-K filed February 10, 1997.
 
    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 June 30, 1996 balances to
conform to current period presentation.
 
    FINANCE INCOME RECEIVABLE.  In April 1997, the Company changed its
accounting policy with respect to valuation of repossessed vehicles. This policy
requires the Company to record the estimated realizable value of repossessed
vehicles at amounts which approximate that which is expected to be achieved
through wholesale disposition. See Management's Discussion and Analysis--SPECIAL
CHARGES for additional discussion.
 
    Effective January 1, 1997 the Company is required to account for gains on
sale of loans in accordance with Statement of Financial Accounting Standards No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities" ("SFAS 125"). The Company's implementation of
SFAS 125 incorporates the change in accounting policy discussed above in
determining the fair value of assets retained by the Company. In addition, the
Company has applied a discount rate in determining the present value of
estimated future cash flows that reflects its revised estimates of the yields
required by purchasers of similar financial instruments. Exclusive of the effect
of the change in accounting policy discussed above, the implementation of SFAS
125 did not have a significant effect on the Company's accounting for gains on
sale of loans.
 
    EARNINGS PER SHARE.  In February 1997, the Financial Accounting Standards
Board issued Statement No. 128, "Earnings per Share," ("SFAS 128") which is
required to be adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements for calculating primary
earnings per share, the dilutive effect of common stock equivalents will be
excluded. Primary and fully-diluted earnings per share, if computed under SFAS
128, for the three and six months ended June 30, 1997 and 1996, is presented
below:
 
<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                JUNE 30,              JUNE 30,
                                                          --------------------  --------------------
                                                            1997       1996       1997       1996
                                                          ---------  ---------  ---------  ---------
<S>                                                       <C>        <C>        <C>        <C>
Primary.................................................  $    0.15  $    0.46  $   (1.80) $    0.92
Fully-diluted...........................................  $    0.15  $    0.40  $   (1.78) $    0.76
</TABLE>
 
                                       7
<PAGE>
                             ARCADIA FINANCIAL LTD.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                FOR THE QUARTER ENDED JUNE 30, 1997 (CONTINUED)
 
2. FINANCE INCOME RECEIVABLE
 
    The following table sets forth the components of finance income receivable.
 
<TABLE>
<CAPTION>
                                                                                 AT             AT
                                                                              JUNE 30,     DECEMBER 31,
                                                                                1997           1996
                                                                           --------------  ------------
<S>                                                                        <C>             <C>
(DOLLARS IN THOUSANDS)
Estimated cash flows on loans sold, net of estimated prepayments.........  $   657,319      $ 549,876
Deferred servicing income................................................      (77,308)      (59,473)
Reserve for loan losses..................................................     (209,638)      (95,005)
                                                                           --------------  ------------
Undiscounted cash flows on loans sold, net of estimated prepayments......      370,373        395,398
Discount to present value................................................      (32,281)      (32,482)
                                                                           --------------  ------------
                                                                           $   338,092      $ 362,916
                                                                           --------------  ------------
                                                                           --------------  ------------
Reserve for loan losses as a percentage of servicing portfolio...........         4.64%          2.51%
</TABLE>
 
    The following represents the roll-forward of the finance income receivable
balance:
 
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S>                                                                                 <C>
BALANCE, DECEMBER 31, 1996........................................................       $  362,916
  Excess cash flows on loans sold, net of estimated prepayments...................          118,944
  Recognition of present value effect of discounted cash flows....................           10,932
  Less:
    Excess cash flows deposited to spread accounts (1)............................          (56,700)
    Change in estimate of future recovery rates (2)...............................          (98,000)
                                                                                           --------
BALANCE, JUNE 30, 1997............................................................       $  338,092
                                                                                           --------
                                                                                           --------
</TABLE>
 
------------------------
 
(1) Includes approximately $1.3 million of cash released to the Company from
    remaining spread account balances associated with two securitization
    transactions initiated in 1993 and closed out during the first quarter of
    1997.
 
(2) Refer to Management's Discussion and Analysis--SPECIAL CHARGES.
 
3. RESTRICTED CASH IN SPREAD ACCOUNTS
 
    The following represents the roll-forward of restricted cash in spread
accounts:
 
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S>                                                                                 <C>
BALANCE, DECEMBER 31, 1996........................................................       $  142,977
  Excess cash flows deposited to spread accounts..................................           56,700
  Initial spread account deposits.................................................           19,375
  Interest earned on spread accounts..............................................            4,302
  Less:
    Excess cash flows released to the Company.....................................          (33,711)
                                                                                           --------
BALANCE, JUNE 30, 1996............................................................       $  189,643
                                                                                           --------
                                                                                           --------
</TABLE>
 
                                       8
<PAGE>
                             ARCADIA FINANCIAL LTD.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                FOR THE QUARTER ENDED JUNE 30, 1997 (CONTINUED)
 
4. OTHER ASSETS
 
<TABLE>
<CAPTION>
                                                                                       AT               AT
                                                                                  JUNE 30, 1997  DECEMBER 31, 1996
                                                                                  -------------  -----------------
<S>                                                                               <C>            <C>
(DOLLARS IN THOUSANDS)
Advances due to servicer........................................................   $     4,749       $   8,140
Deferred debt issuance costs....................................................         9,593           4,438
Investment in subordinated certificates.........................................         3,757           4,329
Servicing fee receivable........................................................         3,700           3,121
Prepaid expenses................................................................         1,707           2,755
Servicing assets................................................................         2,472              --
Other assets....................................................................         8,598           6,506
                                                                                  -------------        -------
                                                                                   $    34,576       $  29,289
                                                                                  -------------        -------
                                                                                  -------------        -------
</TABLE>
 
5. SUBORDINATED NOTES
 
<TABLE>
<CAPTION>
                                                                                       AT               AT
                                                                                  JUNE 30, 1997  DECEMBER 31, 1996
                                                                                  -------------  -----------------
<S>                                                                               <C>            <C>
(DOLLARS IN THOUSANDS)
Senior subordinated notes, Series 1996-A........................................   $    30,000       $  30,000
Junior subordinated notes.......................................................        21,742          23,689
                                                                                  -------------        -------
                                                                                   $    51,742       $  53,689
                                                                                  -------------        -------
                                                                                  -------------        -------
</TABLE>
 
6. SENIOR NOTES
 
    In March 1997, the Company sold to the public $300.0 million aggregate
principal amount of 11.50% Senior Notes, due 2007 (the "Senior Notes") and
received net proceeds of approximately $291.2 million. Each note includes a
detachable Warrant, and such warrant when exercised entitle the holders to
acquire an aggregate of 2,052,000 shares of the Company's common stock. Interest
on the Senior Notes is payable semi-annually on March 15 and September 15 of
each year, beginning September 15, 1997. The Notes may not be redeemed prior to
March 15, 2002. At any time on such date or thereafter, the Company may at its
option elect to redeem the Senior Notes, in whole or in part, at a premium
ranging from 105.75% to 101.92% of the principal amount of Senior Notes redeemed
between the years 2002-2004, respectively, or 100% thereof on or after March 15,
2005, plus accrued interest to and including the redemption date. The Notes are
general, unsecured obligations of the Company and will rank pari passu in right
of payment to all existing and future Senior Debt (as defined in the indenture
governing the Senior Notes). Approximately $173.5 million of the net proceeds
from the issuance of the Senior Notes was used to repurchase and covenant
defease the Company's 13% Senior Term Notes (including a prepayment premium and
accrued interest) and the remainder is available for working capital. The
premium paid for the early extinguishment of debt (approximately $20.3 million)
and the charge-off of remaining capitalized debt financing costs (approximately
$3.2 million) were recognized and accounted for as an extraordinary item.
 
7. SHAREHOLDERS' EQUITY
 
    As discussed in Note No. 6 above, the Company issued Warrants to purchase an
aggregate of 2,052,000 shares of the Company's common stock in connection with
its issuance of Senior Notes. The Warrants are exercisable one year from the
date of issue at an exercise price of $11.00 per share. The fair
 
                                       9
<PAGE>
                             ARCADIA FINANCIAL LTD.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                FOR THE QUARTER ENDED JUNE 30, 1997 (CONTINUED)
 
7. SHAREHOLDERS' EQUITY (CONTINUED)
value of the Warrants on the date of issue, as determined by the Company, has
been recognized as a component of additional paid-in capital.
 
8. EMPLOYEE BENEFITS AND STOCK INCENTIVE PLANS
 
    The Company applies APB No. 25 "Accounting for Stock Issued to Employees,"
in accounting for its stock incentive plans. Accordingly, no compensation cost
has been recognized for such plans during the periods reported. Had compensation
costs for the Company's stock incentive plans been determined as prescribed by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the Company's net income and earnings per share would have been
equal to the amounts listed below.
 
<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                             JUNE 30,              JUNE 30,
                                                                       --------------------  ---------------------
                                                                         1997       1996        1997       1996
                                                                       ---------  ---------  ----------  ---------
<S>                                                                    <C>        <C>        <C>         <C>
(DOLLARS IN THOUSANDS)
Pro-forma net income (loss)..........................................  $   5,731  $  14,315  $  (69,762) $  25,179
Pro-forma earnings (loss) per share:
  Primary............................................................  $    0.15  $    0.40  $    (1.78) $    0.82
  Fully diluted......................................................  $    0.15  $    0.38  $    (1.78) $    0.74
</TABLE>
 
    The fair value of the options was estimated at date of grant using a
Black-Scholes option pricing model with a weighted average risk free interest
rate of 6.7% for 1997 and 1996, volatility factor of the expected market price
of the Company's common stock of .73 and an option life of five or ten years.
 
                                       10
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
OVERVIEW
 
    Substantially all of the Company's earnings are derived from the purchase,
securitization and servicing of consumer automobile loans originated primarily
by car dealers affiliated with major foreign and domestic manufacturers. As of
June 30, 1997, the Company had entered into dealer agreements with more than
8,800 dealers in 42 states, a substantial majority of which have sold loans to
the Company during the past six months. Loans are purchased through 18 regional
buying centers serving as "hubs," supplemented by a network of dealer
development representatives ("DDRs"). DDRs generate loans in "hubs" or "spokes"
(a market outside the specific area of a "hub"), while credit approval and loan
processing, are generally performed at the "hub" or at the Company's
headquarters in Minneapolis, Minnesota. The Company services loans through its
regional buying centers, national customer service center and four regional
collection centers.
 
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
 
    RESULTS OF OPERATIONS
 
    SPECIAL CHARGES.  Included in the Company's financial results during the six
month period ended June 30, 1997 are two special charges taken in March 1997.
These charges include a non-cash after-tax charge of approximately $63.9
million, due to a change in accounting estimate 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 (see Management's Discussion and
Analysis--EXTRAORDINARY ITEM).
 
    Approximately $60.8 million of the $63.9 million after-tax charge is due to
(i) a change in estimated recovery rates on current repossessed inventory and
anticipated future inventory arising from existing securitization transactions,
and (ii) a change in the Company's accounting policy with respect to the
estimated recovery rate realized upon disposition of repossessed inventory. The
remaining $3.1 million after-tax charge relates to various litigation and
severance charges (see Management's Discussion and Analysis--OPERATING
EXPENSES).
 
    The recovery rate on repossessed inventory is measured by the liquidation
amount realized on the repossessed vehicles as a percentage of the outstanding
principal balance of the charged-off loans associated with the repossessed
vehicles. The Company's change in estimated recovery rates was based, in part,
on a decline in the weighted average recovery rate experienced by the Company
during the first three months of 1997. During the first quarter of 1997, the
weighted average recovery rate on repossessed vehicles declined to approximately
70% from approximately 83% for the year ended December 31, 1996. This reduction
in recovery rates primarily reflects increased liquidation of repossessed
inventory through wholesale auctions. The Company increased its use of wholesale
auctions after a review by the Company's new chief executive officer and other
members of management conducted in mid-March 1997 indicated that based on the
number of retail dispositions during the first half of March 1997 the Company's
current retail distribution channels were not sufficient to liquidate vehicles
at a pace satisfactory to management and would not, in the foreseeable future,
be adequate to exceed the number of additional repossessions expected each
month. In order to reduce the Company's repossessed inventory to a level more
acceptable to management, the Company sold a significantly increased number of
repossessed vehicles at wholesale auctions during the last half of March 1997.
As a result, the Company sold approximately 35% of first quarter sales of
repossessed vehicles through wholesale auctions, as compared with 30% during the
calendar year 1996. The Company's recovery rates were also affected during the
first quarter of 1997 due to lower pricing of repossessed vehicles sold through
the Company's retail distribution channels in an attempt to accelerate the
liquidation of repossessed vehicles while maintaining consistent credit quality.
 
                                       11
<PAGE>
    Estimated recovery rates are also determined by an analysis of anticipated
recovery trends in future periods. Based on its evaluation of certain events
occurring late in the first quarter of 1997, the Company believes that recovery
rates are not likely to increase above the level experienced during the first
quarter of 1997 and that certain events may cause a further decline in these
rates in future periods. As explained above, the Company does not believe that
it has sufficient capacity to sell an increasing number of repossessed vehicles
through its current network of retail consignment dealers. Accordingly, the
Company expects to control the size of its repossessed inventory by continuing
to increase the use of wholesale auctions to dispose of repossessed vehicles. In
April 1997, the Company's new chief executive officer completed a review of the
Company's retail disposition strategy. Consequently, based on the recommendation
of the new chief executive officer, the Company adopted modifications to its
retail disposition strategy that are intended to reduce liquidity requirements
of this strategy and establish more efficient operating procedures. The
Company's retail disposition strategy generally requires it to hold a
repossessed vehicle in inventory for a longer period of time than would a
wholesale disposition strategy, and as a consequence delays the receipt of
excess cash flows from securitization trusts following default of a loan. In
light of this, the Company has established a policy that limits the length of
time a repossessed vehicle may be held for resale through retail channels. The
limitation on the length of time a repossessed vehicle is held for sale is
intended to reduce delays in cash flow, but may reduce overall recovery rates
due to an increased use of wholesale auctions. Under the modified retail
disposition strategy, the Company intends to measure the effectiveness of the
strategy by the program's profitability as compared to a wholesale disposition
strategy. Management of the retail disposition program will be accountable for
optimizing the recovery rates on the repossessed inventory and achieving
acceptable profitability levels. As a result, it is expected that managers
responsible for the modified retail disposition program will increase the use of
wholesale auctions to control inventory size and the costs associated with the
operation of the program. The Company's retail disposition strategy, as
modified, is relatively new and evolving, and therefore, the Company's
management has concluded that recoveries under the program are uncertain and may
be subject to further change.
 
    In addition, the Company anticipates a continued softening of the used car
market and therefore lower retail and wholesale prices. Factors contributing to
this market softening include the recent start-up of superstore competition and
forecasted levels of used lease vehicles that will be available in the market.
Further, the Company considered the risk of potentially higher interest rates
which have a direct impact on pricing of vehicles. The Company concluded that,
for the reasons described above, future recovery rates (after giving effect to
related costs) will be lower for the foreseeable future than those reflected in
the Company's prior accounting estimates. In light of these items, the Company
elected to record an after-tax charge of approximately $45.3 million in March
1997 which reflected an adjustment of current inventory and estimated reduction
to future cash flows due to lower expected recovery rates on future inventory
arising from existing securitization trusts.
 
    At the same time as the Company changed its estimated recovery rates, the
Company also deemed it appropriate to review its accounting policy concerning
the valuation of repossessed vehicles in light of the modifications to its
retail disposition strategy and other factors. As a result of this review, the
Company has decided to change its accounting policy concerning the valuation of
repossessed vehicles. This change in policy requires the Company to record all
current and expected repossessed vehicles at recovery rates that reflect
expected values to be achieved through wholesale auctions (which the company
currently believes to be approximately 60% of principal balance outstanding),
regardless of the specific asset disposition strategy to be employed. To the
extent actual results are more favorable than estimates, greater recoveries are
reflected in current period earnings when the vehicles are liquidated. As a
consequence of this policy change, the Company's results of operations will
depend, in part, on sales prices for used vehicles in wholesale auctions.
Decline in wholesale recovery rates may adversely effect the Company's results
unless offset by higher retail recovery rates during the period. The Company
believes that the revised accounting policy will better reflect its modified
retail disposition strategy and, accommodate a better understanding by users of
the Company's financial statements. Moreover, the Company believes this change
in accounting policy provides a financial presentation that is more comparable
to other consumer finance companies and
 
                                       12
<PAGE>
responds to recent events in the consumer finance industry which, the Company
believes, provides further evidence that lower estimated recovery rates are
appropriate. For these reasons, the Company believes the change in accounting
policy adopted in April 1997 reflects a preferable application of generally
accepted accounting principles. Because the change in policy is inseparable from
the estimation process referred to above, it is appropriate to reflect the
effect of the change in accounting policy of approximately $15.5 million
after-tax, as a reduction to current period earnings.
 
    NET INTEREST MARGIN.  The components of net interest margin for each of the
three and six months ended June 30 were:
 
<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                    JUNE 30,              JUNE 30,
                                                              --------------------  --------------------
                                                                1997       1996       1997       1996
                                                              ---------  ---------  ---------  ---------
<S>                                                           <C>        <C>        <C>        <C>
(DOLLARS IN THOUSANDS)
Interest income on loans, net of interest expense on
  warehouse facilities......................................  $   8,961  $   7,434  $  17,131  $  12,640
Interest income on short-term investments, spread accounts
  and other cash accounts...................................      5,609      3,589     10,266      7,035
Recognition of present value discount.......................      4,736      4,212     10,932      7,953
Provision for credit losses on loans held for sale..........       (176)      (150)      (834)      (243)
                                                              ---------  ---------  ---------  ---------
  Net interest margin.......................................  $  19,130  $  15,085  $  37,495  $  27,385
                                                              ---------  ---------  ---------  ---------
                                                              ---------  ---------  ---------  ---------
</TABLE>
 
    Net interest margin increased 27% and 37% during the three and six months
ended June 30, 1997, respectively, compared with the same periods in 1996. The
rise in net interest margin is primarily due to (i) growth in the average
balance of loans held for sale pending securitization, (ii) wider net interest
rate spreads earned on loans held for sale and (iii) interest earned on spread
accounts and other securitization related cash accounts.
 
    The Company's loan purchasing volume for each of the three and six months
ended June 30 are set forth in the table below.
 
<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED
                                                            JUNE 30,         SIX MONTHS ENDED JUNE 30,
                                                     ----------------------  --------------------------
                                                        1997        1996         1997          1996
                                                     ----------  ----------  ------------  ------------
<S>                                                  <C>         <C>         <C>           <C>
(DOLLARS IN THOUSANDS)
Premier............................................  $  358,543  $  430,205  $    761,738  $    923,393
Classic............................................     379,959     227,678       758,636       367,996
                                                     ----------  ----------  ------------  ------------
Total loans purchased..............................  $  738,502  $  657,883  $  1,520,374  $  1,291,389
                                                     ----------  ----------  ------------  ------------
                                                     ----------  ----------  ------------  ------------
</TABLE>
 
    The rise in loan purchasing volume and timing of securitization transactions
during the three and six months ended June 30, 1997 resulted in an increase in
the average monthly balance of loans held for sale, on which the Company earns
interest income until such loans are securitized, to $255.0 million and $246.0
million, respectively, up from $217.2 million and $210.7 million in the same
periods of 1996, respectively. During the three and six months ended June 30,
1997, the weighted average net interest rate spread earned on loans held for
sale pending securitization rose to 9.82% and 9.93% respectively, compared with
8.75% and 8.18%, respectively, during the same periods in 1996. The rise in net
interest rate spread is principally due to an increase in the average annual
percentage rates ("APR") paid by obligors due to the Company's continued
expansion of its Classic loan program and general rate increases reflecting
changes in the consumer lending market.
 
    Interest income on short-term investments, spread accounts and other cash
accounts established in connection with securitization transactions increased
56% and 46% for the three and six months ended June 30, 1997, respectively,
compared with the same periods during 1996. This increase is primarily due to
 
                                       13
<PAGE>
growth in the average balances of spread accounts and other securitization
related cash accounts resulting from higher securitization volume. Income from
the recognition of present value discount also grew due to the increased volume
of securitizations.
 
    GAIN ON SALE OF LOANS.  Revenues provided from gain on sale of loans
increased 4% during the three months ended June 30, 1997 compared to the same
period of 1996. The rise in gain on sale reflects an 11% increase in loan
securitization volume and a 147 basis point widening of the gross interest rate
spread earned on the loans securitized (see table of gross interest rates below)
partially offset by increased loss rate, servicing cost and discount factor
assumptions utilized in the computation of gain on sale. See Management's
Discussion and Analysis--SPECIAL CHARGES for discussion of change in estimates.
As a result of the change in estimates noted above, gain on sale of loans as a
percentage of loans securitized fell to 3.54% during the second quarter of 1997
compared to 3.77% in the same period a year ago. The Company believes that this
percentage should increase over the next few quarters as interest spreads
continue to widen resulting from a continued expansion of the Classic loan
program and refinement of the Company's pricing strategy. Although management
believes that increased interest rate spreads can be achieved, material factors
affecting interest rate spreads are difficult to estimate and could cause
management's projections to be materially inaccurate. Such factors include
changes in consumer interest rates and demand for automobile securitization
transactions.
 
    Included in gain on sale of loans during the six months ended June 30, 1997
is a non-recurring pretax charge to gain on sale of loans of $98.0 million
resulting in a year-to-date loss on sale of loans of $51.4 million (See
Management's Discussion and Analysis--SPECIAL CHARGES). The Company securitized
$1.5 billion of loans held for sale during the six months ended June 30, 1997,
compared with $1.3 billion in the same period a year ago realizing a gain on
sale of approximately $46.6 million, before the non-recurring charge. The
reduction in gain on sale of loans during the first half of 1997, before the
non-recurring charge, compared with $50.7 million realized during the same
period of 1996 is primarily due to an increase in the loss rate, servicing cost
and discount factor assumptions utilized in the Company's computation of gain on
sale. See Management's Discussion and Analysis--SPECIAL CHARGES for discussion
of change in estimates.
 
    The following table summarizes the Company's gross interest rate spreads for
each of the three and six months ended June 30:
 
<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                              JUNE 30,              JUNE 30,
                                                                        --------------------  --------------------
                                                                          1997       1996       1997       1996
                                                                        ---------  ---------  ---------  ---------
<S>                                                                     <C>        <C>        <C>        <C>
Weighted average APR of loans securitized.............................      15.83%     14.40%     15.65%     14.11%
Weighted average securitization rate..................................       6.50       6.54       6.51       6.19
                                                                        ---------  ---------  ---------  ---------
Gross interest rate spread (1)........................................       9.33%      7.86%      9.14%      7.92%
                                                                        ---------  ---------  ---------  ---------
                                                                        ---------  ---------  ---------  ---------
</TABLE>
 
------------------------
 
(1) Before gains/losses on hedging transactions.
 
    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, and a lower maximum
participation rate allowable under the Premier program, participations paid as a
percentage of the principal balance of loans purchased declined to 3.14% and
3.20% during three and six months ended June 30, 1997, compared to 3.41% and
3.62%, respectively, in the same periods a year ago. The reduced dealer
participations resulted in an increase in gain on sale during 1997.
 
    Gain on sale of loans also reflects realized losses on hedging transactions
of $1.6 million and $0.2 million during the three and six months ended June 30,
1997, compared to realized gains of $1.6 million and $3.5 million, respectively,
in the same periods a year ago.
 
                                       14
<PAGE>
    SERVICING FEE INCOME.  The Company's servicing fee income increased to $11.0
million during the three months ended June 30, 1997 from $6.6 million in the
same three months in 1996. For the six months ended June 30, 1997, servicing fee
income was $20.5 million compared with $12.3 million for the first half of 1996.
The increase in servicing fee income was directly related to an increase in the
average servicing portfolio outstanding. The following table reflects the growth
in the Company's servicing portfolio from June 30, 1996 to June 30, 1997.
 
<TABLE>
<CAPTION>
                                                                                     AT JUNE 30,
                                                                              --------------------------
                                                                                  1997          1996
                                                                              ------------  ------------
<S>                                                                           <C>           <C>
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
Principal balance of automobile loans held for sale.........................  $     51,487  $     51,313
Principal balance of loans serviced under securitizations...................     4,462,522     2,953,393
                                                                              ------------  ------------
Servicing portfolio.........................................................  $  4,514,009  $  3,004,706
                                                                              ------------  ------------
                                                                              ------------  ------------
Average unpaid principal balance (actual dollars)...........................  $     12,382  $     12,456
Number of loans serviced....................................................       364,553       241,230
</TABLE>
 
    OPERATING EXPENSES.  During the three and six months ended June 30, 1997,
salary and benefit expenses increased 72% and 65%, respectively, from the same
periods a year ago. The increase in salaries and benefits is primarily
attributable to an increase in the number of employees to 1,544 at June 30, 1997
from 891 at June 30, 1996. Increased staffing has been necessary to accommodate
the rise in loan purchasing volume and the subsequent servicing of such loans
and reflects additional associates hired to staff four new regional collection
centers opened from October through December of 1996. Further, salaries and
benefit expenses have increased due to costs associated with managing the
Company's retail liquidation strategy for repossessed vehicles. The Company
anticipates that such costs will begin to level off or decline in future periods
due to recently adopted changes to its liquidation strategy (see discussion in
Management's Discussion and Analysis--SPECIAL CHARGES).
 
    Other operating costs including administrative, occupancy, depreciation and
amortization, origination, servicing and collection expenses, increased 114% and
127% during the three and six months ended June 30, 1997, respectively, compared
to the same periods of 1996. The rise in other operating costs is primarily due
to the addition of the regional collection centers, continued expansion of the
regional buying centers and growth in loan purchasing. As loan purchasing volume
increases, the Company incurs incremental increases in costs associated with
underwriting, servicing and collecting of such loans. Also included in operating
costs during the first half of 1997 is a one-time pre-tax charge of
approximately $5.0 million recorded in March. This special charge is primarily
related to legal costs associated with defending recently filed litigation
against the Company as well as costs associated with resolving legal issues
involving improper practices at certain of the Company's initial consignment
dealers. The Company has since terminated its business relationship with such
dealers. Also included, in the special charge are severance expenses for certain
former executives of the Company.
 
    LONG-TERM DEBT AND OTHER INTEREST EXPENSE.  Long-term debt and other
interest expense increased 65% and 53% during the three and six months ended
June 30, 1997, respectively, compared to the same periods in 1996. These
increases are primarily due to the issuance of $300.0 million of 11.5% Senior
Notes in March 1997, partially offset by the concurrent extinguishment of $145
million of 13% Senior Term Notes.
 
    EXTRAORDINARY ITEM.  In March 1997, the Company issued $300.0 million 11.5%
Senior Notes and utilized approximately $173.5 million to repurchase and
covenant defease the Company's $145.0 million 13% Senior Term 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 have
been treated as an extraordinary item, net of tax.
 
                                       15
<PAGE>
    FINANCIAL CONDITION
 
    FINANCE INCOME RECEIVABLE.  Finance income receivable decreased to $338.1
million at June 30, 1997 from $362.9 million at December 31, 1996. This 7.0%
decrease reflects a non-recurring $98.0 million pre-tax charge during the first
quarter of 1997 (See Management's Discussion and Analysis--SPECIAL CHARGES)
partially offset by amounts capitalized upon completion of the Company's first
and second quarter securitizations related to the present value of estimated
cash flows.
 
    DEFERRED INCOME TAX.  Deferred income taxes declined to $11.6 million at
June 30, 1997 from $54.4 million at December 31, 1996. This decrease reflects
the recognition of a tax benefit from the first quarter loss from operations and
extraordinary charge partially offset by the second quarter income tax provision
of $3.5 million.
 
    ACCOUNTS PAYABLE AND ACCRUED LIABILITIES.  Accounts payable and accrued
liabilities increased 112% to $28.0 million at June 30, 1997 as compared with
$13.2 million at December 31, 1996. This increase is partly due to increased
accruals for salary, occupancy and various operating expenses reflecting the
continued growth in the Company's staffing, facilities, loan purchases and
servicing portfolio and also reflects an increase in accrued interest expense
related to the 11.5% Senior Notes issued in March 1997. In addition, the Company
recorded accruals during the first quarter of 1997 related to severance
agreements for certain former executives. The severance accruals will be
reversed as payments are made over the term of the severance agreements.
 
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 loans are charged against
applicable allowances.
 
DELINQUENCY EXPERIENCE (1):
 
<TABLE>
<CAPTION>
                                                                     JUNE 30, 1997            DECEMBER 31, 1996
                                                               -------------------------  -------------------------
                                                                NUMBER OF                  NUMBER OF
                                                                  LOANS       BALANCE        LOANS       BALANCE
                                                               -----------  ------------  -----------  ------------
<S>                                                            <C>          <C>           <C>          <C>
(DOLLARS IN THOUSANDS)
Servicing portfolio at end of period.........................     364,553   $  4,514,009     302,450   $  3,791,857
Delinquencies:
  31-60 days.................................................       5,942   $     73,478       3,884   $     47,225
  61-90 days.................................................       2,069         26,752       1,255         15,877
  91 days or more............................................       1,624         19,963       2,911         37,019
                                                               -----------  ------------  -----------  ------------
Total automobile loans delinquent 31 or more days............       9,635   $    120,193       8,050   $    100,121
Delinquencies as a percentage of number of loans and amount
  outstanding at end of period (2)...........................        2.64%          2.66%       2.66%          2.64%
Amount in repossession (3)...................................       5,334   $     49,037       4,651   $     64,929
                                                               -----------  ------------  -----------  ------------
Total delinquencies and amount in repossession (2)...........      14,969   $    169,230      12,701   $    165,050
                                                               -----------  ------------  -----------  ------------
                                                               -----------  ------------  -----------  ------------
</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.
 
(3) Amount in repossession represents financed automobiles which have been
    repossessed but not yet liquidated.
 
                                       16
<PAGE>
CREDIT LOSS/REPOSSESSION EXPERIENCE (1):
 
<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED           SIX MONTHS ENDED
                                                                    JUNE 30,                    JUNE 30,
                                                           --------------------------  --------------------------
                                                               1997          1996          1997          1996
                                                           ------------  ------------  ------------  ------------
<S>                                                        <C>           <C>           <C>           <C>
(DOLLARS IN THOUSANDS)
Average servicing portfolio outstanding during the
  period.................................................  $  4,335.962  $  2,812,596  $  4,150,719  $  2,635,759
Average number of loans outstanding during the period....       340,143       217,245       324,169       203,846
Number of repossessions..................................         5,672         3,285        10,365         6,262
Gross charge-offs (2)....................................  $     33,261  $      9,011  $     79,671  $     15,484
Recoveries (3)...........................................         2,533         2,915         4,413         4,528
                                                           ------------  ------------  ------------  ------------
Net losses...............................................  $     30,728  $      6,096  $     75,258  $     10,956
                                                           ------------  ------------  ------------  ------------
                                                           ------------  ------------  ------------  ------------
Annualized gross charge-offs as a percentage of average
  servicing portfolio....................................          3.07%         1.28%         3.84%         1.17%
Annualized net losses as a percentage of average
  servicing portfolio....................................          2.83%         0.87%         3.63%         0.83%
</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. Anticipated proceeds
    are based on an amount which management believes the company can receive
    through wholesale distribution channels, currently 60% of the loan value at
    date of charge-off. Prior to March 31, 1997, the Company estimated proceeds
    based on the anticipated disposition strategy for each vehicle (wholesale or
    retail disposition).
 
(3) Includes post-disposition amounts received on repossessed assets, net of
    selling expenses.
 
    The Company's delinquency rate at June 30, 1997, remained relatively flat
compared to December 31, 1996, reflecting the Company's improved servicing and
collection capabilities resulting from the establishment of four new regional
collection centers from October through December 1996. Management anticipates
that delinquency rates will increase during the next several quarters as a
result of the continued expansion of the Classic loan program and seasoning of
the Company's existing servicing portfolio. The number of repossessed vehicles
has increased since December 31, 1996, reflecting a continued rise in defaults
due to growth of the Company's portfolio and seasoning of loans purchased under
the Company's Classic loan program. The net realizable value of the repossessed
inventory has declined due to the Company's revised policy with respect to
inventory valuation (see Management's Discussion and Analysis--SPECIAL CHARGES).
Under its new policy, repossessions are recorded at a value which approximates
that which the Company believes can be achieved through wholesale distribution
channels (regardless of the distribution strategy ultimately utilized). This
change in valuation policy has resulted in significantly higher gross charge-off
and net loss percentages compared with the prior year due to a valuation
adjustment to existing inventory at the time the policy was adopted and the
application of such policy throughout the second quarter of 1997. Second quarter
1997 gross charge-off and net loss percentages have also increased from the
trailing quarter (on a pre-adjusted basis) due to the continued rise in Classic
loan volume and seasoning of the existing portfolio and also the effect of
selling an increased proportion of repossessed vehicles through wholesale
auctions. During the second quarter of 1997, the Company liquidated
approximately 49% of all repossessed vehicles sold through wholesale auctions
compared to 35% in the first quarter of 1997.
 
                                       17
<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) dealer
participations, (iii) cash held from time to time in restricted spread accounts
to support securitizations and other securitization expenses, (iv) interest
advances to securitization trusts and (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, 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 foreseeable future. The Company has historically
funded, and expects to continue to fund, these negative operating cash flows,
subject to limitations in various debt covenants, principally through borrowings
from financial institutions, sales of equity securities and sales of senior and
subordinated notes, among other resources, 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
 
    PURCHASES AND FINANCING OF AUTOMOBILE LOANS.  Automobile loan purchases
represent the Company's most significant cash flow requirement. The Company
funds the purchase price of loans primarily through the use of warehouse
facilities. However, because advance rates under the warehouse facilities
generally provide funds from 90% to 97% of the principal balance of the loans,
the Company is required to fund the remainder of all purchases with other
available cash resources. The Company purchased $1.5 billion of loans during the
first six months of 1997 compared to $1.3 billion during the same period in
1996.
 
    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 six months ended June
30, 1997 were $48.7 million, or approximately 3.20% of the principal balance of
loans purchased, compared with $46.9 million, or approximately 3.63% of loans
purchased, during the same period in 1996. The decrease in dealer participation
as a percentage of loans purchased reflects the growth in volume in Classic
loans and a reduction in the maximum allowable participation paid for Premier
loans.
 
    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
until these spread accounts exceed predetermined levels. In addition, the
company has been required to provide initial cash deposits into the spread
accounts for certain securitizations. The Company had $189.6 million of
restricted cash in spread accounts at June 30, 1997, compared with $143.0
million at December 31, 1996.
 
    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% per annum of the principal amount of the
asset-backed securities sold into the securitizations
 
    NET INTEREST MARGIN.  Although the Company records net interest margin as
earned, 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.
 
    ADVANCES DUE TO SERVICER.  As the servicer of loans sold in securitizations,
the Company periodically makes interest advances to the securitization trusts to
provide for temporary delays in the receipt of required interest payments by
borrowers. In accordance with servicing agreements, the Company makes advances
only in the event it expects to recover them through the ultimate payments from
the obligor on
 
                                       18
<PAGE>
the loan. Beginning in December 1996, the Company's servicing agreements were
modified to require interest advances only when the related loan is 31 days
delinquent or greater.
 
    REPOSSESSED INVENTORY.  At June 30, 1997, repossessed inventory managed or
owned by the Company and held for resale was $49.0 million, compared with $64.9
million at December 31, 1996. 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 June
30, 1997, repossessed inventory was 1.1% of the total servicing portfolio
compared with 1.7% at December 31, 1996. In April 1997, the Company modified its
retail disposition strategy with a goal of increasing its rate of repossessed
inventory turnover (See Management's Discussion and Analysis--Special Charges).
The improvement in excess cash flows due to the increased inventory turnover
rate may be partially reduced by lower recoveries realized through an increased
use of wholesale auctions.
 
    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. 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 and,
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 six months of 1997, the Company received $32.4 million
of excess cash flow, compared with $11.8 million during the same six months in
1996. The Company received an additional $1.3 million and $2.5 million of cash
during the first half of 1997 and 1996, respectively, which was released from
spread accounts associated with certain securitization transactions closed-out
during such periods.
 
    SERVICING FEES.  The Company also receives servicing fee income with respect
to loans held by securitization trusts equal to 1% per annum of the remaining
principal balance. During the six months ended June 30, 1997 and 1996, the
Company received cash for such servicing in the amount of $20.3 million and
$11.8 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.
 
    WAREHOUSE FACILITIES.  Automobile loans held for sale are funded primarily
through warehouse facilities. At June 30, 1997, the Company had warehouse
facilities in place with various financial institutions and institutional
lenders with an aggregate capacity of $680.0 million, of which $582.3 million
was available. Proceeds from securitizations, generally received within seven to
ten days following the cut-off date established for the 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
 
                                       19
<PAGE>
Company's securitization transaction for the six months ended June 30, 1997, all
of which was publicly issued and rated "AAA/Aaa".
 
<TABLE>
<CAPTION>
                                                                  REMAINING
                                                                 BALANCE AS A                              CURRENT
                                                    REMAINING     PERCENTAGE    CURRENT     WEIGHTED        GROSS
                                                    BALANCE AS        OF       WEIGHTED      AVERAGE      INTEREST
                                       ORIGINAL    OF JUNE 30,     ORIGINAL     AVERAGE   SECURITIZATION    RATE
DATE                                   BALANCE         1997        BALANCE        APR         RATE         SPREAD
-----------------------------------  ------------  ------------  ------------  ---------  -------------  -----------
<S>                                  <C>           <C>           <C>           <C>        <C>            <C>
(DOLLARS IN THOUSANDS)
March 1997.........................  $    775,000  $    714,052       92.14%      15.56%        6.54%         9.02%
June 1997 (1)......................       775,000       702,869       90.69%      15.86%        6.50%         9.36%
                                     ------------  ------------
                                     $  1,550,000  $  1,416,921
                                     ------------  ------------
                                     ------------  ------------
</TABLE>
 
------------------------
 
(1) At June 30, 1997, the Company delivered $709.7 million of automobile loans
    $65.3 million cash remained in the pre-funded portion of the trust.
 
    OTHER CAPITAL RESOURCES
 
    Historically, the Company has utilized various debt and equity financings to
offset negative operating cash flows and support the continued growth in loan
volume, increased dealer participations, securitizations and general operating
expenses.
 
    In March 1997, the Company sold $300 million 11.50% Senior Notes, due 2007.
Net proceeds received from the offering of the Senior Notes approximated $291.2
million.
 
    CAUTIONARY STATEMENTS
 
    Information or statements provided by the Company from time to time may
contain certain "forward-looking information" including information relating to
anticipated earnings per share, anticipated returns on equity, anticipated
growth in automobile loan purchases, anticipated net interest margins,
anticipated loan securitizations and gain on sale, anticipated operations costs
and employment growth and anticipated delinquency, loan loss and repossession
experience. The cautionary statements provided below are being made pursuant to
the provisions of the Private Securities Litigation Reform Act of 1995 (the
"Act") and with the intention of obtaining the benefits of the "safe harbor"
provisions of the Act for any such forward-looking information. Many of the
following important factors discussed below as well as other factors have also
been discussed in the Company's prior public filings.
 
    The Company cautions readers that any forward-looking information provided
by the Company is not a guarantee of future performance and that actual results
may differ materially from those in the forward-looking information as a result
of various factors, including but not limited to:
 
    - The effects of increased delinquency rates and loan loss rates, including
      further write downs of finance income receivable and decreases in cash
      flow from securitization trusts in the event certain portfolio performance
      tests are violated.
 
    - The effects of "seasoning" of the Company's loan portfolio and increased
      use of the Company's Classic loan program, each of which are likely to
      adversely affect the Company's level of delinquencies and losses which may
      require higher loss reserves and decrease cash flow from securitization
      trusts in the event certain portfolio performance tests are violated.
 
    - The effects of the Company's modified retail disposition program which may
      result in an increased use of wholesale dispositions for repossessed
      inventory and thereby lower recovery rates.
 
    - The effects of interest rate fluctuations on the Company's net interest
      margin and the value of its assets and liabilities; the continued legal or
      commercial availability of techniques (including interest rate swaps and
      similar financial instruments, loan repricing, hedging and other
      techniques) used by
 
                                       20
<PAGE>
      the Company to manage the risk of such fluctuations and the continuing
      operational viability of those techniques and the accounting and
      regulatory treatment of such instruments.
 
    - Difficulties or delays in the securitization of the Company's automobile
      loans and the resulting impact on the cost and availability of such
      funding. Such difficulties and delays may result from changes in the
      availability of credit enhancement in securitizations, the current legal,
      regulatory, accounting and tax environment and adverse change in the
      performance of the securitized loans.
 
    - Changes in the availability, amount, cost and other terms of warehouse
      financing to purchase loans.
 
    - The amount, and rate of growth in, the Company's expenses (including
      employee and marketing expenses) as the Company's business develops or
      changes and the Company expands into new market areas; the effects of
      changes within the Company's organization or in its compensation and
      benefit plans; and the impact of unusual items resulting from the
      Company's ongoing evaluation of its business strategies, asset valuations
      and organizational structures.
 
    - The availability, amount, type and cost of debt or equity financing for
      the Company to support negative operating cash flows and any changes to
      that financing including any impact from changes in the Company's debt
      ratings.
 
    - The effects of changes in economic conditions which may increase the risk
      of default on automobile loans, increase the number of customers seeking
      protection under bankruptcy laws, reduce demand for automobile loans, and
      reduce demand for used cars through retail channels.
 
    - The effects of intense competition from financial institutions, such as
      banks, other automobiles finance companies, thrifts, leasing companies and
      captive finance companies owned by automobile manufacturers.
 
    - The costs and other effects of legal and administrative cases and
      proceedings, settlements and investigations, claims and changes in those
      items, developments or assertions by or against the Company or its
      subsidiaries; adoptions of new, or changes in existing, accounting
      policies and practices and the application of such policies and practices.
 
                                       21
<PAGE>
                           PART II--OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS
 
    On March 4, 1997, a shareholder commenced an action against the Company and
certain named directors and officers of the Company entitled Taran v. Olympic
Financial Ltd. et al. in the United States District Court for the District of
Minnesota. Four similar lawsuits, three of them in the United States District
Court for the District of Minnesota (Frank Dibella, on behalf of himself and all
others similarly situated vs. Olympic Financial Ltd. et al., Michael Diemer vs.
Olympic Financial Ltd. et al. and Howard Pisnoy vs. Olympic Financial Ltd. et
al.) and one in the United States District Court for the Eastern District at New
York (North River Trading, LLC, and Allan Farkas, and All Others Similarly
Situated vs. Olympic Financial Ltd. et al.) have been filed since that time.
Plaintiffs in these lawsuits allege that the defendants, in violation of federal
securities laws, engaged in a scheme that had the effect of artificially
inflating, maintaining and otherwise manipulating the value of the Company's
Common Stock by, among other things, making baseless, false and misleading
statements about the current state and future prospects of the Company,
particularly with respect to the Classic program and the refinancing of
repossessed automobiles. Plaintiffs allege that this scheme included making
false and misleading statements and/or concealing material adverse facts. Each
of the plaintiffs seeks certification of their case as a class action on behalf
of all persons or entities who purchased the Common Stock of the Company during
the relevant, overlapping periods, which range from November 28, 1994 through
March 3, 1997, inclusive. The Company currently expects that these suits will be
consolidated in one suit in the United States District Court for the District of
Minnesota. These suits are in the preliminary stages and the parties have not
begun discovery. The Company has reviewed the complaints and believes that the
suits are without merit and intends to defend each of them vigorously. There
can, however, be no assurance that the Company will prevail in such defense or
that any order, judgment, settlement or decree arising out of this litigation
will not have a material adverse effect on the Company's financial condition or
results of operations.
 
    The nature of the Company's business is such that it is routinely a party or
subject to other items of pending or threatened litigation, including litigation
involving actions against borrowers to collect amounts on loans or to repossess
vehicles and litigation challenging the terms of loans purchased by the Company.
Although the ultimate outcome of certain of these matters cannot be predicted,
management of the Company believes, based upon information currently available
and the advice of counsel, that the resolution of these various matters will not
result in any material adverse effect on the Company or its results of
operations.
 
ITEM 2.  CHANGES IN SECURITIES
 
    None
 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
 
    None
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    On April 28, 1997, the Company held its annual shareholder's meeting. There
were 38,060,023 shares of common stock outstanding and entitled to vote, and a
total of 33,922,886 shares (89.13%) were represented at the meeting in person or
by proxy. The following summarizes vote results of proposals submitted to the
Company's shareholders.
 
                                       22
<PAGE>
    1.  Proposal to elect nine directors, each for a one-year term.
 
<TABLE>
<CAPTION>
                                                                         FOR        WITHHELD
                                                                     ------------  ----------
<S>                                                                  <C>           <C>
Scott H. Anderson..................................................    32,962,047     960,839
A. Mark Berlin Jr..................................................    32,951,872     971,014
Lawerence H. Bistodeau.............................................    32,960,573     962,313
Robert J. Cresci...................................................    32,978,239     944,647
James L. Davis.....................................................    32,961,575     961,311
Richard A. Greenwalt...............................................    32,981,574     941,312
Warren Kantor......................................................    32,921,225   1,001,661
Robert A. Marshall.................................................    32,947,869     975,017
Frederick W. Zuckerman.............................................    32,892,039   1,030,847
</TABLE>
 
    2.  Proposal to approve a resolution to amend the Company's Restated
Articles Incorporation to change the name of the Company from Olympic Financial
Ltd. to Arcadia Financial Ltd.
 
<TABLE>
<CAPTION>
    FOR              AGAINST          ABSTAIN          BROKER NON-VOTE
<S>                  <C>              <C>              <C>
33,199,605           535,717          187,564                  0
</TABLE>
 
    3.  Proposal to amend the Company's 1992 Director Stock Option Plan to (i)
increase to 15,000 (from 5,000) the number of options to purchase the Company's
Common Stock granted automatically each year to each outside director commencing
in 1997, and (ii) provide for additional grant to each outside Director of the
Board of Directors as of January 2, 1997 a one-time grant thereunder on such
date of an option to purchase 10,000 shares.
 
<TABLE>
<CAPTION>
    FOR              AGAINST          ABSTAIN          BROKER NON-VOTE
<S>                  <C>              <C>              <C>
30,267,024           3,303,476        352,386                  0
</TABLE>
 
    4.  Proposal to amend the Company's 1990 Stock Option Plan to (i) increase
by 3 million (to 5 million) the maximum number of shares which may be issued
upon exercise of options granted under such Plan, (ii) make each option granted
thereunder exerciseable cumulatively to the extent of 100% of the shares subject
to the option, upon the death of the optionee or a Change of Control (as defined
in such Plan) of the Company, and (iii) provide for a per person maximum on the
number of option shares granted thereunder.
 
<TABLE>
<CAPTION>
    FOR              AGAINST          ABSTAIN          BROKER NON-VOTE
<S>                  <C>              <C>              <C>
13,827,230           3,338,349        465,760          16,291,547
</TABLE>
 
    5.  Proposal to approve grants of options to Warren Kantor in the amounts of
125,000 shares on December 18, 1996 and 70,160 shares on January 29, 1997 in
consideration of consulting services to be rendered to the Company by Mr. Kantor
in 1997.
 
<TABLE>
<CAPTION>
    FOR              AGAINST          ABSTAIN          BROKER NON-VOTE
<S>                  <C>              <C>              <C>
13,812,393           3,224,015        594,931          16,291,547
</TABLE>
 
    6.  Proposal to approve an option granted to Richard A. Greenwalt pursuant
to the Employment Agreement dated January 6, 1997 between Mr. Greenwalt and the
Company.
 
<TABLE>
<CAPTION>
    FOR              AGAINST          ABSTAIN          BROKER NON-VOTE
<S>                  <C>              <C>              <C>
14,197,083           2,872,206        562,050          16,291,547
</TABLE>
 
    7.  Proposal to ratify the appointment of Ernst & Young LLP as the company's
independent auditors for the fiscal year ending December 31, 1997.
 
<TABLE>
<CAPTION>
    FOR              AGAINST          ABSTAIN          BROKER NON-VOTE
<S>                  <C>              <C>              <C>
33,420,827           342,093          159,966                  0
</TABLE>
 
                                       23
<PAGE>
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
-------------  -----------------------------------------------------------------------------------------------------
<C>            <S>
       3.1     Restated Articles of Incorporation of the Company, as amended (filed herewith).
 
       3.2     Restated Bylaws of the Company, as amended (filed herewith).
 
       4.1     Rights Agreement dated as 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     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).
 
       4.3     Indenture, dated as of April 28, 1995, between the Company and Norwest Bank Minnesota, National
                 Association, as Trustee, relating to the Company's 13% Senior Notes due 2000 (incorporated by
                 reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended December
                 31, 1995).
 
       4.4     First Supplemental Indenture, dated as of August 11, 1995, to Indenture, dated as of April 28, 1995,
                 between the Company and Norwest Bank Minnesota, National Association, as Trustee, relating to the
                 Company's 13% Senior Notes due 2000 (incorporated by reference to Exhibit 4.6 to the Company's
                 Annual Report on form 10-K for the year ended December 31, 1995).
 
       4.5     Second Supplemental Indenture dated as of March 11, 1997 to Indenture dated as of April 28, 1995
                 between the Company and Norwest Bank Minnesota, National Association (incorporated by reference to
                 Exhibit 4.7 to the Company's current report on Form 8-K dated March 12, 1997 and filed March 18,
                 1997).
 
       4.6     Indenture dated as 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).
 
       4.7     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).
 
       4.8     Indenture dated as of March 12, 1997, between the Company and Norwest Bank Minnesota, National
                 Association, as Trustee (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).
</TABLE>
 
                                       24
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.   DESCRIPTION
-------------  -----------------------------------------------------------------------------------------------------
<C>            <S>
       4.9     First Supplemental Indenture, dated as of March 12, 1997 between the Company and Norwest Bank
                 Minnesota, National Association, as Trustee (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).
 
       4.10    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).
 
       4.11    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).
 
       4.12    Form of 11.5% 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).
 
       4.13    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).
 
      10.1     Spread Account Agreement, dated as of March 25, 1993, as amended and restated as of June 1, 1997
                 among the Company, Arcadia Receivables Finance Corp., Financial Security Assurance Inc., The Chase
                 Manhattan Bank, as Trustee, and Norwest Bank Minnesota, National Associate, as Collateral Agent
                 (filed herewith).
 
      10.2     Series 1997-B Supplement, dated June 19, 1997, to Spread Account Agreement, dated as of March 25,
                 1993, as amended and restated as of June 1, 1997, among the Company, Arcadia Receivables Finance
                 Corp., Financial Security Assurance Inc., The Chase Manhattan Bank, as Trustee, and Norwest Bank
                 Minnesota, National Association, as Collateral Agent (filed herewith).
 
      10.3     Insurance and Indemnity Agreement, dated as of June 19, 1997, among the Company, Financial Security
                 Assurance Inc., Arcadia Automobile Receivables Trust, 1997-B and Arcadia Receivables Finance Corp.
                 (filed herewith).
 
      10.4     Employment Agreement, dated as of May 1, 1997, between the Company and Duane E. White (filed
                 herewith).
 
      10.5     Amendment No. 4 dated as of May 30, 1997 to Sale and Servicing Agreement dated as of December 28,
                 1995 among Olympic Automobile Receivables Warehouse Trust as Issuer, Olympic Receivables Finance
                 Corp. II as Seller, Arcadia Financial Ltd. (formerly Olympic Financial Ltd.) in its individual
                 capacity and as Servicer and Norwest Bank Minnesota National Association as Back-up Servicer (filed
                 herewith).
 
      10.6     Second Amendment and Consent dated as of May 30, 1997 relating to Note Purchase Agreement and among
                 Olympic Automobile Receivables Warehouse Trust as Seller, Arcadia Financial Ltd. (formerly Olympic
                 Financial Ltd.) as Servicer and in its individual capacity, Delaware Funding Corporation as
                 Purchaser, and Morgan Guaranty Trust Company of New York, as Administrative Agent for the benefit
                 of the DFC owners (filed herewith).
 
      10.7     Acknowledgement of Reduction of Purchase Commitment and Consent dated June 30, 1997 relating to Note
                 Purchase Agreement and among Olympic Automobile Receivables Warehouse Trust as Seller, Arcadia
                 Financial Ltd. (formerly Olympic Financial Ltd.) as Servicer and in its individual capacity,
                 Delaware Funding Corporation as Purchaser, and Morgan Guaranty Trust Company of New York, as
                 Administrative Agent for the benefit of the DFC owners (filed herewith).
</TABLE>
 
                                       25
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.   DESCRIPTION
-------------  -----------------------------------------------------------------------------------------------------
<C>            <S>
      10.8     Third Amendment and Consent dated as of May 30, 1997 relating to Certificate Purchase Agreement among
                 Olympic Automobile Receivables Warehouse Trust as Seller, Arcadia Financial Ltd. (formerly Olympic
                 Financial Ltd.) as Servicer and in its individual capacity, the parties signatory hereto as
                 Purchasers, and Morgan Guaranty Trust Company of New York, as Agent for the Purchasers (filed
                 herewith).
 
      10.9     Acknowledgement of Reduction of Purchase Commitments dated June 30, 1997 relating to Certificate
                 Purchase Agreement among Olympic Automobile Receivables Warehouse Trust as Seller, Arcadia
                 Financial Ltd. (formerly Olympic Financial Ltd.) as Servicer and in its individual capacity, the
                 parties signatory hereto as Purchasers, and Morgan Guaranty Trust Company of New York, as Agent for
                 the Purchasers (filed herewith).
 
      10.10    Fourth Amendment and Consent dated as of May 30, 1997 relating to the Asset Purchase Agreement, dated
                 as of December 28, 1995 among Morgan Guaranty Trust Company of New York (successor to J.P. Morgan
                 Delaware), as Administrative Agent, and the APA Purchasers who have executed a signature page to
                 the Agreement or executed an Assignment of Purchase Commitment (filed herewith).
 
      10.11    Fifth Amendment and Consent dated as of June 30, 1997 relating to the Asset Purchase Agreement, dated
                 as of December 28, 1995 among Morgan Guaranty Trust Company of New York (successor to J.P. Morgan
                 Delaware), as Administrative Agent, and the APA Purchasers who have executed a signature page to
                 the Agreement or executed an Assignment of Purchase Commitment (filed herewith).
 
      10.12    Arcadia Financial Ltd. 1990 Stock Option Plan, as amended to date (filed herewith).
 
      10.13    1992 Director Stock Option Plan, as amended to date (filed herewith).
 
      11.1     Computation of Earnings Per Share (filed herewith).
 
      12.1     Computation of Ratio of Earnings to Fixed Changes (filed herewith).
 
      12.2     Computation of Ratio of Earnings to Fixed Charge and Preferred Stock Dividends (filed herewith).
 
      27.1     Financial Data Schedule (filed herewith).
</TABLE>
 
        (b) REPORTS ON FORM 8-K
 
    None
 
                                       26
<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
------------------------------------------------------  -------------------------------------  ------------------
 
<C>                                                     <S>                                    <C>
                /s/ RICHARD GREENWALT
     -------------------------------------------        President, Chief Executive Officer,
                  Richard Greenwalt                      and Director                             August 13, 1997
 
                  /s/ JOHN A. WITHAM                    Executive Vice President and Chief
     -------------------------------------------         Financial Officer (Principal
                    John A. Witham                       Financial Officer)                       August 13, 1997
 
                /s/ BRIAN S. ANDERSON                   Senior Vice President, Corporate
     -------------------------------------------         Controller and Assistant Secretary
                  Brian S. Anderson                      (Principal Accounting Officer)           August 13, 1997
</TABLE>
 
                                       27
<PAGE>
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
 EXHIBIT NO.   DESCRIPTION                                                                                      PAGE
-------------  ---------------------------------------------------------------------------------------------  ---------
<C>            <S>                                                                                            <C>
       3.1     Restated Articles of Incorporation of the Company, as amended (filed herewith)...............
 
       3.2     Restated Bylaws of the Company, as amended (filed herewith)..................................
 
       4.1     Rights Agreement dated as 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     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)................
 
       4.3     Indenture, dated as of April 28, 1995, between the Company and Norwest Bank Minnesota,
                 National Association, as Trustee, relating to the Company's 13% Senior Notes due 2000
                 (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for
                 the year ended December 31, 1995)..........................................................
 
       4.4     First Supplemental Indenture, dated as of August 11, 1995, to Indenture, dated as of April
                 28, 1995, between the Company and Norwest Bank Minnesota, National Association, as Trustee,
                 relating to the Company's 13% Senior Notes due 2000 (incorporated by reference to Exhibit
                 4.6 to the Company's Annual Report on form 10-K for the year ended December 31, 1995)......
 
       4.5     Second Supplemental Indenture dated as of March 11, 1997 to Indenture dated as of April 28,
                 1995 between the Company and Norwest Bank Minnesota, National Association (incorporated by
                 reference to Exhibit 4.7 to the Company's current report on Form 8-K dated March 12, 1997
                 and filed March 18, 1997)..................................................................
 
       4.6     Indenture dated as 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)......................................................
 
       4.7     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).........................................................................
 
       4.8     Indenture dated as of March 12, 1997, between the Company and Norwest Bank Minnesota,
                 National Association, as Trustee (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)..................
 
       4.9     First Supplemental Indenture, dated as of March 12, 1997 between the Company and Norwest Bank
                 Minnesota, National Association, as Trustee (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)....
</TABLE>
 
                                       28
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.   DESCRIPTION                                                                                      PAGE
-------------  ---------------------------------------------------------------------------------------------  ---------
<C>            <S>                                                                                            <C>
       4.10    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)......................................................................................
 
       4.11    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)....................................
 
       4.12    Form of 11.5% 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)....
 
       4.13    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)........
 
      10.1     Spread Account Agreement, dated as of March 25, 1993, as amended and restated as of June 1,
                 1997 among the Company, Arcadia Receivables Finance Corp., Financial Security Assurance
                 Inc., The Chase Manhattan Bank, as Trustee, and Norwest Bank Minnesota, National Associate,
                 as Collateral Agent (filed herewith).......................................................
 
      10.2     Series 1997-B Supplement, dated June 19, 1997, to Spread Account Agreement, dated as of March
                 25, 1993, as amended and restated as of June 1, 1997, among the Company, Arcadia
                 Receivables Finance Corp., Financial Security Assurance Inc., The Chase Manhattan Bank, as
                 Trustee, and Norwest Bank Minnesota, National Association, as Collateral Agent (filed
                 herewith)..................................................................................
 
      10.3     Insurance and Indemnity Agreement, dated as of June 19, 1997, among the Company, Financial
                 Security Assurance Inc., Arcadia Automobile Receivables Trust, 1997-B and Arcadia
                 Receivables Finance Corp. (filed herewith).................................................
 
      10.4     Employment Agreement, dated as of May 1, 1997, between the Company and Duane E. White (filed
                 herewith)..................................................................................
 
      10.5     Amendment No. 4 dated as of May 30, 1997 to Sale and Servicing Agremeent dated as of December
                 28, 1995 among Olympic Automobile Receivables Warehouse Trust as Issuer, Olympic
                 Receivables Finance Corp. II as Seller, Arcadia Financial Ltd. (formerly Olympic Financial
                 Ltd.) in its individual capacity and as Servicer and Norwest Bank Minnesota National
                 Association as Back-up Servicer (filed herewith)...........................................
 
      10.6     Second Amendment and Consent dated as of May 30, 1997 relating to Note Purchase Agreement and
                 among Olympic Automobile Receivables Warehouse Trust as Seller, Arcadia Financial Ltd.
                 (formerly Olympic Financial Ltd.) as Servicer and in its individual capacity, Delaware
                 Funding Corporation as Purchaser, and Morgan Guaranty Trust Company of New York, as
                 Administrative Agent for the benefit of the DFC owners (filed herewith)....................
 
      10.7     Acknowledgement of Reduction of Purchase Commitment and Consent dated June 30, 1997 relating
                 to Note Purchase Agreement and among Olympic Automobile Receivables Warehouse Trust as
                 Seller, Arcadia Financial Ltd. (formerly Olympic Financial Ltd.) as Servicer and in its
                 individual capacity, Delaware Funding Corporation as Purchaser, and Morgan Guaranty Trust
                 Company of New York, as Administrative Agent for the benefit of the DFC owners (filed
                 herewith)..................................................................................
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<C>            <S>                                                                                            <C>
      10.8     Third Amendment and Consent dated as of May 30, 1997 relating to Certificate Purchase
                 Agreement among Olympic Automobile Receivables Warehouse Trust as Seller, Arcadia Financial
                 Ltd. (formerly Olympic Financial Ltd.) as Servicer and in its individual capacity, the
                 parties signatory hereto as Purchasers, and Morgan Guaranty Trust Company of New York, as
                 Agent for the Purchasers (filed herewith)..................................................
 
      10.9     Acknowledgement of Reduction of Purchase Commitments dated June 30, 1997 relating to
                 Certificate Purchase Agreement among Olympic Automobile Receivables Warehouse Trust as
                 Seller, Arcadia Financial Ltd. (formerly Olympic Financial Ltd.) as Servicer and in its
                 individual capacity, the parties signatory hereto as Purchasers, and Morgan Guaranty Trust
                 Company of New York, as Agent for the Purchasers (filed herewith)..........................
 
      10.10    Fourth Amendment and Consent dated as of May 30, 1997 relating to the Asset Purchase
                 Agreement, dated as of December 28, 1995 among Morgan Guaranty Trust Company of New York
                 (successor to J.P. Morgan Delaware), as Administrative Agent, and the APA Purchasers who
                 have executed a signature page to the Agreement or executed an Assignment of Purchase
                 Commitment (filed herewith)................................................................
 
      10.11    Fifth Amendment and Consent dated as of June 30, 1997 relating to the Asset Purchase
                 Agreement, dated as of December 28, 1995 among Morgan Guaranty Trust Company of New York
                 (successor to J.P. Morgan Delaware), as Administrative Agent, and the APA Purchasers who
                 have executed a signature page to the Agreement or executed an Assignment of Purchase
                 Commitment (filed herewith)................................................................
 
      10.12    Arcadia Financial Ltd. 1990 Stock Option Plan, as amended to date (filed herewith)...........
 
      10.13    1992 Director Stock Option Plan, as amended to date (filed herewith).........................
 
      11.1     Computation of Earnings Per Share (filed herewith)...........................................
 
      12.1     Computation of Ratio of Earnings to Fixed Changes (filed herewith)...........................
 
      12.2     Computation of Ratio of Earnings to Fixed Charge and Preferred Stock Dividends (filed
                 herewith)..................................................................................
 
      27.1     Financial Data Schedule (filed herewith).....................................................
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