<PAGE>   1
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   (Mark one)


[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998

                                       or

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

                         Commission File Number: 0-20677

                           FIRSTCITY LIQUIDATING TRUST
             (Exact name of registrant as specified in its charter)

                  Texas                                          06-6414468
     (State or other jurisdiction of                          (I.R.S. Employer
     incorporation or organization)                          Identification No.)

  1021 Main, Suite 250, Houston, Texas                              77002
(Address of principal executive offices)                         (Zip Code)

       Registrant's telephone number, including area code: (713) 651-7841

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X   No
                                       ---     ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of March 31, 1998, 2,460,911
units of Class B Beneficial Interests and 738,273 units of Class C Beneficial
Interests were outstanding.


<PAGE>   2

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                  FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                        MARCH 31,      DECEMBER 31,
                                                                          1998             1997
                                                                      ------------     ------------
<S>                                                                   <C>              <C>         
               Assets, at estimated fair value                        (unaudited)
Cash and cash equivalents .......................................     $     32,911     $      7,948
Trust assets, net ...............................................           66,134           86,015
                                                                      ------------     ------------
       Total assets .............................................           99,045           93,963
                                                                      ------------     ------------

               Less liabilities at face or estimated amount
Payables and accrued liabilities ................................            1,945            2,663
                                                                      ------------     ------------
       Total liabilities ........................................            1,945            2,663
                                                                      ------------     ------------
Commitments and contingencies ...................................               --               --

               Trust net asset value attributable to:
Class "B" Certificate, 2,460,911 units outstanding ..............           97,100           91,300
Class "C" Certificate, 738,273 units outstanding ................               --               --
                                                                      ------------     ------------
       Total net asset value ....................................     $     97,100     $     91,300
                                                                      ============     ============
</TABLE>


                      CONSOLIDATED STATEMENTS OF INCOME AND
                    CHANGES IN NET ASSET VALUE IN LIQUIDATION
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED MARCH 31,
                                                                          1998             1997
                                                                      ------------     ------------
<S>                                                                   <C>              <C>         
Changes in fair value of trust assets ...........................     $     24,766     $     11,761
Interest income on short-term investments .......................              185              402
Interest expense ................................................               --             (155)
Administrative expense ..........................................           (1,925)          (7,922)
                                                                      ------------     ------------
       Net income ...............................................           23,026            4,086
                                                                      ------------     ------------
Net asset value, beginning of period ............................           91,300          121,317
Distributions on Class "A" Certificate ..........................               --          (10,274)
Distributions on Class "B" Certificate ..........................          (17,226)              --
                                                                      ------------     ------------
Net asset value, end of period ..................................     $     97,100     $    115,129
                                                                      ============     ============
</TABLE>


See accompanying notes to consolidated financial statements.



                                        2
<PAGE>   3
                  FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED MARCH 31,
                                                                          1998              1997
                                                                      ------------      ------------
<S>                                                                   <C>               <C>         
Cash flows from operating activities:
    Net income ..................................................     $     23,026      $      4,086
    Adjustments to reconcile net income to net cash provided
    by (used in) operating activities:
      Changes in fair value of trust assets .....................          (24,766)          (11,761)
      Collections on trust assets, net of advances ..............           44,621            16,760
      Capital improvements on trust assets ......................               --            (1,315)
      Decrease in payables and accrued liabilities ..............             (692)           (1,324)
                                                                      ------------      ------------
          Net cash provided by operating activities .............           42,189             6,446
                                                                      ------------      ------------


Cash flows from financing activities:
    Distributions on Class "A" Certificate ......................               --           (10,274)
    Distributions on Class "B" Certificate ......................          (17,226)               --
                                                                      ------------      ------------

          Net cash used in financing activities .................          (17,226)          (10,274)
                                                                      ------------      ------------

    Net increase (decrease) in cash and cash equivalents ........     $     24,963      $     (3,828)
    Cash and cash equivalents, beginning of period ..............            7,948            36,129
                                                                      ------------      ------------
    Cash and cash equivalents, end of period ....................     $     32,911      $     32,301
                                                                      ============      ============
    Supplemental disclosure of cash flow information:
       Cash paid during the period for:
          Interest ..............................................     $         --      $        155
                                                                      ============      ============
</TABLE>


See accompanying notes to consolidated financial statements.



                                        3
<PAGE>   4
                  FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                 March 31, 1998


(A)     Basis of Presentation

        The unaudited consolidated financial statements of FirstCity Liquidating
        Trust (the "Trust", formerly the "Debtor") reflect, in the opinion of
        management, all adjustments, consisting only of normal and recurring
        adjustments, necessary to present fairly the Trust's net assets in
        liquidation at March 31, 1998, and its changes in net asset value in
        liquidation and cash flows for the three month periods ended March 31,
        1998 and 1997.

        Management of the Trust has made certain estimates and assumptions
        relating to the reporting of assets and liabilities and the disclosure
        of contingent assets and liabilities to prepare these consolidated
        financial statements in conformity with generally accepted accounting
        principles. Actual results could differ from those estimates.

        Certain amounts in the financial statements for prior periods have been
        reclassified to conform with current financial statement presentation.

(B)     Trust Assets

        Trust assets are comprised of the following (dollars in thousands):


<TABLE>
<CAPTION>
                                                                    March 31,     December 31,
        Estimated Gross Cash Flow by Type of Asset                    1998            1997
        ------------------------------------------                ------------    ------------
                                                                  (unaudited)
        <S>                                                       <C>             <C>         
        Borrowers' obligation on outstanding balance of:
            Performing loans ..................................   $     31,269    $     50,450
            Nonperforming loans ...............................          2,948           2,993
        Receivable from the FDIC ..............................          2,000           2,000
        Real estate and other assets ..........................         42,476          44,203
                                                                  ------------    ------------
            Total .............................................         78,693          99,646
                                                                  ------------    ------------

            Discount required to reflect trust assets at
                 estimated fair value .........................        (12,559)        (13,631)
                                                                  ------------    ------------

        Trust assets, net .....................................   $     66,134    $     86,015
                                                                  ============    ============
</TABLE>


        For each asset, estimates of income, expense and net cash flow on a
        monthly basis through the expected final disposition date are prepared.
        The individual asset budget is developed based upon factors which
        include physical inspection of the asset or the collateral underlying
        the related loan, local market conditions, contractual payments or
        rents, and discussions with the relevant borrower. The Trust's
        management and the Portfolio Committee periodically reevaluate and
        revise projected monthly cash flows on an asset by asset basis. At March
        31, 1998 and December 31, 1997, the projected monthly cash flows were
        discounted at 11% to reflect the Trust assets at estimated fair value.
        The Trust assets are highly concentrated in Texas.



                                        4
<PAGE>   5
                  FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (continued)



         In the first quarter of 1998, the Trust negotiated and received a
         settlement of approximately $22 million from its fidelity bond
         carriers. As a result of this settlement, there are no remaining claims
         of this nature.

(C)      Distribution Priorities

         The Trust is required to apply all proceeds from liquidation and
         disposition of the Trust's assets first to payment of normal operating
         expenses. Second, Trust proceeds totaling $188 million were distributed
         to FirstCity to retire the Class A Certificate. The third order of
         distribution of Trust proceeds is payments pursuant to employment
         agreements with certain former employees of the Debtor.

         Fourth, Class B Certificate holders (and, pursuant to bonus
         agreements, certain former employees of the Debtor) are entitled to
         distributions up to the Pour-Over Level (as hereinafter defined). The
         bonus pool and executive long-term incentive plan provides for the
         payment of $750,000 in bonuses to certain former employees of the
         Debtor after the Trust distributes $14.9 million to Class B Certificate
         holders, the payment of another $750,000 after approximately $30
         million of additional distributions to Class B Certificate holders, and
         the payment of bonuses in the amount of 5% of any additional
         distributions to Class B Certificate holders. In the first quarter of
         1998, $17.2 million, or $7.00 per certificate, was distributed to Class
         B Certificate holders and a $750,000 bonus was paid to certain former
         employees of the Debtor. In April 1998, $28.3 million, or $11.50 per
         certificate, was distributed to Class B Certificate holders and a
         $763,000 bonus was paid to certain former employees of the Debtor.

         The Pour-Over Level (approximately $123 million at March 31, 1998) is
         the liquidation preference on July 3, 1995 of the Debtor's Series B and
         Series E preferred stock, less the nominal stated value of FirstCity
         special preferred stock and the book value of FirstCity common stock
         issued to the Series B and Series E holders, plus interest at an annual
         rate of 6.5% from July 3, 1995. The Pour-Over Level is also reduced for
         distributions to Class B Certificate holders. Lastly, Class C
         Certificate holders receive distributions, if any, after all required
         payments (approximately $50.10 per unit at March 31, 1998) to Class B
         Certificate holders. No distributions to Class C Certificate holders
         are anticipated.

         The ultimate amounts to be distributed to the holders of the B and C
         Certificates will result from the cash flow actually realized from the
         liquidation of the non-cash Trust assets. The determination of the net
         asset value of the Trust in the accompanying consolidated statements of
         net assets in liquidation is based upon estimates of future cash flows.
         The actual cash



                                        5
<PAGE>   6


                  FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (continued)


         flows and the timing of such cash flows may vary significantly from
         those estimates, thus affecting the final distributions to the
         Certificate holders.

(D)      Investment Management Agreement

         Pursuant to the Investment Management Agreement, FirstCity managed the
         liquidation of Trust assets and the Trust paid FirstCity a servicing
         fee on collections. In the first quarter of 1997, the Investment
         Management Agreement was terminated and, in consideration of this
         termination, the Trust paid FirstCity $6.8 million (included in
         administrative expense), plus interest at a rate of 10 percent per
         annum from January 1, 1997 until paid.

(E)      Contingencies

         The Trust is involved in various legal proceedings in the ordinary
         course of business. In the opinion of management of the Trust, the
         resolution of such matters should not have a material adverse impact on
         the financial position, results of operations or liquidity of the
         Trust.

         In 1996, the FDIC closed the receiverships of the Debtor's banks and
         distributed the remaining surplus of those receiverships to the Trust.
         In accordance with a conveyance and indemnification agreement, the
         Trust will be required, among other things, to provide indemnity until
         March 31, 1999 to the FDIC against any known or unknown liabilities,
         obligations or actual expenses which may arise now or in the future
         associated with the receiverships, in an aggregate amount up to $12
         million. Management of the Trust does not believe that, to the extent
         the Trust is obligated to pay certain claims or expenses associated
         with the past obligations of the Debtor's banks, such payments will
         have a material adverse impact on the financial position, results of
         operations or liquidity of the Trust.



                                        6

<PAGE>   7


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

                  The operations of the Trust for the first quarter of 1998 and
1997 are summarized below (dollars in thousands):


<TABLE>
<CAPTION>
                                                 First Quarter    First Quarter
                                                     1998             1997
                                                 -------------    -------------
<S>                                              <C>              <C>          
Changes in fair value of trust assets ........   $      24,766    $      11,761
Interest income on short-term investments ....             185              402
Interest expense .............................              --             (155)
Administrative expense .......................          (1,925)          (7,922)
                                                 -------------    -------------
       Net income ............................   $      23,026    $       4,086
                                                 =============    =============
</TABLE>


               The estimated fair value of the Trust's assets increased $24.8
million in the first quarter of 1998 as compared to $11.8 million in the first
quarter of 1997, an increase attributable to several factors, including a
settlement of approximately $22 million from the Trust's fidelity bond carriers.
The estimated fair value in the first quarter of 1997 increased, in part due to
the elimination of servicing fees to FirstCity (which were netted against future
cash flows) because the Investment Management Agreement was terminated. Other
factors which contributed to the enhancement of the net asset value of the
Trust's assets in the first quarter of 1998 and 1997 include (i) the
appreciation in value of certain assets attributable to a favorable interest
rate environment and the effect of such favorable interest rates on the
marketability of real estate and (ii) the increase in the estimated market value
of the Trust's assets that naturally occurs as the remaining life of the Trust
(and concomitantly the discount factor applied in calculating net asset value)
decreases.

               Interest income on short-term investments decreased in the first
quarter of 1998 as compared to the first quarter of 1997 because less excess
funds were available. Interest expense in the first quarter of 1997 resulted
from the termination of the Investment Management Agreement, as discussed below.

               Administrative expense totaled $1.9 million in the first quarter
of 1998 as compared to $7.9 million in the first quarter of 1997. In the first
quarter of 1997, the Investment Management Agreement was terminated and, in
consideration of this termination, the Trust paid FirstCity $6.8 million, plus
interest at a rate of 10 percent per annum from January 1, 1997 until paid
(resulting in no servicing fees in 1998). A $750,000 bonus, based on
distributions to Class B Certificate holders, was paid in the first quarter of
1998 (there was no bonus in 1997). Professional fees totaled $.3 million in the
first quarter of 1998 as compared to $.4 million in the first quarter of 1997.

               In the first quarter of 1998, the Trust distributed $17.2
million, or $7.00 per certificate, to Class B Certificate holders. This
distribution was made possible principally by $44.6 million in net collections
on Trust assets in 1998. The Class B Beneficial Interests were valued at $97.1
million at March 31, 1998. In April 1998, the Trust distributed an additional
$28.3 million, or $11.50 per certificate, to Class B Certificate holders.



                                        7
<PAGE>   8

               Non-cash trust assets at March 31, 1998 and December 31, 1997
were comprised of the following (dollars in thousands):


<TABLE>
<CAPTION>
                                                     March 31,     December 31,
Estimated Gross Cash Flow by Type of Asset             1998            1997
------------------------------------------         ------------    ------------
<S>                                                <C>             <C>         
Borrowers' obligation on outstanding balance of:
    Performing loans ...........................   $     31,269    $     50,450
    Nonperforming loans ........................          2,948           2,993
Receivable from the FDIC .......................          2,000           2,000
Real estate and other assets ...................         42,476          44,203
                                                   ------------    ------------
    Total ......................................         78,693          99,646
                                                   ------------    ------------
    Discount required to reflect trust assets at
         estimated fair value ..................        (12,559)        (13,631)
                                                   ------------    ------------
Trust assets, net ..............................   $     66,134    $     86,015
                                                   ============    ============
</TABLE>


               For each asset, estimates of income, expense and net cash flow on
a monthly basis through the expected final disposition date are prepared by
management of the Trust. The individual asset budget is developed based upon
factors which include physical inspection of the asset or the collateral
underlying the related loan, local market conditions, contractual payments or
rents, and discussions with the relevant borrower. The Trust's management
periodically reevaluates and revises its projected monthly cash flows on an
asset by asset basis. At March 31, 1998 and December 31, 1997, the projected
monthly cash flows were discounted at 11% to reflect the Trust assets at
estimated fair value.

               One of the most significant assets of the Trust is a 67% interest
in a partnership which owns a downtown Houston office building. The 67% interest
was under contract for sale to one party for a price of $18.5 million. A second
party (the 33% partnership interest owner) had certain rights of first refusal
and consent to transfer which may or may not have been properly exercised, and
prevented closing with the first party under the original contract which expired
on October 14, 1997. The original buyer has sued the Trust and the 33%
partnership interest owner for specific performance. Although neither party is
quarreling with the Trust about the sales price, the matter is now in litigation
and may lead to considerable delays in disposition of the asset. After a
favorable refinancing of debt of the office building, which included additional
investment by the Trust, and based on current appraisals, cash flow and
profitability, the partnership interest was valued at $20.5 million on March 31,
1998.

               In the first quarter of 1998, the Trust negotiated and received a
settlement of approximately $22 million from its fidelity bond carriers. As a
result of this settlement, there are no remaining claims of this nature.



                                        8
<PAGE>   9

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

        (a) Exhibits

<TABLE>
<CAPTION>
        Exhibit
          No.                         Description
        -------                       -----------
        <S>         <C>
        2.1(1)      Joint Plan of Reorganization for First City Bancorporation of
                    Texas, Inc., as modified, under Chapter 11 of the United States
                    Bankruptcy Code, as confirmed by the U.S. Bankruptcy Court for
                    the Northern District of Texas, Dallas division on May 31, 1995.
        
        3.1(1)      The Liquidating Trust Agreement, dated as of July 3, 1995, by and
                    between First City Bancorporation of Texas, Inc. and Shawmut Bank
                    Connecticut, National Association (subsequently Fleet National
                    Bank, now State Street Bank and Trust Company), as Trustee.
        
        10.1(3)     Employment Agreement, effective as of July 3, 1995, by and
                    between FCLT Loans Asset Corp. and Robert W. Brown, as amended
                    May 1, 1996.
        
        10.2(2)     Settlement Agreement, dated as of June 22, 1994, as amended as
                    of January 30, 1995, by and among FDIC-Corporate, the
                    FDIC-Receivers and the First City Parties.
        
        10.3(3)     Conveyance and Indemnification Agreement, dated December 23,
                    1996, between FDIC-Corporate, the FDIC-Receivers, FCLT Loans,
                    L.P. and the Trust.
        
        27.1        Financial Data Schedule.
</TABLE>
----------

(1)  Filed as the exhibit indicated to the Registration Statement on Form
     10 filed with the Securities and Exchange Commission on May 1, 1996 and
     incorporated herein by reference.

(2)  Filed as the exhibit indicated to the Registration Statement on Form
     10/A filed with the Securities and Exchange Commission on July 10, 1996
     and incorporated herein by reference.

(3)  Filed as the exhibit indicated to the Form 10-K for the fiscal year
     ended December 31, 1996 filed with the Securities and Exchange
     Commission and incorporated herein by reference.

     (b) Reports on Form 8-K. No report on Form 8-K was filed by the Registrant 
with the Commission during the quarterly period ended March 31, 1998.



                                       9
<PAGE>   10
                                   SIGNATURES

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


                                       STATE STREET BANK AND TRUST
                                       COMPANY, as Trustee



Date: April 29, 1998                   /s/ Susan T. Keller
                                       -----------------------------------------
                                       Name: Susan T. Keller
                                       Title: Vice President



                                       10

<PAGE>   11

                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
         Exhibit
           No.                         Description
         -------                       -----------
         <S>      <C>
         2.1(1)   Joint Plan of Reorganization for First City Bancorporation of
                  Texas, Inc., as modified, under Chapter 11 of the United
                  States Bankruptcy Code, as confirmed by the U.S. Bankruptcy
                  Court for the Northern District of Texas, Dallas division on
                  May 31, 1995.
         3.1(1)   The Liquidating Trust Agreement, dated as of July 3, 1995, by
                  and between First City Bancorporation of Texas, Inc. and
                  Shawmut Bank Connecticut, National Association (subsequently
                  Fleet National Bank, now State Street Bank and Trust Company),
                  as Trustee.
         10.1(3)  Employment Agreement, effective as of July 3, 1995, by and
                  between FCLT Loans Asset Corp. and Robert W. Brown, as amended
                  May 1, 1996.
         10.2(2)  Settlement Agreement, dated as of June 22, 1994, as amended as
                  of January 30, 1995, by and among FDIC-Corporate, the
                  FDIC-Receivers and the First City Parties.
         10.3(3)  Conveyance and Indemnification Agreement, dated December 23,
                  1996, between FDIC-Corporate, the FDIC-Receivers, FCLT Loans,
                  L.P. and the Trust.
         27.1     Financial Data Schedule.
</TABLE>
----------

(1)  Filed as the exhibit indicated to the Registration Statement on Form
     10 filed with the Securities and Exchange Commission on May 1, 1996 and
     incorporated herein by reference.

(2)  Filed as the exhibit indicated to the Registration Statement on Form
     10/A filed with the Securities and Exchange Commission on July 10, 1996
     and incorporated herein by reference.

(3)  Filed as the exhibit indicated to the Form 10-K for the fiscal year
     ended December 31, 1996 filed with the Securities and Exchange
     Commission and incorporated herein by reference.