<PAGE>
                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C. 20549
                                         
                                    FORM 10-QSB
                                
      (Mark One)
      [ X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR
                        15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
      For the quarterly period ended         DECEMBER 31, 1996    
                                             -----------------
                                        OR
                                
      [   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR
             15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
  
      For the transition period from               to 
                                     -------------       ------------
      Commission File Number            333-4072  
                                     -------------
                               
                            SOVEREIGN CREDIT FINANCE I
               ---------------------------------------------------------
           (Exact name of small business issuer as specified in its charter)
                                
                  TEXAS                                   75-2645150 
      (State or other jurisdiction of                  (I.R.S. Employer 
      incorporation or organization)                  Identification No.)
  
                4015 BELTLINE ROAD, BUILDING B, DALLAS, TEXAS   75244
               ---------------------------------------------------------
               (Address of principal executive offices)      (Zip Code)
  
                                     972-960-5500
               ---------------------------------------------------------
                 (Registrant's telephone number, including area code)
                                
               ---------------------------------------------------------
                   (Former name, former address and former fiscal
                        year, if changed since last report)
                                          
    Check whether the issuer (1) filed all reports required to be filed by 
Section 13 or 15 (d) of the Securities Exchange Act  during the past 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     No  X  
                   ---    ---

                  APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                    PROCEEDINGS DURING THE PRECEDING FIVE YEARS

    Check whether the registrant filed all documents and reports required to 
be filed by Section 12, 13, or 15(d) of the Exchange Act after the 
distribution of securities under a plan confirmed by a court.  N/A
                                                              -----
                       APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of 
common stock, as of the last practicable date.   1,000 SHARES
                                                 ------------

Transitional Small Business Disclosure Format (Check One):  Yes     No  X 
                                                                ---    ---
<PAGE>

                          SOVEREIGN CREDIT FINANCE I
                   INDEX TO QUARTERLY REPORT ON FORM 10-QSB


PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS   
                                                                      PAGE
                                                                      ----
      Condensed Balance Sheet at December 31, 1996 (Unaudited) . . . .  3

      Condensed Income Statements for the three and six months
            ended December 31, 1996 (Unaudited). . . . . . . . . . . .  4

      Condensed Statement of Cash Flows for the 
            six months ended December 31, 1996 (Unaudited) . . . . . .  5

      Notes to Condensed Financial Statements (Unaudited). . . . . . .  6
      
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . .  8


PART II.  OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . .  9


SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10


                                   -2-

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS


                       SOVEREIGN CREDIT FINANCE I, INC.
                          CONDENSED BALANCE SHEET
                                 (UNAUDITED)

                                                  December 31,
                                                      1996
                                                      ----

ASSETS

    Cash                                             $ 829
                                                    -------

  Total Assets                                       $ 829
                                                    -------
                                                    -------

STOCKHOLDER'S EQUITY

    Common Stock - $0.01 par value, 50,000 
      shares authorized; 1,000 shares issued 
      and outstanding                                $  10

    Additional Paid-in Capital                         990

    Retained Deficit                                  (171)
                                                    -------

  Total Stockholder's Equity                         $ 829
                                                    -------
                                                    -------


               The accompanying notes are an integral part of the 
                       condensed financial statements.

                                      -3-
<PAGE>

                         SOVEREIGN CREDIT FINANCE I, INC.
                           CONDENSED INCOME STATEMENTS
                                   (UNAUDITED)

                                 Three months     Six months
                                     ended          ended
                                  December 31,    December 31,
                                     1996            1996
                                     ----            ----

REVENUE                              $  -            $  -

EXPENSES
   Service Charges                   $ 30            $ 60
                                     -----           -----
   Net Loss                          $(30)           $(60)
                                     -----           -----
                                     -----           -----



                The accompanying notes are an integral part of the 
                          condensed financial statements.

                                        -4-

<PAGE>
                                       
                        SOVEREIGN CREDIT FINANCE I, INC.
                       CONDENSED STATEMENT OF CASH FLOWS
                                  (UNAUDITED)


                                                                     Six months
                                                                       ended
                                                                    December 31,
                                                                        1996
                                                                    ------------

Cash flows from operating activities:
   Net (Loss)                                                          $ (60)

Cash flows from investing activities:                                  $   -

Cash flows from financing activities:
   Issuance of Common Stock                                            $   -

Net increase (decrease) in cash                                        $ (60)
Cash at beginning of period                                              889
                                                                       -----
Cash at end of period                                                  $ 829
                                                                       -----
                                                                       -----



Supplemental disclosures of cash flow information:
   Cash paid during the period for:
      Interest                                                         $   -
      Income Taxes                                                     $   -




                                       
              The accompanying notes are an integral part of the 
                        condensed financial statements.


                                      -5-
<PAGE>
                                       
                        SOVEREIGN CREDIT FINANCE I, INC.
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  (UNAUDITED)


NOTE 1  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

           The accompanying unaudited financial statements of Sovereign 
           Credit Finance I, Inc. (the "Company") have been prepared in 
           accordance with generally accepted accounting principles for 
           interim financial information and with the instructions to Form 
           10-QSB and Item 310(b) of Regulation S-B.  Accordingly, they do 
           not include all of the information and footnotes required by 
           generally accepted accounting principles for complete financial 
           statements.  In the opinion of management, all adjustments 
           (consisting of normal recurring accruals) considered necessary 
           for fair presentation have been included.  Operating results for 
           the three and six month periods ended December 31, 1996 are not 
           necessarily indicative of the results that may be expected for 
           future periods.


NOTE 2  -  NATURE OF OPERATIONS

           The Company was incorporated in March of 1996 as a Texas 
           Corporation.  The Company was formed for the purpose of 
           purchasing, collecting and servicing retail installment sales and 
           lease contracts (the "Contracts") secured by motor vehicles.  The 
           Company is subsidiary of Sovereign Credit Holdings, Inc. 
           (Parent).  The Company does not expect to have in the future any 
           significant assets other than the Contracts and the proceeds 
           thereof.
           
           Sovereign Credit Corporation (Sovereign), which is also a 
           subsidiary of the Company's parent, administers and manages the 
           ongoing operations of the Company.  Sovereign Associates, Inc. 
           (SAI), a subsidiary of Sovereign, provides purchasing and 
           collection services to the Company.


NOTE 3  -  DEVELOPMENT STAGE ENTERPRISE

           The Company is in the developmental stage, offering on a "best 
           efforts" basis up to $20,000,000 in principal amount of 11% Notes 
           Payable (the "Notes") due February 15, 2001.  The principal is 
           required to be repaid in six equal monthly installments beginning 
           September 15, 2000.  Interest begins to accrue on the Notes upon 
           release of escrowed subscription funds to the Company, which will 
           not occur until a minimum of $500,000 of the Notes are sold. 
           
           The notes are being offered through licensed broker-dealers which 
           receive sales commissions of 8% of the principal amount of the 
           Notes sold.  The Company also pays up to 2% of the gross proceeds 
           from the sale of the notes to pay offering and organizational 
           expenses.  Some of these expenses will be advanced by Sovereign.  
           Sovereign has agreed to pay such expenses to the extent they 
           exceed 2% of the gross proceeds from the sale of the Notes.  The 
           Company will also pay to Sovereign 5.5% of the gross proceeds 
           from the sale of the Notes (5.0% of the gross proceeds in excess 
           of $9,000,000) for its services in administering and managing the 
           ongoing operations of the Company.  Sovereign will also 
           administer Noteholder payments, communications and relations.  
           For such services, the Company will pay Sovereign a monthly fee 
           equal to 1/12 of 0.5% of the outstanding principal amount of the 
           Notes.  These payments to Sovereign are contingent on the 
           successful completion of the Company's public offering.  If the 
           offering is not successful, the Company is not obligated to 
           reimburse Sovereign for any expenses incurred.  The remainder of 
           the proceeds from the sale of the Notes (84.5% of the gross 
           proceeds) is to be used to acquire Contracts.  No more than 15.5% 
           of the gross proceeds is to be used for the foregoing 
           commissions, fees and expenses.


                                      -6-
<PAGE>
                                       
                        SOVEREIGN CREDIT FINANCE I, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)


           The Company will enter into a note purchasing and servicing 
           agreement with SAI.  The Contracts will be initiated by a network 
           of automobile dealers which finance the sale of motor vehicles, 
           some of whom may be affiliate entities of the Company.  SAI is 
           entitled to a monthly servicing fee of $20 for each Contract not 
           assigned for repossession, for administering the collection of 
           payments due under the Contract.  SAI will receive a purchase 
           administration fee for each contract purchased equal to the 
           lesser of $500 or 5% of the total amount of installments due 
           under the Contract as of the date of purchase. Additionally, SAI 
           will receive a purchase administration fee of $125 for each 
           Financed Vehicle assigned for repossession, to reimburse for 
           overseeing the repossession and resale of the vehicle securing 
           any Contract in default.
           
           The Company intends to enter into an Indenture agreement with a 
           trust company which will govern the collection of the Contract 
           proceeds and repayment of the notes.










                                      -7-
<PAGE>

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

           PLAN OF OPERATION

           Sovereign Credit Finance I, Inc. (the "Company") is in the 
           developmental stage, offering on a "best efforts" basis up to 
           $20,000,000 in principal amount of 11% Notes Payable (the 
           "Notes") due February 15, 2001.  As such, operations have not 
           commenced as of December 31, 1996. The Company is subsidiary of 
           Sovereign Credit Holdings, Inc. (Parent).  Sovereign Credit 
           Corporation (Sovereign), which is also a subsidiary of the 
           Company's parent, administers and manages the ongoing operations 
           of the Company. Sovereign Associates, Inc. (SAI), a subsidiary of 
           Sovereign, provides purchasing and collection services to the 
           Company.
           
           The proceeds from the sale of the Notes will be held in escrow 
           until such amount reaches $500,000, the minimum offering amount.  
           After such amount is attained the Company will begin purchasing, 
           collecting and servicing retail installment sales and lease 
           contracts (the "Contracts") secured by motor vehicles, and 
           accruing interest on the Notes.  The Company will use at least 
           84.5% of the proceeds from the sale of the Notes for the purchase 
           of the contracts.  No more than 15.5% of such proceeds will be 
           used for commissions, fees, and expenses.  
           
           SAI is a party to an arbitration proceeding in which the other 
           party has filed a counterclaim against SAI requesting unspecified 
           damages, but which are stated in the counterclaim to be in excess 
           of $1 million. SAI believes the counterclaim is without merit, 
           and intends to vigorously defend itself against the counterclaim. 
           Additionally, SAI intends to vigorously pursue its claims in the 
           arbitration proceeding. As of December 31, 1996 it is unknown 
           whether an adverse decision with respect to the counterclaim 
           would have a material effect on SAI's operations, financial 
           condition, or ability to act as Servicer on behalf of the Company.
           
           Management anticipates the cash flow from Contract installments 
           and sales of the Notes to be sufficient to fund the future cash 
           requirements of the Company.  In addition, the Company intends to 
           enter into a senior line of credit agreement which will provide 
           additional capital for the acquisition of Notes and to fund 
           day-to-day operations of the Company.  At this time, no such 
           line of credit agreement has been reached.










                                      -8-
<PAGE>
                                       
                          PART II - OTHER INFORMATION

Item 6  -  Exhibits and Reports on Form 8-K

Number                   Description 
------                   -----------

 2          not applicable

 3 (i)      Articles of Incorporation of Sovereign
            Credit Finance I, Inc.*

 3 (ii)     Bylaws of Sovereign Credit Finance I, Inc.*

 4          Indenture between Sovereign Credit
            Finance I, Inc. and Sterling Trust Company, 
            as Trustee*

10          not applicable

11          not applicable

15          not applicable

16          not applicable

18          not applicable

19          not applicable

22          not applicable

23          not applicable

24          not applicable

27          Financial Data Schedule

99          not applicable


*Incorporated by reference to the registrant's Registration Statement on 
 Form S-1, Commission file number 333-4072



















                                      -9-
<PAGE>
                                       
SIGNATURES

In accordance with 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.

                                  SOVEREIGN CREDIT FINANCE I, INC.


           Signature              Title                     Date
           ---------              -----                     ----

/s/ A. Starke Taylor, III         President,                March 10, 1997
------------------------------    (principal executive
    A. Starke Taylor, III         officer) and director


/s/ Christopher R. Frattaroli     Treasurer                 March 10, 1997
------------------------------    (principal financial 
    Christopher R. Frattaroli     officer and chief 
                                  accounting officer) 
                                  and director 










                                      -10-
<PAGE>
                                       
              EXHIBIT INDEX PURSUANT TO ITEM 601 OF REGULATION S-B


Number                   Description 
------                   -----------

 2          not applicable

 3 (i)      Articles of Incorporation of Sovereign
            Credit Finance I, Inc.*

 3 (ii)     Bylaws of Sovereign Credit Finance I, Inc.*

 4          Indenture between Sovereign Credit
            Finance I, Inc. and Sterling Trust Company, 
            as Trustee*

10          not applicable

11          not applicable

15          not applicable

16          not applicable

18          not applicable

19          not applicable

22          not applicable

23          not applicable

24          not applicable

27          Financial Data Schedule

99          not applicable


*Incorporated by reference to the registrant's Registration Statement on 
 Form S-1, Commission file number 333-4072