<PAGE>

                                       
                        SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549

                                    FORM 10-K
          (Mark One)
          /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
          OF THE SECURITIES EXCHANGE ACT OF 1934
          For the fiscal year ended MARCH 31, 1998
                         OR
          / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
          OF THE SECURITIES EXCHANGE ACT OF 1934
          For the transition period from _________ to ________

                                       
                                    1-14074
                         -------------------------
                         (Commission File Number)

                          CONTIFINANCIAL CORPORATION
             -------------------------------------------------------
              (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                         <C>
             DELAWARE                                        13-3852588
------------------------------------            ----------------------------------
  (State of other jurisdiction of               (I.R.S. Employer Identification No.)
   incorporation or organization)


277 Park Avenue
NEW YORK, NEW YORK                                              10172
-------------------------------------------------------------------------------
(Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code:         (212) 207-2800

Securities registered pursuant to Section 12(b) of the Act:
        COMMON STOCK                                    NEW YORK STOCK EXCHANGE
    -------------------                     --------------------------------------------
   (Title of each Class)                     (Name of each exchange on which registered)

</TABLE>

            Securities registered pursuant to Section 12(g) of the Act:
                                       NONE
-------------------------------------------------------------------------------
                                  (Title of Class)

     Indicate by check mark whether 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 by check mark if disclosure of delinquent filers pursuant to 
Item 405 of Regulation S-K is not contained herein, and will not be 
contained, to the best of registrant's knowledge, in  definitive proxy or 
information statements incorporated by reference in Part III of this Form 
10-K or any amendment to this Form 10-K. _______

As of June 1, 1998 the aggregate market value of the voting stock held by 
non-affiliates of the registrant was $275,495,383.

The Company had 47,068,135 shares of common stock outstanding as of  June 1, 
1998.

DOCUMENTS INCORPORATED BY REFERENCE:
The information required by Part III, Items 10,11,12 and 13, is incorporated 
by reference to ContiFinancial Corporation's proxy statement which will be 
filed with the Securities and Exchange Commission not more than 120 days 
after March 31, 1998.

<PAGE>
                                       
                            CONTIFINANCIAL CORPORATION

                                TABLE OF CONTENTS


                                     PART I.

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                                                                           Page
                                                                           ----
<S>      <C>                                                               <C>
Item 1.  Business ........................................................    3
Item 2.  Properties.......................................................   19
Item 3.  Legal Proceedings................................................   19
Item 4.  Submission of Matters to a Vote of Security Holders..............   19

                                    PART II.

Item 5.  Market for Registrant's Common Equity and Related Stockholder
         Matters..........................................................   20
Item 6.  Selected Financial Data..........................................   21
Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations............................................   24
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.......   39
Item 8.  Financial Statements and Supplementary Data......................   40
Item 9.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure.........................................   69

                                   PART III.


Item 10. Directors and Executive Officers of the Registrant...............   70
Item 11. Executive Compensation...........................................   70
Item 12. Security  Ownership of  Certain Beneficial Owners and Management.   70
Item 13. Certain Relationships and Related Transactions...................   70


                                    PART IV.


Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..   70


Signatures................................................................   73
</TABLE>

                                       2
<PAGE>

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Annual Report Form 10-K which are not 
historical fact, may be deemed to be forward-looking statements under the 
federal securities laws.  There are many important factors that could cause 
the Company's actual results to differ materially from those indicated in the 
forward-looking statements.  Such factors include, but are not limited to, 
general economic conditions, interest rate risk, prepayment speeds, 
delinquency and default rates, changes (legislative and otherwise) in the 
asset securitization industry, demand for the Company's services, the impact 
of certain covenants in loan agreements of the Company, the degree to which 
the Company is leveraged, its needs for financing, the Net Interest Margin 
Notes market and other risks identified in the Company's Securities and 
Exchange Commission filings. In addition, it should be noted that past 
financial and operational performance of the Company is not necessarily 
indicative of future financial and operational performance.

                                      PART I.
ITEM I.  BUSINESS.

GENERAL

ContiFinancial Corporation together with its subsidiaries, (collectively, the 
"Company" or "ContiFinancial"), engages in the consumer and commercial 
finance business by originating home equity loans, commercial real estate 
loans and non-prime auto loans.  The Company also provides financing and 
asset securitization structuring and placement services to originators of a 
broad range of loans, leases, receivables and other assets.  The Company is a 
leading originator, purchaser, seller and servicer of home equity loans made 
to borrowers whose needs may not be met by traditional financial institutions 
due to credit exceptions or other factors.  Loans are primarily for debt 
consolidation, home improvements, education or refinancing and are primarily 
secured by first mortgages on one- to four-family residential properties.  
For the years ended March 31, 1998 and 1997, the Company originated $6.8 
billion and $4.0 billion, respectively, of home equity, home improvement and 
other residential mortgage loans, and securitized or sold $6.7 billion and 
$3.8 billion, respectively,  of such loans.  For the same periods, the 
Company  originated  $1.9 billion and $632.5 million, respectively, and 
securitized or sold $1.5 billion and $742.3 million, respectively, of 
commercial real estate loans, and originated $192.0 million and $47.0 
million, respectively, of non-prime auto loans through its subsidiary, Triad 
Financial Corporation ("Triad"), and securitized $178.0 million and $43.5 
million, respectively, of Triad auto loans.

Through the years the Company's home equity business has expanded through 
growth in volume of loans and access to the capital markets to facilitate the 
most efficient sale of these loans through securitization. The Company 
believes it has a competitive advantage because the management of 
ContiMortgage Corporation ("ContiMortgage") and ContiWest Corporation 
("ContiWest") is able to focus exclusively on expanding the volume of loans 
originated or purchased, enhancing loan underwriting efficiencies and 
building ContiMortgage's servicing portfolio, while relying upon the 
professional staff of ContiTrade Services L.L.C. ("ContiTrade") and 
ContiFinancial Services Corporation ("ContiFinancial Services") to focus 
exclusively on providing warehouse financing, hedging and securitization 
structuring and placement services. This specific industry expertise enables 
the Company to minimize its financing costs and interest rate exposure and 
maximize the proceeds and profits from its securitizations and its growing 
servicing portfolio. From March 1991 through March 31, 1998, ContiMortgage 
completed 31 Real Estate Mortgage Investment Conduit ("REMIC") 
securitizations and as of March 31, 1998, ContiMortgage had a servicing 
portfolio of $10.1 billion.

The Company, through investments, strategic acquisitions and internal growth, 
is continually pursuing opportunities to expand the origination capabilities 
of its current asset classes and diversifying into the origination and 
servicing of other under-served, securitizable asset classes.  This is 
demonstrated by changes in the composition of the Company's revenues in 
fiscal 1998. ContiMortgage/ContiWest securitizations, which 

                                       3
<PAGE>

provided the Company with 74.7% of its gain on sale of receivables in fiscal 
1997, represented 57.6% of gain on sale during the current fiscal year.  
Income from other home equity/home improvement sales and fees increased to 
21.4% of gain on sale in fiscal 1998 from 13.6% in fiscal 1997.  These 
increases were indicative of the continued growth of the Company's retail 
origination platform.  Commercial real estate loan sales and securitizations 
produced 11.9% of total gain on sale in fiscal 1998, up from 7.8% in fiscal 
1997.

In fiscal 1997, the Company acquired 100% of three home equity companies, 
California Lending Group, Inc., d/b/a United Lending Group ("ULG"), Resource 
One Consumer Discount Company, Inc. ("Resource One"), Royal Mortgage 
Partners, L.P., d/b/a Royal MortgageBanc ("Royal") and 56% of an auto finance 
company, Triad. Also during fiscal 1997, the Company organized ContiWest, a 
Nevada corporation, to better administer and underwrite the Company's 
origination portfolio.  In fiscal 1998, the Company acquired the remaining 
44% of Triad and 100% of two additional home equity companies,  Fidelity 
Mortgage Decisions Corporation ("Fidelity") and Crystal Mortgage Company, 
Inc. ("Crystal") along with its subsidiary Lenders M.D., Inc. In each case, 
the companies acquired were former Strategic Alliances or ContiMortgage loan 
origination sources.

In fiscal 1998, the Company acquired a 24% interest in Empire Funding Holding 
Corp., ("Empire") a long-term strategic alliance that is one of the largest 
high loan-to-value and F.H.A. Title I lenders in the United States.  Upon 
closing, the Company's majority shareholder, Continental Grain Company 
("Continental Grain"), exchanged a warrant for a 25% equity interest in 
Empire.  The Company also established new business units during 1998 focusing 
on small ticket equipment lease financing services and the securitization of 
charged-off credit card and other consumer debt.

Towards diversifying into other securitizable asset classes, the Company, in 
February 1998, through its subsidiary ContiAsset Receivables Management LLC 
("CARMA"), acquired Pacific Advisory Services LLC, a 
California-based firm specializing in sourcing, pricing and acquiring 
charged-off consumer receivable portfolios.  CARMA made a 33% equity 
investment in Arrow Service Bureau, Inc., a midwest-based accounts receivable 
management firm specializing in the collection of charged-off consumer 
receivables to service and collect the charged-off consumer debt sourced by 
CARMA.   Also, in January 1998, the Company formed ContiBusiness Services 
Corporation d/b/a ContiLeasing Corporation ("ContiLeasing").  ContiLeasing is 
80% owned by the Company and will provide equipment financing solutions to 
small businesses nationwide, targeting relationships with equipment 
manufacturers and dealers to develop customized financing programs.

Since fiscal 1996, the Company's commercial real estate loan originations, 
made through ContiMAP-Registered Trademark-, the Company's commercial real 
estate conduit, have increased at an annual compound growth rate of 128% to 
$1.9 billion.  The Company purchases and underwrites commercial real estate 
loans suitable for securitization and sale into the capital markets.  The 
Company's strategy is to grow ContiMAP-Registered Trademark- by continuing to 
add additional qualified commercial lenders and by continuing to enhance its 
product offerings.  As part of this strategy, in April 1998, the Company 
acquired a 75% interest in Keystone Mortgage Partners L.L.C. an originator 
and servicer of commercial mortgage loans.  In March 1998, the Company also 
expanded its commercial mortgage business by investing in convertible 
preferred stock and warrants of Crown NorthCorp, Inc. ("Crown").  The 
preferred stock, when converted, together with the warrants, when exercised, 
will represent 7% of the common stock of Crown. Crown is an international 
financial services firm which originates commercial mortgages and provides 
asset management and loan servicing capabilities.

As previously noted, the Company, through its subsidiary ContiTrade, provides 
financing and asset securitization structuring expertise and through its 
subsidiary ContiFinancial Services, provides placement services. In this 
area, ContiTrade's management and execution of ContiMortgage and ContiWest's 
financing, hedging and securitization needs has served as a model for the 
Company's strategic alliances with originators of a broad range of consumer 
and commercial loans and other assets ("Strategic Alliances"). Understanding 
the cash flow and credit characteristics associated with each of the asset 
classes with which it works, ensuring that each pool of 

                                       4
<PAGE>

assets is securitizable prior to funding and controlling its own warehouse 
take-out risk through its placement capabilities, allows the Company to 
assume controlled risks, support new business, and introduce more 
securitizable assets to the institutional marketplace.  The Company's 
strategy is to replicate its success with ContiMortgage by (i) targeting 
classes of consumer and commercial loans, leases, receivables and other 
assets, which have the potential to be financed more efficiently through 
securitization, (ii) identifying and establishing Strategic Alliances with 
originators of these assets that have experienced management teams, 
sophisticated systems and a proven track record of originating, underwriting, 
servicing and collecting consumer and commercial loans, leases, receivables 
and other assets and (iii) securing from these originators a consistent flow 
of securitizable assets. The Company offers Strategic Alliance clients 
("Strategic Alliance Clients") complete balance sheet liability management, 
including warehouse financing, interest rate hedging services and the 
structuring and placement of asset portfolios in the form of asset-backed 
securities. This allows the management of its Strategic Alliance Clients to 
focus on expanding and improving asset origination and servicing.

The Company earns fees for the financing and asset securitization services 
provided to its Strategic Alliance Clients. In addition, in order to support 
its Strategic Alliance Clients and to further enhance its returns, the 
Company may take what it believes are manageable risk positions in its 
Strategic Alliances by purchasing whole loans (and issuing asset-backed 
securities and thus recognizing gain on sale) and providing financing of the 
subordinated classes of securitizations owned by its clients. In certain of 
its Strategic Alliances, the Company may receive warrants or warrant-like 
equity participations in Strategic Alliance Clients or may otherwise seek to 
make equity investments in its Strategic Alliance Clients (collectively, 
"Strategic Alliance Equity Interests").

The Company's successful execution of its Strategic Alliance strategy to date 
has resulted in the addition of the following new business lines and 
securitization volume from 1991 through March 31, 1998: twelve commercial/ 
multi-family securitizations and sales for $2.5 billion, twenty-eight home 
equity loan securitizations and sales representing $2.3 billion (other than 
ContiMortgage/ContiWest), twenty equipment lease securitizations for $1.5 
billion, five adjustable rate mortgage securitizations for $642 million, 
eight Title I home improvement loan securitizations for $384 million, seven 
non-prime and sub-prime auto securitizations for $380 million, six franchisee 
loan securitizations for $312 million and two other securitizations for $50 
million.

HOME EQUITY LOAN ORIGINATION AND SERVICING

LOAN PRODUCTION

ORIGINATION. ContiMortgage's and ContiWest's principal loan product is a 
non-conforming home equity loan with a fixed principal amount and term to 
maturity, can have a fixed or adjustable interest rate and is typically 
secured by a first mortgage on the borrower's residence.  Currently, over 
93.5% of ContiMortgage/ContiWest loan originations are secured by a first 
lien mortgage. Non-conforming home equity loans are home equity loans made to 
borrowers whose borrowing needs may not be met by traditional financial 
institutions due to credit exceptions or other factors and that cannot be 
marketed to agencies, such as Ginnie Mae, Fannie Mae and Freddie Mac.  The 
Company obtains its loans through two primary sources in 50 states: 
wholesale, which represents loans purchased from mortgage bankers and 
commercial banks; and retail which represents loans make directly to 
customers.

For fiscal year 1998, wholesale purchases accounted for approximately 81% of 
the Company's loan production.  Wholesale sources underwrite loans to 
ContiMortgage and ContiWest's underwriting guidelines and fund those loans in 
their own name and deliver pre-approved loan packages to ContiMortgage and 
ContiWest typically in excess of $1.0 million in size. As a result, the 
general and administrative expenses of the Company associated with wholesale 
loan purchases are significantly less than those associated with direct 
retail loans which are originated on a loan-by-loan basis. For fiscal 1998, 
ContiMortgage and ContiWest purchased loans from approximately 254 wholesale 
sources, with no one source accounting for more than 10% of total home 
equity, 

                                       5
<PAGE>

home improvement and other residential mortgage loans and the top five 
wholesale sources accounting for 20.7% of total home equity, home improvement 
and other residential mortgage loan production.

UNDERWRITING.  All home equity loans are underwritten to the Company's 
mortgage underwriting guidelines. The underwriting process is intended to 
assess both the prospective borrower's ability to repay the loan and the 
adequacy of the real property security as collateral for the loan. In the 
underwriting process, a credit package is submitted to the Company which 
includes a current appraisal from an independent appraiser, a property 
inspection, a credit report and a verification of employment. On a 
case-by-case basis, after review and approval by the Company's underwriters, 
home equity loans may be made which vary from the underwriting guidelines. 
However, any significant variations from guidelines must be approved by a 
senior underwriter or by an executive officer of ContiMortgage or ContiWest.

The Company generally purchases or originates loans which either fully 
amortize over a period not to exceed 360 months or provide for amortization 
over a 360-month schedule with a "balloon" payment required at the maturity 
date, which will not be less than five years after origination. The loan 
amounts generally range from a minimum of $10,000 to a maximum of $350,000, 
unless a higher amount is specifically approved. Management estimates that 
the current average home equity loan purchased or originated by ContiMortgage 
is approximately $64,000. ContiMortgage and ContiWest primarily purchase or 
originate non-purchase money first or second mortgage loans although 
ContiMortgage and ContiWest have programs for origination of certain purchase 
money first mortgages.

The homes used for collateral to secure the loans may be either residential 
(mostly primary residences, but also second and vacation homes) or 
investor-owned one- to four- family homes, condominiums or townhouses. 
Generally, each home must have a minimum appraised value of $40,000. Mobile 
housing or agricultural land are not accepted as collateral. In addition, 
mixed-use loans secured by owner-occupied properties, including one- to 
four-family and small multifamily residences, are made where the proceeds may 
be used for business purposes.

Each property proposed as collateral for a loan must be appraised not more 
than six months prior to the date of such loan. The combined loan-to-value 
ratio ("CLTV") of the first and second mortgages generally may not exceed 
90%. If a prior mortgage exists, the Company first reviews the first mortgage 
history. If it contains open end, advance or negative amortization 
provisions, the maximum potential first mortgage balance is used in 
calculating the CLTV ratio which determines the maximum loan amount. The 
Company does not purchase or originate loans where the first mortgage 
contains a shared appreciation clause.

The Company also requires a credit report by an independent credit reporting 
agency which describes the applicant's credit history. The credit report 
should reflect all delinquencies of 30 days or more, repossessions, 
judgments, foreclosures, garnishments, bankruptcies, divorce actions and 
similar adverse credit events that can be discovered by a search of public 
records. Written verification is obtained on any first mortgage balance, its 
status and whether local taxes, interest, insurance and assessments are 
included in the applicant's monthly payment on the first mortgage. All taxes 
and assessments not included in the monthly payment must be verified as 
current.

Each loan applicant is required to secure property insurance in an amount 
sufficient to cover the new loan and any prior mortgage. If the sum of the 
outstanding first mortgage, if any, and the home equity loan exceeds 
replacement value, insurance at least equal to replacement value may be 
accepted.

QUALITY CONTROL. The purpose of the Company's quality control program is: (i) 
to monitor and improve the overall quality of loan production generated by 
ContiMortgage's regional offices, ContiWest and wholesale sources; and (ii) 
to identify and communicate to management, existing and/or potential 
underwriting and loan file packaging problems or areas of concern. Each 
month, the following sample of funded loans are examined: (i) a 10% random 
sample of all funded loans, (ii) a  1-3% random sample of loans underwritten 
at the maximum LTV 

                                       6
<PAGE>

ratio for such risk class of loans,  (iii) a 1-3% random sample of loans with 
a debt-to-income ratio greater than 50%, (iv) a minimum of the first five 
loans from any new origination source, and (v) loans selected in accordance 
with such other criteria as may be determined by management. The quality 
control file review examines compliance with underwriting guidelines and 
federal and state regulations.  This is accomplished through a focus on (i) 
accuracy of all credit and legal information, (ii) collateral analysis 
including re-appraisals of property (field or desk) and review of original 
appraisal, (iii) employment and income verification and (iv) legal document 
review to ensure that the appropriate documents are in place.

LOAN SECURITIZATION

GENERAL. The primary funding strategy of the Company is to securitize loans 
purchased or originated. The Company's origination sources benefit from the 
reduced cost of funds and greater leverage provided through securitization. 
Through March 31, 1998, the Company has completed 31 ContiMortgage/ContiWest 
AAA/Aaa-rated REMIC securitizations.  Management has structured the Company's 
operations and processes specifically for the purpose of efficiently 
originating, underwriting, and servicing  loans for securitization in order 
to meet the requirements of rating agencies, credit enhancers and 
AAA/Aaa-rated REMIC pass-through investors. The Company generally seeks to 
enter the public home equity securitization market  on a quarterly basis.

In a securitization, the Company sells the loans that it has originated or 
purchased to a REMIC, owner trust or grantor trust, for a cash purchase price 
and an interest in the loans or other assets securitized.  See "Gain on Sale 
of Receivables and Excess Spread Receivables" in Item 7. Management's 
Discussion and Analysis of Financial Condition and Results of Operations    
for further discussion of the Company's securitization procedures.

The purchasers of the pass-through certificates receive a credit-enhanced 
security. Credit enhancement is generally achieved by the Company's 
subordination of its Excess Spread in the form of over collateralization or 
by one or both of the following:  (i) subordination of subsidiary classes of 
bonds to senior classes; and (ii) an insurance policy provided by an 
AA/Aaa-rated monoline insurance company.  As a result, each offering of the 
senior class of REMIC pass-through certificates has received ratings of AAA 
from Standard & Poor's Ratings Group and Fitch Investor Services, L.P. and 
Aaa from Moody's Investors Service.

The pooling and servicing agreements that govern the distribution of cash 
flows from the loans included in the REMIC trusts require either: (i) the 
establishment of a reserve account that may be funded by cash or a letter of 
credit deposited by the Company, or (ii) the over collateralization of the 
REMIC trust, which is intended to result in receipts and collections on the 
loans exceeding the amounts required to be distributed to the holders of the 
senior REMIC pass-through certificates. If payment defaults exceed the amount 
in the reserve account or the amount of over collateralization, as 
applicable, the monoline insurance company policy will pay any further losses 
experienced by holders of the senior interests in the related REMIC trust or 
a subordinate class will bear the loss. To date, there have not been any 
writedowns of subordinated classes of bonds or any calls on monoline 
insurance company policies obtained in any of the Company's 
ContiMortgage/ContiWest securitizations.

LOAN SERVICING

OVERVIEW. The Company retains the right to service the home equity loans 
originated or purchased and included in ContiMortgage/ContiWest 
securitizations. Servicing includes collecting payments from borrowers, 
remitting payments to investors who have purchased the loans, investor 
reporting, accounting for principal and interest, contacting delinquent 
borrowers, conducting foreclosure proceedings and disposing of foreclosed 
properties. As of March 31, 1998, ContiMortgage serviced 157,365 loans in 50 
states with an outstanding balance of $10.1 billion, up 57.8% from March 31, 
1997 earning a servicing fee of approximately 50 basis points per annum.

                                       7
<PAGE>

ContiMortgage has a sophisticated computer-based mortgage servicing operation 
that it believes enables it to provide effective and efficient processing of 
home equity loans. The key elements of any servicing operation are the 
quality and experience of the staff and the effectiveness of the computer 
software.

The servicing system is an on-line real time system. It provides 
payment-processing and cashiering functions, automated payoff statements, 
on-line collections, hazard insurance and tax monitoring and a full range of 
investor-reporting requirements.

ContiMortgage is a Fannie Mae and Freddie Mac approved seller/servicer. As 
such, ContiMortgage is subject to a thorough due diligence of its policies, 
procedures, and business, and is qualified to underwrite, sell and service 
loans on behalf of both Fannie Mae and Freddie Mac. This designation is 
typically a prerequisite for loan securitization.

The pooling and servicing agreements which govern the distribution of cash 
flows within the REMIC trusts generally require that ContiMortgage, as 
servicer, advance interest (but not principal) on any delinquent loans to the 
holders of the senior interests in the related REMIC trust until satisfaction 
of the note, liquidation of the mortgaged property or charge-off of the loan 
to the extent ContiMortgage deems such advances of interest to be ultimately 
recoverable. To the extent there are any realized losses on loans, such 
losses are paid out of, current excess spread, the related reserve account, 
out of principal and interest payments on over collateralized amounts or, if 
necessary, from the related monoline insurance company policy.

COLLECTIONS. The ContiMortgage collection department is organized into 
divisions each led by a collections or a default manager. The collection 
divisions are comprised of teams whose responsibilities include contacting 
first payment defaults that are one to ten days delinquent and post 30-day 
delinquent accounts with balances over $100,000. The default divisions are 
comprised of teams of foreclosure and bankruptcy coordinators assigned 
different geographic regions and REO and property preservation units assigned 
the task of monitoring and preserving collateral values. If a property is 
acquired through foreclosure, the Company will market the property for 
liquidation and recovery.

During fiscal 1998, the Company's loss mitigation team further developed its 
loss mitigation strategy.  This strategy includes, in certain circumstances, 
the identification of individual defaulted loans and repossessed properties 
to be purchased out of its REMICs.  After buying these assets out of the 
REMICs, they are resolved using loss mitigation techniques which may include 
sales to third party investors. This process, while successfully meeting the 
Company's goal of reducing loss severity and improving long term REMIC and 
residual loss performance, did have the effect during fiscal 1998 of 
accelerating losses. For the Company's fiscal years ended March 31, 1998 and 
1997, accelerated losses were 26 basis points and 8 basis points, 
respectively. See "Defaults and Losses" in Item 7. Management's Discussion 
and Analysis of Financial Condition and Results of Operations for further 
discussion.

Generally, collection activity will commence once a loan has not been paid 
within five days of the due date.  Once a loan becomes 30 days past due, a 
collection supervisor generally analyzes the account to determine the 
appropriate course of action. On or about the 45th day of delinquency, each 
property is typically inspected. The inspection indicates if the property is 
occupied or vacant, the general condition of the property, whether the 
condition is deteriorating, and a recommendation for securing, repair or 
maintenance. Borrowers usually will be contacted by telephone at least five 
times and also by written correspondence before the loan becomes more than 60 
days delinquent. Collection activity on accounts 60 days or more delinquent 
typically emphasizes curing the delinquency, including the use of formal 
forbearance, refinance and voluntary liquidation and other means directed at 
completely curing the delinquency. In most cases, accounts that cannot be 
cured by reasonable means will be moved to foreclosure as soon as all legal 
documentation permits.

                                       8
<PAGE>

Depending upon the circumstances surrounding the delinquent account, a 
temporary suspension of payments or a repayment plan to return the account to 
an up-to-date status may be authorized by the collection supervisor. In any 
event, it is the Company's policy to work with the delinquent customer to 
resolve the past due balance before legal action is initiated.

Mortgaged properties securing loans that are more than 60 days delinquent, 
including loans in foreclosure, are typically inspected on a monthly basis.  
In most cases, the cost of these inspections will be advanced by 
ContiMortgage and charged to the individual escrow accounts of the borrowers. 
The Company expects that the cost of inspections generally will be recovered 
through reinstatement, liquidation or payoff.  The property preservation unit 
generally reviews each inspection report and takes whatever corrective action 
is necessary.  The cost to secure, winterize or maintain a property are 
typically charged to the borrower's escrow account.  If and when a property 
moves to foreclosure status, a foreclosure coordinator will review all 
previous inspection reports, evaluate the lien and equity position and obtain 
any additional information as necessary. The ultimate decision to foreclose, 
after all necessary information is obtained, is made by an officer of 
ContiMortgage.

Foreclosure regulations and practices and the rights of the owner in default 
vary from state to state, but generally procedures may be initiated if: (i) 
the loan is 90 days or more delinquent; (ii) a notice of default on a senior 
lien is received; or (iii) ContiMortgage discovers circumstances indicating 
potential loss exposure.

See Item 6. Selected Financial Data for information regarding the ContMortgage
Servicing portfolio's delinquencies, defaults and loan loss experience.


                                       9
<PAGE>

The following chart outlines certain parameters of the credit grades of 
ContiMortgage's and ContiWest's current underwriting guidelines:

                            DESCRIPTION OF CREDIT GRADES

<TABLE>
<CAPTION>
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                 "A" CREDIT GRADE     "B" CREDIT GRADE     "C" CREDIT GRADE      "D" CREDIT GRADE 
--------------------------------------------------------------------------------------------------
<S>              <C>                  <C>                  <C>                   <C>
GENERAL          Has good credit      Pays the             Marginal credit       Designed to
REPAYMENT        but might have       majority of          history which         provide a
                 some minor           accounts on          is offset by          borrower with
                 delinquency.         time but has         other positive        poor credit
                                      some 30- and/or      attributes.           history an
                                      60-day                                     opportunity to
                                      delinquency.                               correct past
                                                                                 credit problems
                                                                                 through lower
                                                                                 monthly
                                                                                 payments.
--------------------------------------------------------------------------------------------------
EXISTING         Current at           Current at           Cannot exceed         Must be paid in
MORTGAGE LOANS   application          application          four 30-day           full from loan
                 time and a           time and a           delinquencies         proceeds and no
                 maximum of two       maximum of           or one 60-day         more than 119
                 30-day               three 30-day         delinquency in        days'
                 delinquencies        delinquencies        the past 12           delinquency.
                 in the past 12       in the past 12       months.               
                 months.              months.                                    
--------------------------------------------------------------------------------------------------
NON-MORTGAGE     Major credit         Major credit         Major credit          Major and minor
CREDIT           and installment      and installment      and installment       credit
                 debt should be       debt can             debt can              delinquency is
                 current but may      exhibit some         exhibit some          acceptable, but
                 exhibit some         minor 30-and/or      minor 30-and/or       must
                 minor 30-day         60-day               90-day                demonstrate
                 delinquency.         delinquency.         delinquency.          some payment
                 Minor credit         Minor credit         Minor credit          regularity.
                 may exhibit          may exhibit up       may exhibit           
                 some minor           to 90-day            more serious          
                 delinquency.         delinquency.         delinquency.          
--------------------------------------------------------------------------------------------------
BANKRUPTCY       Charge-offs,         Discharged more      Discharged more       Discharged
FILINGS          judgments,           than two years       than two years        prior to
                 liens, and           with                 with                  closing.
                 former               reestablished        reestablished         
                 bankruptcies         credit.              credit.               
                 are                                                             
                 unacceptable.                                                   
--------------------------------------------------------------------------------------------------
DEBT SERVICE-    Generally not        Generally not        Generally not         Generally not
TO-INCOME        to exceed 45%.       to exceed 50%.       to exceed 50%.        to exceed 50%.
RATIO                                                                            
--------------------------------------------------------------------------------------------------
MAXIMUM LOAN-                                                                    
TO-VALUE RATIO:                                                                  
--------------------------------------------------------------------------------------------------
OWNER OCCUPIED   Generally 80%        Generally 80%        Generally 75%         Generally 65%
                 (or 90%) for a       (or 85%) for a       (or 85%) for a        (or 70%) for a
                 1 to 4 family        1 to 4 family        1 to 4 family         1 to 4 family
                 dwelling             dwelling             dwelling              dwelling
                 residence; 75%       residence; 75%       residence; 70%        residence.
                 for a                for a                for a                 
                 condominium.         condominium.         condominium.          
--------------------------------------------------------------------------------------------------
NON-OWNER        Generally 75%        Generally 70%        Generally 65%         N/A
OCCUPIED         for a 1 to 2         for a 1 to 2         for a 1 to 2          
                 family               family               family                
                 dwelling or          dwelling or          dwelling or
                 condominium, 70%     condominium 65%      condominium 60%         
                 for a 3 to 4         for a 3 to 4         for a 3 to 4          
                 family.              family.              family.               
--------------------------------------------------------------------------------------------------
</TABLE>
                                       10
<PAGE>

FINANCING AND ASSET SECURITIZATION SERVICES

GENERAL

The Company provides financing and asset securitization execution and 
expertise to originators of a broad range of consumer and commercial loans, 
leases, receivables and other assets. Through ContiTrade and ContiFinancial 
Services, the Company provides financing and asset securitization services to 
its subsidiaries and Strategic Alliance Clients. ContiTrade provides 
financing and structuring of asset-backed securities. ContiFinancial 
Services, a National Association of Securities Dealers, Inc. ("NASD") member 
and broker/dealer, privately places or underwrites offerings of asset-backed 
securities on behalf of the Company and its finance company clients.

TARGETING OPPORTUNITIES

The Company seeks to identify consumer and commercial loans, leases, 
receivables or other assets which have the potential to be more efficiently 
financed through securitization and to form Strategic Alliances with the 
originators of such assets. Identifying such assets involves a thorough 
analysis and due diligence of: (i) the asset (loan, lease, or receivable), 
(ii) the management team of the potential Strategic Alliance client, and 
(iii) the servicing systems of the potential Strategic Alliance client. The 
credit review process of the Company seeks to determine whether or not a new 
asset is securitizable to investment grade and whether there exists a ready 
and interested investor base for the new product.

The due diligence process and the results thereof are outlined in a risk 
memorandum. The preparation of the risk memorandum is an intensive process, 
managed by the Company's Chief Credit Officer, and focuses on four areas: (i) 
background on company, management, asset and industry, (ii) risks and 
mitigating factors, (iii) projected profitability, and (iv) balance sheet and 
cash impact. Once the risk memorandum is completed, the decision to 
securitize a new class of assets with a new client is subject to approval by 
a credit committee made up of senior executive officers of the Company. After 
the credit process is completed for a new client, each subsequent 
securitization transaction by that client will be subject to an abridged 
credit review process.

CLIENT SERVICES

The Company provides warehouse financing, whole loan purchasing, hedging, 
credit enhancement and Excess Spread Receivables financing services to the 
Company's subsidiaries, equity investments and  Strategic Alliance Clients.

WAREHOUSE FINANCING.  The Company makes financing available to its 
securitization clients through secured loans or purchase commitments to 
facilitate the accumulation of securitizable assets prior to securitization 
("warehouse financing"). As of March 31, 1998, through ContiTrade, the 
Company had committed $1.7 billion of financing to its third party clients 
and equity investments, of which $848 million was drawn down. Warehouse 
financing commitments are typically for a term of one year or less and are 
generally designed to fund only securitizable assets. Assets from a 
particular client typically remain in the warehouse for a period of up to 90 
days at which point they are securitized and sold to institutional investors, 
in most cases, through ContiFinancial Services, the Company's NASD registered 
broker/dealer. The Company utilizes its asset purchase and sale facilities 
with certain financial institutions ("Purchase and Sale Facilities") and a 
funding agreement under an agreement to repurchase ("Repurchase Agreement") 
to finance this warehouse financing.

WHOLE LOAN PURCHASING.  The Company seeks opportunities to purchase assets 
for sale into securitized trusts and to recognize gain on sale.  The 
Company's Strategic Alliance Clients often seek to raise additional cash to 
cover 

                                       11
<PAGE>

the expenses and the negative cash flow associated with securitization. 
Therefore, whole loan pools of assets may be purchased by the Company from a 
Strategic Alliance Client and then securitized under the Company's name or 
the name of its Strategic Alliance Client.  The Company will typically invest 
its capital in the transaction through the purchase of loans at a premium and 
the assumption of certain costs of securitization.

CONDUITS.  The Company also executes its loan purchase strategy through loan 
conduits. Conduits are stand-alone securitization vehicles where the 
originator(s), underwriter(s), servicer(s), and seller(s) may all be 
different parties coming together to generate loans to be serviced and 
securitized. Conduits allow smaller originators to sell their product into a 
single securitizable pool, thus benefiting from the economies of scale and 
the ability to share the fixed transaction costs associated with 
securitization.  The Company has established a conduit for 
commercial/multi-family mortgages ("ContiMAP-Registered Trademark-").  The 
Company's role is to provide capital through warehouse financing and/or the 
purchase of loans at a premium and to ensure that the loans are underwritten 
to the conduit's underwriting guidelines and are thus securitizable. In 
addition, the Company also manages the ultimate sale or securitization of the 
loans originated through ContiMAP-Registered Trademark-.  The Company had 
previously also operated an adjustable rate mortgage conduit which was closed 
in fiscal 1997 due to the strategic acquisition of Royal, previously the 
major participant of the conduit.

HEDGING. As certain assets are accumulated for securitization, they are 
exposed to fluctuations in interest rates. This is because the securitization 
of each asset class is priced to the investor utilizing the United States 
Treasury security with a maturity most closely matching the assets' average 
lives. Therefore, at the client's discretion, the Company will hedge the 
specific United States Treasury security in the cash market.

CREDIT ENHANCEMENT. To the extent that the securitization of a particular 
asset class requires credit enhancement in addition to the Excess Spread, the 
Company will consider providing that additional support in the form of (i) an 
initial deposit to be reimbursed from the cash flow of the assets securitized 
or (ii) the purchase of a mezzanine security.

EXCESS SPREAD RECEIVABLES FINANCING. In certain cases, the Company finances a 
client's Excess Spread Receivables in order to provide the client with cash 
to cover the expenses and negative cash flow associated with securitization. 
The financing is typically in the form of a secured loan.  The Company 
commits to provide such financing only to its Strategic Alliance Clients. In 
each case, in return for the financing, the Company will receive ownership 
participations either in the Strategic Alliance Clients or in the portfolio 
of loans securitized. As of March 31, 1998,  the total committed amount of 
such financing was $42.0 million and the amount outstanding of such financing 
was $26.3 million.

CONTIFINANCIAL SERVICES

PLACEMENT OF ASSET-BACKED SECURITIES. Securitization or structured finance 
expertise is the foundation upon which the Company has built its business and 
executes its strategy. Since 1991 through March 31, 1998, the Company has 
structured or placed $22.0 billion of securitized assets representing 123 
transactions for ContiMortgage, Triad and other clients.

ContiFinancial Services' placement capabilities accomplish two objectives: 
(i) generating fee income, and (ii) providing a controlled exit strategy for 
assets financed by allowing the Company and its Strategic Alliance Clients to 
manage more effectively when and how transactions are brought to market. 
While ContiFinancial Services' placement capabilities have been primarily 
focused on private placements, to the extent opportunities exist in the 
public market, ContiFinancial Services will bid out the public underwriting 
business to other investment banks and manage the process on behalf of itself 
and its clients. The Company has filed a $6.0 billion shelf registration 
statement with the Securities and Exchange Commission (the "Commission") with 
$5.0 billion available at March 31, 1998 to securitize certain asset-backed 
securities.

                                       12
<PAGE>

If the Company is successful in a Strategic Alliance (earning fees for 
warehousing, gain on sale for whole loan purchases and sales, and fees for 
the placement of asset-backed securities) while its client experiences 
significant growth and profitability, the Strategic Alliance client will 
ultimately need the services of a larger full service investment bank.  The 
Company's strategy, however, contemplates this evolution through: (i) 
continuing to purchase whole loans from the Strategic Alliance client, (ii) 
creating new loan conduits, (iii) recognizing the value of any Strategic 
Alliance Equity Interests, and, most importantly, (iv) continuing to develop 
new securitizable assets and Strategic Alliances.

PURCHASE AND SALE FACILITIES AND REPURCHASE AGREEMENT ("FACILITIES")

As of March 31, 1998, the Company had $2.8 billion of committed and an 
additional $3.1 billion of uncommitted sale capacity under its Facilities.  
The Facilities allow the Company to sell, with limited recourse, interest in 
designated pools of loans and other assets.  The Company utilized the 
Facilities to sell assets totaling $18.7 billion, $7.4 billion and $5.7 
billion, in the fiscal years 1998, 1997 and 1996, respectively.  As of March 
31, 1998, the Company had utilized $1.0 billion of the sale capacity under 
the Facilities.

ASSET CLASSES

Since 1991, the Company has expanded the scope of its products to include 
equipment leases, franchisee loans, commercial/multi-family loans, non-prime 
and sub-prime auto loans and leases, and timeshare loans.

The following table illustrates the Company's  securitizations and sales 
volume:
                                       
                   The Company's Securitizations and Sales
                             Volume by Asset Classes

<TABLE>
<CAPTION>
                                                                                                                        
                                                                                      Years Ended March 31,              Total By 
                                                            ----------------------------------------------------------     Asset   
                                                              1998        1997          1996          1995       1994      Class
(in millions)                                               --------    --------      ---------   ----------   --------- --------
<S>                                                         <C>         <C>           <C>         <C>          <C>        <C>
Home equity, home improvement and other
  residential mortgage loans:
     ContiMortgage/ContiWest securitizations..............  $    6,150  $    3,454     $  2,030   $    1,259  $     733   $   13,626
     Other home equity, home improvement and
        other residential mortgage sales..................         596         586          755          374         99        2,410
                                                            ----------  ----------     --------   ----------  ---------   ----------
     Total home equity, home improvement and
        other residential mortgage sales (1)..............  $    6,746  $    4,040     $  2,785   $    1,633  $     832   $   16,036
Commercial real estate mortgage loans ....................       1,498         742          186           89        --         2,515
Non-prime and sub-prime auto loans and leases.............         309          91          162           39        --           601
ARMs .....................................................         --          --           505          101         36          642
Equipment leasing.........................................          46         250          190          179        178          843
Title I home improvement loans............................         139         --           --           149         96          384
Franchisee loans..........................................                      21          145           98         48          312
Other.....................................................          30         --            20          --         --            50
                                                            ----------  ----------     --------   ----------  ---------   ----------
Total securitization volume...............................  $    8,768   $   5,144     $  3,993   $    2,288  $   1,190   $   21,383
                                                            ----------  ----------     --------   ----------  ---------   ----------
                                                            ----------  ----------     --------   ----------  ---------   ----------
</TABLE>


---------------
(1) Includes Strategic Alliances' sales.

HOME EQUITY, HOME IMPROVEMENT AND OTHER RESIDENTIAL MORTGAGE LOANS.  The Company
leveraged its financing capabilities and structured finance expertise by
acquiring ContiMortgage in 1990 and establishing 

                                       13
<PAGE>

Strategic Alliances with other clients in the home equity loan industry.  In 
addition to providing its financing, hedging and securitization services to 
ContiMortgage,  the Company also provided its services to other clients.

COMMERCIAL REAL ESTATE MORTGAGE LOANS.  In 1993, the Company established a 
commercial real estate conduit, ContiMAP-Registered Trademark-, to satisfy a 
need in the marketplace for the financing of $150,000 to $40 million 
loans secured by commercial properties, such as multi-family dwellings, self 
storage facilities, assisted living and other health related facilities, 
retail and industrial buildings.  Since fiscal 1996, the Company's commercial 
real estate loan securitizations, made through ContiMAP-Registered 
Trademark-, the Company's commercial real estate conduit, has increased at an 
annual compound growth rate of 156% to $1.5 billion.

ContiMAP-Registered Trademark- purchases commercial real estate loans 
suitable for securitization and sale into the capital markets.  The Company 
underwrites the loans and manages the aggregation of the loans through 
correspondent relationships with established lending companies.  The 
Company's strategy is to grow ContiMAP-Registered Trademark- by continuing to 
add additional qualified commercial lenders and by continuing to enhance its 
product offerings.  As part of this strategy, in April 1998, as previously 
discussed, the Company acquired a 75% interest in Keystone Mortgage Partners 
L.L.C. an originator and servicer of commercial mortgage loans.  In March 
1998, the Company also expanded its commercial mortgage business by investing 
in convertible preferred stock and warrants of Crown NorthCorp, Inc. 
("Crown").  The preferred stock, when converted, and the warrants, when 
exercised will represent 7% of the common stock of Crown. Crown is an 
international financial services firm which originates commercial mortgages 
and  provides asset management and loan servicing capabilities.

NON-PRIME AND SUB-PRIME AUTO LOANS AND LEASES.   Non-prime and sub-prime 
automobile lending represents loans to credit-impaired borrowers.  Like the 
home equity loan market, the Company believes that prudent loan underwriting 
and pricing, coupled with strong servicing and collections, mitigates the 
risk of the non-prime and sub-prime credit borrower.  Non-prime auto loans 
and leases are originated to primarily "B" and "C" credit grade borrowers as 
opposed to sub-prime auto loans which are usually issued on a discount basis 
to "C-" and "D" credit grade borrowers.

In Fiscal  1997, the Company purchased 56% of the common stock of Triad, a 
California-based auto finance company specializing in origination of 
non-prime auto finance contracts for used and new vehicles and in fiscal 
1998, the Company purchased the remaining 44% of the common stock of Triad. 
As of March 31, 1998, Triad has relationships with over 2,000 dealerships in 
28 states, with California representing approximately 34% of loan 
originations.  As with ContiMortgage, Triad utilizes centralized origination, 
underwriting and servicing techniques.

The Company believes that significant opportunities still exist in the 
non-prime and sub-prime auto loan and lease market due to: (i) the higher 
cost of funds through which these assets are typically being financed; (ii) 
the discipline which the regular securitization process brings to the 
origination, underwriting, servicing, collection and monitoring of auto loans 
and leases; (iii) consolidation in the industry; and (iv) the Company's 
ability to identify strong management teams and provide its unique mix of 
products and services.

ADJUSTABLE RATE MORTGAGES.   The Company established an Adjustable Rate 
Mortgage Conduit  ("ARM Conduit") in 1994.   The Company's ARM  Conduit 
allowed smaller originators to sell their loan product into a single 
securitizable pool and to benefit from the economies of scale not otherwise 
available to them on a stand-alone basis.  In fiscal 1997, the Company 
acquired Royal, the largest contributor to the ARM Conduit and discontinued 
the conduit.

                                       14
<PAGE>

EQUIPMENT LEASING.  The equipment leasing industry is a highly fragmented 
industry where leases of a wide array of equipment are made to predominately 
commercial users.  The typical leasing company provides a specialized service 
to a relatively specific asset class (e.g., office equipment or medical 
equipment). The Company has financed various assets for several  equipment 
lease company clients ranging from $300 fax machines to $3 million MRI 
machines.  In January 1998, the Company formed ContiLeasing to provide 
equipment financing solutions to small businesses nationwide, targeting 
relationships with equipment manufacturers and dealers to develop customized 
financing programs.

TITLE I CONVENTIONAL HOME IMPROVEMENT LOANS.  Home improvement loans 
represent loans to homeowners, a portion of which may be guaranteed by the 
U.S. Government in the case of Title I home improvement loans for the purpose 
of certain pre-qualified home improvements.  The Company decided to pursue 
this business line, which was a natural extension of its home equity loan 
business, because of its highly fragmented nature and higher cost of funds 
through which these assets are typically being financed.

The Company executed securitizations, in the form of conduits where it 
financed and placed Title I and conventional home improvement loans on behalf 
of conduit participants and through a Strategic Alliance with one of the 
conduit participants.  The Company's strategy is to facilitate the growth of 
its Strategic Alliance client through securitizations, expanding its presence 
nationwide, building economies of scale and helping to create a low cost, 
high volume producer in an otherwise fragmented industry.

The Company's, wholly-owned subsidiary ULG and Empire, in which the Company 
owns a minority interest, also originate Title I and conventional home 
improvement loans through retail origination channels.

FRANCHISEE LOANS.  Franchisee loans represent loans to franchisees of top 
tier national restaurant chains and other franchise chains.  In the Company's 
securitization of franchisee loans, the underwriting process focuses on the 
franchisee borrower's ability to generate cash flow from the particular 
restaurant as opposed to more traditional financing, which is based upon hard 
collateral values or the credit rating of the franchisor.

In 1993, the Company identified this niche opportunity and developed this 
business line in conjunction with a Strategic Alliance client.  The Company 
believes that its warehouse financing, hedging, structured finance and 
placement capabilities combined with its unique approach to underwriting and 
credit analysis, will provide it with a competitive advantage.

WARRANTS AND STOCK OWNERSHIP

In certain of its Strategic Alliances, the Company may receive Strategic 
Alliance Equity Interests.  Based on its prior experience, the Company does 
not anticipate that any Strategic Alliance Equity Interest that it holds or 
may acquire in the future will have any effect on the Company's financial 
position or results of operations until the business of the Strategic 
Alliance client matures, which typically takes several years.  However, in 
fiscal 1998, the Company received $1.1 million of warrant income from the 
sale of stock warrants in a Strategic Alliance company.  In addition, the 
Company may, from time to time, make a direct cash equity or subordinated 
debt investment in a Strategic Alliance Client.

REGULATION

GENERAL.  The Company's businesses are subject to extensive regulation in the
United States at both the Federal and state level.  In the Company's home equity
loan and financing businesses, regulated matters include loan 

                                       15
<PAGE>

origination, credit activities, maximum interest rates and finance and other 
charges, disclosure to customers, the terms of secured transactions, the 
collection, repossession and claims-handling procedures utilized by the 
Company, multiple qualification and licensing requirements for doing business 
in various jurisdictions and other trade practices. As part of the Company's 
financing and asset securitization business, ContiFinancial Services is 
required to register as a broker/dealer with certain Federal and state 
securities regulatory agencies and is a member of the NASD.

TRUTH IN LENDING. The Truth in Lending Act ("TILA") and Regulation Z 
promulgated thereunder contain disclosure requirements designed to provide 
consumers with uniform, understandable information with respect to the terms 
and conditions of loans and credit transactions in order to give them the 
ability to compare credit terms. TILA also guarantees consumers a three day 
right to cancel certain credit transactions including loans of the type 
originated by the Company. Management of the Company believes that it is in 
compliance with TILA in all material respects. If  the Company were found not 
to be in compliance with TILA, aggrieved borrowers could have the right to 
rescind their mortgage loan transactions and to demand the return of finance 
charges paid to  the Company.

In September 1994, the Riegle Community Development and Regulatory 
Improvement Act of 1994 (the "Riegle Act") was enacted. Among other things, 
the Riegle Act makes certain amendments to TILA.  The Riegle Act generally 
applies to certain mortgage loans with (i) total points and fees upon 
origination exceeding eight percent of the loan amount  (as adjusted for 
changes in the Consumer Price Index) or (ii) an annual percentage rate of 
more than ten percentage points higher than comparably maturing United States 
Treasury securities ("Covered Loans").

The Riegle Act  imposes disclosure requirements on lenders originating 
Covered Loans and prohibits lenders from originating Covered Loans that are 
underwritten solely on the basis of the borrower's home equity without regard 
to the borrower's ability to repay the loan.

The Riegle Act also prohibits lenders from including prepayment fee clauses 
in Covered Loans to borrowers with a debt-to-income ratio in excess of 50% or 
Covered Loans used to refinance existing loans originated by the same lender. 
The Company will continue to collect prepayment fees on loans originated 
prior to the October 1995 effectiveness of the Riegle Act and on non-Covered 
Loans as well as on Covered Loans in permitted circumstances.  The Riegle Act 
imposes other restrictions on Covered Loans, including restrictions on 
balloon payments and negative amortization features, which the Company does 
not believe will have a material impact on its operations.

EQUAL CREDIT OPPORTUNITY ACT OF 1974, as amended ("ECOA"), prohibits 
creditors from discriminating against applicants on the basis of race, color, 
sex, age or marital status. Regulation B promulgated under ECOA restricts 
creditors from obtaining certain types of information from loan applicants. 
It also requires certain disclosures by the lender regarding consumer rights 
and requires lenders to advise applicants of the reasons for any credit 
denial. In instances where the applicant is denied credit or the rate or 
charge for loans increases as a result of information obtained from a 
consumer credit agency, another statute, the Fair Credit Reporting Act of 
1970, as amended, requires lenders to supply the applicant with the name and 
address of the reporting agency.  The Company is also subject to the Real 
Estate Settlement Procedures Act of 1974, as amended, and is required to file 
an annual report with the Department of Housing and Urban Development 
pursuant to the Home Mortgage Disclosure Act.

THE REAL ESTATE SETTLEMENT PROCEDURES ACT  ("RESPA")  and Regulation X are 
designed to protect borrowers against abusive practices, such as kick-backs 
and hidden fees, and to provide additional disclosures so borrowers know the 
nature and cost of the real estate settlement process, including escrow 
payments.

                                       16
<PAGE>

THE HOME MORTGAGE DISCLOSURE ACT ("HMDA") and Regulation C enables the 
government and regulators to determine whether financial institutions are 
serving the housing needs of their communities,  assist public officials in 
distributing public sector investments so as to attract private investment to 
where there is economic decline, assist in identifying possible 
discriminatory lending practices and enforce nondiscrimination statutes. 
Regulation C requires lenders to collect  and report certain information 
about applicants including : loan type, loan purpose, loan amount, credit 
decision, location of the property, race, sex and income of the applicant.  
HMDA requires lenders to place notices in certain public locations regarding 
the availability of its reporting data.

THE FAIR CREDIT REPORTING ACT ("FCRA") is designed to regulate the consumer 
reporting industry.  It places disclosure obligations on the users of 
consumer credit reports and is designed to ensure fair, timely, and accurate 
reporting of credit information. FCRA also restricts the use of consumer 
credit reports and in certain circumstances requires the deletion of obsolete 
information.

THE FAIR DEBT COLLECTION PRACTICES ACT ("FDCPA") generally specifies the 
manner in which debt collectors may pursue debtors to receive payment for 
outstanding obligations including but not limited to communication regarding 
a debt, harassment or abuse, unfair practices or  false or misleading 
representations.

In addition,  the Company is subject to various other federal and state laws, 
rules and regulations governing, among other things, the licensing of, and 
procedures which must be followed by, mortgage lenders and servicers, and 
disclosures which must be made to consumer borrowers. Failure to comply with 
such laws may result in civil and criminal liability and may, in some cases, 
give consumer borrowers the right to rescind their mortgage loan transactions 
and to demand the return of finance charges paid to the Company.

Also, certain of the loans purchased by  the Company, such as Title I home 
improvement loans, are insured by an agency of the federal government. Such 
loans are subject to extensive government regulation.

ENVIRONMENTAL LIABILITY.  In the course of its business, the Company may 
acquire properties securing loans that are in default.  There is a risk that 
hazardous or toxic waste could be found on such properties.  In such event, 
the Company could be held responsible for the cost of cleaning up or removing 
such waste, and such cost could exceed the value of the underlying properties.

BROKER/DEALER. In  the Company's capital management services business, 
ContiFinancial Services acts as a placement agent and underwriter for public 
and private offerings of asset-backed securities. As a result, ContiFinancial 
Services is registered as a broker/dealer with the Securities and Exchange 
Commission, the State of California and the State of New York and is a member 
of the NASD. ContiFinancial Services is subject to regulation by the 
Commission, the NASD and state securities administrators in matters relating 
to the conduct of its securities business, including record keeping and 
reporting requirements, supervision and licensing of employees and 
obligations to customers. Additional legislation and regulations, including 
those relating to the activities of affiliates of broker/dealers, changes in 
rules promulgated by the Commission or other regulatory authorities, and the 
NASD, changes in the interpretation or enforcement of existing laws and rules 
and changes in the special exemption of ContiFinancial Services may adversely 
affect the manner of operation and profitability of  the Company.

As a registered broker/dealer, ContiFinancial Services is subject to the 
Commission's net capital rules. These rules, which specify minimum net 
capital requirements for registered broker/dealers, are designed to assure 
that broker/dealers maintain adequate regulatory capital in relation to their 
liabilities and the size of their customer business and have the effect of 
requiring that at least a substantial portion of their assets be kept in cash 
or highly liquid investments. Because it acts primarily as a private 
placement agent in asset-backed securities offerings, ContiFinancial Services 
operates under a less restrictive net capital standard. To the extent that 
the Company elects to expand its public underwriting capacity, it would be 
required to substantially increase the net capital of 

                                       17
<PAGE>

ContiFinancial Services. Under such circumstances, there can be no assurance 
that  the Company will have the capital necessary to increase such net 
capital.

FUTURE LAWS.  Because each of  the Company's businesses is highly regulated, 
the laws, rules and regulations applicable to  the Company are subject to 
regular modification and change. There are currently proposed various laws, 
rules and regulations which, if adopted, could impact  the Company. There can 
be no assurance that these proposed laws, rules and regulations, or other 
such laws, rules or regulations will not be adopted in the future which could 
make compliance much more difficult or expensive, restrict  the Company's 
ability to originate, broker, purchase or sell loans, further limit or 
restrict the amount of commissions, interest and other charges earned on 
loans originated, brokered, purchased or sold by  the Company, or otherwise 
adversely affect the business or prospects of  the Company.

COMPETITION

See "Competition" in Item 7. Management's Discussion and Analysis of 
Financial Condition and Results of Operations for discussion of the Company's 
competition.

EMPLOYEES

At March 31, 1998 the Company had 2,881 employees.  None of  the Company's 
employees are represented by a labor union.  The Company believes that its 
relations with its employees are good.

                                       18
<PAGE>

ITEM 2.   PROPERTIES.

The Company's principal executive offices  are  located at 277 Park Avenue, 
New York, New York, 10172 and are occupied under a sublease with Continental 
Grain. The lease on this premises extends through February 28, 2000. In 
addition, the Company also occupies office space at another location in New 
York, New York and a location in Santa Monica, California under leases with 
third parties that expires in October 1999 and September 1999, respectively.

ContiMortgage's headquarters are in Hatboro, Pennsylvania, and has offices 
located in Phoenix, Arizona; Orange and Pleasanton, California; Maitland, 
Florida; Atlanta, Georgia; Oak Brook, Illinois; Carmel, Indiana; Bridgewater, 
New Jersey; Charlotte, North Carolina; Horsham, Pennsylvania and Irving, 
Texas. These properties are operated under leases with third parties that 
expire through August 2009.

ContiWest, ULG, Resource One, Royal, Triad, Fidelity, Crystal, ContiLeasing 
and CARMA have various offices throughout the United States and operate under 
various leases with third parties that expire through December 2003.

The Company believes that its present facilities are adequate for its current 
needs.

ITEM 3.   LEGAL PROCEEDINGS.

The Company has been named as a defendant in various legal actions arising 
from the conduct of its normal business activities.  Although the amount of 
any liability that could arise with respect to these actions cannot be 
accurately predicted, in the opinion of the Company, any such liability will 
not have a material adverse effect on the consolidated financial position or 
results of operations of the Company.

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

None.

                                       19
<PAGE>

                                    PART II.
 
ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 
MATTERS.

The Company's common stock is traded under the symbol "CFN" on the New York
Stock Exchange.  The following table sets forth, for the periods indicated, the
high and low closing sale price per share of the Company's common stock:

<TABLE>
<CAPTION>
                                            SALES PRICE
                                  ------------------------------
                                      HIGH               LOW
                                  -----------         ----------
<S>                               <C>             <C>
Fiscal Year Ended March 31, 1998:

               First Quarter       $36.8750       $26.5000
               Second Quarter      $40.3125       $31.0000
               Third Quarter       $32.3750       $23.7500
               Fourth Quarter      $32.1875       $18.3125


Fiscal Year Ended March 31, 1997:

               First Quarter       $33.0000       $28.5000
               Second Quarter      $30.2500       $23.2500
               Third Quarter       $39.2500       $28.8750
               Fourth Quarter      $39.3750       $31.0000

</TABLE>

As of  June 1, 1998, the Company had 101 stockholders of record, and 
approximately 6,150 beneficial owners of its common stock.

The Company has no current intention to pay cash dividends on its Common 
Stock. As a holding company, the ability of the Company to pay dividends is 
dependent upon the receipt of dividends or other payments from its 
subsidiaries.  Any future determination as to the payment of dividends will 
be at the discretion of the Company's Board of Directors and will depend upon 
the Company's operating results, financial condition and capital 
requirements, contractual restrictions, general business conditions and such 
other factors as the Company's Board of Directors deems relevant.  
Furthermore, covenants in the Company's loan agreements restrict the payment 
of dividends by the Company.  If these covenants are still in place at the 
time the Company decides to declare a dividend, a waiver from the related 
lenders would have to be obtained.  In addition, there can be no assurance 
that dividends will be permitted under applicable law.

                                       20

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA.

SELECTED FINANCIAL DATA
(in thousands, except share data)

<TABLE>
<CAPTION>
                                                                              YEARS ENDED MARCH 31,
                                                         -------------------------------------------------------------------
                                                            1998          1997          1996          1995          1994
                                                         -----------   -----------   -----------   -----------   -----------
<S>                                                      <C>           <C>           <C>           <C>           <C>
INCOME STATEMENT DATA:

  Gross income
  Gain on sale of receivables                            $   311,606   $   210,861   $   146,529   $    67,512   $    49,671
  Interest                                                   236,494       161,402        91,737        42,929        20,707
  Net servicing income                                        90,509        46,340        29,298         9,304         3,989
  Other income                                                21,553         9,227         4,252         2,252           162
                                                         -----------   -----------   -----------   -----------   -----------
      Total gross income                                     660,162       427,830       271,816       121,997        74,529
                                                         -----------   -----------   -----------   -----------   -----------
Expenses
  Compensation and benefits                                  161,992        82,170        52,203        23,812        14,674
  Interest                                                   165,904       120,636        74,770        29,635        12,124
  Provision for loan losses                                    5,668         3,043           285         1,935         4,499
  General and administrative                                 101,633        44,940        18,022         9,627         7,946
                                                         -----------   -----------   -----------   -----------   -----------
      Total expenses                                         435,197       250,789       145,280        65,009        39,243
                                                         -----------   -----------   -----------   -----------   -----------
Income before income taxes and minority interest             224,965       177,041       126,536        56,988        35,286
Income taxes                                                  91,149        71,341        49,096        22,168        13,726
Minority interest in subsidiaries                               (488)         (304)        3,310         8,728         5,076
                                                         -----------   -----------   -----------   -----------   -----------
Net income                                               $   134,304   $   106,004   $    74,130   $    26,092   $    16,484
                                                         ===========   ===========   ===========   ===========   ===========
Basic earnings per common
   share (pro forma for 1996)(1)                         $      2.90   $      2.44   $      2.01
                                                         ===========   ===========   ===========
Diluted  earnings per common
   share (pro forma for 1996)(1)                         $      2.86   $      2.40   $      2.00
                                                         ===========   ===========   ===========
Basic weighted average number of shares 
   outstanding (pro forma for 1996)(1)                    46,330,810    43,361,253    36,942,363
                                                         ===========   ===========   ===========
Diluted weighted average number of shares
   outstanding (pro forma for 1996)(1)                    46,992,449    44,152,343    37,050,165
                                                         ===========   ===========   ===========
During fiscal 1995 and 1996, the Company paid cash dividends to Continental
   Grain of $30,000 and $305, respectively.

<CAPTION>
                                                                                  AS OF MARCH 31,
                                                         -------------------------------------------------------------------
                                                            1998          1997          1996          1995          1994
                                                         -----------   -----------   -----------   -----------   -----------
<S>                                                      <C>           <C>           <C>           <C>           <C>
BALANCE SHEET DATA:
Interest-only and residual certificates                  $   648,785   $   445,005   $   293,218   $   143,031   $    94,491
Trade receivables, net                                       888,905       709,151       352,325        92,050        47,624
Total assets                                               2,808,579     1,545,798       892,540       327,742       217,856
Due to affiliates                                                163        36,367       337,734       114,907        49,846
Short-term debt                                              366,104        25,299            --            --            --
Long-term debt                                               499,553       498,817            --            --            --
Total liabilities                                          2,161,642     1,136,726       597,721       243,579       138,513
Minority interest in subsidiaries                                629         1,288            --        16,248         7,520
Stockholders' equity                                         646,308       407,784       294,819        67,915        71,823

</TABLE>

-------------------------------
(1) Because of the Company's December 1995 reorganization and changes in 
capital structure, per share data for the years ended March 31, 1995 and 1994 
is not meaningful.
                                       21

<PAGE>
                      SELECTED FINANCIAL DATA--(continued)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                              YEARS ENDED MARCH 31,
                                                         -------------------------------------------------------------------
                                                            1998          1997          1996          1995          1994
                                                         -----------   -----------   -----------   -----------   -----------
<S>                                                      <C>           <C>           <C>           <C>           <C>
LOAN ORIGINATIONS:
Home equity, home improvement and other 
residential mortgage loans:
Wholesale:
   Brokers                                               $ 1,031,465   $   827,096   $   505,587   $   265,535   $   138,054
   Correspondents                                          4,455,070     2,921,296     1,736,909     1,023,704       642,152
Direct retail                                              1,321,596       293,842        68,975        38,919         6,548
                                                         -----------   -----------   -----------   -----------   -----------
Total home equity, home improvement and
   other residential mortgage loans                        6,808,131     4,042,234     2,311,471     1,328,158       786,754
Commercial real estate mortgage loans                      1,873,849       632,524       321,165       158,343            --
Triad auto loans                                             191,967        47,049            --            --            --
                                                         -----------   -----------   -----------   -----------   -----------
     Total loan originations                             $ 8,873,947   $ 4,721,807   $ 2,632,636   $ 1,486,501   $   786,754
                                                         ===========   ===========   ===========   ===========   ===========
SECURITIZATIONS AND SALES:
   ContiMortgage/ContiWest securitizations               $ 6,150,000   $ 3,454,259   $ 2,030,000   $ 1,258,919   $   733,182
   Other home equity, home improvement and
     other residential mortgage sales                        596,132       335,991           270        33,772        39,142
                                                         -----------   -----------   -----------   -----------   -----------
   Total home equity, home improvement
     and other residential mortgage sales                  6,746,132     3,790,250     2,030,270     1,292,691       772,324
   Commercial real estate mortgage loans                   1,497,507       742,259       185,980        89,000            --
    Triad auto loans                                         177,985        43,530            --            --            --
    Strategic alliances                                      346,464       568,401     1,776,700       906,000       418,000
                                                         -----------   -----------   -----------   -----------   -----------
 Total securitizations and sales                         $ 8,768,088   $ 5,144,440   $ 3,992,950   $ 2,287,691   $ 1,190,324
                                                         ===========   ===========   ===========   ===========   ===========

CONTIMORTGAGE SERVICING PORTFOLIO:
Number of loans serviced  (at year end)                      157,365        104,568       65,121        38,740        20,146

Serviced loan portfolio (at year end)                    $10,135,785    $ 6,423,376  $ 3,863,575   $ 2,192,190   $ 1,105,393
Delinquencies:
   30-59 days                                                   1.50%         2.18%         1.81%         0.83%         0.45%
   60-89 days                                                   0.51%         0.68%         0.47%         0.36%         0.19%
   90 days and over                                             0.35%         0.38%         0.23%         0.45%         0.27%
                                                         -----------   -----------   -----------   -----------   -----------
   Total delinquencies (%)                                      2.36%         3.24%         2.51%         1.64%         0.91%
                                                         ===========   ===========   ===========   ===========   ===========
   Total delinquencies ($)                               $   239,015   $   208,084   $    97,082   $    35,980   $    10,036
                                                         ===========   ===========   ===========   ===========   ===========
Defaults:

   Foreclosure                                                  2.31%         2.90%         2.42%         0.46%         0.59%
   Bankruptcy                                                   1.70%         1.15%         0.74%         0.41%         0.23%
   Real estate owned                                            0.83%         0.52%         0.13%         0.09%         0.05%
   Forbearance                                                  0.74%         0.13%         0.25%         0.20%          N/A
                                                         -----------   -----------   -----------   -----------   -----------
   Total defaults (%)                                           5.58%         4.70%         3.54%         1.16%         0.87%
                                                         ===========   ===========   ===========   ===========   ===========
   Total defaults ($)                                    $   565,238   $   302,164   $   136,796   $    25,486   $     9,615
                                                         ===========   ===========   ===========   ===========   ===========
</TABLE>
                                       22

<PAGE>
                      SELECTED FINANCIAL DATA--(continued)

                                 (in thousands)

                     Loan Loss Experience on ContiMortgage's
                    Servicing Portfolio of Home Equity Loans

<TABLE>
<CAPTION>
                                                                              YEARS ENDED MARCH 31,
                                                         -------------------------------------------------------------------
                                                            1998          1997          1996          1995          1994
                                                         -----------   -----------   -----------   -----------   -----------
<S>                                                      <C>           <C>           <C>           <C>           <C>
Loan loss experience (1):
Average amount outstanding                               $ 8,166,407   $ 4,845,304   $ 2,858,790   $ 1,663,865   $   745,351
Net losses:
    REMICs and loans held
       pending securitization                            $    37,600   $    12,719   $     3,686   $     1,308   $     1,108
Loans and properties
    purchased out of REMICs                                   21,162         3,576            --            --            --
                                                         -----------   -----------   -----------   -----------   -----------
             Total net losses                            $    58,762   $    16,295   $     3,686   $     1,308   $     1,108
                                                         ===========   ===========   ===========   ===========   ===========
Realized net losses as a percentage 
  of average amount outstanding:
     REMICs and loans held
           pending securitization                               0.46%         0.26%         0.13%         0.08%         0.15%
      Loans and properties
           purchased out of REMICs                              0.26%         0.08%           --            --            --
                                                         -----------   -----------   -----------   -----------   -----------
             Total realized net losses as
                a percentage of average
                amount outstanding                              0.72%         0.34%         0.13%         0.08%         0.15%
                                                         ===========   ===========   ===========   ===========   ===========
</TABLE>

(1) See "Defaults and Losses" included in Item 7. Management's Discussion and 
Analysis of Financial Condition and Results of Operations for a discussion of 
the Company's loss mitigation program.

                                       23
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

This discussion should be read in conjunction with "Selected Financial Data" 
and the Company's Consolidated Financial Statements and the Notes thereto. In 
addition, this year's report includes a separate section Gain on Sale of 
Receivables and Excess Spread Receivables, which should be read in 
conjunction with Results of Operations. Certain statements under this caption 
constitute "forward-looking statements" under federal securities laws. See 
the "Forward-looking Statements" on page 3 of this annual report.

GENERAL

ContiFinancial engages in the consumer and commercial finance business by 
originating home equity loans, commercial real estate loans and non-prime 
auto loans. ContiFinancial also provides financing and asset securitization 
structuring and placement services to originators of a broad range of loans, 
leases, receivables and other assets. ContiFinancial is a leading originator, 
purchaser, seller and servicer of home equity loans to borrowers whose needs 
may not be met by traditional financial institutions due to credit exceptions 
or other factors. These loans are primarily for debt consolidation, home 
improvements, education or refinancing and are secured primarily by first 
mortgages on one- to four-family residential properties.

The Company through ContiTrade Services L.L.C. ("ContiTrade"), a wholly-owned 
subsidiary, provides financing and asset securitization structuring 
expertise, and through ContiFinancial Services Corporation ("ContiFinancial 
Services"), a wholly-owned subsidiary, provides placement services. 
ContiTrade's management and execution of the Company's financing, hedging and 
securitization needs serve as a model for the Company's "Strategic Alliances" 
with originators of a broad range of consumer and commercial loans and other 
assets. The Company offers Strategic Alliances complete balance sheet 
liability management, including warehouse financing, interest rate hedging 
services and structuring and placement of asset portfolios in the form of 
asset-backed securities.

The Company, through investments and strategic acquisitions, as well as 
through internal growth, has continued to expand and diversify its 
businesses. Within its core home equity business, the Company has developed a 
significant retail origination platform to complement its established 
wholesale origination capabilities. Acquisitions of retail home equity loan 
originators are discussed below. The retail origination subsidiaries provide 
a source of cash revenues through loan origination points and fees and whole 
loan sales. Significant growth in origination volume has been accompanied by 
infrastructure investments that have enhanced and expanded ContiMortgage 
Corporation's ("ContiMortgage") home equity loan servicing capacity, which 
represents another source of cash income to the Company. With a managed 
portfolio of $10.1 billion at March 31, 1998, ContiMortgage is among the 
largest originators and servicers of non-conforming home equity loans. In 
addition to expanding its retail origination capabilities, the Company has 
expanded home equity loan originations through its broker network, which 
represents a lower cost source of origination volume. Originations from 
direct retail operations and brokers were $2.4 billion in fiscal 1998, or 
34.6% of total home equity, home improvement and other residential mortgage 
loan origination volume. This compares with $1.1 billion, or 27.7% of total 
originations in fiscal 1997.

The Company's commercial real estate activities have grown considerably over 
the past three years. Notable developments with respect to this business 
include the April 1998 acquisition of a 75% interest in Keystone Mortgage 
Partners L.L.C. and the June 1997 acquisition of a minority interest in First 
Security Commercial Mortgage, L.P. As a consequence of its relatively low 
level of operating expenses, commercial real estate's contribution to the 
Company's pre-tax earnings exceeded 15% in fiscal 1998.

                                       24
<PAGE>

In fiscal 1997, the Company acquired 100% of three home equity companies, 
California Lending Group, Inc., d/b/a United Lending Group ("ULG"), Resource 
One Consumer Discount Company, Inc. ("Resource One"), Royal Mortgage 
Partners, L.P., d/b/a Royal MortgageBanc ("Royal") and 56% of an auto finance 
company, Triad Financial Corporation ("Triad"). Also during fiscal 1997, the 
Company organized ContiWest Corporation ("ContiWest"), a Nevada corporation, 
to better administer and underwrite the Company's origination portfolio. In 
fiscal 1998, the Company acquired the remaining 44% of Triad and 100% of two 
additional home equity companies, Fidelity Mortgage Decisions Corporation 
("Fidelity") and Crystal Mortgage Company, Inc. ("Crystal") along with its 
subsidiary Lenders M.D., Inc. ("Lenders"). ULG, Resource One, Royal, Triad, 
Fidelity and Crystal are collectively referred to herein as the 
"Acquisitions". In each case, the companies acquired were former Strategic 
Alliances or ContiMortgage loan origination sources.

In fiscal 1998, the Company acquired a 24% interest in Empire Funding Holding 
Corp. ("Empire") a long-term strategic alliance that is one of the largest 
high loan-to-value and F.H.A. Title I lenders in the United States. The 
Company also established new business units during 1998 focusing on small 
ticket equipment lease financing services and the securitization of 
charged-off credit card and other consumer debt. Upon closing, the Company's 
majority shareholder, Continental Grain Company ("Continental Grain"), 
exchanged a warrant for a 25% equity interest in Empire.

RESULTS OF OPERATIONS

The Company's development of its retail origination platform has resulted in 
a change in the profile of the Consolidated Statements of Income. Retail 
origination expenses focus heavily on compensation and benefits and general 
and administrative expenses, whereas wholesale origination costs in the form 
of origination points, are netted against gain on sale of receivables. 
Consequently, the accompanying Consolidated Statements of Income reflect 
increases in operating expenses, as well as higher income from origination 
points.

YEAR ENDED MARCH 31, 1998 COMPARED TO YEAR ENDED MARCH 31, 1997 AND 
YEAR ENDED MARCH 31, 1996

Net income increased $28.3 million or 26.7% to $134.3 million in fiscal 1998 
from $106.0 million in fiscal 1997, which in turn increased $31.9 million or 
43.0% from net income of $74.1 million in fiscal 1996. The Company's total 
gross income increased 54.3% to $660.2 million in fiscal 1998 from $427.8 
million in fiscal 1997, which in turn increased 57.4% from $271.8 million in 
fiscal 1996.

                                       25

<PAGE>

On a percentage basis, the following table sets forth the composition of the 
Company's results as a percentage of total gross income for the periods 
indicated:

<TABLE>
<CAPTION>
                                                                  YEARS ENDED MARCH 31,
                                                         ---------------------------------------
                                                            1998          1997          1996    
                                                         -----------   -----------   -----------
<S>                                                      <C>           <C>           <C>
Gross income
Gain on sale of receivables                                 47.20%        49.28%        53.91%
Interest                                                    35.82%        37.73%        33.75%
Net servicing income                                        13.71%        10.83%        10.78%
Other income                                                 3.27%         2.16%         1.56%
                                                          -------       -------       -------
      Total gross income                                   100.00%       100.00%       100.00%
                                                          -------       -------       -------

Expenses

   Compensation and benefits                                24.54%        19.21%        19.21%
   Interest                                                 25.13%        28.20%        27.51%
   Provision for loan losses                                 0.86%         0.71%         0.10%
   General and administrative                               15.39%        10.50%         6.63%
                                                          -------       -------       -------
     Total expenses                                         65.92%        58.62%        53.45%
                                                          -------       -------       -------

Income before income taxes and minority interest            34.08%        41.38%        46.55%
Income taxes                                                13.81%        16.67%        18.06%
Minority interest                                           -0.07%        -0.07%         1.22%
                                                          -------       -------       -------
      Net income                                            20.34%        24.78%        27.27%
                                                          =======       =======       =======
</TABLE>


See "Gain on Sale of Receivables and Excess Spread Receivables", for a 
discussion of year to year changes in the amount and composition of gain on 
sale of receivables.

Interest Income and Expense:

In the normal course of its activities, the Company carries inventories of 
loans pending sale or securitization and earns a positive spread between the 
interest income earned on those loans and its cost of financing those loans. 
The Company's sales and securitization volume has increased significantly, 
contributing to a concurrent increase in the average level of loans held in 
inventory pending securitization. As a result, net interest income has 
increased significantly, reaching $70.6 million in fiscal 1998 compared with 
$40.8 million in fiscal 1997 and $17.0 million in fiscal 1996. Interest 
income also includes accrued interest on Excess Spread Receivables ("ESR"). 
In addition to the cost of financing loans pending sale or securitization, 
interest expense includes the cost of financing the Company's longer term 
capital requirements, including the cost of strategic acquisitions. Interest 
income increased $75.1 million or 46.5% in fiscal 1998 over fiscal 1997 and 
increased $69.7 million or 75.9% in fiscal 1997 over fiscal 1996. Interest 
expense increased $45.3 million or 37.5% in fiscal 1998 over fiscal 1997 and 
increased $45.9 million or 61.3% in fiscal 1997 over fiscal 1996. During 
fiscal 1998, the Company benefited from the expansion and diversification of 
its funding sources (see "Liquidity and Capital Resources - Sources of 
Liquidity and Capital").

                                       26
<PAGE>

Net servicing Income:

Net servicing income increased $44.2 million or 95.3% in fiscal 1998 over 
fiscal 1997 and $17.0 million or 58.2% in fiscal 1997 over fiscal 1996 due to 
the increase in the size of the servicing portfolio and the volume of 
securitizations. The Company's home equity loan servicing portfolio increased 
to $10.1 billion at March 31, 1998 from $6.4 billion at March 31, 1997 and 
$3.9 billion at March 31, 1996. Servicing income consists of fee income and 
capitalized servicing. The fee income component (which is realized in cash) 
represents income earned from Real Estate Mortgage Investment Conduits 
("REMICs") and trusts based on the level of loans serviced. The fee income 
component of servicing income was $52.8 million in 1998, $30.0 million in 
1997 and $17.6 million in 1996. Capitalized servicing consists of servicing 
assets recorded in connection with new securitizations (i.e., the present 
value of future servicing income, net of expenses), reduced by amortization 
of capitalized servicing from prior securitizations. The capitalized 
servicing component of servicing income was $37.7 million in 1998, $16.3 
million in 1997 and $11.7 million in 1996.

Other income:

Other income increased to $21.6 million in fiscal 1998 from $9.2 million in 
fiscal 1997 and $4.3 million in fiscal 1996. Other income consists primarily 
of purchase premium refunds, mortgage banking and other fees and for fiscal 
1998, income from unconsolidated subsidiaries of $5.4 million. Purchase 
premium refunds are received from certain wholesale origination sources when 
loans prepay within a specified time period. Purchase premium refunds were 
$8.1 million in 1998, $4.6 million in 1997 and $3.9 million in 1996. Mortgage 
banking and other fee income was $5.2 million in 1998, $1.9 million in 1997 
and $0.2 million in 1996. In addition, income of $1.1 million was received in 
fiscal 1998 from the sale of stock warrants in a Strategic Alliance company.


                                       27
<PAGE>

<TABLE>
<CAPTION>
                                                                                                        INCREASES OVER
                                                                   YEAR ENDED MARCH 31,                   PRIOR YEAR
                                                         ---------------------------------------   -------------------------
                                                            1998          1997          1996          1995          1994
                                                         -----------   -----------   -----------   -----------   -----------
                                                                                    (IN THOUSANDS)
<S>                                                      <C>           <C>           <C>           <C>           <C>
Compensation and benefits:
   Acquisitions                                          $    69,746   $    16,078   $        --   $    53,668   $    16,078
   Operations excluding Acquisitions                          92,246        66,092        52,203        26,154        13,889
                                                         -----------   -----------   -----------   -----------   -----------
Total compensation and benefits                          $   161,992   $    82,170   $    52,203   $    79,822   $    29,967
                                                         ===========   ===========   ===========   ===========   ===========
General and administrative:
  Acquisitions                                           $    49,400   $     9,434   $        --   $    39,966   $     9,434
  Operations excluding Acquisitions                           52,233        35,506        18,022        16,727        17,484
                                                         -----------   -----------   -----------   -----------   -----------
Total general and administrative                         $   101,633   $    44,940   $    18,022   $    56,693   $    26,918
                                                         ===========   ===========   ===========   ===========   ===========
Headcount (at period end):
   Acquisitions                                                1,723           859            --           864           859
   Headcount excluding Acquisitions                            1,158           703           455           455           248
                                                         -----------   -----------   -----------   -----------   -----------
Total headcount                                                2,881         1,562           455         1,319         1,107
                                                         ===========   ===========   ===========   ===========   ===========
</TABLE>

Compensation and Benefits and General and Administrative Expenses:

The above table allocates the Company's compensation and benefits, general 
and administrative expenses and headcount between the Acquisitions and all 
other activities. As noted earlier, the Company has significantly expanded 
its retail origination platform, which in turn has resulted in a significant 
increase in expenses. From the date of the acquisition of majority ownership, 
expenses of the acquired subsidiaries are included in the Company's 
consolidated expenses.

As previously discussed and as demonstrated in the table above, the 
acquisition of retail origination subsidiaries has resulted in significantly 
higher levels of compensation and benefits expense and general and 
administrative expenses. With respect to the Company's activities exclusive 
of the Acquisitions, the expense increases are indicative of the significant 
growth in ContiMortgage's origination volume, its serviced loan portfolio and 
the related growth in headcount to support these activities. Combined 
compensation and benefits and general and administrative expenses for 
ContiMortgage (exclusive of its acquisitions) increased by $27.6 million in 
1998 and $20.9 million in 1997. ContiMortgage's headcount (exclusive of its 
acquisitions) was 1,059 at the end of fiscal 1998 compared with 629 at the 
end of fiscal 1997 and 411 at the end of fiscal 1996. Combined compensation 
and benefits and general and administrative expenses for activities other 
than ContiMortgage and the Acquisitions increased by $15.3 million in 1998 
and $10.5 million in 1997.

Minority Interest:

In fiscal 1996, minority interest was attributable to the 20% minority 
shareholders of ContiMortgage prior to the Company's June 19, 1995 
acquisition of that interest. In fiscal 1997 and 1998, minority interest was 
primarily attributable to the 44% minority shareholders of Triad prior to the 
Company's March 1998 acquisition of that interest.

                                       28
<PAGE>

DEFAULTS AND LOSSES:
(SEE "CONTIMORTGAGE SERVICING PORTFOLIO" ON PAGE 22)

ContiMortgage's servicing portfolio has grown considerably. Annual growth in 
the portfolio was 98% in fiscal 1995, 76% in fiscal 1996, 66% in fiscal 1997 
and 58% in fiscal 1998. Compound annual growth over this four-year period was 
74%. As the annual growth rate has slowed and the portfolio has seasoned, 
defaults as a percentage of loans outstanding have increased. Included in the 
default total at March 31, 1998 were loans performing under bankruptcy plans 
and REOs, which represented 0.63% and 0.83%, respectively, of the servicing 
portfolio.

Early in the life of a securitization, realized losses are generally very 
low. Losses as a percentage of average serviced loans have increased over 
time as the portfolio has seasoned and annual growth has decelerated. Losses 
in the portfolio are overwhelmingly attributable to the time period a loan 
remains in foreclosure status and are primarily a function of interest 
foregone on the loans and the deterioration of collateral value over this 
time frame. During the course of fiscal 1998, the Company implemented an 
aggressive loss mitigation program focused on this issue, with the long-term 
objective of a significant reduction in the time period defaulted loans are 
held in the serviced portfolio. This program, which includes purchasing loans 
and properties out of REMICs for early disposition, results in a near term 
acceleration of losses and a longer term mitigation of total potential 
losses. These accelerated losses were 8 basis points in fiscal 1997 and 26 
basis points in fiscal 1998. The Company anticipates that the continuation of 
this program in fiscal 1999 will result in a combination of REMIC losses and 
loss mitigation program losses on the order of 75 to 85 basis points as a 
percentage of loans serviced (on a trailing 12 month basis). However, due in 
part to this acceleration of losses in fiscal 1998 and 1999, the Company 
expects a significant reduction in total losses as a percentage of serviced 
loans in fiscal 2000 and beyond. As of March 31, 1998, the Company projects 
an average annual loss rate over remaining REMIC lives of 62 basis points. 
See "Accounting for ESR - Valuation Process and Significant Assumptions" for 
information regarding the Company's estimated future credit losses.

GAIN ON SALE OF RECEIVABLES AND EXCESS SPREAD RECEIVABLES

General

A major source of income for the Company is the recognition of gains in 
connection with securitizations and whole loan sales. In a whole loan sale, 
the Company recognizes a gain and receives cash upon completion of the 
transaction. Although whole loan sales represent a growing source of cash 
income for the Company, the largest component of the Company's gain on sale 
revenues is the securitization of home equity loans originated and serviced 
by the Company's wholly-owned subsidiaries, ContiMortgage/ContiWest.

In a typical securitization, the Company sells loans or other assets to a 
special purpose entity, established for the limited purpose of buying the 
assets from the Company and transferring such assets to a trust, most often a 
REMIC. The REMIC issues interest-bearing securities that are collateralized 
by the underlying pool of mortgage loans or other assets, as the case may be. 
The proceeds are used as consideration to purchase the assets from the 
Company. Typically, the securities are sold at an amount that is the same (or 
nearly the same) as the underlying mortgage loan amounts and the Company 
retains a residual interest that represents its right to receive, over the 
life of the securitization, the excess of the weighted average coupon on the 
loans securitized over the sum of the interest rate on the securities sold, a 
normal servicing fee, a trustee fee, an insurance fee (where applicable) and 
the credit losses relating to the loans or other assets securitized (the 
"Excess Spread"). In a securitization, the Company may also sell a portion of 
this Excess Spread in the form of interest-only ("IO") securities, which are 
not exposed to the risk of credit losses.

                                       29
<PAGE>

The ESR is recorded as a receivable at the time of securitization. It is 
subsequently realized over the life of the securitization as cash 
distributions are received from the trust. ESR, reported as "Interest-only 
and residual certificates" in the accompanying Consolidated Balance Sheets, 
is the present value of the Excess Spread that the Company expects to receive 
over the life of a securitization, taking into consideration estimated 
prepayment speeds and credit losses.

As a credit enhancement to support the sale of senior collateralized 
securities, the Company's ESR is subordinate to the rights of such holders. 
Terms of the REMICs or trusts generally require the establishment of a level 
of over-collateralization, based largely on projected cumulative default and 
loss levels of the underlying pools of mortgages. The required level of 
over-collateralization is attained by utilizing cash flows otherwise 
distributable to ESR holders to either pay down outstanding principal of 
senior interests or to be placed in segregated deposit accounts. At March 31, 
1998, over-collateralization of ContiMortgage/ContiWest REMICs totaled $233.4 
million.

GAIN ON SALE OF RECEIVABLES

The following table sets forth the components of gain on sale of receivables 
for each of the last three fiscal years:

<TABLE>
<CAPTION>
                                     YEAR ENDED MARCH 31,   YEAR ENDED MARCH 31,    YEAR ENDED MARCH 31, 
                                            1998                   1997                    1996
                                    ---------------------   --------------------    ---------------------
(IN THOUSANDS)                                 PERCENT OF             PERCENT OF              PERCENT OF
                                    AMOUNT       TOTAL      AMOUNT       TOTAL      AMOUNT      TOTAL
                                    ------     ----------   ------    ----------    ------    ----------
<S>                                <C>           <C>       <C>          <C>       <C>            <C>
Home equity/home improvement:
  ContiMortgage/ContiWest
    securitizations                $ 179,640      57.6%    $ 157,483     74.7%    $ 110,229       75.2%
  Other (including whole
    loan sales, origination
    points and fees)                  66,640      21.4        28,640     13.6        26,886       18.3
                                   ---------     -----     ---------    -----     ---------      -----
Total home equity/home
  improvement                        246,280      79.0       186,123     88.3       137,115       93.5
Commercial real estate                37,058      11.9        16,420      7.8         3,456        2.4
Auto                                  20,781       6.7         4,976      2.3         1,467        1.0
Other                                  7,487       2.4         3,342      1.6         4,491        3.1
                                   ---------     -----     ---------    -----     ---------      -----
       Total                       $ 311,606     100.0%    $ 210,861    100.0%    $ 146,529      100.0%
                                   =========     =====     =========    =====     =========      =====
</TABLE>

Gain on sale of receivables increased to $311.6 million in 1998 from $210.9 
million in 1997 and $146.5 million in 1996. Gain on sale of receivables 
includes the gain recorded upon the completion of securitizations and whole 
loan sales. In a securitization, the gain is significantly affected by the 
estimated fair value attributed to the retained ESR (see "Accounting for ESR 
- Valuation Process and Significant Assumptions"). Gain on sale of 
receivables also includes unrealized gains or losses that result from the 
quarterly adjustment of ESR to fair value, points and fees generated through 
direct retail mortgage originations (included in earnings when the loans are 
securitized or sold) and fees earned in connection with securitization 
services provided to Strategic Alliance clients.

                                       30
<PAGE>

See  "Securitizations  - Hedging  Interest Rate Risk" for a discussion  of 
the impact of hedging  activities on gain on sale of receivables.

Securitizations of home equity loans originated by ContiMortgage/ContiWest 
represent the largest component of gain on sale of receivables. Revenues from 
ContiMortgage/ContiWest securitizations were $179.6 million in 1998 compared 
with $157.5 million in 1997 and $110.2 million in 1996. The gain on sale 
percentage (i.e., gain as a percentage of ContiMortgage/ContiWest 
securitization volume) was 2.92% in 1998 compared with 4.56% in 1997 and 
5.43% in 1996.

The 1998 growth in ContiMortgage/ContiWest gain on sale of receivables was 
driven by a 78% increase in securitization volume to $6.1 billion, offset in 
part by the lower gain on sale percentage. Approximately 30 basis points of 
the 1998 decrease in gain on sale percentage was attributable to a higher 
level of premiums paid to acquire loans from wholesale sources. A further 
decrease of approximately 30 basis points was the result of a narrowing of 
the spread between the weighted average interest rate on mortgage loans 
securitized and the pass-through interest rate on securities sold. This was 
attributable in part to a further flattening of the U.S. Treasury yield 
curve. Declines in long-term mortgage interest rates exceeded declines in the 
related pass-through interest rates. The remaining 1998 decrease of 
approximately 100 basis points resulted largely from the fair value 
adjustment of ESR retained in connection with securitizations prior to fiscal 
1998 due to higher prepayment speeds than those used to determine fair value 
as of March 31, 1997. On a weighted average basis, the estimated future 
Conditional (or Constant) Prepayment Rate ("CPR") on ContiMortgage/ContiWest 
REMICs was increased from approximately 24% at the end of fiscal 1997 to 
approximately 27% at the end of fiscal 1998. See "Accounting for ESR - 
Valuation Process and Significant Assumptions" for further discussion of CPR.

The 1997 increase in ContiMortgage/ContiWest gain on sale over the 1996 
amount was driven by a 70% increase in securitization volume, offset in part 
by the lower gain on sale percentage. The decrease in the gain on sale 
percentage was primarily the result of a tightening in the spread between the 
weighted average interest rate on mortgage loans securitized and the 
pass-through interest rate on securities sold. A contributing factor was the 
flattening of the U.S. Treasury yield curve in fiscal 1997; a decline in 
long-term mortgage interest rates was accompanied by an increase in the 
related pass-through interest rates.

Cash flow and gain on sale on ContiMortgage/ContiWest securitizations are 
reduced by premiums paid to acquire loans from wholesale sources. These 
premiums increased in 1998, in both absolute terms and as a percentage of 
loans acquired. In fiscal 1998, premiums paid totaled $253.7 million, 
compared with $130.9 million in 1997 and $80.5 million in 1996. Cash expended 
for premiums in 1998 was largely recovered through the sale of IO securities 
in conjunction with the securitizations and Net Interest Margin Notes 
("NIMS") subsequent to securitizations. Proceeds of $85.4 million were 
generated from IO sales. Fiscal 1998 NIMS sales generated proceeds of $159.7 
million.

The Company has taken steps to mitigate its reliance on wholesale loan 
sources, primarily through the development, including acquisitions, of its 
retail origination platform. In 1998, the Company's direct retail origination 
operations represented 19.4% of the Company's total home equity, home 
improvement and other residential mortgage loan origination volume, up from 
7.3% in 1997. In addition to originating loans for inclusion in 
ContiMortgage/ContiWest securitizations, the Company's retail activities 
generate cash gains on sale through whole loan sales and origination points 
and fees. Gain on home equity whole loan sales, origination points and fees 
increased to $66.6 million in 1998 from $28.6 million in 1997 and $26.9 
million in 1996.

Over the past three years, the Company has expanded and diversified its 
revenue sources beyond the home equity product. Commercial real estate loan 
sales and securitizations generated gains on sale of $37.1 million in fiscal 
1998, up from $16.4 million in 1997 and $3.5 million in 1996. The vast 
majority of gain on 

                                       31
<PAGE>

sale resulting from commercial real estate activity is realized in cash upon 
completion of the transactions. As discussed in "General", the Company has 
significantly expanded this business and expects that commercial real estate 
gains on sale, as a percentage of total gains on sale, will continue to 
increase.

Gain on sale of receivables in connection with automobile loan 
securitizations was $20.8 million in fiscal 1998 compared with $5.0 million 
in fiscal 1997 and $1.5 million in 1996. In March 1998, the Company increased 
its ownership of Triad, its non-prime automobile loan origination subsidiary, 
from 56% (originally acquired in November 1996) to 100%.

SECURITIZATIONS - HEDGING INTEREST RATE RISK

The most significant variable in the determination of gain on sale in a 
securitization is the spread between the weighted average coupon on the 
securitized loans and the weighted average interest rate on the securities 
issued. In the interim period between loan origination and securitization of 
such loans, the Company is exposed to interest rate risk. The majority of 
loans are securitized within 90 days of origination. However, a portion of 
the loans are held for sale or securitization for as long as twelve months 
(or longer, in very limited circumstances) prior to securitization. If 
interest rates rise during the period that the mortgage loans are held, the 
spread between the weighted average interest rate on the loans to be 
securitized and the pass-through interest rates on the securities to be sold 
(the latter having increased as a result of market interest rate movements) 
would narrow. Upon securitization, this would result in a reduction of the 
fair value of the retained ESR and the related gain on sale. The Company 
mitigates this exposure through short sales of U.S. Treasury securities and 
interest rate futures contracts. Hedge gains or losses are initially deferred 
and subsequently included in gain on sale upon completion of the 
securitization. With respect to ContiMortgage/ContiWest securitizations, gain 
on sale included hedge losses of $11.9 million and $5.4 million in fiscal 
1998 and 1997, respectively. These hedging activities help mitigate the risk 
of absolute movements in interest rates but they do not mitigate the risk of 
a change in the spreads between pass-through certificates and U.S. Treasury 
securities with comparable maturities.

EXCESS SPREAD RECEIVABLES

At March 31, 1998 and 1997, the Company's ESR portfolio was comprised of the
following :

<TABLE>
<CAPTION>
                                                     March 31,      Percentage       March 31,    Percentage
                                                       1998          of Total          1997        of Total
                                                    ----------      ----------      ----------    ----------
                                                                          (in thousands)
<S>                                                 <C>             <C>             <C>           <C>
Home equity:
    ContiMortgage/ContiWest                         $  555,884          85.7%       $  344,613       77.4%
    Other servicers                                     37,428           5.8            55,890        12.6
                                                    ----------        ------        ----------      ------
       Total home equity                               593,312          91.5           400,503        90.0
Home improvement                                         7,919           1.2             9,868         2.2
Commercial real estate                                   8,233           1.3             7,966         1.8
Auto                                                    28,223           4.3             7,245         1.6
Leases                                                   8,960           1.4            17,333         3.9
Franchise                                                2,138           0.3             2,090         0.5
                                                    ----------        ------        ----------      ------
       Total ESR portfolio                          $  648,785         100.0%       $  445,005       100.0%
                                                    ==========        ======        ==========      ======
</TABLE>

                                       32
<PAGE>

Although ESR does not carry a stated rate of interest, it represents the 
present value of an estimated stream of future cash flows. Accordingly, over 
the life of the asset, interest income is accrued and, as a result, ESR is 
increased. As cash distributions are received, ESR is reduced. The aggregate 
value of ESR at March 31, 1998 was $648.8 million, compared with $445.0 
million at March 31, 1997. This increase includes $381.0 million in 
connection with fiscal 1998 gain on sale (new securitizations and changes in 
fair value of prior securitizations) and $52.3 million of accrued interest 
income, less $69.8 million of cash received. ESR was further reduced by 
$159.7 million in connection with sale of NIMS securities.

ACCOUNTING FOR ESR - VALUATION PROCESS AND SIGNIFICANT ASSUMPTIONS

Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 125, 
"Accounting for Transfer and Servicing of Financial Assets and Extinguishment 
of Liabilities," the fair value of the retained ESR is accounted for as a 
component of sale proceeds. Consequently, the Company recognizes a gain upon 
completion of the securitization.

In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt 
and Equity Securities," the Company classifies ESR as "trading securities". 
As such, they are carried at fair value in the Consolidated Balance Sheets. 
Unrealized changes in ESR fair value are included in the Company's results of 
operations (in Gain on sale of receivables) in the period of the change.

The Company has, from time to time, completed sales of ESR, as either sales 
with limited recourse or NIMS sales. Nevertheless, there is only a limited 
market for ESR. The Company estimates the fair value of ESR through the 
application of discounted cash flow analysis, which requires the use of 
various assumptions. A significant factor affecting the level of estimated 
future ESR cash flows is the rate at which the underlying principal of the 
securitized loans is reduced. Prepayments represent principal reductions in 
excess of contractually scheduled reductions; prepayment speeds are generally 
expressed as an annualized CPR. Estimated future CPR is a significant 
assumption in the determination of ESR fair value. Additional assumptions 
include estimated future credit losses and the discount rate. A discount rate 
of 10% was used to arrive at the fair values presented in the March 31, 1998 
and 1997 Consolidated Balance Sheets. The Company continuously monitors the 
fair value of ESR and reviews the factors expected to influence future CPR 
and credit losses. If changes in assumptions regarding expected future CPR or 
credit losses are necessary, ESR fair value is adjusted accordingly.

Both the amount and timing of expected ESR cash flows are dependent on the 
performance of the underlying loans, and actual cash flows may vary 
significantly from expectations. If actual prepayments or credit losses 
exceed the assumptions used to determine ESR fair value, the ESR carrying 
value would be reduced through a charge to earnings. (Similarly, actual 
prepayment or credit losses that are less than the assumptions used to 
determine ESR fair value, would result in an increase in ESR carrying value 
and earnings.) Further, assumptions regarding future CPR and credit losses 
are subject to volatility that could materially affect operating results.

                                       33
<PAGE>

PREPAYMENT SPEEDS

The following table presents historical data as well as expected future CPR 
for ContiMortgage/ContiWest related ESR amounts, which represent 86% of the 
Company's total ESR value at March 31, 1998.

<TABLE>
<CAPTION>
                                                                 REMICS BY YEAR OF ISSUE (A)
                                                                 ---------------------------
                                                                        (IN MILLIONS)
                                                  1994 AND
                                                   EARLIER       1995        1996        1997       1998         TOTAL
                                                  --------       ----        ----        ----       ----         -----
<S>                                                <C>         <C>         <C>         <C>        <C>          <C>
Pool balances:
     Original                                      $ 1,100     $ 1,259     $ 2,030     $ 3,454    $ 6,150      $ 13,993
     At March 31, 1998                             $   334     $   432     $   881     $ 2,112    $ 5,678      $  9,437
Fair value of ESR                                  $    10     $    10     $    27     $   141    $   368      $    556
CPR:
  Actual life-to-date                                20.8%      25.1%       27.8%       29.3%      17.8%         24.8%
  Projected for the remaining
  pool over its estimated remaining life             23.8%      27.9%       28.2%       28.3%      27.0%         27.3%


</TABLE>

(a) This table includes ContiMortgage/ContiWest REMICs, based on fiscal years 
ended March 31.

In developing assumptions regarding expected future CPR, the Company 
considers a variety of factors, many of which are inter-related. These 
include, among other things, historical performance, characteristics of 
borrowers, and market factors that influence competition. For example, 
historical performance indicates that the rate of prepayments generally 
increases from a low level shortly after loan origination and peaks in 
approximately 12 to 15 months. Subsequently, as the loan portfolio "seasons", 
the level of prepayments generally declines. This is commonly referred to as 
the prepayment "ramp" or "curve". For the most part, the fiscal 1998 
securitizations included in the table have not yet reached the expected peak 
of the prepayment ramp. Consequently, actual life-to-date CPR for those 
transactions is lower than that of the prior years' transactions.

The shape of the prepayment curve (i.e., rate of CPR increase, timing of the 
peak, timing and extent of subsequent decline, absolute CPR levels, etc.) may 
vary considerably based upon the characteristics of the underlying loans. For 
example, in recent years prepayment speeds for variable-rate loans have 
exceeded prepayment rates for fixed-rate loans. Specific terms, such as the 
existence of prepayment penalties, will further influence prepayment 
performance. For various reasons, historical performance may not necessarily 
be indicative of future performance. Nevertheless, it is one of many factors 
that are considered.

Characteristics of borrowers are an important consideration in determining 
CPR assumptions. Credit quality and loan-to-value relationships both have an 
impact on the borrower's capacity to refinance. Improvements in borrowers' 
credit quality, coupled with an increase in the level of competition among 
lenders, has created 

                                       34
<PAGE>

opportunities for borrowers to refinance at advantageous terms, for example, 
with positive up-front cash flows. Industry competition has intensified, in 
part the result of technological improvements that enhance the ability of 
lenders to re-solicit borrowers. The Company's analysis of prepayment 
performance also considers the historical performance by specific origination 
source (e.g., individual correspondents, brokers and retail units).

Factors that influence prepayments range from the very broad (e.g., national 
and regional housing market conditions, lenders' access to low cost 
financing) to the very specific (e.g., state and local laws regarding the use 
of prepayment penalties), and the factors identified in this discussion are 
not all-inclusive.

CREDIT LOSSES

Like prepayment assumptions, there are a variety of factors that the Company 
considers in determining future credit loss assumptions. Credit losses have a 
direct impact on ESR cash flows and, consequently, ESR fair value. The review 
of credit exposure considers historical experience, including frequency of 
defaults and loss severity (i.e., realized loss as a percentage of liquidated 
loan principal). Frequency is influenced by borrower credit quality and 
market conditions that may affect the borrower's ability to perform. Loss 
severity is influenced by the relationship of loan balances to property value 
and, more importantly, the length of the foreclosure and liquidation process.

The following table presents historical credit loss information, as well as 
expected future credit losses, for ContiMortgage/ContiWest REMICs, including 
loans and properties purchased out of the REMICs. Annual loss rates represent 
losses as a percentage of average loan principal outstanding, expressed at an 
annualized rate.

ANNUAL LOSS RATES:
   Weighted average life-to-date                                       0.47%
   Projected over remaining REMIC lives                                0.62%

AGGREGATE LOSSES AS A PERCENT OF ORIGINAL POOL BALANCES:
   Actual life-to-date                                                 0.51%
   Projected over entire life (i.e., historical plus future losses)    1.84%

Estimated future credit losses (undiscounted)                       $185 million

Further information on credit losses is included in Selected Financial Data 
and "Results of Operations - Defaults and Losses."

LIQUIDITY AND CAPITAL RESOURCES

The following discussion of Liquidity and Capital Resources should be read in 
conjunction with the separate discussion of Gain on Sale of Receivables and 
Excess Spread Receivables.

FUNDING REQUIREMENTS

The Company requires continued access to short- and long-term sources of 
funding. The Company's primary cash requirements include the funding of: (i) 
mortgage, loan and lease originations and purchases 

                                       35
<PAGE>

pending their pooling and sale; (ii) premiums paid in connection with the 
acquisition of wholesale loans; (iii) fees and expenses incurred in 
connection with its securitization program; (iv) over-collateralization or 
reserve account requirements in connection with loans and leases pooled and 
sold; (v) ongoing administrative and other operating expenses; (vi) payments 
related to tax obligations; (vii) interest and principal payments relating to 
the Company's long-term debt and short-term borrowed funds; (viii) the costs 
of sales under the Company's asset purchase and sale facilities with certain 
financial institutions ("Purchase and Sale Facilities") and funding under an 
agreement to repurchase (the "Repurchase Agreement"), collectively, the 
"Facilities"; and (ix) the cost of any new acquisitions and subsequent 
purchase price adjustments on prior acquisitions.

In a securitization, the Company recognizes a gain on the sale of loans or 
assets securitized upon the closing of the securitization, but does not 
receive the majority of the cash representing such gain until it realizes the 
Excess Spread, which occurs over the actual lives of the loans or other 
assets securitized. Home equity securitizations are cash flow negative upon 
their initial execution, primarily as a result of premiums paid to acquire 
loans from wholesale sources. For ContiMortgage/ContiWest securitizations in 
fiscal 1998, these premiums totaled $253.7 million and were largely recovered 
through the sale of IO securities and NIMS totaling $245.1 million.

The Company has taken steps to improve the cash flow characteristics of its 
business activities. For example, NIMS and IO sales have accelerated the 
monetization of ESR. The Company has increased the relative contribution of 
its commercial real estate business which, for the most part, generates cash 
gain on sale. Development of the Company's retail home equity origination 
platform provides a source of cash income through whole loan sales and 
origination points and fees.

Specific cash funding requirements are listed above. In general, cash is 
required to fund a) operations - to the extent that they generate negative 
cash flow and b) investments - strategic acquisitions and infrastructure 
expansion. Operating cash flows consist primarily of the cash components of 
gross income and expenses and the cash used to fund trade receivables 
including loans held pending sale or securitization, advances to affiliates 
and servicing advances.

CASH GROSS INCOME: The principal non-cash components of gross income include
gain on sale attributable to retained ESR, capitalized servicing (net of related
amortization) and equity in undistributed earnings of less than 50% owned
subsidiaries. Interest income includes non-cash interest accrued on ESR. With
respect to ESR, however, cash realization occurs through the receipt of cash
distributions from the REMICs (or trusts) and NIMS and IO sales.

Total gross income of $660.2 million in fiscal 1998 included cash interest
income of $184.2 million, cash servicing income of $52.8 million and other cash
income of $16.1 million. Gain on sale, excluding the ContiMortgage/ContiWest
securitizations was $132.0 million, of which $109.7 million was realized in cash
at the time of the sale or securitization. Net cash flow from
ContiMortgage/ContiWest securitizations, taking into consideration proceeds from
NIMS sales and, at the time of the securitization, IO sales, was negative $40.0
million. Cash distributions on ESR during fiscal 1998 were $69.8 million.
Aggregate cash gross income in fiscal 1998, taking into consideration all of the
aforementioned items, was $392.6 million.

CASH EXPENSES: Most of the Company's expenses represent cash outflows. Total
expenses in fiscal 1998, excluding non-cash deferred compensation and
depreciation and amortization, were $420.7 million.

Trade receivables increased by approximately $180.0 million in fiscal 1998,
while trade receivables sold under agreements to repurchase declined by $6.0
million. Thus, cash required to fund the growth in trade receivables in fiscal
1998 was approximately $186.0 million. Cash required to fund acquisitions and
infrastructure investments totaled $68.6 million in fiscal 1998.

                                       36

<PAGE>

Aggregate cash required to fund trade receivables growth, acquisitions and 
infrastructure investments, adjusted for net cash gross income and expenses, 
was approximately $280.0 million. Other net cash requirements (e.g., taxes, 
shares repurchased, payments of amounts due affiliates, etc.) totaled 
approximately $40.0 million. The Company generated cash proceeds of $340.8 
million from short-term borrowings and $100.8 million from its common stock 
offering. The excess of such proceeds over aggregate cash requirements was 
approximately $122.0 million and is reflected as an increase in cash and cash 
equivalents in the accompanying Consolidated Balance Sheets. In the normal 
course of its activities, the Company must maintain sufficient liquidity to 
finance loan acquisitions by its subsidiaries and Strategic Alliance clients. 
The increase in cash and cash equivalents was primarily the result of the 
timing of loan acquisitions. The Company's financing requirements and cash 
balances will vary considerably on a daily basis.

SOURCES OF LIQUIDITY AND CAPITAL

The Company's primary sources of liquidity are sales of loans, leases and 
other assets through securitization, the sale of loans, leases and other 
assets under its Facilities, the issuance of shares of common stock, the 
issuance of long-term debt and short-term borrowed funds.

In previous fiscal years, the Company sold ESR, with limited recourse, to 
provide cash to fund the Company's securitization program. Under the recourse 
provisions of the agreements, the Company is responsible for losses incurred 
by the purchaser within an agreed-upon range. At March 31, 1998 $100.9 
million of these sales were outstanding. The Company's performance 
obligations in these transactions are guaranteed by Continental Grain for an 
agreed-upon fee. Another method of generating liquidity from the ESR is 
through the sale of NIMS, which generated proceeds of $159.7 million in 
fiscal 1998. Although the Company intends to continue to pursue opportunities 
to sell ESR, there is only a limited market for such instruments and no 
assurance can be given that such opportunities will be available in the 
future.

The Company had $2.8 billion of committed and $3.1 billion of uncommitted 
sale capacity under the Facilities as of March 31, 1998. The Purchase and 
Sale Facilities allow the Company to sell, with limited recourse, interests 
in designated pools of loans and other assets. The Repurchase Agreement 
allows the Company to sell receivables held for sale to a financial 
institution under an agreement to repurchase the receivables. The Facilities 
generally have one year renewable terms (one Purchase and Sale Facility has a 
two-year term), all of which will expire between June 1998 and April 1999. As 
of March 31, 1998, the Company had utilized $1.0 billion of the capacity 
under the Facilities. Although the Company currently anticipates that it will 
be able to renew these facilities when they expire and to obtain additional 
facilities, there can be no assurance that such financing will be obtainable 
on as favorable terms, if at all.

On June 4, 1997, the Company completed a primary offering of 2,800,000 shares 
of common stock; an additional 420,000 shares were purchased by the 
underwriters for over allotments. The net proceeds of the offering to the 
Company were $100.8 million which were used for general corporate purposes 
including funding loan originations and purchases, supporting securitization 
transactions (including the retention of ESR), supporting other working 
capital needs and funding strategic acquisitions.

In February 1998, the Company's Board of Directors authorized the purchase up 
to one million shares of the Company's outstanding common stock. The 
purchased shares will be held in treasury for use in connection with 
ContiFinancial's 1995 Long-Term Stock Incentive Plan. Through June 9, 1998, 
the Company repurchased 830,000 shares under the plan at an average cost of 
$29.05 per share.

                                       37
<PAGE>

On September 9, 1997, the Company initiated a $275 million Commercial Paper 
Program, supported by an irrevocable direct-pay letter of credit provided by 
a syndicate of banks. At March 31, 1998, $270.7 million of commercial paper 
was outstanding.

In anticipation of growth in the Company's operations, additional financing 
sources will be required. The Company currently has commitments for financing 
through the unsecured revolving credit facility and, in April 1998, issued 
$200 million of senior unsecured debt. However, there can be no assurance 
that the Company will be successful in obtaining additional financing in the 
future on terms that the Company would consider to be favorable. Furthermore, 
no assurance can be given that Continental Grain will provide such financing 
if the Company is unable to obtain third party financing.

See Note 9 to the Consolidated Financial Statements for further discussion of 
the Company's short- and long-term borrowings. See Note 13 to the 
Consolidated Financial Statements for further discussion of the Company's 
sales of assets with recourse and loan warehousing activities.

FINANCIAL POSITION - MARCH 31, 1998 COMPARED WITH MARCH 31, 1997

Trade receivables, net increased $179.8 million from $709.2 million at March 
31, 1997 to $889.0 million at March 31, 1998. This increase was primarily due 
to a $101.4 million increase in receivables held for sale and a $77.2 million 
increase in other receivables. Receivables held for sale fluctuate based upon 
the volume of loans originated and the timing of securitizations. The growth 
in other receivables was primarily due to a $20.3 million increase in REMIC 
advances for delinquent loans made by ContiMortgage on loans serviced and an 
increase in receivables from unconsolidated subsidiaries of $47.6 million.

The Company hedges, in part, its interest rate exposure on receivables held 
for sale and loans and other assets sold, with limited recourse, through the 
use of futures contracts and short sales of United States Treasury 
securities. Securities purchased under agreements to resell increased $633.6 
million from $224.0 million at March 31, 1997 to $857.6 million at March 31, 
1998. Securities sold but not yet purchased increased $622.4 million from 
$225.1 million at March 31, 1997 to $847.5 million at March 31, 1998. The 
increases in securities purchased under agreements to resell and securities 
sold but not yet purchased, which are integral to this hedging strategy, 
reflect growth in the level of loans and other assets sold with limited 
recourse or held for sale.

DIVIDEND POLICY

The Company has no current intention to pay cash dividends on its Common 
Stock. As a holding company, the ability of the Company to pay dividends is 
dependent upon the receipt of dividends or other payments from its 
subsidiaries. Any future determination as to the payment of dividends will be 
at the discretion of the Company's Board of Directors and will depend upon 
the Company's operating results, financial condition and capital 
requirements, contractual restrictions, general business conditions and such 
other factors as the Company's Board of Directors deems relevant. 
Furthermore, covenants in the Company's loan agreements restrict the payment 
of dividends by the Company. If these covenants are still in place at the 
time the Company decides to declare a dividend, a waiver from the related 
lenders would have to be obtained. In addition, there can be no assurance 
that dividends will be permitted under applicable law.

YEAR 2000

The "Year 2000" issue involves computer programs and applications that were 
written using two digits (instead of four) to describe the applicable year. 
Failure to successfully modify such programs and 

                                       38
<PAGE>

applications to be Year 2000 compliant would have a material adverse impact 
on the Company. Exposure arises not only from potential consequences (e.g., 
business interruption) of certain of the Company's own applications not being 
Year 2000 compliant, but the impact of non-compliance by certain significant 
counterparties, including Strategic Alliances. The Company has undertaken an 
assessment to determine the anticipated costs and remediation of the systems 
and applications, either its own or those of material business 
counterparties, to make them Year 2000 compliant. These efforts are being 
coordinated by a task force whose members include the Company's senior 
management and information technology, finance, accounting and legal staffs, 
supported by external consultants. At this time, the Company estimates that 
the cost of its Year 2000 remediation will be approximately $5.0 million. 
This estimate is subject to change as the project progresses. The Company 
expects to implement a solution to the Year 2000 issue by March 31, 1999. The 
Company presently believes, based on the information obtained during its 
assessment of the Year 2000 issue, that the matter will not have a material 
adverse impact on its computer systems or operations. The Company will, 
however, reassess the expected cost of compliance and the risk that the Year 
2000 issue will have a material adverse impact during the modification, 
testing and implementation phases of its Year 2000 conversion effort.

COMPETITION

The home equity lender market is highly competitive. The Company faces 
competition from other consumer finance lenders, mortgage lenders, mortgage 
brokers, commercial banks, mortgage banks, large securities firms, smaller 
boutique securities firms, credit unions, thrift institutions, credit card 
issuers and finance companies. Some of these competitors are substantially 
larger and have more capital and other resources than the Company. 
Competition can take many forms, including convenience in obtaining a loan, 
customer service, marketing and distribution channels, terms provided and 
interest rates charged to borrowers. Heightened competition could contribute 
to higher prepayments. In addition, the current level of gains realized by 
the Company and its competitors on the sale of their home equity loans could 
attract additional competitors into this market with the possible effect of 
lowering gains that may be realized on the Company's future loan sales. 
Although the Company has recently diversified its origination capabilities 
with the acquisition of home equity companies with retail capabilities, 
wholesale loans are expected to remain a significant part of the Company's 
home equity loan production program. As a purchaser of wholesale loans, the 
Company is exposed to fluctuations in the volume and cost of wholesale loans 
resulting from competition from their purchasers of such loans, market 
conditions and other factors.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

                                       39
<PAGE>

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                           CONTIFINANCIAL CORPORATION
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            PAGE

Report of Independent Public Accountants....................................  41

Consolidated Balance Sheets as of March 31, 1998 and 1997...................  42

Consolidated Statements of Income for the Years Ended March 31, 1998, 1997
   and 1996.................................................................  43

Consolidated Statements of Changes in Stockholders' Equity for the Years
   Ended March 31, 1998, 1997 and 1996......................................  44

Consolidated Statements of Cash Flows for the Years Ended March 31, 1998,
   1997 and 1996............................................................  45

Notes to Consolidated Financial Statements..................................  47




                                       40
<PAGE>

                               ARTHUR ANDERSEN LLP



                     REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of ContiFinancial Corporation:

We have audited the accompanying consolidated balance sheets of 
ContiFinancial Corporation (a Delaware corporation) and subsidiaries as of 
March 31, 1998 and 1997, and the related consolidated statements of income, 
changes in stockholders' equity and cash flows for each of the three years in 
the period ended March 31, 1998. These financial statements are the 
responsibility of the Company's management. Our responsibility is to express 
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of 
ContiFinancial Corporation and its subsidiaries as of March 31, 1998 and 
1997, and the results of their operations and their cash flows for each of 
the three years in the period ended March 31, 1998, in conformity with 
generally accepted accounting principles.


                                        /s/ Arthur Andersen LLP

New York, New York
May 15, 1998

                                       41
<PAGE>
                           CONTIFINANCIAL CORPORATION
                           Consolidated Balance Sheets
                          as of March 31, 1998 and 1997
                         (in thousands, except share data)

                                                              MARCH 31,
                                                       ------------------------
                                                          1998          1997

                                           ASSETS
Cash and cash equivalents                              $  173,588    $   51,200
Restricted cash                                             1,147           464
Securities purchased under agreements to resell           857,649       223,962
Trade receivables:
   Receivables held for sale                              726,990       625,545
   Other receivables                                      164,600        87,353
   Allowance for loan losses                               (2,685)       (3,747)
                                                       ----------    ----------
Total trade receivables, net                              888,905       709,151
                                                       ----------    ----------
Interest-only and residual certificates                   648,785       445,005
Capitalized servicing rights                               74,292        29,353
Premises and equipment, net of accumulated 
  depreciation of $7,951 and $4,298 as of 
  March 31, 1998 and 1997, respectively                    18,887         7,789
Cost in excess of equity acquired                          55,738        48,200
Equity investments in unconsolidated subsidiaries          53,660         4,080
Other assets                                               35,928        26,594
                                                       ----------    ----------
Total assets                                           $2,808,579    $1,545,798
                                                       ==========    ==========

                    LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable                                       $   91,179    $   71,060
Securities sold but not yet purchased                     847,470       225,131
Trade receivables sold under agreements to repurchase     245,556       251,539
Due to affiliates                                             163        36,367
Short-term debt                                           366,104        25,299
Taxes payable                                              81,190        16,710
Long-term debt                                            499,553       498,817
Other liabilities                                          30,427        11,803
                                                       ----------    ----------
Total liabilities                                       2,161,642     1,136,726
                                                       ----------    ----------
Commitments and contingencies
Minority interest in subsidiaries                             629         1,288
                                                       ----------    ----------
STOCKHOLDERS' EQUITY:
   Preferred stock (par value $0.01 per share; 
    25,000,000 shares authorized; none issued at 
    March 31, 1998 and 1997)                                   --            --
   Common stock (par value $0.01 per share; 
    250,000,000 shares authorized; 47,657,539 and 
    44,390,335 shares issued at March 31, 1998 and
    1997, respectively)                                       477           444
   Paid-in capital                                        399,776       295,029
   Retained earnings                                      262,956       128,652
   Treasury Stock (201,209 and 27,931 shares of 
    common stock, at cost, at March 31, 1998 and 1997,
    respectively)                                          (5,794)         (586)
   Deferred compensation                                  (11,107)      (15,755)
                                                       ----------    ----------
Total stockholders' equity                                646,308       407,784
                                                       ----------    ----------
Total liabilities and stockholders' equity             $2,808,579    $1,545,798
                                                       ==========    ==========

         The accompanying notes to consolidated financial statements are
                    an integral part of these statements.

                                       42
<PAGE>

                           CONTIFINANCIAL CORPORATION
                        Consolidated Statements of Income
                for the years ended March 31, 1998, 1997 and 1996
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                               YEARS ENDED MARCH 31,
                                                                    -----------------------------------------
                                                                       1998            1997           1996
                                                                    -----------    -----------    -----------
<S>                                                                 <C>            <C>            <C>
Gross income:
   Gain on sale of receivables                                      $   311,606    $   210,861    $   146,529
   Interest                                                             236,494        161,402         91,737
   Net servicing income                                                  90,509         46,340         29,298
   Other income                                                          21,553          9,227          4,252
                                                                    -----------    -----------    -----------
         Total gross income                                             660,162        427,830        271,816
                                                                    -----------    -----------    -----------
Expenses:
   Compensation and benefits                                            161,992         82,170         52,203
   Interest                                                             165,904        120,636         74,770
   Provision for loan losses                                              5,668          3,043            285
   General and administrative                                           101,633         44,940         18,022
                                                                    -----------    -----------    -----------
         Total expenses                                                 435,197        250,789        145,280
                                                                    -----------    -----------    -----------
Income before income taxes and minority interest                        224,965        177,041        126,536
Income taxes                                                             91,149         71,341         49,096
                                                                    -----------    -----------    -----------
Income before minority interest                                         133,816        105,700         77,440
Minority interest in subsidiaries                                          (488)          (304)         3,310
                                                                    -----------    -----------    -----------
Net income                                                          $   134,304    $   106,004    $    74,130
                                                                    ===========    ===========    ===========

Basic earnings per common share (pro forma for 1996)                $      2.90    $      2.44    $      2.01
                                                                    ===========    ===========    ===========

Diluted earnings per common share (pro forma for 1996)              $      2.86    $      2.40    $      2.00
                                                                    ===========    ===========    ===========
Basic weighted average number of shares
  outstanding (pro forma for 1996)                                   46,330,810     43,361,253     36,942,363
                                                                    ===========    ===========    ===========
Diluted weighted average number of shares
  outstanding (pro forma for 1996)                                   46,992,449     44,152,343     37,050,165
                                                                    ===========    ===========    ===========
</TABLE>

               The accompanying notes to consolidated financial statements are
                          an integral part of these statements.

                                       43
<PAGE>
                                CONTIFINANCIAL CORPORATION
                Consolidated Statements of Changes in Stockholders' Equity
                     for the years ended March 31, 1998, 1997 and 1996
                            (in thousands, except share data)

<TABLE>
<CAPTION>
                                       NUMBER OF SHARES                                                              TOTAL
                                        OF COMMON STOCK    COMMON    PAID-IN  RETAINED  TREASURY    DEFERRED      STOCKHOLDERS'
                                       ISSUED   TREASURY    STOCK    CAPITAL  EARNINGS    STOCK    COMPENSATION      EQUITY
                                       -----    --------   ------    -------  --------    -----    ------------   -------------
<S>                                 <C>         <C>      <C>        <C>       <C>       <C>         <C>            <C>
Balance at March 31, 1995              3,100        --   $     1    $ 34,000  $ 33,914  $      --   $      --      $  67,915
Capital contribution                      --        --        --      10,000        --         --          --         10,000
Net income for the period from
   April 1, 1995 to February 8, 1996      --        --        --          --    51,482         --          --         51,482
Cash dividend paid                        --        --        --          --      (305)        --          --           (305)
                                  ----------   -------   -------    --------  --------  ---------   ---------     ----------
Balance at February 8, 1996            3,100        --         1      44,000    85,091         --          --        129,092
Reorganization:
   Transfer of stock                  (3,100)       --        (1)         --        --         --          --             (1)
   Common stock issued            35,918,421        --       359      84,732   (85,091)        --          --             --
Common stock issued in public
    offering                       7,130,000        --        72     138,041        --         --          --        138,113
Issuance of restricted stock       1,330,532        --        13      27,928        --         --     (27,941)            --
Net income for the period
  from February 9, 1996 to
  March 31, 1996                          --        --        --          --    22,648         --          --         22,648
Amortization of deferred
  compensation                            --        --        --          --        --         --       4,967          4,967
                                  ----------   -------   -------    --------  --------  ---------   ---------     ----------
Balance at March 31, 1996         44,378,953        --       444     294,701    22,648         --     (22,974)       294,819
Net income                                --        --        --          --   106,004         --          --        106,004
Exercise of options                   11,382        --        --         240        --         --          --            240
Forfeiture of restricted stock            --    33,931        --          --        --       (712)        712             --
Restricted stock awards                   --    (6,000)       --          88        --        126        (214)            --
Amortization of deferred
 compensation                             --        --        --          --        --         --       6,721          6,721
                                  ----------   -------   -------    --------  --------  ---------   ---------     ----------
Balance at March 31, 1997         44,390,335    27,931       444     295,029   128,652       (586)    (15,755)       407,784
Net income                                --        --        --          --   134,304         --          --        134,304
Common stock issued in
 public offering                   3,220,000        --        32     100,746        --         --          --        100,778
Repurchase of common stock                --   193,700        --          --        --     (5,636)         --         (5,636)
Exercise of options                   47,204        --         1         994        --         --          --            995
Forfeiture of restricted stock            --    15,978        --          --        --       (335)        335             --
Restricted stock awards                   --   (36,400)       --         364        --        763      (1,127)            --
Amortization of deferred
 compensation                             --        --        --       2,643        --         --       5,440          8,083
                                  ----------   -------   -------    --------  --------  ---------   ---------     ----------
Balance at March 31, 1998         47,657,539   201,209   $   477    $399,776  $262,956  $  (5,794)  $ (11,107)    $  646,308
                                  ==========   =======   =======    ========  ========  =========   =========     ==========
</TABLE>

               The accompanying notes to consolidated financial statements are
                            an integral part of these statements.

                                       44
<PAGE>

                           CONTIFINANCIAL CORPORATION
                      Consolidated Statements of Cash Flows
                for the years ended March 31, 1998, 1997 and 1996
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                               YEARS ENDED MARCH 31,
                                                                    -----------------------------------------
                                                                       1998            1997           1996
                                                                    -----------    -----------    -----------
<S>                                                                 <C>            <C>            <C>
Cash flows from operating activities:
   Net income                                                       $   134,304    $   106,004    $    74,130
   Adjustments to reconcile net income to net cash used
    in operating activities:

      Amortization of deferred compensation                               5,440          6,721          4,967
      Depreciation and amortization                                       9,106          4,536          1,690
      Equity in earnings of unconsolidated subsidiaries (net of
       dividends received)                                               (4,919)            --             --
      Minority interest in subsidiaries                                    (488)          (304)         3,310
      Provision for deferred taxes                                       72,449          5,680          3,830
      Provision for loan losses                                           5,668          3,043            285
   Net changes in operating assets and liabilities:
      (Increase) decrease in restricted cash                               (683)           156            140
      (Increase) decrease in receivables held for sale:
         Originations and purchases                                 (35,681,653)   (16,094,071)   (12,532,051)
         Sales and principal repayments                              35,581,823     15,774,222     12,304,078
      Increase in other receivables                                     (78,071)       (34,858)       (33,924)
      Increase in interest-only and residual certificates              (203,780)      (150,701)      (150,187)
      Increase in capitalized servicing rights                          (44,939)       (17,664)       (11,689)
      Increase (decrease) in accounts payable                            17,359         (5,612)        30,786
      (Increase) in securities purchased under
         agreements to resell less the increase in securities 
         sold but not yet purchased                                     (11,348)           315          3,887
      Increase (decrease) in trade receivables sold under 
         agreements to repurchase                                        (5,983)       251,539             --
      Increase in taxes payable                                           6,613         13,520            570
      Other, net                                                            844        (15,950)          (279)
                                                                    -----------    -----------    -----------
         Net cash used in operating activities                         (198,258)      (153,424)      (300,457)
                                                                    -----------    -----------    -----------
Cash flows from investing activities:
      Acquisitions of majority owned subsidiaries 
       (net of cash acquired)                                           (10,315)       (28,277)       (34,600)
      Acquisitions of minority owned subsidiaries                       (44,385)            --             --
      Purchase of property and equipment, net
                                                                        (13,922)        (3,535)        (2,643)
                                                                    -----------    -----------    -----------
         Net cash used in investing activities                          (68,622)       (31,812)       (37,243)
                                                                    -----------    -----------    -----------

                                                                                                  (continued)
                                       45
<PAGE>
                           CONTIFINANCIAL CORPORATION
                Consolidated Statements of Cash Flows, continued
                for the years ended March 31, 1998, 1997 and 1996
                                 (in thousands)

<CAPTION>
                                                                               YEARS ENDED MARCH 31,
                                                                    -----------------------------------------
                                                                       1998            1997           1996
                                                                    -----------    -----------    -----------
<S>                                                                 <C>            <C>            <C>
Cash flows from financing activities:
      Increase (decrease) in due to affiliates, net                     (48,156)        17,972        (94,451)
      Increase (decrease) in notes payable to affiliates                     --       (324,000)       324,000
      Increase in short-term borrowed funds                             340,573         25,000             --
      Increase in long-term debt                                            714        498,423             --
      Proceeds from exercise of employee stock options                      995            240             --
      Debt issuance costs                                                    --        (12,982)            --
      Other, net                                                             --           (696)            --
      Repurchase of common stock                                         (5,636)            --             --
      Net proceeds from public common stock offerings                   100,778             --        138,113
      Dividends paid                                                         --             --           (305)
                                                                    -----------    -----------    -----------
          Net cash provided by financing activities                     389,268        203,957        367,357
                                                                    -----------    -----------    -----------
Net increase in cash and cash equivalents                               122,388         18,721         29,657
Cash and cash equivalents at beginning of  year                          51,200         32,479          2,822
                                                                    -----------    -----------    -----------
Cash and cash equivalents at end of year                            $   173,588    $    51,200    $    32,479
                                                                    ===========    ===========    ===========
</TABLE>


SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:

For the year ended March 31, 1996, Continental Grain Company forgave 
intercompany debt of $10,000 and such amount was capitalized as a capital 
contribution.


     The accompanying notes to consolidated financial statements are
               an integral part of these statements.

                                       46
<PAGE>
                           CONTIFINANCIAL CORPORATION
                   Notes to Consolidated Financial Statements
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)

1. BASIS OF PRESENTATION

ContiFinancial Corporation ("ContiFinancial" or the "Company") was 
incorporated in Delaware on September 29, 1995. The accompanying consolidated 
financial statements include the accounts of the Company and its majority 
owned subsidiaries. All significant intercompany accounts and transactions 
have been eliminated in consolidation. The preparation of financial 
statements in conformity with generally accepted accounting principles 
requires management to make estimates and assumptions that affect the 
reported amounts of assets, liabilities and results of operations. Actual 
results could differ from these estimates.

REORGANIZATION

Prior to February 14, 1996, the consolidated financial statements present the 
financial condition and results of operations of the Company which includes 
its directly wholly-owned subsidiaries: ContiSecurities Asset Funding Corp. 
("CSAF"), ContiSecurities Asset Funding II, L.L.C. ("CSAF II"), ContiFunding 
Corporation ("CFC"), ContiTrade Services L.L.C. ("ContiTrade"), ContiMortgage 
Corporation ("ContiMortgage"), all Delaware corporations or limited liability 
companies, and ContiFinancial Services Corporation ("ContiFinancial 
Services"), a New York corporation.

On February 14, 1996, ContiFinancial completed an initial public offering in 
the United States and internationally (the "IPO") of approximately 16% of its 
common stock. In the reorganization that occurred in December 1995 (the 
"Reorganization"), (i) ContiTrade Services Corporation ("CTSC") transferred 
certain of its businesses (excluding its trade finance business) to 
ContiTrade and the common stock of its subsidiaries, ContiMortgage and 
ContiFinancial Services, and its interest-only and residual certificates to 
Continental Grain Company ("Continental Grain") and (ii) Continental Grain 
transferred all of the common stock of ContiMortgage, ContiFinancial 
Services, CSAF and CFC, all of the members' interest held by it in ContiTrade 
and CSAF II and the transferred interest-only and residual certificates to 
ContiFinancial. As a result, ContiFinancial owns all of the common stock or 
members' interests in ContiTrade, ContiMortgage, ContiFinancial Services, 
CFC, CSAF and CSAF II (collectively, the "Previous Companies"). Prior to the 
IPO, both ContiFinancial and the Previous Companies (exclusive of 
ContiMortgage) were direct or indirect wholly-owned subsidiaries of 
Continental Grain. On June 19, 1995, CTSC effectively acquired control of the 
remaining 20% minority interest of ContiMortgage for $34,600.

As a result of the Reorganization, the Company issued 35,918,421 shares of 
common stock to Continental Grain. Additionally, the Company converted 
$84,732 of the Previous Companies' retained earnings to paid-in capital.

The March 31, 1996 Consolidated Statement of Income and Consolidated 
Statement of Changes in Stockholders' Equity include a period prior to the 
IPO which has been combined to reflect the Reorganization accounted for 
similar to the pooling of interests method. All material intercompany 
transactions have been eliminated in the combination. Included are additional 
charges and liabilities related to expenses incurred by Continental Grain on 
behalf of the Previous Companies, which historically had not been allocated 
to the Previous Companies. These charges include corporate service charges 
from Continental Grain and income taxes (see Note 8).

                                       47
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)

2. NATURE OF BUSINESS

The Company, together with its subsidiaries, engages in the consumer and 
commercial finance business by originating and servicing home equity loans, 
commercial real estate loans and non-prime auto loans. The Company also 
provides financing and asset securitization structuring and placement 
services to originators of a broad range of loans, leases, receivables and 
other assets. The Company considers its business to be one operating segment.

Through ContiMortgage and ContiWest Corporation ("ContiWest"), a Nevada 
corporation organized in fiscal 1997, the Company is an originator, 
purchaser, seller and servicer of home equity loans made to borrowers whose 
borrowing needs may not be met by traditional financial institutions due to 
credit exceptions or other factors. The loans are sold to whole-loan 
investors or securitized in the form of Real Estate Mortgage Investment 
Conduits ("REMICs"), owner trusts or grantor trusts. All of the securitized 
loans are sold on a servicing retained basis. The outstanding principal 
balance of ContiMortgage's mortgage servicing portfolio at March 31, 1998 and 
1997 was $10,135,785 and $6,423,376, respectively. Through ContiTrade and 
ContiMAP(R), the Company's commercial real estate conduit, the Company 
finances a wide range of commercial real estate. Through ContiTrade and 
ContiFinancial Services, the Company provides other originators ("Strategic 
Alliances") complete balance sheet liability management, including warehouse 
financing, interest rate hedging services and the structuring and placement 
of asset portfolios in the form of asset-backed securities. In certain of the 
Strategic Alliances, the Company receives warrants or warrant-like equity 
participations ("Strategic Alliance Equity Interests") in the Strategic 
Alliance client. If such Strategic Alliance Equity Interests develop a 
readily determinable fair value, the Strategic Alliance Equity Interests will 
be recorded at fair value. If such value is not determinable, the Strategic 
Alliance Equity Interests will be recorded at cost adjusted for write downs 
for impairment as appropriate.

ContiMortgage is subject to minimum capital requirements imposed by the 
states in which it operates, with the highest being $250. In addition, 
ContiMortgage is required by the U.S. Department of Housing and Urban 
Development to maintain minimum capital of $250 plus an amount based on the 
volume of Federal Housing Authority business. Furthermore, ContiMortgage is 
required by the Federal National Mortgage Association ("FNMA") to maintain 
minimum capital of $250 plus 0.20% of the principal balance of the portfolio 
being serviced for FNMA.

ContiFinancial Services is registered as a broker/dealer with the Securities 
and Exchange Commission ("SEC") and is subject to the SEC's Uniform Net 
Capital Rule 15c3-1, under which the ratio of aggregate indebtedness to net 
capital, as defined, may not exceed 15 to 1. At March 31, 1998, 
ContiFinancial Services' net capital, as defined, totaled $1,869 which was 
$1,769 in excess of the SEC regulatory requirement of $100; its ratio of 
aggregate indebtedness to net capital was .3481 to 1.

The Company's business may be affected by many factors including real estate 
and other asset values, the level of and fluctuations in interest rates, 
changes in the securitization market and competition. In addition, the 
Company's operations require continued access to short- and long-term sources 
of cash.

                                       48
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INCOME RECOGNITION

See Note 4 for a discussion of "Gain on Sale of Receivables and Interest-Only 
and Residual Certificates."

Net servicing income consists of fee income and capitalized servicing. The 
fee income component (which is realized in cash) represents income earned 
from REMICs and trusts and is based on the level of assets serviced. 
Capitalized servicing consists of servicing assets recorded in connection 
with new securitizations (i.e., the present value of future servicing income, 
net of expenses), reduced by amortization of capitalized servicing from prior 
securitizations.

Interest income is recorded as earned. Interest income represents the 
interest earned on the loans and leases ("Receivables") during the 
warehousing period (the period prior to their securitization) and the accrual 
of interest income on the interest-only and residual certificates ("ESR"). 
Receivables are placed on non-accrual status when they become sixty days past 
due. When a Receivable is classified as non-accrual, the accrual of interest 
income ceases, and all interest income previously accrued and unpaid on such 
Receivable is reversed.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The Company considers all highly liquid debt instruments purchased with an 
original maturity of no more than three months to be cash equivalents. 
Restricted cash includes amounts segregated in connection with the sale of 
mortgage loans with limited recourse and amounts specifically designated for 
paydowns of warehouse financing.

SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND SECURITIES SOLD BUT NOT 
YET PURCHASED

In order to hedge the interest rate risk on loan purchases and commitments, 
the Company sells short United States Treasury securities which match the 
duration of the receivables held for sale and purchases the securities under 
agreements to resell. Securities sold but not yet purchased are recorded on a 
trade date basis and are carried at their sale amount. Securities purchased 
under agreements to resell are recorded on a trade date basis and are carried 
at the amounts at which the securities will be subsequently resold, plus 
accrued interest. The agreements mature through May 1998 and, as of March 31, 
1998, had interest rates ranging from 4.95% to 5.35%. See Note 13 for a 
discussion of the Company's hedging activities.

RECEIVABLES HELD FOR SALE/TRADE RECEIVABLES SOLD UNDER AGREEMENTS TO 
REPURCHASE

Receivables held for sale include mortgages, loans, leases and other assets 
the Company plans to sell or securitize and other related assets including 
deposits made with financial institutions. Receivables held for sale are 
stated at the lower of aggregate cost or market. Market value is determined 
by outstanding commitments from investors or current investor yield 
requirements, adjusted for deferred hedging gains or losses. The 

                                       49
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)

carrying amount of receivables held for sale is a reasonable estimate of fair 
value based on current pricing of whole-loan transactions.

On January 1, 1997, the Company adopted Statement of Financial Accounting 
Standards ("SFAS") No. 125 "Accounting for Transfers and Servicing of 
Financial Assets and Extinguishment of Liabilities" ("SFAS 125") which 
addresses the accounting for transfers of financial assets in which the 
transferor has some continuing involvement either with the assets transferred 
or with the transferee. A transfer of financial assets in which the 
transferor surrenders control over those assets is accounted for as a sale to 
the extent that consideration other than beneficial interest in the 
transferred assets is received in exchange. SFAS 125 requires that 
liabilities and derivatives incurred or obtained by transferors as part of a 
transfer of financial assets be initially measured at fair value, if 
practicable. In addition, SFAS 125 requires that servicing assets and 
liabilities be subsequently amortized over their estimated life and 
assessment of asset impairment be based on such assets' fair value. SFAS 125 
was applied to transfers and servicing of financial assets and 
extinguishments of liabilities occurring after December 31, 1996. The 
adoption of this standard did not have a material impact on the Company's 
results of operations.

OTHER RECEIVABLES

Other receivables consist primarily of advances made to Strategic Alliances to
finance their purchase of ESR, advances to unconsolidated subsidiaries,
servicing advances, short-term receivables, mortgage loan advances, and accrued
interest on loans and other receivables.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses represents an amount considered by management to
be adequate to cover estimated losses and valuation adjustments related to the
balance of mortgage and non-prime auto receivables held for sale and mortgage
receivables sold with limited recourse. The allowance for loan losses is based
upon periodic analysis of the portfolio, economic conditions and trends,
historical credit loss experience, borrowers' ability to repay and collateral
values. The Company's charge-off policy is based on a review of each individual
receivable.

CAPITALIZED SERVICING RIGHTS

Upon sale or securitization of servicing retained receivables, the fair value
associated with the right to service such receivables is capitalized. The
Company determines fair value based on the present value of estimated net future
cash flows relating to servicing. This consists of servicing fees received
relating to sold receivables and prepayment penalties, where applicable, reduced
by direct servicing expenses. Capitalized servicing rights are amortized in
proportion to and over the period of estimated net future servicing fee income.

The Company capitalized $63,609 and $25,340 of servicing rights during the years
ended March 31, 1998 and 1997, respectively. During the same periods,
amortization of these assets was $18,670 and $7,676, respectively. At March 31,
1998 and 1997, the carrying value of capitalized servicing rights approximated
fair value. The Company periodically reviews capitalized servicing rights for
valuation impairment. This review is performed 

                                       50
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)


on a disaggregated basis for the predominant risk characteristics of the 
underlying loans which are loan type, loan-to-value ratio and credit quality. 
The Company generally makes loans to credit impaired borrowers whose 
borrowing needs may not be met by traditional financial institutions due to 
credit exceptions. The Company has found that credit impaired borrowers are 
payment sensitive rather than interest rate sensitive. As such, the Company 
does not consider interest rates to be a predominant risk characteristic for 
purposes of valuation impairment. Impairment is recognized in a valuation 
allowance for each disaggregated stratum in the period of impairment.

PREMISES AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION

Property and equipment are carried at cost and depreciated on a straight-line
basis over the estimated useful lives of the assets. Leasehold improvements are
amortized over the lesser of the useful lives of the improvements or term of the
leases. The estimated useful lives of property and equipment and leasehold
improvements are between two to twenty years.

COST IN EXCESS OF EQUITY ACQUIRED

Cost in excess of equity acquired represents the excess of investments in
subsidiaries over the net asset value at acquisition, adjusted for subsequent
amortization. Amortization is recorded over the estimated useful life of the
capitalized asset, usually 25 years, on a straight line basis. The Company
evaluates the excess of cost over the equity of businesses acquired for
impairment. No impairment losses have been recognized by the Company.

OTHER ASSETS

Other assets is primarily comprised of prepaid expenses, margin and other
deposits and deferred bond issuance costs.

STOCK BASED COMPENSATION

In October 1995, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") which was
effective beginning in fiscal 1997. SFAS 123 allows companies either to continue
to account for stock-based employee compensation plans under existing accounting
standards or to adopt a fair value based method of accounting for stock options
as compensation expense over the service period (generally the vesting period)
as defined in the standard. SFAS 123 requires that if a company continues to
account for stock options under Accounting Principles Board ("APB") Opinion No.
25, it must provide pro forma net income and earnings per share information "as
if " the new fair value approach had been adopted. The Company continues to
account for stock based compensation under APB Opinion No. 25.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
("SFAS 130") which is effective for fiscal years beginning after December 15,
1997. SFAS 130 establishes standards for reporting 

                                       51
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)


comprehensive income and its components in a full set of general-purpose 
financial statements. SFAS 130 requires that all components of comprehensive 
income be reported in a financial statement that is displayed with the same 
prominence as other financial statements. The adoption of this standard will 
not have an impact on the Company's financial position or results of 
operations.

In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an 
Enterprise and Related Information" ("SFAS 131") which is effective for 
fiscal years beginning after December 15, 1997. SFAS 131 establishes 
standards for reporting information about operating segments in annual 
financial statements and in interim financial reports. It also establishes 
standards for related disclosures about products and services, geographic 
areas and major customers. The adoption of this standard will not have an 
impact on the Company's financial position or results of operations.

PRO FORMA EARNINGS PER COMMON SHARE AND EARNINGS PER COMMON SHARE

Due to the Reorganization and the issuance of common stock in the IPO, basic 
and diluted earnings per common share for the year ended March 31, 1996 have 
been computed on a pro forma basis, assuming the Reorganization occurred at 
the beginning of fiscal 1996. Common shares issued by the Company in the IPO 
plus the effect of equivalent common shares under the restricted stock awards 
and stock option plans are included in basic and diluted earnings per common 
share, as appropriate, from the date of issuance (see Notes 5 and 10).

During fiscal 1998, the Company adopted SFAS No. 128 "Earnings Per Share" 
which replaced primary and fully diluted earnings per common share 
computations with basic and diluted earnings per common share computations. 
The effects of this statement have been applied to previous years' results.

CONSOLIDATED STATEMENTS OF CASH FLOWS--SUPPLEMENTAL DISCLOSURES

Total interest paid was $164,772, $119,223 and $71,539 for the years ended 
March 31, 1998, 1997, and 1996, respectively. Total income taxes paid were 
$59,684, $45,624 and $896 for the years ended March 31, 1998, 1997 and 1996, 
respectively. Through June 4, 1997, federal income taxes were paid on a 
current basis to Continental Grain in accordance with the provisions of the 
tax sharing agreement (see Note 8). As such, these amounts were included in 
total income taxes paid for the year ended March 31, 1997. Prior to the IPO, 
federal income taxes were included in due to affiliates, which were not 
repaid to Continental Grain on a current basis, and as such were not included 
in total income taxes paid for the year ended March 31, 1996.

RECLASSIFICATIONS

Certain reclassifications of prior years' amounts have been made to conform to
the current year presentation.

                                       52
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)


4. GAIN ON SALE OF RECEIVABLES AND INTEREST-ONLY AND RESIDUAL CERTIFICATES

A major source of income for the Company is the recognition of gains in 
connection with securitizations and whole loan sales. In a typical 
securitization, the Company sells loans or other assets to a special purpose 
entity, established for the limited purpose of buying the assets from the 
Company and transferring such assets to a trust, most often a REMIC. The 
REMIC issues interest-bearing securities that are collateralized by the 
underlying pool of mortgage loans or other assets, as the case may be. The 
proceeds are used as consideration to purchase the assets from the Company. 
Typically, the securities are sold at an amount that is the same (or nearly 
the same) as the underlying mortgage loan amounts and the Company retains a 
residual interest that represents its right to receive, over the life of the 
securitization, the excess of the weighted average coupon on the loans 
securitized over the sum of the interest rate on the securities sold, a 
normal servicing fee, a trustee fee, an insurance fee (where applicable) and 
the credit losses relating to the loans or other assets securitized (the 
"Excess Spread"). In a securitization, the Company may also sell a portion of 
this Excess Spread in the form of interest-only securities. In a whole loan 
sale, the Company recognizes a gain and receives cash upon completion of the 
transaction. Gain on sale of receivables also includes unrealized gain or 
losses that result from the quarterly adjustment of ESR to fair value, point 
and fees generated through direct retail mortgage originations (included in 
earnings when the loans are securitized or sold) and fees earned in 
connection with securitization services provided to Strategic Alliance 
clients.

ESR is realized over the life of the securitization as cash distributions are 
received from the trust. ESR, reported as "Interest-only and residual 
certificates" in the accompanying Consolidated Balance Sheets, is the present 
value of the Excess Spread that the Company expects to receive over the life 
of a securitization, taking into consideration estimated prepayment speeds 
and credit losses.

At March 31, 1998 and 1997, the Company's ESR portfolio was comprised of the 
following:

                                            March 31,     March 31,
                                              1998          1997
                                            ----------   ----------
Home Equity:
    ContiMortgage/ContiWest                 $  555,884   $  344,613
    Other Servicers                             37,428       55,890
                                            ----------   ----------
       Total Home Equity                       593,312      400,503
Home Improvement                                 7,919        9,868
Commercial Real Estate                           8,233        7,966
Auto                                            28,223        7,245
Leases                                           8,960       17,333
Franchise                                        2,138        2,090
                                            ----------   ----------
       Total ESR Portfolio                  $  648,785   $  445,005
                                            ==========   ==========

                                       53
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)


Pursuant to SFAS No. 125, the fair value of the retained ESR is accounted for 
as a component of sale proceeds. Consequently, the Company recognizes a gain 
upon completion of the securitization.

In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt 
and Equity Securities", the Company classifies ESR as "trading securities." 
As such, they are carried at fair value in the Consolidated Balance Sheets. 
Unrealized changes in ESR fair value are included in the Company's 
Consolidated Statements of Income (in Gain on sale of receivables) in the 
period of the change.

The Company has, from or time to time, completed sales of ESR as either sales 
with limited recourse or Net Interest Margin Notes sales. Nevertheless, there 
is only a limited market for ESR. The Company estimates the fair value of ESR 
through the application of discounted cash flow analysis, which requires the 
use of various assumptions. A significant factor affecting the level of 
estimated future ESR cash flows is the rate at which the underlying principal 
of the securitized loans is reduced. Prepayments represent principal 
reductions in excess of contractually scheduled reductions; prepayment speeds 
are generally expressed as an annualized Conditional (or Constant) Prepayment 
Rate ("CPR"). Estimated future CPR is a significant assumption in the 
determination of ESR fair value. Additional assumptions include estimated 
future credit losses and the discount rate. A discount rate of 10% was used 
to arrive at the fair values as of March 31, 1998 and 1997.

The Company continuously monitors the fair value of ESR and reviews the 
factors expected to influence future CPR and credit losses. In developing 
assumptions regarding expected future CPR, the Company considers a variety of 
factors, many of which are inter-related. These include, among other things, 
historical performance, characteristics of borrowers (e.g. credit quality and 
loan-to-value relationships) and market factors that influence competition. 
If changes in assumptions regarding expected future CPR or credit losses are 
necessary, ESR fair value is adjusted accordingly.

Both the amount and timing of expected ESR cash flows are dependent on the 
performance of the underlying loans, and actual cash flows may vary 
significantly from expectations. If actual prepayments or credit losses 
exceed the assumptions used to determine ESR fair value, the ESR carrying 
value would be reduced through a charge to earnings. (Similarly, actual 
prepayment or credit losses that are less than the assumptions used to 
determine ESR fair value, would result in an increase in ESR carrying value 
and earnings.) Further, assumptions regarding future CPR and credit losses 
are subject to volatility that could materially affect operating results.

                                       54
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)


The following table presents historical data as well as expected future CPR for
ContiMortgage/ContiWest related ESR, which represent 86% of the Company's total
ESR value at March 31, 1998.

<TABLE>
<CAPTION>
(IN MILLIONS)

                                                                     REMICS BY YEAR OF ISSUE (A)

                                                   1994 AND
                                                    EARLIER       1995        1996       1997        1998          TOTAL
                                                    --------     -------     -------    -------     -------        -----
<S>                                                 <C>          <C>         <C>        <C>         <C>          <C>
Pool balances:
     Original                                        $ 1,100     $ 1,259     $ 2,030    $ 3,454     $ 6,150      $13,993
     At March 31, 1998                               $   334     $   432     $   881    $ 2,112     $ 5,678      $ 9,437
Fair value of ESR                                    $    10     $    10     $    27    $   141     $   368      $   556
CPR:
  Actual life-to-date                                  20.8%       25.1%       27.8%      29.3%       17.8%        24.8%

  Projected for the remaining pool
   over its estimated remaining life                   23.8%       27.9%       28.2%      28.3%       27.0%        27.3%

</TABLE>

(a) This table includes ContiMortgage/ContiWest REMICs, based on fiscal years 
ended March 31.

Like prepayment assumptions, there are a variety of inter-related factors 
that the Company considers in determining future credit loss assumptions, 
such as historical experience, default frequency, loss severity and the 
length of the foreclosure and liquidation process. The following table 
presents historical credit loss information, as well as expected future 
credit losses, for ContiMortgage/ContiWest REMICs, including loans and 
properties purchased out of the REMICs. Annual loss rates represent losses as 
a percentage of average loan principal outstanding, expressed at an 
annualized rate.

ANNUAL LOSS RATES:

   Weighted average life-to-date                                      0.47%
   Projected over remaining REMIC lives                               0.62%

AGGREGATE LOSSES AS A PERCENT OF ORIGINAL POOL BALANCES:

   Actual life-to-date                                                0.51%
   Projected over entire life (i.e., historical plus future losses)   1.84%

Estimated future credit losses (undiscounted)                      185 million

                                       55
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)


5. STOCKHOLDERS' EQUITY

On June 4, 1997, the Company completed a primary offering of 2,800,000 shares of
common stock; an additional 420,000 shares were issued to cover over-allotments.
The proceeds of the offering to the Company, net of expenses and underwriting
discount, were $100.8 million. The net proceeds were used for general corporate
purposes including funding loan originations and purchases, supporting
securitization transactions (including the retention of ESR), supporting other
working capital needs and financing certain strategic acquisitions. The offering
reduced Continental Grain's ownership of the Company from 81% to 75% and caused
the vesting of certain outstanding employee stock options.

The following table presents a reconciliation of basic and diluted earnings per
common share .

<TABLE>
<CAPTION>
                                                                                YEAR ENDED MARCH 31,
                                                                    -----------------------------------------
                                                                       1998            1997           1996*
                                                                    -----------    -----------    -----------
<S>                                                                 <C>            <C>            <C>
Net income                                                          $   134,304    $   106,004    $    74,130
                                                                    ===========    ===========    ===========
Basic weighted average number of shares
  outstanding                                                        46,330,810     43,361,253     36,942,363
Adjustments for dilutive shares outstanding:
   Restricted shares                                                    194,190        246,576         34,352
   Options                                                              467,449        544,514         73,450
                                                                    -----------    -----------    -----------
Diluted weighted average number of shares outstanding                46,992,449     44,152,343     37,050,165
                                                                    ===========    ===========    ===========

Earnings per common share:
     Basic                                                          $      2.90    $      2.44    $      2.01
                                                                    ===========    ===========    ===========
     Diluted                                                        $      2.86    $      2.40    $      2.00
                                                                    ===========    ===========    ===========
</TABLE>

* Amounts for the year ended March 31, 1996 are pro-forma. The weighted 
average number of shares outstanding are presented as if the Reorganization 
occurred at the beginning of the year.

Options to purchase 295,000 and 347,319 shares of common stock, at weighted 
average strike prices of $31.78 and $30.88 were outstanding during the third 
and fourth quarters of fiscal 1998, respectively, but were not included in 
the computation of diluted earnings per share as they were antidilutive.

In February 1998, the Company's Board of Directors authorized the purchase up 
to one million shares of the Company's outstanding common stock. The 
purchased shares will be held in treasury for use in connection with 
ContiFinancial's 1995 Long-Term Stock Incentive Plan (the "Stock Plan"). 
During fiscal 1998, the Company repurchased 193,700 shares under the plan at 
an average cost of $29.07 per share.

6. ALLOWANCE FOR LOAN LOSSES

                                       56
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)

The allowance for loan losses and related  additions  and  deductions to the 
allowance for the years ended March 31, 1998,  1997 and 1996, were as follows:

<TABLE>
<CAPTION>
                   Balance at                                            Reversals
Year Ended         Beginning       Acquired from   Additions Charged         and         Balance at End
 March 31,          of Year        Acquisitions       to Expenses        Charge-offs         of Year
----------         ----------      -------------   -----------------     -----------     ---------------
<S>                <C>             <C>             <C>                   <C>             <C>
1998                  $3,747          $  654             $5,668            $(7,384)           $2,685
1997                   1,824           1,547              3,043             (2,667)            3,747
1996                   1,808              --                285               (269)            1,824

</TABLE>

7. ACQUISITIONS

On November 8, 1996, the Company purchased 100% of the outstanding stock of 
California Lending Group, Inc., d/b/a United Lending Group ("ULG"), a west 
coast-based home equity lender specializing in retail originations via direct 
mail and telemarketing throughout the United States.

On November 15, 1996 ContiMortgage purchased 100% of Royal Mortgage Partners, 
L.P., d/b/a Royal MortgageBanc ("Royal"), a California-based wholesale and 
retail originator of fixed and adjustable rate home equity loans.

On November 21, 1996, the Company purchased 53.5% of the common stock of 
Triad Financial Corporation ("Triad"), an additional 2.5% of the common stock 
in January 1997 and the remaining 44% of the common stock in March 1998. 
Triad is a California-based auto finance company specializing in origination 
of non-prime auto finance contracts for used and new vehicles.

On December 16, 1996 ContiMortgage purchased 100% of the outstanding stock of 
Resource One Consumer Discount Company, Inc. ("Resource One"), a 
Pennsylvania-based home equity lender specializing in retail origination via 
direct mail, television, and telemarketing.

On October 1, 1997, ContiMortgage purchased 100% of the equity of Fidelity 
Mortgage Decisions Corporation ("Fidelity"). Fidelity, headquartered in 
Lincolnshire, Illinois, is a wholesale and retail originator of fixed and 
adjustable rate home equity loans.

On January 8, 1998,  ContiMortgage  purchased 100% of the equity of Crystal 
Mortgage  Company,  Inc.  ("Crystal") and its subsidiary Lenders M.D.,  Inc.  
("Lenders").  Crystal is a retail  mortgage broker and Lenders is a mortgage 
bank. Both Crystal and Lenders are based in Amherst, Ohio, and work together 
to originate conforming and non-conforming mortgage loans.

ULG, Royal, Triad, Resource One, Fidelity and Crystal are collectively 
referred to as the "Acquisitions". In each case the companies acquired were 
former Strategic Alliances or ContiMortgage loan origination sources. These 
transactions have been accounted for as purchases, and the results of 
operations have been included in the Company's results of operations since 
the effective acquisition dates. The aggregate purchase price of the 
Acquisitions during fiscal 1998 and 1997 was approximately $11,000 and 
$38,000, respectively. As a result of the Acquisitions, approximately $9,000 
and $35,000 of cost in excess of equity acquired was recorded during fiscal 
1998 and 1997, respectively, which is being amortized on a straight-line 
basis over a 25 year useful life. Certain acquisitions' terms provide for 
payments which are contingent upon future earnings or employment of 

                                       57
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)


key management. Such contingent payments will be recorded as additions to 
cost in excess of equity acquired or compensation as is appropriate.

In April 1998, the Company acquired,  for approximately  $18,000, a 75% 
interest in Keystone Mortgage Partners L.L.C.  ("Keystone"). Keystone is an 
originator and servicer of commercial mortgage loans.

On December 5, 1997, the Company acquired, for approximately $30,000, 24% of 
the equity of Empire Funding Holding Corporation ("EFHC") with an option to 
acquire additional shares of EFHC at a later date. EFHC, a newly formed 
entity, owns 100% of Empire Funding Corp. ("Empire"). Empire, headquartered 
in Austin, Texas, specializes in originating, servicing and securitizing high 
loan-to-value home improvement loans. This investment is accounted for using 
the equity method and the Company's appropriate share of EFHC's results of 
operations have been included in the Company's Consolidated Statements of 
Income in "Other Income" beginning December 5, 1997. Upon the closing of the 
acquisition, Continental Grain, exchanged a warrant for a 25% equity interest 
in Empire for a 25% equity interest in EFHC.

During fiscal 1998, the Company made other equity investments in 
unconsolidated subsidiaries totaling approximately $15,000.

8. RELATED PARTY TRANSACTIONS

DUE FROM AFFILIATES

Included in other receivables as of March 31, 1998, was $46,922, of amounts 
due from affiliates primarily consisting of a subordinated loan, financed 
residuals and related interest receivable.

DUE TO AFFILIATES

Prior to the IPO, Continental Grain provided the Company with financing to 
support its operations. In connection with the IPO, this financing was 
replaced with term notes payable to Continental Grain. As of March 12, 1997, 
in conjunction with the Company's $200 million term debt issue (see Note 9), 
the Company's term notes payable to Continental Grain were paid in full. 
Interest expense for the years ended March 31, 1997 and 1996 includes $18,598 
and $22,635, respectively, in connection with the Company's obligations to 
Continental Grain.

On February 14, 1996, the Company entered into an agreement with Continental 
Grain (the "Services Agreement") under which Continental Grain provides the 
Company with certain corporate services through March 31, 1999 and on a 
year-to-year basis thereafter.

AFFILIATE CHARGES

Continental Grain incurs certain general and administrative expenses on 
behalf of the Company. Expenses directly attributable to the Company, such as 
occupancy and communication charges, are directly charged to the Company. On 
February 14, 1996, Continental Grain and the Company entered into a sublease 
agreement with subsequent amendments (the "Sublease Agreement") for the 
utilization of the facilities leased from Continental Grain. The Sublease 
Agreement requires an annual payment of approximately $1,209 through the year 
2000. The determination of other general and administrative expenses incurred 
by Continental Grain and applicable to 

                                       58
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)


the Company is based first, on identifying specific expenses that are 
directly attributable to its operations and second, on estimating that 
portion of general and administrative expenses of Continental Grain used to 
support the operations of the Company based on the service hours attributable 
to the Company and the asset base of the Company. Management believes that 
the method of allocation of general and administrative expenses is 
reasonable. The amount of such indirect expenses charged to the Company was 
$2,138, $1,749 and $1,907 for the years ended March 31, 1998, 1997 and 1996, 
respectively.

TAX SHARING AGREEMENT

Effective June 4, 1997, upon the completion of the primary offering of common 
stock, Continental Grain's ownership of the Company decreased from 81% to 
75%. Consequently, from that date, the Company was no longer included in 
Continental Grain's consolidated U.S. Federal tax return. With respect to the 
periods prior to the June 4, 1997 offering, the Company's Federal taxes were 
determined in accordance with the tax sharing agreement (the "Tax Sharing 
Agreement") between the Company and Continental Grain. On February 14, 1996, 
Continental Grain and the Company entered into the Tax Sharing Agreement 
which (i) defines their respective rights and obligations with respect to 
Federal, state, local and all other taxes for all taxable periods both prior 
to and after the IPO and (ii) governed the conduct of all audits and other 
tax matters relating to the Company. Pursuant to the Tax Sharing Agreement, 
the Company was charged or credited for its Federal income tax liability or 
refund that would have been payable or received by the Company for such year, 
or portion thereof, determined as if the Company had filed a separate Federal 
income tax return computed in accordance with prevailing Federal income tax 
laws and regulations as applied to the Company as if it were a separate 
taxpayer.

EMPLOYEE BENEFITS ALLOCATION AGREEMENT

On February 14, 1996, Continental Grain and the Company entered into an 
employee benefits allocation agreement (the "Employee Benefits Allocation 
Agreement") which permitted the Company's employees to continue to 
participate in the Continental Grain employee benefit plans. The cost of the 
Company's employees' participation in these programs was allocated to the 
Company based on the actual cost of benefit accruals and an allocated cost of 
administration of the plans and overhead. Effective April 1, 1998, the 
Company discontinued its participation in the Continental Grain health care 
plan and obtained independent coverage. Effective July 1, 1998, the Company 
will discontinue participation in the pension plan (see Note 10).

                                       59
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)

9. DEBT

Short-term and long-term debt at March 31, 1998 and 1997 consisted of the
following:

                                                 March 31,       March 31,
                                                   1998            1997
                                                -----------     -----------
Short-term debt:
   Commercial paper                             $   270,708     $        --
   Revolving Credit Facility                         95,000          25,000
   Current portion of long-term debt                    396             299
                                                -----------     -----------
Total short-term debt                           $   366,104     $    25,299
                                                ===========     ===========
Long-term debt:
   8 3/8% Senior Notes, $300 million 
    face amount, due 2003                       $   299,295     $   299,194
   7 1/2% Senior Notes, $200 million 
    face amount, due 2002                           199,412         199,288
   Capitalized lease                                    846             335
                                                -----------     -----------
Total long-term debt                            $   499,553     $   498,817
                                                ===========     ===========

On August 14, 1996, the Company issued $300 million of unsecured senior notes 
(the "8 3/8% Senior Notes") due August 15, 2003. Proceeds to the Company, net 
of underwriting fees, market discount and other costs were $287,742. Interest 
on these notes is payable semi-annually on February 15 and August 15 
commencing February 15, 1997. The 8 3/8% Senior Notes are redeemable as a 
whole or in part, at the option of the Company, at any time or from time to 
time at a redemption price equal to the greater of (i) 100% of their 
principal amount or (ii) the sum of the present values of the remaining 
scheduled payments of principal and interest thereon discounted to the date 
of redemption on a semiannual basis at the treasury yield plus 50 basis 
points, plus, in each case, accrued interest to the date of redemption.

On March 12, 1997, the Company issued $200 million of unsecured senior notes 
(the "7 1/2% Senior Notes") due March 15, 2002 (together with the 8 3/8% 
Senior Notes, the "Senior Notes"). Proceeds to the Company, net of 
underwriting fees, market discount and other costs were $197,700. Interest on 
these notes is payable semi-annually on March 15 and September 15 commencing 
September 15, 1997.

On April 2, 1998, the Company issued $200 million of 8.125% unsecured Senior 
Notes due April 1, 2008. Proceeds to the Company, net of underwriting fees, 
market discount and other costs were $188,264. Interest on these notes is 
payable semi-annually on April 1 and October 1 commencing October 1, 1998. 
The notes are redeemable in whole or in part, at the option of the Company, 
at any time or from time to time, at a redemption price equal to the greater 
of (i) 100% of their principal amount or (ii) the sum of the present values 
of the remaining scheduled payments of principal and interest thereon 
discounted to the date of redemption on a semiannual basis at the treasury 
yield plus 50 basis points, plus, in each case, accrued interest to the date 
of redemption.

The Senior Notes are equal in right of payment with all existing and future 
senior indebtedness of the Company and will be senior in right of payment to 
all future subordinated indebtedness of the Company.

                                       60
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)


The Company is required to comply with various operating and financial covenants
as set forth in the agreements governing the issuance of the Senior Notes. Among
other restrictions, the Company must comply with limitations on indebtedness and
restricted payments.

On January 8, 1997, the Company closed a $200 million unsecured revolving credit
facility (the "Revolving Credit Facility"). The three-year Revolving Credit
Facility has several interest rate pricing alternatives, including the prime
rate, London Inter-Bank Offered Rates ("LIBOR") and federal funds rate. The
amount available under the Revolving Credit Facility is formula-driven, based on
certain of the Company's consolidated assets. The weighted average interest rate
on the Revolving Credit Facility was 6.57% for fiscal 1998 and the rate in
effect on March 31, 1998 was 8.23%.

On September 9, 1997, the Company initiated a $275 million one year renewable
unsecured Commercial Paper Program ("Commercial Paper Program") backed by an
irrevocable direct-pay letter of credit that is being provided by a syndicate of
banks. The weighted average interest rate on the Commercial Paper Program was
5.62% for fiscal 1998 and the rate in effect on March 31, 1998 was 5.60%.

10. EMPLOYEE BENEFITS

The Company's employees were previously included in Continental Grain's various
employee benefits programs, and the Company reimbursed Continental Grain for the
actual cost of benefit accruals and an allocable cost of administration and
overhead. Effective April 1, 1998, the Company discontinued its participation in
Continental Grain's health care plan and obtained independent coverage.
Effective July 1, 1998, the Company will discontinue participation in
Continental Grain's pension plan and will institute the ContiFinancial Employee
Savings Plan.

The previous Continental Grain pension plan covered salaried employees and
provided benefits that were generally based on a percentage of the employee's
salary during the five years before retirement. Continental Grain's funding
policy for these plans was generally to make the minimum annual contribution
required by applicable regulations. Pension costs charged to the Company by
Continental Grain were $465, $374 and $118 for the years ended March 31, 1998,
1997 and 1996, respectively.

In fiscal 1997 and 1996, post-retirement health care coverage under Continental
Grain's Salaried Health Care Plan was available on a cost sharing basis to
retired employees. Post-retirement health care costs were $419 and $680 for
fiscal 1997 and 1996, respectively. The Company's participation in this plan
ceased in 1998 and, consequently, no post-retirement health care costs were
expensed during the year ended March 31, 1998.

The Company has in effect an incentive compensation program which is a formula
plan based on pre-tax income targets. Incentive compensation for the years ended
March 31, 1998, 1997 and 1996 was $31,252, $24,580 and $27,986, respectively.

Upon acquisition of ULG, the Company established a long-term incentive plan for
certain key employees of ULG. The program is a formula plan based on after-tax
income. The Company recognized $3,609 and $200 in expense for this plan for the
years ended March 31, 1998 and 1997, respectively.

                                       61
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)


1995 LONG-TERM STOCK INCENTIVE PLAN

The Company has adopted the Stock Plan pursuant to which the Company is
authorized to grant certain key employees 5,437,895 of options and restricted
stock. In fiscal 1998, 1997 and 1996, the Company granted stock options and
restricted stock under the Stock Plan.

The Company applies APB Opinion No. 25 and the related interpretations in
accounting for the Stock Plan. In October 1995, the FASB issued SFAS 123. If
fully adopted, SFAS 123 would have changed the method for measurement and
recognition of stock-based compensation on plans similar to those of the
Company. As permitted, the Company elected not to adopt the accounting
prescribed by SFAS 123. However, as required, the Company has adopted the
disclosure requirements of SFAS 123. Pro forma disclosures as if the Company had
adopted the expense recognition requirements under SFAS 123 are presented below.

Stock options granted under the Stock Plan are nonqualified stock options that:
(1) are granted at prices which are equal to the market value of the stock on
the date of grant; (2) subject to a grantee's continued employment with the
Company, vest at various periods over a three to four year period; and (3)
expire ten years subsequent to the award.

A summary of the status of the Company's  stock options as of March 31, 1998, 
 1997 and 1996 and the changes  during the  respective years is presented 
below:

<TABLE>
<CAPTION>
                                 MARCH 31, 1998              MARCH 31, 1997             MARCH 31, 1996
                            -------------------------   -------------------------   -------------------------
                                         WEIGHTED                    WEIGHTED                    WEIGHTED      
                                          AVERAGE                     AVERAGE                     AVERAGE      
                             SHARES    EXERCISE PRICE    SHARES    EXERCISE PRICE    SHARES    EXERCISE PRICE  
                             ------    --------------    ------    --------------    ------    --------------
<S>                        <C>            <C>           <C>           <C>           <C>           <C>
Outstanding at beginning   2,484,730      $21.41        2,623,500     $21.11               --     $   --
  of year
Granted                    1,053,500       26.38           50,000      35.63        2,623,500      21.11
Exercised                    (47,204)      21.11          (11,382)     21.11               --         --
Forfeited                    (62,211)      22.70         (177,388)     21.11               --         --
                           ---------                    ---------                   ---------
Outstanding at end of
 Year                      3,428,815      $22.91        2,484,730     $21.41        2,623,500     $21.11
                           =========                    =========                   =========
Options exercisable at
 end of year               1,903,252      $21.38          491,946     $21.26          196,763     $21.11
                           =========                    =========                   =========
</TABLE>

The fair value of each option granted during fiscal 1998, 1997 and 1996 was 
estimated on the date of grant using the Black-Scholes option-pricing model 
with the following assumptions: (1) dividend yield of zero; (2) expected 
volatility 39.70% for 1998 and 49.75% for 1997 and 1996; (3) risk-free 
interest rate of 5.85% for 1998, 6.32% for 1997 and 5.05% for 1996 ; (4) 
expected life of 3.5 years. The weighted average fair value of options 
granted during fiscal 1998, 1997 and 1996 was $9.63, $15.33 and $8.78, 
respectively.
                                       62
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
                (in thousands, except share data and where noted)


Had compensation cost for the Company's fiscal 1998, 1997 and 1996 grants for 
stock options been determined consistent with SFAS 123, the Company's pro 
forma net income and pro forma net income per common share for fiscal 1998, 
1997 and 1996 would be:


<TABLE>
<CAPTION>
                                 MARCH 31, 1998              MARCH 31, 1997             MARCH 31, 1996
                            -------------------------   -------------------------   -------------------------
                            AS REPORTED     PRO FORMA   AS REPORTED     PRO FORMA   AS REPORTED     PRO FORMA
                            -----------     ---------   -----------     ---------   -----------     ---------
<S>                           <C>            <C>         <C>             <C>          <C>
Net income                    $134,304       $131,540    $106,004        $99,730      $74,130        $72,217
Net income per common 
share:
        Basic                    $2.90          $2.84       $2.44          $2.30        $2.01          $1.95
        Diluted                  $2.86          $2.80       $2.40          $2.25        $2.00          $1.95
</TABLE>

Restricted stock granted under the Stock Plan is recorded as deferred
compensation in the Consolidated Statements of Changes in Stockholders' Equity.
The deferred compensation is amortized over the vesting period of the restricted
stock. The restricted stock vests over a 3 to 4 year period and is subject to
the employee's continued employment with the Company. In connection with
amortization of deferred compensation, the Company recorded compensation expense
of $5,440, $6,721 and $4,967 in fiscal 1998, 1997 and 1996, respectively.

A summary of the status of the Company's  restricted  stock as of March 31, 
1998,  1997 and 1996 and the changes  during those years is presented below:

<TABLE>
<CAPTION>
                                 MARCH 31, 1998              MARCH 31, 1997             MARCH 31, 1996
                            -------------------------   -------------------------   -------------------------
                                         WEIGHTED                    WEIGHTED                    WEIGHTED    
                                          AVERAGE                     AVERAGE                     AVERAGE    
                                           GRANT                       GRANT                       GRANT
                             SHARES        PRICE         SHARES        PRICE         SHARES        PRICE    
                             ------        -----         ------        -----         ------        -----
<S>                        <C>            <C>           <C>           <C>           <C>           <C>
Outstanding at beginning
  of year                  1,245,551      $21.07        1,330,532     $21.00               --      $   --
Granted                       36,400       30.99            6,000      35.63        1,330,532       21.00
Forfeited                    (15,978)      21.00          (33,931)     21.00               --          --
Vested and transferable      (12,805)      21.00          (57,050)     21.00               --          --
                           ---------                    ---------                   ---------
Outstanding at end of
  year                     1,253,168      $21.36        1,245,551     $21.07        1,330,532      $21.00
                           =========                    =========                   =========
</TABLE>

                                       63
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
               (in thousands, except share data and where noted)

11. INCOME TAXES

Income taxes included in the Consolidated Statements of Income represent the
following:

                                     CURRENT      DEFERRED      TOTAL
                                     -------       -------    -------
Year ended March 31, 1998
   Federal                           $15,687       $59,608    $75,295
   State and local                     3,013        12,841     15,854
                                     -------       -------    -------
                                     $18,700       $72,449    $91,149
                                     =======       =======    =======
Year ended March 31, 1997
   Federal                           $54,137       $ 4,661    $58,798
   State and local                    11,524         1,019     12,543
                                     -------       -------    -------
                                     $65,661       $ 5,680    $71,341
                                     =======       =======    =======
Year ended March 31, 1996
   Federal                           $38,762        $3,278    $42,040
   State and local                     6,504           552      7,056
                                     -------       -------    -------
                                     $45,266       $ 3,830    $49,096
                                     =======       =======    =======

The following table reconciles the "expected" tax provision, computed by 
applying the U.S. Federal statutory tax rate to income before income taxes 
and minority interest, to the Company's actual effective tax rate and expense:

<TABLE>
<CAPTION>
                                 MARCH 31, 1998              MARCH 31, 1997             MARCH 31, 1996
                            -------------------------   -------------------------   -------------------------
                                           PERCENT OF                  PERCENT OF                   PERCENT OF
                                            PRE-TAX                     PRE-TAX                      PRE-TAX
                            EARNINGS        AMOUNT      EARNINGS        AMOUNT      EARNINGS          AMOUNT
                            --------        ------      --------        ------      --------          ------
<S>                        <C>              <C>          <C>             <C>        <C>             <C>
Computed "expected" tax 
  provision                  $78,738         35.0%       $61,963         35.0%      $44,288         35.0%
State and local taxes, net 
 of related Federal benefit   10,236          4.6%         8,055          4.6%        4,808          3.8%
Other                          2,175          1.0%         1,323          0.7%           --            --
                             -------         ----        -------         ----       -------         ----
   Total                     $91,149         40.6%       $71,341         40.3%      $49,096         38.8%
                             =======         ====        =======         ====       =======         ====
</TABLE>

The effects of temporary differences that give rise to deferred tax assets 
and deferred tax liabilities are as follows:

<TABLE>
<CAPTION>
                                                                                    MARCH 31,
                                                                    -----------------------------------------
                                                                       1998            1997           1996
                                                                    -----------    -----------    -----------
<S>                                                                 <C>            <C>            <C>
Deferred Tax Assets:
   Nondeductible reserves                                           $     5,268    $     1,069    $       982
   Compensation related                                                   4,985          5,136          1,927
   Other                                                                  1,874          2,776            377
Deferred Tax Liabilities:
   Capitalized servicing rights                                         (25,986)       (11,081)        (4,535)
   Interest-only and residual certificates                              (73,531)       (12,942)        (9,813)
   Other                                                                   (217)          (115)           (18)
                                                                    -----------    -----------    -----------
Net deferred tax liability                                          $   (87,607)   $   (15,157)   $   (11,080)
                                                                    ===========    ===========    ===========
</TABLE>
                                       64
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
               (in thousands, except share data and where noted)

12.  COMMITMENTS AND CONTINGENCIES

In addition to utilizing facilities leased by Continental Grain, the 
Company's operations are conducted from leased facilities located in various 
areas of the United States. These leases have clauses which provide for 
increases in rent in the event of increases in real estate taxes and 
maintenance costs. Rental expense for the years ended March 31, 1998, 1997 
and 1996 was $8,595, $3,470 and $1,884, respectively. The Company also has a 
capital lease on certain machinery and equipment included as part of 
"Premises and equipment". The future minimum lease payments under the 
Company's operating and capital leases, are as follows:

                               Operating              Capital
Fiscal Year                      Leases               Leases

1999                          $    13,901            $    495
2000                               13,303                 417
2001                               10,245                 298
2002                                7,625                 143
2003                                6,176                 104
Thereafter                         23,277                  --
                              -----------            --------
                              $    74,527            $  1,457
                              ===========            ========

Less: amounts representing interest                      (215)
                                                     --------
Present value of net minimum lease payments             1,242
Less: current maturities                                 (396)
                                                     --------
Long-term obligation                                 $    846
                                                     ========

LITIGATION

The Company is involved in certain litigation arising in the normal course of 
business. The Company believes that any liability with respect to such legal 
actions, individually or in the aggregate, is not likely to be material to 
the Company's consolidated financial position or results of operations.

13. FINANCIAL INSTRUMENTS AND OFF-BALANCE SHEET ACTIVITIES

SALES OF ASSETS WITH RECOURSE

During 1998, 1997 and 1996, the Company utilized agreements with financial 
institutions (the "Purchasers") to sell, with limited recourse, interests in 
designated pools of receivables. Under the agreements, the Purchasers have 
given the Company a right of first refusal to repurchase such receivables 
prior to third-party sales. Pursuant to the recourse provisions of these 
agreements, the Company is responsible for losses incurred by the Purchasers 
on third-party sales of the receivables up to either 5% or 10% of the sale 
amounts. The agreements are guaranteed by the Company. The Company monitors 
its exposure associated with these agreements and records recourse provisions 
as necessary. During 1998, 1997 and 1996, the Company utilized these 
agreements to sell receivables totaling approximately 

                                       65
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
               (in thousands, except share data and where noted)


$18,680,000, $7,350,000 and $5,671,000, respectively. At March 31, 1998 and 
1997, approximately $758,000 and $591,000, respectively, were outstanding and 
reflected as reductions in Receivables held for sale in the Consolidated 
Balance Sheets.

During 1997, 1996 and 1995 the Company sold, with limited recourse, interests 
in certain ESR for $96,545, $54,500, and $50,000, respectively. At March 31, 
1998 and 1997 $100,867 and $144,926, respectively, of such sales were 
outstanding and reflected as reductions in Interest-only and residual 
certificates in the Consolidated Balance Sheets. Under the recourse 
provisions of the agreements, the Company is responsible for losses incurred 
by the purchaser within an agreed upon range. The agreements are guaranteed 
by Continental Grain for an agreed upon fee.

SECURITIZATIONS - HEDGING INTEREST RATE RISK

The most significant variable in the determination of gain on sale in a 
securitization is the spread between the weighted average coupon on the 
securitized loans and the pass-through interest rate. In the interim period 
between loan origination and securitization of such loans, the Company is 
exposed to interest rate risk. The majority of loans are securitized within 
90 days of origination. However, a portion of the loans are held for sale or 
securitization for as long as twelve months (or longer, in very limited 
circumstances) prior to securitization. If interest rates rise during the 
period that the mortgage loans are held, the spread between the weighted 
average interest rate on the loans to be securitized and the pass-through 
interest rates on the securities to be sold (the latter having increased as a 
result of market interest rate movements) would narrow. Upon securitization, 
this would result in a reduction of the fair value of the retained ESR and 
the related gain on sale. The Company mitigates this exposure through short 
sales of U.S. Treasury securities and interest rate futures contracts. Hedge 
gains or losses are initially deferred and subsequently included in gain on 
sale upon completion of the securitization. With respect to 
ContiMortgage/ContiWest securitizations, gain on sale included hedge losses 
of $11,946 and $5,413 in fiscal 1998 and 1997, respectively. These hedging 
activities help mitigate the risk of absolute movements in interest rates but 
they do not mitigate the risk of a widening in the spreads between 
pass-through certificates and U.S. Treasury securities with comparable 
maturities.

The Company's deferred gains (losses) in connection with hedging activities 
were as follows:

                                                       At March 31,
                                                  1998              1997
                                                -------           --------
Futures contracts                               $ 1,082           $  2,821
Short sales of  U.S. Treasury securities         (3,088)             4,061
                                                -------           --------
Total                                           $(2,006)          $  6,882
                                                =======           ========

The total principal amount pertaining to sales of U.S. Treasury futures 
contracts was $543,200 at March 31, 1998 and $364,900 at March 31, 1997. The 
total principal amount pertaining to short sales of U.S. Treasury securities 
was $815,060 at March 31, 1998 and $231,947 at March 31, 1997.

                                       66
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
               (in thousands, except share data and where noted)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments recorded at contractual amounts that
approximate market or fair value primarily consist of securities purchased under
agreements to resell, trade receivables, accounts payable, securities sold but
not yet purchased and trade receivables sold under agreements to repurchase. As
these amounts are short term in nature and/or generally bear market rates of
interest, the carrying amounts of these instruments are reasonable estimates of
their fair values. The carrying amount of the Company's long-term debt
approximates fair value when valued using available quoted market prices. As
discussed in Note 4, Interest-only and residual certificates are recorded at
fair value.

CREDIT RISK

The Company is exposed to on-balance sheet credit risk related to its
receivables and Interest-only and residual certificates. The Company is exposed
to off-balance sheet credit risk related to loans which the Company has
committed to originate or buy and loans and ESR sold with limited recourse.

The Company utilizes securities purchased under agreements to resell as part of
its interest rate management strategy. These instruments expose the Company to
credit risk which is measured as the loss the Company would record if
counterparties failed to perform pursuant to terms of their contractual
obligations and the value of the collateral held, if any, was not adequate to
cover such losses. The Company's policy is to take possession of securities
purchased under agreements to resell. The Company monitors the market value of
the assets acquired to ensure their adequacy as compared to the amount at which
the securities will be resold. The Company may require the counterparty to
deposit additional collateral or reduce the loan balance when necessary. The
interest rate on these instruments depends upon, among other things, the
underlying collateral, the term of the agreement and the credit quality of the
counterparty. At March 31, 1998, 1997 and 1996, these instruments had a weighted
average interest rate of 5.3%, 5.1%, and 4.7%, respectively. The Company
transacts these resale agreements primarily with three institutional
broker/dealers.

The Company is a party to financial instruments with off-balance sheet credit
risk in the normal course of business. These financial instruments include
commitments to extend credit to borrowers, commitments to purchase loans from
correspondents, and recourse provided on loans sold to investors in prior years.
The Company has a first or second lien position on all of its loans, and the
combined loan-to-value ratio ("CLTV") permitted by the Company's mortgage
underwriting guidelines generally may not exceed 85%. The CLTV represents the
combined first and second mortgage balances as a percentage of the appraised
value or the mortgaged property, with the appraised value determined by an
appraiser with appropriate professional designations. A title insurance policy
is required for all loans.

As of March 31, 1998 and 1997, the Company had outstanding commitments to extend
credit or purchase loans in the amount of $666,380 and $428,234, respectively.
As these amounts are short term in nature and/or generally bear market rates of
interest, the contractual amounts of these instruments are reasonable estimates
of their fair values.

Commitments to extend credit or to purchase a loan are granted for a period of
thirty days and are contingent upon the borrower and the borrower's collateral
satisfying the Company's underwriting 

                                       67
<PAGE>
                           CONTIFINANCIAL CORPORATION
             Notes to Consolidated Financial Statements (continued)
                          March 31, 1998, 1997 and 1996
               (in thousands, except share data and where noted)


guidelines. Since many of the commitments are expected to expire without 
being exercised, the total commitment amount does not necessarily represent 
future cash requirements or future credit risk.

The Company monitors concentrations of credit risk associated with business 
conducted with financial institutions and minimizes credit risk by avoiding a 
concentration with any single financial institution. As of March 31, 1998, 
and 1997 the majority of loans with on-balance sheet and off-balance sheet 
credit risk were collateralized by properties located throughout the United 
States.

WAREHOUSING EXPOSURE

The Company utilizes warehouse financing in the form of asset purchase and 
sale facilities with certain financial institutions and a funding agreement 
under an agreement to repurchase, collectively the ("Facilities") to 
facilitate the accumulation of securitizable products prior to 
securitization. As of March 31, 1998 and 1997, the Company had $2,780,000, 
and $2,250,000 of committed warehousing, and $3,100,000 and $1,100,000 of 
uncommitted warehousing, respectively. As of March 31, 1998 and 1997, 
$1,003,747 and $842,268 respectively, was drawn down. Warehouse commitments 
are typically for a term of one year or less and are designated to fund only 
securitizable assets. The majority of the assets remain in the Facilities for 
a period of up to 90 days at which point they are securitized and sold to 
institutional investors. As these amounts are short term in nature and/or 
generally bear market rates of interest, the contractual amounts of these 
instruments are reasonable estimates of their fair values.

14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table presents the quarterly results of operations for the 
years ended March 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                June 30,       September 30,    December 31,     March 31,
                                                                  1997             1997             1997            1998
                                                                  ----             ----             ----            ----
<S>                                                            <C>              <C>            <C>             <C>
Gross income                                                   $   134,023      $  158,130     $   177,255     $   190,754
Net income                                                          26,873          34,837          35,140          37,454
Basic earnings per common share                                       0.60            0.74            0.75            0.80

Diluted earnings per common share                              $      0.59      $     0.73     $      0.74     $      0.79

<CAPTION>

                                                                                  Three Months Ended
                                                                June 30,       September 30,    December 31,     March 31,
                                                                  1996             1996             1996           1997
                                                                  ----             ----             ----           ----
<S>                                                            <C>              <C>            <C>             <C>
Gross income                                                   $    69,763      $    89,683    $   121,332     $   147,052
Net income                                                          19,433           25,516         29,025          32,030
Basic earnings per common share                                       0.45             0.59           0.67            0.73
Diluted earnings per common share                              $      0.44      $      0.58    $      0.66     $      0.72

</TABLE>

                                       68
<PAGE>

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.

None.





                                       69












<PAGE>

                                      PART III.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF  THE REGISTRANT.

     The Company incorporates by reference herein information in its proxy
     statement which complies with the information called for by Item 10 of the
     Form 10-K.  The proxy will be filed at a later date, that is not more than
     120 days after the end of the Company's 1998 fiscal year, with the
     Commission.

ITEM 11.  EXECUTIVE COMPENSATION.  

     The Company incorporates by reference herein information in its proxy
     statement which complies with the information called for by Item 11 of the
     Form 10-K.  The proxy will be filed at a later date, that is not more than
     120 days after the end of the Company's 1998 fiscal year, with the
     Commission.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.  

     The Company incorporates by reference herein information in its proxy
     statement which complies with the information called for by Item 12 of the
     Form 10-K.  The proxy will be filed at a later date, that is not more than
     120 days after the end of the Company's 1998 fiscal year, with the
     Commission.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The Company incorporates by reference herein information in its proxy
     statement which complies with the information called for by Item 13 of the
     Form 10-K.  The proxy will be filed at a later date, that is not more than
     120 days after the end of the Company's 1998 fiscal year, with the
     Commission.

                                      PART IV.
                                          
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)  Financial Statements, Financial Statement Schedules and Exhibits.

     (1) Financial Statements

           See Item 8.  "Financial Statements and Supplementary Data."

     (2) Financial Statement Schedules

     No Financial statement schedules are included because of the absence of the
     conditions under which   they are required or because the information is
     included in the financial statements or the notes thereto.

                                       70

<PAGE>

(3) Exhibits

EXHIBIT
   NO.              DESCRIPTION

3.1            Restated Certificate of Incorporation of  the Company (1)
3.2            By-laws of the Company (1)
4.1            Indenture between the Company and the Trustee with form of
               Indenture Note (1)
4.2            Form of Term Note issued by the Company to Continental Grain (1)
4.3            Form of Four Year Note issued by The Company to Continental Grain
               (1)
10.1           Indemnification Agreement between the Company and Continental
               Grain (1)
10.2           Tax Sharing Agreement between the Company and Continental Grain
               (1)
10.3           Employee Benefit Allocation Agreement between the Company and
               Continental Grain (2)
10.4           Services Agreement between the Company and Continental Grain (1)
10.5           Note Purchase Agreement between the Company and Continental Grain
               (1)
10.6           Common Stock Registration Rights Agreement between the Company
               and Continental Grain (1)
10.7           Indenture Note Registration Rights Agreement between the Company
               and Continental Grain (1)
10.8           Sublease Agreement between the Company and Continental Grain (1)
10.9           ContiFinancial Corporation 1995 Long -Term Stock Incentive Plan
               (1)
10.10          ContiFinancial Services Long -Term Incentive Compensation Plan
               (1)
10.11          1997 ContiFinancial Services Division Incentive Compensation Plan
               (1)
10.12          1997 ContiMortgage Corporation Incentive Compensation Plan (1)
10.13          Form of Stock Option Agreement (1)
10.14          Form of Restricted  Stock Award Agreement (1)
10.15          Agreement of Lease between LC/N Keith Valley Limited Partnership
               I and ContiTrade Services Corporation and amendments thereto (1)
10.16          ContiFinancial Corporation Directors Retainer Fee Plan (1)
10.17          Assignment and Transfer of Excess Spread Receivables between
               Continental Grain and certain subsidiaries of the Company (1)
10.18          Secured Promissory Note (2)
10.19          Indenture - 83/8 %  Senior Notes due 2003 (3)
10.20          First Amendment to Note Purchase Agreement (4)
10.21          First Supplemental Indenture (5)
10.22          Revolving credit facility-Credit Agreement (6)
10.23          Letter of Credit and Reimbursement Agreement (8)
11.1           Computation of the Company's earnings per common share 
12.1           Ratio of Earnings to Fixed Charges
21.1           List of Subsidiaries of the Company 
23.2           Consent of Arthur Andersen LLP (2)
23.3           Consent of Arthur Andersen LLP
24.1           Attorneys-In-Fact and Agents for James J. Bigham (2)
24.2           Attorneys-In-Fact and Agents for Paul J. Fribourg (2)
24.3           Attorneys-In-Fact and Agents for John W. Spiegel (2)
24.4           Attorneys-In-Fact and Agents for Donald L. Staheli (2)
24.5           Attorneys-In-Fact and Agents for John P. Tierney (2)
24.6           Attorneys-In-Fact and Agents for Lawrence G. Weppler (2)
24.7           Attorneys-In-Fact and Agents for Daniel J. Willett (2)
24.8           Attorneys-In-Fact and Agents for Michael J. Zimmerman (7)
27.1           Financial Data Schedule for the year-to-date period ended June
               30, 1996
27.2           Financial Data Schedule for the year-to-date period ended
               September 30, 1996
27.3           Financial Data Schedule for the year-to-date period ended
               December 31, 1996
27.4           Financial Data Schedule for the fiscal year ended March 31, 1997
27.5           Financial Data Schedule for the year-to-date period ended June
               30, 1997
27.6           Financial Data Schedule for the year-to-date period ended
               September 30, 1997
27.7           Financial Data Schedule for the year-to-date period ended
               December 31, 1997
27.8           Financial Data Schedule for the fiscal year ended March 31, 1998

-----------------------------
                                       71
<PAGE>

       (1) Incorporated by reference to the exhibit of the same number from the
       Company's Registration Statement on Form S-1, File No. 33-98016.

       (2) Incorporated by reference to the exhibit of the same number from the
       Company's Annual Report on Form 10-K for the fiscal year ended March 31,
       1996, File No. 1-14074.
 
       (3) Incorporated by reference to exhibit 10.2 from the Company's
       quarterly Report on Form 10-Q for the quarterly period ended September
       30, 1996, File No. 1-14074.

       (4) Incorporated by references to exhibit 10.3 form the Company's
       Quarterly Report on Form 10-Q for the quarterly period ended September
       30, 1996, File No. 1-14074.

       (5) Incorporated by references to exhibit 10.4 form the Company's
       Quarterly Report on Form 10-Q for the quarterly period ended September
       30, 1996, File No. 1-14074.

       (6) Incorporated by reference to exhibit 10.5 from the Company's
       Quarterly Report on Form 10-Q for the quarterly period ended December
       31, 1996, File No. 1-14074.

       (7) Incorporated by reference to exhibit 24.8 from the Company's Annual
       Report on Form 10-K for the fiscal year ended March 31, 1997, File No.
       1-14074.

       (8) Incorporated by reference to exhibit 10.23 from the Company's
       Quarterly Report on Form 10-Q for the quarterly period ended September
       30, 1997, File No. 1-14074.


(b)  Reports on Form 8-K.
      None

(c)  Exhibits.
      See (a) (3) above.

(d)  Financial Statement Schedules.
      See (a) (2) above.

                                       72
<PAGE>

                                      SIGNATURES

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

                              CONTIFINANCIAL CORPORATION


                              By: /s/ James E. Moore
                                 ------------------------------
                                 James E. Moore
                                 President, Chief Executive Officer and Director
                               Date: June 29, 1998

Pursuant to the requirements of  the Securities Act of 1934, this Report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.

SIGNATURE                             TITLE                            DATE
---------                             -----                            ----

/s/ James E. Moore       President, Chief Executive Officer        June 29, 1998
-----------------------  and Director (Principal Executive
James E. Moore           Officer)
       

/s/ Daniel J. Willett    Senior Vice President and Chief           June 29, 1998
-----------------------  Financial Officer (Principal
Daniel J. Willett        Financial Officer)
       

/s/ Dennis G. Sullivan   Vice President and Controller             June 29, 1998
-----------------------  (Principal Accounting Officer)
Dennis G. Sullivan

          *              Director and Chairman of the Board        June 29, 1998
-----------------------
James J. Bigham

          *              Director                                  June 29, 1998
-----------------------
Paul J. Fribourg

          *              Director                                  June 29, 1998
----------------------- 
John W. Spiegel

          *              Director                                  June 29, 1998
----------------------- 
Donald L. Staheli

          *              Director                                  June 29, 1998
----------------------- 
John P. Tierney

          *              Director                                  June 29, 1998
----------------------- 
Lawrence G. Weppler

          *              Director                                  June 29, 1998
----------------------- 
Michael J. Zimmerman


* By: /s/ James E. Moore
     --------------------------
     James E. Moore
     Attorney-In-Fact
                                       73
<PAGE>

                                    EXHIBIT INDEX

EXHIBIT
   NO.                   DESCRIPTION
-------                  -----------

11.1   Computation of the Company's earnings per common share
12.1   Ratio of Earnings to Fixed Charges
21.1   List of Subsidiaries of the Company
23.3   Consent of Arthur Andersen LLP
27.1   Financial Data Schedule for the year-to-date period ended June 30, 1996
27.2   Financial Data Schedule for the year-to-date period ended September 30,
       1996
27.3   Financial Data Schedule for the year-to-date period ended December 31,
       1996
27.4   Financial Data Schedule for the fiscal year ended March 31, 1997
27.5   Financial Data Schedule for the year-to-date period ended June 30, 1997
27.6   Financial Data Schedule for the year-to-date period ended September 30,
       1997
27.7   Financial Data Schedule for the year-to-date period ended December 31,
       1997
27.8   Financial Data Schedule for the fiscal year ended March 31, 1998