FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549


/X/   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.

      For the quarterly period ended June 30, 1998

                              OR

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

      For the transition period from ____________ to ____________

               Commission file number 2-63708

           METROPOLITAN MORTGAGE & SECURITIES CO., INC.
      (Exact name of registrant as specified in its charter)

          WASHINGTON                             91-0609840
 (State or other jurisdiction of            (I.R.S. Employer
  incorporation or organization)             Identification No.)

       601 W. 1ST AVENUE, SPOKANE, WASHINGTON               99201-5015
         (Address of principal executive offices)     (Zip Code)

Registrant's telephone number, including area code: (509)838-3111

Former  name,  former address and former fiscal year, if  changed  since  last
report:   Former  address  was 929 West Sprague Avenue,  Spokane,  Washington,
99201.

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

      APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:  N/A.

       Indicate  by check mark whether the registrant has filed all  documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes / /   No / /   N/A.

      APPLICABLE ONLY TO CORPORATE ISSUERS:

       Indicate  the  number  of shares outstanding of each  of  the  issuer's
classes of common stock, as of the latest practicable date.

      Common "A": 130 shares at July 31, 1998.
      Common "B":   0 shares at July 31, 1998.

                 METROPOLITAN MORTGAGE & SECURITIES CO., INC.
                                     INDEX

                        PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

      Condensed Consolidated Balance Sheets
      As of June 30, 1998 and September 30, 1997 (unaudited)

      Condensed Consolidated Statements of Income
      Three and Nine Months Ended June 30, 1998 and 1997 (unaudited)

      Condensed Consolidated Statements of Cash Flows
      Nine Months Ended June 30, 1998 and 1997 (unaudited)

      Notes to Condensed Consolidated Financial Statements

                        PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

         METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                              June 30,        September 30,
                                                1998              1997
                                          ______________    ______________
<S>                                       <C>               <C>
ASSETS                                                      
  Cash and Cash Equivalents               $   24,107,786    $   58,924,958
  Investments                                               
    Trading Securities, at market             54,421,324        34,477,091
    Available-for-Sale Securities, at                       
      Market                                  28,991,227        36,621,351
    Held-to-Maturity Securities, at                         
      Amortized cost (market value                          
      $104,348,158 and $112,711,688)         103,634,497       113,730,535
                                                            
  Accrued Interest on Investments         _____2,111,585    _____1,516,739
                                                            
      TOTAL CASH AND INVESTMENTS             213,266,419    __ 245,270,674
                                                            
  Real Estate Contracts and Mortgage                        
    Notes and Other Receivables              692,440,519       677,398,455
  Pledged Real Estate Contracts and                         
    Mortgage Notes
      Nikko Financial Services                35,684,172    
  Real Estate for Sale and Development,                     
    Including Foreclosed Real Estate          90,707,398        81,802,266
                                          ______________    ______________
  Total Receivables and Real Estate                         
    Assets                                   818,832,089       759,200,721
  Less Allowance for Losses                  (11,820,690)      (12,327,098)
                                          ______________    ______________
      NET RECEIVABLES AND REAL ESTATE                       
         ASSETS                              807,011,399       746,873,623
                                          ______________    ______________
  Deferred Acquisition Costs, Net             72,981,877        72,503,095
  Land, Building and Equipment - net                        
    of accumulated depreciation               24,563,593         9,408,578
  Other Assets, net of allowance              37,744,757        38,333,490
                                           _____________    ______________
      TOTAL ASSETS                        $1,155,568,045    $1,112,389,460
                                          ==============    ==============
</TABLE>

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

         METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                              June 30,        September 30,
                                                1998              1997
                                          ______________    ______________
<S>                                       <C>               <C>
LIABILITIES                                                 
  Life Insurance and Annuity Reserves     $  816,701,793    $  825,368,988
  Debenture Bonds                            190,040,444       185,213,688
  Notes Payable                                             
    Nikko Financial Services                  33,899,963    
  Other Debt Payable                           8,118,308         4,917,779
  Accounts Payable and Accrued Expenses       20,326,436        19,114,354
  Deferred Income Taxes                       23,826,701        22,029,778
  Minority Interest in Consolidated                         
    Subsidiaries                               1,712,529         1,632,139
                                          ______________    ______________
    TOTAL LIABILITIES                      1,094,626,174     1,058,276,726
                                          ______________    ______________
STOCKHOLDERS' EQUITY                                        
  Preferred Stock, Series A, B, C, D,                       
    E Cumulative with Variable Rate,                        
    $10 Par Value, Authorized 8,325,000,                    
    issued 2,005,614 Shares and                             
    2,095,414 Shares (Liquidation                           
    Preference $50,067,061 and                              
    $50,729,084, respectively)                20,056,136        20,954,141
  Class A Common Stock-Voting, $2,250                       
    par value, authorized 222 shares,                       
    issued 130 shares                            293,417           293,417
  Additional Paid-In Capital                  18,845,242        18,596,231
  Retained Earnings                           22,404,425        14,536,114
  Net Unrealized Losses on                                  
    Investments, Net of Income Taxes            (657,349)         (267,169)
                                          ______________    ______________
    TOTAL STOCKHOLDERS' EQUITY                60,941,871        54,112,734
                                          ______________    ______________
    TOTAL LIABILITIES AND STOCKHOLDERS'                     
      EQUITY                              $1,155,568,045    $1,112,389,460
                                          ==============    ==============
</TABLE>

   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.
          METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                   Three Months Ended               Nine Months Ended         
                                                        June 30,                         June 30,
                                                  1998             1997            1998           1997
                                             ____________     ____________    ____________   ____________
<S>                                          <C>              <C>             <C>            <C>
REVENUES                                                                                     
  Insurance Premiums Earned                  $    700,000     $    750,000    $  2,100,000   $  2,250,000
  Interest and Earned Discounts                23,295,437       23,401,038      69,225,623     70,280,631
  Real Estate Sales                             8,182,351        9,820,370      23,220,394     23,972,756
  Fees, Commissions, Service and Other                                                       
    Income                                      1,827,110        1,227,344       5,275,853      3,612,928
  Investment Gains (Losses), Net                  250,767        1,416,282       6,714,001       (699,877)
  Realized Gains on Sales of Receivables       11,663,283           38,988      11,974,492     11,586,529
                                             ____________     ____________    ____________   ____________
    TOTAL REVENUES                             45,918,948       36,654,022     118,510,363    111,002,967
                                             ____________     ____________    ____________   ____________
EXPENSES                                                                                     
  Insurance Policy and Annuity Benefits        11,595,215       12,772,479      36,023,274     37,837,493
  Interest Expense                              5,031,303        4,309,694      14,189,192     14,128,615
  Cost of Real Estate Sold                      7,473,116        9,572,797      21,700,779     24,715,458
  Provision for Losses on Real Estate                                                        
    Assets                                      1,521,818        1,400,781       4,220,621      3,397,615
  Salaries and Employee Benefits                5,093,510        3,544,021      13,479,234      9,914,179
  Commissions to Agents                         2,660,928        1,614,104       6,921,085      5,838,189
  Other Operating and Underwriting                                                           
    Expenses                                    1,808,040          939,060       5,033,745      4,756,478
  Decrease (Increase) in Deferred                                                            
Acquisition                                       (55,920)       1,223,639         595,267      1,456,012
     Costs
                                             ____________     ____________    ____________   ____________
    TOTAL EXPENSES                             35,128,010       35,376,575     102,163,197    102,044,039
                                             ____________     ____________    ____________   ____________
Income Before Income Taxes and                                                               
  Minority Interest                            10,790,938        1,277,447      16,347,166      8,958,928
Provision for Income Taxes                     (3,696,253)        (443,662)     (5,588,025)    (3,061,713)
                                             ____________     ____________    ____________   ____________
Income Before Minority Interest                 7,094,685          833,785      10,759,141      5,897,215
Income of Consolidated Subsidiaries                                                          
  Allocated to Minority Stockholders              (53,590)         (13,600)        (99,390)       (75,900)
                                             ____________     ____________    ____________   ____________
Net Income                                      7,041,095          820,185      10,659,751      5,821,315
Preferred Stock Dividends                        (930,512)      (1,060,687)     (2,848,764)    (3,097,647)
                                             ____________     ____________    ____________   ____________
INCOME (LOSS) APPLICABLE TO COMMON                                                           
   STOCKHOLDERS                              $  6,110,583     $   (240,502)   $  7,810,987   $  2,723,668
                                             ============     ============    ============   ============
Basic and Diluted Income per Share                                                           
Applicable to Common Stockholders            $     47,004     $     (1,850)   $     60,085   $     20,951
                                             ============     ============    ============   ============
Weighted Average Number of Shares of Common                                                  
Stock Outstanding                                     130              130             130            130
                                             ============     ============    ============   ============
                                                                                             

</TABLE>

The accompanying notes are an integral part of the condensed consolidated
financial statements.
METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                              Nine Months Ended June 30,
                                                1998              1997
                                          ______________    ______________
<S>                                       <C>               <C>
NET CASH PROVIDED BY (USED IN)                              
  OPERATING ACTIVITIES                    $   13,078,887    $  (95,354,775)
                                          ______________    ______________
CASH FLOWS FROM INVESTING ACTIVITIES                        
  Change in Restricted Cash and Cash                        
    Equivalents                                                132,652,334
  Principal Payments on Real Estate                         
    Contracts and Mortgage Notes and                        
    Other Receivables                         93,156,352        88,032,412
  Proceeds From Real Estate Sales             14,910,747         6,045,297
  Proceeds From Investment Maturities         16,091,098        14,371,647
  Proceeds from Sale of Available-for-                      
    Sale Securities                            1,769,954        22,556,364
  Purchase of Available-for-Sale                            
    Securities                                  (592,421)      (46,409,515)
  Purchase of Held-to-Maturity                              
    Securities                                                     (99,625)
  Proceeds From Sale of Real Estate                         
    Contracts and Mortgage Notes and                        
    Other Receivables                        212,241,886       184,761,380
  Acquisition of Real Estate Contracts                      
    and Mortgage Notes and Other                            
    Receivables                             (356,163,115)     (285,109,122)
  Additions to Real Estate Held              (12,802,871)      (16,563,297)
  Capital Expenditures                       (16,325,228)       (1,335,335)
                                          ______________    ______________
    NET CASH PROVIDED BY (USED IN)                          
      INVESTING ACTIVITIES                   (47,713,598)       98,902,540
                                          ______________    ______________
CASH FLOWS FROM FINANCING ACTIVITIES                        
  Net Change Short Term Borrowings From                     
    Brokers and Banks                         33,950,713        55,948,711
  Receipts From Life and Annuity              60,935,212        48,298,041
Products
  Withdrawals on Life and Annuity                           
    Products                                (105,084,777)      (87,604,090)
  Ceding of Life and Annuity Products to                    
    Reinsurers, Net                            2,175,181    
  Borrowings from Banks and Others             2,800,000    
  Repayment to Banks and Others                 (274,627)       (2,326,345)
  Issuance of Debenture Bonds                 49,170,232        24,988,240
  Issuance of Preferred Stock                  1,549,430         1,667,187
  Repayment of Debenture Bonds               (40,413,961)      (34,029,931)
  Preferred and Common Stock Dividends        (2,927,008)       (3,097,647)
  Redemption of Preferred Stock               (2,198,424)         (454,094)
  Receipt of Contingent Sale Price for                      
    Subsidiary Sold to Related Party             135,568           249,721
                                          ______________    ______________
NET CASH  PROVIDED BY (USED IN) FINANCING                   
ACTIVITIES                                      (182,461)        3,639,793
                                          ______________    ______________
Net Change in Cash and Cash Equivalents      (34,817,172)        7,187,558
Cash and Cash Equivalents at Beginning                      
  Of Period                                   58,924,958        35,226,746
                                          ______________    ______________
CASH AND CASH EQUIVALENTS AT END                            
  OF PERIOD                               $   24,107,786    $   42,414,304
                                          ==============    ==============
</TABLE>

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

         METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.    In  the  opinion  of  the Company, the accompanying unaudited  condensed
      consolidated  financial statements contain all adjustments necessary  to
      present fairly the Company's financial position as of June 30, 1998, and
      the  results of operations for the three and nine months ended June  30,
      1998 and 1997 and the cash flows for the nine months ended June 30, 1998
      and  1997.   The  results of operations for the  three  and  nine  month
      periods  ended June 30, 1998 and 1997 are not necessarily indicative  of
      the  results  to  be  expected for the full year.  As  provided  for  in
      regulations  promulgated by the Securities and Exchange Commission,  all
      financial  statements  included  herein  are  unaudited;  however,   the
      condensed  consolidated balance sheet at September  30,  1997  has  been
      derived  from  the audited consolidated balance sheet.  These  financial
      statements should be read in conjunction with the consolidated financial
      statements including notes thereto included in the Company's fiscal 1997
      Form 10-K.

2.    The principal amount of receivables as to which payments were in arrears
      more  than three months was $31,600,000 at June 30, 1998 and $36,000,000
      at September 30, 1997.

3.    The  Company  had  no outstanding legal proceedings  other  than  normal
      proceedings  associated with receivable foreclosures and/or the  general
      business activities of the Company.

4.    Certain  amounts  in  the prior year's condensed consolidated  financial
      statements  have  been reclassified to conform with the  current  year's
      presentation.   These reclassifications had no effect on net  income  or
      retained earnings as previously reported.

5.    The   Company  has  retained  residual  interests  from  its  receivable
      securitizations.  At June 30, 1998, the Company held approximately $30.5
      million  in residual certificates at their estimated fair market  value.
      The Company currently values its residual certificates at an approximate
      12% return which is after considering expected losses and an approximate
      15% annual prepayment rate.

6.    In  February 1997, Statement of Financial Accounting Standards  No.  128
      (SFAS  128),  "Earnings  per Share" was issued.   SFAS  128  establishes
      standards  for  computing and presenting earnings per  share  (EPS)  and
      simplifies   the  existing  standards.   This  standard   replaces   the
      presentation of primary EPS with a presentation of basic EPS.   It  also
      requires the dual presentation of basic and diluted EPS on the  face  of
      the  income  statement for all entities with complex capital  structures
      and  requires a reconciliation of the numerator and denominator  of  the
      basic  EPS  computation to the numerator and denominator of the  diluted
      EPS  computation.  SFAS 128 is effective for financial statements issued
      for  periods  ending after December 15, 1997, including interim  periods
      and  requires  restatement  of  all  prior-period  EPS  data  presented.
      Accordingly,  the Company applied this new standard during  the  quarter
      ended December 31, 1997 and all prior-period EPS data has been restated.
      The  application of this standard did not have a material effect on  the
      presentation of the Company's EPS disclosures as the Company did not and
      does not have potentially dilutive securities.

7.    On  November  14,  1997,  the Company acquired an approximately  200,000
      square  foot office building located at 601 West First Avenue,  Spokane,
      Washington,  approximately three blocks from the  current  headquarters.
      The purchase price was approximately $11.7 million with remodeling costs
      estimated  at  an  additional  $5 million.   Approximately  42%  of  the
      building  is currently leased by other tenants.  The Company  moved  its
      headquarters into this building in late June, 1998.

8.    In  April,  1998,  the Company and its subsidiary, Western  United  Life
      Assurance Company (WULA), participated as two of the four co-sellers  in
      a  receivable  securitization sponsored by Metropolitan  Asset  Funding,
      Inc.  II,  an  affiliated company.  Proceeds from the  transaction  were
      approximately  $170.3  million,  including  the  fair  market  value  of
      retained  certificates and the valuation of retained  servicing  rights.
      The  transaction  resulted  in  pre-tax  gains  of  approximately  $10.5
      million.

9.    The  Company  currently  has  credit  facilities  with  Nikko  Financial
      Services  for  $200  million  and  with  NationsBanc  Mortgage   Capital
      Corporation  for $100 million.  Any advances under these agreements  are
      collateralized by pledged real estate contracts and mortgage notes.   As
      of  June 30, 1998, the Company had outstanding advances of approximately
      $33.9 million from these credit facilities.

10.   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 and  liabilities
      and  disclosure of contingent assets and liabilities at the dates of the
      financial  statements and the reported amounts of revenues and  expenses
      during  the  reporting periods.  Actual results could differ from  those
      estimates.
ITEM 2.     MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION  AND
            RESULTS OF OPERATIONS

      The discussions may contain some forward-looking statements.  A forward-
looking statement may contain words such as "will continue to be," "will be,"
"continue to," "expect to," "anticipates that," "to be," or "can impact."
Management cautions that forward-looking statements are subject to risks and
uncertainties that could cause the Company's actual results to differ
materially from those projected in forward-looking statements.

Significant Transactions:

      In November 1996, Metropolitan Mortgage & Securities Co., Inc. (Metro or
the  Company) and its subsidiary Western United Life Assurance Company  (WULA)
participated  as  two  of  the four co-sellers in a receivable  securitization
sponsored  by  Metropolitan Asset Funding, Inc., an affiliated  company.   The
Company's  proceeds  from  the transaction were approximately  $110.4  million
including the fair market value of retained certificates and the valuation  of
retained  servicing  rights.  The transaction resulted in  approximately  $8.9
million   in  pre-tax  gains.   As  an  economic  hedge  for  this  receivable
securitization  sale,  the  Company had previously sold  short  U.S.  Treasury
securities  of  varying  maturities.  Concurrent with the  completion  of  the
securitization transaction, the Company purchased and delivered  the  borrowed
securities.   The Company lost approximately $2.5 million on this short  sale.
Thereby  from an economic standpoint, the Company realized approximately  $6.4
million in pre-tax gains on the securitization sale.

      In  September 1997, Metro and WULA again participated as two of the four
co-sellers  in  a  receivable securitization sponsored by  Metropolitan  Asset
Funding,  Inc.  II,  an affiliated company.  The Company's proceeds  from  the
transaction were approximately $143.0 million including the fair market  value
of  retained  certificates and valuation of retained  servicing  rights.   The
transaction   resulted  in  pre-tax  gains  of  approximately  $7.2   million.
Additionally,   in   September  1997,  the  Company   securitized   and   sold
approximately  $29.7 million of timeshare receivables recording  approximately
$1.5 million in pre-tax gains.
      
      In April 1998, Metro and WULA participated as two of the four co-sellers
in  a  receivable securitization sponsored by Metropolitan Asset Funding, Inc.
II,  an affiliated company.  The Company's proceeds from the transaction  were
approximately  $170.3  million including the fair  market  value  of  retained
certificates and the valuation of retained servicing rights.  The  transaction
resulted in pre-tax gains of approximately $10.5 million.

      The  Company  has  currently  negotiated credit  facilities  with  Nikko
Financial  Services  for  $200 million and with NationsBanc  Mortgage  Capital
Corporation for $100 million.  Any advances under these credit facilities  are
collateralized  by pledged real estate contracts and mortgage  notes.   As  of
June  30,  1998,  the Company had outstanding advances of approximately  $33.9
million from these credit facilities.

      WULA  entered  into  a  reinsurance agreement  with  Old  Standard  Life
Insurance Company (OSL), an affiliated company, whereby WULA reinsured 75%  of
the risk on six different annuity products through OSL.  This agreement became
effective  January 23, 1997 and continued through September 30,  1997,  during
which  time  approximately $28 million in premiums was reinsured through  OSL.
Effective  October 1, 1997, the agreement was terminated.  A similar agreement
was  executed August, 1998 with retroactive application to April 1, 1998.   As
of  June  30,  1998,  the account value of reinsured annuities  with  OSL  was
approximately $27.4 million.

       On  January  31, 1995, the Company concluded an agreement  with  Summit
Securities, Inc. (Summit), whereby it sold Metropolitan Investment Securities,
Inc.  (MIS)  to  Summit, at a sale price of $288,950, which  approximated  the
current  book  value  of MIS at date of sale.  On May 31,  1995,  the  Company
concluded  an  agreement with Summit, whereby it sold OSL to Summit  effective
May  31,  1995, at a sale price of $2,722,000, which approximated the  current
book  value of OSL at date of sale, with future contingency payments based  on
earnings  of OSL.  The sales price plus estimated future contingency  payments
approximates the actuarial appraised valuation of OSL.  As of June  30,  1998,
the  Company  has  received all required future contingency payments  totaling
approximately $385,000.


Financial Condition and Liquidity:

       As  of June 30, 1998, the Company had cash or cash equivalents of $24.1
million  and liquid investments (trading or available-for-sale securities)  of
$83.4  million compared to $32.0 million and $76.2 million at March 31,  1998,
$33.4  million  and $76.1 million at December 31, 1997 and $58.9  million  and
$71.1  million  at September 30, 1997.  Management believes  that  cash,  cash
equivalents and other liquidity provided by investments are adequate  to  meet
planned  asset  additions,  debt  retirements or  other  business  operational
requirements  during the next twelve months.  Additionally,  the  Company  has
negotiated  credit facilities of $300 million to add additional liquidity  for
the  purchase  of real estate contracts and mortgage notes.   Total  cash  and
investments  at  June  30,  1998, including held-to-maturity  securities,  was
$213.3 million compared to $218.3 million at March 31, 1998, $222.6 million at
December  31, 1997 and $245.3 million at September 30, 1997.  During the  nine
month  period  ended  June 30, 1998, operating activities  provided  funds  of
approximately  $13.1  million.  Funds used in investing  activities  of  $47.7
million  were  primarily  the  result of  $356.2  million  of  new  receivable
acquisitions,  plus  additions to real estate held of $12.8  million  and  new
capital  expenditures of $16.3 million, which included the purchase of  a  new
home office headquarters building, exceeding the sale proceeds and collections
of  receivables  of $305.4 million, proceeds from the sale of real  estate  of
$14.9 million and sales and maturities of investments of $17.9 million.  Funds
used in financing activities of $182,000 were primarily the result of the  net
cash  outflow  of $42.0 million in life and annuity products  and  payment  of
preferred  and common stock dividends of $2.9 million exceeding the  increases
in  short-term  borrowings of $34.0 million and $8.1 million net  cash  inflow
from   debentures  sales  less  maturities  and  preferred  stock  sales  less
redemptions.

       The  receivable  portfolio totaled $728.1  million  at  June  30,  1998
compared  to $821.0 million at March 31, 1998, $739.1 million at December  31,
1997  and $677.4 million at September 30, 1997.  During the nine months  ended
June  30,  1998,  the  increase primarily resulted  from  the  acquisition  of
receivables totaling $356.2 million plus an additional $8.3 million  in  loans
to  facilitate  the  sale of real estate being partially offset  by  principal
collections on receivables of $93.2 million, reduction for the cost  basis  of
receivables   sold  of  $200.3  million  and  reductions  due  to   foreclosed
receivables of approximately $19.3 million.  Receivable acquisitions  included
over $100 million in volume from correspondent and direct lending activities.

       Real estate held for sale and development increased to $90.7 million at
June  30,  1998 compared to $88.0 million at March 31, 1998, $83.3 million  at
December  31,  1997  and $81.8 million at September 30, 1997.   For  the  nine
months ended June 30, 1998, real estate additions of  $34.4 million, including
$21.6  million of foreclosed receivables, were offset by costs of real  estate
sold  of  $21.7 million, depreciation of $1.6 million and charge-offs  to  the
allowance for losses of $2.2 million.

      Life insurance and annuity policy reserves decreased $8.7 million during
the  nine  months  ended June 30, 1998 to approximately  $816.7  million  from
$818.7  million  at March 31, 1998, $820.9 million at December  31,  1997  and
$825.4  million  at  September 30, 1997.  This  decrease  was  the  result  of
withdrawals  in  the amount of $105.1 million exceeding credited  earnings  of
$33.3  million, receipts from sales of new life and annuity products of  $60.9
million and $2.2 million in net reinsurance ceded.  For the nine months  ended
June  30,  1998, net debenture bonds outstanding increased by $4.8 million  to
$190.0  million  from  $186.5 million at March 31,  1998,  $185.9  million  at
December  31, 1997 and $185.2 million at September 30, 1997.  Net cash  inflow
from  issuance  less maturities of debentures was approximately  $8.8  million
less  a  $3.9  million decrease in credited interest held.  Additionally,  the
Company  had a net cash outflow of approximately $.6 million as redemption  of
capital  stock  exceeded  the  sale of preferred  stock  and  reinvestment  of
preferred stock dividends during the nine months ended June 30, 1998.   During
the  nine  month period ended June 30, 1998, the Company increased its  short-
term borrowings by $34.0 million to an approximate outstanding amount of $36.8
million.   At  June  30, 1998, the Company had a total of  $266.1  million  in
unused credit lines available.

       Total assets increased by $43.2 million to $1,155.6 million at June 30,
1998  from  $1,112.4  million at September 30, 1997.   During  the  nine-month
period ended June 30, 1998, the Company primarily used existing cash and  cash
flow   from  short-term  borrowings  to  increase  its  receivable  investment
portfolio  and to purchase a new home office headquarters.  At June 30,  1998,
the  Company had net unrealized losses on securities available-for-sale in the
amount  of  $657,000  as  compared to net unrealized  losses  of  $267,000  at
September 30, 1997.  Net unrealized losses on securities available-for-sale is
presented as a separate component of stockholders' equity.


Results of Operations:

       The Company recorded net income before preferred dividends for the nine
months  ended June 30, 1998 of  $10.7 million compared to $5.8 million in  the
prior year's period.  Comparing the current year's nine month period with  the
prior  year's  similar period, increases in gains on the sale of  receivables,
increased  gains  on investments, increased gains on sale of real  estate,  an
increase  in the net interest spread, an increase in other fees and commission
revenues and an increase in deferred acquisition costs (costs capitalized  net
of amortization) associated with insurance products were only partially offset
by  an increase in the provision for losses on real estate assets, an increase
in  salaries,  commissions and benefits, and an increase  in  other  operating
expenses along with an increase in the related provision for income taxes.

       For  the nine-month period ended June 30, 1998, the Company reported  a
positive  spread  on  its interest sensitive assets and liabilities  of  $21.1
million as compared to $20.6 million in the prior year's period.  The increase
was primarily the result of an increase in the receivable portfolio funded  by
increases  in  short-term  borrowings.  Currently,  it  is  the  strategy   of
management   to   finance  receivable  portfolio  increases  with   short-term
borrowings  in anticipation of its next receivable securitization  sale.   The
Company  completed its most recent receivable securitization  in  April  1998.
The  Company currently anticipates that its next securitization of real estate
contracts and mortgage receivables will occur in approximately October,  1998.
Currently, the Company also anticipates securitizing approximately $23 million
of  structured  settlements  in  August  1998.   While  there  has  been  some
contraction  in  portfolio investment earnings rates  in  the  current  year's
period, the Company has also experienced reduced renewal rates on some of  its
life  and  annuity  policies  and has used lower interest  costing  short-term
borrowings  resulting  in the improved net interest  spread.   Currently,  the
Company continues to control life and annuity policy surrenders by maintaining
current  market  credited rates.  Normally, the Company's investment  earnings
rates  are  not as sensitive to market conditions as is its life  and  annuity
policy rates and thus a sustained rise in interest rates could have a negative
impact  on its net interest spread as its liabilities reprice faster than  its
assets.

       During  the  nine months ended June 30, 1998, the Company realized  net
gains on investments of $6.7 million compared to net losses of $740,000 in the
prior year's period.  The current period gain includes both gains on sales  of
investments  and mark-to-market gains, as lower interest rates  have  improved
the  valuation of the Company's trading securities.  The prior year  loss  was
primarily  the result of a short sale of U.S. Treasury securities.  The  short
sale  was  used  by  the  Company  as  an economic  hedge  of  its  receivable
securitization in November 1996.  The $2.5 million loss on the short sale  was
partially  offset  by  gains on sales of investment securities  and  gains  on
trading  securities.  Additionally, in the current year's period, the  Company
realized gains of $12.0 million from the sale of approximately $200.3  million
of receivable investments, while in the prior year, the Company realized gains
of  approximately $11.6 million from the sale of approximately $173.2  million
of  receivable  investments.  The Company realized gains of  $1.5  million  on
sales of $23.2 million of real estate in the current year's period compared to
losses  of $743,000 on sales of $24.0 million in the prior year.  It has  been
the  policy of management to actively sell its real estate in order to  return
the investment to an earning asset.  In addition to returning these assets  to
earning  status, the Company has been able to reduce other operating  expenses
associated  with  its real estate, such as insurance, taxes,  maintenance  and
amenities.

       In the nine months ended June 30, 1998, the Company recorded other fees
and  commission  revenues of $5.3 million as compared to $3.6 million  in  the
prior  year.  The increase in the current year is primarily the result of  net
servicing  revenues related to the retained servicing rights  from  receivable
securitizations.

       In the nine months ended June 30, 1998, the Company made provisions for
losses on receivables and real estate assets of approximately $4.2 million  as
compared  to $3.6 million in the prior year's period.  The increased provision
is  primarily the result of increases in both the receivable portfolio and the
real  estate  asset portfolio.  As an offset to the portfolio  increases,  the
Company has experienced improved receivable delinquency rates and a stable  to
improving real estate market.  The principal amount of receivables as to which
payments were in arrears more than three months was $31.6 million at June  30,
1998  compared to $34.6 million at March 31, 1998, $36.4 million  at  December
31, 1997 and $36.0 million at September 30, 1997.

      In the nine months ended June 30, 1998, the Company incurred expenses of
$20.4  million  for  salaries, commissions and benefits as compared  to  $15.8
million in the prior year's period.  The increase included additional salaries
and  benefits  of $3.6 million while commissions increased $1.1 million.   The
salary  and benefit increase resulted from the following: 1) a general  salary
increase throughout the Company; 2) additional employees to perform additional
servicing  of  securitized  receivable pools; and  3)  the  expansion  of  the
Company's direct and correspondent lending business.  The commission  increase
was  primarily the result of the increased acquisition of receivables and  the
increased sales of life and annuity products.

       In  comparing the three months ended June 30, 1998 with the prior  year
similar period, the Company recorded net income before preferred dividends  of
$7.0  million on revenues of $45.9 million as compared to $820,000 on revenues
of $36.7 million.  The increase in net income for the comparative three months
was   primarily  the  result  of  improvements  from  (1)  larger   receivable
securitizations resulting in increased gains from the sale of receivables, (2)
increased  gains on sale of real estate, (3) an increase in the  net  interest
spread, (4) an increase in other fees and commissions, and (5) an increase  in
deferred  acquisition costs (costs capitalized net of amortization) associated
with insurance products which were partially offset by (1) an increase in  the
provision for loss on real estate assets, (2) a decrease in investment  gains,
and  (3)  increases  in salaries, commissions, benefits  and  other  operating
expenses along with an increase in the related provision for income tax.

       For  the three months ended June 30, 1998, the net interest spread  was
$7.4  million  compared to $7.1 million in the prior year.  The  increase  was
primarily the result of the increase in the receivable portfolio being  funded
with  short-term  borrowings.   The Company  currently  has  $300  million  in
available credit facilities, of which approximately $36.8 million was used  at
June  30,  1998.   These facilities provide a lower cost of funds  to  finance
increases in the receivable portfolio.

       During the three months ended June 30, 1998, the Company recorded gains
on  the sale or valuation of investments of $251,000 and $11.7 million on  the
sale  of  receivables.  In the prior year, the Company recorded gains  on  the
sale  of  investments of $1.4 million and $39,000 on the sale of  receivables.
The  current year's period increase was primarily the result of the receivable
securitization  completed in April 1998 which contributed approximately  $10.5
million in pre-tax gains on sale of receivables.

       During  the  three  months ended June 30, 1998, the  Company  generated
approximately $1.8 million of fee revenues as compared to $1.2 million in  the
prior year.  The increase is primarily service fee income associated with  the
retained servicing rights from the receivable securitizations.

       The  Company  realized gains of $709,000 on real estate sales  of  $8.2
million  in  the  current year's three-month period as compared  to  gains  of
$248,000 on sales of $9.8 million in the prior year's comparable period.   The
Company  continues  to actively sell its real estate in order  to  return  the
investment  to an earning asset and reduce operating expenses associated  with
the holding of real estate.

       In conjunction with the Company's evaluation of its real estate assets,
the  Company made provisions for losses on these assets of $1.5 million in the
current  year's three-month period as compared to $1.4 million  in  the  prior
year.

       In the three months ended June 30, 1998, the Company incurred costs  of
$9.6  million for salaries, commissions, benefits and other operating expenses
as compared to $6.1 million in the prior year.  The increase was primarily the
result  of  increased  costs associated with additional  employees  needed  to
expand  servicing  of  the  Company's  receivables  and  real  estate  assets,
including  the  retained  servicing  of securitized  receivables,  along  with
increased  costs  associated  with the startup of  the  Company's  direct  and
correspondent  lending  business.  As an offset  to  the  increased  operating
expenses  during the period, the Company's capitalization of insurance  policy
acquisition  costs  over related amortization has increased  by  approximately
$1.3  million.   The  increase in capitalized costs is  related  to  increased
annuity sales production.

 .
New Accounting Rules:

       In  June  1997, the Financial Accounting Standards Board (FASB)  issued
Statement  of  Financial  Accounting Standards No.130, "Comprehensive  Income"
(SFAS No.130).  SFAS No.130 becomes effective for fiscal years beginning after
December   31,  1997  and  requires  reclassifications  of  earlier  financial
statements  for  comparative purposes.  SFAS No.130 requires that  amounts  of
certain  items, including foreign currency translation adjustments  and  gains
and  losses on certain securities, be included in comprehensive income in  the
financial statements.  SFAS No.130 does not require a specific format for  the
financial  statement  in  which comprehensive income  is  reported,  but  does
require that an amount representing total comprehensive income be reported  in
that  statement.  Management has not yet determined the effects of SFAS No.130
on the consolidated financial statements.

       Also,  in  June 1997, the FASB issued Statement of Financial Accounting
Standards  No.131, "Disclosures about Segments for an Enterprise  and  Related
Information"  (SFAS  No.131).   This Statement  will  change  the  way  public
companies report information about segments of their business in their  annual
financial  statements and requires them to report selected segment information
in  their quarterly reports issued to shareholders.  It also requires  entity-
wide  disclosures  about  the products and services an  entity  provides,  the
material  countries  in which it holds assets and reports  revenues,  and  its
major  customers.  The Statement is effective for fiscal years beginning after
December 15, 1997.  Management has not yet determined the effect, if  any,  of
SFAS No.131 on the consolidated financial statements.

       In  June  1998,  the  FASB  issued Statement  of  Financial  Accounting
Standards   No.133,  "Accounting  for  Derivative  Instruments   and   Hedging
Activities"  (SFAS No.133).  SFAS No.133 establishes accounting and  reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as derivatives) and for
hedging  activities.  It requires that an entity recognize all derivatives  as
either  assets  of  liabilities in the statement  of  financial  position  and
measure  those  instruments at fair value.  SFAS No.133 is effective  for  all
fiscal  quarters  of  fiscal years beginning after  June  15,  1999,  however,
earlier  application is encouraged as of the beginning of any fiscal  quarter.
Management  has  not  yet  determined  the  effect  of  SFAS  No.133  on   the
consolidated financial statements.

           Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

      Not currently applicable.  Pursuant to General Instructions to Item 305,
disclosures  are applicable to the registrant in filings with  the  commission
that include financial statements for fiscal years ended after June 15, 1998.



PART II - OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

      There are no material legal proceedings or actions pending or threatened
against  Metropolitan Mortgage & Securities Co., Inc. or to which its property
is subject.

ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS

      None.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

      None.

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

       No  matters  were  submitted to a vote of security holders  during  the
reporting period.

ITEM 5.     OTHER INFORMATION

       During  June,  1998  Metropolitan  moved  its  headquarters  facilities
approximately  three  blocks  to 601 W. 1st  Avenue,  Spokane,  WA.   The  new
facility  is  approximately 200,000 square feet, of  which  42%  is  currently
leased to other tenants.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

      (a)   Exhibits

                3(a).    Restated   Articles  of  Incorporation,  as  amended,
                         dated   November   30,   1987   (Exhibit   3(a)    to
                         Metropolitan's Annual Report on Form 10-K for  fiscal
                         1987).

                3(b).    Amendment   to   Articles  of   Incorporation   dated
                         November  5,  1991 (Exhibit 3(c) to Registration  No.
                         33-40220).

                3(c).    Amendment   to   Articles  of   Incorporation   dated
                         September  20,  1992 (Exhibit 3(c) to  Metropolitan's
                         Annual Report on Form 10-K for fiscal 1992).

                3(d).    Bylaws  as amended to October 31, 1988 (Exhibit  3(b)
                         to  Metropolitan's Annual Report  on  Form  10-K  for
                         fiscal 1988).

                4(a).    Indenture,   dated  as  of  July  6,  1979,   between
                         Metropolitan   and   Seattle-First   National   Bank,
                         Trustee  (Exhibit 3 to Metropolitan's  Annual  Report
                         on Form 10-K for fiscal 1979).

                4(b).    First Supplemental Indenture, dated as of October  3,
                         1980,    between   Metropolitan   and   Seattle-First
                         National  Bank,  Trustee (Exhibit 4 to Metropolitan's
                         Annual Report on Form 10-K for fiscal 1980).

                4(c).    Second  Supplemental Indenture, dated as of  November
                         12,  1984,  between  Metropolitan  and  Seattle-First
                         National  Bank, Trustee (Exhibit 4(d) to Registration
                         No. 2-95146).

                4(d).    Third  Supplemental Indenture, dated as  of  December
                         31,   1997  between  Metropolitan  and  First   Trust
                         (Exhibit 4(d)) to Form 10-K filed January 8, 1998).

                4(e).    Amended   Statement  of  Rights,   Designations   and
                         Preferences of Variable Rate Preferred Stock,  Series
                         C (Exhibit 4(g) to Registration No. 33-2699).

                4(f).    Statement of Rights, Designations and Preferences  of
                         Variable  Rate  Preferred Stock,  Series  D  (Exhibit
                         4(a) to Registration No. 33-25702).

                4(g).    Statement of Rights, Designations and Preferences  of
                         Variable  Rate Preferred Stock, Series  E-1  (Exhibit
                         4(a) to Registration No. 33-19238).

                4(h).    Amended   Statement  of  Rights,   Designations   and
                         Preferences of Variable Rate Preferred Stock,  Series
                         E-2 (Exhibit 4(a) to Registration No. 33-25702).

                4(i).    Statement of Rights, Designations and Preferences  of
                         Variable  Rate Preferred Stock, Series  E-3  (Exhibit
                         4(a) to Registration No. 33-32586).

                4(j).    Statement of Rights, Designations and Preferences  of
                         Variable Rate Cumulative Preferred Stock, Series  E-4
                         (Exhibit 4(h) to Registration No. 33-40221).

                4(k).    Form   of  Statement  of  Rights,  Designations   and
                         Preferences of Variable Rate Preferred Stock,  Series
                         E-5 (Exhibit 4(i) to Registration No. 33-57396).

                4(l).    Statement of Rights, Designations and Preferences  of
                         Variable Rate Cumulative Preferred Stock, Series  E-6
                         (Exhibit 4(1) to Registration No. 333-19755).

                4(m).    Statement of Rights, Designations and Preferences  of
                         Variable Rate Cumulative Preferred Stock, Series  E-7
                         (Exhibit 4(d) to Amendment 1 to Registration No. 333-
                         19755).


                10(a).   Employment  Agreement  between Metropolitan  Mortgage
                         and   Securities   Co.,  Inc.  and  Bruce   Blohowiak
                         (Exhibit 10(a) to Form 10-K filed January 8, 1998).

                10(b).   Employment  Agreement  between Metropolitan  Mortgage
                         and  Securities Co., Inc. and Michael  Kirk  (Exhibit
                         10(b) to Form 10-K filed January 8, 1998).

                10(c).   Employment  Agreement  between Metropolitan  Mortgage
                         and  Securities  Co., Inc. and Jon McCreary  (Exhibit
                         10(c) to Form 10-K filed January 8, 1998).

                *10(d).  Employment Agreement between Metropolitan Mortgage  &
                         Securities Co., Inc. and Cameron E. Williams.

                *10(e).  Reinsurance  Agreement between  Western  United  Life
                         Assurance  Company  and Old Standard  Life  Insurance
                         Company.
                
                *10(f).  Master   Repurchase  Agreement  between  Metropolitan
                         Mortgage  &  Securities  Co.,  Inc.  and  NationsBanc
                         Mortgage Capital Corporation.
                

                11.      Statement   indicating   Computation   of   Per-Share
                         Earnings   (see   Condensed  Consolidated   Financial
                         Statements).

                *27.     Financial Data Schedule

                *Filed herewith.

      (b)   Reports on Form 8-K
      
            On  May 13, 1998 the Company filed a report on Form 8-K disclosing
            the following:
            
            On April 29, 1998, Metropolitan Mortgage & Securities Co., Inc.
            ("Metropolitan") and its wholly owned subsidiary, Western United
            Life Assurance Company ("Western"), sold approximately $164.3
            million in first lien mortgage loans secured by, and contracts for
            the sale of real property relating to, residential, multi-family
            and commercial properties (the "Mortgage Loans").  Such sale was
            made in connection with the issuance of approximately $186.8
            million of mortgage pass-through certificates (the
            "Certificates"), of which $182.1 million were sold in a public
            offering. In connection with the sale, Metropolitan received cash
            and approximately $4.7 million in Certificates and a residual
            certificate resulting in an after tax profit of approximately $7.0
            million.
            
            Old Standard Life Insurance Company, ("Old Standard") and Arizona
            Life Insurance Company ("Arizona Life") also participated in the
            offering by selling approximately $22.5 million of Mortgage Loans.
            Old Standard and Arizona Life are under common control with
            Metropolitan.

            The  Mortgage Loans were sold to Metropolitan Asset Funding,  Inc.
            II  ("MAFI")  which in turn sold the Mortgage Loans to  the  trust
            created  pursuant  to  the  Pooling and Servicing  Agreement  (the
            "Agreement"), dated as of April 1, 1998, among MAFI, as depositor,
            Metropolitan, Western, Old Standard and Arizona Life,  as  sellers
            of   the   Mortgage   Loans,  Metwest  Mortgage   Services,   Inc.
            ("Metwest"), as the master servicer, and The Bank of New York,  as
            trustee.   Pursuant  to  the Agreement, Metwest,  a  wholly  owned
            subsidiary of Metropolitan, will continue to service the  Mortgage
            Loans for which it will receive a fee.
SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant  has  duly  caused this report to be signed on  this  12th  day  of
August, 1998 on its behalf by the undersigned, thereunto duly authorized.

            METROPOLITAN MORTGAGE & SECURITIES CO., INC.

            /s/ BRUCE J. BLOHOWIAK

            ______________________________________________
            Bruce J. Blohowiak
            Executive Vice President, Chief Operating Officer and
              Director


            /s/ CAMERON E. WILLIAMS

            ______________________________________________
            Cameron E. Williams
            Chief Financial Officer
            Principal Accounting Officer
            Principal Financial Officer