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 December 31, 1997

                              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 ____________

           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.)

       929 WEST SPRAGUE AVENUE, SPOKANE, WASHINGTON   99201
         (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:  N/A.

      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 January 31, 1998.
      Common "B":   0 shares at January 31, 1998.

                 METROPOLITAN MORTGAGE & SECURITIES CO., INC.
                                     INDEX

                        PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

      Condensed Consolidated Balance Sheets
      As of December 31, 1997 and September 30, 1997 (unaudited)

      Condensed Consolidated Statements of Income
      Three Months Ended December 31, 1997 and 1996 (unaudited)

      Condensed Consolidated Statements of Cash Flows
      Three Months Ended December 31, 1997 and 1996 (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>
                                           December 31,     September 30,
                                               1997              1997
                                          ______________    ______________
<S>                                       <C>               <C>
ASSETS                                                      
  Cash and Cash Equivalents               $   33,350,026    $   58,924,958
  Investments                                               
    Trading Securities, at market             42,735,241        34,477,091
    Available-for-Sale Securities, at                       
      market                                  33,396,028        36,621,351
    Held-to-Maturity Securities, at                         
      amortized cost (market value                          
      $110,919,913 and $112,711,688)         110,898,282       113,730,535
                                                            
  Accrued Interest on Investments         _____2,204,814    _____1,516,739
                                                            
      TOTAL CASH AND INVESTMENTS          ___222,584,391    __ 245,270,674
                                                            
  Real Estate Contracts and Mortgage                        
    Notes and Other Receivables              739,145,287       677,398,455
  Real Estate for Sale and Development,                     
    Including Foreclosed Real Estate          83,314,570        81,802,266
                                          ______________    ______________
  Total Receivables and Real Estate                         
    Assets                                   822,459,857       759,200,721
  Less Allowance for Losses                  (12,505,834)      (12,327,098)
                                          ______________    ______________
      NET RECEIVABLES AND REAL ESTATE                       
         ASSETS                              809,954,023       746,873,623
                                          ______________    ______________
  Deferred Acquisition Costs, Net             72,279,394        72,503,095
  Land, Building and Equipment - net                        
    of accumulated depreciation               21,194,199         9,408,578
  Other Assets, net of allowance              33,323,966        38,333,490
                                          ______________    ______________
      TOTAL ASSETS                        $1,159,335,973    $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>
                                           December 31,     September 30,
                                               1997              1997
                                          ______________    ______________
<S>                                       <C>               <C>
LIABILITIES                                                 
  Life Insurance and Annuity Reserves     $  820,895,573    $  825,368,988
  Debenture Bonds                            185,905,095       185,213,688
  Other Debt Payable                          58,359,507         4,917,779
  Accounts Payable and Accrued Expenses       15,213,628        19,114,354
  Deferred Income Taxes                       21,917,235        22,029,778
  Minority Interest in Consolidated                         
    Subsidiaries                               1,643,079         1,632,139
                                          ______________    ______________
    TOTAL LIABILITIES                     1,103,934,117     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 2,085,904 Shares and                             
    2,095,414 Shares (Liquidation                           
    Preference $51,028,857 and                              
    $50,729,084, respectively)                20,859,042        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                  18,993,174        18,596,231
  Retained Earnings                           15,786,247        14,536,114
  Net Unrealized Gains (Losses) on                          
    Investments, Net of Income Taxes            (530,024)         (267,169)
                                          ______________    ______________
    TOTAL STOCKHOLDERS' EQUITY                55,401,856        54,112,734
                                          ______________    ______________
    TOTAL LIABILITIES AND STOCKHOLDERS'                     
      EQUITY                              $1,159,335,973    $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
                                                     December 31,
                                                 1997             1996
                                             ____________     ____________
<S>                                          <C>              <C>
REVENUES                                                      
  Insurance Premiums Earned                  $    700,000     $    750,000
  Interest and Earned Discounts                22,223,453       24,105,516
  Real Estate Sales                             9,023,915        6,846,700
  Fees, Commissions, Service and Other                        
    Income                                      1,780,820        1,208,087
  Investment Gains (Losses), Net                4,153,476       (2,160,155)
  Realized Gains on Sales of Receivables           98,390        9,834,959
                                             ____________     ____________
    TOTAL REVENUES                             37,980,054       40,585,107
                                             ____________     ____________
EXPENSES                                                      
  Insurance Policy and Annuity Benefits        12,265,107       13,055,411
  Interest Expense                              4,064,642        5,835,322
  Cost of Real Estate Sold                      8,457,734        7,440,009
  Provision for Losses on Real Estate                         
    Assets                                      1,766,034          586,221
  Salaries and Employee Benefits                4,083,797        3,032,934
  Commissions to Agents                         1,958,130        2,158,770
  Other Operating and Underwriting                            
    Expenses                                    1,548,582        2,299,904
    Decrease in Deferred Acquisition Costs        409,102          237,955
                                             ____________     ____________
    TOTAL EXPENSES                             34,553,128       34,646,526
                                             ____________     ____________
Income Before Income Taxes and                                
  Minority Interest                             3,426,926        5,938,581
Provision for Income Taxes                     (1,158,582)      (2,022,167)
                                             ____________     ____________
Income Before Minority Interest                 2,268,344        3,916,414
Income of Consolidated Subsidiaries                           
  Allocated to Minority Stockholders              (29,940)         (35,560)
                                             ____________     ____________
Net Income                                      2,238,404        3,880,854
Preferred Stock Dividends                        (988,271)      (1,023,365)
                                             ____________     ____________
INCOME APPLICABLE TO COMMON STOCKHOLDERS     $  1,250,133     $  2,857,489
                                             ============     ============
Basic and Diluted Income per Share                            
Applicable to Common Stockholders            $      9,616     $     21,981
                                             ============     ============
Weighted Average Number of shares of Common                   
Stock Outstanding                                     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>
                                          Three Months Ended December 31,
                                               1997              1996
                                          ______________    ______________
<S>                                       <C>               <C>
NET CASH PROVIDED BY (USED IN)                              
  OPERATING ACTIVITIES                    $    5,421,022    $ (116,924,803)
                                          ______________    ______________
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                         33,963,548        29,383,414
  Proceeds From Real Estate Sales              5,833,371           709,061
  Proceeds From Investment Maturities          4,213,283         6,596,423
  Proceeds from Sale of Available-for-                      
    Sale Securities                            1,770,168
  Purchase of Available-for-Sale                            
    Securities                                                 (23,684,536)
  Proceeds From Sale of Real Estate                         
    Contracts and Mortgage Notes and                        
    Other Receivables                         11,407,020       119,209,316
  Acquisition of Real Estate Contracts                      
    and Mortgage Notes and Other                            
    Receivables                             (109,894,173)      (79,616,347)
  Additions to Real Estate Held               (4,070,583)       (6,351,906)
  Capital Expenditures                       (12,302,770)         (198,228)
                                          ______________    ______________
    NET CASH PROVIDED BY (USED IN)                          
      INVESTING ACTIVITIES                   (69,080,136)      178,699,531
                                          ______________    ______________
CASH FLOWS FROM FINANCING ACTIVITIES                        
  Net Change Short Term Borrowings From                     
    Brokers and Banks                         53,161,607       (30,328,500)
  Receipts From Life and Annuity                            
Products                                      14,801,881        20,337,089
  Withdrawals on Life and Annuity                           
    Products                                 (31,283,358)      (25,369,936)
  Ceding of Life and Annuity Products to                    
    Reinsurers, Net                              678,868    
  Repayment to Banks and Others                 (201,627)          (55,545)
  Issuance of Debenture Bonds                 13,685,931         4,140,969
  Issuance of Preferred Stock                    541,239           549,743
  Repayment of Debenture Bonds               (12,072,693)       (2,096,235)
  Preferred Stock Dividends                     (988,271)       (1,023,366)
  Redemption of Capital Stock                   (239,395)             (300)
                                          ______________    ______________
NET CASH  PROVIDED BY (USED IN) FINANCING                   
ACTIVITIES                                    38,084,182       (33,846,080)
                                          ______________    ______________
Net Decrease in Cash and Cash Equivalents    (25,574,932)       27,928,648
Cash and Cash Equivalents at Beginning                      
  of Period                                   58,924,958        35,226,746
                                          ______________    ______________
CASH AND CASH EQUIVALENTS AT END                            
  OF PERIOD                               $   33,350,026    $   63,155,394
                                          ==============    ==============
</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 December 31, 1997,
      and the results of operations for the three months ended December 31,
      1997 and 1996 and the cash flows for the three months ended December 31,
      1997 and 1996.  The results of operations for the three month periods
      ended December 31, 1997 and 1996 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 $36,350,000 at December 31, 1997 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.    In November 1996, 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.  Approximately $126.7 million of receivables,
      with $115.5 million provided by Metropolitan and WULA, were sold in a
      securitization transaction with proceeds, after costs, of approximately
      $121.1 million, of which $110.4 million was allocated to Metropolitan
      and WULA.  With an amortized carrying value of approximately $101.5
      million in the receivables sold in the securitization, Metropolitan and
      WULA recorded approximately $8.9 million in pre-tax gains from their
      portion of the sale.  Metropolitan Asset Funding, Inc. sold
      approximately $113.4 million in varying classes of mortgage pass-through
      certificates.  In addition to the certificates sold to the public,
      approximately $13.3 million in subordinate class certificates and
      residual class certificates were returned to the various co-sellers of
      the receivables included in the securitization.  Metropolitan and WULA
      received approximately $101.6 million, after costs, from the
      securitization and received approximately $12.0 million (estimated fair
      value) in subordinate class and residual class certificates.  As an
      economic hedge for this receivable securitization sale, the Company had
      previously sold short approximately $128 million of 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 an approximate $6.4 million in pre-tax gains on the
      securitization sale.  The Company has retained residual interests in its
      prior securitizations.  At December 31, 1997, the Company held
      approximately $21 Million in residuals at their estimated fair market
      value.  The Company currently values its residuals at an approximate 12%
      return after losses with an approximate 15% 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 fact 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.

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.
      Purchase price was approximately $11.7 Million with remodel costs
      estimated at an additional $5 Million.  Approximately 50% of the
      building is currently leased by other tenants.  The Company anticipates
      moving its headquarters to this building in late Spring, 1998.

8.    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

      These discussions may contain 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.
(Metropolitan 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.   Approximately $126.7 million of receivables,  with  $115.5  million
provided  by  Metropolitan and WULA, were sold in a securitization transaction
with  proceeds,  after  costs, of approximately $121.1 million,  which  $110.4
million  was  allocated to Metropolitan and WULA.  With an amortized  carrying
value  of  approximately  $101.5  million  in  the  receivables  sold  in  the
securitization, Metropolitan and WULA recorded approximately $8.9  million  in
pre-tax  gains from their portion of the sale.  As an economic hedge for  this
receivable  securitization  sale,  the  Company  had  previously  sold   short
approximately $128 million of 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 an approximate $6.4 million in pre-tax  gains
on the securitization sale.

      In  September 1997, Metropolitan and WULA again participated as  two  of
the  four  co-sellers in a receivable securitization sponsored by Metropolitan
Asset  Funding, Inc.  Approximately $152.1 million of receivables, with $143.8
million  provided  by  Metropolitan and WULA, were sold with  proceeds,  after
costs, of approximately $151.2 million, which $143.0 million was allocated  to
Metropolitan  and  WULA.   With an amortized carrying value  of  approximately
$135.8 million in the receivables sold in the securitization, Metropolitan and
WULA  recorded approximately $7.2 million in pre-tax gains from their  portion
of  the  sale.   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.
      
      WULA  entered  into  a  reinsurance agreement  with  Old  Standard  Life
Insurance Company (OSL)(a company affiliated through common control),  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
suspended  and is expected to be reinstated in the first quarter  of  calendar
1998.

       On  January  31, 1995, the Company concluded an agreement  with  Summit
Securities,  Inc.  (Summit)  (a company affiliated  through  common  control),
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 December 31, 1997, the Company has received
approximately $250,000 in contingent consideration.


Financial Condition and Liquidity:

       As  of  December 31, 1997, the Company had cash or cash equivalents  of
$33.4   million   and   liquid  investments  (trading  or   available-for-sale
securities)  of  $76.1  million compared to $58.9 million  in  cash  and  cash
equivalents  and  $71.1 million in liquid investments at September  30,  1997.
Management  believes  that  cash  and cash  equivalents  and  other  liquidity
provided  by  investments  and  available lines  of  credit,  along  with  the
Company's  ability to securitize real estate collateralized  receivables,  are
adequate  to meet planned asset additions, debt retirements or other  business
operational  requirements during the next twelve  months.     Total  cash  and
investments at December 31, 1997, including held-to-maturity securities,  were
$222.6  million as compared to $245.3 million at September 30,  1997.   During
the  three month period ended December 31, 1997, operating activities provided
funds  of  approximately $5.4 million.  Funds used in investing activities  of
$69.1  million  were primarily the result of $109.9 million of new  receivable
acquisitions,  plus  additions to real estate held of  $4.1  million  and  new
capital  expenditures of $12.3 million, which included the purchase of  a  new
home office headquarters building, exceeding the sale proceeds and collections
of receivables of $45.4 million, proceeds from the sale of real estate of $5.8
million  and  sales  and  maturities of investments of  $6.0  million.   Funds
provided by financing activities of $38.1 million were primarily the result of
increases  in short-term borrowings of $53.2 million, and a $1.6  million  net
cash  inflow  from debentures sales less maturities, exceeding  the  net  cash
outflow  of  $15.8  million  in  life and annuity  products,  and  payment  of
preferred stock dividends of $1.0 million.

       The  receivable portfolio totaled $739.1 million at December  31,  1997
compared  to  $677.4 million at September 30, 1997.  During the  three  months
ended  December 31, 1997, the increase primarily resulted from the acquisition
of  receivables  totaling $109.9 million plus an additional  $3.2  million  in
loans  to  facilitate  the  sale  of real estate  being  partially  offset  by
principal collections on receivables of $34.0 million, reduction for the  cost
basis  of  receivables sold of $11.3 million and reductions due to  foreclosed
receivables of approximately $7.2 million.

       Real estate held for sale and development increased to $83.3 million at
December  31,  1997 from $81.8 million at September 30, 1997.  For  the  three
months  ended  December  31, 1997, real estate additions  of   $11.3  million,
including $7.2 million of foreclosed receivables, were offset by costs of real
estate  sold  of $8.5 million, depreciation of $.3 million and charge-offs  to
the allowance for losses of $1.0 million.

      Life insurance and annuity policy reserves decreased $4.5 million during
the  three months ended December 31, 1997 to approximately $820.9 million from
$825.4  million  at  September 30, 1997.  This  decrease  was  the  result  of
withdrawals  in  the  amount of $31.3 million exceeding credited  earnings  of
$11.3  million, receipts from sales of new life and annuity products of  $14.8
million  and  $.7  million  in  net reinsurance ceded.   Net  debenture  bonds
outstanding  increased by $.7 million to $185.9 million at December  31,  1997
from $185.2 million at September 30, 1997.  Net cash inflow from issuance less
maturities of debentures was approximately $1.6 million less an additional $.9
million  decrease in credited interest held.  Additionally,  the  Company  had
cash  flow,  net  of  redemptions,  of  approximately  $.3  million  from  the
reinvestment  of  preferred  stock dividends during  the  three  months  ended
December 31, 1997.  During the three month period ended December 31, 1997, the
Company increased the portion of its other debt payable represented by  short-
term borrowings by $53.2 million to an approximate outstanding amount of $56.1
million  on  December  31, 1997, principally to fund its acquisition  of  real
estate contracts and mortgage notes receivable.

       Total assets increased by $46.9 million to $1,159.3 million at December
31,  1997 from $1,112.4 million at September 30, 1997.  During the three-month
period, the Company primarily used existing cash and cash flow from short-term
borrowings to increase its receivable investment portfolio and purchase a  new
home office headquarters.
At  December  31,  1997, the Company had net unrealized losses  on  securities
available-for-sale in the amount of $530,000 as compared to 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 three
months  ended  December 31, 1997 of $2,238,000 compared to $3,881,000  in  the
prior year's period.  Comparing the current year's three month period with the
prior  year's  similar period, a decrease in gains on the sale of receivables,
an  increase in the provision for losses on real estate assets, and  increased
salaries,  commissions and benefits were only partially offset by an  increase
in  the  net  interest spread, increased gains from the sale of  real  estate,
increased  gains  on  investments, an increase in other  fees  and  commission
revenues and a reduction in other operating expenses along with a reduction in
related provision for income taxes.

      For the three month period ended December 31, 1997, the Company reported
a  positive  spread on its interest sensitive assets and liabilities  of  $6.6
million  as compared to $6.0 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.  It has been the strategy of management to
finance   receivable  portfolio  increases  with  short-term   borrowings   in
anticipation  of  its  next receivable securitization  sale.   Currently,  the
Company  is planning its next securitization for April 1998.  While there  has
been  some  contraction  in the portfolio investments earning's  rate  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 short-term borrowings
with  a  lower  interest cost 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 three months ended December 31, 1997, the Company  realized
net  gains on investments of $4.2 million, including $3.0 million in  mark-to-
marks  gains on trading securities, compared to net losses of $2.2 million  in
the  prior  year's period.  The current period gain includes both sales  gains
and  mark-to-market gains as lower interest rates have improved the  valuation
of  the trading securities, which primarily consists of the Company's retained
interests in residual certificates associated with securitizations.  The prior
year's  period 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.  Additionally, in  the  prior
year's  period, the Company realized gains of $9.8 million from  the  sale  of
approximately $109.4 million of receivable investments, while in  the  current
year,  sales of approximately $11.3 million of receivable investments produced
realized gains of $98,000.  The Company realized gains of $566,000 on sales of
$9.0 million of real estate in the current year's period compared to losses of
$593,000  on sales of  $6.8 million in the prior year.  The increase  in  1997
was primarily the result of a $1.2 million increase in the sale of development
property  and a $1.0 million increase in sales of repossessed properties.   It
has  been the policy of management to actively market 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 three months ended December 31, 1997, the Company recorded other
fees  and  commission revenues of $1.8 million as compared to $1.2 million  in
the  prior year.  The increase in the current year is primarily the result  of
net servicing revenues related to the receivable securitizations.

      In the three months ended December 31, 1997, the Company made provisions
for losses on receivables and real estate assets of approximately $1.8 million
as  compared to $586,000 in the prior year's period.  The increased  provision
is  the result of the increase in the receivable portfolio and the real estate
asset portfolio.  The Company has experienced increased receivable delinquency
rates  when comparing the current year's period with the prior year's  period;
however,  a  stable to improving real estate market has offset the effects  of
the delinquency rate increases.
 .

New Accounting Rules:

       In  June  1997, the Financial Accounting Standards Board (FASB)  issued
SFAS  No.130,  "Comprehensive  Income" (SFAS  No.130).   SFAS  No.130  becomes
effective   in  1998  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,  if  any,  of
SFAS No.130 on the consolidated financial statements.

       Also,  in  June  1997, the FASB issued SFAS 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.


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

      There were no matters submitted to a vote of Security Holders during the
reporting period.

ITEM 5.     OTHER INFORMATION

      None.

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).   Reinsurance Agreement between Western United Life
                         Assurance Company and Old Standard Life Insurance
                         Company (Exhibit 10(d) to Form 10-K filed January 8,
                         1998).

                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 October 30, 1997 a Report on Form 8-K was filed reporting that
            on September 26, 1997 Metropolitan and WULA sold through a
            securitization approximately $143.75 Million in first lien
            mortgages.

                                  SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on this 23rd day of
February, 1998 on its behalf by the undersigned, thereunto duly authorized.

            METROPOLITAN MORTGAGE & SECURITIES CO., INC.

            /s/ C. PAUL SANDIFUR, JR.

            ______________________________________________
            C. Paul Sandifur, Jr.
            Chairman, President, Chief Executive Officer


            /s/ BRUCE J. BLOHOWIAK

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


            /s/ STEVEN CROOKS

            ______________________________________________
            Steven Crooks
            Vice President, Principal Accounting Officer