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, 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 ____________

           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:  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, 1999.
      Common "B":   0 shares at January 31, 1999.

                 METROPOLITAN MORTGAGE & SECURITIES CO., INC.
                                     INDEX

                        PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

      Condensed Consolidated Balance Sheets
      As of December 31, 1998 and September 30, 1998 (unaudited)

      Condensed Consolidated Statements of Income
      Three Months Ended December 31, 1998 and 1997 (unaudited)
      
      Consolidated Statements of Comprehensive Income
      Three Months Ended December 31, 1998 and 1998 (unaudited)

      Condensed Consolidated Statements of Cash Flows
      Three Months Ended December 31, 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>
                                           December 31,     September 30,
                                               1998              1998
                                          ______________    ______________
<S>                                       <C>               <C>
ASSETS                                                      
  Cash and Cash Equivalents               $  106,889,738    $   31,733,362
  Investments                                               
    Trading Securities, at market             84,269,370        55,865,875
    Available-for-Sale Securities, at                       
      market                                  28,523,554        25,988,789
    Held-to-Maturity Securities, at                         
      amortized cost (market value                          
      $80,420,964 and $86,396,021)            77,992,645        83,036,525
                                                            
  Accrued Interest on Investments         _____1,808,868    _____1,646,527
                                                            
      TOTAL CASH AND INVESTMENTS          ___299,484,175    __ 198,271,078
                                                            
  Real Estate Contracts and Mortgage                        
    Notes and Other Receivables              604,649,375       692,822,886
  Real Estate Contract Securities,                          
    pledged to NationsBanc Mortgage                         
    Capital Corp.                             29,630,736       122,128,970
  Real Estate for Sale and Development,                     
    Including Foreclosed Real Estate          89,886,868        89,713,967
                                          ______________    ______________
  Total Receivables and Real Estate                         
    Assets                                   724,166,979       904,665,823
  Less Allowance for Losses                  (10,412,277)      (11,000,618)
                                          ______________    ______________
      NET RECEIVABLES AND REAL ESTATE                       
         ASSETS                              713,754,702       893,665,205
                                          ______________    ______________
  Deferred Acquisition Costs, Net             69,495,368        71,262,489
  Land, Building and Equipment - net                        
    of accumulated depreciation               26,076,708        25,889,102
  Mortgage Servicing Rights, Net               8,303,147         6,292,375
  Other Assets, net of allowance              35,555,327        31,284,532
                                          ______________    ______________
      TOTAL ASSETS                        $1,152,669,427    $1,226,664,781
                                          ==============    ==============
</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,
                                               1998              1998
                                          ______________    ______________
<S>                                       <C>               <C>
LIABILITIES                                                 
  Life Insurance and Annuity Reserves     $  796,679,167    $  800,848,929
  Debenture Bonds                            200,257,134       198,205,294
   Advances under line of credit                  28,495,434       118,342,972
  Other Debt Payable                          20,122,528         7,359,339
  Accounts Payable and Accrued Expenses       19,026,157        18,687,539
  Deferred Income Taxes                       23,904,346        22,725,052
  Minority Interest in Consolidated                         
    Subsidiaries                               1,728,147         1,738,887
                                          ______________    ______________
    TOTAL LIABILITIES                      1,090,212,913     1,167,908,012
                                          ______________    ______________
STOCKHOLDERS' EQUITY                                        
  Preferred Stock, Series A, B, C, D,                       
    E Cumulative with Variable Rate,                        
    $10 Par Value, Authorized 8,325,000,                    
    issued 1,935,141 Shares and                             
    1,945,407 Shares (Liquidation                           
    Preference $49,478,075 and                              
    $49,200,583, respectively)                19,351,412        19,454,071
  Class A Common Stock-Voting, $2,250                       
    par value, authorized 222 shares,                       
    issued 130 shares                            293,417           293,417
  Additional Paid-In Capital                  18,961,398        18,580,051
  Retained Earnings                           24,668,656        21,109,849
  Accumulated other comprehensive income        (818,369)         (680,619)
                                          ______________    ______________
    TOTAL STOCKHOLDERS' EQUITY                62,456,514        58,756,769
                                          ______________    ______________
    TOTAL LIABILITIES AND STOCKHOLDERS'                     
      EQUITY                              $1,152,669,427    $1,226,664,781
                                          ==============    ==============
</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,
                                                 1998             1997
                                             ____________     ____________
<S>                                          <C>              <C>
REVENUES                                                      
  Insurance Premiums Earned                  $    675,000     $    700,000
  Interest and Earned Discounts                22,546,428       22,223,453
  Real Estate Sales                             7,782,847        9,023,915
  Fees, Commissions, Service and Other                        
    Income                                      1,748,935        1,780,820
  Investment Gains (Losses), Net                 (302,957)       4,153,476
  Realized Gains on Sales of Receivables       11,645,525           98,390
                                             ____________     ____________
    TOTAL REVENUES                             44,095,778       37,980,054
                                             ____________     ____________
EXPENSES                                                      
  Insurance Policy and Annuity Benefits        10,951,812       12,265,107
  Interest Expense                              5,751,035        4,064,642
  Cost of Real Estate Sold                      7,520,227        8,457,734
  Provision for Losses on Real Estate                         
    Assets                                      2,157,402        1,766,034
  Salaries and Employee Benefits                5,270,422        4,083,797
  Commissions to Agents                         1,202,119        1,958,130
  Other Operating and Underwriting                            
    Expenses                                    2,646,962        1,548,582
Decrease in Deferred Acquisition Costs          1,745,899          409,102
                                             ____________     ____________
    TOTAL EXPENSES                             37,245,878       34,553,128
                                             ____________     ____________
Income Before Income Taxes and                                
  Minority Interest                             6,849,900        3,426,926
Provision for Income Taxes                     (2,398,141)      (1,158,582)
                                             ____________     ____________
Income Before Minority Interest                 4,451,759        2,268,344
(Income) Loss of Consolidated Subsidiaries                    
  Allocated to Minority Stockholders               10,740          (29,940)
                                             ____________     ____________
Net Income                                      4,462,499        2,238,404
Preferred Stock Dividends                        (825,448)        (988,271)
                                             ____________     ____________
INCOME APPLICABLE TO COMMON STOCKHOLDERS     $  3,637,051     $  1,250,133
                                             ============     ============
Basic and Diluted Income per Share                            
Applicable to Common Stockholders            $     27,977     $      9,616
                                             ============     ============
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
                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                  Three Months Ended
                                                     December 31,
                                                 1998             1997
                                             ____________     ____________
<S>                                          <C>              <C>
                                                              
  NET INCOME                                 $  4,462,499     $  2,238,404
                                                              
  OTHER COMPREHENSIVE LOSS, BEFORE INCOME                     
    TAXES:
Change in unrealized losses on                                
investments                                      (208,712)        (398,264)
Less deferred income tax benefit                  (70,962)        (135,409)
                                             ____________     ____________
  Net other comprehensive income (loss)          (137,750)        (262,855)
                                             ____________     ____________
  Comprehensive income                       $  4,324,749     $  1,975,549
                                             ============     ============
</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,
                                               1998              1997
                                          ______________    ______________
<S>                                       <C>               <C>
NET CASH PROVIDED BY (USED IN)                              
  OPERATING ACTIVITIES                    $  (24,641,818)   $    5,421,022
                                          ______________    ______________
CASH FLOWS FROM INVESTING ACTIVITIES                        
  Principal Payments on Real Estate                         
    Contracts and Mortgage Notes and                        
    Other Receivables                         30,842,794        33,963,548
  Proceeds From Real Estate Sales              6,418,501         5,833,371
  Proceeds From Investment Maturities         13,665,167         4,213,283
  Proceeds from Sale of Available-for-                      
    Sale Securities                            2,991,773         1,770,168
  Purchase of Available-for-Sale                            
    Securities                               (14,676,712)   
  Proceeds From Sale of Real Estate                         
    Contracts and Mortgage Notes and                        
    Other Receivables                        276,825,258        11,407,020
  Acquisition of Real Estate Contracts                      
    and Mortgage Notes and Other                            
    Receivables                             (121,133,043)     (109,894,173)
  Additions to Real Estate Held               (3,907,172)       (4,070,583)
  Capital Expenditures                          (365,174)      (12,302,770)
                                          ______________    ______________
    NET CASH PROVIDED BY (USED IN)                          
      INVESTING ACTIVITIES                   190,661,392       (69,080,136)
                                          ______________    ______________
CASH FLOWS FROM FINANCING ACTIVITIES                        
  Net Change Short Term Borrowings From                     
    Brokers and Banks                        (77,342,288)       53,161,607
  Receipts From Life and Annuity              41,747,096        14,801,881
Products
  Withdrawals on Life and Annuity                           
    Products                                 (25,551,057)      (31,283,358)
  Ceding of Life and Annuity Products to                    
    Reinsurers, Net                          (30,053,218)          678,868
  Repayment to Banks and Others                  (65,881)         (201,627)
  Issuance of Debenture Bonds                  8,065,511        13,685,931
  Issuance of Preferred Stock                    452,694           541,239
  Repayment of Debenture Bonds                (7,038,357)      (12,072,693)
  Cash Dividends                                (903,692)         (988,271)
  Redemption of Preferred Stock                 (174,006)         (239,395)
                                          ______________    ______________
NET CASH  PROVIDED BY (USED IN) FINANCING                   
ACTIVITIES                                   (90,863,198)       38,084,182
                                          ______________    ______________
Net Change in Cash and Cash Equivalents       75,156,376       (25,574,932)
Cash and Cash Equivalents at Beginning                      
  of Period                                   31,733,362        58,924,958
                                          ______________    ______________
CASH AND CASH EQUIVALENTS AT END                            
  OF PERIOD                               $  106,889,738    $   33,350,026
                                          ==============    ==============
</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, 1998,
      and the results of operations for the three months ended December 31,
      1998 and 1997 and the cash flows for the three months ended December 31,
      1998 and 1997.  The results of operations for the three month periods
      ended December 31, 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, 1998 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 1998
      Form 10-K.

2.    The principal amount of receivables as to which payments were in arrears
      more than three months was $35,600,000 at December 31, 1998 and
      $34,000,000 at September 30, 1998.

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, 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.  Approximately $194.4 million of receivables,
      with $182.4 million provided by the Company and WULA, were sold in the
      securitization.  The Company and WULA recorded approximately $8.8
      million in pre-tax gains from their portion of the sale.  In December,
      1998, the Company participated as one of the two co-sellers in a
      structured settlement securitization sponsored by Select Asset Funding
      Corporation, an affiliated company.  Approximately $37.7 million in
      structured settlements at amortized costs, with $21.8 million provided
      by the Company, were sold in the securitization.  The Company recorded
      approximately $1.4 million in pre-tax gains from its portion of the
      sale.

6.    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.

7.    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 First Quarter Transactions:

        In  November  1998,  Metropolitan  Mortgage  &  Securities  Co.,  Inc.
(Metropolitan or the Company) and its subsidiary Western United Life Assurance
Company  (WULA)  participated  as  two of  four  co-sellers  in  a  receivable
securitization sponsored by Metropolitan Asset Funding II, Inc, an  affiliated
company.   Approximately $194.4 million of receivables,  with  $182.4  million
provided  by  Metropolitan and WULA, were sold in a securitization transaction
with  proceeds,  after  costs, of approximately $199.3 million,  which  $187.0
million  was  allocated to Metropolitan and WULA.  With an amortized  carrying
value  of  approximately  $178.2  million  in  the  receivables  sold  in  the
securitization, Metropolitan and WULA recorded approximately $8.8  million  in
pre-tax gains from their portion of the sale.  The gain included approximately
$2.5  million  associated  with  the estimated  fair  value  of  the  mortgage
servicing rights retained on the pool.

      In December 1998, Metropolitan participated as one of the two co-sellers
in  a  structured settlement securitization sponsored by Select Asset  Funding
Corporation, an affiliated company.  Approximately $37.7 million of structured
settlements  at  amortized cost, with $21.8 million provided by  Metropolitan,
were sold with proceeds, after costs, of approximately $39.7 million, of which
$23.2 million was allocated to Metropolitan.  With an amortized carrying value
of  approximately  $21.8  million in the structured settlements  sold  in  the
securitization,  Metropolitan recorded approximately $1.4 million  in  pre-tax
gains from their portion of the sale.

Financial Condition and Liquidity:

       As  of  December 31, 1998, the Company had cash or cash equivalents  of
$106.9   million   and   liquid  investments  (trading  or  available-for-sale
securities)  of  $112.8 million compared to $31.7 million  in  cash  and  cash
equivalents  and  $81.9 million in liquid investments at September  30,  1998.
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, 1998, including held-to-maturity securities,  were
$299.5  million as compared to $198.3 million at September 30,  1998.   During
the  three  month period ended December 31, 1998, approximately $24.6  million
were used in operating activities.  The primary reason for the use of funds in
operating  activities was the acquisition of approximately  $34.0  million  of
trading  securities.  Funds provided by investing activities of $190.7 million
were  primarily the result of sale proceeds and collections of receivables  of
$307.7  million,  proceeds from the sale of real estate of  $6.4  million  and
sales  and  maturities of investments of $16.7 million, exceeding  the  $121.1
million of new receivable acquisitions, additions to real estate held of  $3.9
million and purchase of available-for-sale securities of $14.7 million.  Funds
used  in  financing activities of $90.9 million were primarily the  result  of
decreases  in  short-term borrowings of $77.3 million and the  net  ceding  of
annuity  products  to  reinsurers of $30.1 million, which  exceeded  the  $1.0
million  net cash inflow from debentures sales less maturities, the  net  cash
inflow  of  $16.2  million in life and annuity products, and payment  of  cash
dividends of $900,000.

       The  receivable portfolio totaled $634.3 million at December  31,  1998
compared  to  $815.0 million at September 30, 1998.  During the  three  months
ended  December 31, 1998, the decrease primarily resulted from  the  principal
collections on receivables of $30.8 million, reduction for the cost  basis  of
receivables   sold  of  $265.2  million  and  reductions  due  to   foreclosed
receivables  of  approximately  $6.3 million,  exceeding  the  acquisition  of
receivables totaling $121.1 million plus an additional $1.4 million  in  loans
to facilitate the sale of real estate.

       Real  estate held for sale and development increased slightly to  $89.9
million  at December 31, 1998 from $89.7 million at September 30,  1998.   For
the  three  months  ended December 31, 1998, real estate additions  of   $10.2
million,  including  $6.3 million of foreclosed receivables,  were  offset  by
costs  of  real estate sold of $7.5 million, depreciation of $1.5 million  and
charge-offs to the allowance for losses of $1.0 million.

      Life insurance and annuity policy reserves decreased $4.2 million during
the  three months ended December 31, 1998 to approximately $796.7 million from
$800.8  million  at  September 30, 1998.  This  decrease  was  the  result  of
withdrawals in the amount of $25.6 million and net reinsurance ceded of  $30.0
million exceeding credited earnings of $9.7 million and receipts from sales of
new  life  and  annuity  products  of  $41.7  million.   Net  debenture  bonds
outstanding increased by $2.1 million to $200.3 million at December  31,  1998
from $198.2 million at September 30, 1998.  Net cash inflow from issuance less
maturities  of  debentures was approximately $1.1 million plus  an  additional
$1.0  million increase 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, 1998.  During the three month period ended December 31, 1998, the
Company  had  a net decrease in short-term borrowings of $77.3 million  to  an
approximate  outstanding amount of $46.5 million on December  31,  1998.   The
reduction  was  primarily the result of the securitization of  receivables  of
which  portions  of  the  proceeds  were used  to  payoff  a  line  of  credit
collateralized in part by loans sold in the securitization.

       Total assets decreased by $74.0 million to $1,152.7 million at December
31,  1998 from $1,226.7 million at September 30, 1998.  During the three-month
period,  the  Company  primarily  used  existing  cash,  cash  flow  from  its
receivable  investment portfolio and cash flow from receivable securitizations
to   decrease  its  short-term  borrowings  and  to  increase  its  securities
investment  portfolio.  At December 31, 1998, the Company had  net  unrealized
losses  on securities available-for-sale in the amount of $818,000 as compared
to unrealized losses of $681,000 at September 30, 1998.  Net unrealized losses
on   securities   available-for-sale  is  presented   as   accumulated   other
comprehensive loss.


Results of Operations:

      The Company recorded net income before preferred dividends for the three
months  ended  December 31, 1998 of $4,462,000 compared to $2,238,000  in  the
prior year's period.  Comparing the current year's three month period with the
prior  year's similar period, the increase in gains on the sale of receivables
completely offset increases in the provision for losses on real estate assets,
increases in salaries, commissions and benefits, a small decrease in  the  net
interest spread, a decrease in gains from the sale of real estate, a  loss  on
investment securities and increased other operating expenses.

      For the three-month period ended December 31, 1998, the Company reported
a  positive  spread on its interest sensitive assets and liabilities  of  $6.5
million  as  compared to $6.6 million in the prior year's period.  The  slight
decrease  was  primarily the result of a decrease in the receivable  portfolio
and  the  larger cash position of the Company, primarily the result of  recent
securitizations.   After  securitizations it often takes  the  Company  a  few
months  to  reinvest the proceeds in new receivable investments.  While  there
has  been some contraction in the portfolio investments earnings 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 in an effort to maintain its level of 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.  Thus, a sustained rise in interest
rates  could  have  a  negative  impact on its  net  interest  spread  as  its
liabilities presently reprice faster than its assets.

       During  the three months ended December 31, 1998, the Company  realized
net  gains on sales of receivables of $11.6 million as compared to $98,000  in
the  prior year's period.  The increase resulted primarily from a real  estate
receivable  securitization  in  November  1998  and  a  structured  settlement
securitization   in  December  1998.   The  Company  did  not   complete   any
securitizations during the prior year's similar period.

       During  the three months ended December 31, 1998, the Company  realized
net losses on investments of $303,000, including mark-to-market adjustments on
trading securities, compared to net gains of $4.2 million in the prior  year's
period.   The  current period net loss includes both sales gains and  mark-to-
market  losses  as higher interest rates and increased spreads  to  treasuries
have  decreased  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 gain  was  primarily  the
result of reduced interest rates and tightening of spreads to treasuries which
increased  the  fair value of the Company's trading securities.   The  Company
realized  gains  of $263,000 on sales of $7.8 million of real  estate  in  the
current  year's period compared to gains of $567,000 on sales of $9.0  million
in  the  prior year.  It is the policy of management to actively  market  real
estate in order to return the investment to an earning asset.

             In  the  three months ended December 31, 1998, the  Company  made
provisions  for losses on receivables and real estate assets of  approximately
$2.2  million  as  compared to $1.8 million in the prior year's  period.   The
increased  provision  is the result of an increase in the  real  estate  asset
portfolio;  in  particular the Company's portfolio of repossessed  properties.
The  increase  in  reserves  and valuation accounts  was  based  upon  updated
appraisals on delinquent receivables, appraisals or fair market valuations  of
newly  acquired  repossessed  properties and  a  slight  increase  in  overall
delinquency   rates.    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 generally
offset any significant effects of the delinquency rate increases.

       In  the  three months ended December 31, 1998, the Company has incurred
increases  in  other  operating  expenses  including  decreases  in   deferred
acquisition  costs  related to its insurance business.  Of  the  $1.1  million
increase  in  other  operating expenses, the significant  increase  came  from
additional  depreciation  and  amortization expenses  of  $900,000  associated
principally  with  the Company's new headquarters building.  Additionally,  in
the  current  year's  period  the Company experienced  a  larger  decrease  in
deferred  acquisition  costs related to its insurance  business  as  increased
amortization  and  reduced capitalization resulted in a $1.3  million  expense
increase.


New Accounting Rules:

       In  June  1997,  Statement of Financial Accounting Standards  No.  130,
"Reporting  Comprehensive Income" (SFAS 130).  SFAS 130 establishes  standards
for   reporting  and  display  of  comprehensive  income  and  its  components
(revenues,  expenses,  gains  and losses) in a  full  set  of  general-purpose
financial statements.  This Statement requires that all items required  to  be
recognized under accounting standards as components of comprehensive income be
reported  in a financial statement that is displayed with the same  prominence
as  other  financial statements.  This Statement does not require  a  specific
format  for the financial statement, but requires an enterprise to display  an
amount representing total comprehensive income for the period in the financial
statements.  This Statement requires an enterprise to classify items of  other
comprehensive income by their nature in a financial statement and display  the
accumulated  balance  of other comprehensive income separately  from  retained
earnings  and additional paid-in capital in the equity section of a  statement
of  financial position.  The Company adopted SFAS 130 as of October  1,  1998.
The  application of SFAS 130 did not have a material effect on  the  Company's
net income or stockholders' equity.  The Statement of Comprehensive Income for
the three months ended December 31, 1997 has been presented to conform to SFAS
130.

       In  June  1997,  Statement of Financial Accounting Standards  No.  131,
"Disclosures  about Segments for an Enterprise and Related Information"  (SFAS
131)  was  issued.   SFAS 131 establishes standards for the  way  that  public
business  enterprises report information about operating  segments  in  annual
financial  statements  and  requires that those  enterprises  report  selected
information  about operating segments in interim financial reports  issued  to
shareholders.   It  also establishes standards for related  disclosures  about
products  and services, geographic areas and major customers.  This  Statement
supersedes   SFAS  14,  "Financial  Reporting  for  Segments  of  a   Business
Enterprise,"  but  retains the requirement to report information  about  major
customers.  The Company adopted this standard as of October 1, 1998;  however,
this  standard does not require interim period disclosures in the initial year
of adoption.

      In December 1997, the American Institute of Certified Public Accountants
issued  Statement  of  Position  97-3,  "Accounting  by  Insurance  and  Other
Enterprises for Insurance-Related Assessments" ("SOP 97-3").  SOP 97-3 applies
to  all entities that are subject to guaranty-fund and other insurance-related
assessments.  Assessments covered by this SOP include any charge  mandated  by
statute  or  regulatory authority that is related directly  or  indirectly  to
underwriting  activities (including self-insurance), except for  income  taxes
and  premium taxes.  SOP 97-3 is effective for financial statements for fiscal
years  after December 15, 1998.  The Consolidated Group does not believe  that
the  application  of SOP 97-3 will have a material effect on its  consolidated
financial statements.

       In  June  1998,  Statement of Financial Accounting Standards  No.  133,
"Accounting  for Derivative Instruments and Hedging Activities" ("SFAS  133"),
was  issued.   SFAS  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 or liabilities in the statement of financial position and measure those
instruments at fair value.  SFAS 133 is effective for all quarters  of  fiscal
years  beginning  after  June  15,  1999,  however,  earlier  application   is
encouraged as of the beginning of any fiscal quarter.  The Consolidated  Group
has  not yet determined the effect of the application of this statement on its
consolidated financial statements.

       In  October 1998, Statement of Financial Accounting Standards No.  134,
"Accounting  for Mortgage-Banking Enterprise" ("SFAS 134"), was issued.   SFAS
134 requires that after the securitization of mortgage loans held for sale, an
entity engaged in mortgage banking activities classify the resulting mortgage-
backed  securities or other retained interests based on its ability and intent
to  sell  or  hold those investments.  This statement conforms the  subsequent
accounting for securities retained after the securitization of mortgage  loans
by a mortgage banking enterprise with the subsequent accounting for securities
retained  after the securitization of other types of assets by a  non-mortgage
banking  enterprise.  This statement is effective for the first fiscal quarter
beginning  after  December  15,  1998.  The Consolidated  Group  has  not  yet
determined the effect of the application of this statement on its consolidated
financial statements

Year 2000 Disclosure

      The Consolidated Group is aware of the potential effect that the year
2000 and the new century may have on computer hardware, computer software and
applications and embedded micro-controllers in non-computer equipment
(collectively "Information Technology").  The problem is insuring that the
Consolidated Group is "Year 2000 Compliant" meaning that the Information
Technology is able to (i) process date and time data accurately and (ii)
calculate, compare and sequence from, into and between the twentieth and
twenty-first centuries, the years 1999, 2000 and leap years.
      
      The Consolidated Group and its affiliates share many software, hardware,
facilities and other systems.  Therefore, the Consolidated Group's Year 2000
efforts are a combined and coordinated effort among all companies within the
Consolidated Group and its affiliates.  The following are statements regarding
the Year 2000 compliance of the Consolidated Group.  The information below has
not been independently verified by the Consolidated Group, other than
statements relating to the Consolidated Group.
      
      State of Readiness
      
      The Consolidated Group has established a Year 2000 task force which has
developed an action plan for addressing issues related to the Year 2000.
Management currently contemplates that the plan, with the exception of the
contingency plan, will be substantially completed by August 1, 1999.  The
contingency plan is expected to be substantially completed by December 1,
1999, but will continue to be revised thereafter as needed in order to
maintain an effective contingency plan.  The action plan includes the
following phases:
      
      Inventory - Identify all internal and external systems and services that
      may utilize date sensitive information.
      
      Assessment - Determine whether each system or service meets the
      Consolidated Group's definition of Year 2000 Compliance and assess the
      potential business impact of non-compliance.
      
      Renovation - Modify and/or replace any systems or services that  do  not
      satisfy the Consolidated Group's  definition of Year 2000 Compliance.
      
      Certification  - Obtain certification that each system or service  meets
      the definition of compliance.
      
      Training - Develop and implement any training and procedural changes to
      ensure correct data-entry.
      
      Contingency Planning - Develop and implement contingency plans against
      possible failures.

      The plan includes a timeline for the completion of each of the phases
and components of the work within each phase.  Many of the different phases
have overlapping timelines and are therefore progressing simultaneously,
therefore the status of progress on any particular phase is difficult to
assess at any point in time.  The Year 2000 task force generally meets weekly
to coordinate its efforts as well as to monitor progress.
      
      The status of the Consolidated Group's Year 2000 efforts are regularly
monitored by the internal auditor.  In addition, during the first quarter of
calendar 1999, the Consolidated Group intends to engage a third party to
provide an external evaluation of its Year 2000 plan and the status of the
preparations of the Consolidated Group at that time.
      
      The Consolidated Group has begun the testing of its internally developed
and supported software applications, hardware and facilities systems.  Testing
to date has not produced any results which were not able to be resolved.  The
testing continues to be substantially on track with the Year 2000 action plan
timeline.
      
      The Consolidated Group is requesting vendor documentation certifying
Year 2000 compliance with respect to third party software applications, third
party services, equipment and facilities related systems.  Certain equipment
and facilities systems which have been identified as higher priority are also
being tested for compliance, where testing is possible.  To date, the
Consolidated Group has not received any indication from any third party that a
mission critical system or service will not be able to be certified by them as
Year 2000 compliant.  The Year 2000 task force is monitoring and tracking
projected certification dates from third party providers.
      
      The Consolidated Group has begun the development of a Year 2000
contingency plan to address potential Year 2000 related failures.  There can
be no assurance that this contingency plan or that the Year 2000 action plan
will be able to prevent a material disruption of the Consolidated Group's
business.
      
      Expected Costs of Remediation
      
      Prior to fiscal 1998, the Consolidated Group did not track Year 2000
related costs. The Consolidated Group and its affiliates had developed a Year
2000 budget of approximately $1.3 million for the fiscal year commencing
October 1, 1998.  Certain of these costs will be charged to or reimbursed by
the affiliated companies, and certain of these costs will be paid by the
Consolidated Group with respect to their respective costs associated with the
Year 2000 action plan.  The predominant components of both past and future
costs consist of soft costs related to employee time and resource allocations
rather than direct costs such as the acquisition of new software.
      
      Risks
      
      The Consolidated Group, as a financial institution, relies heavily upon
computers and information technology systems to acquire, service and sell
Receivables as well as for its securities and insurance sales activities.  The
Consolidated Group faces extensive Year 2000 related risks.  The order within
which these risks are presented is not intended as a prioritization of the
potential risks nor an exhaustive identification of the risks.  These risks
include, but are not limited to the following:
      
      unavailability of electrical power or telecommunication systems supplied
      by third parties;
      
      inability of obligors on the Receivables to access their funds to make
      required payments;
      
      inability of the mail systems or wire transfer systems performed by
      third parties to deliver such payments;
      
      inability of banks to process those payments;
      
      failure of any of the software/hardware systems which the Consolidated
      Group uses to track insurance products, securities products or acquire,
      service and sell Receivables;
      
      inability of the Consolidated Group to access its own funds or to make
      wire transfers or otherwise make payments on its obligations due to
      internal or third party (generally banking) system failures; and
      
      inability of the Consolidated Group to process data accurately or timely
      for general business management purposes, regulatory reporting purposes
      or other purposes.
      
      Contingency Plans
      
The Consolidated Group has commenced the development of a contingency plan but
has not finalized such a plan to date.  Development of contingency plans for
mission critical items is the first and top priority of the contingency
planning phase.  Where appropriate and feasible, the plan will also address
alternatives for internally developed systems as well as externally developed
ones, and will include steps to implement transition to an alternative system.
The plan will include trigger dates for implementing alternative solutions
prior to the Year 2000, where system testing or third party documentation
indicates that a system is not and will not be compliant.  There can be no
assurance that this contingency plan, or that the Year 2000 action plan will
be able to prevent a material disruption of the Consolidated Group's business.


ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Consolidated Group is in a "liability sensitive" position in that it
interest sensitive liabilities reprice or mature more quickly than do its
interest sensitive assets.  Consequently, in a rising interest rate
environment, the net return from interest sensitive assets and liabilities
will tend to decrease, thus rising interest rates will have a negative impact
on results of operations.  Conversely, in a falling interest rate environment,
the net return from interest sensitive assets and liabilities will tend to
improve, thus falling interest rates will have a positive impact on results of
operations.  As with the impact on operations from changes in interest rates,
the Consolidated Group's Net Present Value ("NPV") of financial assets and
liabilities is subject to fluctuations in interest rates.  The Consolidated
Group continually monitors the sensitivity of net interest income and NPV to
changes in interest rates.  NPV is calculated based on the net present value
of estimated cash flows utilizing market prepayment assumptions and market
rates of interest provided by independent broker quotations and other public
sources.  Any computation of forecasted effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, loan prepayments and redemptions of certificates, and should
not be relied upon as indicative of actual future results.

      The Company believes that there has not been a material change in its
market risk since the end of its last fiscal year.

                          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).    Restated Bylaws as amended to December 26, 1995
                         (Exhibit 3(e) to Metropolitan's Annual Report on
                         Form 10-K for fiscal 1995).

                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) for the fiscal year ended
                         September 30, 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 December 4, 1998 a Report on Form 8-K was filed reporting that
            on November 24, 1998 Metropolitan and WULA sold through a
            securitization approximately $182.4 Million in first lien mortgage
            loans.
                                  SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on this 22nd day of
February, 1999 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