U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   Form 10-QSB

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR (15)d OF THE SECURITIES EXCHANGE ACT
    OF 1934

For the quarterly period ended September 30, 1999
                               ------------------

                                       OR

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

For the transition period ____________________ to ____________________

Commission file number 0-12199
                       -------

                           SOURCE CAPITAL CORPORATION
             (Exact name of registrant as specified in its charter)

          Washington                                       91-0853890
          ----------                                       ----------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                        Identification No.)


               1825 N. Hutchinson Road, Spokane, Washington 99212
               --------------------------------------------------
                     (Address of principal executive office)


                                 (509) 928-0908
                                 --------------
                          ( Issuer's telephone number)

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

As of November 9, 1999, there were 1,359,645 shares of the Registrant's common
stock outstanding.

Transitional Small Business Disclosure Format (check One)  Yes____    No [X]


<PAGE>
<TABLE>
<CAPTION>

                           SOURCE CAPITAL CORPORATION

                                   Form 10-QSB
                    For the Quarter Ended September 30, 1999
                                  ------------


                                      Index
                                      -----

                                                                                                             Page
                                                                                                             ----
<S>                                                                                                            <C>
Part I - Financial Information

         Item 1 - Financial Statements:

                      -  Consolidated Balance Sheets - September 30, 1999 and December 31, 1998                1

                      -  Consolidated Statements of Income, Comprehensive Income and
                         Retained Earnings Three and Nine Months Ended
                      -  September 30, 1999 and 1998                                                           2

                      -  Consolidated Statements of Cash Flows - Nine months
                         Ended September 30, 1999 and 1998                                                     3

                      -  Notes to Consolidated Financial Statements                                            4

         Item 2 - Management's Discussion and Analysis of
                         Financial Condition and Results of
                         Operations                                                                            8

PART II - Other Information                                                                                   12

</TABLE>



<PAGE>
<TABLE>
<CAPTION>



                         Part I - Financial Information

Item 1.  Financial Statements

                           SOURCE CAPITAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                  ------------

                                                                   September 30,              December 31,
                                                                            1999                      1998
                                                                            ----                      ----
                                                                     (Unaudited)
<S>                                                                  <C>                       <C>
           ASSETS
Loans receivable, net                                                $46,148,612               $40,411,783
Leases receivable, net                                                14,595,066                14,006,137
Accrued interest receivable                                              456,681                   463,986
Cash and cash equivalents                                                593,776                   750,218
Marketable securities                                                    205,865                   219,502
Other real estate and equipment owned                                    879,330                   393,013
Other assets                                                             995,633                   853,942
Deferred income tax                                                    1,208,060                 1,467,660
                                                                    ------------             -------------

Total assets                                                         $65,083,023               $58,566,241
                                                                    ============             =============

       LIABILITIES
Notes payable to bank                                               $ 41,270,997               $35,243,164
Mortgage contracts payable                                             3,113,702                 3,147,579
Accounts payable and accrued expenses                                    616,486                   651,904
Customer deposits                                                        709,124                   687,802
Convertible subordinated debentures                                    5,950,000                 6,000,000
                                                                    ------------             -------------

Total liabilities                                                     51,660,309                45,730,449
                                                                    ------------             -------------


       STOCKHOLDERS' EQUITY
Preferred stock, no par value, 10,000,000
  shares authorized, none outstanding                                          -                         -
Common stock, no par value, authorized 10,000,000
  shares; issued and outstanding, 1,359,825 and
  1,350,279 shares                                                     7,054,028                 7,006,849
Additional paid in capital                                             2,049,047                 2,049,047
Accumulated other comprehensive loss                                     (29,506)                  (15,869)
Retained earnings                                                      4,349,145                 3,795,765
                                                                    ------------             -------------

Total stockholders' equity                                            13,422,714                12,835,792
                                                                    ------------             -------------

Total liabilities and stockholders' equity                           $65,083,023               $58,566,241
                                                                    ============             =============
</TABLE>


See accompanying notes to consolidated financial statements.

                                       1
<PAGE>
<TABLE>
<CAPTION>

                           SOURCE CAPITAL CORPORATION
           CONSOLIDATED STATEMENTS OF INCOME, COMPREHENSIVE INCOME AND
                                RETAINED EARNINGS
         For the Three and Nine Months Ended September 30, 1999 and 1998
                                   (Unaudited)
                                  ------------

                                                Three Months ended September 30,          Nine Months ended September 30,
                                                     1999              1998                    1999            1998
                                                     ----              ----                    ----            ----
<S>                                               <C>               <C>                      <C>             <C>
Financing income:
  Interest and fee income                         $1,828,443        $1,319,294               $4,913,323      $4,056,124
  Lease financing income                             656,887           454,898                2,035,534         882,368
  Interest expense                                (1,119,289)         (827,681)              (3,086,850)     (2,276,987)
                                                  ----------        ----------               ----------      ----------
    Net financing income                           1,366,041           946,511                3,862,007       2,661,505

Non-interest income:
  Gain on sales of investments,
    other assets and real estate                     114,285                 -                  301,680          87,640
  Provision for loan and lease losses               (178,838)          (53,000)                (423,612)       (109,000)
                                                  ----------        ----------               ----------      ----------
    Income before non-interest expenses            1,301,488           893,511                3,740,075       2,640,145

Non-interest expenses:
   Employee compensation and benefits                537,215           400,774                1,546,400       1,155,493
   Other operating expenses                          342,565           235,839                  975,347         716,624
                                                  ----------        ----------               ----------      ----------
Total non interest expenses                          879,780           636,613                2,521,747       1,872,117
                                                  ----------        ----------               ----------      ----------
Income before income taxes                           421,708           256,898                1,218,328         768,028
Income tax provision:
  Current                                            (51,055)          (83,962)                (325,105)       (188,400)
  Deferred                                           (65,495)           (3,638)                 (97,095)        (72,900)
                                                  ----------        ----------               ----------      ----------
     Total income tax provision                     (116,550)          (87,600)                (422,200)       (261,300)
                                                  ----------        ----------               ----------      ----------

         Net income                                  305,158           169,298                  796,128         506,728
Retained earnings, beginning of period             4,043,987         3,388,546                3,795,765       3,295,163
Dividends paid                                             -                 -                 (242,748)       (244,047)
                                                  ----------        ----------               ----------      ----------
Retained earnings, end of period                  $4,349,145        $3,557,844               $4,349,145      $3,557,844
                                                  ==========        ==========               ==========      ==========

Net income per common share - basic               $      .22        $      .12               $      .59      $      .37
                                                  ==========        ==========               ==========      ==========
Net income per common share - diluted             $      .18        $      .12               $      .49      $      .35
                                                  ==========        ==========               ==========      ==========

Weighted average number of common
   shares outstanding:
    Basic                                          1,360,012         1,355,679                1,359,059       1,355,725
                                                  ==========        ==========               ==========      ==========
    Diluted                                        2,121,302         2,129,004                2,115,310       2,053,950
                                                  ==========        ==========               ==========      ==========
Cash dividends per share                                None              None                     $.18            $.18
                                                  ==========        ==========               ==========      ==========

Net income                                          $305,158          $169,298                 $796,128        $506,728
Other comprehensive income, net of tax:
   Unrealized loss on marketable securities           (7,437)          (25,302)                 (13,637)         (3,042)

   Income tax benefit                                  2,529             8,603                    4,637           1,034
                                                  ----------        ----------               ----------      ----------
Comprehensive income                                $300,250          $152,599                 $787,128        $504,720
                                                  ==========        ==========               ==========      ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       2

<PAGE>
<TABLE>
<CAPTION>

                           SOURCE CAPITAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Nine Months Ended September 30, 1999 and 1998
                                   (Unaudited)
                                   -----------
                                                                               1999                      1998
                                                                               ----                      ----
<S>                                                                        <C>                        <C>
Cash flows from operating activities:
   Net income                                                              $     796,128              $     506,728
   Adjustments to reconcile net income to net
   cash provided by operating activities:
     Depreciation                                                                 47,548                     34,145
     Provision for loan and lease losses                                         352,145                    109,000
     Impairment loss on repossessed assets                                        71,467                     -
     Deferred income taxes                                                       259,600                    (26,121)
     Gain on sale of assets                                                     (301,680)                   (87,640)
     Change in:
       Accrued interest receivable                                                (1,251)                   (20,143)
       Other assets                                                               71,843                   (434,164)
       Accounts payable and accrued expenses                                     (47,438)                   395,475
       Customer deposits                                                          21,322                          -
                                                                          --------------             --------------
          Net cash provided by operating activities                            1,269,684                    477,280
                                                                          --------------             --------------

Cash flows from investing activities:
     Sale of investment securities                                             -                             13,005
     Loan originations                                                       (22,999,262)               (17,228,062)
     Loan repayments                                                          17,042,791                 19,685,138
     Direct financing lease originations                                      (9,133,684)               (11,035,922)
     Collections on direct financing leases                                    3,577,992                  2,226,979
     Recovery (capitalization) of costs related to
      other real estate and equipment owned                                        6,211                     (1,611)
     Proceeds from sale of other real estate and equipment                       334,161                     19,500
     Proceeds from sale of leases                                              4,094,949                   -
     Purchase of office equipment and vehicle                                   (101,079)                   (88,632)
                                                                          --------------             --------------
        Net cash used in investing activities                                 (7,177,921)                (6,409,605)
                                                                          --------------             --------------

Cash flows from financing activities:
     Proceeds from line of credit                                             34,362,162                 26,345,616
     Payments on line of credit                                              (28,334,329)               (26,002,119)
     Proceeds from sale of convertible subordinated debentures                         -                  6,000,000
     Payments of long-term debt                                                  (33,877)                   (29,331)
     Proceeds from exercise of stock options                                      50,000                          -
     Payments for redemption of common stock                                      (2,821)                    (1,112)
     Payments for redemption of debentures                                       (46,592)                         -
     Cash dividends paid                                                        (242,748)                  (244,047)
                                                                          --------------             --------------
       Net cash provided by financing activities                               5,751,795                  6,069,007
                                                                          --------------             --------------

Net increase (decrease) in cash and cash equivalents                            (156,442)                   136,682
Cash and cash equivalents, beginning of period                                   750,218                    473,551
                                                                          --------------              -------------
Cash and cash equivalents, end of period                                  $      593,776              $     610,233
                                                                          ==============              =============

Supplemental disclosure of cash flow information:
   Cash paid during the period for interest                               $    3,132,317               $  2,301,217
   Cash paid during the period for income taxes                                  212,300                    156,000
   Non-cash financing and investing transactions:
    Financing sales of other real estate                                               -                    292,993
    Deferred interest on financing of real estate sold                                 -                     56,442
    Loans and accrued interest converted to repossessed assets                   198,317                    458,218
    Leases converted to repossessed and other assets                             882,699                     19,000
</TABLE>

See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
                           SOURCE CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.
-------

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Source Capital Leasing Co. All significant
intercompany transactions and balances have been eliminated in consolidation.

The unaudited consolidated financial statements reflect all adjustments, which
in the opinion of management, are necessary to fairly state the periods
reported. Certain 1998 amounts have been reclassified to conform with the 1999
presentation. These reclassifications had no effect on the net income or
retained earnings as previously reported. The results of operations for the
nine-month period ended September 30, 1999 are not necessarily indicative of the
results to be expected for the full year. These unaudited financial statements
should be read in conjunction with the Company's most recent audited financial
statements for the year ended December 31, 1998.

NOTE 2.
-------

The Company's provision for federal income taxes for the nine months ended
September 30, 1999 and 1998, is based on the statutory corporate income tax rate
of 34%. For the period ended September 30, 1999 the Company has accrued an
additional $23,000 for state income tax. The actual current income tax liability
to the Company for the year ending December 31, 1999, is estimated to be
significantly less than the amount based on the statutory corporate tax rate,
because of the effect of net operating loss carryforwards from prior years and
the difference between book and tax accounting for leases.

NOTE 3.
-------

Net income per share - basic is computed by dividing net income by the
weighted-average number of common shares outstanding during the period. Net
income (after adjustment for the after-tax effect of interest on convertible
debentures) per share - diluted is computed by dividing net income by the
weighted-average number of common shares outstanding increased by the additional
common shares that would have been outstanding if the dilutive potential common
shares had been issued
<TABLE>
<CAPTION>

Earnings Per Share Computation:
                                                     For the Quarter Ended September 30, 1999
                                                     ----------------------------------------
                                                                       Weighted-                 Per-Share
                                            Net Income                 Average shares            Amount
                                            ----------                 --------------            ------
<S>                                         <C>                        <C>                       <C>
Basic EPS
Income available to
  Stockholders                              $  305,158                 1,360,012                 $     .22
                                                                                                 =========

Effect of Dilutive Securities
   Interest on convertible subordinated
     debentures (net of 34% tax)                82,817                   742,822
   Common stock options                                                   18,468
                                           -----------                ----------
Diluted EPS
Income available to common
  stockholders + assumed conversions       $   387,975                 2,121,302                 $     .18
                                           ===========                ==========                 =========

</TABLE>


                                       4
<PAGE>
<TABLE>
<CAPTION>

                           SOURCE CAPITAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued


Earnings Per Share Computation, Continued:

                                                     For the Quarter Ended September 30, 1998
                                                     ----------------------------------------
                                                                       Weighted-                 Per-Share
                                            Net Income                 Average shares            Amount
                                            ----------                 --------------            ------
<S>                                         <C>                        <C>                       <C>
Basic EPS
Income available to
  Stockholders                              $  169,298                 1,355,679                 $     .12
                                                                                                  ========

Effect of Dilutive Securities
Interest on convertible subordinated
     debentures (net of 34% tax)                83,332                   749,064
Common stock options                                                      24,261
                                           -----------                ----------

Diluted EPS
Income available to common
  stockholders + assumed conversions        $  252,630                 2,129,004                 $     .12
                                           ===========                ==========                 =========
</TABLE>
<TABLE>
<CAPTION>


                                                     For the Nine  Months Ended September 30, 1999
                                                     ------------  -------------------------------
                                                                       Weighted-                 Per-Share
                                            Net Income                 Average shares            Amount
                                            ----------                 --------------            ------
<S>                                         <C>                        <C>                       <C>
Basic EPS
Income available to
  Stockholders                              $  796,128                 1,359,059                 $     .59
                                                                                                 =========

Effect of Dilutive Securities
   Interest on convertible subordinated
     debentures (net of 34% tax)               249,613                   742,822
   Common stock options                                                   13,429
                                            ----------                 ---------

Diluted EPS
Income available to common
  stockholders + assumed conversions        $1,045,741                 2,115,310                 $     .49
                                            ==========                 =========                 =========
</TABLE>

                                       5


<PAGE>
<TABLE>
<CAPTION>


                           SOURCE CAPITAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

Earnings Per Share Computation, Continued:

                                                     For the Nine Months Ended September 30, 1998
                                                     --------------------------------------------
                                                                       Weighted-                 Per-Share
                                            Net Income                 Average shares            Amount
                                            ----------                 --------------            ------
<S>                                         <C>                        <C>                       <C>
Basic EPS
Income available to
  Stockholders                              $  506,728                 1,355,725                 $     .37
                                                                                                 =========

Effect of Dilutive Securities
Interest on convertible subordinated
     debentures (net of 34% tax)               210,877                   665,835
Common stock options                                                      32,390
                                            ----------                 ---------

Diluted EPS
Income available to common
  stockholders + assumed conversions        $  717,605                 2,053,950                 $     .35
                                            ==========                 =========                 =========
</TABLE>

NOTE 4.
-------

The Company's consolidated financial statements include certain reportable
segment information. The segments include the parent company Source Capital
Corporation who's primary business is commercial real estate lending and its
wholly owned subsidiary Source Capital Leasing Co. who's primary business is
equipment lease financing. All accounting policies of the parent and subsidiary
are the same. The parent evaluates the performance of the subsidiary based upon
multiple variables including lease income, interest expense and profit or loss
after tax.
The parent does not allocate any unusual items to the subsidiary.

Company segment profit and loss components and schedule of assets as of
September 30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>

                                             1999                      1998
                                             ----                      ----

                                   Leasing       Lending       Leasing       Lending
                                   -------       -------       -------       -------
<S>                             <C>           <C>           <C>           <C>
Income commercial real estate   $         -   $ 4,937,981   $         -   $ 4,143,764
Income lease financing            2,322,033             -       882,368             -
Interest expense                    712,434     2,374,416       266,918     2,010,069
Depreciation                         12,310        35,238         5,586        28,559
Income tax expense (benefit)         90,300       331,900        46,800       214,500
Net income                          158,996       637,132        90,871       415,857
Significant non-cash items
  other than depreciation           398,612        25,000        87,000        22,000
Real estate lending assets                -    54,015,703             -    42,174,455
Leasing assets                   16,233,453             -    12,263,074             -


</TABLE>


                                       6
<PAGE>

                           SOURCE CAPITAL CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

NOTE 4., Continued:
-------------------

Reconciliation of segment net income, total assets, notes payable and other
significant items for the nine months ended September 30, 1999 and 1998 follows:
<TABLE>
<CAPTION>

                                                               1999           1998
                                                               ----           ----
<S>                                                       <C>             <C>
Profit or loss

Leasing net income                                        $    158,996    $     90,871
Adjustment for income taxes                                   (331,900)       (214,500)
Unallocated amounts:
  Revenue of real estate lending                             4,937,981       4,152,021
  Expense of real estate lending                            (3,968,949)     (3,521,664)
                                                          ------------    ------------
Consolidated net income after tax                         $    796,128    $    506,728
                                                          ============    ============

Total assets

Net lease investment                                      $ 14,595,066    $ 11,620,089
Unallocated assets of leasing                                1,638,388         642,985
Elimination of intercompany                                 (4,206,887)     (3,484,197)
Commercial loans receivable, net                            46,148,612      33,972,482
Unallocated assets of real estate lending                    6,907,844       7,263,105
                                                          ------------    ------------
Consolidated assets                                       $ 65,083,023    $ 50,014,464
                                                          ============    ============

Debt

Leasing note payable                                      $ 11,190,997    $  8,573,593
Real estate lending note payable                            30,080,000      18,760,000
Real estate lending long-term debt                           3,113,702       3,158,208
Real estate lending convertible subordinated debentures      5,950,000       6,000,000
                                                          ------------    ------------
Consolidated notes payable and long-term debt             $ 50,334,699    $ 36,491,801
                                                          ============    ============


</TABLE>
<TABLE>
<CAPTION>

                                                             Real Estate
                                                Leasing        Lending
Other significant items                          Total          Total     Consolidated
                                                 -----          -----     ------------
<S>                                             <C>          <C>          <C>
1999
----
Interest expense                                $  712,434   $2,374,416   $3,086,850
Provision for losses                               398,612       25,000      423,612

1998
----
Interest expense                                $  266,918   $2,010,069   $2,276,987
Provision for losses                                87,000       22,000      109,000

</TABLE>

                                       7
<PAGE>

                           SOURCE CAPITAL CORPORATION

                         PART I - FINANCIAL INFORMATION
                         ------------------------------


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
of Operations
-------------

General
-------

These discussions may include forward-looking statements containing words such
as "will continue to be," "will be," "continue 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.

Nine Months Ended September 30, 1999 Compared to Nine Months Ended
------------------------------------------------------------------
September 30, 1998
------------------

For the nine months ended September 30, 1999 the Company reported net income of
$796,128 or $.49 per diluted common share. These results compare to net income
of $506,728 or $.35 per diluted share for the comparable period in 1998. Net
financing income (interest and lease income less interest expense) increased
from approximately $2,662,000 during the nine months ended September 30, 1998 to
$3,862,000 in the comparable period in 1999 (a 45.1% increase). Finance income
of $6,949,000 and $4,938,000 in the nine months ended September 30, 1999 and
1998 respectively represents an approximate average interest yield of 15.44% and
15.08% respectively, on the Company's average earning assets. Loans funded
during the first nine months of 1999 exceeded those funded during the comparable
period in 1998 by approximately $5,771,000, and loan repayments during the 1999
period were less than those in the 1998 period by approximately $2,642,000. The
increase in average interest yield in 1999 is primarily due to higher average
rates earned on the Company's loan portfolio and fewer non-performing loans as
compared with the period ended September 30, 1998. During the nine months ended
September 30, 1999 the Company's leasing subsidiary contributed approximately
$159,000 to net income as compared to approximately $90,000 in the 1998
comparable period.

The increase in financing income of approximately $2,010,000 is directly
attributable to the increase of approximately $16,400,000 in the Company's
average earning assets over the first nine months of 1998. The Company's average
earning asset portfolio grew from approximately $43,600,000 in the nine-month
period ended September 30, 1998 to approximately $60,000,000 for the comparable
period ended September 30, 1999. The change in the portfolio is directly related
to the growth in both loans and leases. The loan portfolio grew by approximately
$12,200,000 from $33,973,000 at September 30, 1998 to approximately $46,149,000
at September 30, 1999. The lease portfolio grew by approximately $2,975,000 from
$11,620,000 to approximately $14,595,000 during the same period. The increase in
financing income was partially offset by an approximate $810,000 increase in
interest expense. The Company's cost of funds on average borrowings decreased
from approximately 8.9% for the first nine months of 1998 to approximately 8.3%
for the comparable period in 1999. The Company was able to reduce its borrowing
costs by funding a portion of its loan portfolio using a "LIBOR" based rate,
which was lower than the prime based rate option. The Company funds its lease
portfolio using a "LIBOR" based rate which approximated prime less .3% during
the period. Loans and leases delinquent more than 90 days equaled 3.98% of the
loans and leases outstanding at September 30, 1999 as compared to approximately
3.45% at September 30, 1998. These loans and leases are collateralized by deeds
of trust and equipment, respectively. The Company's allowance for probable loan
losses of approximately $234,000 and lease losses of approximately $222,000 are
considered adequate as of September 30, 1999.


                                       8
<PAGE>

During the nine-month period ended September 30, 1999 the Company recognized a
gain of approximately $286,000 from the sale of three tranches of net leases
totaling approximately $3,800,000. These leases were sold on a non-recourse
basis which allowed the Company to accelerate the earnings process for a
percentage of the total portfolio.

Total non-interest expenses in the first nine months of 1999 increased
approximately 34.7% over the first nine months of 1998. The increase was
primarily due to a 33.8% increase in salaries and benefits as a result of an
increase in personnel due to the growth in the Company's leasing operations,
salary increases related to performance and competitive factors and profit
sharing accrual related to the increased profitability of the Company. Other
operating expenses increased by approximately 36.1% the most significant being
an approximate $236,000 increase in general and administrative expense which is
directly related to the growth of the Company's leasing activities.
Additionally, occupancy expense increased by approximately $27,000 as a result
of the Company's expansion. The Company recognized a provision for probable loan
and lease losses of $424,000 for the nine months ended September 30, 1999, and
$109,000 for the comparable period in 1998. The primary increase in the 1999
provision is related to the Company's lease portfolio.

The provision for income taxes of approximately $422,000 and $261,000 for the
nine months ended September 30, 1999 and 1998, respectively, is based upon the
statutory income tax rate of 34%. The Company expects to pay significantly less
current income tax than the estimated tax provision for the year ended December
31, 1999, due to the utilization of net operating loss carryovers and the
difference between book and tax reporting for leases. The Company's effective
tax rate for its actual tax liability in 1998 was approximately 13%.

Three Months Ended September 30, 1999 Compared to Three Months ended
--------------------------------------------------------------------
September 30, 1998
------------------

For the three months ended September 30, 1999, the Company reported net income
of $305,158 or $.18 per diluted common share. These results compare to net
income of $169,298 or $.12 per diluted share, for the comparable period in 1998.
Net financing income (interest and lease income less interest expense) increased
from approximately $947,000 during the three months ended September 30, 1998 to
approximately $1,366,000 in the comparable period of 1999 (a 44.3% increase).
Finance income of approximately $2,485,000 and $1,774,000 in the three months
ended September 30, 1999 and 1998 respectively, represents an approximate
average interest yield of 15.7% and 15.0%, respectively, on the Company's
average earning assets. The increase in interest yield on the Company's real
estate portfolio (approximately .72%), is mitigated by a slight decline in rates
received on the Company's lease portfolio. Lease income of approximately
$657,000 resulted in an average yield on lease contracts of 16.2% for the
three-months ended September 30, 1999 as compared to revenues of approximately
$455,000 and a yield of 16.9% for the third quarter of 1998.

The increase in financing income of approximately $711,000 is directly
attributable to the increase of approximately $18,210,000 in the Company's
average earning assets over the third quarter of 1998. The Company's average
earning asset portfolio grew from $45,284,000 for the three months ended
September 30, 1998 to approximately $63,494,000 at September 30, 1999. Growth in
the loan and lease portfolio is directly attributable to the increase in loan
originations and fewer early loan payoffs in 1999 as compared to an unusually
high number of early loan payoffs in 1998. Loans funded in the third quarter of
1999 were approximately $10,277,000 as compared to approximately $7,503,000 in
1998. Loan repayments in the third quarter were approximately $8,214,000 as
compared to approximately $9,536,000 in the third quarter of 1998. The Company
funded approximately $1,327,000 in new leases as compared to approximately
$4,885,000 in the third quarter of 1998 and collected lease payments of
approximately $1,236,000 as compared to $1,221,000 for the quarter ended
September 30, 1998. The downturn in leases funded in the third quarter 1999 as
compared to 1998 is primarily due to the loss of two production personnel in May
1999. These employees were replaced and subsequently, October 1999 lease
production improved over the third quarter 1999 average.

The increase in financing income was partially offset by an approximate $292,000
increase in interest expense. The increase in interest expense is primarily
attributable to the increased borrowing related to growth in outstanding loans.
The Company's cost of funds on average borrowings decreased from approximately
8.8% at September 30, 1998 to approximately 8.5% in the comparable period in
1999. The Company was able to reduce its borrowing costs by funding a portion of
its loan portfolio using a "LIBOR" based rate, which was lower than the prime
based rate option. The Company also funds its lease portfolio using a "LIBOR"
based rate which currently approximates prime at September 30, 1999. See "Effect
of Inflation and Changing Prices" regarding interest rate fluctuations.


                                       9
<PAGE>


During the third quarter ended September 30, 1999 the Company recognized a gain
of approximately $114,000 from the sale of one tranche of net leases totaling
approximately $1,600,000. These leases were sold on a non-recourse basis.

Total non-interest expenses for the third quarter of 1999 increased
approximately 38.2% over the third quarter of 1998. The increase was primarily
due to a 34.0% increase in salaries and benefits resulting from added personnel
(primarily leasing), salary increases related to performance and competitive
factors and profit sharing accrual related to increased profitability of the
Company. Additionally, other operating expenses increased by approximately 45.3%
over the prior year, and the provision for probable loan and lease losses
increased $126,000 over the third quarter of 1998. Of the increase in other
expense, the most significant was an $83,000 increase in general and
administrative expense primarily related to the increase in leasing activities.
For the quarter ended September 30, 1999 the leasing subsidiary was at break
even as compared to an approximate $67,000 profit in 1998. There were other
increases and decreases in the Company's other operating expenses none of which
is material when considered individually.

Financial Condition and Liquidity
---------------------------------

At September 30, 1999, the Company had approximately $594,000 of cash and cash
equivalents as compared to approximately $750,000 at December 31, 1998. The
Company also had $206,000 of marketable securities at September 30, 1999, as
compared to approximately $220,000 at December 31, 1998. The Company's primary
sources of cash during the first nine months of 1999 were approximately
$34,362,000 from short term borrowings, $17,043,000 loan repayments, $4,095,000
sale of leases, $3,578,000 repayments of lease receivables, $1,270,000 from
operations and $334,000 from the sale of real estate and equipment. The primary
uses of cash during the first nine months of 1999 were approximately $28,334,000
repayment of short term borrowings, $22,999,000 of loan originations, $9,134,000
additions to direct financing leases and $243,000 payment of dividends.

The Company's $40,000,000 line of credit, which matures annually, was renewed
April 30, 1999. At September 30, 1999, the Company had $30,080,000 outstanding
under the line of credit. In addition, the Company's wholly owned subsidiary,
Source Capital Leasing Co., has a $22,000,000 line of credit to fund its lease
portfolio. The leasing company's line of credit also renewed on April 30, 1999,
and will mature April 30, 2000. The leasing company had approximately
$11,191,000 outstanding under its line of credit at September 30, 1999. The cash
flows from the Company's lines of credit, loan and lease repayments, and the
existing cash, cash equivalents and marketable securities are expected to be
sufficient for the operating needs of the Company.

                                       10
<PAGE>

Effect of Inflation and Changing Prices
---------------------------------------

Interest rates on the Company's loan portfolio are subject to inflation as
inflationary pressures affect the prime interest rate. At September 30, 1999,
interest rates on approximately 98% of the Company's loan portfolio were
variable based on various indexes. The remaining loans have fixed interest
rates. Loans with fixed rates and maturities of less than one year at September
30, 1999 are considered variable. The Company's line-of-credit agreement
provides for variable interest based on the prime rate or at the Company's
option, a "LIBOR" based rate.

Management believes that any negative effects of an increase in the prime
interest rate would be largely offset by the Company's relatively short-term
loan portfolio, balloon payments and the large percentage of variable rate
loans.

Rates earned on the Company's lease portfolio are fixed for the term of the
lease, however, the Company funds its portfolio by borrowing under its
line-of-credit as soon as is practicable after funding the lease. Each lease is
funded separately and the interest rate charged by the bank is fixed for the
term of the advance which correspondingly is matched to the term of the lease.

Year 2000 Issues and Status
---------------------------

As the millennium approaches, the Company is addressing the impact of year 2000
(Y2K) on its information technology (IT) and non-IT functions. Currently, the
Company's IT related electronics infrastructure consists of primary and backup
domain controller servers utilizing the Windows NT operating system, and
independent workstations utilizing the Windows 95 operating system. All leasing
portfolio management, servicing and general ledger information is maintained on
the system. Additionally, the Company contracts with an external third party
service provider for all commercial loan sub-ledger and general ledger systems.

In completing its assessment of Y2K compliance, the Company reviewed and
identified all of the major system components believed to be susceptible to Y2K
issues. These included all software components of its in-house network as well
as its commercial lending service provider. The Company has obtained written
confirmation from all software vendors and software service providers of Y2K
compliance. The Company also reviewed other components of its in-house system
and is currently working with a third party network administrator to identify
and resolve other non-major Y2K issues.

The Company believes that its Y2K compliance effort is complete as of the end of
September 1999, however the Company's third party provider is continually
testing and updating the Company's systems as new releases are provided by
software vendors. The Company estimates that any additional Y2K compliance cost
will be negligible.

The Company's exposure to a non-compliant system is considered minimal. System
and software vendors utilized by the Company are nationally known and reputable
service providers that offer these and similar services to many subscribers. The
Company does not believe it is reasonable to assume a collapse of the entire or
significant portion of its computer system as a result of a Y2K issue. Should
the entire system or major component fail as a result of a Y2K compliance issue,
the Company maintains adequate historical records that would enable
reconstruction and maintenance of loan and lease information manually until the
system is corrected.

The Company has completed its assessment of non-IT related systems for Y2K
compliance and has been assured by providers the systems are compliant. Major
non-IT related systems utilized by the Company include telephone systems and
building security systems. If the Company determines that any non-IT related
systems are not Y2K compliant, it will be necessary to adjust estimates of the
cost of Y2K compliance.

                                       11

<PAGE>
                           SOURCE CAPITAL CORPORATION


                           PART II - OTHER INFORMATION
                           ---------------------------




Items 1,2,3,4 and 5 of Part II are omitted from this report as they are either
inapplicable or the answer is negative.


Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits

          27.1 Financial Data Schedule

     (b)  Reports on Form 8-K

          None










          (The balance of this page has been intentionally left blank.)




                                       12

<PAGE>


                           SOURCE CAPITAL CORPORATION

                                   SIGNATURES
                                  ------------



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


                                  SOURCE CAPITAL CORPORATION
                                  (Registrant)



Date:      November 09, 1999      By:  /s/ D. Michael Jones
       ------------------------        -----------------------------
                                        D. Michael Jones
                                        President and Chief Executive Officer




Date:      November 09, 1999      By:  /s/ Lester L. Clark
       ------------------------        --------------------------------
                                        Lester L. Clark
                                        Vice President-Secretary/Treasurer
                                        Principal accounting and finance officer







                                       13