<PAGE>   1
 
 
================================================================================
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549
 
                            ------------------------
 
                                   FORM 10-Q

                            ------------------------
 
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
   SECURITIES EXCHANGE ACT OF 1934
 
                 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
 
                                        OR
 
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
   SECURITIES EXCHANGE ACT OF 1934
 
    FOR THE TRANSITION PERIOD FROM __________________ TO __________________
 
                         COMMISSION FILE NUMBER 1-12889
 
                            ------------------------
 
                        LONG BEACH FINANCIAL CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                            <C>
                  DELAWARE                                      33-0739843
       (STATE OR OTHER JURISDICTION OF             (I.R.S. EMPLOYER IDENTIFICATION NO.)
       INCORPORATION OR ORGANIZATION)
</TABLE>
 
         1100 TOWN & COUNTRY ROAD, SUITE 1650, ORANGE, CALIFORNIA 92868
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
 
                                 (714) 835-5743
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
 
                            ------------------------
 
     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 [ ]
 
     As of November 12, 1998, registrant had outstanding 22,607,218 shares of
Common Stock.
 
 
================================================================================
<PAGE>   2
 
                        LONG BEACH FINANCIAL CORPORATION
 
                               TABLE OF CONTENTS
 
                                  TO FORM 10-Q
         FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998
 
                        PART I -- FINANCIAL INFORMATION
 
<TABLE>
<CAPTION>
                                                                       PAGE
                                                                       -----
<S>      <C>                                                           <C>
Item 1.  Financial Statements
         Consolidated Statements of Financial Condition as of
         September 30, 1998 (Unaudited) and December 31, 1997........      2
         Consolidated Statements of Operations for the Three Months
         and Nine Months Ended September 30, 1998 and 1997
         (Unaudited).................................................      3
         Consolidated Statements of Stockholder's Equity for the
         Three Months and Nine Months Ended September 30, 1998
         (Unaudited).................................................      4
         Consolidated Statements of Cash Flows for the Nine Months
         Ended September 30, 1998 and 1997 (Unaudited)...............      5
         Notes to the Consolidated Financial Statements for the Three
         Months and Nine Months Ended September 30, 1998 and 1997
         (Unaudited).................................................      6
Item 2.  Management's Discussion and Analysis of Financial Condition,
         Results of Operations, Liquidity and Capital Resources......     13
Item 3.  Quantitative and Qualitative Disclosures About Market
         Risk........................................................     23
 
PART II -- OTHER INFORMATION
 
Item 1.  Legal Proceedings...........................................     24
Item 2.  Changes in Securities.......................................     24
Item 3.  Defaults Upon Senior Securities.............................     24
Item 4.  Submission of Matters to a Vote of Securities Holders.......     24
Item 5.  Other Information...........................................     24
Item 6.  Exhibits and Reports on Form 8-K............................     25
         (a) Exhibits................................................     25
         (b) Reports on Form 8-K.....................................     26
</TABLE>
 
                                        1
<PAGE>   3
 
                         PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
                        LONG BEACH FINANCIAL CORPORATION
 
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 
<TABLE>
<CAPTION>
                                                                SEPTEMBER 30,    DECEMBER 31,
                                                                    1998             1997
                                                                -------------    ------------
                                                                 (UNAUDITED)
                                                                   (DOLLARS IN THOUSANDS)
<S>                                                             <C>              <C>
ASSETS
Cash and cash equivalents...................................      $ 34,448         $ 38,782
Investment securities available for sale....................            32            3,793
Loans held for sale.........................................        52,888           17,241
Receivable from the sales of loans..........................       320,517          143,088
Premises and equipment, net.................................         4,361            3,620
Deferred income taxes.......................................        32,600           34,400
Originated mortgage servicing rights........................         5,048            3,054
Prepaid expenses and other assets...........................         4,519            4,110
                                                                  --------         --------
          Total assets......................................      $454,413         $248,088
                                                                  ========         ========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Warehouse financing facility................................      $255,553         $146,271
Reverse repurchase agreement................................        95,073               --
Accounts payable and accrued liabilities....................        13,036            8,280
Accrued income taxes payable................................            69            2,792
                                                                  --------         --------
          Total liabilities.................................       363,731          157,343
Stockholders' equity:
Common stock, $.001 par value; 150 million shares
  authorized; 25 million shares issued; 22.6 million and
  24.7 million shares outstanding for 1998 and 1997,
  respectively..............................................            25               25
Additional paid-in capital..................................        75,360           75,307
Retained earnings...........................................        39,772           18,697
Treasury stock, at cost: 2,400,682 and 300,000 shares for
  1998 and 1997, respectively...............................       (24,475)          (3,284)
                                                                  --------         --------
          Total stockholders' equity........................        90,682           90,745
                                                                  --------         --------
          Total liabilities and stockholders' equity........      $454,413         $248,088
                                                                  ========         ========
</TABLE>
 
        See accompanying notes to the consolidated financial statements.
                                        2
<PAGE>   4
 
                        LONG BEACH FINANCIAL CORPORATION
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED        NINE MONTHS ENDED
                                                          SEPTEMBER 30,             SEPTEMBER 30,
                                                      ----------------------    ----------------------
                                                        1998         1997         1998         1997
                                                      ---------    ---------    ---------    ---------
                                                      (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                   <C>          <C>          <C>          <C>
REVENUES:
Gain on sale of loans.............................     $31,098      $24,829      $86,653      $62,008
Net interest income...............................       1,996        1,151        5,032        1,768
Loan servicing and other fees on loans............       1,532          289        3,372          307
Amortization of mortgage servicing rights.........        (328)         (69)        (796)         (69)
                                                       -------      -------      -------      -------
Net operating income..............................      34,298       26,200       94,261       64,014
EXPENSES:
Compensation expense..............................      12,100        8,957       35,797       21,941
Premises and equipment expenses...................       3,119        1,020        8,288        2,625
Other general and administrative expenses.........       3,207        1,970        8,015        4,307
Corporate administrative charges..................          --           --           --        2,294
Provision for losses..............................       1,100          500        3,500        3,428
Sub-servicing costs...............................       1,542          294        3,326          340
                                                       -------      -------      -------      -------
Total expenses....................................      21,068       12,741       58,926       34,935
                                                       -------      -------      -------      -------
Earnings before income taxes......................      13,230       13,459       35,335       29,079
Provision for income taxes........................       4,973        5,600       14,260       11,780
                                                       -------      -------      -------      -------
Net earnings......................................     $ 8,257      $ 7,859      $21,075      $17,299
                                                       =======      =======      =======      =======
Basic earnings per share..........................     $  0.35      $  0.31      $  0.88      $  0.69
                                                       =======      =======      =======      =======
Diluted earnings per share........................     $  0.34      $  0.30      $  0.84      $  0.68
                                                       =======      =======      =======      =======
</TABLE>
 
        See accompanying notes to the consolidated financial statements.
                                        3
<PAGE>   5
 
                        LONG BEACH FINANCIAL CORPORATION
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                          ADDITIONAL
                                                 COMMON    PAID-IN     RETAINED   TREASURY
                                                 STOCK     CAPITAL     EARNINGS    STOCK      TOTAL
                                                 ------   ----------   --------   --------   --------
                                                                (DOLLARS IN THOUSANDS)
<S>                                              <C>      <C>          <C>        <C>        <C>
THREE MONTHS ENDED SEPTEMBER 30, 1998:
Balance, July 1, 1998..........................   $25      $75,354     $31,515    $(10,086)  $ 96,808
Net earnings...................................    --           --       8,257          --      8,257
Exercise of stock options......................    --            6          --          --          6
Purchase of treasury stock.....................    --           --          --     (14,389)   (14,389)
                                                  ---      -------     -------    --------   --------
Balance, September 30, 1998....................   $25      $75,360     $39,772    $(24,475)  $ 90,682
                                                  ===      =======     =======    ========   ========
NINE MONTHS ENDED SEPTEMBER 30, 1998:
Balance, January 1, 1998.......................   $25      $75,307     $18,697    $ (3,284)  $ 90,745
Net earnings...................................    --           --      21,075          --     21,075
Exercise of stock options......................    --           53          --          --         53
Purchase of treasury stock.....................    --           --          --     (21,191)   (21,191)
                                                  ---      -------     -------    --------   --------
Balance, September 30, 1998....................   $25      $75,360     $39,772    $(24,475)  $ 90,682
                                                  ===      =======     =======    ========   ========
</TABLE>
 
        See accompanying notes to the consolidated financial statements.
                                        4
<PAGE>   6
 
                        LONG BEACH FINANCIAL CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                    NINE MONTHS ENDED
                                                                      SEPTEMBER 30,
                                                                --------------------------
                                                                   1998           1997
                                                                -----------    -----------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                                             <C>            <C>
Cash Flows from Operating Activities:
Net earnings................................................    $    21,075    $    17,299
Adjustments to reconcile net earnings to net cash used in
  operating activities:
  Depreciation and amortization of premises, equipment and
     warehouse financing facility issuance costs............          1,833            550
  Loans originated and purchased for sale...................     (1,817,060)    (1,157,111)
  Proceeds from sales of loans held for sale................      1,774,981      1,154,145
  Noncash gain recognized on originated mortgage servicing
     rights.................................................         (2,790)        (7,290)
  Amortization of originated mortgage servicing rights......            796             88
  Changes in:
     Receivable from the sales of loans.....................       (177,429)       (83,685)
     Accounts payable and accrued liabilities...............          4,756          6,816
     Accrued income taxes payable...........................           (923)         6,796
Other.......................................................          5,384         (2,380)
                                                                -----------    -----------
     Net cash used in operating activities..................       (189,377)       (64,772)
Cash Flows from Investing Activities:
  Purchases of premises and equipment.......................         (1,934)          (820)
  Purchases of investment securities available for sale.....        (26,810)       (76,120)
  Maturities of investment securities available for sale....         30,570         66,864
                                                                -----------    -----------
     Net cash provided by (used in) investing activities....          1,826        (10,076)
Cash Flows from Financing Activities:
  Net change in warehouse facility..........................        204,355         76,802
  Cash provided to AMC prior to the Reorganization..........             --         (3,852)
  Proceeds from mortgage servicing rights transferred to
     AMC....................................................             --          3,974
  Reorganization and capitalization of LBFC.................             --         38,000
  Purchase of treasury stock................................        (21,191)            --
  Proceeds from exercise of stock options...................             53             --
                                                                -----------    -----------
     Net cash provided by financing activities..............        183,217        114,924
Net increase (decrease) in cash.............................         (4,334)        40,076
Cash, beginning of the period...............................         38,782             --
                                                                -----------    -----------
Cash, end of the period.....................................    $    34,448    $    40,076
                                                                ===========    ===========
Supplemental Disclosures of Cash Flow Information:
  Cash paid during the period for interest on warehouse
     financing facility.....................................    $     9,130    $     4,205
  Cash paid during the period for federal and state income
     taxes..................................................         15,045             --
Supplemental Schedule of Non-Cash Activities:
  Deferred tax asset........................................             --         36,000
  Amortization of deferred tax asset........................          1,800          1,000
</TABLE>
 
        See accompanying notes to the consolidated financial statements.
                                        5
<PAGE>   7
 
                        LONG BEACH FINANCIAL CORPORATION
 
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                  (UNAUDITED)
 
NOTE 1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
 
DESCRIPTION OF THE BUSINESS
 
     Long Beach Financial Corporation ("LBFC"), through its wholly-owned
subsidiary, Long Beach Mortgage Company ("LBMC"), (collectively, the "Company"),
is a specialty finance company engaged in the business of originating,
purchasing and selling subprime residential mortgage loans secured by one- to
four-unit family residences. The Company's core borrower base consists of
individuals who do not qualify for traditional "A" credit because their credit
histories, debt to income ratios or other factors do not conform to standard
agency lending criteria. The Company originates loans primarily through
independent mortgage loan brokers.
 
     The Company generally follows a strategy of selling substantially all of
its loan originations in the secondary market through loan sales for a cash
price that represents a premium over the principal balance of the loans sold.
Prior to the expiration and fulfillment of its outstanding loan purchase
commitment, the Company generally obtains a new purchase commitment from one or
more loan purchasers for the volume of loans expected to be originated during
the next several months. As a result, the Company endeavors to have a buyer for
each loan at the time it is funded and, therefore, can deliver loans and receive
the purchase price shortly after funding.
 
     LBFC was incorporated in January 1997. At the time of incorporation, LBFC
was a wholly-owned subsidiary of a company now known as Ameriquest Mortgage
Company ("AMC"). AMC conducted its mortgage lending business through four
divisions: (i) the direct-sourced lending division, (ii) the broker-sourced
lending division, (iii) the loan sales division, and (iv) the loan servicing
division. LBFC was formed to facilitate the public sale of AMC's broker-sourced
lending division. All references to the "Wholesale Division" herein shall be
deemed to include the operations of the broker-sourced lending division and the
loan sales division of AMC prior to the Reorganization (defined below).
 
     On April 28, 1997, LBFC's Registration Statement on Form S-1 under the
Securities Act of 1933, as amended (the "Registration Statement"), relating to
the initial public offering of its common stock, was declared effective. The
initial public offering closed on May 2, 1997. Immediately prior to the closing
of the initial public offering, AMC reorganized its business operations (the
"Reorganization") by transferring certain assets and personnel relating to the
broker-sourced lending and loan sales divisions to the Company in exchange for
shares of common stock. The Reorganization has been accounted for in a manner
similar to a pooling of interests; therefore, the historical cost basis of the
assets and liabilities transferred to the Company was carried over from the
Wholesale Division and the loan sales division of AMC.
 
BASIS OF PRESENTATION
 
     The Company had no operations through the date of the Reorganization and
all rights, benefits and obligations relating to the operations and net earnings
of the Wholesale Division of AMC, up to the date of the Reorganization, remained
with AMC. However, because the Reorganization has been accounted for in a manner
similar to a pooling of interests, the results of operations reported for the
nine months ended September 30, 1997 include: (i) the results of operations of
the Wholesale Division of AMC from January 1, 1997 through May 1, 1997 (the
"1997 Operating Results of the Wholesale Division of AMC"), and (ii) the
Company's results of operations from May 2, 1997 through September 30, 1997 (the
"Company's Results of Operations"). Collectively, the combination of the 1997
Operating Results of the Wholesale Division of AMC and the Company's Results of
Operations represent the "Combined Results of Operations for the Nine Months
Ended September 30, 1997".
 
                                        6
<PAGE>   8
                        LONG BEACH FINANCIAL CORPORATION
 
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                  (CONTINUED)
                                  (UNAUDITED)
 
NOTE 1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION (CONTINUED)

     Cash flows for the nine months ended September 30, 1997 include: (i) cash
flows of the Wholesale Division of AMC from January 1, 1997 through May 1, 1997
(the "1997 Cash Flows of the Wholesale Division of AMC"), and (ii) the Company's
cash flows from May 2, 1997 through September 30, 1997 (the "Company's Cash
Flows"). Collectively, the combination of the 1997 Cash Flows of the Wholesale
Division of AMC and the Company's Cash Flows represent the "Combined Cash Flows
for the Nine Months Ended September 30, 1997."
 
     All information relating to the Wholesale Division of AMC included or used
in the preparation of this report has been prepared from records maintained by
AMC and provided to the Company by AMC.
 
     In the normal course of business prior to the Reorganization on May 2,
1997, the Wholesale Division had various transactions with other divisions of
AMC that are material in amount. The financial statements and financial data of
the Wholesale Division of AMC included in this report on Form 10-Q reflect key
assumptions regarding the allocation of certain revenue and expense items and
certain balance sheet accounts, many of which could be material. The financial
data of the Wholesale Division of AMC included in this report on Form 10-Q may
not necessarily be indicative of the conditions that would have existed if the
Wholesale Division of AMC had operated as an independent entity.
 
     The accompanying consolidated financial statements include financial data
of the Wholesale Division of AMC and reflect the assets, liabilities, revenues
and expenses that were directly related to the continuing operations of the
Wholesale Division as they were operated by AMC. In cases involving assets,
liabilities, revenues and expenses not specifically identifiable to any
particular division of AMC, certain allocations were made to reflect the
operations of the Wholesale Division. Allocations have been made for, among
other things, accounting, information services, legal, compliance, and other
executive and administrative services. These allocations were based on a variety
of factors which take into consideration the loan origination volume, employee
head count, and historical ratios of direct expenses incurred by the divisions
to total direct expenses. Management believes these allocations provide a
reliable basis for the accompanying consolidated financial statements, which are
also based on the following assumptions:
 
     1.   No cash balances were recorded as part of these historical financial
          statements as it was the practice of AMC not to maintain separate cash
          balances for the various divisions.
 
     2.   The net change in divisional equity arising from intracompany
          transactions, as reflected in the combined statements of stockholders'
          equity and divisional equity, includes: (i) the aggregate intracompany
          allocations of costs and expenses incurred by the Wholesale Division
          and paid by AMC, (ii) cash generated by the Wholesale Division and
          collected by AMC during the periods presented, and (iii) cash advanced
          by AMC on behalf of the Wholesale Division. The net change in
          divisional equity arising from intracompany transactions also includes
          all liabilities of the Wholesale Division, such as income taxes
          payable, that are not separate legal obligations of the Wholesale
          Division but have been charged to the Wholesale Division.
 
     The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and include all
information and footnotes required for interim financial statement presentation.
In the opinion of the Company, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ materially from those estimated. All significant
 
                                        7
<PAGE>   9
                        LONG BEACH FINANCIAL CORPORATION
 
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                  (CONTINUED)
                                  (UNAUDITED)
 
NOTE 1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION (CONTINUED)

intercompany transactions and balances have been eliminated and certain
reclassifications have been made to prior periods' consolidated financial
statements to conform to current period presentation. The results of operations
for the three and nine months ended September 30, 1998 are not necessarily
indicative of the results of operations to be expected for the year ending
December 31, 1998.
 
     The consolidated financial statements and notes to the consolidated
financial statements, along with management's discussion and analysis of
financial condition, results of operations, liquidity and capital resources
should be read in conjunction with the Company's recent filing on Form 10-K,
which contains the latest available audited consolidated financial statements
and notes thereto, as of and for the period ended December 31, 1997.
 
NOTE 2. STATEMENT OF OPERATIONS, PRESENTATION AND ANALYSIS OF PRO FORMA
        OPERATIONS
 
     The statements of operations for the three months and nine months ended
September 30, 1997, presented in this report on Form 10-Q include the 1997
Operating Results of the Wholesale Division of AMC and the Company's Results of
Operations. All rights, benefits and obligations relating to the 1997 Operating
Results of the Wholesale Division of AMC up to the time of the Reorganization
remain with AMC.
 
     The rights to loans which were originated by the Wholesale Division but
remained unsold at May 2, 1997 were retained by AMC (the "Retained Loans"). The
costs relating to the production of these loans were incurred and recorded by
the Wholesale Division of AMC and these loans were included as part of the loan
production for the month of April 1997. Subsequent to the Reorganization, the
Company purchased the Retained Loans from AMC at the same price and at the same
time that the Company sold these loans to an independent third party purchaser.
Because the gain from the sale of the Retained Loans was recorded after the
Reorganization, and because the Company's stockholders did not receive any of
the benefit of this gain, the Company did not include the gain from the sale of
the Retained Loans as part of the Company's Results of Operations. The principal
amount of the Retained Loans was approximately $33.8 million and the after tax
gain from the sale of these loans was approximately $807,000. The gains from the
sale of the Retained Loans are not reflected either as income from the Wholesale
Division of AMC or as income from the Company.
 
                                        8
<PAGE>   10
                        LONG BEACH FINANCIAL CORPORATION
 
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                  (CONTINUED)
                                  (UNAUDITED)
 
NOTE 2. STATEMENT OF OPERATIONS, PRESENTATION AND ANALYSIS OF PRO FORMA
        OPERATIONS (CONTINUED)
 
     The following table presents separately the operations of the Wholesale
Division of AMC and the Company, and the combined effect of their results for
each respective period. Additionally, the gain from the sale of the Retained
Loans is presented for informational purposes, with corresponding earnings and
per share data presented on a pro forma basis.
 
<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED                 NINE MONTHS ENDED
                                               SEPTEMBER 30, 1997                 SEPTEMBER 30, 1997
                                        --------------------------------   --------------------------------
                                         WHOLESALE                          WHOLESALE
                                        DIVISION OF     THE                DIVISION OF     THE
                                            AMC       COMPANY   COMBINED       AMC       COMPANY   COMBINED
                                        -----------   -------   --------   -----------   -------   --------
                                            (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                     <C>           <C>       <C>        <C>           <C>       <C>
REVENUES:
Gain on sale of loans.................      $--       $24,829   $24,829      $25,604     $36,404   $62,008
Net interest income...................       --         1,151     1,151          168       1,600     1,768
Loan servicing and other fees on
  loan................................       --           289       289           --         307       307
Amortization of mortgage servicing
  rights..............................       --           (69)      (69)          --         (69)      (69)
                                            ---       -------   -------      -------     -------   -------
Net operating income..................       --        26,200    26,200       25,772      38,242    64,014
EXPENSES:
Compensation expense..................       --         8,957     8,957        8,242      13,699    21,941
Premises and equipment expenses.......       --         1,020     1,020        1,106       1,519     2,625
Other general and administrative
  expenses............................       --         1,970     1,970        1,391       2,916     4,307
Corporate administrative charges......       --            --        --        2,294          --     2,294
Provision for losses..................       --           500       500        2,808         620     3,428
Sub-servicing costs...................       --           294       294           --         340       340
                                            ---       -------   -------      -------     -------   -------
          Total expenses..............       --        12,741    12,741       15,841      19,094    34,935
                                            ---       -------   -------      -------     -------   -------
Earnings before income taxes..........       --        13,459    13,459        9,931      19,148    29,079
Provision for income taxes............       --         5,600     5,600        3,984       7,796    11,780
                                            ---       -------   -------      -------     -------   -------
Net earnings..........................      $--       $ 7,859   $ 7,859      $ 5,947     $11,352   $17,299
                                            ===       =======   =======      =======     =======   =======
Pro forma net gain from sale of
  Retained Loans net of taxes.........       --            --        --          807          --       807
                                            ===       =======   =======      =======     =======   =======
Pro forma net earnings inclusive of
  gain from Retained Loans............      $--       $ 7,859   $ 7,859      $ 6,754     $11,352   $18,106
                                            ===       =======   =======      =======     =======   =======
Basic earnings per share..............      $--       $  0.31   $  0.31      $  0.24     $  0.45   $  0.69
                                            ===       =======   =======      =======     =======   =======
Diluted earnings per share............      $--       $  0.30   $  0.30      $  0.24     $  0.44   $  0.68
                                            ===       =======   =======      =======     =======   =======
Pro forma Basic earnings per share
  inclusive of gain from Retained
  Loans...............................      $--       $  0.31   $  0.31      $  0.27     $  0.45   $  0.72
                                            ===       =======   =======      =======     =======   =======
Pro forma Diluted earnings per share
  inclusive of gain from Retained
  Loans...............................      $--       $  0.30   $  0.30      $  0.27     $  0.44   $  0.71
                                            ===       =======   =======      =======     =======   =======
</TABLE>
 
NOTE 3. AGREEMENTS WITH RELATED PARTIES
 
     Administrative Services Agreements -- On April 28, 1997, the Company and
AMC entered into an administrative services agreement under which AMC agreed to
provide various services to the Company, including certain employee benefits
administration services, information services and data processing functions
 
                                        9
<PAGE>   11
                        LONG BEACH FINANCIAL CORPORATION
 
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                  (CONTINUED)
                                  (UNAUDITED)
 
NOTE 3. AGREEMENTS WITH RELATED PARTIES (CONTINUED)

and, through August 1997, mail room services. The agreement had a one year term
from the effective date of the Reorganization unless earlier terminated by the
Company upon 30 days written notice. The Company has paid $250,000 and $284,000
to AMC for such services during the nine months ended September 30, 1998 and
1997, respectively. In February 1998, the Company terminated this agreement,
effective March 1, 1998.
 
     In addition, on April 28, 1997, the Company and AMC entered into a second
administrative services agreement pursuant to which the Company agreed to assist
AMC in selling the mortgage loans originated by AMC and provide investor
coordination and information for the existing loan portfolio as well as new loan
originations. The agreement had a one-year term from the effective date of the
Reorganization, unless earlier terminated by AMC upon 30 days written notice.
The Company has received $110,000 from AMC for such services during the nine
months ended September 30, 1998 and $275,000 for the same period in 1997. AMC
terminated the services pursuant to the second administrative agreement,
effective March 1, 1998.
 
     Loan Sub-servicing Agreement -- On April 28, 1997, the Company and AMC
entered into a three-year loan sub-servicing agreement pursuant to which AMC
agreed to sub-service mortgage loans originated or purchased by the Company
after the Reorganization. Sub-servicing activities include collecting and
remitting loan payments, accounting for principal and interest, holding escrow
or impound funds for payment of taxes and insurance, if applicable, making
required inspections of the mortgaged property, contacting delinquent borrowers,
and supervising foreclosures and property dispositions. The agreement provides
that either party has the right to terminate the agreement effective at any time
after 18 months, upon six months prior written notice to the other party. The
Company has agreed to pay AMC a 45 basis points annual servicing fee on the
outstanding principal balance of each loan sub-serviced. Such sub-servicing
costs for the three months ended September 30, 1998 and 1997 amounted to $1.5
million and $294,000 respectively, and $3.3 million and $340,000 for the nine
months ended September 30, 1998 and 1997, respectively. During the third quarter
of 1998, the Company and AMC modified the sub-servicing agreement to accommodate
the establishment of the Company's independent servicing operations. Under the
modified sub-servicing agreement AMC no longer is required to sub-service loans
originated by the Company on or after November 2, 1998, and the Company is no
longer required to engage AMC to sub-service such loans.
 
     Income Taxes -- In connection with the Reorganization, AMC agreed to
indemnify and hold the Company harmless from any tax liability attributable to
periods ending on or before the Reorganization. For periods ending after the
Reorganization, the Company will pay its tax liability directly to the
appropriate taxing authorities.
 
     The agreements between the Company and AMC were developed in the context of
a related party relationship and, therefore, may not necessarily reflect the
same business terms as might have been obtained in arm's length negotiations
between independent parties.
 
NOTE 4. COMPREHENSIVE INCOME
 
     In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting
Comprehensive Income," which is effective for annual periods beginning after
December 15, 1997. This statement defines comprehensive income as the total of
all components of comprehensive income, including net income and other
comprehensive income. The term "other comprehensive income' refers to revenues,
expenses, gains and losses that under generally accepted accounting principles
are included in comprehensive income but excluded from net income. Other
comprehensive income items are classified separately into foreign currency
items, minimum pension liability adjustments, and unrealized gains and losses on
certain investments in debt and equity securities. All components of
comprehensive income shall be reported in the financial statements in the period
in which they
                                       10
<PAGE>   12

                        LONG BEACH FINANCIAL CORPORATION
 
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                  (CONTINUED)
                                  (UNAUDITED)
 
NOTE 4. COMPREHENSIVE INCOME (CONTINUED)

are recognized; however, if there are no items of other comprehensive income in
any period presented, then comprehensive income is not required to be reported
for that period. During the three months and nine months ended September 30,
1998 and 1997, there were no items of other comprehensive income recognized.
 
NOTE 5. EARNINGS PER SHARE
 
     The Company did not have any independent operations through the date of the
Reorganization, and all rights, benefits and obligations relating to the net
earnings of the Wholesale Division up to the date of the Reorganization remained
with AMC. Additionally, only one share of LBFC's common stock was issued and
outstanding until the Reorganization and no shares were issued or outstanding at
any time prior to 1997. Earnings per share ("EPS") data for 1997 was prepared
under the assumption that 25,000,000 shares of the Company's common stock were
issued and outstanding as of January 1, 1997 through September 30, 1997, and by
using common stock equivalents for all stock options issued by the Company from
the Reorganization through September 30, 1997.
 
     A reconciliation of the numerators and denominators used in basic and
diluted EPS computations for the periods indicated follows:
 
<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED           NINE MONTHS ENDED
                                                    SEPTEMBER 30,               SEPTEMBER 30,
                                              -------------------------   -------------------------
                                                 1998          1997          1998          1997
                                              -----------   -----------   -----------   -----------
<S>                                           <C>           <C>           <C>           <C>
COMPUTATION OF BASIC EARNINGS PER SHARE
Net Earnings available to common
  shareholder...............................  $ 8,257,000   $ 7,859,000   $21,075,000   $17,299,000
                                              ===========   ===========   ===========   ===========
Average common shares outstanding...........   23,506,455    25,000,000    24,076,762    25,000,000
                                              -----------   -----------   -----------   -----------
Basic earnings per share....................  $      0.35   $      0.31   $      0.88   $      0.69
                                              ===========   ===========   ===========   ===========
COMPUTATION OF DILUTED EARNINGS PER SHARE
Net Earnings available to common
  shareholder...............................  $ 8,257,000   $ 7,859,000   $21,075,000   $17,299,000
                                              ===========   ===========   ===========   ===========
Average common shares outstanding...........   23,506,455    25,000,000    24,076,762    25,000,000
Common stock equivalents -- stock options...      926,862     1,068,765     1,150,537       473,288
                                              -----------   -----------   -----------   -----------
Average diluted common shares...............   24,433,317    26,068,765    25,227,299    25,473,288
                                              ===========   ===========   ===========   ===========
Diluted earnings per share..................  $      0.34   $      0.30   $      0.84   $      0.68
                                              ===========   ===========   ===========   ===========
</TABLE>
 
NOTE 6. NET INTEREST INCOME
 
     The components of net interest income for the periods indicated are
presented in the table that follows:
 
<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED    NINE MONTHS ENDED
                                                              SEPTEMBER 30,        SEPTEMBER 30,
                                                           -------------------   ------------------
                                                             1998       1997       1998      1997
                                                           --------   --------   --------   -------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                                        <C>        <C>        <C>        <C>
Interest on loans........................................  $ 6,072    $ 2,579    $ 14,835   $ 5,763
Interest on investments..................................      199        320         735       638
                                                           -------    -------    --------   -------
     Subtotal interest income............................    6,271      2,899      15,570     6,401
                                                           -------    -------    --------   -------
Interest expense.........................................   (4,275)    (1,748)    (10,538)   (4,633)
                                                           -------    -------    --------   -------
Net interest income......................................  $ 1,996    $ 1,151    $  5,032   $ 1,768
                                                           =======    =======    ========   =======
</TABLE>
 
                                       11
<PAGE>   13
                        LONG BEACH FINANCIAL CORPORATION
 
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
     FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                  (CONTINUED)
                                  (UNAUDITED)
 
NOTE 7. NEW ACCOUNTING PRONOUNCEMENTS
 
     In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information, which is effective for annual periods
beginning after December 15, 1997. This statement 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. In the initial year of application, comparative
information for earlier years is to be restated. This statement need not be
applied to interim financial statements in the initial year of its application,
but comparative information for interim periods in the initial year of
application is to be reported in financial statements for interim periods in the
second year of application. The Company has not yet adopted SFAS 131 and does
not anticipate that the impact of this statement will have a material impact on
the Company's financial condition, results of operation and cash flows.
 
     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is effective for annual periods
beginning after June 15, 1999. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The Company
is currently evaluating the effect this standard may have on the Company's
financial condition, results of operations and cash flows.
 
                                       12
<PAGE>   14
 
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION,
             RESULTS OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES
 
ITEM 2. OVERVIEW
 
     Management's discussion and analysis of financial condition, results of
operations, liquidity and capital resources contained within this report on Form
10-Q is more clearly understood when read in conjunction with the Notes to the
Consolidated Financial Statements. The Notes to the Consolidated Financial
Statements define certain terms that are used throughout this discussion and
provide information on the Company and the basis of presentation used in this
report on Form 10-Q.
 
     The Company is a specialty finance company engaged in the business of
originating, purchasing and selling subprime residential mortgage loans secured
by one- to four-unit family residences. The Company's core borrower base
consists of individuals who do not qualify as traditional "A" credit borrowers
because their credit history, debt to income ratio or other factors do not
conform to standard agency lending criteria. The Company's primary loan
origination channel is through independent mortgage brokers and, to a lesser
extent, it purchases loans from mortgage companies and commercial banks.
Substantially all of the Company's loan originations and purchases are sold in
the secondary market through loan sales in which the Company disposes of its
economic interest in the loans for cash, except for the related servicing
rights, which it may retain. The Company has also sold loans on a serviced
released basis. As a result of this overall strategy, the Company's revenue is
primarily generated though cash loan sales, rather than non-cash revenue
attributable to residual interests in future payments on the loans, as is the
case with some securitization structured transactions that require the retention
of a residual economic interest.
 
     Prior to May 1997, the Company operated as the Wholesale Division of a
company now known as Ameriquest Mortgage Company ("AMC"). In May of 1997, AMC
reorganized (the "Reorganization") its business operations by transferring
certain assets, liabilities and personnel relating to the Company in exchange
for shares of common stock. Immediately after the Reorganization, the initial
public offering of the Company's common stock was completed. The Reorganization
has been accounted for in a manner similar to a pooling of interests and
therefore, the historical cost basis of the assets and liabilities transferred
to the Company was carried over from AMC.
 
     The Company's operations for the three months and nine months ended
September 30, 1997 have two components:
 
     1. Operations as a division of AMC for the period January 1, 1997 through
        May 1, 1997; and
 
     2. Operations as an independent company for the period May 2, 1997 through
        September 30, 1997.
 
     Because the Reorganization was accounted for in a manner similar to a
pooling of interests, the information contained within this report presents the
combined results of operations for the three months and nine months ended
September 30, 1997 and the combined cash flows for the nine months ended
September 30, 1997. All of the benefits, rights and obligations relating to the
operations and net earnings of the Wholesale Division of AMC, up to the date of
the Reorganization, remained with AMC.
 
     The financial statements of the Company, up to the date of the
Reorganization, have been prepared in part from records maintained by AMC. The
historical financial statements of the Company, up to the date of the
Reorganization, may not necessarily be indicative of the conditions that would
have existed if the Company had operated as an independent entity. The financial
statements, up to the date of the Reorganization, reflect key assumptions
regarding the allocations of certain revenue and expense items and certain
balance sheet accounts, many of which could be material. In particular, in cases
involving assets, liabilities, revenues and expenses not specifically
identifiable to any particular division of AMC, certain allocations were made to
reflect the operations of the Company. These allocations were based on a variety
of factors which management believes provide a reliable basis for the financial
statements.
 
     The primary components of the Company's revenues are gain on sales of loans
and net interest income. Gain on sales of loans, or the "Net Premium", consists
of: (i) the excess of the cash selling price over the
 
                                       13
<PAGE>   15
 
outstanding principal balance of the loan (the "Gross Cash Premium"), plus (ii)
capitalized mortgage servicing rights, minus (iii) the fees and other
compensation paid to independent mortgage brokers, minus (iv) purchase premiums
paid to correspondent lenders, and plus (v) points and fees received from the
borrower, offset by incremental direct loan origination costs. The Gross Cash
Premium plus capitalized mortgage servicing rights equals the "Gross Sales
Premium". Gross Cash Premiums are affected by market conditions, loan type,
credit quality, interest rate and other factors as negotiated between the
Company and independent purchasers.
 
     Net interest income represents the difference between the interest that is
earned on loans and other interest earning assets over the interest that is paid
under the revolving warehouse credit facility. Net interest income can be
affected by the volatility of interest rates, the level of interest earned on
interest earning assets, the cost of interest on the revolving warehouse credit
facility, the average amount of interest earning assets outstanding, and the
average amount of borrowings outstanding. The Company has adopted an investment
policy which limits its investment activities to high-quality, short-term
investments.
 
     Expenses include general and administrative expenses, provisions for
losses, sub-servicing costs and income tax expense. Prior to the Reorganization,
certain expenses, not specifically identifiable to any particular division of
AMC, were allocated to AMC's various divisions, including the Wholesale
Division. These allocations were prepared by AMC and, according to AMC, were
based on a variety of factors which took into consideration loan origination
volume, employee headcount, and historical ratios of direct expenses incurred by
the divisions to total direct expenses. No assurance can be provided that future
expenses incurred by the Company, as an independent entity, will be comparable
to the historical levels allocated by AMC to the Wholesale Division.
 
     The following table presents the Company's loan originations and purchases
and loan sales for the periods indicated:
 
<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED       NINE MONTHS ENDED
                                                SEPTEMBER 30,           SEPTEMBER 30,
                                             -------------------   -----------------------
                                               1998       1997        1998         1997
                                             --------   --------   ----------   ----------
                                                        (DOLLARS IN THOUSANDS)
<S>                                          <C>        <C>        <C>          <C>
Loan originations and purchases:
  Broker-sourced...........................  $562,022   $401,060   $1,568,748   $1,065,122
  Correspondent............................    93,168     44,704      204,077       91,989
  Retail-sourced...........................    19,121         --       44,235           --
                                             --------   --------   ----------   ----------
          Total loan originations and
            purchases......................  $674,311   $445,764   $1,817,060   $1,157,111
                                             ========   ========   ==========   ==========
Loan sales.................................  $646,481   $465,458   $1,774,981   $1,154,145
</TABLE>
 
     The Company's primary channel of loan production is through its
relationship with a network of approved independent mortgage brokers. The
Company has established a sales force ("Account Executives") to serve as the
principal contact between the Company and the independent mortgage brokers.
Financing USA, the Company's retail division, offers loan products directly to
borrowers, which are identical to those offered to independent brokers. These
products are marketed through direct mail, telemarketing and media advertising.
The Company offers a variety of loan programs and products, however,
substantially all loans originated by the Company are secured by first-lien
mortgages on residential properties consisting of one- to four-unit family
residences.
 
                                       14
<PAGE>   16
 
     The following table presents the Company's loan production, weighted
average interest rate ("WAIR"), and margin for the periods indicated:
 
<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED SEPTEMBER 30,
                                    --------------------------------------------------------
                                               1998                         1997
                                    --------------------------   ---------------------------
                                       LOAN                         LOAN
                                    PRODUCTION   WAIR   MARGIN   PRODUCTION   WAIR    MARGIN
                                    ----------   ----   ------   ----------   -----   ------
                                                     (DOLLARS IN THOUSANDS)
<S>                                 <C>          <C>    <C>      <C>          <C>     <C>
Fixed rate loans..................  $  154,110   9.92%    n/a    $  111,941   10.06%    n/a
Fixed/adjustable rate loans.......     415,220   9.65%   6.67%      206,550    9.71%   6.33%
Six-month adjustable rate loans...     104,981   8.92%   6.60%      127,273    8.91%   6.46%
                                    ----------                   ----------
          Total loan production...  $  674,311   9.60%   6.65%   $  445,764    9.59%   6.38%
                                    ==========                   ==========
</TABLE>
 
<TABLE>
<CAPTION>
                                                NINE MONTHS ENDED SEPTEMBER 30,
                                    --------------------------------------------------------
                                               1998                         1997
                                    --------------------------   ---------------------------
                                       LOAN                         LOAN
                                    PRODUCTION   WAIR   MARGIN   PRODUCTION   WAIR    MARGIN
                                    ----------   ----   ------   ----------   -----   ------
                                                     (DOLLARS IN THOUSANDS)
<S>                                 <C>          <C>    <C>      <C>          <C>     <C>
Fixed rate loans..................  $  420,433   9.98%    n/a    $  315,901   10.14%    n/a
Fixed-adjustable rate loans.......   1,065,933   9.67%   6.62%      465,788    9.71%   6.20%
Six-month adjustable rate loans...     330,694   8.96%   6.47%      375,422    8.94%   6.32%
                                    ----------                   ----------
          Total loan production...  $1,817,060   9.61%   6.58%   $1,157,111    9.58%   6.25%
                                    ==========                   ==========
</TABLE>
 
     During the third quarter of 1998, approximately $409.5 million or 60.7% of
the Company's loan production was made for the purpose of providing funds for
refinancing, and for $293.1 million of these refinancings, the respective
borrowers received cash to pay-off other debts. The average loan-to-value ratio
was 76.6% on loans originated and purchased during the third quarter of 1998 and
was 75.9% for loans produced during the nine months ended September 30, 1998.
 
     The Company's geographic markets are divided into various regions. Once the
Company determines that the level of current and projected business from a
region warrants creation of a local presence, the Company establishes a regional
processing center in or near the region. During the first nine months of 1998,
the Company opened additional centers in Chicago, Denver, and Dallas. At
September 30, 1998, the Company had ten regional processing centers serving its
eighteen regional teams.
 
     The following table presents loan production by state for the five highest
states and all others for the periods indicated:
 
<TABLE>
<CAPTION>
                         THREE MONTHS ENDED SEPTEMBER 30,         NINE MONTHS ENDED SEPTEMBER 30,
                        -----------------------------------   ---------------------------------------
                              1998               1997                1998                 1997
                        ----------------   ----------------   ------------------   ------------------
                                   % OF               % OF                 % OF                 % OF
        STATE            AMOUNT    TOTAL    AMOUNT    TOTAL     AMOUNT     TOTAL     AMOUNT     TOTAL
        -----           --------   -----   --------   -----   ----------   -----   ----------   -----
                                                   (DOLLARS IN THOUSANDS)
<S>                     <C>        <C>     <C>        <C>     <C>          <C>     <C>          <C>
California............  $219,991    32.6%  $151,910    34.1%  $  610,750    33.6%  $  404,236    34.9%
Colorado..............    49,833     7.4%    38,683     8.7%     133,090     7.3%     100,615     8.7%
Michigan..............    33,035     4.9%    29,287     6.6%      98,293     5.4%      69,157     6.0%
Texas.................    33,542     5.0%    14,622     3.3%      87,209     4.8%      43,579     3.8%
Florida...............    27,214     4.0%    23,954     5.3%      83,075     4.6%      59,330     5.1%
All others............   310,696    46.1%   187,208    42.0%     804,643    44.3%     480,194    41.5%
                        --------   -----   --------   -----   ----------   -----   ----------   -----
                        $674,311   100.0%  $445,664   100.0%  $1,817,060   100.0%  $1,157,111   100.0%
                        ========   =====   ========   =====   ==========   =====   ==========   =====
</TABLE>
 
     The Company follows the practice of entering into forward commitments to
sell its production. These forward commitments are typically made for a
substantial amount of the loans that the Company anticipates that it will
originate over the subsequent 90 to 180 days. Prior to entering into a forward
commitment, the Company evaluates prospective purchasers in order to assess
their ability to fulfill the terms of the agreement.
 
                                       15
<PAGE>   17
 
In the event that the volume of loans produced or the coupon rate or margin of
the loans originated and delivered to the purchaser are materially different
from the terms of the forward commitment, the sales price of the loans will be
adjusted accordingly. In the event the Company does not deliver the contract
volume of loans, a pair-off fee may be required to be paid to the purchaser.
 
     Loan sales are made to institutional purchasers on a non-recourse basis
pursuant to a purchase agreement containing customary representations and
warranties regarding underwriting criteria and the origination process. The
Company has not retained residual interests in the loans that it sells other
than servicing rights. Loans which, in the opinion of the Company, meet the
conditions of the forward sales commitment are recorded as sold at the trade
date. In the event that such loans are subsequently determined to be in
noncompliance with the terms of the forward sales commitment or breach of a
representation or a warranty, the Company may be required to repurchase the loan
or substitute a new loan. The Company may also be required to repurchase or
substitute a loan if the borrower defaults on the first payment due after the
loan is funded or if the loan documentation contains fraudulent
misrepresentations made by the borrower. The Company realizes that such
repurchases are inherent in its operations and that the Company may realize a
reduction in the previously recognized gain on sale or sustain a loss from such
repurchases. The Company provides allowances for losses in anticipation of such
events that arise in connection with originating loans and subsequently selling
them to investors.
 
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1997
 
     The Company achieved record earnings for the three and nine months ended
September 30, 1998 as a result of selling its increased loan originations and
purchases. During the three months ended September 30, 1998, net earnings
increased to $8.3 million an increase of $398,000 or 5.1% over $7.9 million of
net earnings for the same period in 1997. During the nine months ended September
30, 1998, net earnings increased by $3.8 million or 21.8% to $21.1 million from
$17.3 million during the same period in 1997. The Company's net earnings per
diluted share was $0.34 for the quarter ended September 30, 1998, an increase of
13.3% over net earnings per diluted share of $0.30 for the third quarter of
1997. Net earnings per diluted share totaled $0.84 for the nine months ended
September 30, 1998, an increase of 23.5% over net earnings per diluted share of
$0.68 for the same period of 1997.
 
     The primary factors that led to the improvement in net earnings and net
earnings per share recorded during the three and nine months ended September 30,
1998 as compared to the same periods in 1997 include:
 
     -  Increased loan production. Loan production increased by $228.5 million
        or 51.3% to $674.3 million during the three months ended September 30,
        1998 as compared to the same period of 1997. During the nine months
        ended September 30, 1998, loan production increased by $659.9 million or
        57.0% to $1.8 billion as compared to the same period of 1997.
 
     -  Increased loan sales. Loans sold during the three months ended September
        30, 1998 totaled $646.5 million, an increase of $181.0 million or 38.9%
        over the same period of 1997. During the nine months ended September 30,
        1998, loan sales totaled $1.8 billion, an increase of $620.8 million or
        53.8% over loan sales of $1.2 billion for the same period of 1997.
 
     -  Lower effective income tax rate. The Company's provision for income
        taxes declined to 38% as a percentage of earnings before income taxes
        during the third quarter of 1998 as compared to 42% during the same
        period of 1998. The income tax rate was 40% during the nine months ended
        September 30, 1998 as compared to 41% during the nine months ended
        September 30, 1997. (See page 20 "Income Taxes").
 
     -  Lower level of shares outstanding. The decline in the average number of
        shares outstanding positively impacted net earnings per share. The
        average number of diluted shares outstanding declined to 24.4 million
        for third quarter of 1998, a decline of 1.6 million shares from the same
        period of 1997. Average diluted shares declined to 25.2 million for the
        nine months ended September 30, 1998, a decline from 25.5 million
        average shares outstanding during the comparable period of 1997. The
 
                                       16
<PAGE>   18
 
        primary reason for the decline in the average number of shares is due to
        the Company repurchasing 2.4 million shares of its common stock,
        pursuant to its stock repurchase program.
 
     Revenues. The following table sets forth the components of the Company's
revenues for the periods indicated:
 
<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED    NINE MONTHS ENDED
                                                       SEPTEMBER 30,        SEPTEMBER 30,
                                                    -------------------   -----------------
                                                      1998       1997      1998      1997
                                                    --------   --------   -------   -------
                                                            (DOLLARS IN THOUSANDS)
<S>                                                 <C>        <C>        <C>       <C>
Gain on sale of loans.............................  $31,098    $24,829    $86,653   $62,008
Net interest income...............................    1,996      1,151      5,032     1,768
Loan servicing and other fees on loans............    1,532        289      3,372       307
Amortization of mortgage servicing rights.........     (328)       (69)      (796)      (69)
                                                    -------    -------    -------   -------
          Total revenues..........................  $34,298    $26,200    $94,261   $64,014
                                                    =======    =======    =======   =======
</TABLE>
 
     Total revenues during the three months ended September 30, 1998, increased
by $8.1 million or 30.9%, compared to same period in 1997, primarily as a result
of an increase in gain on sales of loans of $6.3 million or 25.3% during the
same comparative periods. The primary factor contributing to this increase was
an increase in the amount of loans sold of 38.9% to $646.5 million during the
three months ended September 30, 1998, as compared to the same period in 1997.
Such increase was partially offset by a decrease in Net Premiums on the sale of
loans to 4.81% during the three months ended September 30, 1998, from 5.33%
during the same period in 1997.
 
     During the nine months ended September 30, 1998, total revenues increased
by $30.2 million or 47.3%, compared to the same period in 1997, primarily as a
result of an increase in gain on sales of loans of $24.6 million or 39.7% during
the same comparative periods. The primary factor contributing to this increase
was an increase in the amount of loans sold of 53.8% to $1,775.0 million during
the nine months ended September 30, 1998, as compared to the same period in
1997. Such increase was partially offset by a decrease in the Net Premiums on
the sale of loans to 4.88% during the nine months ended September 30, 1998, from
5.37% during the same period in 1997.
 
     The increase in the amount of loans sold resulted from an increase in loan
originations and purchases to $674.3 million during the three months ended
September 30, 1998, from $445.8 million during the same period in 1997, and $1.8
billion during the nine months ended September 30, 1998, from $1.2 billion
during the same period in 1997. This trend reflects the Company's continued
growth of its broker-sourced business through penetration in existing markets
and expansion into new geographic markets. During the nine months ended
September 30, 1998, the Company originated loans in all 50 states compared to 48
states during the same period in 1997. Additionally, the Company expanded its
sales force to 322 at September 30, 1998, an increase of 46% over the level at
September 30, 1997.
 
     Gain on sale of loans increased to $31.1 million during the third quarter
of 1998, an increase of $6.3 million over gain on sale of $24.8 million during
the same period of 1997. Gain on sale of loans totaled $86.7 million during the
nine months ended September 30, 1998, an increase of $24.7 over gain on sale of
loans during the comparable period of 1997. The increase in gain on sale during
1998 is due to an increase in the amount of loans sold, partially offset by a
decline in Gross Sales Premiums. Net Premiums on the sale of loans decreased to
4.81% during the third quarter of 1998, as compared to 5.33% during the same
period in 1997. For the nine months ended September 30, 1998, Net Premiums on
the sale of loans decreased to 4.88%
 
                                       17
<PAGE>   19
 
as compared to 5.37% during the same period in 1997. The table below presents
the premiums received/paid by the Company expressed as a percentage of loans
sold during the respective period.
 
<TABLE>
<CAPTION>
                                                         THREE MONTHS     NINE MONTHS
                                                            ENDED            ENDED
                                                        SEPTEMBER 30,    SEPTEMBER 30,
                                                        --------------   --------------
                                                        1998     1997    1998     1997
                                                        -----    -----   -----    -----
<S>                                                     <C>      <C>     <C>      <C>
Gross Sales Premiums as a % of loan sales.............   6.18%    6.54%   6.16%    6.45%
Fees paid to brokers as a % of loan sales.............  (1.17)   (1.09)  (1.16)   (1.03)
Fees paid to correspondents as a % of loan sales......  (0.44)   (0.28)  (0.33)   (0.23)
Points, fees and other as a % of loan sales...........   0.24     0.16    0.21     0.18
                                                        -----    -----   -----    -----
Net Premiums as a % of loan sales.....................   4.81%    5.33%   4.88%    5.37%
                                                        =====    =====   =====    =====
</TABLE>
 
     The decline in Net Premiums is primarily the result of the Company selling
a higher amount of loans generated from the Correspondent channel. The Company
normally pays a higher fee to its correspondents than it does to brokers. During
the third quarter of 1998, purchase premiums relating to correspondent loans
averaged 3.21% of correspondent loans sold, while fees paid to brokers averaged
1.40% of broker loans sold.
 
     Loan servicing and other fees totaled $1.2 million during the three months
ended September 30, 1998, net of amortization of mortgage servicing rights
totaling $328,000. During the nine months ended September 30, 1998, loan
servicing and other fees totaled $2.6 million, net of amortization of mortgage
servicing rights totaling $796,000. The Company generally earns an annual 50
basis points on the outstanding principal balance of each loan it services, and
retains the right to receive late fees and other charges in connection with the
servicing of such loans. At September 30, 1998, the outstanding balance of the
servicing portfolio totaled $1.2 billion. Prior to the Reorganization, all
related loan servicing revenues were recognized by an affiliated division of
AMC. During the third quarter, the Company and AMC modified the existing loan
sub-servicing agreement, which provides the Company the right to begin servicing
its loans. The Company began its independent servicing operations on November 2,
1998.
 
     Net interest income totaled $2.0 million during the third quarter of 1998,
an increase of $845,000 compared to the same period in 1997. During the nine
months ended September 30, 1998, net interest income totaled $5.0 million, an
increase of $3.3 million compared to the same period in 1997. Such increases
resulted from a higher level of average loans held for sale during the period,
partially offset by a higher level of average advances under the revolving
warehouse financing facility. Subsequent to the Reorganization, the Company
began utilizing its excess liquidity to fund a portion of its loan originations.
This strategy has resulted in higher levels of return on its excess liquidity
and has allowed the Company the flexibility to transfer such loans to its
warehouse line on a same-day basis.
 
     Expenses. The following table sets forth the components of the Company's
expenses for the periods indicated:
 
<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED    NINE MONTHS ENDED
                                                       SEPTEMBER 30,        SEPTEMBER 30,
                                                    -------------------   -----------------
                                                      1998       1997      1998      1997
                                                    --------   --------   -------   -------
                                                            (DOLLARS IN THOUSANDS)
<S>                                                 <C>        <C>        <C>       <C>
Compensation expense..............................  $12,100    $ 8,957    $35,797   $21,941
Premises and equipment expenses...................    3,119      1,020      8,288     2,625
Other general and administrative expenses.........    3,207      1,970      8,015     4,307
                                                    -------    -------    -------   -------
          Total direct expenses...................   18,426     11,947     52,100    28,873
Allocated expenses from AMC.......................       --         --         --     2,294
                                                    -------    -------    -------   -------
          Total general and administrative
            expenses..............................   18,426     11,947     52,100    31,167
Provision for losses..............................    1,100        500      3,500     3,428
Sub-servicing costs...............................    1,542        294      3,326       340
                                                    -------    -------    -------   -------
          Total expenses..........................  $21,068    $12,741    $58,926   $34,935
                                                    =======    =======    =======   =======
</TABLE>
 
                                       18
<PAGE>   20
 
     The total dollar amount of general and administrative expenses increased
during the three and nine months ended September 30, 1998, compared to the same
periods in 1997. Additionally, the percentage of total general and
administrative expense to loan production increased to 2.73% and 2.87%, during
the three and nine months ended September 30, 1998, respectively, compared to
2.68% and 2.69%, during the three and nine months ended September 30, 1997,
respectively. The increase in general and administrative expenses is due to: (i)
costs relating to the increase in volume of loan production, (ii) an increase in
corporate infrastructure, (iii) the costs of initiating a retail production
channel, and (iv) the costs of initiating a loan servicing function. During 1998
the Company added regional processing centers in Denver, Dallas and Chicago in
order to support loan production.
 
     Compensation expense increased by 35.1% during the third quarter of 1998,
compared to the same period in 1997. During the nine months ended September 30,
1998, compensation expense increased by 63.2% compared to the same period in
1997. The primary reason for such increase is attributable to increases in
commissions paid to production employees. Additionally, compensation expenses
increased during 1998 as a result of the increase in corporate staff to support
the infrastructure of the Company as an independent entity. The number of
employees totaled 788 at September 30, 1998, up from 497 at September 30, 1997.
During the third quarter of 1998 the Company determined that no additional
accruals were necessary for anticipated bonuses for certain corporate officers
for the calendar year 1998.
 
     Premises and equipment expenses increased by 205.8% during the third
quarter of 1998, compared to the same period in 1997. During the nine months
ended September 30, 1998, premises and equipment expenses increased by 215.7%
compared to the same period in 1997. Such increases reflect an increase in
occupancy costs related to growth in personnel to support the increased volume
of loan production, initiating a loan servicing function as well as an increase
in headquarters space to support the Company's infrastructure as an independent
entity since the Reorganization.
 
     Other general and administrative expenses increased by 62.8% during the
third quarter of 1998, compared to the same period in 1997. During the nine
months ended September 30, 1998, other general and administrative expenses
increased by 86.1% compared to the same period in 1997. The increase in other
general and administrative expenses is primarily the result of increased
infrastructure and costs incurred in support of the Company's loan production.
 
     Prior to the Reorganization, the Wholesale Division received an allocation
of expenses from AMC, as detailed in Note 1 to the Company's Consolidated
Financial Statements. Following the Reorganization, such allocations ceased when
the Company began its operations as an independent entity. During the nine
months ended September 30, 1997, such allocated expenses from AMC totaled $2.3
million.
 
     Provision for losses increased to $1.1 million for the three months ended
September 30, 1998, as compared to $500,000 in 1997. During the nine months
ended September 30, 1998, provision for losses increased to $3.5 million
compared to $3.4 million for the same period in 1997. The provision recorded
during 1998 represents estimated losses from:(i) breaches of representations and
warranties, (ii) first payment defaults, (iii) repurchases of loans recorded as
sold, and (iv) loans held for sale. At September 30, 1998, the Company had $1.9
million of allowances for these potential losses. Prior to the Reorganization,
AMC allocated $2.4 million of provision for losses to the Wholesale Division.
This allocation related to losses sustained by the Wholesale Division during
April 1997 from the repurchase and sale of certain loans which were originated
by the Wholesale Division in previous years.
 
     As more fully discussed in Note 3 to the Company's Consolidated Financial
Statements, since the Reorganization, the Company has entered into an agreement
with AMC pursuant to which AMC agreed to sub-service mortgage loans originated
or purchased by the Company after the Reorganization. The Company has agreed to
pay AMC a 45 basis point annual servicing fee on the outstanding principal
balance of each loan sub-serviced. Such sub-servicing costs for the three and
nine months ended September 30, 1998 totaled $1.5 million and $3.3 million,
respectively, compared to $294,000 and $340,000 for the three and nine months
ended September 30, 1997. The Company and AMC modified the sub-servicing
agreement during the third quarter of 1998. The Company anticipates that its
future sub-servicing cost will decline commensurate with
 
                                       19
<PAGE>   21
 
the decline in the volume of loans serviced by the sub-servicer. The Company's
cost of servicing will be reported as part of its general and administrative
expenses in the future.
 
     Income Taxes. During the first quarter of 1998, the Company engaged its
independent external accountants to perform a study on its state income tax
filing methodologies to assist with the filing of its initial state income tax
returns in those states where the Company had significant operations. Prior to
the completion of this analysis, the Company estimated its combined income tax
rate to be 42%. The study was completed during the third quarter of 1998 and
indicated that the Company's actual income tax expense for 1998 should be
approximately 40%-41%. Applying the lower effective annual tax rate to the
Companys's 1998 operations resulted in the Company's income tax expense
declining to 38% of pre-tax earnings during the third quarter and to 40% for the
nine months ended September 30, 1998. Comparatively, the income tax rate for the
third quarter of 1997 was 42% and 41% for the nine months ended September 30,
1997. The Company anticipates that its ongoing combined tax rate to continue to
approximate 40-41% of pre-tax earnings. Because the Wholesale Division was part
of AMC until the Reorganization, AMC is responsible for the payment of all
federal and state income taxes owed by the Wholesale Division of AMC prior to
the Reorganization.
 
FINANCIAL CONDITION
 
     A substantial portion of the Company's cash and cash equivalents are
maintained in accounts with its warehouse lender. The Company earns interest on
these funds at a yield that approximates the 30 day reserve adjusted London
Inter-Bank Offered Rate ("LIBOR"). At September 30, 1998, cash and cash
equivalents included $25.8 million in funds which were borrowed from its
warehouse lender for the funding of loans. Such advances were not utilized to
fund loans and were repaid to the warehouse lender the following business day.
 
     As discussed in more detail in Liquidity and Capital Resources, the
Company's investment securities consists of high-quality, short-term securities.
At September 30, 1998, the largest component of the Company's investment
securities consisted of a money market mutual fund, which limits it holdings to
government securities. These securities are available for sale, and their market
value approximated their historical cost basis at September 30, 1998.
 
     Loans held for sale increased by $35.6 million as of September 30, 1998, as
compared to December 31, 1997, reflecting the continuing increase in loan
origination activity from month to month, partially offset by an increase in the
receivable from the sale of loans. Loans held for sale are valued at the lower
of their historical cost basis or market value, determined on an aggregate
basis. At September 30, 1998, the Company's allowance for losses on loans held
for sale totaled $1.4 million.
 
     Receivable from the sales of loans represents the proceeds from the sales
of loans that have not been received by the Company from the purchaser. At
September 30, 1998, receivable from the sales of loans totaled $320.5 million
compared to $143.1 million at December 31, 1997. Such balances normally are
collected within a 30-day period from month-end. As of October 31, 1998,
substantially all of the proceeds related to the receivable from the sales of
loans at September 30, 1998 had been collect
 
     At September 30, 1998, the Company had recorded $5.0 million of capitalized
servicing rights, net of amortization which totaled $796,000 during the nine
months ended September 30, 1998. Capitalized servicing rights are subject to
downward valuation in the event that the market value of the servicing is lower
than the recorded amounts, which typically occurs when the related loans have
higher ratios of loss (charge-offs) and/or rates of prepayment than had been
predicted at the time of sale.
 
     The warehouse financing facility and reverse repurchase agreement increased
$204.4 million over the 1997 year-end level as a result of an increase in the
receivable from the sales of loans over the same comparative period and
increased origination volume. As a percentage of total capitalization, warehouse
financing facility and reverse repurchase agreement reflects an increase, to 79%
at September 30, 1998 compared to 62% at December 31, 1997.
 
                                       20
<PAGE>   22
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company had $34.4 million in cash and cash equivalents at September 30,
1998 reflecting continued positive cash flows generated since the
Reorganization. Prior to the Reorganization, all cash generated by the Wholesale
Division of AMC was collected by AMC, and as such, cash and cash equivalents for
the Company at any point prior to the Reorganization reflects a zero balance.
Nonetheless, the Company has historically generated positive cash flow. Sources
of cash flow include loan sales, net interest income and borrowings. Uses of
cash include the funding of loan originations and purchases, repayment of
borrowings and related interest expenses, operating and administrative expenses,
income taxes, purchases of treasury stock , and capital expenditures.
 
     The Company funds its operations through its loan sales, revolving
warehouse credit facility under which it borrows money to finance the
origination and purchase of loans, cash reserves, and net earnings.
Additionally, the Company may utilize cash reserves to fund loan production in
order to maximize the return on excess liquidity. The Company repays borrowings
with the proceeds from loan sales. During the three months ended September 30,
1998 and 1997, the Company used cash in the amount of $674.3 million and $445.8
million, respectively, for new loan originations and purchases. During the same
periods, the Company received cash proceeds from the sale of loans of $646.3
million and $465.5 million, respectively, representing the principal balance of
loans sold. The Company received cash proceeds from the premiums on such loans
sales of $34.9 million and $28.2 million, respectively, for the three months
ended September 30, 1998 and 1997. During the nine months ended September 30,
1998 and 1997, the Company used cash in the amount of $1.8 billion and $1.2
billion, respectively, for new loan originations and purchases. During the same
periods, the Company received cash proceeds from the sale of loans of $1.8
billion and $1.2 billion, respectively, representing the principal balance of
loans sold. The Company received cash proceeds from the premiums on such loans
sales of $100.7 million and $67.2 million, respectively, for the nine months
ended September 30, 1998 and 1997.
 
     The Company has three primary sources of funding its loans:(i) a committed
$300 million revolving warehouse facility provided by a syndicate of banks, led
by Chase Bank of Texas, (ii) an uncommitted $100 million repurchase facility,
and (iii) the Company's excess liquidity. Those borrowing facilities have a
variety of financial and compliance covenants and the Company exceeded all of
these covenants at September 30, 1998. These facilities bear interest at a
specified margin over one month LIBOR. The weighted average cost of funds for
these facilities was 6.81% at September 30, 1998. At September 30, 1998, the
Company had borrowed $25.8 million on loans which had not yet funded. These
borrowings were repaid the following business day. At September 30, 1998, the
Company had utilized $35.4 million of its excess liquidity to fund loans.
 
     The Company has adopted an investment program for available liquidity. The
objectives of this program are to preserve the capital of the Company while
maintaining flexibility for strategic opportunities. The Company's investment
strategy seeks to maximize returns within the policy's objectives. The weighted-
average yield on the Company's investment portfolio at September 30, 1998 was
5.35%.
 
     The Company has utilized its available liquidity to repurchase shares of
its stock on the open market. Pursuant to a stock repurchase plan adopted by the
Board of Directors in October 1997, the Company is authorized to repurchase up
to 2.5 million shares of the Company's common stock through the end of September
1999. During the third quarter of 1998 the Company repurchased 1.5 million
shares of stock at a cost of $14.4 million. During the nine months ended
September 30, 1998, the Company used $21.2 million of available liquidity to
purchase an additional 2.1 million shares of its common stock. The Company has
spent $24.5 million and has repurchased 2.4 million shares since the plan's
inception.
 
     The Company believes that sufficient cash from operations and borrowings
will be generated to fund operations. However, the Company's ability to continue
to originate and purchase loans is dependent in large part upon its ability to
sell the loans at a premium in order to generate cash proceeds to repay
borrowings under the warehouse financing facility, thereby creating borrowing
capacity to fund new originations and purchases. The value of and market for the
Company's loans are dependent upon a number of factors, including the
loan-to-value ratios and interest rates on the loans, general economic
conditions, interest rates
                                       21
<PAGE>   23
 
and governmental regulations. Adverse changes in such factors may affect the
Company's ability to sell loans for acceptable prices within a reasonable period
of time. A prolonged, substantial reduction in the size of the secondary market
for loans of the type originated or purchased by the Company may adversely
affect the Company's ability to sell loans in the secondary market with a
consequent adverse impact on the Company's results of operations, financial
condition and ability to fund future originations and purchases.
 
     The Company has entered into a forward sales contract with an investment
banking firm to sell $1.3 billion of its future loan production to be delivered
to the purchaser on or before March 31, 1999. The Gross Sales Premium that the
Company will realize from this commitment is dependent upon the type, quality,
interest rate and other terms of the loans delivered to the purchaser. While the
Company does not currently anticipate that the Gross Sales Premium generated
from this forward sale commitment will vary substantially from recent levels,
there can be no assurance that the Company will be able to generate the
sufficient level of production to fulfill this commitment or that the interest
rates, loan to value ratios and/or other key terms of the loans delivered under
the forward sale agreement will generate a Gross Sales Premium comparable to the
level realized during the third quarter of 1998. Additionally the prices in
secondary market for subprime mortgage have recently constricted. Widening
spreads in the asset-backed capital markets has caused pricing for loans,
similar to those originated by the Company, to substantially decline. There can
be no assurance provided that after the expiration of its forward sales
commitment, that the Company will be able to sell its loans in the secondary
market at a price near recent levels. A material decline in such prices could
have a material adverse impact on the Company's profitability and liquidity.
 
  Year 2000
 
     The Company is aware of ensuing issues involving the upcoming date change
from December 31, 1999 to January 1, 2000 ("Year 2000") and the effect of such
change on the Company's information systems. The Company established a task
force to evaluate the internal information technology (IT) and non-IT systems
that could be affected by such date change and also identified the external
systems that are critical to the Company's operations. An assessment of the
readiness of the Company's suppliers is ongoing.
 
     During 1998, the Company has implemented and upgraded several of its core
systems in its effort to establish fully independent operations from its
predecessor company. The discontinuation of the Administrative Services
Agreements was made possible by building an in-house IT infrastructure. This
infrastructure was designed to be fully compliant with the Year 2000 date
change. The software packages selected by the Company as part of establishing
independent operations was chosen in part based on being Year 2000 compliant.
This software includes the Company's accounting, treasury, human resources,
payroll, loan servicing, and network management software. The total expenditures
during 1998 related to establishing independent IT systems approximate $2.5
million, of which $1.0 million has been capitalized.
 
     The Company's plan for Year 2000 readiness has three phases. Phase one
involves identifying and remediating the internal systems and processes that
must be Year 2000 compliant. The Company estimates that it is 70% complete, with
a planned completion date at the end of 1998. Phase two consists of developing a
contingency plan for those external systems or suppliers that are critical for
the Company to operate, but are not yet Year 2000 compliant. The Company
estimates that it will have developed and begun to implement these contingency
plans during the first quarter of 1999. Phase three consists of testing both the
internal and external systems as a whole, and has been scheduled to be completed
by the end of first quarter 1999.
 
     The Company does not anticipate the cost of addressing all the issues
associated with becoming Year 2000 compliant will have a material impact on its
financial condition, results of operations or liquidity in any single year. The
Company's estimates are based upon the assumption that its major third party
suppliers are or become Year 2000 compliant within the time frame outlined
above. The Company has requested that its major third party suppliers provide
details of their Year 2000 compliance program and schedule of testing. In the
event any of these vendors are unable to become compliant the Company may incur
additional costs.
 
     Although the Company has taken steps to identify, evaluate and remediate
its Year 2000 compliance issues, it is possible that certain of its suppliers
and/or systems may not be Year 2000 compliant by January 1, 2000. These
suppliers provide the Company with computer processing systems, banking and
financial systems,
                                       22
<PAGE>   24
 
and utility infrastructure. In the event that any of these suppliers and/or
systems are not Year 2000 compliant as of January 1, 2000, the Company may be
exposed to an impairment in its: (i) operations, (ii) business processes, (iii)
ability to meet its financial obligations. The impairment in any of these areas
could have a material adverse effect on the Company's financial condition,
results of operations and liquidity. The Company is assessing these risks and is
creating contingency plans intended to address such risks, and expects to have
such plans in place by the end of the first quarter of 1999.
 
     Forward looking information: Certain disclosures made by the Company in
this report and in other reports and statements released by the Company,
including the Company's recent filing on Form 10-K as of and for the period
ended December 31, 1997, are forward-looking in nature, such as comments which
express the Company's opinion about trends and factors which may impact future
operating results. Disclosures which use words such as the Company "believes,"
"anticipates," "expects" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks and
uncertainties which could cause actual results to differ materially from
expectations. Any forward-looking statements, whether made in this report or
elsewhere, should be considered in context with the various disclosures made by
the Company about its business.
 
ACCOUNTING CONSIDERATIONS
 
     In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information, which is effective for annual periods
beginning after December 15, 1997. This statement 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. In the initial year of application, comparative
information for earlier years is to be restated. This statement need not be
applied to interim financial statements in the initial year of its application,
but comparative information for interim periods in the initial year of
application is to be reported in financial statements for interim periods in the
second year of application. The Company has not yet adopted SFAS 131 and does
not anticipate that the impact of this statement will have a material impact on
the Company's financial condition, results of operation and cash flows.
 
     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is effective for annual periods
beginning after June 15, 1999. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The Company
is currently evaluating the effect this standard may have on the Company's
financial condition, results of operations and cash flows.
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
     Not Applicable.
 
                                       23
<PAGE>   25
 
                           PART II. OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
     Not Applicable.
 
ITEM 2. CHANGES IN SECURITIES
 
     Not Applicable.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
     Not Applicable.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
 
     Not Applicable.
 
ITEM 5. OTHER INFORMATION
 
     Not Applicable.
 
                                       24
<PAGE>   26
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
     (a) Exhibits
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
<C>        <S>
  *3.1     Amended and Restated Certificate of Incorporation of Long
           Beach Financial Corporation
  *3.2     Bylaws of Long Beach Financial Corporation
  *4.1     Specimen of the Common Stock of Long Beach Financial
           Corporation
 *10.1     Administrative Services Agreement among Long Beach Mortgage
           Company, Long Beach Financial Corporation and Ameriquest
           Mortgage Corporation
 *10.2     Form of Master Sub-Servicing Agreement, between Long Beach
           Mortgage Company and Ameriquest Mortgage Corporation
 *10.3     4/97 Senior Secured Credit Agreement, among Ameriquest
           Mortgage Corporation and Texas Commerce Bank National
           Association, as Lender and Agent
 *10.4     Form of Director/Officer Indemnification Agreement
 *10.5     Contribution Agreement, between Ameriquest Capital
           Corporation, Long Beach Mortgage Company, Long Beach
           Financial Corporation and Ameriquest Mortgage Corporation
 *10.6     1997 Stock Incentive Plan
 *10.7     Employment Agreement, between Long Beach Financial
           Corporation, Ameriquest Mortgage Corporation and M. Jack
           Mayesh
 *10.8     Employment Agreement, between Long Beach Financial
           Corporation, Ameriquest Mortgage Corporation and Edward
           Resendez
 *10.9     Employment Agreement, between Long Beach Financial
           Corporation, Ameriquest Mortgage Corporation and Frank J.
           Curry
 *10.10    Employment Agreement, between Long Beach Financial
           Corporation, Ameriquest Mortgage Corporation and James H.
           Leonetti
 *10.11    Employment Agreement, between Long Beach Financial
           Corporation, Ameriquest Mortgage Corporation and James J.
           Sullivan
 *10.12    Department of Justice Settlement Agreement
 *10.13    Employment Agreement, between Long Beach Financial
           Corporation, Long Beach Mortgage Company and William K.
           Komperda.
 *10.14    Form of Amendment to Employment Agreement, among Long Beach
           Financial Corporation, Long Beach Mortgage Company and each
           of M. Jack Mayesh, Edward Resendez, Frank J. Curry, James H.
           Leonetti, and James J. Sullivan.
 *10.15    4/98 Amended and Restated Senior Secured Credit Agreement,
           among Long Beach Mortgage Company and Chase Bank of Texas,
           as Lender and Agent.
  10.16    Amended and Restated Employment Agreement, between Long
           Beach Financial Corporation, Long Beach Mortgage Company and
           M. Jack Mayesh
  10.17    Amended and Restated Employment Agreement, between Long
           Beach Financial Corporation, Long Beach Mortgage Company and
           Edward Resendez
  10.18    Amended and Restated Employment Agreement, between Long
           Beach Financial Corporation, Long Beach Mortgage Company and
           Frank J. Curry
  10.19    Amended and Restated Employment Agreement, between Long
           Beach Financial Corporation, Long Beach Mortgage Company and
           William K. Komperda
  10.20    Amended and Restated Employment Agreement, between Long
           Beach Financial Corporation, Long Beach Mortgage Company and
           James H. Leonetti
  10.21    Amended and Restated Employment Agreement, between Long
           Beach Financial Corporation, Long Beach Mortgage Company and
           James J. Sullivan
</TABLE>
 
                                       25
<PAGE>   27
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
<C>        <S>
  10.22    Employment Agreement, between Long Beach Financial
           Corporation, Long Beach Mortgage Company and Elizabeth A.
           Wood
  10.23    Supplemental Agreement to Master Sub-Servicing Agreement
           between Long Beach Mortgage Company and Ameriquest Mortgage
           Company
  10.24    Master Repurchase Agreement between Merrill Lynch Mortgage
           Capital Inc., Merrill Lynch Credit Corporation and Long
           Beach Mortgage Company
  27       Financial Data Schedule
</TABLE>
 
---------------
* Previously filed.
 
     (b) Reports on Form 8-K
 
        None.
 
                                       26
<PAGE>   28
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf of the undersigned
thereunto duly authorized, in the City of Orange, State of California.
 
LONG BEACH FINANCIAL CORPORATION
(Registrant)

 
<TABLE>
<S>  <C>                                                               <C>
By:  /s/  M. JACK MAYESH                                               November 12, 1998
     ------------------------------------------------------------      -----------------
     M. Jack Mayesh                                                    Date
     Chairman and Chief Executive Officer


By:  /s/  JAMES H. LEONETTI                                            November 12, 1998
     ------------------------------------------------------------      -----------------
     James H. Leonetti                                                 Date
     Senior Vice President and Chief Financial Officer
</TABLE>
 
                                       27
<PAGE>   29
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
                                                                         SEQUENTIALLY
EXHIBIT                                                                    NUMBERED
NUMBER                             DESCRIPTION                               PAGE
-------                            -----------                           ------------
<C>        <S>                                                           <C>
  *3.1     Amended and Restated Certificate of Incorporation of Long
           Beach Financial Corporation
  *3.2     Bylaws of Long Beach Financial Corporation
  *4.1     Specimen of the Common Stock of Long Beach Financial
           Corporation
 *10.1     Administrative Services Agreement among Long Beach Mortgage
           Company, Long Beach Financial Corporation and Ameriquest
           Mortgage Corporation
 *10.2     Form of Master Sub-Servicing Agreement, between Long Beach
           Mortgage Company and Ameriquest Mortgage Corporation
 *10.3     4/97 Senior Secured Credit Agreement, among Ameriquest
           Mortgage Corporation and Texas Commerce Bank National
           Association, as Lender and Agent
 *10.4     Form of Director/Officer Indemnification Agreement
 *10.5     Contribution Agreement, between Ameriquest Capital
           Corporation, Long Beach Mortgage Company, Long Beach
           Financial Corporation and Ameriquest Mortgage Corporation
 *10.6     1997 Stock Incentive Plan
 *10.7     Employment Agreement, between Long Beach Financial
           Corporation, Ameriquest Mortgage Corporation and M. Jack
           Mayesh
 *10.8     Employment Agreement, between Long Beach Financial
           Corporation, Ameriquest Mortgage Corporation and Edward
           Resendez
 *10.9     Employment Agreement, between Long Beach Financial
           Corporation, Ameriquest Mortgage Corporation and Frank J.
           Curry
 *10.10    Employment Agreement, between Long Beach Financial
           Corporation, Ameriquest Mortgage Corporation and James H.
           Leonetti
 *10.11    Employment Agreement, between Long Beach Financial
           Corporation, Ameriquest Mortgage Corporation and James J.
           Sullivan
 *10.12    Department of Justice Settlement Agreement
 *10.13    Employment Agreement, between Long Beach Financial
           Corporation, Long Beach Mortgage Company and William K.
           Komperda.
 *10.14    Form of Amendment to Employment Agreement, among Long Beach
           Financial Corporation, Long Beach Mortgage Company and each
           of M. Jack Mayesh, Edward Resendez, Frank J. Curry, James H.
           Leonetti, and James J. Sullivan.
 *10.15    4/98 Amended and Restated Senior Secured Credit Agreement
           among Long Beach Mortgage Company and Chase Bank of Texas,
           as Lender and Agent.
  10.16    Amended and Restated Employment Agreement, between Long
           Beach Financial Corporation, Long Beach Mortgage Company and
           M. Jack Mayesh
  10.17    Amended and Restated Employment Agreement, between Long
           Beach Financial Corporation, Long Beach Mortgage Company and
           Edward Resendez
  10.18    Amended and Restated Employment Agreement, between Long
           Beach Financial Corporation, Long Beach Mortgage Company and
           Frank J. Curry
  10.19    Amended and Restated Employment Agreement, between Long
           Beach Financial Corporation, Long Beach Mortgage Company and
           William K. Komperda
  10.20    Amended and Restated Employment Agreement, between Long
           Beach Financial Corporation, Long Beach Mortgage Company and
           James H. Leonetti
  10.21    Amended and Restated Employment Agreement, between Long
           Beach Financial Corporation, Long Beach Mortgage Company and
           James J. Sullivan
</TABLE>
<PAGE>   30
 
<TABLE>
<CAPTION>
                                                                         SEQUENTIALLY
EXHIBIT                                                                    NUMBERED
NUMBER                             DESCRIPTION                               PAGE
-------                            -----------                           ------------
<C>        <S>                                                           <C>
  10.22    Employment Agreement, between Long Beach Financial
           Corporation, Long Beach Mortgage Company and Elizabeth A.
           Wood
  10.23    Supplemental Agreement to Master Sub-Servicing Agreement
           between Long Beach Mortgage Company and Ameriquest Mortgage
           Company
  10.24    Master Repurchase Agreement between Merrill Lynch Mortgage
           Capital Inc., Merrill Lynch Credit Corporation and Long
           Beach Mortgage Company
  27       Financial Data Schedule
</TABLE>
 
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* Previously filed