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, 1997
                          OR
           [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
           OF THE SECURITIES EXCHANGE ACT OF 1934
           For the transition period from ________ to_________    
                             
                                  1-14074
                --------------------------------------------
                         (Commission File Number)
           
                         ContiFinancial Corporation                       
               -------------------------------------------------
          (Exact name of registrant as specified in its charter)

     Delaware                                    13-3852588 
 -------------------------                  ------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)
                                                 

277 Park Avenue
New York, New York                                                 10172  
--------------------------------------------------------------------------
(Address of principal executive offices)                         (Zip Code)

 
Registrant's telephone number, including area code:        (212) 207-2800     
                                                       ---------------------

                                no change                                
               --------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

      Indicate by check mark whether  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      
   --    -----      


The Company had 47,635,169 shares of common stock outstanding as of       
                ----------
November 10, 1997.
------------------

<PAGE>

                           CONTIFINANCIAL CORPORATION
                           Consolidated Balance Sheets
                   as of September 30, 1997 and March 31, 1997
                    (dollars in thousands, except share data)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                                              
                                                                                                      
                                                                                                                                

                                                                                                                
                                                                                    September 30,    March 31,             
                                          Assets                                        1997           1997
                                          ------                                        ----           ----
<S>                                                                              <C>            <C>        
Cash and cash equivalents .....................................................   $    88,738    $    51,200
Restricted cash ...............................................................         1,697            464
Securities purchased under agreements to resell ...............................       318,471        223,962
Interest-only and residual certificates .......................................       525,015        445,005
Capitalized servicing fees receivable .........................................        44,232         29,353
Trade receivables:
   Receivables held for sale ..................................................       726,352        625,545
   Other receivables ..........................................................       112,304         87,353
   Allowance for loan losses ..................................................        (3,307)        (3,747)
                                                                                       ------         ------ 
Total  trade  receivables, net ................................................       835,349        709,151
                                                                                      -------        -------
Premises and equipment, net of accumulated depreciation of $5,958
   and $4,298 as of September 30, 1997 and March 31, 1997, respectively .......        10,088          7,789
Cost in excess of equity acquired .............................................        47,900         48,200
Other assets ..................................................................        51,878         30,674
                                                                                       ------         ------
         Total assets .........................................................   $ 1,923,368    $ 1,545,798
                                                                                  ===========    ===========

                           Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued expenses .........................................   $   122,143    $    87,770
Securities sold but not yet purchased .........................................       313,370        225,131
Trade receivables sold under agreements to repurchase .........................       103,271        251,539
Due to affiliates .............................................................        16,147         36,367
Short-term borrowed funds .....................................................       270,310         25,000
Long-term debt ................................................................       499,555        498,817
Other liabilities .............................................................        22,889         12,102
                                                                                       ------         ------
         Total liabilities ....................................................     1,347,685      1,136,726
                                                                                    =========      =========
Commitments and contingencies
Minority interest of subsidiary ...............................................           372          1,288
Stockholders' equity:
   Preferred stock  (par value $0.01 per share; 25,000,000 shares authorized;
     none issued at September 30, 1997 and March 31, 1997) ....................            --             --
   Common stock (par value $0.01 per share;  250,000,000 shares
     authorized; 47,635,169 and  44,390,335 shares issued at September 30, 1997
     and March 31, 1997, respectively) ........................................           476            444
   Paid-in capital ............................................................       398,491        295,029
   Retained earnings ..........................................................       190,362        128,652
   Treasury Stock (7,509 and 27,931 shares of common stock, at cost, as of
     September 30, 1997 and  March 31, 1997, respectively) ....................         (157)          (586)
   Deferred  Compensation .....................................................       (13,861)       (15,755)
                                                                                      -------        ------- 
         Total stockholders' equity ...........................................       575,311        407,784
                                                                                      -------        -------
         Total liabilities and stockholders'equity ............................   $ 1,923,368    $ 1,545,798
                                                                                  ===========    ===========
The accompanying notes to the unaudited condensed consolidated financial statements are an integral 
part of these statements.
</TABLE>


                                       2
<PAGE>


                           CONTIFINANCIAL CORPORATION
                        Consolidated Statements of Income
         for the three and six months ended September 30, 1997 and 1996
                    (dollars in thousands, except share data)
                                   (unaudited)



<TABLE>
<CAPTION>
                                                                                          
                                                                                         
                                                                Three Months                 Six Months
                                                            Ended September 30,          Ended September 30,                    
                                                            1997           1996          1997           1996             
                                                            ----           ----          ----           ----             
Gross income
<S>                                                  <C>             <C>           <C>             <C>        
   Gain on sale of receivables ...................   $     78,792    $    44,203   $    143,132    $    75,369
   Interest ......................................         58,225         33,179        107,904         61,694
   Net servicing income ..........................         17,807         10,893         33,780         19,966
   Other income ..................................          3,306          1,408          7,337          2,417
                                                            -----          -----          -----          -----
         Total gross income ......................        158,130         89,683        292,153        159,446
                                                          =======         ======        =======        =======

Expenses
   Compensation and benefits .....................         36,477         15,788         66,711         28,196
   Interest (includes $5,080 and $11,306 due to
     affiliates for the three and six months ended
     September 30, 1996, respectively) ...........         40,499         24,326         76,362         43,988
   Provision for loan losses .....................          1,203             89          2,514            308
   General and administrative ....................         22,718          6,978         43,788         11,757
                                                           ------          -----         ------         ------
       Total expenses ............................        100,897         47,181        189,375         84,249
                                                          -------         ------        -------         ------
Income before income taxes and
    minority interest ............................         57,233         42,502        102,778         75,197
Income taxes .....................................         23,343         16,986         41,984         30,248
                                                           ------         ------         ------         ------
Income before minority interest ..................         33,890         25,516         60,794         44,949
Minority interest of subsidiary ..................           (947)            --           (916)            -- 
                                                             ----           ----           ----           ----      
       Net income ................................   $     34,837    $    25,516   $     61,710    $    44,949
                                                     ============    ===========   ============    ===========
Fully diluted earnings per common  share .........   $       0.73    $      0.58   $       1.32    $      1.02
                                                     ============    ===========   ============    ===========

Primary earnings per common  share ...............   $       0.73    $      0.58   $       1.33    $      1.02
                                                     ============    ===========   ============    ===========

Fully diluted weighted average number of shares
outstanding ......................................     47,619,685     43,949,105     46,604,156     43,996,236
                                                       ==========     ==========     ==========     ==========
Primary weighted average number of shares
outstanding ......................................     47,604,683     43,914,518     46,514,893     43,906,400
                                                       ==========     ==========     ==========     ==========

The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of
these statements.
</TABLE>

                                       3
<PAGE>
                           CONTIFINANCIAL CORPORATION
                 Condensed Consolidated Statements of Cash Flows
              for the six months ended September 30, 1997 and 1996
                             (dollars in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                                              
                                                                                               
                                                                                          Six Months
                                                                                      Ended September 30,       
                                                                                      ------------------
                                                                                     1997             1996           
                                                                                     ----             ----           
<S>                                                                               <C>             <C>       
Net cash used in operating activities ..........................................  $(271,031)      $(169,484)
                                                                                  ---------       --------- 
Cash flows from investing activities:
    Acquisition of unconsolidated subsidiaries .................................     (5,603)             --
    Purchase of property and equipment .........................................     (3,959)           (448)
                                                                                     ------            ---- 
         Cash used in investing activities .....................................     (9,562)           (448)
                                                                                     ------            ---- 
Cash flows from financing activities:
    Net decrease in due to affiliates ..........................................    (29,219)       (112,861)
    Increase in short-term borrowed funds ......................................     245,310              --
    Proceeds from equity offering ..............................................     100,778              --
    Increase in long-term debt .................................................         714         293,136
    Proceeds from exercise of options ..........................................         524              --
    Other, net .................................................................          24              --
                                                                                       -----           -----
        Net cash provided by financing activities ..............................     318,131         180,275
                                                                                     -------         -------
Net increase in cash and cash equivalents ......................................      37,538          10,343
Cash and cash equivalents at beginning of  period ..............................      51,200          32,479
                                                                                      ------          ------
Cash and cash equivalents at end of period .....................................  $   88,738      $   42,822
                                                                                  ==========      ==========
The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of 
these statements.
</TABLE>

                                       4
<PAGE>
                           CONTIFINANCIAL CORPORATION
         Notes to Unaudited Condensed Consolidated Financial Statements
                               September 30, 1997
                    (dollars in thousands, except share data)

 
1.  BASIS OF PRESENTATION

The  accompanying  unaudited  condensed  consolidated  financial  statements  of
ContiFinancial  Corporation  and its  consolidated  subsidiaries  (collectively,
"ContiFinancial"  or the "Company") have been prepared pursuant to the rules and
regulations  of the Securities  and Exchange  Commission  and, in the opinion of
management,  reflect all normal, recurring adjustments which are necessary for a
fair  presentation of the financial  position,  results of operations,  and cash
flows for each period shown. The results for interim periods are not necessarily
indicative of financial  results for the full year.  These  unaudited  condensed
consolidated financial statements should be read in conjunction with the audited
Consolidated  Financial  Statements and notes thereto  included in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1997 (the "Annual
Report").  All  significant  intercompany  accounts and  transactions  have been
eliminated in consolidation.

RECLASSIFICATIONS

Certain  reclassifications  of prior years' amounts have been made to conform to
the current year presentation.

2. RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial  Accounting  Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share
("EPS")"  ("SFAS  128") which is effective  for both interim and annual  periods
ending after December 15, 1997.  SFAS 128 simplifies the standards for computing
earnings  per  share.  It  replaces  the  presentation  of  primary  EPS  with a
presentation  of basic EPS.  Basic EPS  excludes  dilution  and is  computed  by
dividing income available to common stockholders by the weighted-average  number
of common shares outstanding for the period. If SFAS 128 had been applied to the
results  of  operations  for the  three  months  ended  September  30,  1997 and
September 30, 1996,  the  Company's  basic EPS would have been $0.74 (pro forma)
and $0.59 (pro forma),  respectively,  of earnings per common share based on net
income of $34,837 and  $25,516,  respectively,  and  weighted-average  number of
common  shares  of   46,853,920   (pro  forma)  and   43,294,236   (pro  forma),
respectively.  If SFAS 128 had been applied to the results of operations for the
six months ended  September 30, 1997 and September 30, 1996 the Company's  basic
EPS would have been $1.35 (pro forma) and $1.04 (pro  forma),  respectively,  of
earnings  per  common  share  based  on  net  income  of  $61,710  and  $44,949,
respectively,  and  weighted-average  number of common shares of 45,805,621 (pro
forma) and 43,271,118 (pro forma),  respectively.  Fully diluted EPS remains the
same under SFAS 128 but will be referred to as diluted EPS.

In June 1997,  the FASB issued  SFAS No. 130  "Reporting  Comprehensive  Income"
("SFAS 130") which is effective for fiscal years  beginning  after  December 15,
1997. SFAS 130 establishes  standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS 130  requires  that all items  that are  required  to be  recognized  under
accounting  standards as  components  of  comprehensive  income be reported in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial  statements.  The adoption of this standard is not expected to have an
impact on the Company's financial position or results of operations.



                                 5
<PAGE>

                           CONTIFINANCIAL CORPORATION
   Notes to Unaudited Condensed Consolidated Financial Statements (continued)
                               September 30, 1997
                    (dollars in thousands, except share data)

In June 1997,  the FASB issued SFAS No. 131  "Disclosures  about  Segments of an
Enterprise  and  Related  Information"  ("SFAS  131")  which  is  effective  for
financial  statements for periods  beginning  after December 15, 1997.  SFAS 131
establishes  standards  for the way  that  public  business  enterprises  report
information about operating segments in annual financial statements and requires
that those enterprises  report selected  information about operating segments in
interim financial reports issued to shareholders.  It also established standards
for related disclosures about products and services,  geographic areas and major
customers.  The  adoption of this  standard is not expected to have an impact on
the Company's financial position or results of operations.

3.  DEBT

On  September 9, 1997,  the Company  initiated a $275,000  unsecured  Commercial
Paper  Program  ("Commercial  Paper  Program").  The  program  is  backed  by an
irrevocable direct-pay letter of credit that is being provided by a syndicate of
banks.  The letter of credit  provides credit  enhancement for commercial  paper
issued and sold by the  Company.  The  weighted  average  interest  rate through
September 30, 1997 was 5.76%.


4.  EQUITY

On June 4, 1997, the Company completed a primary offering of 2,800,000 shares of
common stock and an additional 420,000 shares were purchased by the underwriters
for  over-allotments.  The  proceeds  of the  offering  to the  Company,  net of
expenses and underwriting discount, were $100,778. The net proceeds will be used
for  general  corporate   purposes   including  funding  loan  originations  and
purchases,  supporting  securitization  transactions (including the retention of
interest-only  and residual  certificates),  other working  capital needs and to
make certain  strategic  acquisitions.  The  completion of the offering  reduces
Continental Grain Company's  ("Continental Grain") ownership of the Company from
approximately 81% to approximately  75%. The consummation of the public offering
caused the vesting of certain employee stock options granted.

5.  SUBSEQUENT EVENTS

On  October  1,  1997,  the  Company,   through  its  subsidiary   ContiMortgage
Corporation  ("ContiMortgage") purchased 100% of the equity of Fidelity Mortgage
Decisions  Corporation  ("Fidelity").  Fidelity,  headquartered in Lincolnshire,
Illinois, is a wholesale and retail originator of fixed and adjustable rate home
equity loans.  This  transaction  has been accounted for as a purchase,  and the
results of operations will be included with the Company's  results of operations
beginning  October 1, 1997. The terms of the acquisition  include payments which
are contingent  upon the future  earnings of Fidelity.  Any contingent  payments
made will be accounted for as cost in excess of equity acquired.

On  November  3,  1997,  the  Company  announced  that  it had  entered  in to a
definitive  agreement  to acquire  24% of the equity of Empire  Funding  Holding
Corporation  ("EFHC") with an option to acquire  additional  shares of EFHC at a
later date.  EFHC, a newly formed entity,  will own 100% of Empire Funding Corp.
("Empire").  Empire,  headquartered in Austin, Texas, is a privately-held lender
specializing  in  originating,  servicing and  securitizing  high  loan-to-value
loans.  The  acquisition  is expected to close by calendar  year-end  subject to
requisite state  licensing,  federal  approvals and fulfillment of other closing
conditions.  A cash  payment  of $30  million  will be made at  closing  for the
initial 24% equity  interest.  If the Company  exercises  its option to purchase
additional  shares, a deferred  payment,  based on the financial  performance of
EFHC, will be made.


                                       6
<PAGE>

                           CONTIFINANCIAL CORPORATION
   Notes to Unaudited Condensed Consolidated Financial Statements (continued)
                               September 30, 1997
                    (dollars in thousands, except share data)

ContiFinancial's  parent,  Continental  Grain,  currently owns a 25% warrant for
equity in  Empire  which  will be  exercised  and  exchanged,  for a 25%  equity
interest in EFHC upon the closing of the ContiFinancial transaction.

On November 10, 1997,  ContiMortgage  signed a definitive  agreement to purchase
100% of the equity of Crystal  Mortgage  Company,  Inc.  ("Crystal") and Lenders
M.D., Inc. ("Lenders"),  subject to satisfactory completion of due diligence and
obtaining the requisite state licensing  approvals.  The acquisition is expected
to close in the current fiscal quarter  ending  December 31, 1997.  Crystal is a
retail  mortgage broker and Lenders is a mortgage bank. Both Crystal and Lenders
are based in Amherst,  Ohio,  and work  together  to  originate  conforming  and
non-conforming mortgage loans.

The Company  does not expect these  purchases  to have a material  effect on the
financial position or results of operations of the Company.

                                       7
<PAGE>


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

This discussion  should be read in conjunction with the  accompanying  unaudited
condensed consolidated financial statements and notes thereto, and the Company's
audited  Consolidated  Financial  Statements  and notes thereto  included in the
Company's  Annual  Report.  Certain  statements  under this  caption  constitute
"forward-looking statements" under federal securities laws. See "Forward-looking
Statements."

General

The  Company,  together  with its  subsidiaries,  engages  in the  consumer  and
commercial  finance  business by  originating  and servicing  home equity loans,
commercial  real estate loans and non-prime  auto loans.  The Company,  together
with  its  subsidiaries,   also  provides  financing  and  asset  securitization
structuring  and placement  services to  originators  of a broad range of loans,
leases,  receivables  and other  assets.  The  Company is a leading  originator,
purchaser,  seller and  servicer of home equity  loans made to  borrowers  whose
borrowing  needs may not be met by  traditional  financial  institutions  due to
credit  exceptions or other factors.  Loans are made to borrowers  primarily for
debt  consolidation,  home  improvements,   education  or  refinancing  and  are
primarily  secured  by  first  mortgages  on  one-  to  four-family  residential
properties.

During the fiscal year ended March 31, 1997,  the Company  purchased 100% of the
outstanding  stock of California  Lending Group, Inc. d/b/a United Lending Group
("ULG"),   a  west  coast-based  home  equity  lender   specializing  in  retail
originations through direct mail and telemarketing throughout the United States,
and Royal  Mortgage  Partners,  L.P.,  d/b/a  Royal  MortgageBanc  ("Royal"),  a
California-based  wholesale  and retail  originator  of home equity  loans.  The
Company also purchased Resource One Consumer Discount Company,  Inc.  ("Resource
One"),  a   Pennsylvania-based   home  equity  lender   specializing  in  retail
origination through direct mail, television, telemarketing,  referrals and other
sources to generate  loan  inquiries  directly  from  borrowers  throughout  the
eastern and mid-western  states,  and 56% of the common stock of Triad Financial
Corporation ("Triad"),  an auto finance company headquarted in Huntington Beach,
California.  These four companies are  collectively  called the  "Acquisitions".
During  the  same   period,   the  Company   organized   ContiWest   Corporation
("ContiWest"),  a Nevada  corporation,  to better  administer and underwrite the
Company's origination portfolio.

Additionally,  the  Company,  through its wholly  owned  subsidiary,  ContiTrade
Services  L.L.C.  ("ContiTrade"),  provides  financing and asset  securitization
structuring  expertise,  and through  its  subsidiary,  ContiFinancial  Services
Corporation  ("ContiFinancial  Services"),  provides placement services. In this
area, ContiTrade's management and execution of the Company's financing,  hedging
and securitization needs served as a model for the Company's strategic alliances
with  originators  of a broad range of consumer and  commercial  loans and other
assets ("Strategic Alliances").  The Company offers Strategic Alliances complete
balance sheet liability management, including warehouse financing, interest rate
hedging  services and structuring and placement of asset  portfolios in the form
of asset-backed securities. including warehouse financing, interest rate hedging
services  and  structuring  and  placement  of asset  portfolios  in the form of
asset-backed securities.


                                       8
<PAGE>

The following  table  presents loan portfolio data relating to the three and six
month periods ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>

                                                                        As of or for the                       As of or for the
                                                                         Three months                             Six Months 
                                                                       ended September 30,                     Ended September 30, 
                                                                       -------------------                     ------------------- 
Loan Portforlio Data                                                    1997           1996                 1997             1996   
--------------------                                                    ----           ----                 ----             ----   
                                                                                              (in thousands)                     
<S>                                                                 <C>               <C>               <C>               <C>       
ContiMortgage serviced loan portfolio ......................        $8,163,419        $4,852,045        $8,163,419        $4,852,045
ContiMortgage and ContiWest home equity
   loan originations:
   Wholesale ...............................................        $1,334,908        $  885,407        $2,501,126        $1,563,535
   Retail ..................................................           165,123                --           332,376                --
 Other home equity/home improvement and
   other loan originations - Retail .......................           112,199                 --           198,068                --
                                                                      -------               ----           -------             -----
Total home equity/home improvement loan
   originations ............................................        $1,612,230        $  885,407        $3,031,570        $1,563,535
                                                                    ==========        ==========        ==========        ==========
Non-prime auto loan originations ...........................        $   38,277        $       --        $   76,333        $       --
Commercial loan originations ...............................        $  383,764        $  276,023        $  575,570        $  341,448
Securitizations and sales:
    ContiMortgage and ContiWest ............................        $1,525,000        $  814,420        $2,790,000        $1,507,374
    Other ContiFinancial home equity/home improvement ......            84,908                --           151,151                --
    Commercial real estate .................................           328,007                --           486,823           193,916
    Triad ..................................................                --                --            45,881                --
    Strategic alliances ....................................            75,877           311,924           250,077           418,483
                                                                        ------           -------           -------           -------
Total securitizations and sales ............................        $2,013,792        $1,126,344        $3,723,932        $2,119,773
                                                                    ==========        ==========        ==========        ==========

                                                                          As of              As of
ContiMortgage Delinquency and                                          September 30,        June 30,
    loan loss data (1):                                                    1997              1997      
                                                                           ----              ----      
    Delinquency rate .......................................               4.27%             3.68%
    Default rate ...........................................               4.97%             5.05%

                                                                    Three Months Ended 
                                                                      September 30, 
                                                                      ------------- 
                                                                    1997        1996 
                                                                    ----        ---- 
    Net losses as a percentage of average               
     amount outstanding ....................................      0.120%         0.074%

</TABLE>
        
(1) Includes home equity loans  originated  by Royal,  Resource One and ULG, and
serviced by ContiMortgage.

The delinquency  rate on  ContiMortgage's  servicing  portfolio at September 30,
1997 was 4.27%. ContiMortgage's delinquencies increased 59 basis points from the
June 30, 1997 rate of 3.68%.  Delinquencies  have  fluctuated  between 3.11% and
4.56% for the past twelve  months.  The default  portfolio  remained  relatively
stable at 4.97%,  down  slightly  from 5.05% at June 30,  1997.  Included in the
default  total were loans  performing  under  bankruptcy  plans and real  estate
owned,  making  up 0.62%  and 0.53% of the  servicing  portfolio,  respectively,
compared with 0.75% and 0.48%, respectively, as of June 30, 1997.

                                       9
<PAGE>
Certain Accounting Considerations

For a  discussion  of  recent  accounting  pronouncements,  see  Note  2 to  the
unaudited condensed consolidated financial statements.

As a fundamental part of its business and financing strategy,  the Company sells
substantially  all of its loans or other assets  through  securitization  in the
form of Real Estate  Mortgage  Investment  Conduits  ("REMIC"),  owner trusts or
grantor  trusts.  In a  securitization,  the Company sells loans or other assets
that it has  originated or purchased to a trust for a cash purchase price and an
interest in the loans or other  assets  securitized  (in the form of the "excess
spread").  The cash purchase price is raised through an offering of pass-through
certificates by the trust.  Following the securitization,  the purchasers of the
pass-through  certificates  receive the principal collected or allocated and the
investor  pass-through  interest  rate on the  certificate  balance,  while  the
Company receives the excess spread . The excess spread represents, over the life
of the loans or other assets,  the excess of the weighted average coupon on each
pool of loans or other  assets  sold over the sum of the  pass-through  interest
rate  plus a  normal  servicing  fee,  a  trustee  fee,  an  insurance  fee,  if
applicable,  and an estimate of annual future credit losses related to the loans
or other  assets  securitized  (the  "Excess  Spread").  These  cash  flows  are
projected over the life of the loans or other assets using prepayment,  default,
and interest rate  assumptions  that market  participants  would use for similar
financial  instruments subject to prepayment,  credit and interest rate risk and
are discounted  using an interest rate that a purchaser  unrelated to the seller
of such a financial instrument would demand. The majority of the Company's gross
income is recognized as gain on sale of loans or other assets,  which represents
the value of the Excess Spread less  origination  and  underwriting  costs.  The
present value of the Excess Spread is the Excess Spread  receivable (the "Excess
Spread Receivable").  The Excess Spread Receivable is either a contractual right
or a certificated security generally in the form of an interest-only or residual
certificate. The majority of the Company's Excess Spread Receivable at September
30,  1997 and  March 31,  1997,  is  interest-only  and  residual  certificates.
Consequently,  the Company's consolidated balance sheets designate Excess Spread
Receivable as "interest-only and residual certificates."

The Company  recognizes  the gain on sale of loans or other assets in the fiscal
year in which such loans or other assets are sold,  although the majority of the
cash  (representing  the Excess  Spread and  servicing  fees) is received by the
Company over the life of the loans or other assets.  Concurrent with recognizing
such gain on sale, the Company records the Excess Spread  Receivable as an asset
on its consolidated  balance sheets.  The Excess Spread Receivable is reduced as
cash distributions are received from the securitization.

Due to the fact  that the  gain  recognized  in the year of sale is equal to the
present value of the  estimated  future cash flows from the Excess  Spread,  the
amount of cash  actually  received  over the lives of the loans or other  assets
normally  exceeds the gain previously  recognized at the time the loans or other
assets were sold and therefore  interest  income is recognized  over the life of
the loans or other assets  securitized.  In periods  subsequent to the sale, the
Company may recognize an increase in fair value of Excess  Spread  Receivable as
gain on sale of  receivables  to the extent  that  estimates  of the loan pools'
future  remaining  lives exceed those  originally  projected.  This  estimate of
extended  life  is  performed  by  reviewing  past  prepayment   experience  and
estimating  future prepayment  experience by considering  numerous factors which
include current market  assumptions,  the interest rate environment and economic
factors. If actual prepayments with respect to sold loans occur faster or credit
experience  is worse  than  projected  at the time such  loans  were  sold,  the
carrying  value of the Excess  Spread  Receivable  may have to be  written  down
through a charge to earnings in the period of adjustment.

Additionally,  upon sale or securitization of servicing retained mortgages,  the
Company capitalizes the cost associated with the right to service mortgage loans
based on its relative fair value. The Company determines fair value based on the
present value of estimated  net future cash flows  related to servicing  income.
The cost  allocated to the  servicing  rights is amortized in  proportion to and

                                       10
<PAGE>

over the period of  estimated  net future  servicing  fee  income.  The  Company
periodically  reviews  capitalized   servicing  fees  receivable  for  valuation
impairment.   This  review  is  performed  on  a  disaggregated  basis  for  the
predominant  risk  characteristics  of the underlying loans which are loan type,
loan-to-value  ratio and credit  quality.  The Company  generally makes loans to
credit  impaired  borrowers  whose borrowing needs may not be met by traditional
financial  institutions  due to credit  exceptions.  The  Company has found that
credit  impaired  borrowers  are payment  sensitive  rather than  interest  rate
sensitive.  As such the Company does not consider  interest  rates a predominant
risk  characteristic  for  purposes  of  valuation  impairment.   Impairment  is
recognized in a valuation allowance for each disaggregated stratum in the period
of impairment.

Financial Condition

September 30, 1997

Securities  purchased  under  agreements to resell  increased $94.5 million from
$224.0  million at March 31, 1997 to $318.5  million at September 30, 1997.  The
Company hedges,  in part, its interest rate exposure on its receivables held for
sale and loans and other assets sold, with recourse under its asset purchase and
sale  facilities  with  certain  financial  institutions   ("Purchase  and  Sale
Facilities")  and a funding  agreement  under an  agreement to  repurchase  (the
"Repurchase  Agreement"),  collectively the  ("Facilities"),  through the use of
United States treasury  securities and futures contracts.  Securities  purchased
under agreements to resell are part of this hedging strategy.  This increase was
primarily due to the increase in the Company's origination volume.

Interest-only  and residual  certificates  increased  $80.0  million from $445.0
million at March 31, 1997 to $525.0 million at September 30, 1997. This increase
represents  $197.5 million  recorded  during the first six months of fiscal 1998
relating to new  securitizations  and recorded  interest income of $23.5 million
partially  offset by the sale of $105.5  million of  interest-only  and residual
certificate sales and $35.5 million of collections.

Capitalized servicing fees receivable increased $14.8 million from $29.4 million
at March 31, 1997 to $44.2 million at September 30, 1997. This balance  reflects
the  capitalization  of $17.6  million of  servicing  rights and $4.4 million of
prepayment premiums, paid partially offset by amortization of $7.2 million.

Trade receivables, net increased $126.1 million from $709.2 million at March 31,
1997 to $835.3 million at September 30, 1997. This increase was primarily due to
an increase in  receivables  held for sale from $625.5 million at March 31, 1997
to $726.4  million at  September  30, 1997 and an increase in other  receivables
from $87.4  million at March 31, 1997 to $112.3  million at September  30, 1997.
The  increase  in  receivables  held for sale of $100.9  million  was due to the
investment of the net cash proceeds  available  from the Company's  June 4, 1997
primary offering of common stock,  the  interest-only  and residual  certificate
sales and the timing of securitizations.

The  increase  in other  receivables  of $24.9  million  from March 31,  1997 to
September 30, 1997,  was  primarily due to an increase in servicing  advances of
$10.2 million and advances to clients of $8.4 million. The increase in servicing
advances was due to REMIC  advances  made by  ContiMortgage  on loans  serviced.
ContiMortgage as servicer,  is contractually liable to pay the REMIC for certain
delinquencies  and then  collects the past due amounts from the  borrower.  This
increase is because of an overall dollar  increase in  delinquencies  from March
31, 1997 to September 30, 1997.

Premises and  equipment,  net increased  $2.3 million from $7.8 million at March
31, 1997 to $10.1 million at September  30, 1997.  The increase is primarily due
to increased  purchases  related to the expansion of  ContiMortgage's  and ULG's
offices.

                                       11
<PAGE>

Cost in excess of equity  acquired  decreased $0.3 million from $48.2 million at
March 31,  1997 to $47.9  million  at  September  30,  1997.  The  decrease  was
primarily due to the amortization of the cost in excess of equity acquired which
was recorded upon the purchase of the Acquisitions.

Other assets  increased  $21.2  million from $30.7  million at March 31, 1997 to
$51.9 million at September 30, 1997. Other assets  represents  prepaid expenses,
margin and other deposits,  deferred bond issuance costs,  equity investments in
unconsolidated  subsidiaries and other  investments.  This increase is primarily
due to an increase of  approximately  $6.0  million  for equity  investments  in
unconsolidated subsidiaries, $6.5 million of margin deposits and $3.4 million of
deferred securitization costs.

Accounts payable and accrued expenses increased $34.3 million from $87.8 million
at March 31, 1997 to $122.1 million at September 30, 1997. The balance increased
primarily due to an increase in accrued  federal,  state and local taxes payable
of $41.4 million, and accrued securitization payables of $11.4 million offset by
a  decrease  in  accrued  incentive  amounts  of  $19.5  million.  (See  "Due to
affiliates"  discussion  below for a discussion of accrued  taxes  payable.) The
increase in  securitization  payables  and the  decreases  in accrued  incentive
amounts  were  due to  timing  differences  relating  to the  payments  of these
liabilities.

Securities  sold but not yet  purchased  increased  $88.3  million  from  $225.1
million at March 31, 1997 to $313.4  million at September 30, 1997.  The Company
hedges, in part, its interest rate exposure on its receivables held for sale and
loans and other assets sold, with recourse under the Facilities  through the use
of United States treasury securities and futures contracts.  Securities sold but
not yet purchased are part of this hedging strategy. This increase was primarily
due to the increase in the Company's origination volume.

Trade  receivables sold under agreements to repurchase  decreased $148.2 million
from $251.5  million at March 31, 1997 to $103.3  million at September 30, 1997.
This  Repurchase  Agreement is used  primarily to finance auto loan  receivables
held  for sale and  receivables  purchased  from  strategic  alliances.  Account
balances will fluctuate based upon the volume of loans being financed.

Due to affiliates  decreased  $20.3 million from $36.4 million at March 31, 1997
to $16.1  million at September  30, 1997.  The decrease is primarily  due to the
effect on accrued taxes of the June 4, 1997 primary stock offering which reduced
Continental   Grain's  ownership  of  the  Company  from  approximately  81%  to
approximately  75%.  When the Company was 81% owned by  Continental  Grain,  the
Company's  Federal  income  taxes were  prepared  on a  consolidated  basis with
Continental  Grain and such  liabilities were paid to Continental  Grain.  Since
Continental Grain's ownership  percentage has been reduced to approximately 75%,
taxes are now accrued and paid directly by the Company. The balance at September
30, 1997 primarily consists of deferred taxes payable to Continental Grain.

Short-term borrowed funds represents  borrowings from a $200.0 million unsecured
revolving  credit  facility  the  Company  entered  into on  January 8, 1997 and
borrowings from the $275.0 Commercial Paper Program closed on September 9, 1997.
At September  30, 1997 and March 31, 1997,  $270.3  million and $25.0 million of
drawings under these lines were outstanding, respectively. These borrowings were
used for general corporate  purposes.  For further discussion see "Liquidity and
Capital Resources".

There  were no  material  changes  in  long-term  debt from  March  31,  1997 to
September 30, 1997.

Other  liabilities  increased $10.8 million from $12.1 million at March 31, 1997
to $22.9  million at  September  30, 1997.  The increase is primarily  due to an
increase  in  deferred  compensation  payable  under the  terms of the  employee
incentive compensation plans.

                                       12
<PAGE>

Stockholders'  equity  increased $167.5 million from $407.8 million at March 31,
1997 to $575.3  million at September 30, 1997.  The increase was due to the June
4, 1997 completion of the primary  offering of common stock with net proceeds of
$100.8  million,  net income of $61.7  million,  the  amortization  of  deferred
compensation and a deferred  compensation tax adjustment of $4.5 million and the
exercise of stock options of $0.5 million.

Results of Operations

Three Months Ended  September 30, 1997 Compared to Three Months Ended  September
30, 1996.

The  Company's  total gross income  increased  from $89.7  million for the three
months  ended  September  30, 1996 to $158.1  million for the three months ended
September 30, 1997,  representing  a 76% increase.  During the second quarter of
fiscal 1998, gross income increased by $37.1 million,  or 41%,  exclusive of the
Acquisitions. Net income increased from $25.5 million for the three months ended
September  30, 1996 to $34.8  million for the three months ended  September  30,
1997,  representing  a 37%  increase.  Net  income  for the three  months  ended
September  30,  1997  increased  by  $3.0  million,  or  12%,  exclusive  of the
Acquisitions.

On a percentage  basis,  the following  table sets forth the  composition of the
Company's  results  as a  percentage  of  total  gross  income  for the  periods
indicated:
<TABLE>
<CAPTION>

                                                                Three Months
                                                            Ended September 30,
                                                            -------------------
    <S>                                                      <C>        <C>  
     Gross income                                             1997       1996 
                                                              ----       ---- 
        Gain on sale of receivables .................        49.83%     49.29%
        Interest ....................................        36.82%     36.99%
        Net servicing income ........................        11.26%     12.15%
        Other income ................................         2.09%      1.57%
                                                              ----       ---- 
           Total gross income .......................       100.00%    100.00%
                                                            ------     ------ 

     Expenses
        Compensation and benefits ...................        23.07%     17.61%
        Interest ....................................        25.61%     27.12%
        Provision for loan losses ...................         0.76%      0.10%
        General and administrative ..................        14.37%      7.78%
                                                             -----       ---- 
          Total expenses ............................        63.81%     52.61%
                                                             -----      ----- 

     Income before income taxes and minority interest        36.19%     47.39%
     Income taxes ...................................        14.76%     18.94%
                                                             -----      ----- 
     Income before minority interest ................        21.43%     28.45%
     Minority interest of subsidiary ................        -0.60%      0.00%
                                                              ----       ---- 
           Net income ...............................        22.03%     28.45%
                                                             =====      ===== 

</TABLE>

The  Company's  move into  retail  origination  has  resulted in a change in the
profile of the income statement.  Retail  origination  expenses focus heavily on
compensation and benefits and general and administrative expenses,  whereas with
wholesale originators,  such as ContiMortgage,  costs of origination in the form
of origination points are netted against gain on sale of receivables.  As retail
origination  grows,  the Company  anticipates  a related  increase in  operating
expenses, largely offset by higher income from origination points and other cash
income included in gain on sale results.

                                       13
<PAGE>

Income.  The increase in total gross income was due to a greater volume of loans
originated as a result of the  expansion of the  Company's  wholesale and broker
home equity loan origination sources and the move into retail originations.
 
The  following  table sets forth  information  regarding  the  components of the
Company's  total gross income in each of the three month periods ended September
30:

<TABLE>
<CAPTION>
                                                  Three Months
                                               Ended September 30,
                                               -------------------
                                                 1997     1996
                                                 ----     ----
                                                 (in thousands)      
<S>                                           <C>        <C>    
                Gain on sale of receivables   $ 78,792   $44,203
                Interest ..................     58,225    33,179
                Net servicing income ......     17,807    10,893
                Other income ..............      3,306     1,408
                                                 -----     -----
                   Total gross income .....   $158,130   $89,683
                                              ========   =======

</TABLE>
Gain on sale of  receivables  was the primary  component of total gross  income,
comprising 50% and 49% of total gross income in the three months ended September
30, 1997 and 1996,  respectively.  Gain on sale of receivables  increased  $34.6
million, or 78%, in the three months ended September 30, 1997 as compared to the
corresponding  period in 1996. During the second quarter of fiscal 1998, gain on
sale  of  receivables  increased  by  $7.8  million  or  18%,  exclusive  of the
Acquisitions.

Gain on sale of receivables represents income primarily from the structuring and
sale of pools of home  equity  loans  originated  by  ContiMortgage,  the retail
origination  companies and Strategic Alliance clients of the Company in REMIC S,
owner trusts and grantor trusts.  In addition,  gains on sale of receivables are
earned  upon  whole  loan  sales  and  upon  securitization  of  commercial  and
multi-family  loans,  home  improvement  loans,   franchisee  loans,  prime  and
non-prime  auto loans and equipment  leases which are sold into either REMICs or
other trust structures or sold as whole loans.

The  increase in income  earned from gain on sale of  receivables  was due to an
increased volume of loans and leases structured  partially offset by a decreased
gain on sale  percentage.  The  Company  structured  and sold  $1.8  billion  of
mortgages, loans and leases, exclusive of the Acquisitions,  in the three months
ended  September  30,  1997,  an increase of $0.6  billion from the three months
ended  September 30, 1996,  which  contributed  $19.0 million of the increase in
gain on sale of receivables.

The  gain  on  sale  percentage,  computed  as the  ratio  of  gain  on  sale of
receivables divided by the dollar volume of loans securitized, both exclusive of
contributions from the Acquisitions, decreased by 99 basis points from 3.92% for
the three  months ended  September  30, 1996 to 2.93% for the three months ended
September 30, 1997. The primary  reasons for the decline were:  (1)  origination
costs or premiums  paid for loans  increased  by 44 basis  points,  reducing the
Excess Spread component of the gain on sale calculation; (2) the average life on
ContiMortgage  securitizations  declined  by 0.2 years in the second  quarter of
fiscal  1998  compared  to the  corresponding  period in  fiscal  1997 due to an
increase  in  prepayment  speed  assumptions  used by the Company in valuing the
Excess Spread  Receivable;  and (3) certain of the securities  sold in the three
months ended  September 30, 1996, were structured with a premium sale generating
21 basis  points  which was not in the  structure  for the three  months  ending
September 30, 1997.  These changes  resulted in an $11.2 million decline in gain
on sale of receivables.



                                       14
<PAGE>

The  combination  of the $19.0 million  increase due to increased  volume and an
$11.2 million decrease due to a decline in ContiMortgage  Excess Spread resulted
in a net  increase in gain on sale of  receivables  from the three  months ended
September  30,  1996 to the  corresponding  period  in  1997  of  $7.8  million,
exclusive of the Acquisitions.

Interest  income  increased  $25.0  million,  or 75%, for the three months ended
September  30,  1997  from the  corresponding  period in 1996.  Interest  income
increased by $21.7  million,  or 65%,  exclusive of the  Acquisitions.  Interest
income  represents  interest  earned on loans  originated  or  purchased  by the
Company  during the period from their  origination  or purchase until the actual
sale of the loans,  as well as the  recognition  of the  increased  value of the
discounted  Excess Spread  Receivables  over time. The interest  earned on loans
originated and purchased  contributed  $17.2 million to the increase between the
three months ended  September 30, 1996 and 1997. The increase in interest earned
on loans originated and purchased was primarily due to a $660.1 million increase
in the average balance of loans originated and purchased but not yet securitized
during the periods.  The  recognition  of the increased  value of the discounted
Excess Spread  Receivables  over time accounted for $4.5 million of the increase
in interest  income which was due to the increase in the average  investment  in
Excess  Spread  Receivables  in the three  months  ended  September  30, 1997 as
compared to the corresponding period in 1996.

Net servicing income increased $6.9 million,  or 63%, for the three months ended
September  30,  1997  compared  to the  corresponding  period in 1996 due to the
increase in the size of the servicing portfolio and the volume of loan sales and
securitizations.  Net  servicing  income  increased  by  $6.7  million,  or 61%,
exclusive  of  the  Acquisitions.  The  Company's  home  equity  loan  servicing
portfolio  increased $2.9 billion from $4.9 billion to $7.8 billion at September
30, 1996 as compared to September 30, 1997, exclusive of loans originated by the
Acquisitions  and  serviced by  ContiMortgage,  contributing  to a $4.4  million
increase in net servicing  income between the three months ending  September 30,
1996 and 1997.  Additionally,  net servicing income increased by $2.3 million in
the second  quarter of fiscal 1998 as  compared to the second  quarter of fiscal
1997 due to capitalized servicing income associated with the 87% increase in the
ContiMortgage and ContiWest home equity loan sales and  securitizations  for the
three months ended September 30, 1997 as compared to the corresponding period in
1996.

Other income  increased $1.9 million,  or 135%, for the three month period ended
September 30, 1997 compared to the  corresponding  period in 1996.  Other income
increased by $1.0 million,  or 72%, exclusive of the Acquisitions.  Other income
consists  primarily of "purchase premium refunds" and for the three months ended
September 30, 1997,  income from  investments  in  unconsolidated  subsidiaries.
"Purchase premium refunds" are received from certain origination sources related
to loans that prepay within a contractually set time period. Upon origination of
a loan, the Company will pay a wholesale  originator a purchase  premium for the
loan or pools  of  loans.  The  Company  negotiates  agreements  with  wholesale
originators  that  stipulate  that a portion of such  purchase  premium  will be
repaid if individual  loans are repaid within a  contractually  set time period.
The income from  "purchase  premium  refunds"  increased by  approximately  $0.4
million due to the increase in  ContiMortgage  origination  volume.  Income from
investments in unconsolidated subsidiaries was $0.4 million for the three months
ended September 30, 1997.

Expenses. Total expenses for the three months ended September 30, 1997 increased
$53.7  million or 114% from the  corresponding  period in 1996.  Total  expenses
increased by $27.6 million, or 58%, exclusive of the Acquisitions. This increase
in total  expenses  was due to the  increase in number of  employees  and  costs
associated with increased loan volume.

                                       15
<PAGE>
The following table sets forth the components of the Company's  expenses for the
three months ended September 30, 1997 and 1996:

<TABLE>
<CAPTION>
                                                                        
                                                 Three Months 
                                              Ended September 30,    
                                              -------------------    
                                                1997     1996    
                                                ----     ----    
                                               (in thousands)  
              <S>                            <C>        <C>    
                Compensation and benefits    $ 36,477   $15,788
                Interest .................     40,499    24,326
                Provision for loan losses       1,203        89
                General and administrative     22,718     6,978
                                               ------     -----
                    Total expenses .......   $100,897   $47,181
                                             ========   =======

</TABLE>
Compensation  and benefits  expense  increased  $20.7 million,  or 131%, for the
three months ended  September 30, 1997 compared to the  corresponding  period in
1996. Of this increase in  compensation  and benefits,  $14.5 million was due to
the addition of 1,202 employees from the Acquisitions. Compensation and benefits
expense increased by $6.2 million,  or 39%, exclusive of the Acquisitions.  This
increase was  primarily due to the addition of new  personnel.  On September 30,
1997, the Company had 892 employees,  exclusive of the Acquisitions, as compared
to 532  employees  on  September  30,  1996,  a 68%  increase,  which  primarily
contributed  to a $3.4 million  increase in salary and benefits in addition to a
$2.8 million increase in total incentive compensation. 

Interest expense increased $16.2 million, or 66%, to $40.5 million for the three
months  ended   September  30,  1997  as  compared  to  $24.3  million  for  the
corresponding  period  in 1996.  This  increase  was  primarily  a result  of an
increase in long-term and short-term  borrowings,  trade  receivables sold under
agreements  to  repurchase  and sales under the  Company's  Facilities.  Average
borrowings  increased by $0.9 billion for the three months ended  September  30,
1997, as compared to the corresponding period in 1996.

Provision  for loan losses  increased to $1.2 million for the three months ended
September  30,  1997 as compared to $0.09  million  for the three  months  ended
September 30, 1996. The provision for loan losses increased by $0.06,  exclusive
of the Acquisitions. Provision for loan losses is recorded in sufficient amounts
to maintain an allowance  at a level  considered  adequate to cover  anticipated
losses  resulting from  liquidation of receivables held for sale and receivables
sold with limited recourse under the Facilities, prior to securitization.

General and  administrative  expenses  increased  $15.7  million or 226% for the
three months ended  September 30, 1997 compared to the  corresponding  period in
1996. Of this increase, $10.6 million was attributable to the retail origination
operations of the Acquisitions. General and administrative expenses increased by
$5.1 million, or 74%, exclusive of the Acquisitions. This increase was primarily
due to an  increase  the  number of  employees  to 892 on  September  30,  1997,
exclusive of employees  from the  Acquisitions,  from 532 on September 30, 1996,
contributing $3.0 million to the increase. Also contributing to the increase was
a $1.1 million increase in costs associated with  underwriting,  originating and
servicing  higher loan  volumes.  In the three months ended  September 30, 1997,
origination volume increased 51% as compared to the three months ended September
30, 1996, exclusive of the Acquisitions.

Income  Taxes.  The  Company's  provision for income taxes was $23.3 million and
$17.0  million  for  the  three  months  ended  September  30,  1997  and  1996,
respectively.  The increase in taxes of 37% for the three months ended September
30,  1997  compared  to the  corresponding  period  in 1996 was  related  to the
increase in income before taxes and minority interest over the same period.  The
effective tax rate for the three months ended  September  30, 1997  increased to
40.8% from 40.0% in the  comparable  period in fiscal 1996 due to an increase in
non-deductible items including cost in excess of equity acquired.

                                       16
<PAGE>

Six Months Ended  September 30, 1997 Compared to Six Months Ended  September 30,
1996

The  Company's  total gross  income  increased  from $159.4  million for the six
months  ended  September  30, 1996 to $292.2  million  for the six months  ended
September 30, 1997, representing an 83% increase. During the first six months of
fiscal 1998, gross income increased by $74.1 million,  or 46%,  exclusive of the
Acquisitions.  Net income  increased from $44.9 million for the six months ended
September 30, 1996 to $61.7 million for the six months ended September 30, 1997,
representing a 37% increase.  Net income for the six months ended  September 30,
1997 increased by $7.2 million, or 16%, exclusive of the Acquisitions.

On a percentage  basis,  the following  table sets forth the  composition of the
Company's  results  as a  percentage  of  total  gross  income  for the  periods
indicated:


<TABLE>
<CAPTION>
                                                               Six Months
                                                           Ended September 30, 
                                                           ------------------- 
     <S>                                                    <C>        <C>       
      Gross income                                           1997       1996      
                                                             ----       ----      
         Gain on sale of receivables .................       49.00%    47.27%
         Interest ....................................       36.93%    38.69%
         Net servicing income ........................       11.56%    12.52%
         Other income ................................        2.51%     1.52%
                                                              ----      ---- 
            Total gross income .......................      100.00%   100.00%
                                                            ------    ------ 

      Expenses
         Compensation and benefits ...................       22.83%    17.69%
         Interest ....................................       26.14%    27.59%
         Provision for loan losses ...................        0.86%     0.19%
         General and administrative ..................       14.99%     7.37%
                                                             -----      ---- 
           Total expenses ............................       64.82%    52.84%
                                                             -----     ----- 

      Income before income taxes and minority interest       35.18%    47.16%
      Income taxes ...................................       14.37%    18.97%
                                                             -----     ----- 
      Income before minority interest ................       20.81%    28.19%
      Minority interest of subsidiary ................       -0.31%     0.00%
                                                              ----      ---- 
            Net income ...............................       21.12%    28.19%
                                                             =====     ===== 

</TABLE>
The  Company's  move into  retail  origination  has  resulted in a change in the
profile of the income statement.  Retail  origination  expenses focus heavily on
compensation and benefits and general and administrative expenses,  whereas with
wholesale originators,  such as ContiMortgage,  costs of origination in the form
of origination points are netted against gain on sale of receivables.  As retail
origination  grows,  the Company  anticipates  a related  increase in  operating
expenses, largely offset by higher income from origination points and other cash
income included in gain on sale results.

                                       17
<PAGE>

Income.  The increase in total gross income was due to a greater volume of loans
originated as a result of the  expansion of the  Company's  wholesale and broker
home equity loan origination sources and the move into retail originations.

The  following  table sets forth  information  regarding  the  components of the
Company's  total gross income in each of the six month periods  ended  September
30:

<TABLE>
<CAPTION>
                                                              Six Months
                                                          Ended September 30, 
                                                          ------------------- 
                                                            1997      1996    
                                                            ----      ----    
                                                             (in thousands)
<S>                                                    <C>              <C>     
Gain on sale of receivables ..................         $143,132         $ 75,369
Interest .....................................          107,904           61,694
Net servicing income .........................           33,780           19,966
Other income .................................            7,337            2,417
                                                          -----            -----
   Total gross income ........................         $292,153         $159,446
                                                       ========         ========
</TABLE>
Gain on sale of  receivables  was the primary  component of total gross  income,
comprising  49% and 47% of total gross income in the six months ended  September
30, 1997 and 1996,  respectively.  Gain on sale of receivables  increased  $67.8
million,  or 90%, in the six months ended  September 30, 1997 as compared to the
corresponding  period in 1996. During the second quarter of fiscal 1998, gain on
sale  of  receivables  increased  by  $16.7  million  or 22%,  exclusive  of the
Acquisitions.

Gain on sale of receivables represents income primarily from the structuring and
sale of pools of home  equity  loans  originated  by  ContiMortgage,  the retail
origination  companies and Strategic Alliance clients of the Company in REMIC S,
owner trusts and grantor trusts.  In addition,  gains on sale of receivables are
earned  upon  whole  loan  sales  and  upon  securitization  of  commercial  and
multi-family  loans,  home  improvement  loans,   franchisee  loans,  prime  and
non-prime auto loans and equipment leases which are sold into either REMICs,  or
other trust structures or sold as whole loans.

The  increase in income  earned from gain on sale of  receivables  was due to an
increased volume of loans and leases structured  partially offset by a decreased
gain on sale  percentage.  The  Company  structured  and sold  $3.2  billion  of
mortgages,  loans and leases,  exclusive of the Acquisitions,  in the six months
ended  September 30, 1997, an increase of $1.4 billion from the six months ended
September 30, 1996, which  contributed  $40.2 million of the increase in gain on
sale of receivables.

The  gain  on  sale  percentage,  computed  as the  ratio  of  gain  on  sale of
receivables divided by the dollar volume of loans securitized, both exclusive of
contributions  from the  Acquisitions,  decreased by 132 basis points from 4.23%
for the six months  ended  September  30, 1996 to 2.91% for the six months ended
September 30, 1997. The primary  reasons for the decline were:  (1)  origination
costs or premiums  paid for loans  increased  by 55 basis  points,  reducing the
Excess  Spread  component of the gain on sale  calculation;  and (2) the average
life on  ContiMortgage  securitizations  declined  by 0.2 years in the first six
months of fiscal 1998 compared to the corresponding period in fiscal 1997 due to
an increase in prepayment  speed  assumptions used by the Company in valuing the
Excess Spread  Receivable.  These changes resulted in a $23.5 million decline in
gain on sale of receivables, exclusive of the Acquisitions.

The  combination of the $40.2 million  increase due to increased  volume and the
$23.5 million decrease due to a decline in ContiMortgage  Excess Spread resulted
in a net  increase  in gain on sale of  receivables  from the six  months  ended
September 30, 1996 to the corresponding period in 1997 of $16.7 million.

                                       18
<PAGE>

Interest  income  increased  $46.2  million,  or 75%,  for the six months  ended
September  30,  1997  from the  corresponding  period in 1996.  Interest  income
increased by $40.7  million,  or 66%,  exclusive of the  Acquisitions.  Interest
income  represents  interest  earned on loans  originated  or  purchased  by the
Company  during the period from their  origination  or purchase until the actual
sale of the loans,  as well as the  recognition  of the  increased  value of the
discounted  Excess Spread  Receivables  over time. The interest  earned on loans
originated and purchased  contributed  $32.3 million to the increase between the
six months ended September 30, 1996 and 1997. The increase in interest earned on
loans originated and purchased was primarily due to a $575.7 million increase in
the average  balance of loans  originated and purchased but not yet  securitized
during the periods.  The  recognition  of the increased  value of the discounted
Excess Spread  Receivables  over time accounted for $8.4 million of the increase
in interest  income which was due to the increase in the average  investment  in
Excess Spread Receivables in the six months ended September 30, 1997 as compared
to the corresponding period in 1996.

Net servicing income  increased $13.8 million,  or 69%, for the six months ended
September  30,  1997  compared  to the  corresponding  period in 1996 due to the
increase in the size of the servicing portfolio and the volume of loan sales and
securitizations.  Net  servicing  income  increased  by $13.0  million,  or 65%,
exclusive  of  the  Acquisitions.  The  Company's  home  equity  loan  servicing
portfolio  increased $2.9 billion from $4.9 billion to $7.8 billion at September
30, 1996 as compared to September 30, 1997, exclusive of loans originated by the
Acquisitions  and  serviced by  ContiMortgage,  contributing  to a $9.0  million
increase in net servicing  income  between the six months  ending  September 30,
1996 and 1997. Additionally,  net servicing income increased by $4.0 million for
the six months  ended  September  30, 1997 as  compared to the six months  ended
September 30, 1996 due to capitalized  servicing income  associated with the 85%
increase  in  the  ContiMortgage  and  ContiWest  home  equity  loan  sales  and
securitizations  for the six months ended  September 30, 1997 as compared to the
corresponding period in 1996.

Other income  increased  $4.9 million,  or 204%,  for the six month period ended
September 30, 1997 compared to the  corresponding  period in 1996.  Other income
increased by $3.6 million, or 148%, exclusive of the Acquisitions.  Other income
consists  primarily of "purchase  premium  refunds" and for the six months ended
September  30,  1997,   miscellaneous   income,   income  from   investments  in
unconsolidated  subsidiaries and fees on warehouse  advances.  "Purchase premium
refunds" are received  from certain  origination  sources  related to loans that
prepay within a contractually  set time period.  Upon origination of a loan, the
Company will pay a wholesale originator a purchase premium for the loan or pools
of loans.  The Company  negotiates  agreements with wholesale  originators  that
stipulate  that a portion of such purchase  premium will be repaid if individual
loans are  repaid  within a  contractually  set time  period.  The  income  from
"purchase  premium refunds"  increased by approximately  $1.3 million due to the
increase in ContiMortgage  origination volume. The miscellaneous income received
during the six months  ended  September  30, 1997  consists  of $1.1  million of
income  received in  connection  with the  termination  of a strategic  alliance
agreement.  Income from investments in  unconsolidated  subsidiaries and fees on
warehouse  advances  were $0.4 million and $0.6 million for the six months ended
September 30, 1997, respectively.

Expenses.  Total expenses for the six months ended  September 30, 1997 increased
$105.1  million or 125% from the  corresponding  period in 1996.  Total expenses
increased by $55.5 million, or 66%, exclusive of the Acquisitions. This increase
in total  expenses  was due to the  increase in number of  employees  and  costs
associated with increased loan volume.

                                       19
<PAGE>


The following table sets forth the components of the Company's  expenses for the
six months ended September 30, 1997 and 1996:

<TABLE>
<CAPTION>

                                                       
                                                               Six Months
                                                           Ended September 30,    
                                                           -------------------    
                                                         1997             1996    
                                                         ----             ----    
                                                             (in thousands)
<S>                                                    <C>               <C>    
Compensation and benefits ...................          $ 66,711          $28,196
Interest ....................................            76,362           43,988
Provision for loan losses ...................             2,514              308
General and administrative ..................            43,788           11,757
                                                         ------           ------
    Total expenses ..........................          $189,375          $84,249
                                                       ========          =======
</TABLE>

Compensation and benefits expense increased $38.5 million,  or 137%, for the six
months ended September 30, 1997 compared to the corresponding period in 1996. Of
this  increase  in  compensation  and  benefits,  $26.8  million  was due to the
addition of 1,202  employees from the  Acquisitions.  Compensation  and benefits
expense increased by $11.7 million, or 42%, exclusive of the Acquisitions.  This
increase was  primarily due to the addition of new  personnel.  On September 30,
1997, the Company had 892 employees,  exclusive of the Acquisitions, as compared
to 532  employees  on  September  30,  1996,  a 68%  increase,  which  primarily
contributed  to a $7.8 million  increase in salary and benefits in addition to a
$3.9 million increase in total incentive compensation. 

Interest expense  increased $32.4 million,  or 74%, to $76.4 million for the six
months  ended   September  30,  1997  as  compared  to  $44.0  million  for  the
corresponding  period in 1996.  Interest expense increased by $32.1 million,  or
73%, to $76.1 million exclusive of the Acquisitions. This increase was primarily
a  result  of  an  increase  in  long-term  and  short-term  borrowings,   trade
receivables  sold under  agreements to repurchase  and sales under the Company's
Facilities.  Average  borrowings  increased  by $0.9  billion for the six months
ended September 30, 1997, as compared to the corresponding period in 1996.

Provision  for loan losses  increased  to $2.5  million for the six months ended
September  30,  1997 as  compared  to $0.3  million  for  the six  months  ended
September 30, 1996.  Provision for loan losses remained comparable  exclusive of
the Acquisitions. Provision for loan losses is recorded in sufficient amounts to
maintain an allowance at a level considered adequate to cover anticipated losses
resulting from  liquidation of receivables  held for sale and  receivables  sold
with limited recourse under the Facilities, prior to securitization.

General and administrative  expenses increased $32.0 million or 272% for the six
months ended September 30, 1997 compared to the corresponding period in 1996. Of
this  increase  in  general  and  administrative  expenses,  $20.2  million  was
attributable to the retail origination  operations of the Acquisitions.  General
and administrative  expenses increased by $11.8 million,  or 100%,  exclusive of
the Acquisitions. The increase was primarily due to an increase in the number of
employees  to 892 on  September  30,  1997,  exclusive  of  employees  from  the
Acquisitions,  from 532 on September 30, 1996,  contributing $5.8 million to the
increase. Also contributing to the increase was a $2.9 million increase in costs
associated with underwriting,  originating and servicing higher loan volumes. In
the six months ended  September 30, 1997,  origination  volume  increased 60% as
compared  to  the  six  months  ended  September  30,  1996,  exclusive  of  the
Acquisitions.


                                       20
<PAGE>

Income  Taxes.  The  Company's  provision for income taxes was $42.0 million and
$30.2   million  for  the  six  months  ended   September  30,  1997  and  1996,
respectively.  The increase in taxes of 39% for the six months  ended  September
30,  1997  compared  to the  corresponding  period  in 1996 was  related  to the
increase in income before taxes and minority interest over the same period.  The
effective  tax rate for the six months  ended  September  30, 1997  increased to
40.8% from 40.2% in the comparable  period in fiscal 1996 due to an  increase in
non-deductible items including cost in excess of equity acquired.

Liquidity and Capital Resources

In a  securitization,  the  Company  recognizes  a gain on the  sale of loans or
assets securitized upon the closing of the securitization,  but does not receive
the  majority of the cash  representing  such gain until it receives  the Excess
Spread,  which is  payable  over  the  actual  life of the loan or other  assets
securitized.  This negative cash flow has been partially offset by the Company's
move into retail  origination which resulted in an increase in the cash received
from  origination  points and other  cash  income  included  in the gain on sale
results.   The  Company  incurs  significant   expenses  in  connection  with  a
securitization  and incurs both current and deferred tax liabilities as a result
of the gain on sale.  Therefore,  the Company requires continued access to short
and long term  external  sources of cash to fund its  operations.  The Company's
primary cash  requirements are expected to include the funding of: (i) mortgage,
loan and lease  originations and purchases  pending their pooling and sale; (ii)
the points and expenses paid in  connection  with the  acquisition  of wholesale
loans;  (iii) fees and expenses  incurred in connection with its  securitization
program;  (iv)  over   collateralization  or  reserve  account  requirements  in
connection with loans and leases pooled and sold; (v) ongoing administrative and
other  operating  expenses;  (vi)  payments  related to tax  obligations;  (vii)
interest  and  principal  payments  under  the  Company's   long-term  debt  and
short-term borrowed funds; (viii) the costs of the Facilities; and (ix) the cost
of any new acquisitions  that the Company may pursue and deferred purchase price
commitments on existing acquisitions.

As a result of its growing securitization program, the Company has operated, and
expects to  continue  to operate,  on a negative  cash flow  basis.  The Company
securitized  and sold in the  secondary  market $3.7 billion of loans in the six
months ended September 30, 1997 compared to $2.1 billion in the six months ended
September 30, 1996. The Company used $271.0 million of cash in operations during
the six months ended September 30, 1997.

During the life of the  REMICs,  owner  trusts or grantor  trusts,  the  Company
subordinates  to the  rights of  holders  of senior  interests  a portion of the
Excess Spread  otherwise due to the Company as a credit  enhancement  to support
the sale of senior interests.  The terms of the REMICs, owner trusts and grantor
trusts generally require that the Excess Spread otherwise payable to the Company
during  the early  months of the  trusts be used to  increase  the cash  reserve
account,   or  to  repay  the  senior   interests  in  order  to  increase  over
collateralization to specified maximums. The value of such "deposit" accounts is
included in the value of Excess Spread  Receivables and the related gain on sale
of receivables, net of necessary reserves for credit losses, if applicable.

In addition, increased use of securitization transactions as a funding source by
the Company has resulted in a significant increase in the amount of gain on sale
of receivables recognized by the Company.  During the six months ended September
30, 1997,  the Company  recognized  gain on sale of receivables in the amount of
$143.1 million compared to $75.4 million for the  corresponding  period in 1996.
The  recognition of gain on sale of receivables  will have a negative  impact on
the cash flows of the Company to the extent the Company is required to pay state
and  Federal   income  taxes  on  these   amounts  in  the  period   recognized,
notwithstanding that the Company does not receive the cash representing the gain
until later periods as the related loans are repaid or otherwise collected.

                                       21
<PAGE>

The Company's primary sources of liquidity are sales of loans,  leases and other
assets through securitization,  the sale of loans, leases and other assets under
the  Facilities,  the  issuance  of shares  of common  stock,  the  issuance  of
long-term debt and the unsecured  revolving credit  facility.  While the Company
sells Excess Spread Receivables from time to time, there is no liquid market for
such Excess Spread Receivables.

The Company had $3 billion of committed sale capacity under its Facilities  with
various  financial  institutions as of September 30, 1997. The Purchase and Sale
Facilities  allow the  Company to sell,  with  limited  recourse,  interests  in
designated  pools of loans and other  assets.  On March 31,  1997,  the  Company
entered into the  Repurchase  Agreement.  The  Repurchase  Agreement  allows the
Company to sell  receivables held for sale to a financial  institution  under an
agreement  that  the  Company  will  repurchase  the  assets.  These  facilities
generally  have one year  renewable  terms (one Purchase and Sale Facility has a
two-year term), all of which will expire between December 1997 and October 1998.
On September 30, 1997, the Company utilized $586.6 million of the capacity under
the Facilities.  The Company currently anticipates that it will be able to renew
these facilities when they expire and to obtain additional facilities.

The  Company has sold Excess  Spread  Receivables,  with  limited  recourse,  to
provide cash to fund the Company's securitization program. At September 30, 1997
$116.9 million of these sales were outstanding. Under the recourse provisions of
the agreements,  the Company is responsible for losses incurred by the purchaser
within an  agreed-upon  range.  The Company's  performance  obligations in these
transactions  are  guaranteed  by  Continental  Grain  for an  agreed-upon  fee.
Although the Company intends to continue to pursue  opportunities to sell Excess
Spread  Receivables,  no assurance can be given that such  opportunities will be
available in the future.

On June 4, 1997, the Company completed a primary offering of 2,800,000 shares of
common stock and an additional 420,000 shares were purchased by the underwriters
for over allotments. The net proceeds of the offering to the Company were $100.8
million which were used by the company for general corporate  purposes including
funding loan originations and purchases,  supporting securitization transactions
(including the retention of Excess Spread  Receivables),  other working  capital
needs and to make certain  strategic  acquisitions. 

On September 9, 1997,  the company  initiated a $275  million  Commercial  Paper
Program.  An  irrevocable  direct-pay  letter of credit is being  provided  by a
syndicate of banks to provide credit enhancement for commercial paper issued and
sold by the Company.

On  September  24,  1997 the Company  sold $99.7  million of  interest-only  and
residual certificates. Net proceeds from the sale were $98.3 million.

In  anticipation  of  growth  in the  Company's  future  operations,  additional
financing  sources will be required.  The Company  currently has commitments for
financing through the unsecured revolving credit facility, however, there can be
no assurance  that the Company will be  successful  in  consummating  additional
financing transactions in the future on terms that the Company would consider to
be favorable. Furthermore, no assurance can be given that Continental Grain will
provide such financing if the Company is unable to obtain third party  financing
or that the terms of the  Continental  Grain  debt  agreements  will  permit the
Company to obtain such financing.


                                       22
<PAGE>

Forward-looking Statements

Certain  statements  contained in this Quarterly  Report on Form 10-Q, which are
not historical  fact, may be deemed to be  forward-looking  statements under the
federal  securities laws. There are many important  factors that could cause the
Company's  actual  results  to differ  materially  from those  indicated  in the
forward-looking  statements.  Such  factors  include,  but are not  limited  to,
general economic conditions,  interest rate risk, prepayment speeds, delinquency
and  default   rates,   changes   (legislative   and  otherwise)  in  the  asset
securitization  industry,  demand  for the  Company's  services,  the  impact of
certain  covenants  in loan  agreements  of the  Company and  Continental  Grain
Company, the degree to which the Company is leveraged,  its needs for financing,
the net interest margin  securities  market,  and other risks  identified in the
Company's Securities and Exchange Commission filings. In addition,  it should be
noted that past  financial  and  operational  performance  of the Company is not
necessarily indicative of future financial and operational performance.

                                       23
<PAGE>
 
                          PART II - OTHER INFORMATION

               Item 4. Submission of Matters to a Vote of Security Holders.
 
          (a) The annual  meeting of  shareholders  of the Company was held 
              September 17, 1997.
 
          (b) Directors whose term of office as a director continued after 
              the meeting including the Class II Directors elected below:


           Class I Directors       Class II Directors     Class III Directors
           -----------------       ------------------     -------------------
           James E. Moore          Paul J. Fribourg       James J.  Bigham
           Donald L. Staheli       John W. Spiegel        John P. Tierney
                                   Lawrence G. Weppler    Michael J. Zimmerman

          (c)  Holders of common shares voted at this meeting on the following 
               matters, which were set  forth in full in the registrant's proxy 
               statement dated July 28, 1997:

          (i)  Election of Class II Directors

<TABLE>
<CAPTION>

           Nominee                           For          Withheld         Abstain        Non-Vote
           -------                           ---          --------         -------        --------
<S>                                      <C>                <C>             <C>            <C>           
           Paul J. Fribourg              45,766,912         90,256             --             --
           John W. Spiegel               45,766,912         90,256             --             --
           Lawrence G. Weppler           45,766,612         90,556             --             --
                                             For          Against          Abstain        Non-Vote
                                             ---          -------          -------        --------
    
          (ii) Appointment of Auditors:  45,845,704          4,342           7,122            --


          Appointment of the firm of Arthur Andersen LLP as the independent
          accountants for the Company for the fiscal year ending March 31, 1998.
</TABLE>

Item 6.           Exhibits and Reports on Form 8-K.

                  (a) Exhibits

                  Exhibit
                     No.                             Description
                     ---                             -----------
 
                  10.1   Letter of Credit and Reimbursement Agreement

                  11.1   Computation of the Company's earnings per common share

                  27.1   Financial Data Schedule

                  (b)  Reports on Form 8-K.

                  None.

                                       24
<PAGE>

                                   SIGNATURES


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


                           ContiFinancial Corporation

Date                    Signature                                 Title

November 14, 1997    /s/ Daniel J. Willett     Senior Vice President and Chief
-----------------    ---------------------     Financial Officer (Principal
                     Daniel J. Willett         Financial Officer)

                               
November 14, 1997   /s/ Susan E. O'Donovan     Vice President and Controller
-----------------   ----------------------     (Principal Accounting Officer)
                    Susan E. O'Donovan     




                                       25
<PAGE>