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  June 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 47,623,984 shares of common stock outstanding as of       
                ----------
 August 7, 1997.

<PAGE>
<TABLE>
<CAPTION>


                       CONTIFINANCIAL CORPORATION
                        Consolidated Balance Sheets
                  as of June 30, 1997 and March 31, 1997
                 (dollars in thousands, except share data)
                                (unaudited)
                                                                  
                                                             June 30,    March 31,                 
                                                               1997        1997
                                                               ----        ----
                        Assets
                        ------
<S>                                                     <C>            <C>        
Cash and cash equivalents ...........................   $   111,146    $    51,200
Restricted cash .....................................           464            464
Securities purchased under agreements to resell .....       504,572        223,962
Interest-only and  Residual Certificates ............       516,707        445,005
Capitalized servicing fees receivable ...............        35,079         29,353
Trade  receivables:
   Receivables held for sale ........................       695,045        625,545
   Other receivables ................................       152,567         87,353
   Allowance for loan losses ........................        (2,768)        (3,747)
                                                             ------         ------ 
Total  trade  receivables, net ......................       844,844        709,151
                                                            -------        -------
Premises and equipment, net of accumulated
depreciation of  $5,112 and  $4,298 as of
June 30, 1997 and March 31, 1997, respectively ......         8,920          7,789
Cost in excess of equity acquired ...................        47,909         48,200
Other assets ........................................        36,893         30,674
                                                             ------         ------
      Total assets ..................................   $ 2,106,534    $ 1,545,798
                                                        ===========    ===========

         Liabilities and Stockholders' Equity
         ------------------------------------
Liabilities:
------------
Accounts payable and accrued expenses ...............   $    94,031    $    87,770
Securities sold but not yet purchased ...............       496,897        225,131
Trade receivables sold under agreements to repurchase       306,042        251,539
Due to affiliates ...................................        16,149         36,367
Short-term borrowed funds ...........................       130,000         25,000
Long-term debt ......................................       498,823        498,817
Other liabilities ...................................        24,538         12,102
                                                             ------         ------
      Total liabilities .............................     1,566,480      1,136,726
                                                          ---------      ---------
Commitments and contingencies
Minority interest of subsidiary .....................         1,319          1,288
Stockholders' equity:
   Preferred stock  (par value $0.01 per share;
      25,000,000 shares authorized; none issued
      at June 30, 1997 and March 31, 1997) ..........            --             --
   Common stock (par value $0.01 per share;
      250,000,000 shares authorized; 47,623,984
      and 44,390,335 shares issued at
      June 30, 1997 and March 31, 1997, respectively)           476            444
   Paid-in capital ..................................       397,984        295,029
   Retained earnings ................................       155,525        128,652
   Treasury Stock (17,509  and 27,931 shares of
      common stock, at cost, as of June 30 1997
      and March 31, 1997, respectively) .............          (368)          (586)
   Deferred  Compensation ...........................       (14,882)       (15,755)
                                                            -------        ------- 
      Total stockholders' equity ....................       538,735        407,784
                                                            -------        -------
      Total liabilities and stockholders' equity ....   $ 2,106,534    $ 1,545,798
                                                        ===========    ===========

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

                                        2
<PAGE>



<TABLE>
<CAPTION>


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

                                                    
                                                          Three Months
                                                          Ended June 30
                                                          -------------
<S>                                                    <C>           <C> 
Gross income                                           1997          1996
                                                       ----          ----
   Gain on sale of receivables ...............   $    64,340    $   31,166   
   Interest ..................................        49,679        28,515
   Net servicing income ......................        15,973         9,073
   Other income ..............................         4,031         1,009
                                                     -------        ------
      Total gross income .....................       134,023        69,763
                                                     -------        ------

Expenses
   Compensation and benefits .................        30,234        12,408
   Interest (includes $6,226 to affiliates for
     the three months ended June 30, 1996) ...        35,863        19,662
   Provision for loan losses .................         1,311           219
   General and administrative ................        21,070         4,779
                                                      ------         -----
      Total expenses .........................        88,478        37,068
                                                      ------        ------

Income before income taxes and
   minority interest .........................        45,545        32,695
Income taxes .................................        18,641        13,262
                                                      ------        ------
Income before minority interest ..............        26,904        19,433
Minority interest of subsidiary ..............            31          --   
                                                  ----------   ----------- 
      Net income .............................   $    26,873   $    19,433
                                                 ===========   ===========
Primary and fully diluted earnings
   per common share ..........................   $      0.59   $      0.44
                                                 ===========   ===========
Fully diluted weighted average number
   of shares outstanding .....................    45,588,626    44,043,368
                                                  ==========    ==========

Primary weighted average number of shares
   outstanding ................................   45,425,103    43,898,281
                                                  ==========    ==========



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


                                       


                                       3
<PAGE>



<TABLE>
<CAPTION>


                        CONTIFINANCIAL CORPORATION
              Condensed Consolidated Statements of Cash Flows
             for the three months ended June 30, 1997 and 1996
                          (dollars in thousands)
                                (unaudited)
                                                     
                                                        Three Months
                                                        Ended June 30,  
                                                        -------------
<S>                                                    <C>          <C>    
                                                       1997         1996   
                                                       ----         ----   
Net cash used in operating activities ...........   $(109,202)   $  (1,948)
                                                    ---------    --------- 
Cash flows from investing activities:
    Acquisition of unconsolidated subsidiaries ..      (5,603)          --
    Purchase of property and equipment ..........      (1,945)         (57)
                                                       ------          --- 
         Cash  used in investing activities .....      (7,548)         (57)
                                                       ------          --- 
Cash flows from financing activities:
    Net decrease in due to affiliates ...........     (29,376)      (5,555)
    Increase in short-term borrowed funds .......     105,000           --
    Proceeds from equity offering ...............     100,778           --
    Proceeds from exercise of options ...........         288           --
    Other, net ..................................           6           --
                                                       ------       ------
      Net cash provided by (used in) 
        financing activities ....................     176,696       (5,555)
                                                      -------       ------ 
Net increase (decrease) in cash and cash
    equivalents .................................      59,946       (7,560)
Cash and cash equivalents at beginning of  period      51,200       32,479
                                                       ------       ------
Cash and cash equivalents at end of period ......   $ 111,146    $  24,919
                                                    =========    =========


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
                               June 30, 1997
                          (dollars in thousands)

 
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.


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
June 30, 1997 and June 30, 1996 the  Company's  basic EPS would have been $0.60
(pro forma) and $0.45 (pro forma),  respectively,  of earnings per common share
based   on   net   income   of   $26,873   and   $19,433,   respectively,   and
weighted-average  number  of  common  shares  of  44,757,322  (pro  forma)  and
43,248,001  (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.

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.



                                       5
<PAGE>



                          CONTIFINANCIAL CORPORATION
        Notes to Unaudited Condensed Consolidated Financial Statements
                                 June 30, 1997
                            (dollars in thousands)

3.  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 estimated 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 Excess  Spread  Receivables  -- as
defined on page 9 herein),  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 options granted.



                                       6
<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 is engaged in the  consumer  and  commercial  finance  business by
originating  and servicing home equity loans and providing  financing and asset
securitization  expertise  to  originators  of a broad  range of loans,  leases
and receivables.  Through ContiMortgage  Corporation  ("ContiMortgage") and the
retail  origination   subsidiaries,   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.  The Company has strategic  alliances with
various  originators  of a broad range of  consumer  and  commercial  loans and
other  assets  ("Strategic  Alliances").  Through  ContiTrade  Services  L.L.C.
("ContiTrade")  the  Company  provides   financing  and  asset   securitization
structuring  expertise,   and  through   ContiFinancial   Services  Corporation
("ContiFinancial  Services"),  an NASD  registered  broker/dealer,  the Company
provides  placement  services.  In  September  1996,  the  Company  established
ContiWest  Corporation,  a Nevada  corporation,  to administer and underwrite a
portion of the Company's origination portfolio.

The  Company's  Strategic  Alliance  clients are  originators  of consumer  and
commercial loans,  leases and receivables.  The Company provides  financing and
asset  securitization  execution and expertise to the Strategic Alliance client
while the client  provides a  consistent  flow of  securitizable  assets to the
Company.  In  certain  Strategic  Alliances,  the  Company  receives  interests
("Strategic  Alliance  Equity  Interests")  in the Strategic  Alliance  client.
The  realization  of value  on such  Strategic  Alliance  Equity  Interests  is
subject to many factors,  including the future growth and  profitability of the
Strategic  Alliance  clients and the completion of initial public  offerings or
sale of such  Strategic Alliance clients.

In the third  quarter of fiscal 1997,  the Company  acquired  three home equity
companies  and one auto  finance  company to  implement  growth  strategies  of
expanding   into  the  western   United   States,   diversifying   into  retail
origination  and  owning  other  asset  origination  platforms  with  which the
Company  has  significant   securitization   experience.   The  four  new  loan
origination  subsidiaries,  California Lending Group, Inc. d/b/a United Lending
Group  ("ULG"),  Royal  Mortgage  Partners,   L.P.,  d/b/a  Royal  MortgageBanc
("Royal"),  Triad Financial  Corporation  ("Triad"),  and Resource One Consumer
Discount  Company,   Inc.   ("Resource  One"),  are  collectively   called  the
"Acquisitions".


                                       7
<PAGE>


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

                                                               
                                                       Three Months                    
                                                       Ended June 30, 
                                                       -------------- 
<S>                                                 <C>          <C>      
Loan  Portfolio Data                                  1997         1996     
--------------------                                  ----         ----     
                                                         (in thousands)
ContiMortgage serviced loan portfolio ...........   $7,269,361    $4,256,948
Home equity loan originations:
    Wholesale ...................................   $1,166,218    $  678,128
    Retail ......................................      226,013          --
                                                       -------      -------      
Total home equity loan originations .............   $1,392,231    $  678,128
                                                    ==========    ==========
Commercial loan originations ....................   $  191,806    $   65,425
Non-prime auto loan originations ................   $   38,056    $     --
Securitizations and sales:
    ContiMortgage and ContiWest .................   $1,265,000    $  692,954
    Commercial real estate ......................      158,816       193,916
    Triad .......................................       45,881          --
    Strategic alliances .........................      174,200       106,559
                                                       -------       -------
Total securitizations and sales .................   $1,643,897    $  993,429
                                                    ==========    ==========
ContiMortgage delinquency and 
    loan loss data (1):                         June 30, 1997   March 31, 1997
                                                -------------   --------------
    Delinquency rate ...........................        3.68%         3.24%
    Default rate ...............................        5.05%         4.70%
                                                      Three Months Ended          
                                                      ------------------          
                                                June 30, 1997   June 30, 1997
                                                -------------   -------------
    Net losses as a percentage of 
       average amount outstanding .............        0.074%       0.051%


(1) Includes home equity loans originated by Royal MortgageBanc, Resource One
    and United Lending Group, and serviced by ContiMortgage.

</TABLE>

The delinquency rate on ContiMortgage's servicing portfolio at June 30, 1997 was
3.68%.  ContiMortgage's  delinquencies  increased 44 basis points from the March
31, 1997 rate of 3.24%,  of which 51 basis  points were in the 30-59 day period.
Delinquencies  have  fluctuated  between  3.02% and  4.18%  for the past  twelve
months. The default portfolio  increased 35 basis points to 5.05% from the March
31, 1997 default  percentage of 4.70%.  Included in the default total were loans
performing  under  bankruptcy  plans and real estate owned,  making up 0.75% and
0.48% of the servicing portfolio,  respectively,  compared with 0.62% and 0.52%,
respectively, as of March 31, 1997. The modest increase in the default portfolio
is due to the seasoning of ContiMortgage's portfolio.

Net loss for the first  quarter of fiscal 1998 was $5.0  million,  or 0.074% of
average  serviced  loans  outstanding,  as  compared  with 0.051% for the first
quarter of fiscal 1997.  Net losses as a percentage  of average  serviced  home
equity loans  outstanding  was 0.28% for the twelve months ended June 30, 1997,
as compared with 0.26% for the twelve months ended March 31, 1997.




                                       8
<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 June 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  

                                       9
<PAGE>

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 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

June 30, 1997

Securities  purchased under  agreements to resell increased $280.6 million from
$224.0  million  at March 31,  1997 to $504.6  million  at June 30,  1997.  The
Company  maintains asset purchase and sale  facilities  with certain  financial
institutions  ("Purchase and Sale  Facilities").  Receivables held for sale and
loans  and  other  assets  sold  with  recourse  under  its  Purchase  and Sale
Facilities  are  hedged,  in part,  through the use of United  States  treasury
securities  and  futures   contracts  to  reduce   exposure  to  interest  rate
fluctuations.  Securities  purchased  under  agreements  to resell  are part of
this  hedging  strategy.  This  increase was  primarily  due to the increase in
the Company's  securitization  volume and the related receivables held for sale
account.

Interest-only  and residual  certificates  increased  $71.7 million from $445.0
million at March 31, 1997 to $516.7  million at June 30,  1997.  This  increase
represents   $81.2  million   recorded  during  fiscal  1997  relating  to  new
securitizations  and  recorded  interest  income  of  $11.2  million  partially
offset by $7.2 million of sales and $13.5 million of collections.

Capitalized  servicing  fees  receivable  increased  $5.7  million  from  $29.4
million at March 31,  1997 to $35.1  million  at June 30,  1997.  This  balance
reflects  the  capitalization  of $7.8  million  of  servicing  rights and $1.1
million of prepayment  premiums paid partially  offset by  amortization of $3.2
million.

Trade  receivables,  net increased  $135.6 million from $709.2 million at March
31,  1997 to $844.8  million  at June 30,  1997.  This  increase  was due to an
increase  in  receivables  held for sale from  $625.5  million  as of March 31,
1997 to $695.0 million at June 30, 1997,  and an increase in other  receivables
from $87.4  million at March 31, 1997 to $152.6  million at June 30, 1997.  The
increase  in  receivables  held  for  sale  of  $69.5  million  was  due to the
investment of the net cash proceeds  available  from the Company's June 4, 1997
primary offering of common stock and the timing of securitizations.

The  increase  in other  receivables  of $65.2  million  from March 31, 1997 to
June 30,  1997,  was  primarily  due to an increase in  short-term  receivables
associated  with the timing of  securitization  transactions  of $48.7 million.
Additional   changes  to  other  receivables  were  an  increase  in  servicing
advances  of  $6.0  million  and an  increase  in  financed  interest-only  and
residual certificates of  $3.9 million.

Premises and  equipment,  net increased $1.1 million from $7.8 million at March
31, 1997 to $8.9  million at June 30, 1997.  The  increase is primarily  due to
increased purchases related to the expansion of ContiMortgage's offices.

                                       10
<PAGE>

Cost in excess of equity  acquired  decreased  $0.3 million from $48.2  million
at March 31,  1997 to $47.9  million at June 30,  1997.  The  decrease  was due
to the  amortization  of the  cost in  excess  of  equity  acquired  which  was
recorded upon the purchase of the  Acquisitions  made by the Company during the
third quarter of fiscal 1997.

Other assets  increased  $6.2  million from $30.7  million at March 31, 1997 to
$36.9  million at June 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  $5.6  million  for  equity
investments in unconsolidated subsidiaries.

Accounts  payable  and  accrued  expenses  increased  $6.2  million  from $87.8
million  at March 31,  1997 to $94.0  million  at June 30,  1997.  The  balance
increased  primarily  due to an  increase  in  accrued  taxes  payable of $27.0
million,  and accrued  interest  payable of $10.0 million  offset by a decrease
in  accrued  incentive  amounts of $27.1  million  and  accrued  securitization
expenses  of  $4.0  million.  See  due to  affiliates  discussion  below  for a
discussion  of  accrued  taxes  payable.   The  increase  in  accrued  interest
payable  and  the   decreases   in  accrued   incentive   amounts  and  accrued
securitization  expenses  were  due  to  timing  differences  relating  to  the
payments of these liabilities.

Securities  sold but not yet  purchased  increased  $271.8  million from $225.1
million  at March 31,  1997 to $496.9  million  at June 30,  1997.  Receivables
held for sale and  loans  and  other  assets  sold,  with  recourse,  under the
Company's  Purchase and Sale  Facilities are hedged,  in part,  through the use
of United States Treasury  securities and futures  contracts to reduce exposure
to  interest  rate  fluctuations.  Securities  sold but not yet  purchased  are
part  of  this  hedging  strategy.  This  increase  was  primarily  due  to the
increase in the  Company's  securitization  volume and the related  receivables
held for sale account.

Trade  receivables sold under agreements to repurchase  increased $54.5 million
from  $251.5  million at March 31,  1997 to $306.0  million  at June 30,  1997.
This  increase is due to the increase in  receivables  held for sale during the
three months ended June 30, 1997.

Due to  affiliates  decreased  $20.3  million  from $36.4  million at March 31,
1997 to $16.1  million at June 30, 1997.  The decrease is primarily  due to the
effect 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 through the due to  affiliates  account.
Since   Continental   Grain's   ownership   percentage   has  been  reduced  to
approximately 75%, taxes are now accrued and paid directly by the Company.

Short-term   borrowed  funds  represents   borrowings  from  a  $200.0  million
unsecured  revolving  credit  facility  the Company  entered into on January 8,
1997.  At June 30, 1997 and March 31, 1997,  $130.0  million and $25.0  million
of drawings under this line 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 June
30, 1997.

Other  liabilities  increased  $12.4  million  from $12.1  million at March 31,
1997 to $24.5  million at June 30, 1997.  The  increase is  primarily  due to a
net  increase  in  deferred  compensation  payable of $10.6  million  under the
terms of incentive plans and an increase in deferred income of $1.8 million.

Stockholders'  equity  increased  $130.9  million from $407.8  million at March
31,  1997 to $538.7  million  at June 30,  1997.  The  increase  was due to the
June 4, 1997  completion  of the  primary  offering  of common  stock  with 

                                       11
<PAGE>

net proceeds of $100.8 million, net income of $26.9 million, the amortization of
deferred compensation and a deferred compensation tax adjustment of $3.0 million
and the exercise of stock options of $0.2 million.

Results of Operations

Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996

The  Company's  total gross income  increased  from $69.8 million for the three
months  ended June 30, 1996 to $134.0  million for the three  months ended June
30,  1997,  representing  a 92%  increase.  During the first  quarter of fiscal
1998,  gross  income  increased  by $37.0  million,  or 53%,  exclusive  of the
Acquisitions.  Net income  increased  from $19.4  million for the three  months
ended  June 30,  1996 to $26.9  million  for the three  months  ended  June 30,
1997,  representing  a 38%  increase.  Net  income for the three  months  ended
June  30,  1997   increased  by  $4.2  million,   or  22%,   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:

                                                     Three Months
                                                     Ended June 30, 
                                                     -------------- 
Gross income                                           1997   1996  
                                                       ----   ----  
 Gain on sale of receivables .................       48.00%   44.67%
 Interest ....................................       37.07%   40.87%
 Net servicing income ........................       11.92%   13.01%
 Other income ................................        3.01%    1.45%
                                                      ----     ---- 
    Total gross income .......................      100.00%  100.00%
                                                    ------   ------ 

Expenses
 Compensation and benefits ...................       22.56%   17.79%
 Interest ....................................       26.76%   28.18%
 Provision for loan losses ...................        0.98%    0.31%
 General and administrative ..................       15.72%    6.85%
                                                     -----     ---- 
   Total expenses ............................       66.02%   53.13%
                                                     -----    ----- 

Income before income taxes and
 minority interest ...........................       33.98%   46.87%
Income taxes .................................       13.91%   19.01%
                                                     -----    ----- 
Income before minority interest ..............       20.07%   27.86%
Minority interest of subsidiary ..............        0.02%    0.00%
                                                      ----     ---- 
   Net income ................................       20.05%   27.86%
                                                     =====    ===== 

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.

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.



                                       12
<PAGE>



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

                                      
                                        
                                      
                                                             Three Months
                                                             Ended June 30, 
                                                             ---------------
                                                             1997       1996
                                                             ----       ----
                                                              (in thousands)
Gain on sale of receivables ..................         $ 64,340         $ 31,166
Interest .....................................           49,679           28,515
Net servicing income .........................           15,973            9,073
Other income .................................            4,031            1,009
                                                          -----            -----
   Total gross income ........................         $134,023         $ 69,763
                                                       ========         ========

 
Gain on sale of  receivables  was the primary  component of total gross income,
comprising  48% and 45% of total gross  income in the three  months  ended June
30, 1997 and 1996,  respectively.  Gain on sale of receivables  increased $33.2
million,  or 106%,  in the three  months ended June 30, 1997 as compared to the
corresponding  period in 1996.  During the first  quarter of fiscal 1998,  gain
on sale of  receivables  increased  by $8.9  million or 29%,  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
REMICs and whole loan and other trust structures.

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  $1.4
billion of mortgages,  loans and leases, exclusive of the Acquisitions,  in the
three months  ended June 30,  1997,  an increase of $0.6 billion from the three
months ended June 30, 1996,  which  contributed  $16.3  million of the increase
in gain on sale of receivables.

The  gain on sale  percentage,  computed  as the  ratio  of gain on sale  gross
income  divided  by the dollar  volume of loans  securitized,  decreased  by 87
basis  points from 3.69% for the three  months ended June 30, 1996 to 2.82% for
the three  months  ended June 30,  1997.  The  primary  reasons for the decline
were twofold:  (1)  origination  costs or premiums paid for loans  increased by
74 basis  points,  reducing  the Excess  Spread  component  of the gain on sale
calculation;  and  (2)  the  average  life  on  ContiMortgage   securitizations
declined  by 0.3 years in the first  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.
Securities  sold were executed at more favorable  investor yields and efficient
securitization  structures  in the three months  ended June 30,  1997,  than in
the comparable  period in 1996,  generating a 30 basis point increase in Excess
Spread,  partially  offsetting  the declines in Excess Spread and average life.
These  changes  resulted  in  a  $7.4  million  decline  in  gain  on  sale  of
receivables.

The combination of the $16.3 million  increase due to increased  volume and the
$7.4  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  June  30,  1996  to the  corresponding  period  in  1997 of $8.9
million.

                                       13
<PAGE>

Interest  income  increased  $21.2 million,  or 74%, for the three months ended
June  30,  1997  from  the  corresponding   period  in  1996.  Interest  income
increased by $19.1 million,  or 67%,  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  $15.1  million to the increase  between
the three  months  ended  June 30,  1996 and 1997.  The  increase  in  interest
earned  on  loans  originated  and  purchased  was  primarily  due to a  $646.4
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
$4.0 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 June 30, 1997 as compared to the corresponding period in 1996.

Net  servicing  income  increased  $6.9  million,  or 76%, for the three months
ended June 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 $6.4 million,  or 70%,
exclusive  of  the  Acquisitions.   The  Company's  loan  servicing   portfolio
increased  $3.0  billion  from $4.3 billion to $7.3 billion at June 30, 1996 as
compared  to June 30,  1997,  contributing  to a $2.6  million  increase in net
servicing  income  between  the  three  months  ending  June 30,  1996 and 1997
Additionally,  net  servicing  income  increased  by $3.8  million in the first
quarter of fiscal 1998 as  compared to the first  quarter of fiscal 1997 due to
capitalized   servicing  income   associated  with  the  83%  increase  in  the
ContiMortgage  and  ContiWest  home equity loan sales and  securitizations  for
the three  months ended June 30, 1997 as compared to the  corresponding  period
in 1996.

Other  income  increased  $3.0  million,  or 300%,  for the three month  period
ended  June 30,  1997  compared  to the  corresponding  period  in 1996.  Other
income  increased by $2.6  million,  or 254%,  exclusive  of the  Acquisitions.
Other income  consists  primarily of  "purchase  premium  refunds" on warehouse
advances and for the three months  ended June 30, 1997,  miscellaneous  income.
"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  $0.9  million due to the increase in  ContiMortgage  origination
volume.  The  miscellaneous  income received during the three months ended June
30, 1997  consists of $1.1 million of income  received in  connection  with the
termination of a strategic alliance agreement.

Expenses.  Total  expenses for the three  months ended June 30, 1997  increased
$51.4 million or 139% from the  corresponding  period in 1996.  Total  expenses
increased  by  $28.0  million,  or 75%,  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.


                                       14
<PAGE>

The following  table sets forth the  components  of the Company's  expenses
for the three months ended June 30, 1997 and 1996.
                                                            Three Months
                                                            Ended June 30,    
                                                            ---------------
                                                            1997       1996
                                                            ----       ----
                                                            (in thousands)
                               
Compensation and benefits ....................          $30,234        $12,408
Interest .....................................           35,863         19,662
Provision for loan losses ....................            1,311            219
General and administrative ...................           21,070          4,779
                                                         ------          -----
    Total expenses ...........................          $88,478        $37,068
                                                        =======        =======

Compensation  and benefits expense  increased $17.8 million,  or 144 %, for the
three  months  ended June 30,  1997  compared  to the  corresponding  period in
1996. Of this  increase in  compensation  and  benefits,  $12.3 million was due
to the  addition  of 974  employees  from the  Acquisitions.  Compensation  and
benefits  expense  increased  by  $5.5  million,   or  44%,  exclusive  of  the
Acquisitions.   This  increase  was  primarily  due  to  the  addition  of  new
personnel.  On June 30, 1997, the Company had 770  employees,  exclusive of the
Acquisitions,  as compared to 515  employees on June 30, 1996, a 50%  increase,
which primarily  contributed to a $5.9 million  increase in salary and benefits
partially  offset by a $0.4 million  decrease in total incentive  compensation.
Incentive  compensation  is  calculated  under  provisions  of certain  formula
based plans. Total incentive  compensation  decreased due to changes in certain
components of these formula based plans.

Interest  expense  increased  $16.2  million,  or 82%, to $35.9 million for the
three  months  ended  June  30,  1997 as  compared  to  $19.7  million  for the
corresponding  period in 1996.  Interest  expense  increased by $15.9  million,
or 81%, to $35.6  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 Purchase and Sale Facilities.  Average  borrowings  increased by $0.9
billion  for  the  three  months  ended  June  30,  1997,  as  compared  to the
corresponding period in 1996.

Provision  for loan  losses  increased  to $1.3  million  for the three  months
ended June 30,  1997 as compared to $0.2  million  for the three  months  ended
June 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  Purchase  and Sale
Facilities, prior to securitization.

General and  administrative  expenses  increased  $16.3 million or 341% for the
three  months  ended June 30,  1997  compared  to the  corresponding  period in
1996.  Of  this  increase  in  general  and   administrative   expenses,   $9.7
million  was  attributable  to  the  retail   origination   operations  of  the
Acquisitions.  General and  administrative  expenses increased by $6.6 million,
or 139%,  exclusive  of the  Acquisitions.  Part of the  increase  was due to a
$1.7 million  increase in costs associated with  underwriting,  originating and
servicing  higher  loan  volumes.  In the three  months  ended  June 30,  1997,
origination  volume  increased  72% as compared to the three  months ended June
30, 1996 exclusive of the Acquisitions.  The remaining  increase in general and
administrative  expenses of  approximately  $2.8 million was  primarily  due to
the increase in the number of  employees to 770 on June 30, 1997,  exclusive of
employees from the Acquisitions, from 515 on June 30, 1996.

Income Taxes.  The  Company's  provision for income taxes was $18.6 million and
$13.3   million   for  the  three   months   ended  June  30,  1997  and  1996,
respectively.  The  increase  in taxes of 40% for the three  months  ended 

                                       15
<PAGE>

June 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  each  of  the  three  month  periods   remained
consistent at 41%.

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  securitization  through  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  Purchase and Sale  Facilities  and the funding
agreement under an agreement to repurchase (the  "Repurchase  Agreement");  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 $1.6 billion of loans in
the three  months  ended June 30, 1997  compared  to $1.0  billion in the three
months  ended  June 30,  1996.  The  Company  used  $109.2  million  of cash in
operations during the three months ended June 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 three  months
ended June 30, 1997,  the Company  recognized  gain on sale of  receivables  in
the amount of $64.3  million  compared to $31.2  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.

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 Purchase and Sale  Facilities  and Repurchase  Agreement,  

                                       16
<PAGE>

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 $2.6  billion of  committed  sale  capacity  under its Purchase
and  Sale  Facilities  and  Repurchase   Agreements   with  various   financial
institutions  as of June 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  October  1997 and July  1998.  On June 30,
1997,  the Company  utilized  $995.5 million of the capacity under the Purchase
and  Sale  Facilities  and  Repurchase   Agreements.   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 June 30, 1997,
$132.2 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.

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.

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,
the degree to which the  Company is  leveraged,  its needs for  financing,  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.


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                        PART II - OTHER INFORMATION



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

           (a) Exhibits

           Exhibit
              No.              Description

           11.2      Computation of the Company's earnings per common share

           27.1      Financial Data Schedule

           (b)       Reports on Form 8-K.

                     None.



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                                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

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

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



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