Form 10-Q Quarterly Report

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

     [x] QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934

                  For the quarterly period ended June 30, 1998

                                       OR

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

                         Commission File Number: 1-7614
                          -----------------------------

                              PMCC FINANCIAL CORP.
             (Exact Name of Registrant as Specified in its Charter)


             Delaware                                    11-3404072
  (State or other Jurisdiction of                     (I.R.S. Employer
   Incorporation or Organization)                   Identification Number)


                               3 Expressway Plaza
                           Roslyn Heights, N.Y. 11577
              (Address of Principal Executive Offices and Zip Code)

                                 (516) 625-3000
              (Registrant's telephone number, including area code)


     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

         Yes       X                No  ________

     Number of shares  outstanding of the issuer's Common Stock,  par value $.01
per share, as of August 7, 1998: 3,750,000 shares.

                                      (1)
<PAGE>


                              PMCC FINANCIAL CORP.

                                    FORM 10-Q

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>


                                                                                    Page No


<S>                                                                                    <C>

     Part I - Financial Information

     Item 1. Financial Statements:

         Condensed Consolidated Statements of Operations (Unaudited)
                  Six Months Ended June 30, 1998 and 1997                                3
                  Three Months Ended June 30, 1998 and 1997                              4

         Condensed Consolidated Statements of Financial Condition (Unaudited)
                  June 30, 1998 and December 31, 1997                                    5

         Condensed Consolidated Statements of Cash Flows (Unaudited)
                  Six Months Ended June 30, 1998 and 1997                                6

         Notes to Condensed Consolidated Financial Statements (Unaudited)                7


Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                                       9

Part II -  Other Information                                                             15

Signatures                                                                               16

Exhibit Index                                                                            17

</TABLE>

                                      (2)
<PAGE>


                         Part I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                      PMCC FINANCIAL CORP. and SUBSIDIARIES
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                      Six Months Ended June 30, 
                                                                         1998              1997
                                                                         ----              ----
<S>                                                                   <C>               <C>

Revenues:
Sales of residential rehabilitation properties                        $16,759,170      $ 8,807,292
Gains on sale of mortgage loans, net                                    6,761,807        4,340,477
Interest earned                                                         2,309,494          426,296
                                                                      -----------      ----------- 
                                                                       25,830,471       13,574,065
                                                                      -----------      -----------
Expenses:
Costs of sales, residential rehabilitation properties                  15,418,658        8,254,452
Compensation and benefits                                               4,470,700        2,677,417
Interest expense                                                        2,373,574          707,778
Other general and administrative                                        1,668,545          967,407
                                                                      -----------      -----------
                                                                       23,931,477       12,607,054
                                                                      -----------      -----------


Income before income tax expense                                        1,898,994          967,011
Income tax expense (1)                                                  1,595,000           16,506
                                                                      -----------      -----------
         Net  Income                                                     $303,994         $950,505
                                                                      ===========      ===========

Pro forma information:
Historical income before income tax                                    $1,898,994         $967,011
Adjustment to compensation expense for contractual
         Increase in officers' salary                                        --           (77,000)
                                                                      -----------      ----------- 
Pro forma income before income tax expense                              1,898,994          890,011
Provision for pro forma income taxes                                    (779,000)        (365,000)
                                                                      -----------      -----------
Pro forma net income                                                   $1,119,994         $525,011
                                                                      ===========      ===========

Pro forma net income per share of common stock-basic                        $0.33            $0.21
                                                                            =====            =====

Pro forma net income per share of common stock-diluted                      $0.32            $0.21
                                                                            =====            =====   

Pro forma weighted average number of shares and
  share equivalents outstanding-basic                            
                                                                        3,418,508        2,500,000
                                                                        =========        =========

Pro forma weighted average number of shares and
  share equivalents outstanding-diluted                                 3,489,381        2,500,000
                                                                        =========        =========
</TABLE>
   

     (1) Income tax  expense for the six months  ended June 30, 1998  includes a
provision for deferred income tax expense of $1,081,000 related to the change in
tax  status  of  the  Company's   subsidiaries   from  S   corporation's   to  C
corporation's.

     See  accompanying  notes  to  unaudited  condensed  consolidated  financial
statements.


                                      (3)
<PAGE>

                      PMCC FINANCIAL CORP. and SUBSIDIARIES
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                      Three Months Ended June 30,
                                                                         1998              1997
                                                                         ----              ----
<S>                                                                   <C>               <C>

Revenues:
Sales of residential rehabilitation properties                         $8,546,493       $4,582,892
Gains on sale of mortgage loans, net                                    3,676,417        2,560,213
Interest earned                                                         1,449,670          310,466
                                                                       ----------       ----------
                                                                       13,672,580        7,453,571
                                                                       ----------       ----------
Expenses:
Costs of sales, residential rehabilitation properties                   7,829,482        4,266,490
Compensation and benefits                                               2,281,622        1,396,005
Interest expense                                                        1,473,049          494,616
Other general and administrative                                          948,232          514,051
                                                                       ----------       ----------
                                                                       12,532,385        6,671,162
                                                                       ----------       ----------


Income before income tax expense                                        1,140,195          782,409
Income tax expense                                                        467,000           13,256
                                                                       ----------       ----------
         Net  Income                                                     $673,195         $769,153
                                                                       ==========       ==========

Pro forma information:
Historical income before income tax                                                       $782,409
Adjustment to compensation expense for contractual
         Increase in officers' salary                                                     (56,000)
                                                                                        ----------
Pro forma income before income tax expense                                                 726,409
Provision for pro forma income taxes                                                     (298,000)
                                                                                        ----------
Pro forma net income                                                                      $428,409
                                                                                        ==========

Net income/pro forma net income per share of common
stock-basic                                                                 $.018            $0.17
                                                                            =====            =====

Net income/pro forma net income per share of common
stock-diluted                                                               $.018            $.017
                                                                            =====            =====

Weighted average number of shares and
  share equivalents outstanding-basic                                   3,750,000        2,500,000
                                                                        =========        =========


Weighted average number of shares and
  share equivalents outstanding-diluted                                 3,826,379        2,500,000
                                                                        =========        =========
</TABLE>




     See  accompanying  notes  to  unaudited  condensed  consolidated  financial
statements.


                                      (4)
<PAGE>



                      PMCC FINANCIAL CORP. AND SUBSIDIARIES
            Condensed Consolidated Statements of Financial Condition
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                        June 30,       December 31,
                                                                          1998             1997
                                                                          ----             ----
<S>                                                                     <C>             <C>

Assets
Cash and cash equivalents                                               $4,619,860      $1,713,405
Receivable from sales of loans                                          44,856,337      35,130,857
Mortgage loans held for sale, net                                       40,289,986      18,609,569
Accrued interest receivable                                                364,958         312,772
Other receivables, net                                                   1,546,829         398,444
Residential rehabilitation properties                                   14,410,905      11,584,273
Furniture & equipment, net                                                 664,645         286,713
Prepaid expenses and other assets                                          480,886         391,299
                                                                           -------         -------

Total assets                                                          $107,234,406     $68,427,332
                                                                      ============     ===========


Liabilities and shareholders' equity Liabilities:
 Notes payable-principally warehouse lines of credit                   $88,576,215     $59,116,509
 Notes payable-shareholder                                                      --         293,163
 Due to affiliates                                                       3,303,850       3,084,503
 Accrued expenses and other liabilities                                  1,482,899       1,123,948
 Distribution payable                                                      665,555              --
 Taxes payable                                                           1,581,349              --
                                                                        ----------      ---------- 
Total liabilities                                                       95,609,868      63,618,123
                                                                        ----------      ----------   

Shareholders' equity
Common stock                                                                37,500           6,250
Additional paid-in capital                                              10,846,043         711,775
Retained earnings                                                          740,995       4,091,184
                                                                        ----------      ----------

Total  shareholders' equity                                             11,624,538       4,809,209
                                                                        ----------       ---------

Total liabilities and shareholders' equity                            $107,234,406     $68,427,332
                                                                      ============     ===========
</TABLE>




     See  accompanying  notes  to  unaudited  condensed  consolidated  financial
statements

                                      (5)
<PAGE>


                      PMCC FINANCIAL CORP. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                 Six months ended June 30,
                                                                                 1998                1997
                                                                                 ----                ----    
<S>                                                                         <C>                 <C>


Cash flows from operating activities:
Net  (loss) income                                                              $303,994           $950,505
    Adjustments to reconcile net (loss) income to net cash used in
    operating activities:
         Residential  rehabilitation properties (exclusive of cash paid directly
         to/by independent contractors):
           Contractual fees received                                         (1,340,512)          (552,840)
           Proceeds from sales of properties                                  16,759,170          8,807,292
           Costs of properties acquired                                     (18,245,290)       (15,163,150)
         Depreciation and amortization                                            43,167             29,492
         Increase in accrued interest receivable                                (52,186)           (28,833)
         Net increase in mortgage loans held for sale                       (21,680,417)       (14,048,971)
         Increase in receivable from sales of loans                          (9,725,480)        (7,004,752)
         Increase in other receivables                                       (1,148,385)          (225,248)
         (Increase) decrease in prepaid expenses and other assets               (89,587)             16,968
         Increase in taxes payable                                             1,581,349                 --
         Increase in due to affiliates                                           219,347          1,950,867
         Increase in accrued expenses and other liabilities                      358,951            310,868
                                                                            ------------       ------------

         Net cash used in operating activities                              (33,015,879)       (24,957,802)
                                                                            ------------       ------------ 

Cash flows from investing activities:
         Purchase of furniture and equipment                                   (421,099)           (64,498)
         Principal repayments of mortgage loans held for investment                  --             22,269
                                                                               ---------           --------
                                                                               (421,099)           (42,229)
                                                                               ---------           --------
Net cash used in investing activities                                                                      

Cash flows from financing activities:
         Distributions to S corporation shareholders, net of
         distribution payable                                                (2,006,435)          (215,756)
         Net proceeds from sale of common stock                                9,183,325                 --
         Net decrease in notes payable-shareholder                             (293,163)                 --
         Net increase in notes payable-warehouse lines of credit              29,459,706         25,441,433
                                                                              ----------         ----------

Net cash provided by financing activities                                     36,343,433         25,225,677
                                                                              ----------         ----------

Net increase in cash and cash equivalents                                      2,906,455            225,646

Cash and cash equivalents at beginning of period                               1,713,405            409,788
                                                                               ---------            -------

Cash and cash equivalents at end of period                                    $4,619,860           $635,434
                                                                              ==========           ========

Supplemental  disclosures  of cash flow  information:
       Cash paid during the year for:
           Interest                                                            2,169,682           $576,883
                                                                              ==========           ========
           Income taxes                                                          $13,651            $25,365
                                                                                 =======            =======
</TABLE>


     See  accompanying  notes  to  unaudited  condensed  consolidated  financial
statements

                                      (6)
<PAGE>


                      PMCC FINANCIAL CORP. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 1998
                                   (Unaudited)

     1. Basis of Presentation

     The unaudited condensed  consolidated  financial statements included herein
reflect all adjustments, which are, in the opinion of management necessary for a
fair presentation of the Company's financial condition as of the dates indicated
and  the  results  of  operations  for  the  periods  shown.  In  preparing  the
accompanying condensed consolidated financial statements, management is required
to make estimates and  assumptions  that reflect the reported  amounts of assets
and  liabilities  as of the date of the  condensed  consolidated  statements  of
financial  condition and of income and expenses for the periods presented in the
condensed consolidated  statements of operations.  The results of operations for
the six and three months ended June 30, 1998 are not  necessarily  indicative of
the results of operations to be expected for the remainder of the year.  Certain
information  and note  disclosures  normally  included in  financial  statements
prepared in accordance with generally accepted  accounting  principles have been
condensed or omitted  pursuant to rules and  regulations  of the  Securities and
Exchange Commission.

     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  Form 10-K for the year ended  December  31,
1997.

     Certain  reclassifications  have been made to  conform  the prior  period's
presentation to the current presentation.

     2. Initial Public Offering 

     On February 18, 1998 the shareholders of Premier Mortgage Corp. ("Premier")
exchanged  all of their  outstanding  common  shares of Premier  for 2.5 million
common shares of the Company.  Following the exchange,  the Company completed an
initial public offering of 1.25 million common shares at a price of $9 per share
from which gross  proceeds of  $11,250,000  and net proceeds of $9,183,000  were
received.At the time of the offering, shareholder equity was $1.7 million.

     At the  time of the  share  exchange,  the  Company  agreed  to make a cash
distribution  to existing  shareholders  of $2.7 million  which was equal to the
Company's  undistributed  subchapter S corporation earnings.  Approximately $1.9
million of the distribution was paid during the quarter ended March 31, 1998, of
which $1 million  was from the  proceeds  of the initial  public  offering.  The
balance  of  the  distribution  will  be  paid  in  four  equal  quarter  annual
installments and is evidenced by the Company's  promissory note bearing interest
at 10% per annum. The remaining undistributed  subchapter S corporation earnings
were reclassified from retained earnings to additional paid in capital.

     3. Income  Taxes

     Prior to February 18, 1998, certain of the Company's  subsidiaries  elected
to be treated as S corporations  for both federal and state income tax purposes.
As a result, the income of the subsidiaries  through February 18, 1998 was taxed
directly to the  individual  shareholders.  On February 18, 1998, in conjunction
with the Company's  initial public  offering,  the S corporation  elections were
terminated and the Company's  subsidiaries became C corporations for federal and
state  income tax  purposes  and, as such,  became  subject to federal and state
income taxes on their taxable  income for the periods  after  February 18, 1998.
Therefore, the provision for income taxes for the six months ended June 30, 1998
includes a provision  for  deferred  income taxes of  $1,081,000  related to the
temporary   differences  existing  at  the  termination  of  the  S  corporation
elections,  and pro forma net income for the six months  ended June 30, 1998 and
the three and six months  ended June 30, 1997  include pro forma income taxes as
if the Company had been taxed as a C corporation throughout the periods.

                                      (7)
<PAGE>
     4. Earnings Per Share of Common Stock

     Effective  December 31, 1997, the Company  adopted SFAS No. 128,  "Earnings
Per Share"  ("EPS").  This  statement  establishes  standards  for computing and
presenting  EPS for entities  with  publicly  held common stock and common stock
equivalents and requires  reconciliation of the numerator and denominator of the
EPS calculation presented.

     Basic EPS is  determined by dividing pro forma net income for the period by
the weighted average number of common shares outstanding during the same period.
Diluted EPS reflects the  potential  dilution  that could occur if securities or
other  contracts to issue common stock were  exercised or converted  into common
stock or resulted in the  issuance of common stock which would then share in the
earnings  of the  Company.  The  additional  number  of shares  included  in the
calculation  of diluted EPS arising from issued stock  options was 70,873 shares
and 0 shares, respectively,  for the six months ended June 30, 1998 and 1997 and
76,379 and 0 shares, respectively,  for the three months ended June 30, 1998 and
1997.

     A ctual earnings per share data for periods prior to February 18, 1998 have
not  been  presented  in  the  accompanying   unaudited  condensed  consolidated
statement of  operations  because the Company was not a public  company.  Actual
earnings per share data for the periods  February 18, 1998 to March 31, 1998 and
February 18, 1998 to June 30, 1998 have not been  presented in the  accompanying
unaudited  condensed  consolidated  statement of operations  because  management
believes  that such data would not be  meaningful  given the less than full time
period  and the  impact  of the  recognition  of a  deferred  tax  liability  in
connection with the change in tax status.

     5. Supplemental Information

     The Company's  operations consist of two principal  activities (a) mortgage
banking and (b) funding the purchase,  rehabilitation  and resale of residential
real estate. The following table sets forth certain information concerning these
activities (in thousands):
<TABLE>
<CAPTION>
                                                                      Six Months Ended June 30,
                                                                           1998     1997
                                                                           ----     ----          

<S>                                                                      <C>      <C>

         Revenues:
            Residential rehabilitation properties                        $16,759  $  8,807
            Mortgage banking                                               9,071     4,767
                                                                         -------  --------
                                                                         $25,830   $13,574
                                                                         =======  ========
         Less: (1)
            Expenses allocable to residential rehabil-
              itation properties (cost of sales, interest
              expense and compensation and benefits)                      16,168     8,440
            Expenses allocable to mortgage banking
               (all other)                                                 7,763     4,167
                                                                        --------   -------          
                                                                        $ 23,931   $12,607
                                                                        ========   =======

         Operating Profit:
              Residential rehabilitation properties                          591       367
              Mortgage banking                                             1,308       600
                                                                          ------   -------             
                                                                          $1,899   $   967
                                                                          ======   =======

         Identifiable   Assets  (at  June  30,  1998
            and   December  31,  1997, respectively):
              Residential rehabilitation properties                     $ 14,411   $11,584
              Mortgage banking                                            92,823    56,843
                                                                        --------   -------   
                                                                        $107,234   $68,427
                                                                        ========   =======
</TABLE>

     (1) In managing  its  business,  the Company  does not  allocate  corporate
expenses  other than  interest  and  compensation  and  benefits  to its various
activities.
                                      (8)
<PAGE>
     6. Common Stock

     The authorized  common stock of the Company consists of 1 million shares of
preferred  stock,  par value $.01,  none of which is  presently  issued,  and 40
million shares of common stock,  par value $.01, of which  3,750,000  shares are
issued and outstanding at June 30, 1998.  Prior to the February 18, 1998 initial
public offering, Premier had 2,500 authorized shares of Class A common stock, of
which 100 shares were issued and  outstanding  at December 31,  1997,  and 1,000
authorized  shares of Class B common  stock,  of which 25 shares were issued and
outstanding  at December  31,  1997.  In  conjunction  with the  initial  public
offering,  both  classes  of  Premier's  common  stock were  exchanged  by their
shareholders for shares of the Company.

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

     Forward-Looking Statements

     The  Private  Securities  Litigation  Reform  Act of 1995  provides a "safe
harbor" for certain  forward-looking  statements.  This Quarterly Report on Form
10-Q may contain forward-looking  statements which reflect the Company's current
views  with  respect  to  future   events  and  financial   performance.   These
forward-looking  statements  are  subject  to certain  risks and  uncertainties,
including  those  identified  below,  which could cause actual results to differ
materially from historical  results or those  anticipated.  The words "believe,"
"expect,"  "anticipate,"  "intend,"  "estimate,"  and  other  expressions  which
indicate future events and trends identify forward-looking  statements.  Readers
are cautioned not to place undue reliance upon these forward-looking statements,
which speak only as of their dates.  The Company  undertakes  no  obligation  to
publicly update or revise any forward-looking statements,  whether as the result
of new  information,  future  events or otherwise.  The following  factors could
cause  actual  results to differ  materially  from  historical  results or those
anticipated:  (1) the level of demand for mortgage credit,  which is affected by
such external  factors as the level of interest  rates,  the strength of various
segments of the economy and demographics of the Company's  lending markets;  (2)
the direction of interest rates; (3) the relationship  between mortgage interest
rates and cost of funds;  (4)  federal  and state  regulation  of the  Company's
mortgage  banking  operations;  (5)  competition  within  the  mortgage  banking
industry and (6) the Company's management of rapid growth and expansion.

     Results of Operations

     Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997

     Revenues.  The following  table sets forth the  components of the Company's
revenues for the periods indicated:
<TABLE>
<CAPTION>

                                                                   Six Months Ended  June 30,            
                                                                   1998                1997
                                                                   ----                ----
<S>                                                           <C>                <C>


Sales of residential rehabilitation properties                $  16,759,170      $  8,807,292
Gains on sales of mortgage loans, net                             6,761,807         2,340,477
Interest earned                                                   2,309,494           426,296
                                                                 ----------         ---------
Total Revenue                                                 $  25,830,471       $13,574,065
                                                                 ==========        ==========
</TABLE>



     Revenues from the sale of residential  rehabilitation  properties increased
$8.0  million,  or 90%, to $16.8  million for the six months ended June 30, 1998
from $8.8  million for the six months  ended June 30,  1997.  This  increase was
primarily the result of the increase in the number of residential rehabilitation
properties  sold to 109 for the six months  ended June 30,  1998 from 62 for the
six months ended June 30, 1997.
                                      (9)
<PAGE>
     Gains on sales of mortgage loans  increased  $2.4 million,  or 56%, to $6.8
million  for the six months  ended June 30,  1998 from $4.3  million for the six
months ended June 30, 1997.  This  increase was  primarily  due to (a) increased
loan originations and loan sales from the Company's existing retail offices, and
(b) loan originations and sales by the Company's  Wholesale and B-C-D Divisions,
which commenced operations in April 1997. Mortgage loan originations were $240.1
million  and $109.7  million  for the six months  ended June 30,  1998 and 1997,
respectively.  For the six months ended June 30, 1998,  approximately 50% of the
Company's mortgage originations were derived from its retail mortgage operations
and  approximately  50% from  its  wholesale  operations.  The  following  table
summarizes the Company's mortgage originations (in millions):

                                      Six Months Ended June 30,
                                          1998        1997
                                          ----        ----

     Conventional                      $155,503   $  66,700
     FHA/VA                              48,403      28,500       
     BCD                                 36,201      14,500
                                         ------      ------
     Total                             $240,107    $109,700
                                       ========    ========

     Although there can be no assurance  thereof,  the Company expects  mortgage
originations  to increase and therefore  believes its gains on sales of mortgage
loans will increase.

     Interest  earned  increased $1.9 million,  or 442%, to $2.3 million for the
six months  ended June 30, 1998 from  $426,000 for the six months ended June 30,
1997. This increase was primarily due to increased mortgage originations for the
six months ended June 30, 1998 as compared to the six months ended June 30, 1997
and an increase in the amount of B-C-D mortgage originations which generally are
held for sale longer than conventional mortgage originations.

     Expenses.  The following  table sets forth the  Company's  expenses for the
periods indicated:
<TABLE>
<CAPTION>

                                                              Six Months Ended June 30,    
                                                              1998                1997
                                                              ----                ----
<S>                                                       <C>               <C>


Cost of sales - residential rehabilitation properties     $ 15,418,658      $   8,254,452
Compensation and benefits                                    4,470,700          2,677,417
Interest expense                                             2,373,574            707,778
Other general and administrative                             1,668,545            967,407
                                                            ----------         ----------
Total expenses                                           $  23,931,477        $12,607,054
                                                            ==========         ==========
</TABLE>


     Cost of  sales  -  residential  rehabilitation  properties  increased  $7.2
million,  or 87%, to $15.4  million for the six months  ended June 30, 1998 from
$8.3 million for the six months ended June 30, 1997. This increase was primarily
due to the increase in the number of  properties  purchased,  rehabilitated  and
sold.

     Compensation and benefits  increased $1.8 million,  or 67%, to $4.5 million
for the six months  ended  June 30,  1998 from $2.7  million  for the six months
ended June 30,1997.  This increase was primarily due to increased sales salaries
and commission,  which are based  substantially  on mortgage loan  originations.
Total personnel  increased to 126 employees at June 30, 1998 from 68 at June 30,
1997.
                                      (10)
<PAGE>
     Interest expense  increased $1.7 million,  or 235%, to $2.4 million for the
six months  ended June 30, 1998 from  $708,000 for the six months ended June 30,
1997. Approximately $351,000 of this increase was attributable to the funding of
residential  rehabilitation  properties.  The  remainder  of  the  increase  was
attributable  to the  increase  in  mortgage  originations  funded  through  the
Company's warehouse facility.

     Other general and  administrative  expense increased  $701,000,  or 72%, to
$1.7  million for the six months  ended June 30, 1998 from  $967,000 for the six
months  ended June 30,  1997.  This  increase  was  primarily  due to  increased
expenses incurred in connection with the growth in the operations of the Company
including rent and facilities expense, telephone and marketing.

                               
     Although there can be no assurance  thereof,  the Company believes that the
expected increase in mortgage origination volume and residential  rehabilitation
activities will result in increased expenses.

     Pro forma net income increased  $595,000,  or 113%, to $1.1 million for the
six months  ended June 30, 1998 from  $525,000 for the six months ended June 30,
1997.  Net income  decreased  $647,000 to $304,000 for the six months ended June
30, 1998 from  $951,000 for the six months  ended June 30, 1997.  The six months
ended June 30, 1998  includes a  provision  for  deferred  income tax expense of
$1,081,000  related to the change in tax  status of the  Company's  subsidiaries
from S corporations to C corporations.


     Quarter Ended June 30, 1998 Compared to Quarter Ended June 30, 1997

     Revenues.  The following  table sets forth the  components of the Company's
revenues for the periods indicated:

                                                     Quarter Ended  June 30,  
                                                     1998               1997

Sales of residential rehabilitation properties  $  8,546,493        $4,582,892
Gains on sales of mortgage loans, net              3,676,417         2,560,213
Interest earned                                    1,449,670           310,466
                                                 -----------        ---------- 
Total Revenue                                    $13,672,580        $7,453,571
                                                 ===========        ==========


     Revenues from the sale of residential  rehabilitation  properties increased
$4.0  million,  or 86%, to $8.5 million for the quarter ended June 30, 1998 from
$4.5 million for the quarter  ended June 30, 1997.  This  increase was primarily
the  result  of  the  increase  in  the  number  of  residential  rehabilitation
properties  sold to 56 for the  quarter  ended  June  30,  1998  from 34 for the
quarter ended June 30, 1997.


     Gains on sales of mortgage loans  increased  $1.1 million,  or 44%, to $3.7
million  for the quarter  ended June 30, 1998 from $2.6  million for the quarter
ended June 30, 1997.  This  increase was  primarily  due to (a)  increased  loan
originations and loan sales from the Company's existing retail offices,  and (b)
loan  originations  and sales by the Company's  Wholesale  and B-C-D  Divisions,
which commenced operations in April 1997. Mortgage loan originations were $139.6
million  and  $72.3  million  for the  quarters  ended  June 30,  1998 and 1997,
respectively.  For the quarter  ended June 30,  1998,  approximately  54% of the
Company's mortgage originations were derived from its retail mortgage operations
and  approximately  46% from  its  wholesale  operations.  The  following  table
summarizes the Company's mortgage originations (in millions):

                                      (11)
<PAGE>
                                             Quarters Ended June 30,
                                              1998           1997
                                              ----           ----

      Conventional                         $ 93,120        $ 43,269
      FHA/VA                                 26,876          14,488
      BCD                                    19,576          14,500
                                            -------          ------
      Total                                $139,572        $ 72,257
                                            =======          ======

     Although there can be no assurance  thereof,  the Company expects  mortgage
originations  to increase and therefore  believes its gains on sales of mortgage
loans will increase.

     Interest  earned  increased $1.1 million,  or 367%, to $1.4 million for the
quarter  ended June 30, 1998 from  $310,000 for the quarter ended June 30, 1997.
This  increase was  primarily  due to increased  mortgage  originations  for the
quarter  ended June 30, 1998 as compared to the quarter  ended June 30, 1997 and
an increase in the amount of B-C-D  mortgage  originations  which  generally are
held for sale longer than conventional mortgage originations.

     Expenses.  The following  table sets forth the  Company's  expenses for the
periods indicated:
<TABLE>
<CAPTION>

                                                             Quarters Ended June 30,    
                                                            1998                1997
                                                            ----                ----
<S>                                                     <C>                <C>

Cost of sales - residential rehabilitation properties   $ 7,829,482        $ 4,266,490
Compensation and benefits                                 2,281,622          1,396,005
Interest expense                                          1,473,049            494,616
Other general and administrative                            948,232            514,051
                                                         ----------          ---------
Total expenses                                          $12,532,385         $6,671,162
                                                         ==========          =========
</TABLE>

     Cost of  sales  -  residential  rehabilitation  properties  increased  $3.6
million,  or 84%, to $7.8 million for the quarter  ended June 30, 1998 from $4.3
million for the quarter ended June 30, 1997.  This increase was primarily due to
the increase in the number of properties purchased, rehabilitated and sold.

     Compensation and benefits increased  $886,000,  or 63%, to $2.3 million for
the  quarter  ended June 30, 1998 from $1.4  million for the quarter  ended June
30,1997.  This  increase  was  primarily  due to  increased  sales  salaries and
commission, which are based substantially on mortgage loan originations.

     Interest  expense  increased  $978,000,  or 198%,  to $1.5  million for the
quarter  ended June 30, 1998 from  $495,000 for the quarter ended June 30, 1997.
Approximately  $192,000  of this  increase  was  attributable  to the funding of
residential  rehabilitation  properties.  The  remainder  of  the  increase  was
attributable  to the  increase  in  mortgage  originations  funded  through  the
Company's warehouse facility.

     Other general and  administrative  expense increased  $434,000,  or 84%, to
$948,000 for the quarter ended June 30, 1998 from $514,000 for the quarter ended
June 30, 1997. This increase was primarily due to increased expenses incurred in
connection  with the growth in the operations of the Company  including rent and
facilities expense, telephone and marketing.  

     Although there can be no assurance  thereof,  the Company believes that the
expected increase in mortgage origination volume and residential  rehabilitation
activities will result in increased expenses.

     Income before income taxes increased $358,000,  or 46%, to $1.1 million for
the quarter  ended June 30, 1998 from  $783,000  for the quarter  ended June 30,
1997. Net income  decreased  $96,000 to $673,000 for the three months ended June
30, 1998 from  $769,000  for the three months ended June 30, 1997 as a result of
the  provision for income tax expense of $467,000 for the quarter ended June 30,
1998  compared  to $13,000 for the quarter  ended June 30, 1997  reflecting  the
change of tax status to a C  corporation  from an S  corporation.  Net income of
$673,000 for the quarter ended June 30, 1998 represents an increase of $245,000,
or 57%,  compared to pro forma net income of $428,000 for the quarter ended June
30, 1997.

                                      (12)
<PAGE>
     Liquidity and Capital Resources

     The Company's  principal  financing needs consist of funding  mortgage loan
originations and residential rehabilitation properties. To meet these needs, the
Company  currently  relies  on  borrowings  under  warehouse  lines  of  credit,
borrowings  from  affiliates  and cash  flow  from  operations.  The  amount  of
outstanding  borrowings  under  warehouse  lines of credit at June 30,  1998 was
$88.6 million.  The mortgage loans and  residential  rehabilitation  properties,
funded with the proceeds from such borrowings, secure warehouse lines of credit.
Borrowings   from  affiliates  are  secured  by  mortgages  on  the  residential
rehabilitation properties for which monies were borrowed.

     On August  7,  1998,  the  Company  entered  into a Senior  Secured  Credit
Agreement  with  Chase  Bank of Texas,  National  Association  and PNC Bank (the
"Warehouse  Line").  The Warehouse  Line provides a warehouse  line of credit of
$120  million  ($90  million  committed  at August  11,  1998) for its  mortgage
originations  and  residential  rehabilitation  purchases.  The  Warehouse  Line
combined  the two  existing  warehouse  lines of credit with the same  financial
institutions and is secured by the mortgage loans and residential rehabilitation
purchases  funded  with the  proceeds of such  borrowings.  The Company has also
pledged the stock of its residential  rehabilitation  subsidiaries as additional
collateral.  Borrowings for residential  rehabilitation purchases are guaranteed
by Ronald Friedman  (President,  Chief  Executive  Officer and a Director of the
Company)  and  Robert  Friedman  (Chairman  of the  Board  of  Directors,  Chief
Operating  Officer,  Secretary and Treasurer of the Company).  The interest rate
charged  for  borrowings  under the  Warehouse  Line is LIBOR  plus 1 1/4%-2 1/4
depending  upon the  collateral  type.  The Warehouse  Line expires on August 6,
1999.

     The Warehouse  Lines  contains  certain  covenants  limiting  indebtedness,
liens, mergers,  changes in control and sales of assets and requires the Company
to maintain minimum net worth and other financial ratios. The Company expects to
be able to renew or replace the Warehouse Line when the current terms expire.

     Since  September 1, 1996, the Company has borrowed funds from  corporations
owned by Ronald Friedman  (President,  Chief Executive Officer and a Director of
the Company) and Robert  Friedman  (Chairman  of the Board of  Directors,  Chief
Operating  Officer,  Secretary  and  Treasurer  of the  Company)  to provide for
funding of residential  rehabilitation  properties and working capital purposes.
At June 30,  1998,  borrowings  from  these  affiliates  totaled  $3.3  million.
Interest  on  borrowings  from  affiliates  is 10% per annum and  certain of the
Company's residential rehabilitation properties secure the borrowings.

     On February 18, 1998 the Company  completed an initial  public  offering of
new shares of common  stock at a price of $9 per  share.  The  Company  received
gross proceeds of $11,250,000  and net proceeds of  approximately  $9.2 million.
The proceeds from this offering were used for funding mortgage  originations and
residential  rehabilitation  properties,  working  capital and an S  Corporation
distribution.

     Net cash used in operations  for the six months ended June 30, 1998 was $33
million.  The  Company  used  cash to fund the $21.8  million  net  increase  in
mortgage loans held for sale,  the $9.6 million net increase in receivable  from
sales of loans and the $2.8 million net increase in  residential  rehabilitation
properties.  The increases in these assets were financed by increased borrowings
under the Warehouse Facility, and the proceeds from the initial public offering.

     Impact of New Accounting Standards

     In June 1997,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement of Financial  Accounting  Standards No. 130 ("SFAS  130"),  "Reporting
Comprehensive  Income".  SFAS 130 is effective for fiscal years  beginning after
December 15, 1997 and requires the  reclassification of financial statements for
earlier periods  provided for comparative  purposes.  The statement  establishes
standards for reporting and display of comprehensive  income and its components.
This  statement  requires that all items that are to be recognized as components
of comprehensive  income be reported in a financial  statement that is displayed
with the same prominence as other financial statements.  Comprehensive income is
defined as all changes in equity  during a period  except those  resulting  from
investments by owners and  distributions  to owners.  The Company has determined
that the requirements of SFAS 130 will have no impact on its financial condition
or results of operations.

                                      (13)
<PAGE>
     In June 1997, the FASB issued SFAS No. 131,  "Disclosures about Segments of
an Enterprise and Related  Information".  SFAS 131 is effective for fiscal years
beginning  after  December  15,  1997.  In  the  initial  year  of  application,
comparative  information  for  earlier  years is to be  restated,  unless  it is
impracticable to do so. The statement requires that a public business enterprise
report  financial and  descriptive  information  about its reportable  operating
segments.   As  the  requirements  of  SFAS  131  are  disclosure  related,  its
implementation  will have no  impact on the  Company's  financial  condition  or
results of operations.

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments  and Hedging  Activities."  SFAS 133 applies to all  entities and is
effective  for fiscal  quarters of fiscal years  beginning  after June 15, 1999.
This  statement  establishes  accounting  and auditing  standards for derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts and for hedging  activities.  This  statement  requires that an entity
recognize all  derivatives  as either assets or  liabilities in the statement of
financial  position and measure those  instruments at fair value. The Company is
currently  evaluating  the  impact  SFAS  No.  133  may  have  on its  financial
statements.

                                      (14)
<PAGE>


                            PART II-OTHER INFORMATION


     Item 1. Legal Proceedings

     The Registrant is a defendant in certain  litigation  arising in the normal
course  of  its  business.  In the  opinion  of the  Registrant,  any  potential
liability  with respect to such legal actions will not,  individually  or in the
aggregate,  be material to the  Registrant's  financial  position,  liquidity or
future results of operations.

     Item 2. Changes in Securities

     None.

     Item 3. Defaults Upon Senior Securities

     None.

     Item 4. Submission of Matters to a Vote of Security Holders

     None.

     Item 5. Other Information

     None.

     Item 6. Exhibits and Reports on Form 8-K

     (a) Exhibits





                                      (15)
<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.


                                            PMCC FINANCIAL CORP.
                                            (Registrant)



                                        By:/s/ Ronald Friedman          
                                           ------------------------------------
                                           Ronald Friedman
                                           President and Chief Executive Officer


                                        By:/s/ Timothy J. Mayette
                                           ------------------------------------
                                           Timothy J. Mayette
                                           Chief Financial Officer
                                           (Principal Accounting Officer)

     Dated: August 13, 1998


                                      (16)
<PAGE>



                                INDEX TO EXHIBITS

Exhibits                                             Sequential Page Number
--------                                             ----------------------
8/98 Amended and Restated Senior
  Secured Credit Agreement with
  Chase Bank of Texas, National
  Association and PNC Bank, N.A.                              10.23*

Financial Data Schedule                                       27


* To be filed as an amendment


                                      (17)